AmendmentFintech

Reserve Requirement – 8th Replacement Directive No. 915/2022

National Bank Of Ethiopia915/2022

Summary

This directive replaces the 7th Replacement Directive concerning reserve requirements for banks operating in Ethiopia. It mandates banks to maintain specific reserve balances with the National Bank of Ethiopia (NBE) and outlines computation methods, reporting requirements, and penalties for non-compliance.

Who's affected

Banks operating in Ethiopia are directly affected by reserve maintenance and reporting requirements.

Action required

Banks must open and maintain two specific Birr accounts with the National Bank of Ethiopia and comply with the specified reserve ratio requirements.

Key points

5
  • Replaces the 7th Replacement Directive (No. 827/2021).
  • Mandates a minimum reserve requirement of 7% on average monthly and 5% at all times.
  • Specifies two Birr accounts to be held at the NBE: Reserve Account and Payment and Settlement Account.
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    • Details penalties for reserve deficiencies and late reporting.
    • Requires weekly and monthly reporting to the NBE.

Requirements

5
  • Banks must open two separate Birr accounts with the NBE: a Reserve Account and a Payment and Settlement Account.
  • Banks must maintain an average of 7% of all Birr and foreign currency deposit liabilities in their Reserve Account each calendar month.
  • Banks must maintain a minimum of 5% of all Birr and foreign currency deposit liabilities in their Reserve Account at all times.
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    • Cash items in process of collection must be deducted from deposit liabilities when computing reserve balances.
    • Banks must submit weekly and monthly reports to the Bank Supervision Directorate of the NBE as per specified annexes.

Rights and permissions

2
  • Banks can request transfer to the Payment and Settlement Account if the daily reserve ratio exceeds 5%.
  • The National Bank of Ethiopia may waive penalties on grounds it considers acceptable.

Restrictions

2
  • No bank shall withdraw any money from its reserve account without prior approval from the Bank Supervision Directorate of the NBE.
  • Cash items in process of collection through the NBE are not acceptable as reserve until credited to the reserve account.

Penalties

2
  • Deficiency in reserve balance is subject to a penalty calculated at the maximum lending interest rate on loans and advances charged by the bank, multiplied by the amount of deficiency and the number of days the deficiency occurred.
  • Late reporting of weekly and monthly reports is subject to penalties as per NBE Directive No. SBB/35/2004 or its revised version.

Objectives

4
  • To outline the statutory reserve requirement for banks operating in Ethiopia.
  • To define the methods for computing reserve balances.
  • To establish reporting requirements for banks regarding their reserve positions.
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    • To specify penalties for non-compliance with reserve requirements.

Organizations

2
  • National Bank of Ethiopia
  • Bank Supervision Directorate of the National Bank of Ethiopia

Legal references

4
  • Article 16(1) (a) of the National Bank of Ethiopia Establishment (as Amended) Proclamation No. 591/2008
  • Article 59(2) of Banking Business Proclamation No. 592/2008
  • Banking Business (Amendment) Proclamation No.1159/2019
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    • NBE Directive No. SBB/35/2004
Original sourcehttps://justice.gov.et/en/directives/reserve-requirement8th-replacement-directive-no-915-2022/
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