EXPLAINER: What is the Reserve requirement set by CBE for Egyptian banks?

Reserve requirements are the amount of funds that a bank holds in reserve to ensure that it is able to meet liabilities in case of sudden withdrawals.

Reserve requirements are a tool used by the central bank to increase or decrease the money supply in the economy and influence interest rates.

The reserve ratio regulates how much capital commercial banks are required to hold in their reserves.

Banks in Egypt are required to hold a certain amount of funds as reserves in their current accounts at their national central bank. These funds are called minimum reserves.

The central bank bumped up its reserve requirement for all banks to 18% from 14%, which it said would “complement the tightening stance that the CBE is maintaining.”

By raising the ratio, the central bank is aiming to restrict lending, tighten financial conditions, control the inflation and support the currency— all without raising the cost of borrowing for the government or the private sector.