Central Bank's Tough Love Targets Loan Risks, Cronyism

Jun 15 , 2024

Regulators at the National Bank of Ethiopia (NBE) have rolled out a series of new directives targeting the banking industry, including the preemptive introduction of an "unlikely to pay" category to identify loans at risk of turning into non-performing loans (NPLs). They have also capped the total exposure to a single borrower at 25pc of a bank's total capital, with a further limitation of 15pc for exposure to related parties. A directive issued last week  mandates that all NPLs must be placed under non-accrual status, regardless of the collateral provided. If a borrower has multiple loans and any one loan becomes non-performing, all loans to that client must be classified as non-performing if they constitute 20pc or more of the bank's total exposure to that client. "By enforcing stricter controls, the NBE aims to prevent the extraction of private benefits at the expense of banks’ stability and integrity," said a statement from the regulators. According to the statement, these directives are part of a broader effort by the NBE to enhance asset classification and provisioning, set requirements for individuals with significant influence in banks, and promote robust corporate governance. The central bank's statement claims that these measures reflect a commitment to safeguarding the financial system and promoting prudent banking operations. The NBE has imposed stringent criteria for the qualifications and experience of board members and senior management, including mandates for the inclusion of independent directors and the promotion of gender diversity on boards. These reforms appear to confirm practices endorsed by the Basel Committee on Banking Supervision and the International Financial Reporting Standards (IFRS), showing the importance of risk management, transparency, and accountability in banking operations.


Ministry Secures $86m Grants

An 86.18 million dollar grant agreement was signed between the Ministry of Finance, UNICEF and UNFPA last week to support the agencies' ongoing country programs for the fiscal year. Out of the total grant, UNICEF committed 70 million dollars to support its water, nutrition, education, health, sanitation, child protection, and gender projects. Meanwhile, UNFPA pledged 16.1 million dollars for family planning, maternal health, adolescent and youth development, and gender equality and women empo...


Authority Reports Fuel Import Stats

Ethiopian Petroleum & Energy Authority (EPA) disclosed that 3.2 million tons of fuel were imported into the country during the last fiscal year. The figure includes 2.04 million tons of diesel and 767,672tns of benzene. In the past fiscal year, the digital payment system, Telebirr, facilitated transactions totalling 103 million volumes worth 61.8 billion Br. Of these transactions, 81.39pc were for diesel, while 17.82pc were for benzene. The number of fuel stations increased from 682 to...


Commercial Bank Collects $3.2b in Foreign Currency

The Commercial Bank of Ethiopia (CBE) announced robust performance in foreign currency collection for the past fiscal year, achieving 3.2 billion dollars in total mobilisation. This includes 2.07 billion dollars in remittances, with the Bank's Diaspora banking service and CBE Birr contributing 89.9 million dollars to the total. The performance details were shared during CBE's annual review meeting last week. "This achievement is particularly gratifying given the challenging economic climat...