CAIRO: The Egyptian government created a new regulatory authority to oversee all non-banking financial markets as part of a long term process to reform and develop the nation's financial sector. President Hosni Mubarak approved on Monday Law 10/ 2009, which establishes the General Authority for Financial Supervision, incorporating various oversight committees into a single umbrella organization that will account for recent growth and the development of new, more complicated financial instruments in the Egyptian market. Legislatures hope the institution will improve market performance and transparency, ensure support for workers, and provide more efficient regulation. The new entity, which is expected to take shape next month, will be affiliated with the Ministry of Investment and will serve as a central bank-like institution overseeing the capital market, the insurance market, mortgage finance and similar non-banking activities. It will have the power of licensing, supervising and regulating these markets, while the Central Bank of Egypt will retain oversight of the banking sector. "This is representing a significant part of the economy, Youmna El-Hamaky, a member of the Shoura Council's economics committee, said about the non-banking financial sector. She said the nation's large economic capacity, which includes high levels of liquidity, provides a strong opportunity to encourage growth. "When you have this type of coordination among the activities, this is going to increase the quality of the service, El-Hamaky said. "It will encourage a lot of investment in this area. The council member said the current structure of regulation will provide a useful basis, but presents a difficult task of unification. "The issue is how to integrate all these bodies into one authority, she said. Dr Ola El-Khawaga, a professor of economics at Cairo University, was confident that the new institution would be better suited to meet the demands of a growing economy as a single entity. "In order to regroup all other non-banking activities under one umbrella, I think it will be very useful, she said. The reform will serve to "activate the non-banking sector, she said. The legislation provided for the framework of a Board of Directors that will serve as the governing body. The chairman, deputy chairman and five additional members will be nominated by the Minister of Investment. The Deputy Governor of the Central Bank will also serve on the board. The Ministry of Investment has not indicated its nominations. El-Khawaga said the success of the institution depended in large part on the future chairman. "He will make his structure and then his action plan for the future, she said. As part of the recent financial legislation, President Mubarak also approved greater regulation of Egypt's stock market, which will take effect on July 1. According to Minister of Investment Mahmoud Mohieldin, the legislation will improve the monitoring and prevention of violations in the stock market. He said it will also build a channel of communication between the Egyptian Stock Exchange and the new General Authority for Financial Supervision. The minister was in attendance when the People's Assembly's financial and economic committee approved the draft of the legislation. According to Arab Finance, he said at the meeting that the current reforms were not a direct response to the global financial crisis. Instead, they are part of a greater legislative effort to accommodate Egypt's growing financial sectors, citing a recent upsurge in the non-banking financial sector despite the global situation. Mohieldin said that he expects the reformation process that began in 2004 to continue through 2012.
