The Strategy of implementing Basel accord in Egypt
The implementation of Basel accord by Egyptian banks aims to increase the ability of banks to manage risk, as part of the Strategy of the Central Bank of Egypt, which was announced to Egyptian banks and all parties concerned with banking affairs at an expanded meeting held in October 2009, focusing on implementing Basel accord using two main principles which are facilitation and consultation with banks to ensure their ability to apply the regulations smoothly and gradually.
This was done through the signing of a joint cooperative agreement in this regard in year 2008 between the Central Bank of Egypt and both of European Central Bank, and seven European central banks of the following countries: Bulgaria, Romania, Greece, France, Italy, Germany and the Czech Republic, where a three-year program has been set as a time frame, started in January 2009. In the mean time a full-time CBE team was formed for the purpose of accomplishing this task and to manage all aspects of the accord’s implementation, in addition to the presence of a resident coordinator nominated from the European partners.
The phases of the program included building the capacity of both the working team and seniors of supervision and bank’s control sector with regard to Basel II accords and to keep an ongoing coordination with Egyptian banks through the issuance of a set of the following: i) discussion papers on various core topics, ii) Quantitative impact studies to assess the results that might effects banks’ performance, and finally, construction of a data warehouse submitted by banks to the CBE , as well as Termination of the regulatory instructions relating to this matter.
The methodology for implementing Basel accords based on following two basic principles by CBE: facilitation and consultation with banks, and the principle of facilitation is required to remain consistent with the different levels of information and control systems of banks, and to ensure a smooth transition under the regulations, taking into consideration that the standardized approach is the appropriate method for doing so at the beginning of the implementation.
As for the second principle, an open dialogue frameworks have been setup with banks, where working groups of all types of Egyptian banks and other parties have been formed, including mutual understanding on the contents of Basel II as well as closely monitoring their impact on the banking system. The working groups were given a fully delegation to examine and provide an opinion on all practical issues.