No enforced FX withdrawal limits in the works, insists the CBE: “Each bank has the discretion to determine its policy” for FX withdrawals, the central bank said in a statement (pdf) yesterday following reports that led to online speculation that enforced limits are in the works.

The root of the drama: The Central Bank of Egypt’s clarification followed a report from AsharqBusiness that the bank had requested local banks to set their own daily and monthly limits on foreign currency withdrawals from the beginning of September, citing several senior banking sources. Unlike for local currency, the CBE does not impose any limits for FX withdrawals and most local banks do not set their own limits, but some online misinterpreted the report to be alleging that the central bank was getting ready to enforce CBE-mandated limits on FX withdrawals.

What was actually reported: Banks have been instructed to set their own internal policies for FX withdrawals based on their foreign currency reserves, secure their board of directors’ approval, and submit the policies to the central bank by 30 August, the banking sources told the outlet. The CBE’s request pertains to withdrawals only and does not apply to FX deposits or overseas transfers, the outlet quotes an official at a state bank as saying.

The rationale: The vice president of a private bank told Asharq Business that the decision was taken to curb the circulation of foreign currency outside the banking system.

Senior banking officials jumped on the airwaves to try and clear up the confusion: “This is completely false,” Banque Misr and Federation of Egyptian Banks Chairman Mohamed El Etreby called in to tell Ahmed Mousa (watch, runtime: 12:56). “The central bank did not force any bank to set limits on withdrawals in USD. Each bank is allowed to set these limits for companies and individuals,” El Etreby added. Over on MBC Masr, veteran banker Sahar El Damaty joined Sherif Amer on Yahduth Fi Masr to discuss the news (watch, runtime: 13:48).

The central bank was also keen to point that it’s been raising limits recently — not reducing them: The CBE also highlighted in its statement that it raised the daily limit in April on local currency withdrawals for both individuals and companies by EGP 100k to EGP 250k for over-the-counter transactions. The daily limit on ATM withdrawals was also raised to EGP 30k, up from EGP 20k.

What will these limits look like? One private bank has set the daily FX withdrawal limit at USD 50k and the monthly limit at USD 200k, Asharq quotes the bank’s head as saying. Meanwhile, an official at a state-run bank told the outlet that the limits will depend on account type — with individual customers and large, medium, and small corporate accounts each getting different limits. If a customer requests to withdraw more than the maximum limit, an approval would be required from the department handling international transactions, the official added.

The criteria behind the limits: Each bank will reportedly set the maximum limit based on its ability to export and import banknotes — i.e., its capacity for depositing foreign currency in banks outside the country and bringing foreign currency into the country — Asharq quotes the head of a local private bank as saying.

Remember: Egypt's net foreign reserves have increased by about USD 11.2 bn in the five months since the government announced the USD 35 bn Ras El Hekma agreement and the central bank floated the EGP. The country’s net foreign reserves came in at USD 46.5 bn in July, surpassing the previous record high USD 46.4 bn recorded in June.

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