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Umniah Ibrahim
Local banks are moving closer to a more flexible and deeper financial system, while the central bank is approaching a new benchmark for day-to-day interbank rates, dubbed CONIA, abbreviation of Cairo Overnight Interbank Average for short-term, risk-free interbank transactions.
The Central Bank of Egypt is preparing to launch the new standard in early October, according to the European Bank for Reconstruction and Development, which confirmed that CONIA will contribute to the development of new products allowing for a more flexible financial system, in line with the trends to develop risk-free interest rate mechanisms and phase out dependence on LIBOR.
The new standard was developed by the Egyptian Financial Market Task Force (MMCG), which includes the Central Bank, commercial banks and the European Bank for Reconstruction and Development (EBRD) .Conia reflects interest rates short-term and risk-free interbank transactions due to their very short duration.
The implementation of CONIA is a new step in financial and currency reform: it will deepen money and capital markets in Egypt and pave the way for the introduction of Egyptian pound derivatives to as the market grows, matures and matures.
They emphasized that the standard was intended to guide loan pricing and corporate bond yields in line with the growth and revitalization of money and money markets, highlighting that CONIA was helping to create a more realistic indicator of market conditions. and reflected its evolution more quickly because of the sensitivity of its interactions. With everything that happens.
Haytham Adel: Making Egypt More Consistent with Movements in Global Financial Markets
Haitham Adel, head of the Treasury and Capital Markets Department of the Industrial Development Bank, said the launch of new interest rate indicators was not new and that the bank's intention Central to launch the benchmark CONIA, which measures the average interbank rate to a day, is a positive and positive step. Reference price more sensitive and more realistic The market has benefited from greater transparency.
Adel pointed out that global markets were beginning to create new indicators of interest for the 2011-2012 period after the LIBOR manipulation crisis in the London market, pointing out that CONIA, which Egyptian banks were preparing for to implement, aimed to create a realistic indicator of risk-free average interbank rates. , Where interbank lending is considered one of the lowest risk ratios for banks.
Adel added that the new interest rate will be based on knowing the minimum rate of return of loans to customers and then added to a risk factor, which facilitates the pricing of loans using a more sensitive indicator. of the current market.
It ruled out that the CONIA index would replace the corridor mechanism, the central bank's key rate index, but would provide a price, a volume and a market circulation more indicative than the market average, given its average weighted on a daily basis. .
The Director General of Treasury Sector and Capital Markets Industrial Development Bank said that the mechanisms for applying the new interest rate and tools that will be guided by the CONIA index to the banking level have not yet materialized, so that they can be fully discussed, and have highlighted the efforts of the Central Bank to make the Egyptian market more consistent with the global capital markets and their movements.
Adel pointed out that the relationship in the CONIA index lies between banks and the Central Bank of Egypt, which will in turn announce the weighted average of overnight rates among banks and with banks. Sergeant's announcement on the implementation mechanisms and uses that will be specified in the next phase. Other banking products and services.
Mohamed Abdel-Al: pioneering the introduction of derivatives on the Egyptian pound
Mohamed Abdel-Al, a board member of the Suez Cbad Bank and expert in currency and money markets, said the new standard that the Central Bank of Egypt intends to use is the same. Develop and implement, in cooperation with the European Bank for Reconstruction and Development and several other central banks, support a more efficient and transparent mechanism that reflects average interbank rates in Short term short term between banks operating in Egypt on the Egyptian pound.
He added that international markets have recently adopted new, more efficient and equitable mechanisms for interest rate determinants, and that LIBOR rate reform measures have been taken.
"The new index will have nothing to do with the 45-day" Corridor "of the central bank's monetary policy committee, which measures the level of market prices and inflation, and is very different of the calculation method, but will serve as an indicator of liquidity levels The rates of return are in the short and medium term.
He added that the new mechanism was designed to deepen the money market and monetary instruments in Egypt, as well as to prepare the way forward for bringing derivatives of various types to the Egyptian market in local currency – the pound sterling .
"The introduction of the new performance mechanism, which will rely on the average daily rates of individual exchanges between banks rather than between banks and their customers, individuals or businesses, highlights the completion of reform of Egypt in light of the implementation of its comprehensive program of economic and financial reforms, 3 years, highlighting that the new standard of daily deposit rate of return is a new step in the way of reform and determines the final characteristics of the integrated financial market in Egypt.
