Central Bank chief holds crisis meeting

Bankers attack Farouk el-Okda

GMT 18:21 2012 Sunday ,30 December

Arab Today, arab today Bankers attack Farouk el-Okda

Farouk el-Okda is keen to resolve the economic crisis
Cairo – Mohammed Salah

Farouk el-Okda is keen to resolve the economic crisis Cairo – Mohammed Salah Egyptian banking sources have told Arabstoday that Governor of Egypt’s Central Bank, Farouk el-Okda led a meeting with other bank chiefs to discuss the economic crisis that the country is experiencing. The meeting, on Saturday evening involved talks about the dollar crisis, the drop in the foreign-exchange reserves and credit-rating demotion, which was followed by a similar demotion of three major government-owned banks. The demotions have had a negative effect on credit letters and increased the collateral requirements for imports, increasing their cost. The director of a leading bank told Arabstoday that banks have started adopting a package of measures in the face of dollar shortages. These procedures include withdrawing some of the bank’s investments abroad to meet the demands of clients making withdrawals in droves due to the hike in the price of the dollar against the Egyptian pound over this past month. Banks are also holding meetings with their department heads and branch directors to look into the implementation of the recent presidential decree limiting daily withdrawals to $10,000, the source said. The decree, according to the source, aims at reining in clients’ constant demand on the dollar from banks and currency exchange firms. The source added that the Central Bank has begun taking steps in this regard by posting its representatives to conduct frequent inspections of exchange firms, to monitor dollarisation attempts and combat the black market. Some banks, including some major government-owned establishments, have called back some of its dollar reserves abroad and millions of dollars have arrived via Egyptian airports headed for Egyptian banks to fulfil the clients’ demands. The banking source added that the meeting with Okda allowed the chiefs to formulate decisions toward the sound management of the crisis and discuss the banks’ ability to face it without being in danger of bankruptcy. Bankers have described el-Okda’s persistence in his position as Governor of the Central Bank as "unconstitutional" after Egypt’s new constitution was recently passed, including new provisions for the appointment and tenure of the governor. They have also branded the state of Egypt’s economy "bleak," with its financial resources "dried up." They have warned of bankruptcy due to the government’s wager that stability will come before the country’s resources have run out completely, which they said has been a failed hypothesis since the revolution broke out. They sat the situation in Egypt is grave, as the continuing political conflicts are pushing Egypt to the edge of bankruptcy, to the point where the government would have no choice but to cease the people’s bank deposits. This option, they said, would be difficult to implement, but they also demanded that the government and Central Bank take precautionary measures to avert a serious crisis With regards to Central Bank governorship regulations, former United Bank managing director Tarek Helmi has demanded that the post (along with other supervisory posts the holder of which cannot be sacked) be limited to a four-year term with a two-term limit set by the constitution, and not according to the President’s judgement. Helmi also emphasised the need for the governor to deliver a report every six months detailing plans and progress, and that his work is assessed every six months or a year to stop him veering off the set course. He also demanded mechanisms by which the governor can be corrected and directed by monitoring bodies. The former banker also called for the an "effective" parliamentary committee on the economy to monitor the Central Bank’s performance and consult with experts to assess reports by the bank as well as the Central Auditing Organisation in order to take control of exchange rates and inflation. Helmi also stressed the needs for reports on the Central Bank’s actions since the outbreak of Egypt’s revolution in January 2011 to be made public, detailing how the bank used the foreign-exchange reserve which Helmi said had "fallen very quickly." Those "implicated" should then be held accountable "without making random accusations," he said.  

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