Yesterday, the CBE dismissed the chairman and managing director of the Commercial International Bank in Egypt (CIB) Hisham Ezz Al-Arab. The CBE decision came after an investigation which showed “serious violations of the Central Bank’s laws, decisions and norms.” Hisham Ezz Al-Arab has been leading the CIB since 2002 years, so what happened that lead to his dismissal?
Who is Hisham Ezz Al-Arab?
Hisham Ezz Al-Arab has been leading CIB since 2002 as Chairman and Managing Director. Under his leadership, CIB expanded its leading position, grew its market capitalization from $200m to almost $6billion. He was recognized in 2016 by Euromoney for his “Outstanding Contribution to Financial Services in the Middle East” and was EMEA Finance’s “Best CEO in Egypt and Africa” at the magazine’s 2014 Banking Awards. So, why did the CBE dismiss him?
Why did the CBE discharge Hisham Ezz Al-Arab?
The CBE issued the following resolution: “In accordance with article 144 (i) of the central bank and banking law no. 194 of 2020, the board of the CBE resolved at its meeting held on October 20, 2020, to discharge the chairman and managing director of Commercial International Bank.”
According to AhramOnline, the CBE said in a letter sent to the CIB’s CEO Hussein Abaza: “The field inspection conducted in your bank revealed serious violations… [as well as] very weak control and supervisory measures on the granting and pursuance of loans.” According to the CBE, there are deficiencies in the bank’s internal auditing, which resulted in “huge financial losses for the bank.” The CBE also said: “…there is a danger on the bank from these negative practices, which can be described as financial crimes.” Nevertheless, the CBE still believes that the CIB’s financial position remains sound and its depositors’ funds are “fully secure”.
Who will replace the chairman?
Today, Egypt’s central bank confirmed the appointment of Sherif Samy as non-executive chairman of CIB bank. According to the CBE, Samy is well placed to address the central bank’s regulatory compliance concerns.
HISHAM EZZ AL-ARAB’s Resignation
On Friday, Hisham Ezz Al-Arab wrote on Facebook the following message:
In my 21 years of service to CIB, we have built an institution, growing its market capitalization to more than USD 6 billion from USD 150 million and being acknowledged in the process as the best bank in global emerging markets in three of the past four years. In the twilight of this long, successful career, I had planned to step down as chairman and managing director last year, but was at the time asked by a number of shareholders to carry on for another 12 months. That year has now nearly passed. In view of the current situation with the Central Bank of Egypt, I have decided the time has come to end my journey with CIB. I have made great friends over these years — I will cherish them as I do the love I have been shown by my colleagues. I view my role in helping create an icon of the financial industry and of the Egyptian Exchange as part of my service to our great nation, and I leave office today secure in the knowledge that I have always lived in accordance with my values, including honesty and decency.
Impact on stock market
The Egyptian Exchange (EGX) has halted trading for CIB shares based upon a request from the Financial Regulatory Authority (FRA). CIB shares are expected to resume trading on Sunday.
CIB’s GDR fell on Friday from 3.5 to 2.05 and then bounced back closing at 4 USD/ share. As expected, the stock had an extremely volatile session. GDR stands for global depositary receipt and it is a bank certificate issued in more than one country for shares in a foreign company. Put simply, CIB’s GDR allows international investors to purchase CIB’s shares in USD on the London Stock Exchange.