The Central Bank of Egypt’s (CBE) governor has no right to determine the tenure of executive officials in banks, regardless of the length of their tenure, according to Banking and Credit Law No. 88/ 2003, a legal adviser to an Arab bank operating in the domestic market affirmed.
CBE Governor Tarek Amer surprised the banking sector by issuing a decree on Thursday to limit the tenure of executive officials in banks to nine years, whether consecutive or cumulative.
Amer defended his decision on Saturday evening during an interview aired on CBC channel, stressing that it does not target specific officials. He added that the decree was designed to rotate positions in the banks and allow the opportunity for lower-ranking bankers to assume leading positions in banks.
According to the banking source, this decision goes beyond the authority of general assemblies and major shareholders in the banks.
The general assembly of any bank owns just 5% of the bank represented in its capital, whereas the CBE’s authority is higher than that of the assembly’s because the bank is obliged to protect depositors’ money, which represents the other 95% of the bank, Amer said.
In response to Amer’s remarks, the source said the CBE can protect depositors’ money by simply monitoring the performance of banks and intervening in the case of any risk, without violating shareholders’ rights.
The general assembly of any bank can determine who is worthy of assuming leadership in those banks, more so than the CBE, the source added.
Under Article 43 of the Banking Law, which identifies the CBE governor’s powers regarding the selection of bank officials, the governor does not have the authority to determine the term of executive officials in banks, the source said.
The law stipulates that the CBE governor has the right to provide counsel on the appointment of chairmen and members of the boards as well as executives of some administrations, such as the credit, investment portfolio management, external transactions and internal audit departments.
The law also gives the CBE governor the right to dismiss one or more of those officials, on condition that the official is proven to have violated rules regarding the safety of depositors’ money and assets. If the bank fails to implement this decision, the governor can issue a reasoned decision to dismiss any official of his job.
Anyone who is dismissed by the CBE governor can submit a complaint to the board of the CBE within 60 days of the date of the decision.
The source stressed that in this case, if the dismissed officials decide to file lawsuits against Amer’s decision, it will be ruled in their favour as the governor is not entitled to take such decision.
Conversely, according to legal adviser for the Federation of Egyptian Banks Ruqia Riad, the CBE’s decision is accurate and falls within its authority either to appoint or dismiss officials, in accordance with banking laws.
She explained that the decision falls under the CBE’s authority to control and supervise the banks operating in Egypt, whether governmental or private, so as to provide an opportunity for rotation of leadership positions. Riad further noted that the federation does not interfere in the CBE’s decisions.
She noted that Articles 41 and 42 of the banking law stipulate that banks operating in Egypt must present the names of candidates for the presidency of the banks or the membership of their boards, whether executive or non-executive, to the CBE for approval.
However, Riad criticised the CBE for not giving an adequate notice for the banks to implement the situation.
She added that the CBE gave a conditional notice for the banks to implement the new decree, pointing out that the CBE may approve the proposed notices of some banks and refuse others which may cause confusion within the banks and affect the workflow.