Bond Activation, EGX-Listing Modifications Are Key Drivers for Market Kick-off
EFSA chief to Amwal al-Ghad:
Microfinance draft law to be finalized before submission to Ministry of Social Solidarity
Cooperation with CBE and Finance Ministry of Finance to define market obstacles
Amendments to regulations in bid to boost business
Sherif Samy, chairman of Egyptian Financial Supervisory Authority (EFSA), unveiled the final draft of the first microfinance law. The law is expected to stimulate work among companies, banks and non-profit organizations, Samy said. At present, the draft is to be discussed with the concerned parties, which include the Ministry of Social Solidarity, he added.
The EFSA is meeting with Central Bank of Egypt (CBE), the Ministry of Finance, the National Bank of Egypt (NBE), Banque Misr and Banque Du Caire in November to discuss obstacles to activating the bond market.
What will be the impacts of the new amendments?
Sherif Samy said new amendments are to be applied in order to make it easier for companies to reduce the required approvals. Contributions took place currently with Stock Exchange Management and other concerned parties as well as the proposals of EFSA which awaits the formation of its new board of directors. Proposed amendments are expected to be ready by the end of 2013.
Amendments will be applied on disclosures, listing terms, holding companies, foreign assets, prior disclosures, share split and Treasury bonds, Samy said, adding that small and medium sized enterprises (SMEs) will have special rules aimed at stimulating the market, activate business and increase liquidity.
What about EFSA meetings with concerned parties on activating the bond market?
Recently we met with the CBE, the Ministry of Finance, the NBE, Banque Misr and Banque Du Caire and some other companies to discuss everything related to reactivating the bond market and to propose a platform for bond trading. The weakness of the stock market has deprived companies fund sources, squeezed balance sheets and harmed business confidence, Samy said. We agreed that parties will have to study the situation before presenting the details and deciding on those obstacles to be discussed in another meeting this November.
Has the EFSA finalized the draft of investment fund regulations?
The EFSA is also drafting rules to prepare for the launch of the country’s first exchange-traded funds (ETFs), which are listed investment funds. It is hoped these will be approved this year. The regulation has ten articles on technical matters, which are to be amended. It is to be presented to EFSA board of directors once the board is formed. After obtaining the board’s approval, the regulation will be sent to the ministry concerned. The draft grants the Mortgage Fund juristic identity. It also deals with the situation of bond and index funds and allows one bond multiple issuances.
What are the latest developments in Exchange-Traded Funds (ETFs)?
A staff representing all concerned parties is working on activating ETFs which are considered low-risk funds for which trading expenses are low. ETFs do not need analysts, while ETF legal and regulatory conditions have recently been discussed to ensure they can be launched, Samy said.
What about the microfinance law?
The EFSA chairman said they had finalized the draft of the first microfinance law, which is aimed at stimulating work among companies, banks and non-profit organizations with the cooperation of other concerned parties and the Ministry of Investment.
What are the results of EFSA meetings with the Constitution Amendment Committee?
We visited the 50-member Constitution Amendment Committee and met with the committee chairman Amr Moussa and committee member Gaber Nassar to discuss the main role of the EFSA. We explained that if the EFSA’s became an independent authority, it would raise market classification. Meanwhile, we told them the amended constitution should not include certain articles relating to taxation to avoid their being interpreted as restrictions on financial policy making.
Recently, you announced the transfer of some of EFSA’s responsibilities to the Egyptian exchange management. What are those responsibilities?
Those responsibilities cannot be disclosed. However, this will be clearer through drafting the market rules. We decided to do this to facilitate procedures for all parties. We transferred everything related to share splitting, listing, and financial deliveries due to their clear procedures which do not require EFSA supervision.
Is the EFSA to reconsider the decree preventing brokerages from dealing with other stock exchanges?
The former decree was in response to problems with foreign currency. Before it can be reconsidered, we have to regain stability in tourism and direct investment.
What about the review of Egypt’s Investor Protection Fund?
We had already received inquiries about this issue after January revolution. We will review the entire file to assess the market.
What are the consequences of EFSA’s recent meeting with big-name accounting firms?
Accounting firms are considered the main driving forces of the market, which is why we met with them to discuss Egyptian accounting standards under EFSA auspices and form its own audit committee. We agreed to review the rules of accountant listing. We also suggested standards for small and medium companies as well.
What issues were raised during the recent meeting between the EFSA and insurance companies?
We held an in-house internal meeting with specialists before our session with insurance companies to define the priorities and needs of the insurance sector. The current political situation topped the agenda of our meeting with 26 insurance firms. Insurance company chairmen said they had made use of the consequences of the January 25 Revolution, which in turn helped resolve all complaints and obstacles that they might encounter.
Does the EFSA intend to meet with other parties?
Of course, with health-care companies and insurance brokerages.
How do you see medical insurance and health care sector performance in the coming period?
Medical insurance and the health care sector are expected to achieve good growth due to increasing demand.
What about private insurance funds?
We will devote special attention on this issue in the coming months to amend its legal terms. The law has barely changed since it was passed in 1975. Meanwhile, private insurance funds were worth LE36 billion by the end 2012, so we are working on that legislation which needs to be modified.
