@EthiopianBanks – Ethiopian Business Review

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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.

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In its ongoing commitment to price and external stability, the National Bank of Ethiopia (NBE) has announced that it will conduct its sixth foreign exchange auction on Thursday, May 22, 2025, offering USD 50 million to participating banks.

This move is part of NBE’s bi-weekly foreign exchange auction framework aimed at supporting a more transparent and market-responsive forex system. Banks are invited to submit bids in line with NBE’s established guidelines, with the settlement set for the end of the auction day.

The announcement follows the previous auction held on May 7, 2025, where the weighted average rate of all successful bids stood at ETB 132.9643 per USD. In that round, 16 banks successfully secured foreign exchange allocations, underscoring robust participation and demand.

By maintaining a consistent auction schedule, the central bank aims to reduce volatility, improve forex access for priority sectors, and enhance monetary policy effectiveness.

The results of the May 22 auction will be disclosed shortly after the bid submission period concludes.

The Cooperative Bank of Oromia, through its mobile platform Coopay e-Birr, has officially launched electricity bill payment services in collaboration with the Ethiopian Electric Utility (EEU)—unlocking new possibilities for rural inclusion and digital convenience.

This move comes as Ethiopia deepens its transition to digital service delivery. Getu Geremew, CEO of EEU reports that around 90% of its five million customers currently use digital payment methods. Until now, digital bill payments have primarily been facilitated by platforms such as Telebirr, Commercial Bank of Ethiopia, Awash Bank, and most recently, Safaricom. But EEU acknowledges that these platforms have struggled to effectively serve rural communities, where farmers often face challenges such as limited access, low trust, and limited digital literacy.

“We chose Coop Bank because of its dominance in the eastern and rural parts of the country,” explained Esayas Dendir, Marketing and Sales Executive Officer at EEU. “The majority of their customers are farmers. That’s a unique reach we didn’t have.”

Coopay e-Birr, with over 7 million users and a transaction volume exceeding 3 trillion birr, is a widely used mobile financial platform in Ethiopia. It facilitates payments for services including Ethiopian Airlines, water utilities, housing corporations, municipal services, and educational institutions.

The addition of electricity bill payments not only adds convenience for users but also promotes operational efficiency and national development goals. For EEU, digital payments minimize delays in fee collection and improve the financing of infrastructure projects. For Coop Bank, the move strengthens its positioning as a key player in digital financial inclusion.

“This isn’t just a new feature—it’s a grassroots shift,” said Derbe Asfaw, CEO of the Cooperative Bank of Oromia. “We’re bringing fintech to the doorsteps of farmers, daily laborers, and small traders who’ve long been excluded from Ethiopia’s digital transformation.”

He added, “We are driven by the belief that digital innovation can transform lives. This collaboration is another step toward building a financially empowered society.”

According to the EEU, efforts are underway to expand the digital payment system across various banks. “We are working to integrate multiple banks in partnership with EthSwitch,” said Getu Geremew.

The National Bank of Ethiopia (NBE) successfully conducted its first bi-weekly foreign exchange auction today, marking a key milestone in its ongoing efforts to stabilize the forex market.

According to NBE’s official announcement, the weighted average exchange rate for successful bids settled at Birr 131.7095 per US Dollar, with 12 banks securing foreign exchange allocations.

This auction is part of the central bank’s broader strategy to enhance forex liquidity for the private sector following Ethiopia’s recent macroeconomic reforms. It follows NBE’s decision to launch regular bi-weekly auctions, a move driven by improved forex reserves and increased capital inflows.

The next auction is scheduled to take place in two weeks, with details on the exact date and time to be disclosed one day prior.

By maintaining a structured approach to foreign exchange distribution, the NBE aims to reinforce market confidence while supporting broader economic stability. Market participants will closely monitor upcoming auctions to assess trends in forex availability and pricing.

The National Bank of Ethiopia (NBE) has drafted a new directive that emphasizes stricter data security, storage, and management for all banks in the country.The Requirements for Licensing and Renewal of Banking Business and Representative Office Directive No. SBB/Xx/2025 opens the door for foreign banks to establish subsidiaries or branches for the first time. However, foreign banks must meet stringent requirements, including a minimum capital of ETB 5 billion (approximately USD87 million) for subsidiaries, possess investment-grade credit ratings, and secure approval from their home-country regulators. This regulatory shift is a part of Ethiopia’s broader effort to modernize its financial sector, attract foreign investment, and align with global banking practices while safeguarding local stability.

