CBE: Basel II To Be Applied By 2012 End

Central Bank of Egypt ended with preparing Basel II banking reform program, whose preparation started since 2009 till March 2012, to support CBE’s capabilities and competitiveness. The reform is prepared in cooperation with European central banks which offered the necessary experience and support to the Egyptian Central Bank.
CBE said in a statement today that all Egyptian banks should be applying Basel II by the end of FY 2012; June 2013 for some banks and December 2012 for some others.
The statement affirmed the importance of applying Basel II in Egyptian banking sector so as to be in line with the optimal banking practices and to be under international supervision. Basel II also set up risk and capital management requirements designed to ensure that a bank has an adequate capital for the risk amid its lending and investment practices as well as applying an advanced IT system.
Applying Basel II program has four phases. The first one started in January 2009 and ended in June 2009. This phase included developing the technical skills of CBE’s staff and Supervisory department’s staff as well as setting a strategy for the application.

The second phase started in July 2009 and ended in June 2011. This phase is the most important one as it included discussing banking systems with banks to choose an optimal system to be applied in the market with considering similar experiences around the world. In addition, gauging the possible quantitative impact of applying Basel II on banks was done before the compulsory application. Also in this phase, a new mechanism is set to collect and save the date received by CBE from banks. The third phase started from July 2011 and ended at the end of March 2012. This phase focused on ending the final form of the supervision regulations and training supervision department on applying these regulations. The fourth phase is a continuing phase in which CBE will help banks in applying Basel II program as well as ending implementing data saving mechanism. CBE noted that Basel agreements are developing and changing to cope with international banking market. Basel III is launched globally and it slated that it will be applied to all banking markets by 2019. CBE’s statement also stated that it took into consideration applying Basel III; therefore it applied first Basel II so as to facilitate the application of Basel III in the Egyptian market. CBE organized a closing ceremony to the technical program made between CBE and European Central Bank as well as the central banks of the following countries: France, Germany, Italy, Greece, Bulgaria, Romania and Czech, besides the financer of EU. The ceremony was attended by EU’s delegation in Cairo, participating European counties ambassadors, the ambassador responsible for Egyptian European partnership at international cooperation ministry, vice director of regional cooperation unit at European Central Bank, banking experts, the seven participating European Central Banks, directors and chairmen of Egyptian banks and CBE’s senior officials.

The statement referred to the positive financial results achieved during the first phase of the reform banking program which extended from 2044 to 2008. The most important of these achievements are limiting the negative effects of the last financial crisis, as compared to the losses that occurred in international markets and banking systems. In addition, banks in Egypt also succeeded in withstanding against the economic turmoil happened after the revolution of 25th of January. The statement also affirmed ECB’s contribution in the first phase by developing supervision department staff at CBE in line with the cooperation agreement signed in 2005. CBE’s statement also noted that banking supervision strategy changed from being commitment supervision to risk-based supervision. In addition, Information management was also developed to guarantee providing high quality data.