Economy
Banks Permitted to Guard Foreign Investor Assets Without Creating Subsidiaries
Addis Fortune · 15 hours ago · Read the Full Story on Addis Fortune
AI SUMMARY
The Ethiopian Capital Market Authority and the National Bank of Ethiopia are considering a temporary framework allowing commercial banks to act as custodians for foreign portfolio investors through ring-fenced in-house departments without establishing separate subsidiaries.
- The Ethiopian Capital Market Authority (ECMA) and the National Bank of Ethiopia (NBE) are considering a draft framework allowing commercial banks to act as custodians for foreign portfolio investors without separate subsidiaries.
- Banks would operate custody services through ring-fenced in-house departments with independent reporting, internal controls, and audits.
- The arrangement temporarily bypasses an NBE directive issued in 2024 that bars banks from directly operating as capital market service providers.
- ECMA senior adviser Assefa Sumoro characterized the arrangement as a temporary exemption rather than a permanent departure from NBE rules.
- To qualify, a bank requires a no-objection letter and a certificate of good standing from the Central Bank, alongside compliance with Basel standards, minimum paid-up capital, and liquidity levels.
- Banks are strictly prohibited from using custodial assets to support, finance, or commingle with banking operations, or using client information for unrelated purposes.
- The draft regulation establishes a custody chain requiring foreign investors to hold securities through a licensed custodian or local sub-custodian.
- The Capital Market Authority held a stakeholder consultation on the draft regulation at its headquarters on October 26, 2026.
- Banks and microfinance institutions hold nearly 99pc of the country's financial assets, according to the African Development Bank.
- Former NBE official Yisehak Teka stated that banks are well-positioned due to their financial capacity, branch networks, and organizational structures.
- Synestate founder Naol Duga described the in-house custody approach as a sensible bridge while the market lacks licensed custodians.
- i-Capital Africa CEO Gemechu Waktola questioned a proposed one-year minimum holding period and raised concerns regarding foreign exchange availability and repatriation certainty.
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