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Majority loans are to the corporate segment, with retail sector loans making
The SME sector is also underserved, as SMEs account for 80% of the private
sector workforce, but only a fraction of their working capital requirements are
http://nilex.com.eg
Issuance of Banknotes
Maintaining Price Stability
Managing the gold and Foreign Exchange Reserves
Implementing monetary and credit policies
Supervising the national payments system.
Recording and following up Egypt's external debt (public and private)
Regulatory Standards
Minimum paid-up capital requirement of EGP 500 million for
domestic banks and US$ 50 million for branches of foreign banks.
Minimum ratio for capital base to risk-weighted assets of 10%.
Liquidity ratio of 20% on the Egyptian pound portion of their liquid
liabilities, and 25% in respect of their foreign currency portion.
Minimum cash reserve requirement with CBE of
Regulatory Standards(cont.)
Bank placements (excluding branches of foreign banks) with a single
correspondent abroad should not exceed 10% of total placements
Basel I and II
In 1988, the Basel Committee on Banking
Supervision
starts to set up rules and
regulation aiming to enrich the stability and
soundness of the international banking system
This ends up with the development of a new
framework, which known as Basel I
For more detailed explanation see page 486
Basel I and II
Summary of Basel I :
Primarily focused on Credit risk
Sets out simple rules for calculation of minimum
regulatory capital by using a risk weighting framework
All assets are assigned a weight to reflect their
riskiness
Assigned Risk Weight x Exposure = Risk weighted Asset
Risk weightings at
0% (for cash, claims on central
governments denominated and funded in national currency),
10%, 20%, 50% and 100% (for claims on corporate)
Basel I and II
Summary of Basel I :
Sum of Risk Weighted Assets x Capital Ratio = Minimum
Regulatory Capital
Where Banks capital under Basel I is divided into two main parts:
Tier 1 (core) capital included the book value of common
stock, non-cumulative preferred stock, share premiums (
surplus), retained profit (undivided profit).
Tier 2 (supplementary) capital included the allowance
(reserve) for loan and lease losses, cumulative preferred
stock, and long-term subordinate debt capital instruments.
Where subordinated debt capital representing long-term
debt capital contributed by outside investors , whose
claims legally follow the claims of depositors .
Basel I and II
Under Basel I , Banks with international
presence are required to hold capital equal to
8 % of the risk-weighted assets
As a general role, risky assets (e.g., commercial
loans and consumer instalment loans) require
maintaining total equity capital equal to 8% of the
assets book value.
On the other hand, risk-less assets (e.g. cash and
government debt) have no-capital-requirements
Basel I and II
The Basel II Capital Accord is Structured around three
pillars:
Pillar One Minimum Capital Requirements
Basel I and II
Pillar Two Supervisory Review Process
Basel I and II
Pillar Three Market Disclosure
Provides detailed guidance on the disclosure of the capital structure, risk exposures
and capital adequacy of banks
Committee Objective: Create another layer of supervision by exposing banks capital
structure, risk exposures and mitigation strategies to the public
Under Basel II , the basic capital requirements for banks (
8%) can be expressed as the ratio of banks capital to credit,
market and operation risks
Basel I and II
Credit risk
Basel I and II
Market risk is the risk that the value of a portfolio, either
an investment portfolio or a trading portfolio, will decrease
due to the change in value of the market risk factors. The four
standard market risk factors are stock prices, interest rates,
foreign exchange rates, and commodity prices.
Islamic Banks
Islamic banking refers to a system of banking or banking
activity that is consistent with the principles of Islamic
law (Sharia) and its practical application through the
development of Islamic economics.
Islamic Banks
The argument is put forward that an interest-based
economy has a built-in tendency toward inflation,
because the creation of money is not related to
productive investment , either at the level of central
bank or at the level of commercial banks.
Islamic banks capital structure rely mainly on their
shareholders and depositors, who are primarily
individuals. Within the banking community, Islamic
institutions are rather small, because of their
shareholder structure being made up of the general
private public of the host country
Islamic Banks
Islamic Finance Institution may engage in the
following activities for their customer:
a) Participation Financing (Musharaka) : The bank
provides part of the equity and working capital
requirement of a project, and shares with the
entrepreneur any profits or losses. Profits are shared
according to a pre-agreed ratio. Losses, however, are
borne in proportion to the capital contribution.
Islamic Banks
Islamic Finance Institution may engage in the
following activities for their customer:
b) Trust Financing (Mudaraba) : The banks provides all
capital required. The clients provides the
management skill for a given project, again on a
predetermined profit-sharing basis. Losses , in this
case, are borne by the bank alone, the client losing
the value of his or her work
Islamic Banks
Islamic Finance Institution may engage in the
following activities for their customer:
C) Cost-Plus-Trade Financing (Murabaha): The Financial
institution purchases raw materials, goods, or
equipment at cost and sells them to the client on a
cost-plus-negotiated profit margin
D) Rental Financing ( Ijar): The bank acquires equipment
or buildings and makes them available to the client on
a straight forward rental basis.
Islamic Banks
Islamic Finance Institution may engage in the
following activities for their customer:
E) Lease-Purchase Financing (Ijar we Iktina): The
arrangement is similar to Rental financing that the
client has the option of acquiring ownership of the
rented equipment or building by paying installments
into a saving account. The re-investment of this
accumulated capital works in favor of the client ,
allowing him or her to offset rental cost.