Egypt’s New Banking Laws

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The new Egyptian banking law, passed under a Presidential Decree last month, is already being credited as a template for other nations. Egypt’s new banking law will help to ensure the country, which is a bridge between the Middle East and Africa (MEA) and beyond, has a banking system that keeps in line with international standards of best practice and norms, drawing upon experiences and insights from other leading global banking centres – amongst other things.

Back in July, Egyptian MPs in Parliament approved a law aimed at regulating the performance of the Central Bank of Egypt (CBE) and the banking sector. The law stipulates that banks operating in Egypt should have a minimum capital of approximately $310 million and representation offices should have capital of around $9.41 million. The new law also aims to catch up with the latest developments in the banking sector and operations and services such as e-payments, fintech businesses, and cryptocurrencies.

Since then, Egypt’s new Banking Law which came into effect follows the ratifications by President Abdel Fattah Al-Sisi and subsequent publication in the Official Gazette in the country. According to local media, the law aims at maintaining banking and monetary stability, avoiding financial crises, and improving the banking sector’s performance. Another aim is to support the sector’s competitiveness on the global scene and to achieve Egypt’s economic development and diversification. Also, the new law targets enhancing the CBE’s governance and independence within the framework of the constitution.

International expertise helped formulate and implement the new initiative. Latham & Watkin helped advise the CBE on the formulation of a new banking law (No 194 of 2020), a key pillar of the on-going economic reform programme for the Republic of Egypt, replacing the previous statute of 2003. Latham & Watkins’s cross-border team spanned its London, New York, Washington, D.C., Frankfurt, Moscow, Hong Kong, and Dubai offices, involving lawyers from the firm’s financial regulatory, fintech, corporate, litigation, antitrust, and capital markets practices.

Latham & Watkins assisted the CBE with the formulation of its usage of non-cash payments’ methods law that was issued in April 2019 and which is designed to encourage the take up of non-cash payment methods in Egypt, thereby encouraging greater adoption of banking services in Egypt.

Egypt is one of the largest economies and most populous nations in Africa.  Governor Amer’s on-going economic reform programme has already led to various positive developments for Egypt. The new banking law should serve to drive yet further positive progress and success. This has resulted, for instance, in a significantly greater proportion of the population having access to banking and payment services.

David Berman, partner at Latham & Watkins in London said, “The new Banking Law should provide Egypt with a strong framework to underpin the regulation of its banking and payments industry; and, in turn, serve to add further impetus to the continuing economic reform programme. It was an honour to work with His Excellency Tarek Amer and his outstanding team at the Central Bank of Egypt on such an integrally important assignment – one which should, in the fullness of time, have tangible benefits for the economy and the population at large.”

According to Stuart Davis, another partner based in London with Latham & Watkins said, “The global financial services industry is undergoing rapid change with rapid developments in payments and financial technology. The new Banking Law creates a comprehensive regulatory regime covering payment systems, services and fintech which should help to foster growth and innovation in these important areas and we are honoured to have worked with the CBE team in its development.”

Egypt is putting financial inclusion, digital economy and trade facilitation as a priority in its agenda. Both the CBE and Financial Regulatory authorities are putting together fintech laws that will enable multiple fintech use cases, launching sandboxes to ensure consumer protection while doing so. In addition, building sovereign funds to close the gap of early-stage investments in fintech startups is being done to help contribute to the creation of a long pipelines of fintech startups that will help the country overall.

In summary, the new banking laws are to apply to all players in Egypt’s banking system, such as the CBE, exchange firms, and money transfer companies. With regards to the indirect ecosystem, those that are covered include credit reporting and rating companies, credit guarantee companies, operators of payment system and also payment service providers.

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