Tag Archives: National Bank of Ethiopia

Capital Goods Leasing Business (Amendment) Proclamation No. 807/2013


PROCLAMATION No. 807/2013

PROCLAMATION TO AMEND THE CAPITAL GOODS LEASING BUSINESS PROCLAMATION

WHEREAS, it has became necessary to amend the Capital Goods Leasing Business Proclamation No.103/ 1998;

NOW, THEREFORE, in accordance with Article55 (1) of the Constitution of the Federal Democratic Republic of Ethiopia, it is hereby proclaimed as follows:

1. Short Title

This Proclamation may be cited as the “Capital Goods Leasing Business (Amendment) Proclamation No. 807/2013″.

2. Amendment

The Capital Goods Leasing Business Proclamation No. 103/ 1998 is hereby amended as follows:

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Following the issuance of the new amendment the National Bank of Ethiopia has issued two directives for its implementation.

Clink the links below to download.

  • LICENSING AND SUPERVISION OF THE BUSINESS OF CAPITAL GOODS FINANCE COMPANIES

Requirements for Licensing of Capital Goods Finance Business Directives No. CGFB /02/ 2013    DOWNLOAD

  • LICENSING AND SUPERVISION OF THE BUSINESS OF CAPITAL GOODS FINANCE COMPANIES

Minimum Paid Up Capital Requirement Directives No.CGFB /01/ 2013      DOWNLOAD

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Regulation of Mobile and Agent Banking Services National Bank of Ethiopia Directives No. FIS /0112012


LICENSING AND SUPERVION OF THE BUSINESS OF FINANCIAL INSTITUIONS DOWNLOAD (.pdf)

Regulation of Mobile and Agent Banking Services

Directives No. FIS /0112012

Whereas, use of technology and innovative financial service delivery channels such as mobile devices and agents have significant contribution in deepening financial service accessibility to the wider section of the population at an affordable price;

Whereas, it has been found essential to encourage and enhance savings mobilization through the use of alternative and innovative financial services delivery channels;

Whereas, there is a need to set the minimum standards for risk management and customer protection on the delivery of mobile and agent banking services;

Whereas, the National Bank of Ethiopia is responsible for ensuring , that financial institutions are delivering mobile and agent banking services without compromising the safety and soundness of the financial system of the country;

Now, therefore, in line with the powers vested in it by article 10 (5) of National Payment System Proclamation No. 718/2011 and article 59 (2) of Banking Business

Proclamation no. 592/2008, the National Bank of Ethiopia has issued these directives. Continue reading →

2009/10 (2002 E.C.) Council of Ministers Regulations


Regulation no. 160-2009 National Lottery Administration Re-establishment

Regulation no. 161-2009 Coffee Quality Control and Transaction

Regulation no. 162-2009 Irrigation Development Investment Incentives

Regulation no. 163-2009 Wildlife Development, Conservation and Utilization

Regulation no. 164-2009 Council of Ministers Income Tax (Amendment)

Regulation no, 165-2009 Ethiopian Postal Service Enterprise Establishment

Regulation no. 166-2009 Work Permit Fees (As Amended)

Regulation no. 167-2009 Federal Hospitals Administration        Corrigendum no. 8-2009

Regulation no. 168-2009 Registration and Administration of Charities and Societies

Regulation no 169-2009 Acess to Genetic Resources and Community Knowledge Communitynity Rights

Regulation no. 170-2009 Ethiopian Electric Power Corporation Re·Establishment

Regulation no. 171-2009 Financial Intelligence Establishment

Regulation no. 172-2009 Re-Organization of the Management of the National Bank of Ethiopia

Regulation no. 173-2009 Classification of Tourist Facilities

Regulation no. 174-2009 Catering and Tourim Training Center Establishment

Regulation no. 175-2009 Genet Hotel Enterprise Establishment

Regulation no. 176-2010 Ethiopian Meat and Dairy Technology Institute Establishment (Amendment)

Regulation no. 177-2010 lnfomtttion Technology Park Corporation Establishment

Regulation No. 178-2010 Sesame and White Beans Transaction

Regulation no. 179-2010 Army Foundation Establishment

Regulation no. 180-2010 Textile Industry Development Institute

Regulation no. 181-2010 Leather Industry Development Institute

Regulation no. 182-2010 Metal Industry Development Institute Establishment

Regulation no. 183-2010 Metal and Engineering Corporation Establishment

Regulation no. 184-2010 Public Procurement and Property Disposal Service Establishment

