Several Central Bank of Egypt (CBE) officials are reported to have resigned this week, in protest against the application of the maximum wage law, The law caps salaries in the public sector and government-owned businesses, including the CBE, at LE42,000 (around $6,500) a month. News reports say around 150 bank officials have resigned from public-sector banks since the application of the law in July 2014, apparently confirming what opponents of the maximum wage law feared that the bright and talented will seek jobs in the private sector or abroad because they are not getting what they say is the pay they deserve in the public sector or in Egypt. CBE Governor Hisham Ramez said on television that it was normal for employees to change jobs and that the banks would continue to operate normally. But Eman Negm, an economist with Prime Securities, said that the new law would negatively affect the performance of the public-sector banks. The decision will drive top management to seek employment in the private banks in order to maintain the same standard of living. Alternatively, top-ranking employees will remain in their positions but will lose the incentive to excel as long as their pay is no longer tied to the banks' performance, she said. The application of the maximum wage to some of the public banks' employees could mean a 50 per cent cut of their income. To others it may much more. Reuters reported this week that one of the officials who recently resigned is moving to a regional bank and will be receiving LE900,000. Losing such executives, many of them experts, could cause the public-sector banks to incur losses above the amount of money saved from the application of the law, Negm said. She added that while some LE80 million could be saved, the banks provided the government with LE5 billion in net profits and their top officials, paid out of the profits of the banks, did not represent a drain on the public finances. The application of a maximum and a minimum wage had been called for as a means of ensuring social justice and was one of the demands of labour groups after the 25 January Revolution. A minimum wage of LE1,200 a month went into effect early this year, with the maximum being fixed at 35 times the minimum wage. The maximum wage is to include all bonuses and additions and, like the minimum wage, only applies to public-sector employees. According to Negm, there are other ways to level out income inequalities. These include a 30 to 35 per cent progressive income tax on the highest public- and private-sector wage-earners, as well as strict rules against tax evasion. The government should have applied the new system more gradually, she added, to ensure that a second tier of employees is ready to lead the public-sector banks. One employee who has been with Banque du Caire, a public-sector bank, for 30 years and who preferred to remain anonymous, said that he agreed that the government should have made sure that officials train a second tier of employees to lead the banks. High-ranking officials had created a culture of dependence on them at the banks and neglected the remainder of bank employees, he said. Banque du Caire is one of three state-owned commercial banks, alongside the National Bank of Egypt and Banque Misr. The source said that the majority of the officials who have quit would not be felt as a loss by the banks, however. He and his colleagues dubbed them “consultants” as they had been recruited 10 years ago to help restructure the public-sector banks and were not originally “sons of the banks,” as he called them. Aside from these consultants, the maximum wage ceiling does not affect the majority of public-sector bank employees. At Banque du Caire, many employees who might have been eligible for such a salary took early-retirement packages in 2007, when the bank was slated for privatisation. They went to work for the private sector, fearing that privatisation of the bank would have led to the loss of their jobs. While acknowledging that the performance of the public-sector banks has been turned around in the past 10 years, the source said that not all consultants merit the salaries they have been receiving. In some cases, their recruitment was said to be the result of nepotism. He added, however, that a handful of the consultants merited even higher salaries. To help public-sector banks retain such competent people, the source suggested that the bank give them other privileges to make up for the drop in their salaries, such as a car or a home. Another source from a private-sector bank who asked to remain anonymous said that the government will need to find a way out of such problems. “The decision must be revisited, otherwise we will be shooting ourselves in the foot,” he said. “Those who have not resigned may have financial obligations to meet and may be just waiting until they find a better job.” He said that Egypt needs the banking sector to support its development plans. The banking sector and the CBE have often been applauded for their ability to withstand shocks, such as the global financial crisis of 2008 and the fallout from the 2011 Revolution. Observers worry not only about the banks the resigning officials will leave behind, but also about the information they may take with them. CBE officials are privy to sensitive information, having worked with the local regulatory body and monitored the market. According to Al-Mal newspaper, the 2013 conflict of interest law stipulates that former government officials must wait six months before taking a position at a company that operates in the same field as that of his or her previous job.
