Personal conflicts and corruption threaten the banking sector

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“Any political or personal conflict between two or more I do not stand with, except for the Egyptian economy and banks. Yesterday, there was an economic shock due to the issue of the Commercial International Bank (the largest private bank) in Egypt.”

This is how the Egyptian media man, loyal to the regime, Omar Adeeb, revealed the scenes of the dismissal of the prominent banker, Hesham Ezz al-Azab, from the Presidency of the Commercial International Bank CIB by a decision of the President of the Central Bank of Egypt, Tariq Amer. Adeeb’s statements clearly indicate that the decision to dismiss Ezz al-Arab was not only economic or professional but rather had other motives and hidden conflicts.

Sources told Egypt Watch that this decision came due to significant differences and a power struggle between the two men. The dispute caused Amer to use his influence to dismiss Ezz al-Arab, in an incident that caused a shock in the banking sector. This decision also resulted in the suspension of dealing with one of the largest banks in the Middle East on the stock exchange, amid reports of corruption and interference from the Administrative Control Authority.

The controversy over what is happening in the CIB began when the Egyptian Stock Exchange announced, Thursday, the suspension of trading on the shares of the Commercial Bank, which has the largest relative weight in the main index, at the request of the Financial Supervisory Authority. The stock exchange did not announce the reasons for suspending trading, and the bank’s shares were no longer traded until the end of trading. This decision caused a significant decline in the main index by one per cent, a collapse in market indices, and a decline of the seventieth index by 4.5 per cent.

The Commercial International Bank is the largest listed bank in Egypt, and foreign investors have large holdings in it. Its chairman, Hisham Ezz al-Arab, is among the country’s top bankers and enjoys widespread fame in the global and Middle East’s financial world. After that, leaked sites circulated a letter from the Central Bank, including a decision to remove the bank’s president from his post, and directives to appoint a non-executive member to the position. But these leaks were not confirmed until after a statement issued by the Commercial International Bank on Saturday.

The decision caused the bank’s share to lose more than 40 per cent of its value in morning trading on the London Stock Exchange. The letter claimed that the bank’s field inspection resulted in severe violations of the Central Bank and Banking System Law provisions, regulatory instructions, decisions issued by the Central Bank of Egypt, and sound banking customs and practices. The accusations against Hesham Ezz al-Arab will not only cause him to step down from the presidency of the CIB but also reach legal accountability in court if proven true.

Later, the Commercial International Bank announced the appointment of Sherif Sami as a non-executive chairman of the board of directors, after obtaining the approval of the Central Bank of Egypt. But the crisis was not over. Rather, this was just the beginning.

Economic sources revealed that an official memorandum had arrived at the Administrative Control Authority, calling for an investigation into the facts of the involvement of former Investment Minister Dalia Khorshid in exploiting the position of her husband, Central Bank Governor, Tariq Amer. This exploitation was represented in facilitating its business, its partners, and putting pressure on the banks not to seize the Egyptian Hydrocarbon Company. Observers say that this complaint apparently came as an attempt at revenge, carried out by the loyalists of Ezz al-Arab against Tariq Amer’s wife.

The memorandum revealed that the company owned by Khorshid, Masar for financial consultations, had great dealings with the Egyptian Hydrocarbon Company, from which it obtained huge financial commissions. These commissions came in return for exploiting her husband’s position to pressure the heads of several banks to prevent her from seizing the company due to its inability to pay debts estimated at $450 million. The memo indicated that Khorshid received $50,000 per month in exchange for consulting work for the Egyptian Hydrocarbon Company, under a contract signed in April 2019. Amer’s wife also got three per cent of the new loan. The memo called on the Administrative Control Authority to open an investigation into the issue of the heads of several banks being pressured by the governor of the Central Bank to facilitate the work of the Masar company, in addition to the conflict of interests in the facts of appointing some officials in banks within the company to facilitate the work of Khorshid.

According to the memo, managers and officials in some governmental and private banks were pressured to accept the postponement of implementing an administrative seizure on the Egyptian Hydrocarbon Company, after it was supposed to be seized for being more than four years late in paying any of the loan installments. According to the memo, on April 9, 2019, Khorshid received $275,000 in cash as a promise in her company’s account “in return for the consultations it provides.”

The Egyptian Hydrocarbon Company obtained a loan of $285 million dollars from 11 banks, most notably Banque Misr, Banque du Caire, and the Commercial International Bank. The company was exposed to some crises that led to a delay in its production, such as the contractor’s delay in implementing the project, difficulties in obtaining company licences due to the security authorities’ approval, and then the accumulation of benefits on it. Khorshid assumed the presidency of the Eagle Capital group, which was established by the General Intelligence as a direct investment fund that manages all the agency’s investments, including the Egyptian Media group, which owns channels, newspapers and news websites, and two dramatic and film production companies.

The Egyptian Hydrocarbon Company is owned by businessman Basil el-Baz, Osama el-Baz’s son, political advisor to the late ousted president, Hosni Mubarak. The company’s debts are distributed by $85.84 million for the Commercial International Bank, $76.87 for Banque Misr, $43.6 million for Al Ahli United – Egypt, $33.2 million for Al Ahli United Bahrain, $31 million for Cairo Bank, $20 million for the Arab Bank, and $15 million For Bank Audi, $20 million for Arab International Bank, $15 million for Al Baraka Bank, $20 million for EgyBank, and $25 million for the banking company.

According to observers, the debt with the Commercial International Bank is the reason for the dismissal of Ezz al-Arab. But the strange thing is that this dismissal took place only five days after a report published by Al-Ahram newspaper, which included praise for the achievements of the Commercial International Bank under the presidency of Ezz al-Arab, which represents the state’s satisfaction with the bank’s performance and even recognition and appreciation for the successes achieved by the Commercial International Bank under the system of the Central Bank of Egypt.

As for the central bank’s letter, the problem mentioned did not affect Ezz al-Arab alone but rather directed every commercial bank entity with accusations against the bank’s supervision, review, and credit systems, which affected the bank, the banking system, the bank’s shares in the stock exchange, and the stock exchange as a whole.