{"id":569196,"date":"2020-02-17T04:24:13","date_gmt":"2020-02-17T04:24:13","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2020\/02\/17\/sme-lenders-and-digital-banks-to-be-made-exempt-from-new-capital-requirements-in-proposed-banking-act\/"},"modified":"2020-02-17T04:24:13","modified_gmt":"2020-02-17T04:24:13","slug":"sme-lenders-and-digital-banks-to-be-made-exempt-from-new-capital-requirements-in-proposed-banking-act","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2020\/02\/17\/sme-lenders-and-digital-banks-to-be-made-exempt-from-new-capital-requirements-in-proposed-banking-act\/","title":{"rendered":"SME lenders and digital banks to be made exempt from new capital requirements in proposed Banking Act"},"content":{"rendered":"

<\/a> EXCLUSIVE- SME lenders and digital banks to be made exempt from new capital <\/strong>requirements in proposed Banking Act:<\/strong> The proposed Banking Act would exempt SME lenders and digital banks from complying with new capital requirements designed to increase the stability of the financial sector, a Central Bank of Egypt (CBE) source tells Enterprise. A revised version of the draft legislation \u2014 which would hike capital requirements for all commercial banks \u2014 would exempt these so-called \u201cspecialized banks\u201d from meeting the new requirements.<\/p>\n

How does the legislation define specialized banks?<\/strong> A copy of the revised legislation seen by Enterprise does not set a clear definition of what the CBE will classify as a \u201cspecialized bank.\u201d One industry watcher with whom we spoke told us that this could be convenient in the future \u2014 the central bank wouldn\u2019t have to get new legislation approved if it decides it wants to widen or change the definition at a later date.<\/p>\n

CBE to classify digital banks and SME lenders \u201cspecialized\u201d: <\/strong>One CBE source said that the bank would initially allow dedicated SME lenders and digital banks to qualify as specialized banks. The amount of capital these banks would be required to hold would be set on a case-by-case basis, unlike local commercial banks which would need to hold at least EGP 5 bn in reserve \u2014 a tenfold increase<\/a> from the current requirements. Banks that apply for the license would need to submit a market study and risk assessment, after which the CBE would set reserve capital requirements, deposit limits, and the maximum amount of money they can lend.<\/p>\n

Existing banks cannot be retrospectively given a specialized bank status<\/strong>, one CBE official told us, explaining that the 2003 Banking Act legally defines all banks currently operating in Egypt as commercial banks. This means that only new banks and subsidiaries of existing ones can be designated specialist. The exemption from the minimum capital requirements would apply only to the subsidiary, not to the parent bank.<\/p>\n

The CBE has already received applications from specialized banks in both sectors <\/strong>\u2014 including from the National Bank of Egypt<\/a>, Banque Misr, and Baraka Bank, media reports suggest \u2014 but will begin studying them once the law is approved.<\/p>\n

This isn\u2019t the only thing that has changed from the last time we saw the draft legislation.<\/strong><\/p>\n

Chief among those changes: <\/strong>Private and state-owned banks<\/strong> would get more control over board composition<\/strong> in the latest draft, which allows them to form their own boards without any CBE intervention. The boards of directors of 100% state-owned banks would be formed with the approval of the prime minister rather than by the presidency.<\/p>\n

Also worth mentioning:<\/p>\n