Regulation no. 185-2010 Defence Construction Enterprise Establishment

Regulation no. 186-2010 Defence Construction Materials Manufacturing Enterprise Establishment

Regulation no. 187-2010 Construction Design Enterprise Establishment

Regulation no. 188-2010 Repealing of the Regulation for the Implementation of African Peer

Regulation no. 189-2010 Ethiopian Food Medicine and Health Care Adminstration and Control Authority Establishment

Limits on Board Remuneration and Number of Employees Who Sit on a Bank Board Directives No. SBB/49/2011


Brief Note

This directives limits the total remuneration to be payed to members of board of directors of a bank to a maximum of 74, 000.00 Birr. (Fifty two thousand Birr)According to article 4.1 of the directive,  Annual board compensation to a director shall not exceed birr 50,000 (fifty thousand birr). In addition o this lump sum payment, the monthly allowance to be paid to a single board member could not exceed birr 2,000 (two thousand birr). The Directive strictly prohibits payment of any financial or otherwise remuneration or benefits other than the stated yearly compensation and monthly allowance.

The directives also prohibits employee of a bank, be it permanent or contractual from becoming members of board of directors.

LICENSING AND SUPERVISION

OF BANKING BUSINESS

Limits on Board Remuneration and Number of Employees Who Sit on a Bank Board Directives No. SBB/49/2011

 

WHEREAS, a sound corporate governance is vital for the health of individual banks and the banking sector as a whole;

WHEREAS, excessive remunerations recently being paid by banks to directors have become a threat to the health of the banking system;

WHEREAS, there is a need to separate board and executive functions, so as to ensure proper checks and balances, in banks;

NOW, THEREFORE, in accordance with paragraphs “e” and “f” of sub-article 4 of article 14 of Banking Business Proclamation No 592/2008, the National Bank of Ethiopia hereby issues these directives.

1. Short Title

These Directives shall be cited as “Limits on Board Remuneration and Number of Employees Who Sit on Bank Board Directives No. SBB/49/2011″.

2. Definitions

For the purpose of these directives, unless the context provides otherwise:

2.1 “bank” means a company licensed by the National Bank of Ethiopia to undertake banking business or a bank owned by the Government;

2.2 “Board allowance” refers to an amount of money that is paid in kind or in cash from any account of the bank to directors to cover incidental costs related to their board membership;

2.3 “Board compensation” refers to any money other than board allowance that is paid, in cash or otherwise, to a director from the bank’s net profit or from any other sources;

2.4 “Director” means any member of the board of directors of a bank, by whatever title he may be referred to;

2.5 “Employee” means a chief executive officer, a senior executive officer or any other person who is appointed or hired by a bank to carry out its day-to-day operational activities;

2.6 “Remuneration” includes board compensation and allowance paid to each director;

3. Scope of the Directives

These directives shall apply to all banks operating in Ethiopia.

4. Remuneration of Directors

4.1 Annual board compensation to a director shall not exceed birr 50,000 (fifty thousand birr).

4.2 Monthly allowance paid to a director shall not exceed birr 2,000 (two thousand birr).

4.3 No bank shall pay any financial or otherwise remuneration or benefits other than those stated under sub-articles “4.1” and “4.2” of this article in whatsoever form to its directors any time.

5. Number of Employees Who Sit on Bank Board

No employee of a bank, be it permanent or contractual, shall sit on the board of any bank.

6. Effective Date

These Directives shall enter into force as of 15th day of January 2011.

 

Interest Free Banking Directives Number SBB/51/2011


LICENSING AND SUPERVISION OF BANKING BUSINESS Directives to Authorize the Business of

Interest Free Banking   DOWNLOAD (PDF)

Directives Number SBB/51/2011

WHEREAS there has been increasingly strong public demand for interest free banking products in Ethiopia;

WHEREAS supply of such products by banks has to be carried out in a safe and sound manner;

WHEREAS there has been lack of regulatory framework for interest free banking business;

NOW, THEREFORE, in accordance with Article 22(2) of Banking Business Proclamation Number 592/2008, the National Bank of Ethiopia hereby issues these directives.

