Date: Dec. 17, 2024
On 17 December 2024, the FDRE House of People’s Representatives deliberated on and approved the Banking Business Proclamation.
1. Liberalization and Licensing of Banking Business
The Proclamation opens the banking sector to foreign investors. Foreign banks may now enter the Ethiopian market by establishing a subsidiary, a branch, a commercial representative office (CRO), or by acquiring shares in an existing bank.
2. Operation and Employment of Foreigners
The Proclamation introduces the role of independent directors—non‑executive board members responsible for safeguarding objective judgment. Employment of foreign individuals in banks is restricted to positions requiring specialized knowledge for up to five years. The National Bank of Ethiopia (NBE) is mandated to supervise technology and skill transfer to ensure a timely transition of responsibilities to Ethiopian nationals.
3. Merger and Acquisition
In addition to voluntary mergers previously recognized with NBE approval, the Proclamation introduces statutory mergers. The NBE is empowered to establish statutory mergers to rescue problem banks or strengthen the sector by creating more viable institutions.
4. Crisis Management
The NBE is mandated to prepare resolution plans for critical banking institutions to address potential financial crises. A national crisis management committee chaired by the NBE will develop a comprehensive crisis‑management framework. The Proclamation also introduces the concept of a bridge bank, which temporarily acquires the assets and liabilities of a failing bank until its final resolution is determined.
