(The author is a Reuters Breakingviews columnist. The opinions expressed are her own)

QInvest's bid to carve up EFG Hermes is a test for the new Egypt. Ten months have passed and the Qatari firm is still waiting for regulators to approve its deal with the Cairo-listed EFG Hermes, the region's top investment bank. The decision is a political hot potato.

Under the agreement, EFG would initially inject its core business into a joint venture, 60 percent controlled by QInvest. The current terms are only valid until May 4, according to sources familiar with the transaction. If a green light isn't given by then, the firms will have to decide whether to extend, renegotiate or walk away.

The Egyptian Financial Supervisory Authority is in an awkward spot. EFG's co-chief executives, Hassan Heikal and Yasser El Mallawany, have been accused by Egyptian authorities of illegal share dealings in relation to a 2007 transaction, alongside the two sons of the deposed President Hosni Mubarak. If the Qatari deal is approved, the regulators would be criticised for letting executives who profited during the old regime gain handsomely in the new order.

But rejecting the deal is not easy. Qatar has provided both financial and political support to Egypt's new Muslim Brotherhood government, and the Egyptian government says it doesn't want to alienate businessmen.

Doing nothing would also leave both buyer and seller in a difficult position. QInvest is banking on the deal to transform it from minnow into major regional player. It has almost halved its headcount in anticipation of the tie-up, according to two people familiar with the bank. EFG also faces a tough time in its home Egyptian market, which accounts for the bulk of its fees and commission. The hope is that QInvest's Qatari connections will give it new business from the sovereign, and help the bank expand in Africa and Asia.

EFG shareholders have been promised a dividend equivalent to 35 percent of its current share price after the transaction. That's made a deal tempting to large shareholders that want to get cash out. But the investors may be disappointed. Most bankers now expect Egypt's regulator to avoid any decision until the insider trading charges are resolved. – Reuters