Banks operating in the Egyptian market will have to increase their capital holdings, especially after the new lending regulations issued by CBE in January 2016, according to Deputy Governor of the Central Bank of Egypt (CBE) Gamal Negm.
In January, the CBE decided to lower the maximum percentage of a bank’s capital base it may offer to one customer from 20% to 15%, while also reducing the maximum percentage of a bank’s capital base it may offer to one customer and parties related to him or her from 25% to 20%.
The CBE allowed banks three years to adjust to this decision.
However, Negm has not issued a directive to local banks to increase their capital holdings. Rather, Negm stated that banks should voluntarily pursue such an increase as it will expand the volume of business in the Egyptian market.
Banking Law No 88 of 2003 stipulates that a bank’s issued and paid-up capital should not fall below EGP 500m. In addition, the capital allocated for a foreign bank’s Egyptian branch activities should not be less than $50m or their equivalent in foreign currencies, according to the same article.
Most banks operating in the Egyptian market have a capital base of more than EGP 1bn.