1. Short Title

These directives may be cited as “Directives to Authorize the Business of Interest Free Banking No. SBB/ 51/2011”

2. Definitions

For the purpose of these directives, unless the context provides otherwise:

2.1“bank” means a company licensed by the National Bank to undertake banking business or a bank owned by the Government;

2.2“interest free banking business” refers to banking business in which mobilizing or advancing funds is undertaken in a manner consistent with Islamic finance principles and mode of operation that avoids receiving or paying interest;

2.3“interest free banking window” refers to a unit within a conventional bank exclusively offering interest free banking services; and

2.4“National Bank” means the National Bank of Ethiopia.

3. Scope

Provisions of these directives shall apply to all banks in Ethiopia engaged in interest free banking business.

4. Authorization

4.1 A bank shall obtain a written authorization from the National Bank to carry on interest free banking business.

4.2 A bank which wishes to obtain an authorization to carry on interest free banking business shall submit a duly completed application in the prescribed format together with documents specified below:

a)a report on resource mobilization and use;

b)planned balance sheet structure for interest free window and the whole bank;

c)maximum share of planned interest free business in total consolidated balance sheet of the bank;

d)risk management framework for all interest free banking products;

e)a statement on availability of adequate capacity and facilities to run interest free banking business;

f) accounting aspects, such as accounting policies to be followed and profit and loss sharing mechanisms;

g)evidence of financial strength as reflected in capital adequacy, asset quality, earnings capability, future earnings prospects, and current liquidity position and forecast for the next 12 months;

h) track records of adherence to prudential regulations, credit discipline, quality of customer services ;

i) a statement on the convenience as well as the needs of the population of the area to be served by interest free banking services;

j) methods of segregating the funds of interest free banking businesses from all other business ; and

k) such other information as required by the National Bank while processing the application.

4.3The National Bank shall evaluate the application submitted by a bank in view of risk management, Banking Business Proclamation, applicable directives issued by it as well as other rules and regulations; and upon its satisfaction, may authorize the applicant to open an interest free banking window.

5. Prohibition

5.1Banks shall not alter maximum share of interest free banking business in their consolidated balance sheet without prior approval of the National Bank.

5.2Failure to comply with sub-article 1 of this article may result in the closure of interest free banking window.

6. Maintenance of Accounts and Financial Statements

Banks engaged in interest free banking business shall:

6.1keep separate books of accounts in respect of interest free banking operations and ensure proper maintenance of records for all transactions for segregation of funds.

6.2report their interest free banking business activities every month to the National Bank.

7. Compliance with Regulatory and Supervisory Requirement

7.1In conducting interest free banking business, banks shall comply mutatis mutandis with all regulatory and supervisory requirements except National Bank’s directives on interest rate.

7.2 Equity participation in a project or a company shall be in strict compliance with “ limitation on Investment of Banks Directives No. SBB/12/96’’.

8.Effective Date

These Directives shall enter into force as of the 1st day of October 2011.

ASSET CLASSIFICATION AND PROVISIONING FOR DEVELOPMENT FINANCE INSTITUTIONS Directives No. SBB/ 48/2010


LICENSING AND SUPERVISION OF BANKING BUSINESS

Directives No. SBB/ 48/2010     DOWNLOAD (PDF)

ASSET CLASSIFICATION AND PROVISIONING FOR DEVELOPMENT FINANCE INSTITUTIONS

1. Issuing Authority

These Directives are issued by the National Bank of Ethiopia pursuant to the authority vested in it by articles 21 and 22 of Banking Business Proclamation No. 592/2008.

2. Short Title

These Directives may be cited as “Asset Classification and Provisioning for

Development Finance Institutions Directives No. SBB/ 48/2010”.

