CBE Capital Deserves the Headlines. Now the Hard Work Begins

Jul 12 , 2025
By Eyasu Theodros

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CBE Capital Investment Bank announced on June 26, 2025, its first “inter-broker trade” on the Ethiopian Securities Exchange (ESX), the bourse that opened its doors only weeks earlier. A few days before, Gadaa Bank became the second firm to list.

The twin milestones, splashed across front pages, were celebrated as proof that Ethiopia can at last channel household savings, unlock diaspora cash and attract foreign currency through a transparent marketplace. The optimism is deserved, yet the fanfare obscures a tougher question.

Can a market dominated from birth by a state-backed giant convince ordinary investors that everyone plays by the same rules?

That giant is CBE Capital, the securities arm of the Commercial Bank of Ethiopia (CBE), the state-owned financial mammoth. As an investment bank, it arranges initial public offerings and bond sales, serving the issuer and striving to maximise valuations. As a retail broker, it now executes orders for walk-in customers, many of them first-time equity buyers who rely on their agent to flag every risk. The two mandates pull in opposite directions. One hat pushes prices higher, the other hunts for bargains. When the same desks wear both hats, confusion is the mildest outcome; unfair pricing and selective disclosure are the darker prospects.

CBE’s heft makes the tension impossible to ignore. The parent bank controls more than 30 billion dollars in assets, handles government payroll accounts and operates branches in virtually every woreda. Those advantages give its securities offshoot unrivalled access to deposits, deal flow and policymakers. Allowing CBE Capital to act simultaneously as underwriter, broker and, eventually, market maker without internal separation would tilt the playing field against private lenders, especially diaspora-linked challengers that might otherwise spur competition.

More troubling, small savers should wonder whose interests come first.

Mature markets address such conflicts with what Wall Street refers to as a “Chinese Wall.” Departments whose incentives collide are physically and digitally sealed off. Emails are screened, calls recorded, and data rooms are locked. Compliance teams run constant audits, and staff members face personal liability for mis-selling. Clients receive written notice whenever a conflict exists. In the United States and the United Kingdom, these firewalls are far more than guidelines. They are enforceable laws. Break them and fines, licence suspensions and career-ending bans follow quickly.

No public evidence shows that comparable protections exist inside CBE Capital, nor has the Ethiopian Capital Market Authority (ECMA) declared them mandatory. The omission matters because the Exchange is an infant, public knowledge of equities is thin, and the marketing of new issues is squarely targeted at small savers and members of the diaspora. Trust, not technology, will unlock those deposits and attract foreign portfolio managers. If the same firm drafts a prospectus, leads the roadshow and then fills the buy orders, investors lose the neutral checkpoint that separates promotion from execution.

CBE’s structural power also poses a threat to the market’s long-term growth. Allowing its securities arm to juggle three roles at once could deter independent research, custody, and market-making services that deepen liquidity and keep valuations honest. Worse, a single rumour of unfair pricing could freeze trading overnight. Early enthusiasm is brittle; one misstep could turn today’s triumph into a cautionary tale that echoes for years.

The region offers pointed warnings. Kenya’s Exchange spent much of the 2000s rebuilding confidence after related-party trades and cloudy disclosures drove retail investors away. Nigeria tightened its rules only after scandals rattled the market. Ethiopia can spare itself a similar detour. Constructing sturdy firewalls now will cost far less than restoring trust later and will give every participant, large or small, a fair shot from the start.

Private banks still have the opportunity to shape their culture with transparency, unequivocal role separation, and investor-first practices. They can establish a commercial standard that rivals should match. The reward is a reservoir of diaspora savings whose owners are accustomed to data-rich, choice-heavy markets. Winning even a slice of that capital could ease the foreign-exchange crunch and give companies a deeper pool from which to raise funds.

Trust, in short, is a form of infrastructure. Designing the Exchange around credible oversight and conflict-free execution can lower the risk premium foreign nationals assign to Ethiopian assets and give domestic savers a reason to stay invested once the novelty fades. Scrutiny need not suffocate innovation; it can trim borrowing costs, sharpen price discovery and broaden access for citizens who have long relied on bank deposits and real estate.

The Exchange is live, and the first trades are on the tape. The job now is to weave investor protection into its culture, not merely its rulebook. Any institution that raises money for issuers should maintain a solid wall between its bankers and its brokers, disclose conflicts of interest plainly, and punish breaches swiftly. State ownership should not exempt CBE Capital from that discipline; if anything, public backing makes vigilance more pressing.

Ethiopia will earn its investors only if roles are separate and customers come first. One scandal could set the project back years; a well-governed exchange can deepen savings, stabilise foreign-exchange flows and let Ethiopians at home and abroad share in the country’s growth..

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PUBLISHED ON Jul 12,2025 [ VOL 26 , NO 1315]

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