Financial Innovation: Digital Banks Licensing in Egypt New Regulations

In recent years, financial innovation has transformed the banking sector, offering customers’ convenience, accessibility, and improved services. As part of this wave of innovation, digital banks have emerged as a promising solution. Digital banks are financial institutions that operate solely online, without any physical branches. The online system functions by employing cutting-edge technology to guarantee smooth and uninterrupted operations.

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Digital banking has numerous advantages, including but not limited to high-quality and efficient personalized services, expedited transactions, enhanced financial control, and a personalized experience. By leveraging advanced technologies, digital banking offers a wide range of benefits to its users.

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The Importance of Financial Innovation

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Financial innovation plays a crucial role in driving economic growth. By embracing digital banking, the Egyptian government remains unwavering in its commitment to strengthen the economy through promoting innovation and fostering digital transformation. As a result, the Central Bank of Egypt (CBE) enacted a circular on July 12th, 2023, outlining comprehensive directives for the licensing of digital banks. This proactive initiative demonstrates the government's continued endorsement of technological progress within the financial industry.

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Digital Bank Licensing Requirements

·?????? To initiate the application process, the applicant should complete an application form and satisfy specific prerequisites, including meeting capital requirements and other conditions stipulated by the CBE to obtain the license.

·?????? Licensing requirements for digital banks include that the issued and paid-up capital must not be less than 2 billion pounds to practice all banking activities, except financing large-scale businesses.

·?????? To offer financing to large-scale businesses, the capital is increased to 4 billion pounds.

·?????? It’s necessary to submit a comprehensive feasibility study, encompassing the identification of the intended customer segments and the proposed range of products to be offered.

·?????? Additionally, it’s crucial to submit detailed information technology plans, and cybersecurity plans and strategies.

·?????? A reputable financial institution is expected to hold the majority stake in the established company, with a minimum ownership of 30%. Moreover, the financial institution should have a proven record of engaging in similar activities. However, the CBE's Board of Directors may grant an exception to the experience requirement upon approval.

·?????? A foreign branch of a bank operates under the jurisdiction and oversight of a regulatory authority in the country where its head office is situated.

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In conclusion, the regulations stipulated by CBE for digital bank licensing in Egypt signify a significant step toward fostering financial innovation in the country. These regulations align with the government's goal of reducing reliance on cash and open up opportunities for a wider adoption of technology-based financial services in Egypt. By implementing these measures, the government not only encourages the growth of digital banks but also facilitates the broader adoption of technology-driven financial services.

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