Private banks discuss protecting dollar liquidity after launch of high-interest CDs

The CBE is widely projected to raise basic interest rates by 0.5-1 percentage points next Thursday to shore up the pound

In an effort to mitigate an exodus of dollars in favour of newly-launched certificates of deposit (CDs), private banks operating in the local market held intensive meetings last Thursday, and will continue in the upcoming days, to discuss how to protect their dollar liquidity.
The meetings come following the launch of high-interest CDs offered in dollars by the National Bank of Egypt (NBE), Banque Misr, and Banque du Caire, as banks fear their dollar liquidity may shift from their saving schemes to the publically-offered CDs.
Director General of the Treasury at the Industrial Development and Workers Bank of Egypt (IDBE) Haitham Abdel Fattah said the bank has a previous three-year dollar saving certificate, for which it granted a return of 3.75%. However, the bank quickly raised the return to 4.25% – the same rate offered by the three public banks for the certificate they offered last Thursday.
Abdel Fattah explained that the bank took this step to maintain its dollar liquidity obtained through this certificate, to prevent this liquidity from moving to the newly-launched CDs.
Tamer Youssef, the head of the treasury department at a foreign bank operating in the local market, projected that a number of banks will raise the interest rates on their dollar savings schemes after the three public banks offered their certificates.
Youssef asserted that this step may be necessary for some banks to maintain their dollar liquidity, especially in the wake of the foreign exchange crisis in the Egyptian market, which has recently intensified.
Meanwhile, both Abdel Fattah and Youssef expect the Monetary Policy Committee of the Central Bank of Egypt (CBE) will raise its basic interest rates during its meeting next Thursday, by 0.5-1 percentage points, in an attempt to shore up the pound against the dollar.
The two bankers explained that the rise in interest rates on dollar CDs to 5% diminished the difference between them and the interest on the pound; thus boosting the interest rates on savings in pounds is necessary to avoid exchanging pound savings to dollars.
Both Abdel Fattah and Youssef ruled out the possibility that the demand on the dollar certificates offered by the NBE, Banque Misr, and Banque du Caire would be affected if the interest rate of pound increases. In addition, they emphasised that dollar owners will not turn to pound saving certificates, while those who prefer their savings in pound would not turn to the dollar schemes.