The National Bank of Ethiopia has introduced Directive No. SBB/92/2024, which serves to regulate the investment activities of banks within the country. This directive is designed to effectively manage risks, encourage diversification of business activities, and establish clear investment limits.
Key definitions are provided for terms such as “Bank,” “Banking Business,” “Capital Market Service Provider,” and “Financial Infrastructure,” ensuring clarity and uniformity in application across all banks in Ethiopia.
Under this directive, banks are permitted to acquire equity shares in insurance companies, capital market service providers, and financial infrastructure entities, subject to certain limitations and the requirement of obtaining prior approval from the National Bank. However, banks are prohibited from directly engaging in insurance business, non-banking business, and from holding equity in credit rating agencies.
The directive stipulates that a bank’s total equity investment in all non-bank businesses must not exceed 15% of its total capital. Furthermore, banks are restricted from investing more than 10% of their total capital in real estate acquisition and development without the National Bank’s prior approval.
Banks are required to report any equity investment to the National Bank within 30 working days, with the exception of investments in financial infrastructure and interest-free banking services. Investments made prior to the effective date of the now-repealed directive are exempt from the new limitations.
This directive supersedes the previous Directive No. SBB/65/2017 and is set to be enforced starting from July 19, 2024.
Download the Directive here: