Bonds Market Development Plan. Ministry of Investment November 2009

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Bonds Market

Development Plan

Ministry of Investment November 2009

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Financial Sector Reform Program

Phase I: 2005 – 2008

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Improve the soundness and efficiency of the financial

sector through comprehensive structural and financial

reform, to ultimately boost economic growth and

development as well as enhancing competitiveness,

and financial innovation

.

Reform

Objective

Reform

Objective

Main Pillars of

the Reform

Program

Main Pillars of

the Reform

Program

1.

Restructuring the Insurance Sector

2.

Deepening the Capital Market

3.

Developing the Mortgage Market

4.

Activating other Financial Services

Time Frame

2005-2008

Phase I: 2005 - 2008

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- Merging six banks.

- Settling 65% of public sector NPLs.

- Privatizing Bank of Alexandria

- Divesting 13 cases of public sector banks holdings in JV banks.

Financial Sector Reform Program

Main Implemented Reforms of Phase I: 2005-2008

1- Reforming the Banking Sector

- Merging Al-Shark and Egypt Re in Misr Insurance.

- Establishing the Holding Company for Insurance.

- Restructuring the boards of public insurance companies.

- Establishing a State Fund for compensation

- Amending the insurance law and allowing corporation to act as insurance brokers.

- Raising the minimum issued capital to EGP 60 million for life and non-life insurance companies.

- Reducing stamp duties on insurance policies for life, property and casualty insurance.

2- Restructuring the Insurance Sector

3- Deepening the Capital Markets

- Establishing a special registrar for qualified auditors at the CMA.

- Introducing Margin Trading, Short Selling, Same Day Trading, Market Making Activity, and Securitization.

- Issuing the legislative framework for organizing Acquisitions.

- Issuing the new Egyptian Accounting Standards in compliance with the International Accounting Standards.

- Issuing regulations to organize and introduce investment funds, and organize exchange traded funds, money market funds and real estate funds.

- Establish the Nile Stock Exchange (Nilex) for SMEs.

- Introducing more flexibility to income recognition rules and regulations.

- Reducing the registration fee to a maximum of EGP 2000 .

- Establishing the Egyptian Mortgage Refinance Company.

- Raising the maximum subsidy obtained from the Mortgage Finance Subsidy and Guarantee fund from EGP 10,000 to EGP 15,000.

- Activating the role of insurance in mortgage finance activity.

- Standardizing contracts of mortgage finance to facilitate the securitization process.

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Insurance 2004/2005 2007/2008 Premiums/GDP 0.8% 1.1% Assets (EGP bn) 20 33.4 Investments(EGP bn) 16.3 29 Equity (EGP bn) 3.8 8.5 Volume of Premiums 4.3 7.4 Paid Claims 2.4 4.2 Net profits (EGP bn) 0.6 1.1 Public Companies

Market Share

70% 49%

Capital Market 2004/2005 2007/2008

Value traded 83.7 Billion 553.2 Billion Monthly Average value of trade 0.6 Billion 46.1 Billion Volume 3 Billion Paper 19.9 Billion Paper Monthly Average volume of trade 270.9 Billion Paper 1659.3 Billion Paper Total acquisitions 3.64 Billion 123.8 Billion The number of registered investors 875 Thousand 1.6 Billion

Mortgage Finance 2004/2005 2007/2008 Institutions 2 Companies and 2 Banks 10 companies and 2 banks

Mortgage finance 16 Million 2.6 billion

Evaluation experts 75 117

Intermediaries 203 234

Auditors 23 45

Investors 3 4371

Financial Sector Reform Program

Impact of Reforms of Phase I: 2005-2008

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6 Main Pillars of the Reform Program Main Pillars of the Reform Program

• Mobilize savings and financing investments • Improving access to finance especially for SMEs • Developing the society’s financial culture

• Enhancing the efficiency of the markets and further developing the non bank financial services

• Increasing the efficiency of regulations and supervision to ensure the soundness of the financial system

• Strengthening the reach of the non bank financial services to remote and under develop areas in Egypt and enhancing regional expansion by the non bank financial institutions

Financial Sector Reform Program

Phase II: 2009 - 2012

Reform

objectives

Reform

objectives

Time Frame

2009-2012

Phase I of the reform program aimed at restructuring financial institutions and enforcing prudential regulations to enhance soundness of the financial sector and ensure its stability.

Phase II aims at improving the efficiency of financial intermediation, and to enhance its ability to mobilize savings and provide finance.

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Bond Market Indicators

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Bond Market Indicators

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Bond Market Indicators

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Bond Market Indicators

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Reform Measures Problem

-Simplifying corporate bond issuance procedures

-Introducing shelf registration to reduce the time taken for secondary public offerings of bonds.

-Encouraging the establishment of a new credit rating agency in Egypt to promote competition in this field to ultimately reduce the rating costs

- Lengthy and costly issuance procedures

Measures related to the primary market (supply side)

Action plan to Develop the Bonds Market

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Reform Measures Problem

- Introducing amendments to the executive regulations of the Capital Market Law No. 95/1992 to regulate the issuance of Sukuk in the Egyptian Market

-Issuing the regulations pertinent to the issuance of local currency bonds by supranational institutions. This is in relation to the latest amendments of the CML by the law No. 123/2008

-Further developing the REPO market on treasury bonds via introducing amendments in the current trading and settlement systems -Lack of diversity of fixed income instruments in the Egyptian market -Limited number of issuers

Measures related to the primary market (supply side)

Action plan to Develop the Bonds Market

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Reform Measures Problem

-Amending the executive regulations to allow for and facilitate the promotion of fixed income funds in the Egyptian market

- Modifying the investment regulations for insurance companies and pension funds to increase the demand on bonds

-Increasing the investors awareness with bonds, and training

investment managers to increase their investments in this asset class - Weak institutional

demand for bonds

Measures related to the primary market (demand side)

Action plan to Develop the Bonds Market

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Reform Measures Problem

-Reducing settlement time of bonds from T+1 to T+0 -Introducing short selling on bonds.

-Introducing intra-day trading on bonds.

-Amending the current trading and clearing and settlement systems to allow for REPO transactions

- Shallow

Secondary Market trading

Measures related to Trading and Settlement

Action plan to Develop the Bonds Market

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Reform Measures Problem

- Enhancing Disclosure by publishing the trading data by the Egyptian

Exchange and the Clearing house on a daily basis

- Launching an index on bond prices and publish this index on a

widely read newspaper

- Amending the current trading system to allow for gathering prices for treasury bonds with reference maturities

- Creating and publishing a yield curve

-Improve market monitoring and surveillance procedures to reduce window dressing

-Lack of

transparency and investor awareness related to bonds trading and prices

Measures related to Transparency and Awareness

Action plan to Develop the Bonds Market

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Thank you..

Thank you..

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