Capital Adequacy Ratio Requirement Directives No. CGFB/04/2016

f h. T f< Jr / -ft NATIONAL BANK OF ETHIOPIA ADDIS ABABA LICENSING AND SUPERVISION OF THE BUSINESS OF CAPITAL GOODS FINANCE COMPANIES Capital Adequacy Ratio Requirement Capital Goods Finance Business Directives No. CGFB/04/2016 Whereas, it is important to strengthen the safety and soundness of capital goods finance companies by creating a consistent capital adequacy measurement; Whereas, it is essential to measure the level of capital adequacy of capital goods finance companies according to perceived level of risks of balance sheet items, so as to build the level of confidence in the industry; Now, therefore, in accordance with powers vested in it under Articles 4 (4) and 18 (4) of Capital Goods Leasing Business (Amendment) Proclamation No 807/2013, the National Bank of Ethiopia has issued these directives.

1. Short Title These directives may be cited as "Capital Adequacy Ratio Requirement of Capital Goods Finance Business Directives No. CGFB/04/2016".

2. Definitions For the purpose of these directives, unless the context requires otherwise: 2.1 "total capital" means the sum of paid-up capital, retained earnings, donated equity, legal reserve and permanent free reserves acceptable to the National Bank of Ethiopia held by a capital goods finance company; 2.2 "total risk-weighted assets" means assets of a capital goods finance company determined by weighting each asset item by the weight assigned to it and aggregating the result which shall be calculated in accordance with the table attached herewith which shall be part hereof.

3. Scope of Application The provisions of these directives shall be applicable to all capila companies licensed by the National Bank of Ethiopia and exclude bank .X. r.1.4s. 5550/2048 4-hrt *TC 0115 51 45 88 flAh T£ 0115 51 ADDRESS: SUDAN STRCET P.O.BOX 5550/2048 FAX No. 011551 45 88 TEL. No. 0115 51 74 30 ADDIS ABABA TELEGRAPHIC ADDRESS: NATIONBAN K CODES-USED PETERSON 3rd& 4th ED BENTLEY'S 2nd PHRASE A.B.C. 6 ED1TIO

4. Minimum Capital Adequacy Ratio A capital goods finance company shall maintain at all times a minimum capital adequacy ratio of 10% (ten percent) computed as a ratio of total capital to total risk-weighted assets in the manner specified in the table annexed to these directives which shall be part hereof.

5. Regulatory Reporting For the purpose of monitoring compliance with the requirement set out under article 4 herein above, each capital goods finance company shall submit to the National Bank of Ethiopia a quarterly capital position report within thirty consecutive days after the close of each quarter in the manner shown in the attached table.

6. Effective Date These directives shall enter into force as of the 1st day of April 2016. Avf . , f^jjf^i r\I ^/ TEKLEWOtD ATNAF^J GOVKHNOt

Annex-1 Name of the Company: Computation of Capital Adequacy Ratio (Quarterly) Date as of: No. 1 2 3 4 5 Computation of Total Capital Paid-up capital Retained earnings/accumulated losses: Prior periods Donated equity - unrestricted Legal reserves Permanent free reserves (such as general reserve) Total Capital (1+2+3+4+5) Amount (In Birr) Name of officer: Signature: Designation: Date: Tel: (Amount in Birr) No. 1 2 3 4 5 6 7 8 9 10 11 12 13 A B C Assets Cash on hand Cash at banks/MFIs including time deposits Cash at NBE Prepayments Claims on Federal Government Claims on Regional Governments Net Investment in Hire-purchase portfolio after loss reserves Financial lease assets (net of accumulated depreciation) Other Receivables Investments (all investments except investment in government securities) Fixed Assets (net of accumulated depreciation) Intangible assets Other Assets Total Risk Weighted Assets Total Capital Ratio of Total Capital to Risk-Weighted Assets (C=B/A) (%) Amount (A) Risk weight (%) (B) 0 20 20 100 Total Risk Weighted Assets (C = AxB) I