Banks operating in the local market must adhere to using a risk management system for early prediction and warning of risks, as well as being ready with effective plans for crisis management on all levels, according to Central Bank of Egypt (CBE) Deputy Governor Gamal Negm.
According to Negm, practical experience has shown that supporting and strengthening the banking sector helped it to stay steadfast during crises. This support also helped the sector to, in turn, support the rest of the country’s sectors and assist them in overcoming these crises and to continue the growth and stability with its comprehensive meaning, economically and security-wise. The banking sector was able to carry out this mission by pumping financing, and supporting the economy, as well as its role as a safe haven for the savings and fortunes of the society.
Negm’s statement came during his participation in the eighth annual conference of the Egyptian Banking Institute (EBI) held on Monday.
He explained that following the 25 January Revolution, the Egyptian banking sector played a major role in protecting the country and supporting its economic activities, thanks to the banking reform process the CBE carried out earlier.
Banks were and still are the most important sector in the country and the size of their assets now exceeds EGP 2tn, he said.
Negm mentioned the importance of the role of the supervisory authorities and central banks in maintaining depositors’ money and achieving the interests of banks’ shareholders, investors, and all users of banking services, as well as banks’ workers.
He added that the CBE is keen to achieve a good level of economic growth and to maintain stable prices. He noted, however, that these goals are challenging as they are intertwined and must be handled professionally.
The CBE is deliberating when to pick the required supervisory measure at the right time, so as to reduce risks and not to affect economic growth rates, and the smooth flow of credit in the business sectors, Negm said.
Owing to the fact that liquidity is available, in accordance with known standards, liquidity risk management is not a major concern for CBE. However, the bank does pay great attention to this issue, in line with the successive regulatory changes.
He added that CBE is keen to apply new developments in the field of banking supervision in a way that aligns with the Egyptian banking sector, and after consultation with the banks themselves.
According to the executive director of EBI, Mona El-Baradei, risks are an integral part of banks’ operations, adding that the banking industry would not have been able to continue without strong risk management departments.
She added that the tremendous development in the payments industry recently increased the size and types of the risks that banks face. Consequently, banks modernised and developed their systems to cope with modern risks.
She noted that the experience has proven that supporting the Egyptian banking sector helped it to overcome a lot of crises the country went through during the past periods and even support all of the country’s economic sectors.
According to director of the Research and Awareness Unit at EBI, Ola El Khawaga, the risks that banks face now extend to other types associated with e-banking, reputation, mergers, and acquisitions, rather than just traditional risk represented in the credit, market, and transactions risks.
Banks need to re-assess all kinds of risks in order to avoid crises in the future, El Khawaga said.