The new governor of the Central Bank of Egypt (CBE), Tarek Amer, has called on Egyptian and foreign banks operating in the domestic market to support the CBE in overcoming the nation's shortage of dollars. Amer also advised banks to prioritise imports of basic commodities when providing dollars. Banks in Egypt received their first official letter from Amer on Thursday, in which he said that banks should maximise their resources of foreign exchange, especially those suffering from a shortage. The CBE urged banks to arrange credit facilities with correspondent banks abroad to finance letters of credit, as is customary in financing foreign-trade operations all over the world. This is the first time the CBE has officially sought the support of banks via formal letter instead of verbal instructions. A number of officials in the Egyptian banking sector told Daily News Egypt that public, private and foreign banks will work to provide foreign exchange to their customers to help the CBE in solving the foreign currency crisis. They noted that this will guarantee their share of dollars auctioned by the CBE three times a week. While a number of large banks have moved to secure dollar liquidity, a director of one small bank said they are suffering badly from the shortage, with the limited resources they have failing to cover their needs for dollars in both domestic and foreign markets. He said that this will hinder the bank's standing with the CBE. The source noted the 50-piaster gap between the official exchange rate and that on the parallel market, saying that this increases the problems of small banks as customers prefer to sell their dollars elsewhere. Banque Misr is to sign an agreement with a Gulf banking alliance led by the Bahraini Arab Banking Corporation (ABC) to provide a loan worth $250m to strengthen the bank's dollar resources. Banque Misr, among others, has been working to obtain loans in hard currency. The list also includes the National Bank of Egypt, Commercial International Bank (CIB), and the National Bank of Kuwait. Last Thursday CBE sold $39.3m to banks in an auction with an allocation rate of 35.7%. This is CBE's third regular auction under Amer. The Central Bank denied requests from some banks for the dollar, where the market estimates that only 14 banks were provided dollars. CBE does not usually disclose the names of banks that win auctions. The CBE recently lifted the average coverage ratio to 57% in the auction held on Tuesday, which is one-and–a-half times more than previous auction rates of 19.5%. The new regulations were imposed by the CBE on Thursday, linking the provision of dollars through its regular FX Auctions to the banks' effectiveness in providing dollars. The cooperation of banks with the CBE in the provision of foreign exchange is determined based on three factors. The first factor relates to bank's credit facilities in hard currency. The second factor is the bank's ability to secure dollars for a broad spectrum of their customers, especially small businesses. The third factor assesses the bank's flexibility when covering their customers' dollar needs and opening currency positions according to the CBE's regulatory limit. Ambiguity has prevailed in the Egyptian banking sector as to how those factors are assessed. Inside sources have told Daily News Egypt that they consider the move as a warning to some banks that have not been cooperating with the CBE in solving the exchange crisis and only relying on dollars they obtain from auctions. They called on the CBE to provide more clarification to these regulations and how they are assessed, so that banks can organise their operations.
