CBE considering allowing new int’l banks to enter Egypt
Will the central bank issue new licenses to international players looking to set up shop in Egypt? The Central Bank of Egypt is mulling whether to resume issuing licenses to international banks that want to open in Egypt, according to a report in state news agency MENA picked by Al Shorouk. The move will help boost confidence in the Egyptian economy and the banking sector, a CBE official told the state news agency, while also enhancing competitiveness. Several international banks have expressed interest in entering the Egyptian market, the unnamed source added.
Why this matters: Egypt has for years refused to issue new banking licenses, pointing potential market entrants — foreign and domestic, provided their names do not start with ‘Naguib’ and end with ‘Sawiris’ — to potential acquisition targets among the country’s nearly 40 licensed banks. The preference at the central bank for acquisitions over new licenses goes back to the early-to-mid 2000s, when it successfully drove the cleanup and consolidation of the banking industry after the non-performing loans crisis of the late 1990s (and the ex-bank pyramid / Ponzi schemes of the 1980s that tarnished the reputation of financial services for a generation).
Questions to ask yourself this morning: Did MENA get it right? If so, does the report mean rep office licenses (relatively easy to acquire) or new, full-service banking licenses? Is this for foreign entrants only, or would domestic players be allowed to apply? And is this a genuine trial balloon or a straw man — a bargaining chip in the ongoing behind-the-scenes fight over the still-not-released amendments to the Central Bank and Banking Act? Readers will remember the proposed changes to the act were controversial in the industry for proposals including term limits on bank MDs and a tithe on bank profits to endow an industry development fund.