The National Bank of Ethiopia (NBE) has issued Directive No. SBB/73/2020 on “Manner of Equity Investment by Foreign Nationals of Ethiopian Origin in Banks”, which came into effect as of 28th of February 2020. This Directive has 8 provisions and three annexes are attached to it. The full text of the Directive is attached herewith. The salient legal conditions are highlighted hereunder.
Scope of Application: Although, the legal obligations that needs to be observed by them differs, the Directive is applicable on banks that are already in operation as well as those that are in the process of formation.
Place of Subscription: Even though banks and banks under formation can conduct the promotion and other related activities for share subscription outside of Ethiopia, all subscriptions as well as initial and subsequent sales of shares to Foreign Nationals of Ethiopian Origin or organizations owned by them is required to be undertaken only within Ethiopia.
Bank Accounts for Share Payment: the amount for the share payment is required to be deposited in escrow foreign currency bank, which bank under formation can open at another bank upon the permission of NBE. Banks that are already in operation are required to maintain separate foreign currency (mirror) account for accepting share payment and for collection of share premium, if any.
Currencies of the Subscription: as per the Directive, Foreign Nationals of Ethiopian Origin or their organization can effect the payment for the shares of banks using the United States’ Dollar, Great Britain’s Pound and Euro, which are all defined as acceptable foreign currencies. The Directive mandated NBE to specify other currencies.
Payment of Share Subscription: Foreign Nationals of Ethiopian Origin or their organizations can also effect the payment for the share subscription by using acceptable currencies or by reinvesting the dividend generated from their or their organization’s investment activities, as long as their investment activities makes them eligible for repatriation. In case of payment by acceptable currencies, Foreign Nationals of Ethiopian Origin or their organizations are required to transfer the amounts through the banking system or from their Non-Resident Foreign Currency Account. An Ethiopian national who after acquiring shares of banks changes his/her nationality, is entitled to continue holding shares and can pay in Birr for an already subscribed shares. However, subscription of new shares is required to be made in acceptable currencies. In case where the share purchase is to be made by companies jointly owned by Foreign Nationals of Ethiopian Origin and Ethiopian national (s), the payment by Foreign Nationals of Ethiopian Origin shall be made to extent of the percentage held by him/her and the remaining part of the subscription can be made in Birr.
Prohibited Payment Modalities: Foreign Nationals of Ethiopian Origin or their organizations are not allowed to purchase shares of banks through foreign payment cards or cash or international money transfer organizations as long as credit advice that shows the identity, the amount and purpose of the transfer cannot be generated.
Partial Surrender of the Share Subscription: both banks that are in operation and that are under formation are required by the Directive to surrender 30% of the foreign currency collected from the sales of shares to NBE and NBE will effect the payment of the surrendered amount in Birr based on the mid exchange rate, which is defined by the Directive as exchange rate between buying and selling rate of the day set by NBE.
Obligations of the Banks: banks (both that are in operation or under formation) that floats and sales their shares to Foreign Nationals of Ethiopian Origin or their organizations are required to verify and validate the fulfillment of the requirements set out in the Directives. They are also required to document the details of the subscribers and submit the necessary documents and reports to NBE. Finally, they are required to develop and put in place comprehensive policies and procedures for handling share subscription by Foreign Nationals of Ethiopian Origin or their organizations.
Transfer of Shares: Ethiopian nationals can sell their shares in banks to Foreign Nationals of Ethiopian Origin or their organizations as long as the payment is made in acceptable foreign currencies and the sales price is not less than the par value of the shares. Transfer of shares can also be made to Foreign Nationals of Ethiopian Origin or their organizations through succession but not through donation.
Dividend Payment: dividends earned from the investment in shares of banks can be received only in Birr and cannot be repatriated but it can be used for purchase and payment of newly issued and subscribed shares in the same bank.
Published on April 19th 2020
| File | Description | File size |
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 Manner of Equity Investment by Foreign Nationals of Ethiopian Origin in Banks Directive No. SBB-73-2020.pdf | 9229 kB |