Egypt’s central bank exempts EALB bank from 14% required reserve ratio

Egypt’s central bank has exempted the state-owned Egyptian Arab Land Bank (EALB) from a 14 percent required reserve ratio on local currency deposits, banking sources said on Sunday.

The move came as part of the central bank’s plans to ease regulations for local specialised lenders, the sources told Amwal Al Ghad.

The central bank wants to provide indirect support for the EALB’s liquidity and capital base, enabling it to pump more funding into the market, they said.

This is not the first bank to receive an exemption as the state-owned Egyptian Agricultural Bank was recently given reserve requirement ratios of zero percent besides a central bank deposit worth 10 billion Egyptian pounds ($558.1 million), they added.

Egypt’s central bank raised in October 2017 the required reserve ratio on local currency deposits to 14 percent from 10 percent for domestic banks.

The reserve ratio is the portion of reservable liabilities that depository institutions must hold onto, rather than lend out or invest. This is a requirement determined by the country’s central bank. As a simplistic example, if the central bank determined the reserve ratio to be 14 percent. This means if a bank has deposits of 1 billion pounds, it is required to have 114 million pounds on reserve.