Private banks operating in the Egyptian market decided against increasing interest rates on their savings certificates at this time, after implementing limited interest increases on deposits and saving accounts.
According to Osama El-Menilawy, assistant general manager of the financial sector at a private bank operating in Egypt, private banks are not going to increase the interest rates on their bank certificates unless the National Bank of Egypt (NBE) and Banque Misr (BM) increase their interest rates first. They will also wait until the long-term and consecutive time treasury yields posed by the Ministry of Finance increase.
NBE and BM decided on 12 June and 13 June to increase the interest rates on deposits, while savings account interest increased by 0.75% to 1%.
The return on three to nine months treasury bills were raised by 1%, while treasury bond yields increased by 0.88%.
The increasing return on bills and bonds is not sufficient enough to encourage the banks to change the interest on their long-term savings certificates, especially since the increase might be temporary and the return prices may decline at anytime, according to El-Menilawy.
He added that the deposit interest might witness very limited movement, especially since most banks provide distinct interest rates on their deposits, and therefore are not compelled to increase the deposits’ interest.
The Asset-Liability Committee (ALCO) — the entity responsible for determining interest rates of the Industrial Development & Workers Bank of Egypt — will hold a meeting on Wednesday 22 June to make a decision about the interest rates on bank savings, according to the bank’s director general of the treasury Haitham Abdel Fattah.
Several other banks will hold similar meetings in the next few days to discuss the issue.
Abdel Fattah contended that the interest rate increase will only be implemented on deposits and savings accounts, but not on savings certificates.
He explained that the cost of long-term savings certificate is high, and the return on debt may not cover that cost for the bank.