Banks operating in the Egyptian market will start discussing raising the interest rates on their USD certificates on Sunday after the National Bank of Egypt (NBE) raised the rate on its certificates to 5.30%.
Recently, the NBE announced that it would adjust the interest rates on its three “golden” USD savings certificates and the Ahl Misr USD certificates for five and seven years for new issues starting from 9 October.
These certificates can be deposited through all of the bank’s branches or through the Al-Ahly Net application for the convenience of customers
The new gold certificate gives an interest of 5.30% annually, 5.25% semi-annually, 5.20% quarterly, and 5.15% monthly.
The minimum purchase amount for the certificate is $500 and its multiples.
As for the Ahl Masr USD certificate — which has a term of five years — yields an interest of up to 5.15% annually, 5.10% semi-annually, 5.05% quarterly, and 5% monthly.
The minimum purchase amount for this certificate is also $500 and its multiples.
As for the seven-year-term Ahl Masr USD certificate, it yields an interest of 5.05% annually, 5% semi-annually, 4.95% quarterly, and 4.90% monthly.
The minimum purchase amount for this certificate is $1,000 and its multiples.
Following the trend, Banque Misr also decided to raise the interest rates on its USD savings certificates starting Sunday.
A source at the bank said that the yield for the the-year maturity certificate will be 5.30% annually, 5.25% semi-annually, 5.20% quarterly, and 5.15% monthly.
Meanwhile, the interest of the certificate with a five-year maturity will be raised to 5.15% annually, 5.10% semi-annually, 5.05% quarterly, and 5% monthly.
This move by the NBE is the first step in re-pricing the savings vessels in USD in the Egyptian market after the recent increases approved by the US Federal Reserve for the USD.
A few days ago, Daily News Egypt published details on what happened during a meeting between officials of the treasury sectors and bank money managers with officials of the Central Bank of Egypt (CBE), the Treasury, the Asset Management Committee of the Federation of Egyptian Banks, and the Egyptian Association of Traders, all of which met with the aim of developing a vision for pricing savings vessels in foreign currencies, and the main indicators that will be used in the pricing process.
Banks operating in the Egyptian market are aiming to use the American SOFR index as an alternative to the LIBOR index in pricing their savings vessels in USD in preparation for halting all dealings with the LIBOR permanently as of June 2023.
During a meeting of treasury officials with the leaders of the CBE headed by Acting Governor of the CBE Hassan Abdalla, discussions were held repricing savings vessels in foreign exchange, especially deposits and savings certificates in USD in light of the developments in global financial markets, the US Federal Reserve raising the USD interest to record levels, and the presence of expectations for continuity of this trend in the coming period.
The pricing of USD deposits in banks was previously done on the basis of the LIBOR rate for a period of three months + 1%, provided that the interest rate on USD savings certificates did not exceed 2.25%, according to previous instructions from the CBE in this regard.
According to sources, after much consultations, banking officials suggested the possibility of pricing USD deposits for terms less than one year on the basis of the SOFR index for a period of three months + a margin, and pricing deposits for terms of more than one year on the basis of the SOFR for a period of one year + a margin.
As for the savings certificates in USD, it was agreed to re-price them in line with the trend of USD interest globally, so that the prices traded in the local market are not far from it.
The CBE also asked treasury officials and bank money managers who attended this meeting to discuss everything that was reached in this meeting with the Egyptian Association of Traders and the Treasury and Asset Management Committee of the Federation of Egyptian Banks to reach a final formula that can be agreed upon and sent to the CBE for final discussion and approval.
Consequently, an expanded meeting was held between these parties under the umbrella of the Union of Banks, where what was agreed upon at the CBE meeting was discussed.
According to sources, the meeting witnessed extensive discussions between money managers in banks about the need to set maximum limits for pricing USD savings vessels, as officials of small-sized banks preferred this matter so that they could compete, while representatives of major banks objected to it, demanding not to set a maximum pricing limit.
It was also discussed during the meeting the possibility of reducing the mandatory reserve ratio of foreign exchange deposits with banks, which currently stands at 10%, as some see the need to reduce it to 8% to help banks raise the interest of their deposits in those currencies.
This meeting ended with an agreement that the Treasury and Asset Management Committee of the Federation of Egyptian Banks would draft what was agreed upon and send it to the banks for discussion in preparation for sending it to the CBE for approval.