House approves draft Banking Act with new provisions
LEGISLATION WATCH- House approves draft Banking Act with new provisions: The House of Representatives has approved the long-awaited Banking and Central Bank Act with several new provisions and shipped it off to the State Council for final legal review, the local press reported yesterday, citing MENA. The legislation, which received a preliminary nod from the House earlier this month, would give the Central Bank of Egypt (CBE) increased discretionary powers to regulate the banking sector. The bill won’t become a law until returned to the House for a final vote by the general assembly. It would also require President Abdel Fattah El Sisi’s signature.
CBE to issue licenses for credit risk guarantee companies: The law’s latest provision, added yesterday after a proposal from the CBE, will put the central bank in charge of licensing companies that want to offer credit risk guarantees. Credit risk guarantee arms must be established for the sole purpose of providing services to protect receivables against defaults and must have a minimum of EGP 50 mn in paid-in and issued capital. Companies interested in setting up credit guarantee arms will be subject to a EGP 100k “inspection fee” and EGP 50k for every other new branch.
Authorization for bank bailouts: The law will allow the CBE to provide short-term bailout funding to struggling banks. This would come in the form of a three-month to one-year loan carrying an interest higher than the market average.
The law will also not affect the current CBE board and the boards of commercial banks, which will only be shuffled to comply with the new stipulations after their terms expire. Under the legislation, future boards and chairmen of state-owned banks will be appointed by the Prime Minister and will be subject to some form of competency approval from the CBE.
Background: The draft Banking Act, which has been in the works since 2017, will replace the 2003 Banking Act, as well as cancel overlapping provisions in related laws. Besides increasing the CBE’s oversight over the sector, the law would introduce measures governing e-payment, fintech businesses, and cryptocurrencies, as well as strengthen data protection and consumer privacy. The legislation would also put in place a 1% levy on bank profits to endow an industry development fund. Banks will have 1-3 years to comply with the new provisions once it’s signed into law. You can find out more here and here.