Egypt has temporarily limited daily withdrawals in a strategy to suppress hoarding amid the Covid-19 crisis. And it’s not the first to worry about its banking system.
On Sunday, Egypt's central bank ordered banks to provisionally limit daily withdrawals. These thresholds are 10,000 Egyptian pounds ($634.97) for individuals and 50,000 pounds ($3,174.87) for businesses. Meanwhile, daily ATM withdrawals are capped at just 5,000 pounds ($317.43).
The central bank cancelled fees on transfers and e-payments to incentivize electronic means of payment.
"We found that individuals are withdrawing money from the banks although they did not need it, said central bank governor Tarek Amer, "They withdrew 30 billion pounds in the past three weeks."
The financial system relies on fractional banking to free up liquidity for loans. As a rule, large banks are only required to hold 10% cash in deposits, meaning that if there were a run on the bank, a liquidity crisis would likely ensue.
Egypt isn’t the only country to be worried. Last week in the US, the chairman of the Federal Deposit Insurance Corporation (FDIC) advised Americans not to withdraw all their money from banks to safeguard against market volatility in the stock market caused by the coronavirus pandemic.
According to the World Health Organization, banknotes can spread the coronavirus—making the pandemic even worse. In South Korea, banks are even attempting to disinfect banknotes by putting them through a high-heat process and in quarantine for 14 days.
If only money was digital.