the National Bank of Ethiopia (NBE) has enacted a comprehensive new directive requiring all banks to implement robust recovery planning frameworks. The Recovery Plan of Banks Directive No. SBB/93/2025, effective since May 13, 2025, represents a paradigm shift in Ethiopia’s approach to banking sector risk management.

The directive establishes rigorous standards for crisis preparedness, mandating that financial institutions develop detailed strategies to maintain viability during periods of severe stress. Banks must now incorporate sophisticated monitoring systems to detect early warning signs of financial deterioration, with specific thresholds triggering predefined corrective actions.

A cornerstone of the new regulation is the requirement for institutions to conduct extensive scenario analyses. These stress tests must evaluate potential impacts from both institution-specific difficulties and broader market disruptions, with particular attention to liquidity pressures, capital adequacy, and operational continuity. The framework emphasizes the importance of maintaining critical functions even during periods of financial distress.

Governance requirements under the directive are particularly stringent. Bank boards now bear direct responsibility for approving and regularly reviewing recovery plans, with clear lines of accountability established for crisis decision-making. For foreign bank branches operating in Ethiopia, the rules mandate close coordination with parent institutions while ensuring local obligations are fully safeguarded.

The NBE has established a phased implementation timeline, with banks required to submit their inaugural recovery plans within eight months. Ongoing compliance will involve annual updates and prompt reporting of any material changes to business models or risk profiles. The central bank has introduced strict penalties for banks that fail to comply, including fines of ETB 100,000 for missing the initial submission deadline and ETB 50,000 for delayed annual updates. Persistent non-compliance could result in further administrative actions under the Banking Business Proclamation.