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Implementing Basel III, reducing government's borrowing rate are best ways to improve banking sector: expert - Daily News Egypt

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Implementing Basel III, reducing government’s borrowing rate are best ways to improve banking sector: expert

The next step needed to reform the banking sector is to implement the Basel III banking system, says head of research department at Prime Holding


The Central Bank of Egypt (CBE) is ready to implement the next phase for reforming the banking sector following the decision to float the Egyptian pound in November, CBE governor Tarek Amer said on Thursday.

He added that new targeted reforms include financial inclusion, electronic payment, and implementing new criteria that guarantee that banks are performing at their best in order to serve customers.

Abobakr Emam, head of the research department at Prime Holding, said that the next step needed to reform the banking sector is to implement the Basel III banking system.

He said that banks currently operating in Egypt depend on the Basel II system, and it is time to implement the new system.

According to the Bank for International Settlements, Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision, and risk management of the banking sector. These measures aim to improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source, improve risk management and governance, and strengthen banks’ transparency and disclosures.

Emam believes the banking sector in Egypt is very strong and well trained to absorb any economic problems, such as what happened in 2008.

He said that former CBE governor Farouk El Okdah established a very strong system aimed at strengthening banks and guaranteeing their sustainability.

“The problem with financing private sector projects is not reduced to problems at banks,” Emam said, adding that financing the private sector requires that a lot of other measures be taken by the government.

The government’s massive borrowing rate from banks makes it easier for banks to finance the government and invest its money in treasury bills, instead of lending to the private sector for more risky investments, Emam said.

The best solution is for the government to reduce its rate of borrowing from banks, he noted.

Emam also said that the CBE must reduce its interest rate if it really wants banks to finance the private sector, explaining that it is too high, which makes it hard for investors to apply for loans, and also results in banks implementing tougher conditions for providing loans.

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https://www.dailynewsegypt.com/2016/12/10/implementing-basel-iii-reducing-governments-borrowing-rate-best-ways-improve-banking-sector-expert/
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