Government banks have ruled out offering new savings certificates in the Egyptian pound with a return of 25% to attract citizens’ savings in local currency, following the decision of the Central Bank of Egypt (CBE) to raise its basic interest rate by 2% on Thursday.
The leaders of the National Bank of Egypt (NBE), Banque Misr (BM), and Banque du Caire (BC), which, collectively, hold the largest share of the volume of deposits and loans in the Egyptian market, told Daily News Egypt that offering new certificates is completely excluded and has not been studied either inside the banks themselves or with the CBE.
The three state banks have savings vessels that offer the highest return on the market, including savings certificates with a return of 16% for three years and 20% for 18 months.
Chairperson of Banque Misr Mohamed El-Etreby said that the bank has yet to decide on a date for the Asset-Liability Committee (ALCO) meeting to discuss the interest rate on deposits and loans.
He added that what was deliberated over on raising interest rates on the bank’s certificates or issuing new certificates for a period of six months for 25% return is false.
He added that the bank is currently studying the CBE decision to hike interest rates and its effects, and taking the appropriate decision through the ALCO Committee, pointing out at the same time that the decision to raise the interest rate of the CBE is temporary and may change soon.
NBE deputy chairpersonn Yehia Aboul Fotou said that the ALCO committee will meet on Tuesday or Wednesday to discuss the fate of the bank’s savings and loan facilities.
He ruled out the potential of increasing the interest on savings certificates. “They have already reached the maximum and cannot be increased,” he stressed.
He added that if the bank approves any new interest rate increases, the decision will be limited to short-term saving instruments only.
He also denied any trend within the National Bank of Egypt to offer short-term savings certificates with a return of 25% as some rumors spread. “This has not even been discussed,” he stressed.
CEO and chairperson of Banque du Caire Mounir El-Zahed said that the bank will hold a meeting to discuss the fate of interest rates on its savings vessels during the coming week. He stressed that no further increases in interest rates have been considered.
In addition, he explained that there will be no interest rate increase on loans given to micro, small, and medium enterprises within and outside the initiatives of the CBE.
As for corporate loans, he said that some loans are linked to the basic rates of return of the CBE, which then nominates their interest to increase. Yet, he stressed that the bank is seeking to limit this.
In private banks, a number of treasury officials confirmed that the trend within these banks is to increase interest rates on deposits and short-term savings accounts by a maximum of one year only, and not to increase the rates of return on existing savings certificates or the issuance of new certificates.
Following the decision, banks only moved to raise interest on some savings vessels that are linked to the price of the deposit rate with the CBE only.
On 6 July 2017, the CBE’s Monetary Policy Committee (MPC) decided to raise the overnight deposit rate, the overnight lending rate, and the rate of the Central Bank of Egypt’s (CBE) main operation by 200 basis points (2%) to 18.75%, 19.75%, and 19.25% respectively. The discount rate was also raised by 200 basis points to 19.25%.
CBE Governor Tarek Amer said that this step comes to control the markets, relieve the citizens of the effects of higher prices, work on stability, and maintain the purchasing power of the Egyptian pound.