Industrial Parks Development Coorporation

by ipdcadmin
0Comments
3 days, 4 hours ago
37 Views

Ethiopian Parliament Approves Landmark Proclamation Allowing Foreign Banks to Enter Financial Market

The Ethiopian Parliament has approved a historic proclamation that permits foreign banks to enter the country's financial market. This significant policy shift allows foreign banks to hold up to 49 percent of stakes in domestic banks, opening the door to international financial institutions in Ethiopia.

For nearly five decades, Ethiopia has kept its financial sector closed to foreign involvement, citing the need to protect domestic investors and concerns over the country's capacity to manage multinational financial entities with advanced capabilities. However, this new reform seeks to enhance the competitiveness, efficiency, and stability of Ethiopia's financial sector while driving sustainable economic growth.

Key elements of the proclamation include:

• Foreign banks are allowed to open either deposit-taking or non-deposit-taking branches, but not both simultaneously.

• Foreign nationals, excluding foreign banks, and foreign-owned Ethiopian entities are now permitted to acquire shares in domestic banks.

• Foreign strategic investors are limited to holding up to 40 percent of the total shares in a bank, whether in an existing or newly established domestic bank. Non-strategic foreign investors can hold up to 7 percent, while foreign legal entities are capped at 10 percent. The combined foreign ownership in any bank is restricted to 49 percent.

The proclamation also introduces the concept of Short-Term Debt Instruments, enabling the National Bank of Ethiopia (NBE) to issue its own short-term debt instruments as part of open market operations. Additionally, it establishes a regulatory sandbox framework to allow the testing and introduction of innovative financial services.

The reform also enhances the governance structure of the NBE:

• The NBE’s board will expand from seven to nine members.

• A Financial Stability Committee, with seven members, will be created to regularly assess and manage systemic risks to the financial system, propose macroeconomic policies, and recommend crisis management tools, including the Lender of Last Resort.

• A new Monetary Policy Committee, also with seven members, will be tasked with preparing and proposing monetary policy.

• The NBE board may issue directives related to the operation of Central Bank Digital Currency.

This transformative policy is expected to significantly reshape Ethiopia's financial landscape, paving the way for increased foreign investment and a more competitive banking environment.

#IPDC

#PMOEthiopia

#striving_for_eco_industrial_park

#industrialpark

#eco industrial park

#Investment

#ForeignDirectInvestment

#Importsubstitution

#exportprocessingzo

#specialeconomiczone

#Madeinethiopia

#nationalbankofethiopia