Middle East: Amer throws the ball into Egyptian banks’ court

By:
Eric Ellis
Published on:

The Egyptian central bank’s decision to allow the pound to float freely in November caught many bankers in Cairo by surprise. But it was a long-held ambition of governor Tarek Amer, a veteran of Egyptian finance with a reputation as a straight-shooter. Now he needs to show the move heralds a cultural, positive shift for Egypt’s economy.

Tarek Amer illustration-600
Illustration: Pete Ellis

Thursday, November 3 dawned as another regular day for banker Hisham Ezz Al Arab, the long-serving chief executive of Egypt’s biggest non-state bank, Commercial International Bank.

At around 8am, Hisham was at home with his usual workaday routine: showering and dressing before a quick breakfast and a look through his mail and the overnight markets, his car waiting outside for the 10 minute drive to the office in Giza.

Across the Nile, at the Central Bank of Egypt’s heavily defended fortress in Cairo’s old financial district, the CBE governor of just one year’s standing, Tarek Amer, had already been at work for hours with his team, about to enact a policy no Arab central banker has done before him – to release his nation’s currency to the vagaries of the free market

I had just come out of the shower to get dressed and was putting my shoes on. The assistant called me up to tell me what was going on. I said: 'Shit’ 
 - Hisham Ezz Al Arab, CIB

A crucial part of Amer’s long-planned flotation process was to summon Egypt’s most senior bankers to an early morning meeting at CBE headquarters downtown. Once assembled, Amer would explain to them a fait accompli: that the Egyptian pound was now liberated and was the market’s to trade as they saw fit. As Amer later described the moment to Euromoney: "Intervention is history."

The meeting caught Hisham by surprise.

"I had just come out of the shower to get dressed and was putting my shoes on," he recalls. "The assistant called me up to tell me what was going on. I said: 'Shit.’"

The last day of Egypt’s working week, Thursday is casual dress at CIB, but Hisham hastily changed from chinos and a polo shirt to something more suitable for a state meeting: "I put on a different shirt, and a tie, then I went straight to the CBE." 

He arrived with a score of other senior Egyptian bankers, who were ushered into the central bank’s auditorium, where Amer and his staff would reveal the history they had just made.

"I had no idea, but I kind of guessed when I saw all those people," Hisham recalls. "I was very nicely surprised and I got very excited at that meeting. I was the first one to take the microphone sincerely and supported the decision 100%.

"I told the governor that I’m really excited, this is an historic moment. I told him: 'You are throwing the ball into the banks’ courts.’ I told him twice. He said: 'We are no longer a market maker, we’re purely a regulator. The market makers are you guys.’"

Hisham’s support was crucial to Amer. He is chairman of the Federation of Egyptian Banks, the first private-sector banker to hold that post.

Over the history of Egypt’s largely state-owned banking sector, the country’s various bank bosses – including Amer for a time at the National Bank of Egypt (NBE) and a former chair of the banking federation – have tended to do what they are told by Egypt’s succession of military dictators. But Hisham’s CIB is a rare beast in the country’s sclerotic economy, a non-state player, privately owned and market-listed. It understands markets better than many in Egypt.

The float has also seen the old banker juices flowing for Hisham, now pushing 60. Before the float, he explains, there was not much currency action in CIB’s dealing room.

"Now I’m in there for at least an hour a day," he says, delighted. "It’s a great decision but a lot of other things have to be done from the government side."

Amer is the first to agree.

"Governments do not reform until they’re in crisis," he says. As he bluntly tells Euromoney, his predecessors’ decades of supporting the pound had been "a huge mistake. We have wasted billions." 

"There was disorder in the market. The mechanics of the market was totally disturbed and optimal economic decision-making could not be taken in such an environment.

"It’s ironic that you go and float in the time when you are at the weakest," he says, referring to Egypt’s suffering economy. "And when you are strong you do not do it. It only happens when you really have to do it."

Revolutionary tumult

Amer knows all about crises. Managing them has pretty much been his job description since January 2011 and the revolutionary tumult of the Arab Spring, the events that would eventually lead him to the governorship of the central bank. Amer was three years into running the government-owned NBE, the biggest bank in the country, as the regional uprisings spilled into Egypt from Tunisia in January 2011. 

"We Egyptians have always been the focus of events," he says. "We are used to dealing with crises."

To be a banker in modern Egypt inevitably means having the state as boss at some point in one’s career. Amer is a case in point. He had been at the NBE since 2008, coming to the job after five years as deputy governor of the central bank. He arrived at the CBE in 2003 after various posts as a commercial banker, locally and abroad, with Egypt’s state-owned Banque Misr, Citibank and Bank of America. 

As an American University of Cairo economics student, Amer was an admirer of Marriner Stoddard Eccles, chairman of the Federal Reserve from 1934 to 1948 and prominent in US banking lore for his stimulus measures to promote recovery after the Great Depression.