3. Purpose

The purpose of these Directives is to provide guidelines to development finance institutions to assure that:

3.1loans are regularly reviewed and prudently classified in a manner that appropriately reflect credit risk;

3.2loans which are not performing in accordance with contractual repayment terms are timely recognized and reported as past due ;

3.3accrued but uncollected interest on loans is properly accounted for; and

3.4timely and adequate provisions are made to the “Provisions for Loan Losses Account” in order to ensure that disclosed capital and earnings performance are accurately stated. Continue reading →

The Requirements to Carry on Insurance Business in Ethiopia


(Taken from Law of Banking, Negotiable Instruments and Insurance

Prepare by Fasil Alemayehu and Merhatbeb Teklemedhn
Sponsoredby Justice Justice and Legal System Research Institute)

           The Requirements to Carry on Insurance Business
Art 656 of the Commercial Code provides that the law shall determine the conditions under which physical persons or business organizations may carry on insurance business.
Therefore, we have to refer to other parts of the commercial code and other laws to find out as to who may undertake insurance business and the conditions under which it may be undertaken. Accordingly, Art 513 of the code provides that banks and insurance companies cannot be established as private limited companies, i.e., a private limited company cannot engage in banking, insurance or any other business of similar nature. Similarly, Art 6(1) of the Licensing and Supervision of Insurance Business Pro No 86/1994 provides that no person may engage in insurance business of any type unless it applies to and acquires a license from the National Bank
of Ethiopia for the particular class or classes of insurance. Furthermore, Art 4(1) and Art 2(3) of the same proclamation provide that such person has to be a share company as defined under Art 304 of the commercial code.
These requirements / conditions in effect prevent foreigners from engaging in insurance business and foreign banks from opening branches and operating in Ethiopia. The most probable reason for this position is the need to protect infant domestic insurance companies which do not have the desired financial strength, knowhow and human resources to be able to compete with foreign banks which have superior capacity in these areas.
The other condition that a person must fulfill to obtain a license relates to the minimum capital of the company, i.e., it must have a minimum capital of 3 million Birr if it is applying for license to undertake general insurance business i.e., insurances other than insurance of persons, and 4 million Birr if it is applying for a license to undertake long term insurance business, i.e., insurance of persons and 7 million where the application is to undertake both classes of insurance. Such capital has to be paid up in cash and deposited in a bank in the name of the company to be established as an insurance company.

PROCLAMATION No. 718/2011 A PROCLAMATION TO PROVIDE FOR NATIONAL PAYMENT SYSTEM


PROCLAMATION No. 718/2011

A PROCLAMATION TO PROVIDE FOR NATIONAL PAYMENT SYSTEM

WHEREAS, the national payment system is an essential component of the financial infrastructure of the country, whose safety, security and efficiency is critical to ensure financial stability, economic growth and financial inclusiveness;

WHEREAS, it has became necessary to provide rules on establishment, governance, operation, regulation and oversight of the national payment system so as to ensure its safety, security and efficiency;

NOW, THEREFORE, in accordance with Article 55 (1) of the Constitution of the Federal Democratic Republic of Ethiopia it is hereby proclaimed as follows:

PART ONE

GENERAL

1. Short Title

This Proclamation may be cited as the “National Payment System Proclamation No.718/2011″.

2. Definitions

In this Proclamation unless the context requires otherwise:

1/ “book, record, account, document or information” means a book, record, account, document or information recorded or stored in any media including paper or data stored by electronic, optical, magnetic or in any other form;

2/ “card” means any card, or other device, including a code or any other means of access to an account, that may be used from time to time to obtain or deposit money or to make payment, and includes a debit, credit and stored-value card;

3/ “central counter party” means an entity that is the buyer to every seller and the seller to every buyer in a settlement system;

4/ “central securities depository” means an entity in whose register securities or other financial instruments are immobilized so as to enable their transactions to be finally processed by book entry;

5/ “clearing” means the process of transmitting, reconciling and confirming funds or securities transfer instructions prior to settlement and includes the netting of instructions and the establishment of final positions for settlement;

6/ “clearing house” means the National Bank or an entity authorized by the National Bank that provides clearing services but excludes a clearing house recognized under any other law;

7/ “clearing system” means a system whereby participants present and exchange information relating to the transfer of funds, securities or other financial instruments to each other through a centralized system or at a single location and includes mechanisms for the calculation of participants’ positions on a bilateral or multilateral basis with a view to facilitating the settlement of their obligations;

8/ “electronic” mans electrical, digital, magnetic, optical, biometric, electrochemical, wireless or electromagnetic technology or any other technology used in relation to the national payment system;

9/ “electronic communication” mans electronic exchange of messages in a standardized format that allows:

a)visual display or listening of data that is clear and readily understandable; and

b)receiving and retaining the information in the message for subsequent retrieval such as by printing, recording or any other means for later use;

