The National Bank of Ethiopia has issued two new prudential directives — SBB/87/2024 on large exposure limits and SBB/88/2024 on related-party transaction exposure.
Large exposure limits cap the maximum credit concentration that a bank can hold towards a single counterparty or group of connected counterparties, a standard prudential tool with roots in Basel Committee recommendations that aims to limit losses from the failure of a single large borrower. SBB/87/2024 replaces the 2012 directive on credit exposures to single and related counterparties (SBB/53/2012).
SOVEREIGN CARVE-OUT AND RELATED-PARTY RULES
The large exposure directive, SBB/87/2024, contains a carve-out: the limits do not apply to exposures to the central government and state-owned enterprises.
Directive SBB/88/2024 on related-party transactions addresses a distinct but related category of concentration risk: lending to shareholders, directors, senior managers, and entities connected to those individuals.