The Board of Directors of the National Bank of Ethiopia has issued a directive allowing banks to invest in the Ethiopian Stock Exchange (ESX). The banks can invest in and establish subsidiary capital market service providers, including investment banks.
According to the directive, a bank may hold equity shares in a single Insurance company not exceeding 5% of the subscribed capital of the insurance company. It can acquire up to 100% equity shares in a capital market service provider, excluding credit rating agency.
The banks can hold equity interest in financial infrastructure or hold up to 10% equity shares in a single no banking business other than insurance.
The directive prohibits direct engagement of banks in insurance business. Moreover, banks cannot be capital market service providers and cannot engage in non banking business.
The directive restricts bank’s aggregate equity investment, in all non banking businesses, including in insurance companies and capital market service providers, to 15% of its total capital. Moreover no bank shall invest more than 10% of its total capital in real estate acquisition and development.
This week, the Ethiopian Capital Markets Authority (the regulator) issued directive enabling the licensing of the first securities exchange in Ethiopia. The Ethiopian Stock Exchange (ESX) is about to be launched soon.
ESX (Ethiopian Securities Exchange), the first and only regulated and authorized securities exchange in Ethiopia, is planning to start trading equities (stocks) & fixed income securities (bonds, T-bills, repo, etc) by this November.
In the coming few periods, the private sector in particular should expect to see big improved changes as it will start to have wider sources of financing options not only from the capital markets but also from a transformed domestic banking sector which will have fewer but much bigger sized banks and, for the first time in 50 years, will include foreign banks, creating vibrant competition offering sophisticated products and efficient services.
Read more..
The Ethiopian Stock Exchange (ESX) Nears Debut
Ethio Telecom to Sell its Shares through Telebirr on Wednesday