Following the enactment of a new Banking Business Proclamation No. 1360/2025 (the “Banking Proclamation”), the National Bank of Ethiopia (the “NBE”) has passed a directive providing the Requirements for Licensing and Renewal of Banking Business and Representative offices (the “Directive”). The Directive repeals Directive No. SBB/56/2013. While the Banking Proclamation provided general requirements for the licensing of domestic banks, foreign bank subsidiaries, foreign bank branches, and representative offices, details were left to be addressed in a directive. The Directive provides specific licensing requirements, including minimum paid-up capital, application procedures, documentation, and regulatory fees. In this issue of our insight, we explore the key features of the Directive with a focus on the entry requirements for foreign bank subsidiaries, foreign bank branches, and representative offices. For an analysis of the Banking Proclamation in general, visit our previous insight here.
Minimum Capital Requirement
The Directive sets a minimum capital requirement for establishing a foreign bank subsidiary or a foreign branch at 5 billion Birr (~USD 40 million). While this requirement applies equally to domestic and foreign banks, newly established domestic banks benefit from a transitional period to meet the requirement. On the other hand, foreign subsidiaries and branches must remit the full amount into a blocked bank account at the NBE. The bank account for foreign bank subsidiaries must be a non-interest-bearing account. The Directive does not specify minimum capital requirements for foreign investors acquiring shares in domestic banks. It is also silent on the capital requirements applicable to foreign nationals or foreign-owned Ethiopian entities seeking to invest in domestic banks. While the Directive sets a licensing fee of USD 150,000 for foreign bank subsidiaries, it remains unclear whether this fee is in lieu of, or in addition to, the minimum capital requirement under the Investment Proclamation, which sets a USD 150,000 threshold for foreign investors participating in companies owned by domestic investors.
Shareholding Limits
The Banking Proclamation provides that strategic foreign investors may acquire up to a maximum of 40% of existing or new domestic banks. In addition, a 49% aggregate cap is set for foreign ownership of domestic banks. While the Directive provides that a foreign strategic investor may be allowed to establish a partially or wholly foreign owned foreign bank subsidiary, it does not define the mechanics on how this would be allowed, The Directive further breaks down the maximum share ownership percentage of the different types of shareholders per the table below: These shareholding limits also apply for partial or full foreign ownership of a foreign bank subsidiary.
| Shareholding Category | Maximum Allowed Ownership |
| Natural Person (Direct Shareholding) | 7% of total subscribed shares |
| Juridical Person (Direct Shareholding) | 10% of total subscribed shares (up from the 5% previously set). |
| Strategic Investor | 40% of total subscribed shares in an existing or new domestic bank |
| Foreign Nationals & Foreign-Owned Ethiopian Organizations (Aggregate) | 49% of total subscribed shares |
| Natural Person (Direct & Indirect Aggregate Holding, excluding Strategic Investor) | 15% of total subscribed shares |
| Juridical Person (Direct & Indirect Aggregate Holding, excluding Strategic Investor) | 20% of total subscribed shares
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| Combined Natural & Juridical Person (Direct & Indirect Aggregate Holding) | 20% of total subscribed shares |
Licensing Procedure
The Directive outlines a three-stage process for obtaining a banking license: the pre-application phase, the application phase, and the operational commencement phase. It also provides that the NBE may, at its discretion, impose a moratorium on the issuance of business licenses to new banks.
- Pre-application Phase
In this phase, the Directive provides common documentation required for foreign bank applicants and more specific and additional requirements for foreign bank subsidiaries and foreign bank branches. Below is a summary of the required documentation and procedures for both subsidiaries and branches at the pre-application phase.
