Q&A with Chairman of the Egyptian Financial Regulatory Authority (FRA), Dr. Mohamed Farid Saleh
Dr. Mohamed Farid Saleh
Dr. Farid gives a comprehensive account on his journey to becoming Chair of the FRA and how, in his role as Chairman of the Global and Emerging Markets Committee of IOSCO, he is focused on ensuring that both developed and emerging markets have an equal voice in shaping global standards.
Career Highlights
How did you get to where you are?
I began my career journey with a focus on economics and finance during my undergraduate years, unsure of the specific path to take within the industry. Coming from a family background of bureaucrats, I had some insight into the workings of the public sector. Upon graduation in economics and foreign trade, I explored job opportunities in private sector investment banks and multinational corporations before ultimately deciding to join the Ministry of Economy and Foreign Trade, where I could contribute to policy-making and learn from experienced figures in the field.
To further solidify my skills, I pursued an MBA with specializations in finance and management in Egypt, followed by a Chevening Scholarship MSc in Finance and Investment at the University of York. This experience was eye-opening, revealing gaps in my knowledge and pushing me to expand my expertise. I returned to Egypt to work at the Ministry of Investment, focusing on the non-bank financial sector and capital markets development, including initiatives like establishing a derivatives exchange. My continuous pursuit of education led me to an MSc in Quantitative Finance at Bayes Business School, University of London, while working part-time with the ministry to promote economic reforms and engage with investors.
In 2010, I was appointed Vice Chairman of the Egyptian Exchange, facing challenges like the revolution that disrupted market operations. Despite the extreme difficulties, I worked with the team to reopen the market safely and efficiently. After my tenure ended in 2011, I transitioned to the private sector, establishing a consulting firm specializing in economic forecasting and boutique investment banking activities. In 2017, I returned to the Egyptian Exchange as Chairman, completing a successful five-year term.
Alongside my professional journey, I pursued academic endeavours, obtaining a PhD and an LLM from Cardiff Metropolitan University and King’s College London, respectively. Currently, I am involved with the Financial Regulatory Authority and continue to contribute to the finance and economic sectors. My career has been defined by a blend of hands-on experience, academic studies, and a passion for driving positive change in the industry.
How do you unwind?
I primarily unwind in three ways. First and foremost, I engage in sports such as walking, swimming, and playing paddle squash to distance my mind from daily pressures. Secondly, I find solace in gaining knowledge, not just for the sake of obtaining degrees, but for the knowledge itself. Learning new things helps me unwind from work stress.
At the FRA, we are a combination of various regulatory bodies that are independent in the UK, our work includes that of the Financial Conduct Authority (FCA), the Financial Reporting Council (FRC), and The Takeover Panel. We oversee and regulate sectors such as insurance, non-banking financing, fintech, capital markets, private pension funds, insurance companies, insurance brokerage, and more.
I unwind from the demands of my job by participating in sports and expanding my knowledge through learning. This helps me stay on top of the ever-changing regulatory landscape.
Lastly, I find relaxation in traveling to coastal areas. This process allows me to escape from the pressures of my daily routine.
What inspires you?
Two things inspire me: a desire to fix things and seeing the results of my efforts. I remember reading a book about this desire, which always drives me to fix problems or improve markets. This inspiration pushes me daily, even when I feel exhausted or discouraged. One key aspect that motivates me is the need to enhance the calibre of individuals in different technical roles, such as credit officers, auditors, and actuaries. Moreover, witnessing the positive outcomes of market development efforts is a great source of inspiration for me. My late father is another significant source of inspiration for me. He always encouraged me to push my limits and strive for excellence, never settling for mediocrity. His belief in constantly raising the bar resonates with me, guiding me to always seek improvement and better solutions. Ultimately, both the desire to fix problems and the drive to achieve excellence motivate me every day.
What is your advice to the younger generation?
Efforts should not be directly correlated with results, especially for Generation Z. It is important to put in effort unconditionally without expecting immediate results. Waiting for quick, immediate results can hinder progress. One should focus on putting in the effort and the results will eventually follow. Continuous learning and education are crucial for personal and professional growth. Investing in self-improvement will be valuable in the long run. To succeed in career advancements and life, one must dedicate themselves wholeheartedly to their pursuits. Avoid being hesitant or holding back in educational opportunities as it will be beneficial for future success and growth.
Horizon
Describe the role and importance of a regulator in ensuring fair and transparent financial markets.
Let’s go back to basics. Why are there regulators? Regulators play a crucial role in ensuring the integrity and stability of financial markets. In the past, there was a belief that markets were completely efficient and would naturally self-correct any misconduct. However, real-life examples have shown that this is not always the case. This has led to a debate on how regulators should deal with failing companies – should they be allowed to go bankrupt or should they be rescued to prevent negative externalities on the economy? This is where the concept of systematically important institutions comes into play, as their failure could have far-reaching consequences.
