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Licensing and Supervision of Banking Business Legal Reserve (Directive No. 198/2021)

National Bank Of Ethiopia198/2021

Summary

This directive outlines the requirements for banks to transfer a portion of their net profit to a Legal Reserve Account until it equals the bank's capital.

Who's affected

Banks operating in Ethiopia.

Action required

Banks must ensure compliance with the specified legal reserve transfer requirements.

Key points

3
  • Annual transfer of 25% of net profit to Legal Reserve until it equals capital.
  • Reduced transfer of 10% of net profit once Legal Reserve equals capital.
  • Issued by the National Bank of Ethiopia.

Requirements

2
  • Every bank shall transfer annually 25% of its annual net profit to its Legal Reserve Account until such account equals its capital.
  • When the legal reserve account equals the capital of the bank, the amount to be transferred to the legal reserve account shall be 10% of the annual net profit.

Objectives

2
  • To establish and regulate the Legal Reserve requirements for banking businesses.
  • To ensure the financial stability and soundness of banks.

Organizations

1
  • National Bank of Ethiopia

Legal references

2
  • Article 41 of the Monetary and Banking Proclamation No. 83/1994
  • Article 13(4) of the Licensing and Supervision of Banking Business Proclamation No. 84/1994
Original sourcehttps://justice.gov.et/en/directives/licensing-and-supervision-of-banking-business-legal-reserve-directive-no-198-2021/
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