Egypt to have highest monitoring and standards for banking sector

The number of bank-loan defaulters is limited and settling their cases will not inflict financial damage on the Egyptian banking sector, a top official affirmed to a weekly magazine.

ÊÊÊ The sector can cope with these cases and they, Mahmoud Abul Eiyoun, governor of the Central Bank of Egypt (CBE), will not affect its performance and activities told Akhr Sa'aa in an interview.

ÊÊÊ The government, Abul Eiyoun said, has prepared a new law that aims to strengthen the CBE's role and give it more monitoring powers over commercial banks.

ÊÊÊ The CBE has approved a new list of chartered accountants who will be in charge of auditing the annual financial statements and budgets of commercial banks operating here, he said.

ÊÊÊ Recent indicators, Abul Eiyoun said, have shown a 12 per cent increase in bank deposits during the past year.

ÊÊÊ However, they showed that credit rates were slow during the first quarter of FY2002/2003, he said.

ÊÊÊ These slow rates must be regarded as an early alarm to the banks, which are responsible for upgrading economic activities in the nation, Dr Aboul Eiyoun continued.

ÊÊÊ Referring to the defaulting investors, who could not repay their bank loans, the CBE governor said that other countries have passed through this problem and solved it. In Egypt too, he said, we will find sound and realistic solutions to this problem, which has shown us who is a serious investor and who is not.

ÊÊÊ "The banking sector will support the serious entrepreneurs, who could not pay their loans for reasons that are beyond their control.

ÊÊÊ In the meantime, the sector will take firm action against those investors, who have proved not to be serious," he told the magazine.

ÊÊÊ During the past three years the nation has suffered from a cash shortage, a sluggish economy and economic stagnation.

ÊÊÊ These problems had a negative impact on the over all business and market activities in the country? Added the CBE "governor.

ÊÊÊ However, only serious and hard-working investors managed to overcome these problems because they had a strong and continuous relationship with the banking sector, Dr Abul Eiyoun said. Only these investors deserve all possible assistance from the banking sector until they can stand on their feet again, he confirmed.

ÊÊÊ These investors and their ventures are Egyptian properties and they will be assisted in order to help the economy recover, added Dr Aboul Eiyoun.

ÊÊÊ "But those less serious businessmen will not survive because they did not enjoy a strong relationship with the sector," he told the magazine.

ÊÊÊ The CBE governor confirmed that settling the issue of defaulting investors would not affect the activities or the performance of banks.

ÊÊÊ He said that the nation had passed through the same problem in 1991 and managed to solve it quietly.

ÊÊÊ The government, Dr Aboul Eiyoun said, took the initiative towards settling the present problem by inviting defaulting investors to repay their bank loans.

ÊÊÊ "There is nothing wrong with this initiative as it yielded some tangible results," he told the magazine.

ÊÊÊ He also denied rumours that the nation's reserves of foreign currency had dropped. "If these rumours were true, then how could the government pay for its wheat imports in cash," he asked.

ÊÊÊ Dr Aboul Eiyoun unveiled a new plan for upgrading the banking sector. The plan incorporates a new early warning system for detecting, identifying and correcting defaults and mistakes, he explained.

ÊÊÊ This system, he continued, also prevents the re-occurrence of these mistakes in the future. Moreover, the plan includes new monitoring rules and regulations that govern credit opening and loan offering to investors, he added.

ÊÊÊ The rules also call for activating the role of the board of directors at commercial banks and improving their performance in terms of following-up project implementation, he said.

ÊÊÊ The plan covers all banks as well as the CBE, which has a new fully computerised clearance department and information section.

ÊÊÊ The information section is responsible for exchange of data on credits and loans with commercial banks, he explained.

ÊÊÊ The section can instruct banks to continue or stop offering loans to certain investors, who are proved to be not serious about their business activities, the CBE governor said.

ÊÊÊ This new section, which provides vital data about investors helps bank officials make the right decisions and judges whether they are serious or not.

ÊÊÊ If they are serious, the bank will help them and if they are not, it will take all the necessary legal action against them.