Interview: Egypt banking sector safe from financial crisis

Interview: Egypt banking sector safe from financial crisis
# 31 December 2012 00:16 (UTC +04:00)

Baku-APA. There is a big difference between the government's budget deficit and its financial crisis and the banking sector, which is completely independent from the government, Tarek Amer, Chairman of National Bank of Egypt (NBE) and President of Egypt Banks Union, told Xinhua in an exclusive interview Sunday.

Amer, who is managing Egypt's largest bank with over 48 billion U.S. dollars in assets, stressed that even the banks of the public sector are completely independent from the government, "They are not subjected to government supervision and their funds are separate from those of the government," he explained.

The NBE Chairman said that since Dec. 2003, when Central Bank Governor Farouk al-Okda came to office, the banking sector in Egypt was separated from the government after it had been under the Ministry of Economy, describing the move as the most important step in the reform of Egypt's banking sector.

"Ever since, the state could not use funds of the Central Bank of Egypt (CBE) for any projects unless with the latter's approval based on studies of the projects and their revenues," Amer said, adding that over those years the performance of Egypt's 38 banks maintained adequate assets, capitals and investment revenues that varied between 20 and 30 percent.

"Over this period, the Egyptian banks had the highest level of liquidity worldwide," he noted, stressing that the CBE is "in a very good condition."

Amer highlighted that the government's financial issues must not be confused with the performance of the banking sector.

"The government is facing financial issues including the large budget deficit and the low reserves of foreign currency, but the Egyptian banks and their agents are stable and they are not facing problems," Amer pointed out.

The top banker continued that the CBE did not have to pump cash into Egyptian banks as the banks did not need it, whereas European central banks had to pump cash into their banks to overcome financial issues, reaffirming that the Egyptian banks are still doing well.

In a recent statement, the CBE warned that Egypt's reserves of foreign currency had reached an alarming level, falling from 36 billion U.S. dollars in Jan. 2011 to 15 billion U.S. dollars at the moment.

Amer described this level of foreign currency reserves as " critical", explaining that developing countries like Egypt that can easily be affected by global changes need a higher level of foreign fund reserves to be in the safe side.

Yet, Amer rejected claims that the foreign fund reserves in Egypt suffice only for three months of exports.

"This can only happen if the Suez Canal was shut down, the Egyptians abroad stopped transferring 20 billion U.S. dollars every year. This might happen on the Doomsday! Only then the foreign fund reserve would suffice for just three months," he rhetorically remarked.

The NBE Chairman commended the new system applied Sunday by the CBE for trading foreign currency through auctions to help preserve foreign fund reserves.

"This system has given more freedom to pricing of foreign currency. Although it slightly increased the value of U.S. dollars against the Egyptian pound, it made pricing more accurate and the market more systematic," Amer said.

He added that the auctions made traders unable to excessively buy and store up foreign currency and restored stability and system to the market, noting that the new system benefits exporters who are happy with getting high-price foreign currency and also local businessmen who are happy with an organized foreign currency market.

Amer said that Egypt has to rationalize its imports of foreign currency, noting that in 2003 Egypt used to import 18 billion U.S. dollars per year and now it imports 60 billion U.S. dollars, which made the CBE interfere to control the market.

"After the new system took effect today, the NBE sold only five million U.S. dollars in Cairo and one million U.S. dollars in Alexandria, which means success of the new system introduced by the CBE," Amer illustrated.

Amer concluded that such an organized foreign currency market through the successful new system will help attract foreign investors and will positively reflect on the Egyptian stock exchange market in particular and the economy in general.

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