Egypt’s current crisis of low foreign currency reserves requires that the banking sector has direct access to foreign cash flows via the stock market, as transactions in the stock market aim to achieve trading in shares and in currency, said Egyptian Financial Supervisory Authority (EFSA) chairperson Sherif Samy.
The financial controls set by the EFSA on Egyptian Depository Receipts (EDR) oblige owners of EDR to obtain returns in Egyptian pounds when converting them into shares and selling them abroad, Samy told Daily News Egypt. EDR are equal to Global Depository Receipts (GDR), which transfer the proceeds of sale to Egypt via depository company accounts and via the central registry at any international custodian.
The EFSA did not monitor intensive transfers of EDR for the purpose of selling them, however, everyone knows the extent of the US dollar crisis in the local market, Samy said. This crisis requires transferring the output of any transactions carried out through the EGX to the banking sector, especially if the investor paid in Egyptian pounds and not in US dollars.
EDR are shares traded in foreign stock exchanges. They are inserted into the EGX as GDR issued by Egyptian shares and traded on the London Stock Exchange.
EDR give investors the right to locally buy certificates in Egyptian pounds, convert them into shares in another country, and then sell them abroad in the currency of that country.
Samy explained that the EFSA does not deal with EDR as a way to extract funds from the local market, but the current circumstances have required the authority to make these amendments.
Imposing financial controls on the outcome of GDR and EDR has put restrictions on Egyptian investors. Samy commented on this, saying that the Egyptian economy’s current situation requires these financial controls and that investors can sell their shares with the same currency with which they bought the receipts.
The EFSA did not reconsider the controls on GDR, which stipulate that investors receive sale proceeds in Egyptian pounds, the chairperson said.
On the other hand, Samy confirmed the delivery of the Guarantee Law draft regulations to Investment Minister Dalia Khorshid for her to consider and submit to the cabinet to review before it is sent to the State Council.
The law aims to help small- and medium-sized companies diversify their financing sources, such as financial leasing, by having an accurate electronic record of diverse guarantees by which the company can obtain the required funding.
The EFSA is trying to create a legislative climate to suit the development of non-banking financial activities, but the authority needs a speedy approval by parliament regarding amendments to articles that regulate the issuing of sukuk and the Capital Market Law.