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Licensing and Supervision of Banking Business Limitation on Accommodation (Directive No. 199/2021)

National Bank Of Ethiopia199/2021

Summary

This directive limits the amount of unsecured loans, advances, or credit facilities that banks can grant, directly or indirectly, without prior written approval from the National Bank of Ethiopia. The limit is set at an aggregated amount not exceeding Birr 30,000 to directors or persons for whom directors are guarantors.

Who's affected

Banks operating in Ethiopia and their directors.

Action required

Banks must ensure that unsecured loans, advances, or credit facilities granted to their directors or to persons for whom directors are guarantors do not exceed Birr 30,000 in aggregate without prior written approval from the National Bank of Ethiopia.

Key points

5
  • Limitation on unsecured loans/advances/credit facilities for banks.
  • Aggregate limit of Birr 30,000 applies.
  • Restriction applies to directors and persons with director guarantees.
    • Show 2 more
    • Prior written approval from National Bank of Ethiopia is required to exceed the limit.
    • Definition of 'person' as a physical person.

Requirements

3
  • No bank shall grant or permit to be outstanding unsecured loans, advances, or credit facilities of an aggregated amount in excess of Birr 30,000.
  • Such facilities must not be granted to directors or to persons for whom directors are guarantors, except with the prior written approval of the National Bank of Ethiopia.
  • The term 'person' is defined as a physical (natural) person.

Rights and permissions

2
  • Banks have the right to grant unsecured loans, advances, or credit facilities up to Birr 30,000.
  • Banks have the right to seek prior written approval from the National Bank of Ethiopia to exceed the Birr 30,000 limit.

Restrictions

2
  • Unsecured loans, advances, or credit facilities to directors or related parties are limited to an aggregate amount of Birr 30,000 without prior approval.
  • Direct or indirect granting of such facilities is prohibited without the National Bank of Ethiopia's written consent if they exceed the limit.

Objectives

2
  • To establish a limitation on unsecured loans and credit facilities provided by banks.
  • To prevent potential conflicts of interest and ensure sound banking practices.

Organizations

1
  • National Bank of Ethiopia

Legal references

2
  • Article 41 of the Monetary and Banking Proclamation No. 83/1994
  • Article 17(1) 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-limitation-on-accommodation-directive-no-199-2021/
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