CBE ties up with ECB EGYPT'S banking system, which received a standing ovation for its steadfastness in the face of the current financial turmoil, is set to adopt measures that will make it even stronger. Last week, Central Bank of Egypt (CBE) Governor Farouk El-Okda and European Central Bank (ECB) President Jean-Claude Trichet signed a memorandum of understanding (MoU) launching a new programme of technical assistance between the two institutions. Scheduled to begin January 2009 and to last for three years, the programme aims to gradually strengthen banking supervision in Egypt towards basic Basel II compliance. "The aim of the programme is to support the CBE in drafting new rules, policies and practices that will effectively create an appropriate Egyptian version of the internationally accepted banking supervision standard known as Basel II," said Trichet in a statement following the signature of the MoU. This programme will also involve the cooperation of the central banks of Bulgaria, the Czech Republic, Germany, Greece, France, Italy and Romania. Worth three million euros, the programme will be financed by a non-refundable grant through the European Commission, in the framework of cooperation between Egypt and the European Union. According to Trichet, European and Egyptian banking experts will work closely together to develop a "new regulation that will apply to banks in the country and new reporting scheme for banks in order to provide the CBE's banking supervisors with the information they need to carry out their job." The ECB and the partner national central banks will dispatch Banque de France Inspector Herve Leclerc as resident programme coordinator to Cairo to oversee the implementation process of the agreement. A similar technical assistance programme in the area of banking supervision was executed between 2005 and 2007 at a cost of 4.5 million euros. It involved banking supervisors from Germany, Greece, France and Italy sharing their knowledge and experience with their Egyptian counterparts to reform the internal procedures and policies of the CBE towards a greater focus on risk-based supervision. Basel II, the second accord to be issued by the Basel Committee on Banking Supervision, is a set of recommendations on banking laws and regulations. It aims to create an international benchmark against which banking regulators can measure how much capital banks need to put aside to guard against financial and operational risks. Basel II details what reserves banks should hold to mitigate any risk they may expose themselves to by lending and investment. It also seeks to enhance transparency in banks' financial reporting. A committed EC THE EUROPEAN Commission's Ambassador to Cairo Klaus Ebermann this week pledged to remain committed to assisting Egypt in its modernisation process. Speaking at a press conference this week Ebermann said that Egypt's relationship with the EU stands on a basis that is strong enough to withstand today's new economic realities. He said that despite economic difficulties, there is great potential for the Egyptian economy if it capitalises on trade, particularly agricultural exports which, starting March, enjoy duty and quota free access into the EU. Ebermann added that if Egypt continues to maintain stable investment and banking conditions, it should not worry about attracting investments. Europe's investments reached 4.1 billion euros in 2007/08, coming in second as the largest foreign direct investor, following the US and almost double the total sum of Arab investments. According to Ebermann, a high-level official delegation is set to meet mid-December to take stock of the Egypt-EU cooperation within the neighbourhood policy framework. It has been a year and a half since the action plan on the neighborhood policy was signed. Ebermann also said that the EU is on track with its disbursement of 558 million euros earmarked for Egypt's modernisation for the period of 2007-2010. Meanwhile, 149 million euros are lined up for allocation before the end of the year. They will be used to finance reform efforts in various sectors such as transport (80 million euros), education (20 million euros), waste water (29 million euros), civil and political rights (17 million euros) and good governance (three million euros). The EC ambassador also highlighted the significance of close Egypt-EU trade ties. Ebermann said trade has grown by 20 per cent annually since the Egypt-EU Association Agreement was signed in 2004, pushing bilateral trade to a record of 20 billion euros.
