CBE's Bold Reforms Under Hassan Abdullah's Leadership Drive Economic Transformation

More than a year has passed since Hassan Abdullah assumed the position of Acting Governor of the Central Bank of Egypt, succeeding Tarek Amer, following a period that was the toughest both domestically and globally, requiring significant courage in making economically sound decisions.

So, how did Abdullah deal with all these challenging tasks?

First Bank highlights the key decisions made by Hassan Abdullah since he took the reins of CBE in August 2023.

His first decisions included simplifying business procedures by removing deposit limits for retail and companies and increasing the maximum withdrawal limit for individuals and companies, raising the maximum cash withdrawal limit for individuals and companies from EGP50,000 to EGP150,000 while keeping the daily withdrawal limit from ATMs at EGP20,000

This had a positive impact on the banking sector, as it lifted restrictions on banking transactions, accelerated economic activity by facilitating liquidity provision, and rapidly increased the deposit portfolio in Egyptian banks.

Abdullah also aimed to address the issue of inflation, which had reached record levels. He opted to use a monetary policy tool, mandatory reserves, contrary to expectations that pointed to an interest rate hike. He decided to raise the percentage that banks must keep with CBE to 18% instead of 14%, thus withdrawing liquidity from the banking market and reducing banks' lending capacity.

He also decided to increase the value of exempted shipments from documentary credits to $500,000 or its equivalent in other currencies, replacing the previous limit of $5,000. This served as an incentive for economic activity.

He allowed banks to engage in exchange rate swaps for corporate customers, provided that the purpose was to hedge customer positions resulting from previous commercial operations conducted through the same bank. He emphasized that these operations could only be carried out with local banks.

Additionally, he permitted forward exchange transactions for corporate clients only, with the condition that the purpose was to hedge customer positions resulting from previous commercial operations conducted through the same bank. Speculative purposes were not allowed, and these transactions had to be settled in the local currency.

Recognizing the importance of sustainable finance during challenging times to support financial stability, CBE issued mandatory guidelines on sustainable finance. These guidelines included establishing separate sustainability and sustainable finance department in each bank, requiring banks to incorporate policies and implementing procedures for sustainable finance within their credit and investment policies, and seeking environmental consultants to evaluate major corporate projects from an environmental perspective. Finally, regular reports in this regard were to be prepared.

All of this enhanced investment opportunities, particularly attracting a new segment of investors interested in sectors that promote sustainable development principles and encouraging the injection of more foreign currencies into the Egyptian market.

These include suspending a private sector initiative in industry, agriculture, and contracting with an 8% interest rate. It also mentions applying market interest rates to unused medium and long-term facilities until November 20, 2022.

Furthermore, continuing available balances within specified limits for short-term facilities at prevailing market rates and gradually paying off the utilized balance according to set deadlines without reusing them. Short-term facilities are to be paid off within a maximum of one year.

Efforts to reduce cash dependency and mentions initiatives by CBE. These initiatives extend from January 1 to December 31, 2023. They include exemptions from fees and commissions for instant payment services, as well as a new pricing policy for mobile wallet transfer services.

Additionally, it discusses a maximum fee for customer transactions between mobile wallets belonging to the same service provider and adjustments to the pricing for transactions between different mobile wallet providers.

Also mentions the reintroduction of collection documents for import operations and efforts to promote digital transformation. This includes rules for encoding payment cards on electronic devices to facilitate contactless payments.

The adoption of these rules is expected to enable various international companies and financial technology firms (such as Apple Pay and Samsung Pay) to provide innovative financial solutions that meet customer demands.

Furthermore, the new system is expected to reduce both time and costs for banks operating in the Egyptian banking market and enable digitization of different types of payment cards.

Finally, it mentions CBE's efforts to regulate and supervise digital banks, aligning with global trends in fintech, and meeting customer needs in the Egyptian market.