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Wednesday, 5 October 2022

CBE move to raise up reserve requirements “logical,” says HSBC Egypt CEO

The Central Bank of Egypt’s decision to increase the reserve ratio to 18% was “logical” given current global economic conditions, HSBC Egypt CEO and Deputy Chair Todd Wilcox told CNBC Arabia (watch, runtime 2:34). Wilcox said the decision would have a “minimal effect” on HSBC’s bottom line in the short term, but expects it to lead to growth in the long term.

Refresher: The central bank last month bumped up its reserve requirement for all banks to 18% from 14%, which it said would “complement the tightening stance that the CBE is maintaining.” The reserve ratio regulates how much capital commercial banks are required to hold in their reserves. By raising the ratio, the central bank is aiming to restrict lending, tighten financial conditions, and support the currency — all without raising the cost of borrowing for the government or the private sector.

HSBC wants to get more involved in SME lending: SMEs account for some 20% of the bank’s total financing portfolio, Wilcox said, adding that HSBC is looking to expand in the Egyptian market, particularly in the SMEs sector, with a focus on companies in import and export, technology, green energy, sustainability, and women-led businesses.

**Read more about what our friends at HSBC have in store for SMEs in our recent Coffee With interview with Wilcox.

ALSO FROM THE CBE- Banks now have until 14 September 2023 to comply with the new capital requirements required by the 2020 Banking Act after the central bank agreed to extend the deadline by another year, according to a decree published in the Official Gazette. This is the second year-long extension the CBE has granted banks. The central bank has not publicly commented on the reasons for the extension.

The requirements: Under the legislation, banks have to have at least EGP 5 bn in liquid assets, a tenfold hike from previous minimim. Foreign lenders’ minimum capital was raised threefold to USD 150mn, while forex bureaus’ increased fivefold to EGP 25 mn.

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