Investment Minister Mahmoud Mohieldin has approved the draft law to replace five of Egypt’s financial services regulators with a single entity, one senior official linked to the ministry tells MEED.
The new regulator is expected to launch in the first three months of 2009. It will be responsible for all financial services companies except banks, which will still be regulated by the central bank.
Ashram Gamal, executive director of the Egyptian Institute of Directors (EIOD), a thinktank operating under the umbrella of the Investment Ministry, says the draft law is now expected to go before parliament in November.
The single regulator will take on the regulatory responsibilities of the Cairo & Alexandria Stock Exchanges (Case), the Capital Market Authority (CMA), the Egyptian Insurance Supervisory Authority, the Mortgage Finance Authority and the General Authority for Investment & Free Zones, which regulates the leasing of plant and machinery to companies.
The single regulator’s first task will be to create a single rule book of corporate governance to replace the three codes enforced by the CMA, the insurance regulator and the mortgage finance regulator. The EIOD will help draft the code. “I would say that corporate governance is on top of the agenda for the new regulator,” says Gamal. “We will be the key providers of a code for corporate governance to the single regulator.”
Many of Egypt’s largest listed companies have an indifferent record of compliance with the CMA’s existing corporate governance rules, even though they have been in force since 2005.
According to an EIOD survey from late 2007, 65 per cent of companies on the Case 30 index fail to abide by CMA rules to outline their yearly strategies to shareholders.
“Companies were doing very well in terms of financial disclosure, but most companies do not disclose their future plans to their shareholders,” says Gamal. “They also do not disclose things as simple as board composition or what is happening at board meetings.”
In the run-up to the launch of the single regulator, the EIOD will work with the existing regulators by encouraging companies to follow the existing rules. Gamal says the three most important issues that Egyptian companies have to address are: separating the roles of chairman and chief executive officer; setting up audit committees; and introducing independent directors to company structures.
The EIOD is to further test levels of compliance with the CMA’s rules among Case 30 companies in a survey due to be carried out before the end of 2008.
Although the new regulator is expected to be in place in the first quarter of 2009, the Egyptian Insurance Supervisory Authority is in the middle of an overhaul of its existing corporate governance regulations. Draft regulations are planned before the end of this year.
The Investment Ministry declined to comment on the status of the draft law for the new single financial regulator.