All banks are required to file their monthly and quarterly reports to the National Bank of Ethiopia (NBE) within three consecutive days from the end of the reporting period. Previously, banks have been submitting quarterly and monthly reports 20 and 10 consecutive days after the reporting period is closed, respectively.
A new circular issued by the central bank narrowed the reporting period due to a call from the government urging the regulatory bank to submit the consolidated banking industry reports immediately from the end of the reporting period. The letter sent to all of the banks on February 1, 2020, advised them to comply with the new reporting schedule starting from this month.
"The NBE has come to learn that almost all sectors that have not automated their systems are submitting reports to the government immediately after the end of the reporting period," reads the letter signed by Frezer Ayalew, director of banking supervision at the central bank.
The circular further detailed that banks had automated their respective management information systems (MIS), networked their respective branches and can submit the reports to the central bank via Bank Secrecy Act (BSA), an electronic filing system that helps them to make more timely report submissions.
"[However], banking sector reports are submitted to the government later than any other sector in the economy," adds the letter. "To this end, NBE decided to narrow submission windows of all monthly and quarterly reports."
Banks are required to file financial and operational information and reports to the regulator bank, daily, weekly, monthly and quarterly based on the type of report. Though the number of reports varies depending on each bank's interest rate risk profile, banks file close to 20 reports to the central bank. The reports include risk management, audit, finance and credit administration.
Quarterly reports incorporate the loan position that includes non-performing loans (NPL) and impairment provisions on loans and advances. Monthly reports should cover a bank's financial position, such as cash flows and reports from the investment banking division (IBD).
The reports incorporate summaries of the bank's aggregate exposure; reports demonstrating the bank's compliance with policies and limits; results of stress tests, including those assessing the breakdown in key assumptions and parameters. Summaries of the findings of reviews of interest rate risk policies, procedures and the adequacy of the interest rate risk measurement systems, including internal and external auditors and consultants should also be included in the reports.
A banking executive, who wishes to remain anonymous, says that the central bank's move is logical. However, he has reservations over the new system's applicability, especially in the coming few months until the system is well practised. He also questions the quality of the reports compiled in a shorter period.
"There are problems with the core banking systems of many banks," he said. "Due to efficiency issues with core banking systems, there are some reports that are made manually and then fed to the digital system."
Loan data of banks will be generated at the end of the month, and branch managers will access this data the next day, according to another branch manager. After compiling the data, the branches send the report to the districts, which oversee many branches, for review. Each district will then send the report to the branches for confirmation. Once the confirmation is obtained from branches, the reports will be sent to the head office for review before sending them to the central bank.
"This process obviously takes over three days," the branch manager said. "Thus, to meet the deadline there will obviously be a quality compromise."
Unless each and every branch and district dedicate personnel that will exclusively work on reports, deadlines will not be met, according to the branch manager.
PUBLISHED ON Feb 06,2021 [ VOL 21 , NO 1084]
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