Non-Banking Regulatory Entities Merger:
During an interview with Al-Shaab Yoreed (People Want) talk show, Dr. Ashraf Al-Sharkawy – the Chairman of the Egyptian Financial Supervisory Authority (EFSA), stressed that it was necessary to unify all the non-banking regulatory institutions into one entity. He added that each country has only two entities for regulation; one for the financial sectors and other for the banking sector of which the central banks are in charge.
Al-Sharkawy noted that working on unifying the regulatory institutions has started in 2004 through the making of unified rules as well as legal and administrative structures in order to make the merger among capital market, insurance, mortgage finance, securitization and factoring.
“After making the merger among the regulatory entities, we shall start then working on dissolving the administrative and legislative differences among them so that we would eventually get the full integration.” Al-Sharkawy added
Al-Sharkawy explained that the merger process has been slowed down due to the revolution repercussions on the capital market. During that time, the EFSA was busy with protecting the non-banking financial system. EFSA had imposed a number of precautionary procedures on the market. EFSA had also solved problems related to mortgage finance’s defaulted payments.
Brokerage Firms Not Listed In NILEX For International Standards
Al-Sharkawy stated that the decision of preventing financial services companies from listing at Nile Stock Exchange – NILEX has been made in accordance with the principles of International Securities Exchange.
According to international standards, companies responsible for running other firms’ properties are not considered small-or-medium-sized enterprises (SMEs), regardless of the volume of their capital. Accordingly, such companies are not allowed to get listed in NILEX, as prescribed by the amendments to the listing rules, he added.
He also stressed that violating the international standards will have a negative impact on Egypt’s ranking among the world’s economic powers, and will also affect Egypt’s membership at the International Organization of Securities Commissions (IOSCO), which would, in turn, hinder the flow of foreign investments into the Egyptian economy.
EGX Companies Should Have Websites… Deadline March 2013:
Al-Sharkawy said the companies listed in EGX have a grace period till 30th March 2013 to create websites.
Al-Sharkawy added that the companies should abide by updating these websites, and the EGX will have the complete rights in supervising these websites. It also will abide the companies by offering periodic financial statements, stating all the disclosures and data of the company, to have a new development in disclosure rules of EGX, as the investor will be able to make his decisions.
He explained that the EFSA regularly changes the rules of registration, write-off and the organized mechanisms of stock markets. It always has changes and ongoing development every three months. He added that he called on the EGX administration to send all the controversial points around the mechanisms of dealing, full disclosure and governance, in order to have all the demanded change by the end of June 2013.
On the other context, he referred to the problems of the companies which were written off in 2009; explaining that these companies could be registered again in EGX, after improving their states. Moreover, the shareholders should exercise their rights in the general assemblies, so as to press on the administration till the managing director submits re-listing requests to the EGX.
‘Exploratory Session To Return This Month … Block Trade Not Fit Egyptian Market’
Dr. Ashraf Al-Sharkawy – the Chairman of the Egyptian Financial Supervisory Authority (EFSA), has asserted that the Egyptian Exchange (EGX) will decide when the exploratory session would come into effect.
“EGX is making nowadays experimental sessions aiming to review the amended exploratory session. There are still two further remaining reviewing sessions before deciding to activate the exploratory session eventually.”
“I expect that EGX will decide to activate the exploratory session within this month (September).”
Al-Sharkawy noted that the new amendments made on the mechanisms of defining the closing price will actually reflect the true exact price of each stock as there were a lot of stocks of which closing prices went down due to the old regulations.
“As pursuant to the old regulations, the stock’s closing price used to be defined sometimes after viewing the transactions of 100 securities only. Certainly, it did not reflect the actual prices of each stock.”
Referring to the Block Trade system, Al-Sharkawy said this system is more appropriate for the global markets as it is also named as the fourth market.
“Yet, it does not match with the requirements of the Egyptian market as it would convey a negative undesirable message.”
He explained that the Block Trade system will allow the mega deals to trade through prices defined by the deal parties. Sometimes, the agreed trading price contrasts with the prices of other small transactions due to the fact that the mega deals’ agreed prices tend to be so enormous that small investors may not handle.
“Accordingly, if we really aim to apply the Block Trade system, we must first conduct more studies and make further amendments.”
No For Short Selling For Current Phase:
There are no disputes between the EFSA and the Ministry of Finance over sukuk (Islamic bonds), Ashraf Al-Sharkawy affirmed, noting that he has no authority to reject new instruments. The role of the regulator is limited to organizing the work of the instruments and guaranteeing the rights of each party.
Al-Sharkawy differentiated between two kinds of sukuk; one issued by the Ministry of Finance to plug the budget deficit such as treasury bills which is not directly supervised by EFSA and the other is issued by companies to finance their projects and it is supervised by EFSA through obligating the issuer to declare its financial position and the uses of funding in order to guarantee the rights of financiers. Issuing sukuk requires a legal framework to be approved by the next parliament. This legal framework shall be based on studies prepared by experts, Islamic clerics and concerned bodies.
The role of EFSA is supervising the financial instruments only as it has no authority to object the launch of any new instrument. EFSA has earlier approved the launch of many Islamic financial instruments such as Ijara sukuk (Islamic lease) and sharia-compliant investment funds.
Al-Sharkawy confirmed that the precautionary procedures will be implemented again gradually according to the performance of the market. Trading in the exploratory session will be soon approved. T+1 mechanism will be applied in Egypt soon after being set by the Misr for Central Clearing Depository and Registry (MCDR). Conducting T+0 mechanism can also be conducted.
Al-Sharkawy refused the implementation of short-selling transactions as they were stopped in all international markets and are not suitable to the Egyptian market in the current period.
Amending Article 36 To Finance Low-Income People:
Dr. Al-Sharkawy noted that he submitted a request to the Cabinet concerning the amendment of Article 36 of the Mortgage law which states that a customer shall not receive a loan more than 25% of his monthly income. He demanded raising this minimum limit in order to finance low-income people.
EFSA will meet the Insurance Federation of Egypt next week to discuss the obstacles facing the issuance of new insurance policies and the payment of insurance premiums in order to increase the volume of premiums which registered 2.7% of GDP.
He said some people claim that the regulator pays more attention on money market. However, EFSA deals fairly with all financial sectors without bias to any sector, Al-Sharkawy stressed. People may believe in that because the media gives more attention on the EGX.
Al-Sharkawy refused to comment on the lawsuits raised by EFSA as he affirmed that we should respect the court rulings. The violations that were made by the brokerage companies and referred to the persecution in 2011 are less than that in 2010.
The rate of mergers and acquisitions made by sister states in the EGX was highly increased. These acquisitions are made in accordance with the laws and regulations. There is nothing can limit the volume of foreign cash inflows, except the companies in Sinai and the companies which impose some restrictions on acquisitions.
The declarations required from Hermes Holding Company – (HRHO.CA) concerning the details of the deal and the position of young investors will be discussed firstly in the Group’s shareholders extraordinary meeting and will be then submitted to EFSA. EFSA will study then these disclosures to protect the minority’s rights. No party has the right to interfere in the decisions of the Group’s shareholders extraordinary meeting, Al-Sharkawy stressed.
