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Compliance Procedures for Banks in Ethiopia

Ethiopia’s banking sector has experienced rapid growth, with 30 commercial banks operating in the country. The industry is governed by the Banking Business Proclamation No. 592/2008 and its amendment, Banking Business Proclamation Amendment No. 1159/2019.

Eligibility for Investment

According to the proclamation, foreign nationals of Ethiopian origin, organizations fully owned by foreign nationals, and organizations jointly owned by Ethiopian nationals and foreign nationals of Ethiopian origin are allowed to invest in the banking sector. However, such organizations must be registered under Ethiopian laws and have their head office in Ethiopia. Foreign nationals of Ethiopian origin and organizations partly or wholly owned by such persons can only procure shares in an acceptable foreign currency.

Licensing Requirements

To engage in banking business, banks must obtain a license from the National Bank of Ethiopia (NBE), the country’s financial regulatory body. The NBE requires banks to meet certain preconditions, including:

  • A completed application and accompanying documents
  • Payment of investigation fees
  • Publication of a notice of intention to engage in banking business in widely circulating newspapers
  • Minimum paid-up capital of 500 million Ethiopian Birr (ETB)
  • Directors, CEO, and senior executive officers must meet qualification criteria prescribed by the NBE

Licensing Process

The NBE has 90 days to decide on a licensing application after accepting the completed application and payment of the licensing fee.

Share Restrictions

Bank shares are restricted in Ethiopia, with certain individuals and companies prohibited from acquiring more than 5% of a bank’s total shares. Influential shareholders, who hold directly or indirectly two percent or more of the total subscribed capital of a bank, must obtain approval from the NBE before transferring their shares.

Supervision and Regulation

The National Bank has broad powers to supervise and regulate banks, including the power to:

  • Suspend or remove CEOs, directors, and senior executives
  • Limit voting rights
  • Suspend influential shareholders who fail to meet ethical requirements

Penalties for Non-Compliance

Banking business law also provides for criminal prosecution and penalty for acts in contravention of the law. For example, transacting in a banking business without a license can result in rigorous imprisonment from 10 to 15 years and a fine of 20,000 ETB.

Contact Information

The National Bank of Ethiopia is responsible for enforcing compliance with banking regulations and can be contacted at:

  • Sudan Avenue
  • Tel: +251 11 5517438
  • Fax: +251 11 5514588
  • Website: nbe.gov.et