The licensing and supervision of banking business reserve requirements (9th replacement) directive number SBB/97/2025
Legal update on The licensing and supervision of banking business reserve requirements (9th replacement) directive number SBB/97/2025
The National Bank of Ethiopia (NBE) issued this directive to regulate reserve requirements for commercial banks operating in Ethiopia. The directive aims to enhance interbank money market functioning, provide flexibility in liquidity management, and promote stability in short-term interest rates. Below is a summary of the key provisions.
The directive is titled “Reserve Requirements (9 – Replacement) Directive No. SBB/97/2025.”
Key terms defined in the directive include:
- Bank: Includes private, state-owned, foreign subsidiaries, or branches licensed by NBE.
- Reserve Base: All domestic and foreign currency deposit liabilities, including demand/current, savings, and time deposits.
Lagged Maintenance Period: Reserve maintenance period based on the previous calendar month’s reserve base. - Payment and Settlement Account: Account maintained by banks with NBE for reserve requirements and daily transactions.
The directive applies to all commercial banks collecting deposits and operating in Ethiopia
Banks must open and maintain a Payment and Settlement Account in Birr with NBE. Previous Reserve Accounts are merged into this account.
Statutory Reserve Requirements
- Banks must maintain a minimum daily reserve balance of 5% of their average reserve base from the previous calendar month in their Payment and Settlement Account.
- By the end of the reserve maintenance period, banks must maintain an average reserve of 10% of their previous calendar month’s average reserve base.
Computation of Reserve Requirements
- Reserve base is calculated monthly, excluding cash items in process of collection.
- The reserve maintenance period starts on the first Thursday of the month following the calculation month and ends on the first Wednesday of the subsequent month.
Transition Period
Banks are categorized into two groups (Category 1 and Category 2) during the transition period to meet monthly average reserve requirements:
- Category 1: Gradual increase from 8% in January 2026 to 10% in March 2026.
- Category 2: Gradual increase from 7.5% in January 2026 to 10% in June 2026.
Reporting Requirements
Banks must submit:
- Monthly reserve base reports (Annex 1) on the first working day after the end of the calendar month.
- Statutory reserve requirement reports (Annex 2) on the day after the end of the maintenance period.
- Monthly net average reserve base reports via the Ethiopian Automated Transfer System.
Administrative Sanctions
Non-compliance with the directive results in financial fines and administrative sanctions, including:
- Fines for failing to meet daily or average reserve requirements.
- Fines for delayed or missing reports.
- Additional sanctions such as suspension of lending, prohibition of dividend payments, and restrictions on opening new branches or expanding services.
The previous directive, “Reserve Requirement (8 – Replacement) Directive No. SBB/84/2022,” is repealed and replaced by this directive.
The directive is effective starting January 1, 2026.
This directive establishes clear guidelines for reserve requirements, reporting, and penalties to ensure effective monetary management and banking stability in Ethiopia.
Legal Disclaimer
This material is provided for general informational purposes only and does not constitute legal or financial advice. Ethio Alliance Law Firm makes no warranty as to its accuracy or completeness and accepts no liability for any reliance placed on it. Readers should consult the official Directive and obtain specific legal advice before acting on any information herein.
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