Interest rates

Banks seek to raise interest rates on USD certificates by Sunday

Banks operating in the Egyptian market will start discussing raising interest rates on their USD certificates on Sunday after the National Bank of Egypt (NBE) raised the rate on its certificates to 5.30%.

Recently, the NBE announced that it would adjust the interest rates on its three “golden” USD cash certificates and Ahl Misr USD certificates for five and seven years for new issues from October 9th.

These certificates can be deposited at any branch of the bank or through the Al-Ahly Net application for the convenience of customers.

The new gold certificate gives an interest of 5.30% per annum, 5.25% per semester, 5.20% per quarter and 5.15% per month.

The minimum purchase amount for the certificate is $500 and its multiples.

As for the Ahl Masr USD certificate – which has a term of five years – earns interest of up to 5.15% per annum, 5.10% per semester, 5.05% per quarter and 5% per month.

The minimum purchase amount for this certificate is also $500 and its multiples.

As for the Ahl Masr USD certificate with a term of seven years, it pays an interest of 5.05% per year, 5% per semester, 4.95% per quarter and 4.90% per month.

The minimum purchase amount for this certificate is $1,000 and its multiples.

Following the trend, Banque Misr also decided to raise interest rates on its USD cash certificates from Sunday.

A source at the bank said the yield on the certificate maturing annually will be 5.30% per year, 5.25% per semester, 5.20% per quarter and 5.15% per month.

During this time, the interest on the five-year certificate will be increased to 5.15% per year, 5.10% per semester, 5.05% per quarter and 5% per month.

This decision by the NBE is the first step in the revaluation of USD savings ships in the Egyptian market after the recent increases approved by the US Federal Reserve for the USD.

A few days ago, Daily News Egypt published details of what happened during a meeting between officials from Treasury sectors and bank fund managers with officials from the Central Bank of Egypt (CBE ), the Treasury, the Asset Management Committee of the Federation of Banks and the Egyptian Traders Association, all of which came together with the aim of developing a vision for the pricing of foreign currency savings vessels, and the main indicators that will be used in the pricing process.

Banks operating in the Egyptian market aim to use the US SOFR index as an alternative to the LIBOR index to price their savings vessels in USD with a view to permanently stopping all transactions with LIBOR from from June 2023.

During a meeting of treasury officials with CBE leaders led by Acting CBE Governor Hassan Abdalla, discussions were held on repricing foreign currency savings vessels, especially deposits and USD savings certificates in light of developments in global financial markets, with the US Federal Reserve driving interest on the dollar to record highs, and the presence of expectations for the continuation of this trend in the period coming.

Pricing of USD deposits in banks used to be based on the LIBOR rate for a period of three months + 1%, provided that the interest rate on USD cash certificates did not exceed 2.25% , according to the prior instructions of the ECB in this regard.

According to sources, after much consultation, bank officials suggested the possibility of pricing USD deposits for terms of less than one year based on the SOFR index for a period of three months + a margin, and pricing deposits for terms longer than one year based on SOFR for a term of one year + a margin.

As for the USD cash certificates, it was agreed to revalue them according to the trend of USD interest rates around the world, so that the prices traded in the local market are not far from it. .

The CBE has also asked the Treasury officials and bank fund managers who attended this meeting to discuss all that was achieved in this meeting with the Egyptian Traders Association and the Treasury and Cash Management Committee. assets of the Federation of Egyptian Banks to arrive at a final formula which can be agreed and sent to the CBE for final discussion and approval.

Therefore, an enlarged meeting took place between these parties under the aegis of the Union of Banks, where what had been agreed at the EPC meeting was discussed.

According to sources, the meeting was the scene of in-depth discussions between bank fund managers on the need to set maximum limits for the pricing of US dollar savings vessels, as officials from smaller banks preferred this issue. to be able to compete, while the representatives of the big banks opposed him, demanding not to set a maximum price limit.

The meeting also raised the possibility of reducing the reserve requirement rate for foreign currency deposits with banks, which currently stands at 10%, as some see the need to reduce it to 8% to help banks increase the interest on their deposits in these currencies.

This meeting ended with an agreement that the Treasury and Asset Management Committee of the Federation of Egyptian Banks would draft what had been agreed and send it to the banks for discussion with a view to sending it to the CBE for approval.