CBE announces new digital bank capital requirements and regulations

Digital banks will now be required to maintain $2 billion in capital when offering digital services to consumers, according to new regulations set by the Central Bank of Egypt (CBE).

On Wednesday, the central bank issues new rules for licensing, registering, and supervising digital banks. The CBE emphasized that the new regulations were in line with the government’s efforts in keeping pace with global developments within the financial technology industry (FinTech) and support the country’s transformation into a digital economy.

According to the Banking System Law #194, the CBE defines digital banks as companies offering banking services through digital channels or platforms using technology, which include certain transaction functions that are provided by traditional banks completed within the regular banking system.

These digital banks provide all their services via the Internet only and include some of the transaction functions of the basic banking system provided by all traditional banks.

With the new licensing regulations, digital banks will be required to keep a minimum issued and paid-up capital of LE 2 billion ($65 million), the CBE explained in an official statement on Wednesday, with an exemption for those financing larger scale companies.

For digital banks financing large companies, the banks are obligated to have a minimum capital of LE 4 billion with the additional stipulation that the majority shareholder must also be a financial institution with a previous business operating similar activities and hold no less than 30 percent of the total capital value.

Other licensing requirements included the submission of a detailed feasibility study, which must comprise of target segments and a list of intended products to be offered, as well as strategies and plans associated with cybersecurity and information technology.

The new rules are within the government’s vision of transitioning the Egyptian economy into a cashless society, and its efforts to promote financial inclusion and enhance the local FinTech industry. As part of its efforts, the central bank announced its financial inclusion strategy for 2022/2025 late last year which introduced key objectives and priorities for bolstering financial inclusion in the country.

In an April report, the CBE revealed that Egypt’s financial inclusion efforts have borne fruit, recording a whopping 147 percent growth between 2016 and 2022, and 64.8 percent in 2022 alone. Women-owned accounts surged in 2022 by 210 percent when compared to 2016, reaching 18.3 million.