About CBE

The history of the Central Bank of Egypt may be traced back to year 1951 when Law No. 57 was issued  concerning the establishment of a state central bank. It was the first legislation that stipulated clearly the establishment of such an organization in Egypt. Actually, this Law did not establish a new institution in charge of central banking activities, but it assigned the central banking functions to the National Bank of Egypt (NBE). Accordingly, Dr Ahmed Zaki Saad was appointed as the first Egyptian Governor of the Bank.

The economic and social developments that took place during the 1950s necessitated the amendment of the said Law to grant the central bank more powers to regulate banks activities, particularly those related to credit operations. Therefore, Law No. 163 for 1957 was promulgated. Article no (1) of this Law stipulated that the NBE is the Central Bank of Egypt that regulates the banking and credit policy and oversees the implementation of this policy according to the general plans of the state to promote the national economy and achieve stability in the Egyptian banknotes.

In line with the growing international trend during the 1960s concerning state ownership of central banks, conditions were considered then favourable for nationalizing the NBE. As such, Law No. 40 for 1960 was promulgated. By virtue of this Law, the NBE became a state owned public organization that acted as a central bank.

After achieving stability in the NBE conditions  following its nationalization, it was divided into two banks. In this respect, Law No. 250 for 1960 was issued concerning the Central Bank of Egypt and the NBE. Article no (1) of this Law stipulated the establishment of  a public legal entity called the Central Bank of Egypt that performs the duties and  functions of the central bank, stipulated in Law no 163 for 1975. The Central Bank of Egypt began exercising its  functions as a separate bank  as of  the 1st of Jan. 1961.

According to each historical stage of the Egyptian economy, the duties and functions of the CBE has been tailored to meet each respective requirements. Prior to the open door policy, banks had been  subject, by virtue of  Law No. 163 for 1957 concerning Banks and Credit, to several regulations regarding the use of their resources, such as setting a maximum limit for interest rates as well as for loans granted thereby. However, the said Law was amended when the State entered the stage of the open door policy during the 1970s and allowed the establishment of private banks, joint ventures  as well as branches of foreign banks.  In this regard, Law No. 120 for 1975 was promulgated. According to the Law the discount and interest rates (deposit and lending) on LE banking operations were allowed to move, and the CBE was granted  more independency and freedom to manage its affairs and achieve its purposes.

Law No. 50 for 1984 was issued so that  the CBE could exercise more effective  regulatory role , and stricter supervision on the banking sector , including banks that had not previously been subject to its  supervision.

In the early 1990s, Egypt began to adopt a comprehensive economic reform program based on market mechanisms, subsequently granting  the private sector a greater role in the country's development process and achieve an efficient resource allocation of. The Reform Program focused in its first stages on liberalization of the financial sector. The reform measures related to the banking system included: shifting toward the indirect monetary management; liberalizing interest rates on loans and deposits; liberalizing exchange rates; eliminating credit ceilings; as well as liberalizing banking service fees.

In the light of the economic developments taken place internally and externally, especially those relating to  the regulation of dealing on the foreign exchange market, and Banking supervision,  Law No.88 of the Year 2003 Promulgating the Law of the Central Bank, the Banking Sector and Money was issued. This law has repudiated all relevant  previous laws. This Law mainly aimed at enhancing the independency of the CBE as regards formulating and implementing the objectives of the monetary policy. Moreover, it gives the Bank more powers to ensure the realization of the said objectives. According to this Law, the Central Bank became directly subject to the President of the Republic . It states that the Central Bank shall set, in agreement with the government, the objectives of the monetary policy, through a coordinating council to be formed by decree of the President of the Republic (Presidential Decree No. 17 of the Year 2005). The Council is to be chaired by  the Prime Minister, and with the membership of : the Ministers of Finance, Planning and Investment, Governor of the Central Bank and his two deputy governors, and expertise in the economic, banking and financial affairs. Article II of this Decree sets the authorities of the Coordinating Council, stating that the Council shall determine the targets of the monetary policy and the Prime Minister shall determine the issues to be referred to the Council.  The Governor of the Central Bank shall notify the People’s Assembly as well as the Shura Council of these objectives, and any modifications to them during the financial year. The Central Bank shall take the means with which it ensures the realization of its objectives and the discharge of its functions.

The Central Bank of Egypt has declared its intention to put in place a formal inflation targeting framework to anchor monetary policy once the fundamental prerequisites are met. This will further enhance the predictability and transparency of the monetary policy in Egypt. In the transition period up till now , the CBE meets its inflation objectives by steering short term interest rates, keeping in view the developments in credit and money supply, as well as a host of other factors which may influence the underlying rate of inflation.

At the same time , the Central Bank has embarked upon a comprehensive banking reform based on the following  four pillars :

1) privatization and consolidation of the banking sector;

2) addressing the issue of non-performing loans;

3)streamlining the financial and managerial structure of state-owned banks; and 

4) upgrading the CBE banking supervision.

Since 2004 up to the date ( 2007), the CBE has managed to achieve a sizable  part  of this plan. Indeed, the CBE spares no effort to promote the efficiency of the banking sector to increase its robustness in face of a highly competitive international and regional banking industry.