As gold prices have risen significantly in recent months, Egypt’s banking sector has begun to face additional pressures, prompting banks to intensify stress testing as a core tool for strengthening liquidity risk management. Although most of the liquidity currently used by individuals to purchase gold comes from the parallel market and remittances from Egyptians abroad, questions remain over whether savers’ behavior could change in the future.
Baher Abdel Aziz, economic expert and Chief Operating Officer at Feslift Consulting, explained that nominal growth rates in deposits differ from real growth rates once adjusted for the impact of inflation.
Abdel Aziz added that higher returns on gold could lead some customers in the future to redirect their savings away from bank deposits, which may create indirect pressures on liquidity, especially amid volatile market conditions. He noted that these developments require banks to adopt more advanced stress-testing scenarios that reflect the impact of gold price movements on depositor behavior and bank funding structures.
He also pointed out that the Central Bank of Egypt’s instructions issued in March 2024 came at a highly critical time, as they mandated banks to conduct comprehensive stress tests as part of the Internal Capital Adequacy Assessment Process (ICAAP), with a focus on measuring financial institutions’ ability to withstand potential liquidity shocks.
Abdel Aziz emphasized that incorporating scenarios of rising gold prices into stress-testing frameworks has become imperative to ensure banks’ readiness, support asset-liability management, and strengthen contingency and recovery plans—thereby contributing to financial stability and reinforcing confidence in Egypt’s banking sector.