According to the preamble of the Proclamation, the amendment is necessitated to allow Foreign Nationals of Ethiopian origin to invest in the banking sector and to include new provisions that contribute to safety, soundness and effectiveness of banks and consumer protection.
The Proclamation adds new sets of activities within the definition of “Banking Business”. These are digital financial service and agent banking. The Proclamation defines Digital Financial Service as a financial service including payments, remittances and insurance accessed and delivered through digital channels. Agent banking was first regulated by the National Bank of Ethiopia Directive No. FIS/01/2012 that regulates Mobile and Agent Banking Services. The Directive defines agent banking as conduct of banking business on behalf of a financial institution through an agent using various service channels as permitted under the Directive. New sub-articles to the definitions article of the Proclamation are added. These provide for the definitions of Guarantee, Digital Financial Service, Foreign Nationals of Ethiopian Origin, Illiquid, Indirectly Owning Shares of a Company and Normal Course of Business.
Notably the Proclamation lifts the prohibitions on Foreign Nationals of Ethiopian Origin from holding shares in Banks. It allows Foreign Nationals of Ethiopian Origin as defined under Proclamation No. 270/2002 to engage directly and indirectly in banking business. Foreign Nationals of Ethiopian Origin are required to pay the value of shares in a Bank only in acceptable foreign currency. Payments relating to dividends, transfer of shares, sale and liquidation of the bank or any other payment due to Foreign Nationals of Ethiopian Origin are paid in Birr. Furthermore, any Foreign National of Ethiopian Origin that directly or indirectly holds shares in Bank is not allowed to repatriate any asset or interest obtained in this manner. The Proclamation authorizes the National Bank of Ethiopia to issue a directive on additional conditions for investment in a Bank by Foreign Nationals of Ethiopian Origin.
The proclamation introduces new grounds for revocation of banking license immediately, which are: a) when a Bank becomes illiquid; it becomes insolvent; or it fails to abide by laws and directives of the National Bank of Ethiopia.
The Proclamation introduces new articles that deal with security measures, advertisement, outsourcing of critical or important functions, suitability of services to disables customer, consumer protection, digital financial services and interest free bank. The National Bank is authorized to determine by directive the minimum conditions for outsourcing of critical or important functions; standards on banks’ minimum security measures; minimum conditions for consumer protection; minimum conditions for providing digital financial services; additional conditions of licensing, supervisions and requirements to establish Interest Free Bank.
With respect to advertisement, the Proclamation authorizes the National Bank to direct a bank in writing to withdraw, amend or refrain from issuing an advertisement that is considers to be false, misleading, deceptive, or offensive in accordance with the Directive to be issued by the National bank.