Regulators at the National Bank of Ethiopia (NBE) have issued a stern warning to the President and Vice-president of Debub Global Bank over what they say was "negligence" during the managment of letters of credit (LCs).

Alarmed by the mismanagement of forex and letters of credit at Debub Global, the central bank has conducted an assessment on Debub Global's forex approval process and reprimanded its executives for engaging "in activities that compromise the financial health of the Bank and tarnish its reputation."

Debub Global is not the first bank to find itself in the midst of a quandary because of controversy over the letters of credit management after executives of the Cooperative Bank of Oromia were suspended six years ago.

Signed by Solomon Desta, vice governor of the NBE, the letters have been separately addressed to both Tesfaye Boru (PhD), president of Debub Global Bank, and his deputy, Fekadu Shigute. The central bank held them liable for the Bank's failure to settle foreign currency bills with overseas clients of importers after approving letters of credit requests beyond the Bank's forex position.

The regulatory body says it has found 197 defaults in letters of credit commitment after October 5, 2020, imposing a 985,000 dollar penalty on the Bank. It has also put a one million Birr fine on Debub Global for an additional 104 defaults that occurred prior to that. While the former has to be deposited in the central bank account with Citibank in New York, the fine must be paid in local currency within the next four months.

A rare measure by authorities at the central bank, this has resulted in disappointment for the Bank's shareholders, whose dividends have been suspended for the same reason.

Authorities at the central bank believe Debub Global has yet to settle its forex liabilities, incurring additional expenses due to fluctuations of the exchange rate. This, however, remains undisclosed, according to a letter written by the NBE on May 14, 2021.

According to the central bank, this has led to the misrepresentation of the Bank's profits on its latest annual financial reports, and the regulatory body holds both Tesfaye and his deputy, Fekadu, responsible for the act.