Banque Misr Raises Capital To Comply With Basel II, Offer Larger Finances: Experts

Bankers welcomed the move taken by Banque Misr to increase its capital by EGP 6.3 billion to reach EGP 11.3 billion, becoming the largest capital holder of all Egyptian banks. Such move will enable the bank to expand in its lending activities more than before as the Central Bank of Egypt does not allow a lender to finance a customer with more than 25% of its capital.

Bankers expected most banks in Egypt to increase their capitals in the current period as the credit ratings of banks, which focused in the last period on investing in treasury bills and bonds, were downgraded. In addition, the economic situation is expected to achieve high growth rates amid expectations of attracting great investments which would require large finances. Besides, banks are in need to raise their capitals so as to comply with Basel II and Basel III regulations.

Saeed Zaki, board member of Egyptian Gulf Bank, said banks tend to raise their capitals in order to comply with Basel II regulations and capital adequacy ratio. In addition, large companies are venturing in new investments which require large finances.

Increasing capital will contribute in strengthening the financial positions of banks to be able to stand against economic crises, Zaki noted. Banks will raise their capitals on a long term as some banks need five years to raise their capitals EGP 2 billion, he added.

Bassant Fahmy, banking expert and former consultant to Al Baraka Bank, hailed Banque Misr’s decision to raise its capital. The government decided to covert a loan made to the bank earlier into bank equity, raising the bank’s capital. Such move will bring the bank’s capital into compliance with capital adequacy ratio and Basel II and III regulations, she added.

She noted that state-owned banks are in need to raise their capitals more than private banks as the government turned in the last period to public banks to finance a budget deficit, which accordingly lowered the credit ratings of these banks three consecutive times since the beginning of the last year. On the other hand, private-sector banks have strong capitals as they finance customers with strong solvency levels and retreat from offering large finances. The banking expert expected Banque Misr to lend large companies after being the largest capital holder of all Egyptian banks.