Ethiopia’s Council of Ministers has approved banking reforms proposing a legal framework to develop the country’s central bank digital currency and opening the banking sector to foreign investment. The proposed reforms under the banner of “The National Bank of Ethiopia (NBE) Proclamation and the Banking Business Proclamation” has been introduced to re-shape the financial structure of Ethiopia.
The draft proclamations, prepared by the NBE, will be sent to the House of People’s Representatives for review and ratification to align with Ethiopia’s Homegrown Economic Reform Agenda.
Thus, according to the NBE Proclamation, a Monetary Policy Committee has been formed to enable the central bank to target monetary stability by consultations with the government and other agencies and select the right tools to use in its bid.
The proclamation also includes measures for the establishment of a National Financial Stability Committee to protect the overall soundness of the financial system and describes the qualifications of members that can be liable to the NBE Board and standards for employment of the governor and vice governor.
In providing the legal foundation for a CBDC, the NBE Proclamation also enables the introduction of a CBDC as required Section 9 of the proclamation allows Ethiopia to consider digital currency options to align with global trends.
The Banking Business Proclamation also liberalizes the banking industry in Ethiopia for foreign investors to enable the foreign banks to have their branches or to invest in the existing domestic banks.
The new proclamations incorporate legal instruments as forms of regulation including the formulation of immediate corrective measures on the troubled banks and resolution power vested in the NBE to address the under-performing institutions and create a regulatory sandbox to test innovation in financial services to spur development.
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