AmendmentFintech

Requirements for Persons With Significant Influence in a Bank (2nd Replacement) (Directive No. 789/2021)

National Bank Of Ethiopia789/2021

Summary

This directive, a second replacement of Directive No. 789/2021, outlines the requirements for persons with significant influence in a bank in Ethiopia, focusing on fit and proper criteria related to knowledge, experience, integrity, and financial soundness. It also details the National Bank of Ethiopia's powers to conduct ongoing tests and take actions, as well as notification requirements and documents to be submitted.

Who's affected

Banks operating in Ethiopia, including their influential shareholders, directors, chief executive officers, and senior executive officers.

Action required

Ensure that all influential shareholders, directors, chief executive officers, and senior executive officers meet the specified fit and proper criteria and submit the required documentation to the National Bank of Ethiopia.

Key points

8
  • Defines 'persons with significant influence' to include influential shareholders, directors, CEO, and senior executive officers.
  • Establishes detailed 'fit and proper' criteria for knowledge, experience, integrity, and financial soundness.
  • Mandates National Bank approval for appointments of key personnel and influential shareholdings.
    • Show 5 more
    • Grants the National Bank authority to conduct ongoing fitness and propriety tests and impose sanctions.
    • Specifies notification requirements for events impacting fitness and propriety.
    • Outlines documentation required for fitness and propriety assessments.
    • Introduces limitations on director tenure and acting officer positions.
    • Repeals Directive No. SBB/70/2019.

Requirements

16
  • Persons with significant influence must meet respective requirements and considerations set in these Directives.
  • Appointment of directors, chief executive officer, senior executive officers, chief internal auditor, and chief risk and/or compliance officer are subject to approval by the National Bank.
  • Any shareholding that makes a person an influential shareholder requires National Bank approval.
    • Show 13 more
    • Directors must hold a minimum of a first degree, have adequate business management experience (preferably in banking), and be at least 30 years old.
    • Chief Executive Officers must hold a minimum of a first degree and have at least 12 years of banking experience, with at least 5 years as a senior executive officer.
    • Senior Executive Officers (deputy to CEO) must hold a minimum of a first degree and have at least 10 years of banking experience, with at least 4 years as a department manager or equivalent.
    • Senior Executive Officers (reporting to the board) must hold a minimum of a first degree and have at least 8 years of banking experience, with at least 3 years in a managerial position.
    • Persons with significant influence must demonstrate integrity (honesty, reputability, diligence) and financial soundness.
    • Influential shareholders, directors, chief executive officers, and senior executive officers must undergo fitness and propriety tests.
    • Persons with significant influence must immediately notify the National Bank of any events that might change their assessment as fit and proper.
    • Banks must report any doubts about a person with significant influence failing to meet criteria to the National Bank.
    • Specific documents must be submitted for fitness and propriety tests for directors, CEOs, and senior executive officers.
    • For corporate directors and influential shareholders, specific documents must be submitted.
    • A person may not serve as a director for more than six consecutive years without a lapse.
    • Acting appointments for CEO or senior executive officer positions are limited to six months and require reporting/approval.
    • Banks must notify the National Bank of any transfer or removal of senior executive officers reporting directly to the board within 30 days prior.

Rights and permissions

6
  • The National Bank of Ethiopia has the right to assess whether banks are soundly and prudently managed.
  • The National Bank may conduct ongoing fitness and propriety tests.
  • The National Bank may suspend voting rights of influential shareholders.
    • Show 3 more
    • The National Bank may suspend and/or remove a director, chief executive officer, or senior executive officer if they fail fitness and propriety tests.
    • Shareholders may re-elect directors for one more term if continuity is desired, limited to one-third of board seats.
    • A director may be re-elected after a lapse of six consecutive years.

Restrictions

5
  • Directors must be at least 30 years old.
  • Acting appointments for CEO or senior executive officer positions are limited to six months.
  • Experience exceeding six months in an acting capacity shall not be counted as managerial experience.
    • Show 2 more
    • A person may not serve as a director for more than six consecutive years.
    • The number of re-elected board members for continuity is limited to a maximum of one-third of the board seats.

Penalties

2
  • The National Bank may suspend voting rights of influential shareholders.
  • The National Bank may suspend and/or remove a director, chief executive officer, or senior executive officer.

Objectives

4
  • Ensuring sound practices, stability, and long-term institutional success in the banking sector.
  • Enhancing the effectiveness and soundness of bank governance.
  • Ensuring the National Bank of Ethiopia can assess whether banks are soundly and prudently managed.
    • Show 1 more
    • Maintaining public confidence in the financial system.

Organizations

2
  • National Bank of Ethiopia
  • Banks operating in Ethiopia

Legal references

3
  • Banking Business Proclamation No. 592/2008
  • Proclamation No. 1159/2019
  • Directive No. SBB/70/2019
Original sourcehttps://justice.gov.et/en/directives/requirements-for-persons-with-significant-influence-in-a-bank-2nd-replacement-directive-no-789-2021/
View source