10/ “electronic equipment” means electronic terminal including computer, points of sale, automated teller machine, telephone and other similar devices;

11/ “electronic signature” means a data in an electronic form, affixed to or logically associated with, an electronic message, which may be used to guarantee the authenticity and identify the signatory in relation to the date message and to indicate the signatory’s approval of the information contained in the data message;

12/ “financial institution” means a bank, a micro-financing institution, postal savings, money transfer institution, an insurance company or such other similar institution as determined by the National Bank;

13/ “funds transfer” means any transfer of funds, either representing an order of payment or a transfer of money, which is initiated by a person by way of instruction, authorization or order to a financial institution to debit or credit an account maintained with that financial institution and includes point of sale transfers, automated teller machine transactions, direct deposits or withdrawal of funds, transfers initiated by telephone, internet, card or other devices;

14/ “large value funds transfer system” means large value electronic fund transfers, the amount of which shall be determined by the National Bank, which consists of:

a)an inter-bank funds transfer system;

b)high priority and time critical government fund transfer;

c)clearing and settlement of securities of the government; or

d)any other fund transfer system prescribed by the National Bank as large value.

15/ “National Bank’ means the National Bank

of Ethiopia;

16/ “national payment system” means a system in the Federal Democratic Republic of Ethiopia that consists of the following :

a)sending, receiving and processing of orders of payment or transfers of money in domestic or foreign currencies:

b)issuance and management of payment instruments;

c) payment, clearing and settlement systems;

d)arrangements and procedures associated to those systems specified under paragraph (c) of this sub-article; and

e)payment service providers, including operators, participants, issuers of payment instruments and any third party acting on behalf of them, either as an agent or by way of outsourcing agreements, whether entirely or partially operating in the country;

17/ “netting” means the determination of the net payment obligations or the determination of the net termination value of settlement obligations by setting off or adjusting the payment obligations between two or more participants within the payment system;

18/ “operator” means the National Bank, a financial institution or any other entity authorized by the National Bank as operator;

19/ “participant” means a party who participates in a payment, clearing or settlement system as a direct participant which opens and maintains a settlement account at the National Bank or any other settlement entity or an indirect participant which shall only be able to settle its obligations due through the account of a direct participant;

20/ “payment instrument” means any instrument, whether tangible or intangible, that enables a person to obtain money, goods or service or to otherwise make payment or transfer money such as cheques, drafts and cards;

21/ “person” means any natural or juridical person;

22/ “retail funds transfer system” means a fund transfer system consisting of the cheque clearing system operated and administered by the National Bank and any type of retail fund transfer system authorized by the National Bank;

23/ “settlement” means the act of discharging obligations by transferring funds, securities or financial instruments between two or more parties;

24/ “settlement rule” means the rule that provide the basis upon which payment obligations are calculated, netted or settled;

25/ “settlement system” means a system for the discharge of payment and settlement obligations established and operated by National Bank or any other settlement system authorized by the National Bank;

26/ “stored value” means a representation of value that is intended to be used to make a payment which includes units of value recorded in a computer chip or any other device and may or may not be denominated by reference to units of a currency;

27/ “stored value card” means a prepaid card in which the record of funds can be increased or decreased;

28/ “system” includes a payment, clearing and settlement system;

29/ any expression in the masculine gender includes the feminine.

Continue reading →

PROCLAMATION NO. 591/2008. A PROCLAMATION TO AMEND THE NATIONAL BANK OF ETHIOPIA ESTABLISHMENT PROCLAMATION


PROCLAMATION NO. 591/2008.   DOWNLOAD (pdf)

A PROCLAMATION TO AMEND THE NATIONAL BANK OF ETHIOPIA ESTABLISHMENT PROCLAMATION

WHEREAS, for the rapid economic development of Ethiopia stable price and foreign exchange rate and healthy financial system are being necessary;

WHEREAS, it is necessary for the National Bank of Ethiopia to undertake such other activities as are conforming to the proportional economic growth of Ethiopia;

NOW, THEREFORE, in accordance with Article 55(1) of the Constitution of the Federal Democratic Republic of Ethiopia, it is hereby proclaimed as follows: Continue reading →

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