LICENSING AND SUPERVISION OF BANKING BUSINESS -Ethiopian National Bank Directives
Directive for the Proper Operation of Current Account and Cheque Whereas, the proper use of current accounts and the function of cheque as an instrument of payment is crucial in a modern society;Whereas, cheque as a negotiable instrument is recognized and given legal protection under Ethiopian law;Whereas, the National Bank of Ethiopia is entrusted with the responsibility of
creating and maintaining an efficient and sound financial system;
Now, therefore, the National Bank of Ethiopia has issued these Directives
pursuant to the authority vested in it under Article 61 of the Monetary and Banking Proclamation No. 83/1994.
In these Directives, unless the context otherwise requires,
1.1 “Cheque” shall have the meaning ascribed to it under the Ethiopian
1.2 “Current Account” shall mean an active account on which cheques are
drawn and to which deposits are made and credits paid.
1.3 “Banks” shall mean all banks licensed and operating under proclamation
1.4 “Delinquent List” shall mean the register held by the National Bank of
Ethiopia, indicating the names of current account holders whose cheques
have been dishonored repeatedly and whose accounts are closed by banks.
1.5 “Dishonored Cheque” shall mean a cheque drawn without sufficient cover and is rejected by banks for this reason.
1.6 “Drawer” shall mean a person who signs a cheque giving an order to a
bank to pay the amount mentioned therein.
1.7 “Persons” shall include physical and juridical persons.
2. Bank’ Action on Dishonoring Cheques
2.1 Banks shall maintain a register where all cheques dishonored for the first
time shall be registered. Banks shall notify drawers of the dishonored
cheques of such registration;
2.2 The register shall include the name and address of the bank and its branch, the name and address of drawer, the date on which the cheque was
dishonored, the amount of the dishonored cheque and the action taken by
2.3 Banks shall regularly check the register under 2.1 above and upon
dishonoring a cheque drawn by a current account holder whose name
appears on the register, they shall levy a fine of 5% of the amount
appearing on the dishonored cheque;
2.4 Upon dishonoring a cheque drawn by an account holder fined under 2.3
above, banks shall close the current account of such person at all their
3. Opening of Current Accounts
Banks shall, upon opening of current accounts,
3.1 verify that the name of the person requesting to open a current account
does not appear in the dishonored cheques register or in the list of persons
whose current accounts have been closed that is circulated by the National
Bank of Ethiopia;
3.2 check the memorandum and articles of association of juridical persons to
verify that the name of the members do not appear in the delinquent list;
3.3 inform their customers about the use and purpose of current account and
cheque and the consequences of misusing it; and
3.4 include in the current account deposit agreement a clause about the measures that shall be taken when there is misuse of cheque.
Banks shall send a report to the National Bank of Ethiopia, Supervision
Department, regarding customers whose current accounts are closed on the
following three working days from the date of such closing. the report shall
include the name and address of the drawer, the name of the branch where the account was held and the date on which the account was closed.
5. Delinquent List
5.1 The National Bank of Ethiopia shall keep a delinquent list of the names of
reported misusers of current accounts;
5.2 The National Bank of Ethiopia shall send information to Banks about
persons whose names appear on the delinquent list;
5.3 Banks shall deny service of current account to customers whose names
appear on the delinquent list and shall close all already existing current
accounts under such names.
6. Conditions for Deletion of Names of Misusers of Current Accounts from the Delinquent List
6.1 The NBE may delete the name of a current account misuser from the
Delinquent List stated under article 5 of this directive if such person
fulfills all of the following conditions;
6.1.1 Is suspended from use of current account for a minimum of 18
months from the date of closure of the account or produces a
guarantee valid for 18 consecutive months from a domestic bank
explicitly stating that the bank shall cover and effect full payment
against any one cheque drawn by such person at any one time;
6.1.2 Presents satisfactory evidence to the NBE with respect to full
settlement of all dishonored cheques and penalty charges related to
the earlier closure of current account, and
6.1.3 Files with the NBE a written application, with a copy to the Federal Police Commission, indicating his/her intention and commitment to operate current account honestly and carefully in the future.
6.2 The NBE may authorize all banks to provide current account service to the person whose name has been deleted from the delinquent list.
6.3 Banks shall maintain a separate register, wherein they book names of
persons deleted from NBE’s delinquent list.
6.4 Upon dishonoring at any one time a cheque drawn by a person who has
been provided with current account service in line with the authorization
obtained from the NBE under article 6.2 and recorded in register book
established in accordance with article 6.3 of this directive, banks shall i)
levy a fine of 10% of the amount appearing on the dishonored cheque, and
ii) automatically close current accounts of such person in all their branches
and report to the NBE within the following three working days.
6.5 The NBE shall reenter the name of a person whose current account has
been closed in line with article 6.4 of this directive into its delinquent list
and shall inform all banks about the closure of current account of such
person for the second time. Banks shall apply all requirements set out
under articles 3 and 5.3 of this Directive with respect to such person:
6.6 Persons whose names are re-entered in the delinquent list for the second
time and subsequently shall be eligible to use current account service if
they fulfill the conditions specified in sub-article 6.1 of this directive.
Directive No. SBB/25/200 is hereby repealed and replaced by this directive.
8. Effective Date
These Directives shall enter into force as of the 17th day of June 2002.