A new 249-article law regulating the performance of the Central Bank of Egypt (CBE) and the country's banking sector is expected to be up for a final vote in parliament next week. The law, which has been in the works since 2017, was approved in principle on 4 May when MPs also discussed and approved 50 of its articles. According to a report prepared by parliament's Economic Affairs Committee, the law aims to reinforce the supervisory powers of the CBE and will raise its capital to LE20 billion to help it exercise its financial obligations. “The law will give the CBE new powers and roles in the areas of centralising deposits, listing and registering government securities, and covering any seasonal deficits in the state budget,” the report said. “The law also seeks to increase the number of non-executive members on the CBE board. It stipulates that members of the board are to be independent, neutral, and have no conflicts of interest,” the report said, adding that it also tackled the CBE's roles in licensing foreign banks and representation offices in Egypt. The law stipulates that banks operating in Egypt should have capital of at least LE5 billion and branches should have capital of at least $150 million. The law “creates a new system for settling the conditions for defaulting banks, with the objective of maintaining the stability of the banking sector and protecting the interests and money of depositors,” the report said. CBE Governor Tarek Amer told MPs that the long-awaited law was intended to catch up with the latest developments in the banking sector and operations and services such as e-payments, fintech businesses, and cryptocurrencies. “The introduction of these new services has become necessary in order to be able to effectively cover all areas of credit, finance, and money transfers,” Amer said, indicating that there was a section in the new law about e-payments. The greater use of electronic payments was necessary to improve banking services and reduce costs, Amer said, arguing that “the law is set to usher the Egyptian economy into a much better period that will have a positive impact on development plans and job opportunities.” “Though the volume of banking deposits and savings in Egypt has soared to LE4 trillion in recent years, most of this financial liquidity has not been fully tapped in setting up development projects,” he added. The draft law is divided into seven sections covering all areas of banking operations in Egypt. The Economic Affairs Committee also introduced a new article stating that a Banking Sector Support Fund and a Defaulting Banks Bailout Fund would also be set up. “While the first fund aims to boost the financial resources of the banks, the second seeks to settle the conditions of defaulting banks,” the committee report said, indicating that financial contributions to the two Funds would come from banks operating in Egypt over 10 years. “The banks will have to set aside 0.5 per cent of their deposits over a 10-year period to finance the two funds,” the report said, adding that each bank would also contribute one per cent of its net annual profits to them. Hisham Emara, a member of the Economic Affairs Committee, said the new article serves the general objectives of the law. “It aims to grant the banking sector greater stability and security and sends a message to depositors that their money and interests are secure, protected, and guaranteed,” he said, indicating that the two funds would be affiliated with the CBE and their boards led by the CBE governor. The law states that the CBE is an independent and regulatory authority affiliated with the president of the republic. “Article one states that the CBE has full technical, financial and administrative powers, is consulted on laws regulating its performance, and seeks to maintain the security of the monetary and banking system in Egypt and the stability of prices in line with the state's economic policies,” the report said. Article 48 states that a coordinating council will be formed by the president to take charge of coordinating the CBE's monetary policies and the government's financial policies. “The council will comprise experienced representatives from the government and the CBE and will meet at least once every three months and submit an annual report on its activities to the president,” it added. Amer indicated that in the area of reinforcing control and oversight over the banking sector in Egypt, the law makes it clear that the CBE will be allowed to intervene to make sure that deposits in the banks under its control are mainly invested in development projects. He added that the new law aimed to reinforce data protection and consumer privacy. The CBE will continue to have the power to set competence requirements for executive board members, according to Article 118. The boards and chairmen of state-owned banks will be appointed by the prime minister and will be subject to the same approvals by the CBE. The law sets a capital requirement of LE25 million for foreign-exchange companies in Egypt, reducing by half the requirement set by the CBE in previous drafts. The law imposes harsher punishments for black-market dealings on the foreign-exchange markets, including three to 10-year prison terms and fines of up to LE5 million. It establishes a grievances committee to appeal CBE decisions and penalties against the banks. Parliamentary Speaker Ali Abdel-Aal said the CBE should continue not to be involved in politics. “According to the constitution, the CBE is independent, but it is one of the state institutions working to achieve financial and monetary stability in the country,” he said. *A version of this article appears in print in the 14 May, 2020 edition of Al-Ahram Weekly