The financial sector is experiencing sharp divisions among commercial banks as the Birr continues to depreciate rapidly against the U.S. Dollar. This widening gap reveals sharp differences between cautious established private banks, aggressive new entrants, and the conservative posturing of the state-owned Commercial Bank of Ethiopia (CBE).

The big five private banks — Awash, Abyssinia, Dashen, Wegagen, and Zemen — remain cautious players, deliberately avoiding crossing the psychological threshold of 129 Br for a dollar. Wegagen posted one cent short of this mark last week. According to market observers, these established financial institutions are carefully balancing competitive pricing with prudent risk management during market volatility. Their cautious approach contrasted with the assertive strategies younger, third-generation private banks adopted lately.

Last week's currency market displayed considerable disparities.

The Birr (Brewed Buck) saw accelerated depreciation against the U.S. Dollar (Green Buck) with considerable divergence in exchange rates offered by different banks. Notably, the CBE remained largely disconnected from prevailing market dynamics, offering the lowest buying rate at around 124 Br a dollar and a selling rate slightly above 126 Br, revealing a deliberate policy strategy to stabilise the currency artificially.

The persistent underpricing by CBE has sparked debate about its sustainability and the broader implications for foreign exchange market stability.

Emerging private banks, especially third-generation institutions like Amhara Bank, are pushing exchange rates higher. Amhara Bank consistently offered the highest buying rate at 131.55 Br a dollar last week, closely followed by Lion, ZamZam, Gadaa, Hijira, Tsedey, and Goh Betoch banks. This group collectively demonstrated a noteworthy shift toward aggressive pricing strategies, signalling intensified competition and liquidity stress in the economy.