Cairo, Egypt, May 21—The International Finance
Corporation (IFC) will establish a Risk Management Facility (RMF) for the
National Bank of Egypt (NBE), the largest commercial bank in the country.
The new facility will allow NBE to offer its private sector clients medium
and long-term fixed rate financing and a variety of risk management products.
The RMF Agreement was signed in Cairo at a ceremony held at NBE's offices.
Mr. Jannik Lindbaek, IFC's Executive Vice President, who is visiting Egypt
to discuss new private sector initiatives and Mr. Mahmoud Abdel Aziz, Chairman
of NBE, signed the RMF Agreement.
This is the first such facility established by IFC in Egypt and will address
the needs of business enterprises seeking longer fixed rate financing through
the banking system, which has traditionally provided variable rate financing.
For instance, it will allow NBE--upon executing interest rate swaps--to
convert existing variable rate loans into fixed rate obligations. It will
also allow private exporters to benefit through currency swaps by enabling
them to better match their earnings--which are often in non-US$ denominated
currencies, particularly with European Union countries--with borrowings
that are US$ based. The RMF could permit the undertaking of approximately
US$400 million of risk management transactions, depending on the type of
Mr. Lindbaek said at the signing, "This project will assist the Egyptian
banking sector by introducing new products to the country's capital markets
while helping a growing private sector access financial products that are
necessary for their international competitiveness." He added that
IFC's strategy is to promote the development of a competitive financial
market and strong banking institutions by introducing new products and
intermediaries through a combination of technical assistance, institution
building and resource mobilization activities.
Besides providing the facility, IFC has been working with NBE and the Central
Bank of Egypt to organize and arrange technical assistance to ensure careful
management of these products. NBE is the largest commercial bank in Egypt
with total assets of over US$15 billion. NBE has been a trendsetter in
the reform process taking place in Egypt through privatizations, introducing
specialized financial subsidiaries (for investments, brokerage, insurance
and leasing), launching mutual funds and providing innovative banking services
to its clients.
IFC, a member of the World Bank Group, is the largest multilateral source
of equity and loan financing for private sector projects in developing