17:32
Friday 23 September 2022
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I wrote – Manal Al-Masry:
The bankers, with whom Masrawy spoke, expected that banks would seek to create innovative and non-traditional savings vessels that are not subject to required reserves, such as savings certificates for 3 years or more, in the coming period, in order to strengthen competition between the banking system.
According to the bankers, savings certificates starting from 3 years are not subject to the mandatory cash reserve, while short-term deposits will be subject to it.
Banks offering certificates of less than 3 years mean they will incur a higher cost, as if the bank draws £ 1 million from them, it will have to deposit 180,000 with the Central Bank.
The Central Bank of Egypt has decided to increase the mandatory cash reserve ratio of bank deposits to 18% instead of 14%, which accompanied its decision to set interest rates for the third time in a row.
Maged Fahmy, former head of the Bank for Industrial Development, said the decision will push banks to adjust the interest structure to reduce the cost of funds and to rely on three times as many savings certificates, as they are not subject to the ‘reserve obligation.
He explained that the decision will not have a significant impact on banks, as most of the deposits of individuals are concentrated in certificates and the minimum percentage is invested in short-term deposits and most of their clients are from the government or industry. private, which reduces the pressure to increase the compulsory reserve on the profitability of the banking system.
Sahar El-Damaty, former vice president of Banque Misr, said that increasing the cash reserve on banks will help create competition between them to issue savings certificates with a distinctive yield, rather than focusing on short-term vessels.
He explained that banks can resort to lowering the interest rate on short-term deposits to reduce the cost of operating funds following the increase in reserve requirements.
A board member of a private bank, who preferred not to be named, said the rumors could aim to create innovative non-traditional savings vessels that are not subject to required reserves, such as certificates.
He added that savings certificates with a duration of 3 years and beyond will not be affected by the decision to increase the mandatory reserve on banks, so as not to put any pressure on the banking system from the decision.
But short-term deposits from one day to less than 3 years will be subject to compulsory reserve, but their impact could be very weak on banks, as most of the deposit portfolio is concentrated in medium and long-term savings pools, according to the member of the Board of Directors.
He added that the bank’s decision to increase the required reserve is subject to adjustment, but after the improvement in the global geopolitical situation that has affected the world and has had its reflected effects on Egypt.
According to a central bank official, who yesterday said that the value of deposits increased by a trillion pounds in the period (January-August 2022) to bring the total deposits of the banking sector to 6.5 trillion. pounds at the end of last August, which helped increase liquidity – which is substantially high – with banks.
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