He pointed out that the new standard allowed the creation of a market of financial derivatives on the Egyptian pound between banks operating in the local market depending on the duration and maturity of the market. It could then be exported to international markets later, and the start will link the money market to similar markets around the world. .
A board member of Suez Cbad Bank said the new standard will include determinants and controls to be announced, in order to know how to calculate the weighted average rate of return on demand deposits between banks, pointing out that the new index will facilitate the completion of the economic and monetary reform plans and give a positive image of the capital market. L & # 39; Egyptian
Mohammed Badra: An important indicator of the size of real liquidity. Assists the Monetary Policy Committee in determining policy rates
"The new standard, which the central bank intends to launch in October, will be presented for the first time on the local market.This is a positive step for the Egyptian money market, which gives an idea of the magnitude of the change in interest rates between banks and some of them, It indicates the amount of liquidity available in the market and the most interest rates. high.
Badra said the new standard of average daily rates of return would provide the Central Bank of Egypt with accurate indicators of the actual volume of liquidity, noting that banks produce statistics and periodic reports on liquid they were submitted to the Central Bank, without however giving a clearer picture of the size of the cash. He was employed and the rates of return for a night on him.
"Given the international markets, we find that they have several interest rate indicators.For example, there is a one-night LIBOR rate that facilitates free market transactions," he said. said an expert in the banking sector.
Badra said that Interbank Interbank Deposits are an active and efficient market and that the daily announcement by the banks of the interest rates of the central bank charged with calculating the weighted average day-to-day rate will reveal that 39; a larger number of banks with excess liquidity or others facing a deficit, stressing that the new standard will give a real indication of the market more transparent.
Badra said the CBE could benefit from the launch of the new index, which will reveal more clearly the average rates of return on short-term interbank deposits, baduming that the average yield of inter-bank demand deposits varies from 9% to 10%. . Although the main interest rate is 15.75% on the deposit, it helps the CPM to determine the fate of the interest rate at its meetings and encourages it. decides to reduce its rates.
"The timing of the launch of the new interest rate is in line with the implementation of the state and central bank plan to transform a less-dependent society into the circulation of notes and clients to pay their payments at a given time electronically, Liquidity being more important in banks, the new standard for determining average daily interbank rates will facilitate the process of using cash.
Head of Treasury and Financial Markets Sector of Foreign Bank Operating in Egypt Confirms New Interest Rate Criterion Based on Reference Price to Determine Credit Price and Bond Issue Performance companies, which are supposed to be linked to a money market instrument.
The head of the Treasury and Financial Markets Department announced that the central bank had held a meeting last Thursday with the directors of treasury and management of Egyptian banks funds to announce the application of the new rate index of Interest at the average rate of overnight deposit transactions.
He added that the new index will help determine the rate of return of corporate or credit bonds, in contrast to the Corridor mechanism put in place by the Central Bank as a tool to use available excess liquidity for banks, confirming that it is a step forward consistent with the global trend to become an index reflecting the real rates traded between banks. Short term.
The head of the Treasury sector said that global markets, including Bank of England, had decided to reform interest rate mechanisms after the bank liquidity crisis in 2012 and had found that Interest rates were far from the Libor rate, explaining that these reforms were needed in open and active markets. We are witnessing a considerable volume of interbank lending, some of which is due to different financial situations in terms of excess or liquidity deficit.
The Bank of England (BOE) manages the interest rate known as SONIA, the average rate of overnight financing of the pound sterling, and has published a series of reforms of the new standard in the framework of its implementation as an alternative to the performance of LIBOR. Development of a risk-free alternative return (IRR) instead of the LIBOR benchmark: SONIA has been approved as a short-term interest rate indicator in the UK in April 2017 as an alternative to LIBOR.
The head of the Treasury Sector pointed out that global markets are established and open markets, characterized by strong external demand and that it is therefore necessary to develop short-term interest rate mechanisms.
The head of treasury emphasized the need to revitalize the market and tools such as the corporate bond and increased borrowing volume to take advantage of the new interest rate benchmark short-term loans.
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