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.