Egypt May Risk Bank Run as Uprising Against Mubarak Regime Hits Economy

[Joanne98]

Source: Bloomberg

Egypt’s banks may risk a surge in customer withdrawals when they open for business, placing them among companies worst hit by the nationwide uprising against President Hosni Mubarak.

“A run on the banks would be the biggest concern, which is possible in the current situation,” Robert McKinnon, chief investment officer at ASAS Capital in Dubai, said in a telephone interview. Authorities are likely to keep the financial system closed to avert the risk, he said.

Egypt’s banks and markets stayed shut yesterday after six days of clashes in the most populous Arab country that left as many as 150 people dead. Tanks are guarding banks and government buildings in Cairo that are vulnerable to looting, state television said. The EGX 30 stock index had a two-day drop of 16 percent through Jan. 27, with Commercial International Bank Egypt SAE, which accounts for more than one-fifth of the benchmark, falling 12 percent. Markets throughout the Middle East declined yesterday on concern the unrest may spread.

Mubarak responded to the protesters’ accusations of presiding over a corrupt and repressive regime by sacking the Cabinet and appointing a vice-president, intelligence chief Omar Suleiman, for the first time. The measures weren’t enough to prevent more clashes as thousands defied a curfew in Cairo and other cities. The central bank said banks and markets will stay closed today, and a government debt auction was canceled.



Read more: http://www.bloomberg.com/news/2011-01-30/egypt-may-risk-bank-run-as-uprising-against-mubarak-regime-hits-economy.html

[virgogal]

1. What's a government debt auction?

[Joanne98]

2. A bond auction

[virgogal]

3. Thank you.

[Demeter]

4. Borrowing Money to Pay the Bills for the Govt.

From banks, other nations, and private sources...if anyone trusts that they will get the money back, that is.

[dixiegrrrrl]

5. Selling Treasury bonds, is what we call it here.

[DCKit]

6. At $2/day, I doubt the majority of Egyptians would be affected by a bank run. nt

[Igel]

7. When they go to their employer for their pay and there's no money?

Then they're affected.

When the shopkeeper needs money to buy food to stock his store?

When the gas station owner needs money to pay for the fuel shipment?

You're right. At two dollars a day--whatever that actually means in purchasing parity power--nobody needs pay, food, or gas.

Banks play a lesser role in many countries, but they still play a role. In a functioning society, pretty much nobody is self-sufficient.