Reserve Requirement – 8th Replacement Directive No. SBB/84/2022

የኢትዮጵያ ብሔራዊ ባንክ NATIONAL BANK OF ETHIOPIA አዲስ አበባ / ADDIS ABABA

LICENSING AND SUPERVISION OF BANKING BUSINESS Reserve Requirement – 8th Replacement Directive No. SBB/84/2022

Whereas, the National Bank of Ethiopia is vested with powers, duties and responsibilities of monetary management and regulation and supervision of banks.

Whereas, statutory reserve requirement, which obliges banks to hold a proportion of their deposit balance with the National Bank of Ethiopia, is one of the important monetary policy instruments and prudential regulation tools.

Now, therefore, the National Bank has issued this Directive pursuant to the powers vested in it by Article 16(1) (a) of the National Bank of Ethiopia Establishment (as Amended) Proclamation No. 591/2008, and 59(2) of Banking Business Proclamation No. 592/2008 as amended by Banking Business (Amendment) Proclamation No. 1159/2019.

1. Short Title This Directive may be cited as "Reserve Requirement–8th Replacement Directive No. SBB/84/2022".

2. Opening Accounts with the National Bank of Ethiopia Banks operating in Ethiopia shall open two separate Birr accounts with the National Bank of Ethiopia to be used as follows:

2.1) Reserve Account (a) A reserve account shall exclusively be used to maintain the reserve balance stated under Article 3 of this Directive. (b) No bank shall withdraw any money from its reserve account without prior approval of the Bank Supervision Directorate of the National Bank of Ethiopia. (c) A bank can request for transfer to Payment and Settlement Account maintained with the National Bank, if daily reserve ratio is above 5%. But a bank must ensure that average reserve ratio of a calendar month is 7% at minimum, calculated as per article 3 of this Directive.

2.2) Payments and Settlement Account A payment and settlement account shall be used to carry out all day-to-day transactions of banks through the National Bank of Ethiopia.

3. Reserve Requirement 3.1) A bank operating in Ethiopia shall maintain in its Reserve Account stated under Article 2.1(a) of this Directive 7% (seven percent), on average in every calendar month, of all Birr and foreign currency deposit liabilities held in the form of demand/current deposits, saving deposits and time deposits.

3.2) Notwithstanding sub-article 3.1 hereinabove, a bank, at all times, shall maintain a minimum of 5% of all Birr and foreign currency deposit liabilities held in the form of demand/current deposits, saving deposits and time deposits.

4. Computation of Reserve Balance 4.1) Cash items in process of collection, if included under deposits, shall be deducted there from in computing the balance of total deposits for reserve purposes.

4.2) Cash items in process of collection through the National Bank of Ethiopia shall not be acceptable as reserve until credited to the reserve account.

4.3) The reserve requirement shall be computed on the net deposit balance, i.e., excluding cash items in process of collection, shown at the end of each reporting week.

5. Reporting Requirements 5.1) For the purpose of determining strict compliance with the reserve requirement stated under Article 3 of this Directive, a bank shall submit properly checked and signed weekly report, showing balances as of each Wednesday, not later than Tuesday of the following week, to Bank supervision Directorate of the National Bank, as per Annex I.

5.2) Notwithstanding sub-article 5.1 hereinabove, a bank shall submit a monthly report showing each day's reserve ratio and monthly average reserve ratio, to Bank Supervision Directorate of the National Bank, as per Annex II.

5.3) Both weekly and monthly reports shall show the balance of each type of deposit, reserve balance with National Bank and the excess/shortfall over reserve requirement.

6. Penalty on Incompliance with Reserve Requirement 6.1) Deficiency in reserve balance is subject to a penalty; and the penalty shall be assessed at a maximum lending interest rate on loans and advances charged by the bank breaching the requirement, and computed on the amount of the deficiency in reserve and multiplied by the number of days over which the reserve account remained deficient.

6.2) The penalty for late reporting of weekly and monthly reports shall be as per NBE Directive No. SBB/35/2004, or its revised version thereof.

6.3) The National Bank of Ethiopia may waive the penalty stated herein above on grounds it considers acceptable.

7. Repeal NBE Directive No. SBB/80/2021 is hereby repealed and replaced by this Directive.

8. Effective Date This Directive shall enter into force as of the 9th day of June 2022.

Yinager Dessie (PhD) Governor

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Annex 1 Name of the Bank.......................................... Month Ended..................................................

Weekly Reserve Requirement Report (Amount in Millions of Birr)

Code	Description	Amount
1	Deposits (1.1+1.2+1.3)
1.1	Demand/Current Deposits
1.2	Saving Deposits
1.3	Time Deposits
2	Deductions (2.1+2.2)
2.1	Un-cleared Checks paid-local
2.2	Un-cleared effects- foreign
3	Net Deposits Balance (1 minus 2)
4	Reserve Requirement (5% of 3)
5	Reserve account with NBE
6	Payment and Settlement account with NBE
7	Currency Issue Account Balance
8	Deposit with NBE (5+6+7)
9	Excess/Deficiency (5 minus 4)
10	Reserve Ratio (5/3*100)

Note: Only Wednesday's Position

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Annex 2 Name of the Bank.......................................... Month Ended..................................................

Monthly Reserve Requirement Report (Amount in Millions of Birr)

Code	Description	Day 1	Day 2	Day 3	Day 4	Day 5	Day 6	Day 7	Day 8	Day 9	Day 10	Day 11	Day 12	Day 13	Day 14	Day 15	etc	Monthly Average
1	Deposits (1.1+1.2+1.3)
1.1	Demand/Current Deposits
1.2	Saving Deposits
1.3	Time Deposits
2	Deductions (2.1+2.2)
2.1	Un-cleared Checks paid-local
2.2	Un-cleared effects- foreign
3	Net Deposits Balance (1 minus 2)
4	Reserve Requirement (5% of 3)
5	Reserve account with NBE
6	Payment and Settlement Account with NBE
7	Currency Issue Account Balance
8	Deposit with NBE (5+6+7)
9	Excess/Deficiency (5 minus 4)
10	Reserve Ratio (5/3*100)

Note: - Consider only each day's position

• Use excel sheet and consider average amounts for "monthly average column" and drag for ratio/calculate