Under the new directive, foreign banks must undergo thorough fit-and-proper checks, which include criminal and tax clearance, and submit detailed business plans demonstrating long-term viability. Non-lending representative offices are also allowed to facilitate market research and business liaisons, but they are prohibited from conducting banking activities. The directive further mandates that all foreign banks and their subsidiaries comply with strict data security requirements, ensuring that customer data is stored and processed within Ethiopia’s borders. This aligns with the Banking Business Proclamation No. 1360/2025 and the Personal Data Protection Proclamation No. 1321/2024, providing a legal framework for safeguarding banking and personal data.

Additionally, the directive imposes higher standards on domestic banks, including increased capital requirements, new data localization rules, and mandates for gender diversity on boards. Domestic banks applying for a new business license will be required to pay an investigation fee of ETB 100,000 and a licensing fee of ETB 300,000, with a renewal fee of ETB 200,000. Foreign banks face higher fees, including an investigation fee of ETB 200,000, a licensing fee of ETB 600,000, and a renewal fee of ETB 400,000. Representative offices of foreign banks will have to pay an investigation fee of ETB 50,000, a licensing fee of ETB 150,000, and a renewal fee of ETB 100,000.

The directive also provides clear rules for the licensing process, including annual renewals for all banks between July 1 and September 30. Banks must submit updated financial statements, capital information, and confirmation of legal reserves, while representative offices must demonstrate proof of a USD 100,000 cash deposit to cover their expenses. The NBE retains the authority to approve or reject applications based on an institution’s ability to operate according to Ethiopian banking laws and regulations.

One of the most significant aspects of the directive is the stringent data security provisions. All banks are now required to store and process customer data within Ethiopia, with foreign bank branches needing to store both primary and backup data locally. Banks transferring data abroad must notify the NBE, ensure robust encryption, access controls, and demonstrate that the jurisdiction receiving the data offers comparable protection.

Analysts view these reforms as a critical step in Ethiopia’s economic transition, following the partial privatization of the telecom sector. While the reforms aim to attract foreign investment and modernize the financial system, they also maintain cautious capital controls and impose limits on foreign ownership, capping foreign stakes in Ethiopian banks at 49%. The NBE is expected to process license applications within 90 days, with the first foreign banks anticipated to begin operations in the country in the coming year.

The directive replaces the previous Requirements for Licensing and Renewal of Banking Business Directive No. SBB/56/2013, marking a step forward in Ethiopia’s efforts to integrate more fully into the global financial system while safeguarding its national interests.

The National Bank of Ethiopia’s (NBE) latest foreign currency auction has sparked confusion among industry stakeholders after concluding at a significantly higher rate than the prevailing market price. While the USD exchange rate stood at ETB 124.0086 on the market, the auction saw USD60 million sold at an average rate of ETB 135.62 per dollar. This unexpected outcome has raised concerns about its impact on the broader market.

A financial expert close to the banking sector explained that for banks, participating in the auction is often their only option to secure the foreign currency needed to cover essential expenses. He noted that NBE holds these auctions to manage forex distribution and stabilize market fluctuations.

In a recent policy shift, NBE has transferred a significant portion of fuel import-related forex responsibilities to commercial banks. Fuel imports require large sums of foreign currency, which could strain reserves. “With payment deadlines for fuel imports approaching, banks likely raised their bids to ensure they could meet their obligations,” the expert said.

Smaller banks also participated aggressively, bidding at higher rates. “They prefer the auction as it offers a better deal compared to purchasing from larger banks, which often charge high commissions,” he added.

A seasoned economist highlighted the uncertainty surrounding future auctions, which has led banks to maximize their forex purchases whenever possible. While acknowledging the auction system’s benefits, he cautioned that the latest auction’s near ETB 136 per USD rate could exert inflationary pressure on the economy. “Exporters may withhold their goods, anticipating further depreciation of the ETB and higher profits in future auctions,” he warned.

According to NBE, 27 banks participated in the auction. Sources indicate that only 12 banks secured foreign currency, with winning bids ranging from a minimum of ETB 130 to a maximum of ETB 141 per dollar. Notably, a single bank reportedly obtained just USD200,000 at the highest rate of ETB 141 per dollar.

Source: The Reporter

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