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Reading: Central Bank halts cash dividends at banks in anticipation of continued pandemic
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Dailynewsegypt > Blog > Business > Banking > Central Bank halts cash dividends at banks in anticipation of continued pandemic
Banking

Central Bank halts cash dividends at banks in anticipation of continued pandemic

Hossam Mounir
Last updated: 2021/01/13 at 8:30 AM
By Hossam Mounir 2 Min Read
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The Central Bank of Egypt (CBE) has launched a new EGP 15bn initiative to finance the dual-fuel vehicle conversion plan, with a lump-sum return of 3%.
The Central Bank of Egypt (CBE) has launched a new EGP 15bn initiative to finance the dual-fuel vehicle conversion plan, with a lump-sum return of 3%. In a Sunday letter to banks, the CBE said that the initiative aims to support the government’s ambitious, recently announced multi-year plan to replace car engines powered by traditional fossil fuels with dual-fuel engines that run on both petrol and natural gas.
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Banks operating in the local market will not be obliged to make cash dividends from the year’s profits, or retained earnings that are distributable to shareholders, according to the Central Bank of Egypt (CBE).

In a letter to banks posted on its website, the CBE clarified that the measure aims to support the capital base of banks in Egypt. It will ensure that they are able to face the potential risks as a result of the continued spread of the novel coronavirus (COVID-19).

The CBE added that the disbursements will be limited to employees, and the remuneration to Boards of Directors at banks, which will be paid for fiscal year (FY) 2019/20 only.

It added that the decision comes in light of the continuing COVID-19 pandemic, both within Egypt and worldwide, and given the lack of clarity of vision regarding the expected end date.

The decision also aims to cover the extent of the pandemic’s impact on the economic situation in the coming period. It takes into account the role entrusted to the CBE in maintaining the integrity of Egypt’s monetary and banking systems to hedge against any events that may arise during the coming period.

Radwi Al-Swaify, Head of Research Sector at Pharos Holding, said that the CBE’s decision helps banks boost their capital to the stipulated EGP 5bn, as minimum capital under Egypt’s new banking law.

Al-Swaify also said that not distributing cash dividends enhances the capital, and enables banks to gain faster access to the legally required capital. At the same time, it reduces the need to pump liquidity into the capital before the date specified in the law, whilst also allowing shareholders to be compensated by distributing free shares.

She added that this decision enhances the banks’ ability to increase their capital adequacy rates and reach Basel III requirements in this regard.

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TAGGED: banks, CBE, Central Bank of Egypt
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