Foreign Currency Intermediation by Ethiopian Banks

The National Bank of Ethiopia(NBE) issued a directive Directive No SBB/77/2020( the Directive) effective from August 18,2020, that allows Foreign Currency Intermediation(FCI) by Ethiopian banks, as one form of banking business. FCI is defined as an act of borrowing in foreign currency from foreign lenders and granting credit to local borrowers in foreign currency as well as collecting the repayment of the credit in foreign currency.
Foreign currency acquired through borrowing from external source shall be used only for extending credit in foreign currency to foreign currency generating activities in Ethiopia or to deposit at the NBE or at a foreign correspondent bank, in foreign currency.
The Ethiopian bank acquiring an external loan in foreign currency shall register the loan with NBE by submitting a copy of the signed contract and term sheet of the loan within 5 business days of the date on which the loan contract was signed.
The Directive avoided for the Ethiopian banks from requesting and acquiring separate permissions from NBE for transaction to be expressed in foreign currency.
All in all the Directive has put in place terms and conditions to be fulfilled, prudent and reporting requirements to be met. In case of not adhering to such terms and conditions and requirements, penalties in foreign currency shall be levied.

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