#Major_Changes_in_the_New_NBE_Proclamation_1359_2024_and_The_amended_Banking_Business_Proclamation_1360_2024
1⃣. Short-Term Debt Instruments: The NBE is now authorized to issue its own short-term debt instruments as part of its open market operations, enhancing its monetary policy tools.
2⃣. Regulatory Sandbox: A regulatory sandbox framework will be established to facilitate the testing and introduction of innovative financial services, encouraging fintech development and experimentation within a controlled environment.
3⃣. Authorized Capital: The authorized capital of the NBE has increased significantly to 20 billion Birr, with a minimum paid-up capital requirement of 10 billion Birr, up from the previous half a billion Birr.
4⃣. General Reserve Fund: The net profit generated by the NBE will be transferred to a General Reserve Fund until it reaches 5% of the NBE's monetary liabilities, reinforcing financial stability.
5⃣. Board Composition: The board of the NBE will expand from seven to nine members, allowing for greater diversity of thought and expertise in governance.
6⃣. Financial Stability Committee: A seven-member Financial Stability Committee will be established to regularly assess systemic risks within the financial system and propose necessary macro and microprudential policies.
7⃣. Monetary Policy Committee: A dedicated Monetary Policy Committee, also comprising seven members, will be responsible for preparing and proposing monetary policy initiatives.
8⃣. Central Bank Digital Currency: The NBE's Board may issue directives regarding the operation of Central Bank Digital Currency (CBDC), signaling a move towards modern digital financial solutions.
▎Implications for Economic Development
The ratification of these proclamations, alongside the amendment to the Banking Business Proclamation allowing foreign banks to operate in Ethiopia, signifies a monumental shift in the country's banking landscape. Key implications include:
• Enhanced Financial Inclusion: By integrating fintech solutions and allowing data-driven lending decisions, more individuals and businesses can access financial services, fostering entrepreneurship and innovation.
• Strengthened Regulatory Framework: The introduction of stringent regulatory measures enhances the stability and integrity of the banking sector, ensuring consumer protection and confidence in financial institutions.
• Increased Competition: Allowing foreign banks to enter the market encourages competition among banks, leading to improved services and innovative financial products tailored to consumer needs.
• Collaboration with Fintech: The reforms facilitate collaboration between traditional banks and fintech companies, promoting advancements in financial technology and service delivery that can better meet the evolving demands of consumers.
In summary, these reforms reflect Ethiopia's commitment to creating a robust, resilient banking system that supports sustainable economic growth and adapts to emerging challenges and opportunities in a rapidly changingI global financial landscape
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