IMF Publishes Reports on the 2017 Article IV Consultation with Egypt
IMF released its staff report and selected issues report for the Arab Republic of Egypt. These reports are in the context of the 2017 Article IV consultation, the second review of economic reform program supported by an arrangement under the Extended Fund Facility, and the request for modification of performance criteria. The report highlights that the authorities are undertaking a comprehensive review of the Law of the Central Bank and the Banking System and their goal to bring the Law in line with the best international practices is welcome. However, the amendments must be carefully considered, as they could have profound implications for the banking system, among others.
The staff report reveals that aggregate capital adequacy ratio (CAR) improved from 14.1% in December 2016 to 14.5% in June 2017, helped by the decision of the Central Bank of Egypt (CBE) to allow banks to include current-year profits in the CAR calculation and prohibit dividend payments for all banks. CAR of 14.5% is well above the Basel-recommended floor of 9.25% and the CBE-mandated 11.25%. The stock of nonperforming loans (NPLs) increased by only 2.3% in the first half of 2017, with the NPL ratio improving to 5.5% due to strong credit growth during this period; moreover, specific loan-loss provisioning coverage is 91.1%. The report also highlights that the banking sector is resilient to moderate shocks and that capital and operating profits are sufficient to absorb possible loan impairments. Banks maintain solid liquidity buffers and execute active balance sheet management, to mitigate the interest rate and liquidity risks from large holdings of government securities. However, several smaller banks, whose capital adequacy, asset quality, and profitability are below the sector averages, remain vulnerable. Solvency pressures in these banks are often explained by the CBE’s stringent capital requirements for excessive loan concentrations. CBE supervision closely monitors implementation of these banks’ remediation plans. These banks do not pose significant risks to financial stability, considering their small market share. Going forward, CBE will continue to enhance systemic risk oversight and prudential supervision.
The efforts of authorities will be focused on a) strengthening the regulatory and supervisory framework, including consolidated supervision; b) phasing in the capital conservation buffer in line with the Basel timelines; c) promoting competition to enhance efficiency in the delivery of financial services; d) strengthening the crisis management and resolution framework to mitigate potential systemic risks; and e) promoting financial inclusion without compromising credit quality. CBE is upgrading the early intervention and resolution frameworks. It is developing a new regulation with clear differentiation between the early intervention and resolution triggers, matrix of enforcement actions, and provisions of the FSB Key Attributes of Effective Resolution Regimes for Financial Institutions. The authorities and staff agreed that implementation of the resolution framework required incorporation of the Key Attributes in the Law of the Central Bank and the Banking System. The authorities have already taken actions to strengthen banking supervision and the regulatory framework. These include (a) implementation of the Internal Capital Adequacy Assessment Process (ICAAP) in the banking sector; (b) strengthening the supervisory early warning system; and (c) implementation of higher capital requirements for domestic systemically important banks.
The selected issues report covers issues such as unlocking higher and more inclusive growth, along with the modernization of the monetary policy framework and international tax regime in Egypt.
Related Links
Keywords: Middle East and Africa, Egypt, Banking, Article IV, Basel, NPLs, CAR, Resolution Regime, IMF
Related Articles
|
News
EC Amends Regulation Supplementing Solvency II DirectiveEC published the Delegated Regulation (EU) 2019/981 that amends the Regulation (EU) 2015/35, which supplements Solvency II Directive (2009/138/EC) on the taking-up and pursuit of the business of insurance and reinsurance.
June 18, 2019
WebPage
Regulatory News
|
|
News
IOSCO Report Examines Application of International Cyber StandardsIOSCO published a final report that examines the application of the three internationally recognized cyber standards and frameworks by IOSCO member jurisdictions.
June 18, 2019
WebPage
Regulatory News
|
|
News
PRA Launches 2019 Stress Test Exercise for Life and General InsurersPRA has launched the biennial insurance stress test and is asking the largest regulated life and general insurers to provide information about the impact of a range of stress tests on their business.
June 18, 2019
WebPage
Regulatory News
|
|
News
PRA Finalizes Reporting Amendments to Pillar 2 Liquidity FrameworkPRA published the final Policy Statement PS13/19 on regulatory reporting amendments and clarifications to the Pillar 2 liquidity framework for banks in UK.
June 17, 2019
WebPage
Regulatory News
|
|
News
FSB Assesses Implementation of Compensation Standards and PrinciplesFSB published the sixth progress report on the implementation of its principles and standards for sound compensation practices in financial institutions.
June 17, 2019
WebPage
Regulatory News
|
|
News
IMF Publishes Reports on 2019 Article IV Consultation with IrelandIMF published its staff report and selected issues report under the 2019 Article IV consultation with Ireland.
June 17, 2019
WebPage
Regulatory News
|
|
News
EBA Updates Data on Deposit Guarantee Schemes in EUEBA published the 2018 data on two key concepts in the Deposit Guarantee Schemes Directive (DGSD)—namely, available financial means and covered deposits.
June 17, 2019
WebPage
Regulatory News
|
|
News
SNB Updates Form for Reporting Solvency Risk of CounterpartiesSNB published the survey (Form Release 5.01) and related documentation for reporting solvency risk of counterparties in the interbank sector (ARIS).
June 17, 2019
WebPage
Regulatory News
|
|
News
ISDA Studies Variation in Global Implementation of Margin RequirementsISDA published a paper that highlights the main areas of difference in the implementation of margin requirements for non-cleared derivatives across jurisdictions and makes recommendations on how to resolve these variations.
June 17, 2019
WebPage
Regulatory News
|
|
News
US Agencies Finalize Rule to Streamline Reporting for Small BanksUS Agencies (FDIC, FED, and OCC) adopted a final rule to streamline the regulatory reporting requirements for small institutions.
June 17, 2019
WebPage
Regulatory News
|
