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A dispute has arisen between the National Bank of Ethiopia (NBE), which regulates the Nation’s financial institutions, and shareholders of Nib International Bank (NIB). The group of shareholders, who claim to own up to 20 percent of the bank’s share, claim they were deceived by the board of directors at NIB.
They are pointing to a list of misdemeanor violations that occurred at NIB and say they have been waiting for a response from NBE for the last nine months.
These shareholders and some of the board members at NIB have talked to the supervisory body about their bank’s illegal activity and want to know what actions will be taken against the board of directors of NIB.
Shareholders who talked to Capital said that NBE did conduct a special investigation on the bank to follow up on their claim but they have not yet received any report or learned about any action that NBE took against the board of directors at NIB.  According to the information that the bank shareholders released, the National Bank has investigated NIB based on the shareholders’ claim.
According to the document Capital obtained, the shareholders have accused the bank’s board of eight violations.
A summary of the complaints that NBE complied with the investigation report stated that problems existed related to the separation process of the previous president Amerga Kassa.
The document stated that the contract of the president was extended for three months without limiting his authority. It was during this period that he approved USD 3,853,157 and EUR 311,237 beyond his mandate and against the bank’s policy. On top of this, the president, Amerga Kassa completed the granting of credit facilities planned for the whole year before his departure, around December 2012.
They have also claimed that by the instruction of the board chairman, a foreign currency amount of USD 917,800 was allocated to three customers against policy and procedures of the bank.
“The board chairman, Tafesse Bogale and the president, Amerga Kassa approved an over withdrawal of 9 million birr that went against the bank’s policy and procedures,” the share holders claimed. The claim further stated that a manufacturing company requested a long term loan of 240 million birr to finance a new project. “It was rejected by many of the board members as the loan was close to 25 percent of the bank’s paid up capital, and the risk was too high. Moreover the source of funding was short term deposits, and the bank lacked the required project evaluation expertise. However, the loan was re-presented by reducing the amount from 240 million birr to 150 million birr and was approved by the board without adequate explanation for the reduction of 90 million birr,” the complaint elaborated.
“The customer could request additional loans in due course claiming that the current grant was not enough in the first place,” the claim read.
The share holders also claimed that some of the branches of the bank were opened without the acceptance of the board.
They also claimed that the bank concluded a 10.3 million birr commission for currency purchased at a rate higher than the buying rate from exporters at Jijiga and Togochale branches. “The board did not take any action for over a year and no effort to recover the money was made,” the claim indicted.
The disgruntled share holders also claimed that the board of the bank proposed building a headquarters without making a detailed feasibility study, or explaining the cost or where they would get the funding. It also did not include details about the building or even a contract stating how the building would be shared even though it was owned by NIB Bank and its sister company NIB Insurance S.C. They also said that the architectural design work of the building was not complete and that there was no construction permit or joint ownership permit. “The board of directors had not reached consensus on awarding a bid for foundation work of the building to a bid winner, which was awarded for China Railway No. 3 Engineering Group,” the claim stated.
The NBE investigation stated that the bid winner was decided under board minutes on June 27, 2013 with a vote of seven in favour and four against. The NBE report issued in March 2014 said that the project should be managed by a project management office (which is currently not adequately staffed) with technically well equipped personnel. As a result of all these concerns the shareholders maintain that the bid for the building should not be awarded.
The 35 storey headquarters will be built on a 3,682 square meter plot secured from the Addis Ababa City Administration and is located behind the National Theater, which is often called the financial district of Addis Ababa. NBE’s 15 page investigation report concluded that there were misdemeanors activities occurring at the bank. It mentioned that there were discrepancies and conflicts of interests with regard to their banking activity.
But the shareholders are now claiming that even though the central bank identified problems in the bank it did not take any action. “Or it does not want to enforce the rules and talk about what problems it observed at NIB,” they said.  “In May Solomon Desta, Director of Banking Supervision at NBE, said the Central Bank would do something within a few weeks but so far we have not heard anything about what actions will be taken,” the shareholders said. On Monday September 8, representative of the shareholders have written a letter to Teklewold Atnafu, governor of NBE, to address the issue.
Solomon told Capital that his office has given an adequate response. The letter signed by Solomon and issued on July 23 stated that it is a responsibility of NBE to keep the financial institutions’ information based on proclamation number 592/2000.
“It is our responsibility to follow the bank and its day to day activity and we are assessing them,” he told Capital.
The shareholders however still feel NBE should provide a final resolution.
The NBE investigation report stated that based on the observation report at the general shareholders meeting of Nib International Bank, the National Bank of Ethiopia had a discussion with directors of the bank on major supervisory concerns on December 25, 2013. Following the discussion and the agreement reached, the Bank Supervision Directorate conducted a special investigation from January 23 to February 17, on the complaints of some board members and major shareholders of the bank.
Tafesse Bogale, board chairman of NIB, told Capital that the national bank had already given its decision after it undertook the investigation. “And every shareholder has to specify their concern to the general assembly that will be held in the next two months,” he added.