The National Bank of Ethiopia (NBE) has introduced a sweeping new directive requiring all banks operating in the country to develop and implement robust recovery plans, marking a significant shift in Ethiopia’s approach to banking sector risk management and crisis preparedness.The directive, officially titled “Banking Recovery Plan Directive No. SBB/93/2025,” came into effect on May 13, 2025, and aims to ensure that banks are equipped to restore their financial health during periods of severe stress—without relying on special intervention from the central bank or government.
This move aligns Ethiopia with international best practices and recommendations from the Financial Stability Board, underscoring NBE’s commitment to enhancing the stability and resilience of the nation’s financial sector.Under the new rules, all banks must submit their initial recovery plans to the NBE within eight months of the directive’s effective date. These plans must outline in detail how each bank would regain financial viability during institution-specific or market-wide crises, including scenario analyses, stress tests, and clear strategies for maintaining critical operations.A cornerstone of the directive is the explicit requirement that recovery options “should not take into account extraordinary government policy intervention from a national bank or access to special financing from public funds.”
This provision is designed to foster a culture of self-sufficiency and resilience in the financial sector, ensuring that banks are accountable for their own stability and can address crises independently.The directive also mandates that banks establish sophisticated monitoring systems to detect early warning signs of financial deterioration. When a recovery indicator is breached, banks must notify the NBE within five working days, providing analysis and proposed corrective measures.The directive places significant responsibility on bank boards, requiring them to approve and regularly review recovery plans and to ensure clear lines of accountability for crisis decision-making.
For foreign bank branches, the rules mandate close coordination with parent institutions, while ensuring that local obligations are fully safeguarded.Non-interest banks are required to ensure their recovery plans comply with Sharia principles, and foreign bank branches must integrate their domestic activities into the broader recovery frameworks of their headquarters. Ongoing compliance will involve annual updates, with banks required to submit revised plans within three months of the end of each financial year.
The NBE has introduced strict penalties for non-compliance, including fines of ETB 100,000 for missing the initial submission deadline and ETB 50,000 for delayed annual updates. Persistent non-compliance could result in further administrative actions under the Banking Business Proclamation.Financial sector experts have welcomed the directive as a timely and necessary reform. Dr. Almaz Gebre, a prominent financial sector analyst, described it as “a timely and necessary step to strengthen the financial resilience of Ethiopian banks,” emphasizing that it will foster a culture of forward planning and reduce pressure on public funds during crises.Experts also highlight the directive’s impact on management practices, noting that requirements for robust governance structures, clear division of responsibilities, and integration with comprehensive risk management frameworks will significantly improve banks’ ability to manage and respond to stress. “It encourages accountability and ensures that recovery plans are not just concept-based documents, but strategies that can be implemented,” noted one sector specialist.
