Non-banking financial activities encompass a wide range of financial services that do not involve traditional banks. These activities are supervised and regulated by the Financial Regulatory Authority in Egypt and include capital markets, insurance, mortgage finance, financial leasing, factoring, financing for medium, small, and micro enterprises, and consumer finance.
Objectives of non-banking financial activities:
- Expanding the beneficiary base: Aiming to increase the number of beneficiaries of financial services.
- Improving efficiency: Enhancing the quality and efficiency of the provided financial services.
- Reducing costs: Lowering the costs required to benefit from these services.
Types of non-banking financial activities:
- Capital markets: Such as stock exchanges and financial markets.
- Insurance activities: Including life insurance and general insurance.
- Mortgage finance: Providing loans for purchasing real estate.
- Financial leasing: Offering financing for purchasing equipment and assets.
- Factoring: Purchasing commercial debts from companies.
- Financing for medium, small, and micro enterprises: Providing loans and financial support to these categories.
- Consumer finance: Offering loans to individuals for purchasing goods and services.
- Financial technology: Fintech plays a significant role in supporting and facilitating non-banking financial activities. It includes the use of applications, software, digital platforms, artificial intelligence, and electronic records to provide financial, financing, and insurance services.
Laws regulating non-banking financial activities
: There are several other laws governing non-banking financial activities in Egypt, including:
- Capital Market Law No. 95 of 1992: Regulates the operation of the stock exchange and companies working in the field of securities.
- Unified Insurance Law No. 155 of 2024: Regulates the operation of insurance and reinsurance companies.
- Mortgage Finance Law No. 148 of 2001: Regulates mortgage finance operations.
- Financial Leasing and Factoring Law No. 176 of 2018: Regulates financial leasing and factoring operations.
- Microfinance Law No. 141 of 2014: Regulates microfinance operations.
These laws aim to regulate and control non-banking financial activities and ensure the protection of investors’ and consumers’ rights.
The Role of the Financial Regulatory Authority in Supervising Non-Banking Financial Activities
The Financial Regulatory Authority (FRA) plays a vital role in regulating and monitoring non-banking financial activities in Egypt. Its main tasks include:
- Supervision and Monitoring: The FRA oversees non-banking financial markets and instruments such as capital markets, insurance, mortgage finance, financial leasing, factoring, and securitization.
- Issuing Licenses: The FRA grants licenses to companies operating in non-banking financial activities and sets the conditions and regulations for granting and maintaining these licenses.
- Investor Protection: The FRA works to protect the rights of investors and consumers by establishing rules and regulations that ensure transparency and integrity in financial operations.
- Enhancing Financial Stability: The FRA develops standards for financial solvency and methods for calculating the net liquid capital of securities companies to enhance stability and reduce the risk of default.
- Inspection and Monitoring: The FRA conducts regular inspections and monitoring of companies to ensure their compliance with applicable laws and regulations.
The FRA also imposes strict penalties on companies that violate regulations related to non-banking financial activities, including:
- Financial Fines: Significant financial fines can be imposed on violating companies. For example, fines may start from EGP 100,000 and reach up to EGP 500,000, increasing if the violation continues.
- Suspension of Activities: If the violation is not rectified within a specified period after a warning, the FRA can issue a decision to suspend the company’s activities for up to 90 days.
- License Revocation: In more severe cases, the FRA can revoke the licenses of violating companies, preventing them from engaging in non-banking financial activities.
- Public Disclosure: The FRA may publish the names of violating companies in the media as a measure to increase transparency and warn the public.
These penalties aim to ensure companies’ compliance with laws and regulations, protect the rights of investors and consumers, and enhance confidence in the financial market.