PLANNED amendments to the Central Bank and Banking Sector Law were leaked last week, causing reservations among bankers. The Federation of Egyptian Banks is currently preparing a list of objections to the changes to hand to Tarek Amer, the governor of the Central Bank of Egypt (CBE). While observers said that the amendments, prepared by the CBE, give its governor more power over the commercial banks, others were concerned that they could undermine the independence of the CBE. One of the most controversial items concerns the appointment of bank chairmen and top executives. The new law stipulates that the chairs of the boards of banks working in Egypt should not have occupied this post for a term exceeding three years before the law is enforced. This not only infringes on the rights of boards of directors and general assemblies of the banks, but would also see changes in at least 80 per cent of the current commercial banks' chairs. Only four months ago the Administrative Court gave the general assemblies of banks working in Egypt the right to appoint and dismiss bank executives. This annulled a decision in March 2016 by Amer requiring the chief executives of public and private banks, as well as the heads of foreign banks operating in Egypt, to step down after nine years. The new bill gives the CBE the right to send a representative to attend all bank board meetings without invitation. Another unexpected amendment requires the banks to allocate five per cent of their net profits to the sector's development fund. This is in addition to increasing fees payable to the CBE, such as inspection fees which have risen 10-fold and upping the registration fees of the headquarters and branches of the banks. “The changes will bring down the listed banks' valuations by around five per cent,” commented Pharos Holding, a leading local investment bank. Another proposed item in the new law is increasing the minimum capital requirements for financial institutions working under the umbrella of the CBE, increasing the minimum capital for banks from LE500 million under the current banking law to LE1.5 billion. The minimum capital of foreign exchange bureau working in Egypt was also raised to LE20 million compared to the LE5 million currently. The Federation of Egyptian Banks will send its comments on the law to the CBE's governor within the next few days. Topping the reservations are moves concerning the independence of the CBE, as Article 1 in the new law states that the CBE is under the authority of the president, which violates the constitution which says the CBE is an independent regulatory authority. The article related to the appointment of the CBE governor upon the decision of the president also contradicts the constitution, which stipulates the approval by the parliament of the president's choice.
