Addis Ababa, December 17, 2024 (FMC) – During its 11th regular session held today, the House of People’s Representatives of Ethiopia (HoPR) approved the National Bank of Ethiopia (NBE) Proclamation and Banking Business Proclamation.
The review and deliberation on these proclamations was held in the presence of the central bank governor Mr. Mamo Mihretu. On the occasion, the NBE proclamation has been unanimously approved 1359/2017, whereas, the Banking Business Proclamation has been approved as 1360/2017 with a majority vote and three against.
It is worth noting that this bill was examined and forwarded to the parliament by the Council of Ministers, during its 35th regular session held on 14th June 2024, for review, comment and final ratification.
These legislations reportedly represent a significant step in laying a strong foundation for growth and enhancing the credibility, accountability, transparency, and governance of the National Bank of Ethiopia.
The amended proclamations have been designed taking into account the current and future level of development and policy direction as well as the rapid technological advancement, international principles and best practices and experiences of peer Central Banks.
The proclamations are also said to be an integral part of the NBE reform agenda as indicated in the Bank’s strategic plan.
NBE’s new Proclamation is said to be historical and ground-breaking in nature as it reorients the central bank’s primary objective towards maintaining price stability.
It also expands NBE’s duties and responsibilities, amplifies its credibility and accountability, grants it new responsibility as a lender of last resort and resolution authority and consumer protection and strengthens its overall institutional standing.
The new Proclamation provides the National Bank of Ethiopia with much improved legal foundation to ensure macroeconomic stability and growth, to maintain the safety and growth of the financial sector and to enhance the efficiency and effectiveness of the payment system.
In particular, the new Proclamation assigns the central bank’s primary responsibility for the choice of its monetary policy instruments and enhances its price stability functions through the formal establishment of a new Monetary Policy Committee.
It is also a historical legal document that strengthens NBE’s governance structures, defines its functional relationship with the Government and increases its credibility, accountability and transparency to new heights.
Meanwhile, the revised Banking Business Proclamation has been ratified to:
i) support and enable the banking sector with modern knowledge and technology;
ii) strengthen the sector’s linkage with the global market;
iii) enhance the sector’s competitiveness. effectiveness and efficiency;
iv) ensure availability of financial resources including foreign currency; and
v) contribute to sustainable economic growth.
The ratified proclamation. upon implementation. is expected to achieve the following:
• Put in place requirements and conditions for the licensing of new entrants
• Implement strong risk-based supervision in a continuous and sustainable manner.
• Provide a legal framework that would allow opening of the banking sector for foreign investment. enabling foreign banks and investors to contribute to the economic development of the country.
• Provide effective resolution regime that enables resolution of a bank experiencing financial crisis to recover, and if recovery is not possible, to facilitate the bank’s orderly exit from the rnarket using a range of resolution tools and options without causing instability in the banking sector and in the broader economy.
Finally. this proclamation is expected to ensure the continued soundness and stability of the banking sector over the next years and thereby for the Banking sector to continue significantly contributing to sustainable economic growth.