FinMin, Federation of Egyptian Banks working toward compromise on new accounting standards? The Finance Ministry and the Federation of Egyptian Banks (FEB) agreed at a meeting yesterday that proposed amendments to the tax code that could hit bank profitability won’t be applied retroactively to the start of this year, sources tell Al Mal. The ministry had proposed a new accounting treatment that would change how banks account for their income from government debt. The move could generate as much as EGP 10 bn for the state, sources in government said over the weekend, by resulting in a double-digit increase in the effective tax rate for some institutions. Al Mal says the ministry has agreed to impose the new standards only on income generated from bank investment in government debt made after the amendments come into effect.

The ministry and federation seem likely to hold another round of talks at the end of this week. The FEB has proposed an alternative to the government’s proposal, which would instead see banks breaking down costs on the income statement in a way that could “render a lower impact … in terms of an additional tax burden.”

The federation will also participate in drafting the executive regulations for the amendments and how they will be implemented to “avoid future disputes,” according to the sources. Finance Minister Mohamed Maait had previously said that the amendments were proposed after consultations with banks and the CBE.

The amendments will make their way to the House of Representatives “soon,” Vice Minister of Finance Ahmed Kouchouk said, suggesting that there may not be all that much time to tweak the government’s proposal.

News of the change in accounting treatment saw the EGX30 post its worst day since February 2016 as index heavyweight CIB dragged the benchmark index down 3.8% yesterday. CIB shares were off 6.5% for the day. The National Bank of Kuwait and QNB Alahli were the only bank shares yesterday to buck the trend as analysts suggested they had the lowest exposure to treasuries in their peer group. Here’s how select bank shares closed yesterday:

• ADIB: -8.28%
• CIB: -6.5%
• Al Baraka: -4.06%
• Crédit Agricole: -3.61%
• Faisal Islamic Bank: -3.51%
• Suez Canal Bank: -3.50%
• HDBK: -2.74%
• NBK: flat
• QNB: +0.47%