Summary

The Banking Business Proclamation No. 1360/2025 aims to modernize Ethiopia’s banking sector by introducing stricter licensing, governance, and supervision rules while allowing foreign bank participation. It strengthens the National Bank’s regulatory powers, establishes mechanisms for managing failing banks (recovery, resolution, liquidation), promotes financial innovation (digital banking and sandbox), and ensures financial stability and depositor protection.

---

Key Features

• Introduction of:
  • Digital banking services
  • Agent banking
  • Regulatory sandbox (for innovation testing)
• Stronger crisis management tools
• Opening door for foreign bank entry

---

Overall Purpose

The Proclamation establishes a modern legal framework for banking in Ethiopia, regulating:

• Licensing and operation of banks
• Supervision by the National Bank of Ethiopia (NBE)
• Entry of foreign banks
• Risk management, resolution, and liquidation of banks

---

Key Words

Acquisition, Agent Banking Service, Asset Management Vehicle, Bank, Bridge Bank, Foreign Bank Branch, Problem Bank, Significant ownership (>2%),

---

Licensing & Authorization

• No Person shall engage in banking business without a license from the National Bank
• Banks must:
  • Meet minimum capital requirements
  • Disclose ownership and beneficial owners
  • Ensure shareholders and managers are fit and proper
    
    
• Banks must obtain approval before:
  • Opening/closing branches
  • Introducing new products
  • Changing business structure
  • Transfer or dispose whole or any part of its property other than the normal course of its business
  • Alter names

---

Foreign Banks Participation:

• Foreign banks can operate through:
  • Subsidiaries
  • Branches- open a foreign bank branch
  • Representative office
  • Acquire shares of a bank (domestic bank)
  • Foreign nationals may be authorized to acquire shares in banks
• Foreign banks are required to:
  • Bring capital into Ethiopia through foreign direct investment (in foreign currency)
  • Follow NBE directives
• Emphasis on knowledge transfer to Ethiopian staff

---

Ownership & Governance:

• Shareholders with significant ownership (≥2%) must meet regulatory standards
• A natural person shall not directly hold more than seven percent of total subscribed shares
• Strategic investor in existing or a new domestic bank shall be limited to forty percent of total subscribed shares
• Non-strategic foreign national natural person and foreign juridical person shall be limited to seven percent and ten percent respectively
• Directors and executives must pass fit-and-proper tests  

---

Financial Obligations and Limitations:

• NBE sets the minimum capital and reserve to be maintained by banks
• Banks are required to transfer at least twenty five percent of their net profit to their legal reserve account

---

Supervision & Control Powers

The National Bank has strong authority to:

• Inspect banks and demand documents
• Restrict unauthorized banking activities
• Appoint:
  • Official administrators (for troubled banks)
  • Liquidators (for failed banks)

---

Mergers & Structural Changes

• Banks may merge:
  • Voluntarily
  • Statutorily (by NBE decision)
• NBE approval is mandatory

---

Problem Banks & Resolution

• A problem bank is one with serious financial or operational weaknesses
• Tools include:
  • Official administration
  • Recovery plans (prepared by banks)
  • Resolution plans (prepared by NBE)
• Goal: protect depositors and maintain financial stability

---

Liquidation & Exit

• Banks may exit through:
  • Voluntary liquidation
  • Forced liquidation by NBE
• Process ensures:
  • Asset collection and sale
  • Payment of creditors

---

Repealed Laws: it replaces:

• Banking Proclamation No. 592/2008
• Amendment No. 1159/2019
• Sub-Article 4 (1) of the Investment Regulation No. 474/2020
  
  

Entry into Force:

• March 12, 2025

---