National Bank of Ethiopia’s Recovery Planning Directive: What Banks Need to Know

The National Bank of Ethiopia (NBE) has taken a pivotal step toward strengthening the resilience and self-reliance of the country’s banking sector by introducing the Recovery Plan of Banks Directive No. SBB/93/2025, effective May 13, 2025. 

The directive requires all banks operating in Ethiopia—including local, foreign subsidiaries, and interest-free banks—to develop comprehensive Recovery Plans to tackle severe financial stress without relying on government bailouts. 

Why This Directive Matters 

In today’s world of growing market volatility and interconnected financial systems, early planning for crises is no longer optional. The NBE’s directive aligns with Basel III global standards, equipping Ethiopian banks to act decisively and independently during systemic or idiosyncratic shocks. 

Key Objectives: 

  • Detect early signs of distress via quantitative and qualitative indicators 
  • Plan credible, actionable, and timely recovery options 
  • Ensure continuity of critical functions and services 
  • Strengthen governance and risk oversight during crises 

Core Components of Every Recovery Plan 

  1. Executive Summary
    Background, objectives, scope, and material updates. 
  2. Strategic & Governance Analysis
    Overview of core business lines, risk interconnections, and crisis governance structures. 
  3. Recovery Triggers & Indicators
    Early warning systems based on thresholds such as: 

    • Capital Adequacy Ratio (CAR), Tier 1, CET1
    • Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR)
    • Non-Performing Loans (NPL) Ratio
    • Return on Equity (ROE), Net Interest Margin
    • GDP forecasts, FX volatility, Credit Ratings
  4. Scenario Analysis
    Simulations of slow- and fast-moving crisis events to test response plans. 
  5. Recovery Options Menu
    Actions may include: 

    • Capital raising
    • Selling non-core assets
    • Liability restructuring
    • Mergers or divestitures
    • Cost control and operational scaling
  6. Communication & Disclosure Plan
    Structured internal and external communication strategy (Board, investors, NBE, public). 
  7. Preparatory Measures
    System, legal, and policy readiness checks. 

 

Timelines Banks Must Follow 

Requirement  Timeline 
Directive Effective Date  May 13, 2025 
First Recovery Plan Submission  January 13, 2026 
Annual Plan Update Deadline  Within 3 months of fiscal year-end 
Post-Material Change Update  Within 15 working days 
Threshold Breach Notification  Within 5 working days to NBE 
NBE Review Period  Within 6 months of submission 
Revised Plan (if required)  Within 2 months of feedback 

Penalties for Non-Compliance:
Failure to submit or update the recovery plan on time results in fines of Birr 100,000 and Birr 50,000, respectively.

Immediate Actions for Banks 

  • Ensure IT and MIS infrastructure can capture, analyze, and report early warning indicators. 
  • Activate cross-functional teams from Risk, Treasury, Finance, and Compliance to begin planning immediately. 

Challenges Ahead: 

  • Managing large volumes of data and developing robust risk models 
  • Limitations in digital infrastructure or risk solutions that may restrict monitoring of key metrics 

 

How JMR Infotech Supports Compliance 

As a global financial technology leader and specialized Oracle implementation partner, JMR Infotech helps Ethiopian banks meet the directive’s requirements through Oracle Financial Services Analytical Applications (OFSAA). 

Support Includes: 

  • Technology Enablement & MIS Integration: Deploy or enhance digital tools for risk monitoring, regulatory reporting, and management dashboards 
  • Indicator Configuration & Generation: Quantitative triggers (CAR, LCR, NSFR, ROE, profitability) and integrated dashboards for continuous monitoring 
  • Scenario Analysis & Stress Testing: Assess capital, liquidity, and profitability under various crisis scenarios 
  • IT Training & Capability Building: Prepare IT teams to manage and report Recovery Plan indicators effectively 

 

Why Partner with JMR Infotech 

  • Trusted Banking Transformation Partner: 18+ years of experience serving top banks in 75+ countries in Africa, the Americas, Asia, Europe, the Middle East, and Oceania. 
  • Proven Expertise: Delivering Basel, Liquidity Risk, and Stress Testing technology and consulting services that meet global prudential standards
  • Local Insight + Global Expertise: Experience in emerging markets, tailored to Ethiopian regulatory and operational realities 
  • Deep Domain Knowledge: Banking risk, compliance, and financial resilience 
  • Integrated Approach: Combining strategy, systems, and support for end-to-end compliance with NBE expectations  

Connect with Our Banking Risk & Analytics Experts
Connect with our Risk and Compliance experts today to map out a clear compliance roadmap for your bank.