| Requirement | Description |
| Promoters and Project Managers Appointment | Project managers must be appointed to oversee the licensing process and act as a legally appointed representative of the parent bank. |
| Parent Company Documentation | Submit a board resolution by the parent bank approving entry into the Ethiopian market, accompanied by authenticated copies of the bank’s certificate of incorporation, Memorandum and Articles of Association, and commercial registration. |
| Trade Name Registration | Verify and register a trade name at the Ethiopian Investment Commission. |
| Business Proposal Summary | Submit a high-level summary of the proposed business strategy. |
| No Objection Letter | Obtain a no-objection letter from the home supervisor sent directly to the NBE. The Letter should, among others, include:
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| Audited Financial Reports | Submit the last three years of the parent bank’s audited financial statements. |
| Ownership Disclosure | Disclose beneficial ownership, parent bank structure, and key affiliations. |
| Investigation Fee | Pay a non-refundable investigation fee of USD 2,500 in foreign currency. |
During this stage, the applicant bank must provide sufficient information to help NBE examine its business plan, assess preparedness, and offer feedback on potential concerns. The NBE may, at its discretion, hold a pre-application phase meeting with the promoters, project manager, and/or delegates of a foreign bank based on the high-level summary document to be prepared by the promoters and project managers. Once the NBE is satisfied with the pre-application phase, it will formally notify the applicant to proceed with the full application process. However, the Directive does not provide a timeline for the NBE to complete its per-application screening and inform the applicant of its decision.
The Directive further provides for cases where promoters wish to raise capital through public offerings. In addition to the approval requirements under the Capital Markets Proclamation No. 1248/2021, promoters must meet all fit and proper requirements that the NBE undertakes. While the language under the Directive does not distinguish between domestic or foreign banks raising capital through public offerings, it remains unclear whether a foreign bank subsidiary or branch, having fulfilled the initial minimum paid-up capital requirement, may subsequently raise additional capital through a public share offering.
- Application Phase
Once a pre-application is completed and the go-ahead is received from NBE, the following documentation must be submitted to NBE:
| Requirement | Description |
| Application Form | A completed application form with supporting documentation. |
| Minimum Capital | Remittance of the minimum capital requirement of Birr 5 billion in foreign currency (~USD 40 Million). (for a foreign bank subsidiary as paid-up capital, for a branch as assigned capital). |
| Letter of Comfort | A letter of comfort and undertaking from the parent bank. |
| Memorandum of Understanding | A signed agreement between the NBE and the home supervisor (regulator) of the parent bank. |
| Business Plan | Detailed business plan including financial, governance, and operational strategies. |
| Organizational Chart | Internal structures include reporting lines, risk, compliance, and control units. |
| Physical Assets and Disclosure | Ownership or lease agreements for banking premises, insurance coverage, and disclosure of related-party transactions. |
| Outsourcing Policy | Any planned outsourcing and ensure compliance with NBE regulations. |
| Data Localization | Commitment to storing and processing customer data in Ethiopia. |
| Licensing Fee | Payment of a non-refundable licensing fee of USD150,000. |
An agreement must be signed between the home regulator and NBE regarding information sharing and cooperation in regulating and supervising the foreign bank subsidiary. Additionally, the Directive introduces a “supervisory college” that would be set up if the proposed foreign bank subsidiary is significant to the foreign bank. The Directive neither defines nor provides details of what a supervisory college does and how it aligns with the supervisory role of the NBE. The NBE, within 90 days of receiving all the necessary documentation from the applicant, decides on the application to either accept or reject. The rejection should clearly indicate the reasons behind it.
- Operation Phase
A licensed bank in Ethiopia must commence operations within 12 months of receiving its business license from the NBE. Further, it must comply with the following:
| Requirement | Description |
| Operational Readiness | Establish internal policies, staffing, IT systems, and physical infrastructure before launch. |
| Local Premises | Provide ownership or lease agreements for premises, vaults, and facilities. |
| Insurance | Proof of insurance covering premises and operations. |
| Regulatory Compliance | Implement procedures to comply with all banking regulations. |
Licensing for Additional Branches
After opening the first branch, foreign banks may establish additional branches (deposit-taking or non-deposit-taking, but not both). These do not require additional capital or a full reassessment by NBE. However, each branch must obtain:
- A no-objection letter from the home supervisor,
- Payment of a non-refundable licensing fee in foreign currency (equivalent to the rate that applies to domestic branches, though the Directive does not specify the domestic branch fee).
Notably, while the Banking Proclamation requires directives to address branch closures, the Directive only covers opening procedures.
