The Central Bank of Egypt (CBE) on Wednesday issued rules for licensing, registering, and supervising digital banks, which represents an important step in keeping pace with global developments in the financial technology industry and meeting the needs of customers in the Egyptian market, according to a statement by the CBE.
The licensing requirements for digital banks stipulate that the issued and paid-up capital not be less than two billion pounds in the event that all bank business is practiced, except for financing large companies.
Digital banks can finance large companies, provided that the capital is increased to four billion LE, as well as that the largest shareholder is an institution with a previous business in similar activities at a rate of not less than 30 percent of the total capital value.
Among the requirements for obtaining the license is the submission of a detailed feasibility study that includes identifying the target segments and products that are planned to be made available, according to the statement, as well as information technology plans, and cyber security plans and strategies.
Digital banks are subject to the same rules for oversight and supervision applied to banks operating in Egypt, the statement added, and the same laws for countering money laundering and terrorist financing, in addition to some other requirements consistent with the nature of its work.
What are digital banks?
According to the definition of the Central Bank and Banking System Law #194, issued on September 15, 2020, digital banks provide banking services through digital channels or platforms using modern technology.
Earlier, six banks operating in the Egyptian market applied to obtain a license to establish a digital bank, including two government banks – the National Bank of Egypt, and Banque Misr, and three Arabian Gulf banks, including Qatar National Bank of Egypt (QNB), Arab Banking Corporation (ABC), and Emirates NBD, and Faisal Islamic Bank.
Digital banks provide all its services via the Internet only and include some of the transaction functions of the basic banking system provided by all traditional banks.
These include opening current and savings accounts, as well as offering long and short-term savings pools, personal loans, in addition to cash withdrawal, money transfer, managing accounts, paying bills, and financing small, medium and micro enterprises, as well as financing institutions and factories, in addition to other productive sectors.
The Union of Arab Banks identified the most important advantages of digital banks:
•Easy access and new clients.
•Lower operational cost, IT cost, etc.
•Ease of use by customers with those banks.
•Providing services to their customers without the need to go to branches.
•Providing a range of new services, like issuing real-time spending notifications, 24/7 in-app support, free payments during travel, regular spending reports, spending forecasts, partnerships with other financial applications and services, and life insurance services.