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Banks to receive 1.5-4.75% commission in return for fixed exchange rate for foreign investment - Daily News Egypt

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Banks to receive 1.5-4.75% commission in return for fixed exchange rate for foreign investment

This mechanism allows foreigners to contract with banks on a specific exchange rate, for instance, EGP 8.78 for $1 according to the current rate at the Central Bank of Egypt (CBE)


Banks that attract foreign investment in treasury bills will receive a return ranging between 1.5% and 4.75% in exchange for guaranteeing a fixed dollar exchange rate for foreign investors when the bills mature.

Banks operating in the local market, most prominently the National Bank of Egypt (NBE) and Banque Misr, have started to work with contracts hedging against exchange rate fluctuations, guaranteeing a fixed dollar exchange rate against the pound for foreign investors who will invest in Egyptian pounds in the Egyptian treasury bill.

This mechanism allows foreigners to contract with banks on a specific exchange rate, for instance, EGP 8.78 for $1 according to the current rate at the Central Bank of Egypt (CBE). They obtain pounds to buy treasury bills and exchange US dollars at the same agreed upon price.

Under this mechanism, risks associated with exchange rates will move from the foreign investor to the bank, and in return the bank will receive a commission from the investor which varies depending on the maturity period of the bills: three, six, nine and 12 months.

Banks set the commission at 1.5% if foreign investors invest in treasury bills for three months, 2.75% if the investment is for six months, 4% if the investment is for nine months, and 4.75% if the investment is for 12 months.

This mechanism is applied through contracts between banks and foreign investors who wish to invest in Egyptian treasury bills. It stipulates that the bank would buy a specific amount of dollars from the foreign investor and would pay for it in pounds at the price announced at the bank during the time of contracting, then the investor would specify the duration of the contract.

According to the contract between the two parties, the foreign investor buys treasury bills for the same period agreed upon, and at the end of the period, the bank would be committed to convert the original amount, plus its interests, from the investment in treasury bills into US dollars at the exchange rate agreed upon while contracting.

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https://wwww.dailynewssegypt.com/2016/03/27/banks-receive-1-5-4-75-commission-return-fixed-exchange-rate-foreign-investment/
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