License Renewal
The Directive provides that a license issued by NBE must be renewed annually between July 1 – September 30. Further, the banks are not required to go through any of the approval processes they did during the initial licensing. The Directive details the supporting documents that must be presented with the renewal application upon the production of the original business license. The license renewal fee is set at Birr 200,000 (~USD 1,612) for foreign bank subsidiaries and foreign bank branches.
Foreign Bank Representative Office
The Banking Proclamation has shifted the regulatory mandate of supervising representative offices of foreign banks from the Ministry of Trade and Regional Integration (MoTRI) to the NBE. Notably, the Directive has introduced new and expansive rules on the licensing of representative offices. A foreign bank applying to open a representative office in Ethiopia must submit the following documentation to the NBE:
| Requirement | Description |
| Application Form | Completed application form as prescribed by the NBE |
| Board Resolution | A board resolution from the parent bank approving the establishment of the representative office. |
| Proof of Incorporation | Certified copy of the parent bank’s certificate of incorporation, memorandum and articles of association, |
| Business Summary | A summary of proposed functions, including scope and purpose of the office.
Details of beneficial owners, percentage holding, direct and indirect affiliates, Information on the board of directors and the Chief Executive Officer of the parent company |
| No Objection Letter | No-objection letter from the home supervisory authority submitted directly to NBE, stating:
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| Annual Reports | Last three years of annual reports of the parent bank. |
| Organizational Chart | Diagram showing structure and reporting lines of the proposed representative office. |
| Investigation Fee | Non-refundable investigation fee of USD500 payable in foreign currency |
| Letter of Comfort | Letter from the parent bank affirming commitment and responsibility for the representative office. |
| Written Undertaking | Confirmation that the representative office will not conduct banking business or imply that it operates as a bank in Ethiopia. |
| Office Address | Proof of suitable premises (e.g., lease or ownership documents of office). |
| Staffing Plan | Details of staff to be posted at the representative office. |
| Licensing Fee | Non-refundable licensing fee of USD1,500 payable in foreign currency |
| Annual Operational Expense | Evidence of deposit of USD 100,000 |
A foreign bank must renew its representative office license annually between July 1 and September 30. To apply, it must submit a renewal application, proof of a cash deposit of at least USD 100,000 for annual expenses, tax clearance from the Ethiopian Ministry of Revenue, the original license, and evidence of payment for the renewal fee (Birr 75,000 – ~USD 604) and any applicable penalties. Existing representative offices that previously acquired a license from MoTRI are required to get relicensed by June 25, 2025.
Appeal on Rejection of Application for a Banking License
The Directive provides a mechanism for applicants to appeal a rejected license application. The appeal must be submitted to the Governor of the NBE within 30 days of receiving the rejection decision. However, the Directive does not specify how long the Governor has to issue a decision, whether a cure period will be granted thereafter, whether the Governor’s decision is final, or whether the applicant may pursue other remedies.
License Suspension and Revocation
Under the Banking Proclamation, NBE is authorized to suspend or revoke a banking license when a bank fails to meet key regulatory expectations. A license may be revoked if a bank does not commence operations within twelve (12) months of being licensed or if it ceases operations for over thirty (30) consecutive days without approval. Revocation may also occur if a bank is found to be insolvent, unable to meet its obligations, or engages in unsafe or unsound practices that threaten financial stability. The process generally requires the NBE to notify the institution in writing, explaining the reasons for the intended action and allowing the bank a chance to respond or remedy the situation within a specified timeframe. However, in cases of urgency or where public interest is at stake, the NBE may revoke a license without prior notice. Once revoked, the bank must cease all operations immediately, and a liquidator is appointed to manage its closure. The decision is then published to inform the public and relevant stakeholders.
Conclusion
The Directive establishes detailed procedures for the establishment and ongoing operation of domestic and foreign banks. It introduces clear processes for licensing, capital requirements, operational expectations and license renewal conditions. However, the Directive is notably silent on the minimum capital requirements applicable to foreign investors acquiring shares in domestic banks—particularly where the investors are not establishing new banks but entering through equity participation. Similarly, capital requirements for foreign nationals and foreign-owned Ethiopian organizations buying shares of domestic banks are not provided. It is unclear whether such investments are to be governed under the investment laws or whether they will be subject to a separate directive. It is also expected that NBE will issue additional directives to cover matters indicated in the Banking Proclamation.
