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Ministry of Finance, public banks in new disagreement - Daily News Egypt

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Ministry of Finance, public banks in new disagreement

Ministry demands government banks reduce volume of retained earnings, banks believe they are necessary to support capital base

The Ministry of Finance demanded that public banks decrease the volume of profits they retain, and supply the bulk of their profits to the state’s public treasury.

According to Finance Minister Hany Kadry Dimian, public banks and institutions will follow a new policy supplying the bulk of their profits and surpluses to the public treasury. It will also see them reducing the volume of profits they retain.

“Retaining part of the profits to support the capital base of the public banks is very important for these banks and for helping them carry out their role in serving the national economy,” says Hussein Refaie, Board Member of Egypt’s biggest government bank, the National Bank of Egypt (NBE).

Refaie said that public banks do not exaggerate in retaining the profits to support their capital base, in order to be able to expand in funding the huge national projects. Other banks act conservatively when it comes to funding, which benefits the state’s public treasury and the national economy as a whole.

He added that the banks decide the percentage they retain from the profits in accordance with several factors. The most important of these include: the level of capital they aim to reach; the plans of the geographical and activities expansion; in addition to their compatibility in the future with the standards of Basel 3, with regard to capital base.

Refaie said the profits of all the governmental banks until seven years ago did not exceed EGP 600m, while taxes that were paid on them did not exceed EGP 150m.

He explained that the NBE’s profits did not exceed EGP 375m in 2008. However, they have now reached approximately EGP 4bn, and a similar number is being paid as taxes, which means that the bank’s profits and taxes it pays to the government have been doubled several times in seven years.

He added that the NBE’s capital amounted to EGP 2.2bn in 2008, while it currently stands at EGP 15bn. The owners’ equity was EGP 7bn in 2008, to currently register EGP 26bn, thanks to the strong activity of the bank and the huge profits it achieves, and its desire to support its capital base.

Refaie said that if the Ministry of Finance does not want the public banks to retain part of their profits, instead giving the funds to the state’s treasury, the public banks have no objection. He added that these banks are owned by the state, and their profits will return to it, although the state must also support the capital base of these banks to be able to carry out their role.

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