REGULATORY FRAMEWORK FOR FOREIGN BANK ENTRY IN ETHIOPIA: CHALLENGES AND PROSPECTS

Abstract

Ethiopia's planned framework for foreign bank entry aims to attract foreign investment and expertise to its financial sector. While fostering competition and economic growth, the framework faces challenges in balancing the interests of domestic banks and ensuring fair competition. This study examines the regulatory framework for foreign bank entry in Ethiopia and explores the challenges and prospects associated with it. The study’s main objective is to analyze the challenges and prospects associated with the new regulatory framework currently under development. To achieve this, the study assesses the legal ramifications of allowing foreign banks to operate within Ethiopia; investigate the potential difficulties and opportunities that the new regulations might present and evaluate the Ethiopian National Bank's capacity to effectively manage and oversee the implementation of the new framework. The research adopts a qualitative research approach by relying on doctrinal legal research methods in addition to non-doctrinal methods, including interviews. This study underlines the Ethiopian government's decision to open the banking sector to foreign banks presents both opportunities and challenges. Its findings show legal gaps that have been identified including inadequate supervision of prudential requirements, lack of specific regulations for foreign branch banking, limited control by host authorities, lack of formal agreements with host countries, lack of clarity and consistency in regulations regarding foreign ownership in banks, lack of specific regulations for joint ventures, inadequate legal framework for mergers and acquisitions, and limited coordination between regulatory bodies. To address these gaps, the study raised recommendations which include enhancing regulatory oversight, developing specific regulations and guidelines, strengthening the regulatory framework, establishing formal agreements with host countries, providing clarity and consistency in regulations, establishing clear guidelines and regulations, developing a comprehensive legal and regulatory framework, and establishing a working relationship between regulatory bodies.