Regulators focus on two main components: ensuring market integrity and maintaining market stability. Market integrity involves monitoring for misconduct and ensuring a level playing field, while market stability aims to minimize negative externalities from financial institution risks. By achieving these goals, regulators help build trust in the financial markets and encourage investment and risk-taking behaviour, which are essential for economic growth and innovation.
Maintaining a healthy financial sector is crucial for mobilizing savings and financing investments. Without a stable market, entrepreneurs may be hesitant to take risks, which can hinder economic progress. Regulators also play a role in consumer protection and policyholder rights, further contributing to market integrity.
Overall, regulators strive to create a reliable and transparent financial market that fosters economic growth and innovation. By upholding integrity and stability, they help ensure that markets function efficiently and effectively to support the needs of the economy.
In an ideal world, how would you shape global standards to ensure frontier, emerging, and developed markets have an equal voice?
As the Chairman of the Global and Emerging Markets Committee of IOSCO, I am focused on ensuring that both developed and emerging markets have an equal voice in shaping global standards. The challenges faced by advanced markets are different from those faced by emerging or frontier markets, so it’s essential to address these differences. We are working on initiatives to attract new investors and companies to emerging markets, as well as discussing regulatory perspectives on Fintech and cryptocurrencies in more advanced markets.
At the IOSCO level, we are focused on capacity building and support programs tailored to the level of development of each market. The Emerging Market Committee is the largest at IOSCO, with members from various backgrounds and challenges. We have identified different types of markets – nascent, frontier, emerging, and almost developed – each requiring specific initiatives to address their needs.
For example, some markets excel in attracting companies to get listed, while others, such as Egypt, are leaders in developing carbon markets and enforcing sustainability regulations. Kenya by example, has been successful in adopting technology. By creating learning programs like NextGEN, we aim to share best practices and learn from each other’s successes. This collaboration is reflected in our representation on the IOSCO board, where we advocate for the unique needs of our diverse markets.
IOSCO is embracing diversity and catering to the individual needs of its members, providing necessary support for capacity building and growth. By recognizing and capitalizing on the strengths of each market, we can collectively advance global standards and ensure that all voices are heard in the international arena of capital market regulators.
What are the key emerging regulatory trends and how are you as an organisation addressing these new risks to remain effective?
We have a clear cross-cutting trend in the adoption of technology. Law #5, issued in 2022, regulates this adoption and includes detailed requirements for Ei Patents, EYC, and E-contracts, as well as the use of distributed ledgers. This trend is essential for insurance companies, capital markets, and financing. We also finalized regulations for robo-advisory services in asset management, aimed at creating a safe saving environment for individuals. Additionally, we are developing databases and infrastructure to enable connectivity among companies, relying on RegTech and SupTech. AI is crucial in dealing with the rapid growth of AI applications in the financial sector.
Another significant trend is the revamp of the insurance sector, with new laws focusing on adequacy and solvency ratios, proper capitalization, and the integration of technology in insurance operations. Actuarial requirements for pricing insurance products are being emphasized.
Furthermore, we are adopting IFRS standards for ESG and climate-related disclosures in listed companies and non-bank financial institutions, with a focus on proportionality and interoperability with other reporting standards. We are developing voluntary carbon markets, considering them as financial instruments and setting requirements for verification and validation bodies. These concepts are new to financial sector regulators. The importance of carbon markets lies in rewarding companies for reducing carbon emissions, ensuring both environmental and financial integrity. This market serves as an incentive for companies to invest in low carbon initiatives and be rewarded with carbon credits that can be sold on exchanges. The FRA finalised nearly all the regulatory requirements to create a regulated voluntary carbon market which is a step beyond what is orthodox when it comes to financial regulation.
What does the future of financial services in Egypt look like?
Let me break it down. The future of financial services will be technology-based, providing users and service providers with new opportunities. Reforms, such as allowing insurance companies to sell their products on platforms like Amazon and Jumia, are opening up distribution channels. This is crucial for financial inclusion, as reducing client acquisition costs through technology can lead to increased access to services. However, the rapid growth in users poses challenges for regulators and the need for consumer protection.
From a business perspective, the future of financial services will involve digitization and AI, requiring companies to adapt and develop new skills. Companies will need to focus on developing the necessary skills to provide services effectively on digital platforms.
In one word, the future of financial services is democratization, allowing everyone to access insurance, financing, investment products, and more. This democratization of financial services will bring about a more accessible and inclusive financial system, but will also require proactive regulation and oversight to ensure consumer protection. The industry is evolving towards a more diverse and inclusive model, providing opportunities for individuals to engage in a wide range of financial activities. This shift towards inclusivity will transform the financial services landscape, providing opportunities for all individuals to participate in various financial activities. This will be the future of financial services, so god help regulators.
This profile forms part of Bloomberg’s Regulatory Affairs insights series and is independent of Bloomberg News.