OROMIA STATE UNIVERSITY
DEPARTMENT
OF ACCOUNTING &
FINANCE
DEGREE PROGRAM: -
REGULAR
2013 ENTRY
3rd year 1st Semester
GROUP ASSIGNMENT OF FINANCIAL ISTITUTOIN & MARKET
Name ID NO.
1. Abdu Mohammed ......................................................................01001
2. Samuel Getachaw .......................................................................01019
3. Hailu Minche ...............................................................................01012
4. Tizazu Gurmessa ..........................................................................01021
5. Amer Duri .....................................................................................01023
6. Gifti Roba ......................................................................................01026
Submitted to instructor: Tsiyon June, 2023
Batu Oromia
1, List and Discuss the Regulation type of followed by the National Bank of Ethiopia?
First we can define the meaning of regulation which means implying rules and laws
role limit the relation of individuals and business to make decisions.
Regulations and laws help prevent banks from self-destruction ensure better
management for a smooth and efficient economy.
Current regulation Of Ethiopian National Banks use Commercial banks to maintain the
flow of money through a nation economic system and market place.
In Ethiopia the regulatory and supervisory instruments applied it include.
Regulating the activities of bank
Board of director and managers
Credit and interest late control
Controlling concentration of credit
Controlling foreign ownership of bank
Capital requirement
Types of regulation followed by the national bank of Ethiopia
1, License Banks; license for doing banking business is issued by the national bank of Ethiopia.
Foreign national shall not undertake banking business in Ethiopia.
2, Maintenance of required capital and reserve requirement
As per the revised directive of SBB NO.24/99 the minimum paid up capital to obtain banking
business license is birr 75,000.
One of the most important monetary policy instruments prudential regulation tools is reserve
requirements.
3, Disclose requirements (Audit Information inspection and Examination)
Accordingly to proclamation 84/1994 every bank shall appoint an independent audit to
report the shareholders of the bank upon the annual balance sheet and profit and loss
statement.
Each bank shall send to NBE the daily signed balance sheet every month within 20 days from the
end of each month from the closing balance sheet and profit loss statement every 6 month and
every year within one month from the closing of each financial year.
4, Limitations of Activities of Banks
The activities of banks are regulated by the government without the free written approval of the
NBE no person may easier either divert of indirectly in a bank a voting right exceeding 20% of
the their capital no bank shall enter into any arrangement of arrangement for the sale of disposal
by amalgamation of effect restricting dispose of the whole of any part of its property provision of
proclamation NO 83/1994.
The sum aggregate loans extended of permitted to be outstanding directly and indirectly
to one related party parties at and the time shall not exceed 15% and 35%respectively of
the true capital of the bank.
Banks shall not extend loans to related parties on preferential terms with respect to
conditions interest rate and repayment periods other than the terms and conditions
normally applied to other borrowers.
5, penalties for non-performance
Because the fundamentals of these proclamation are safe guard the whole economy
achieved sustained economic growth through fostering monetary stability and sound
financial system not to comply with it and lot with the directives would resource in in a
consequence as it is clearly indicated in proclamation NO.86/1994. Penalties could range
from fine in birr and imprisonment up to cancelation of licenses.
The national bank shall license and regulate banks insures and other financial institutions
in accordance with the relevant laws of Ethiopia.
Formulating implements and follow up the country exchange rate policy and manages
and administrates the international reserve of the country.
2, one among the regulation of the financial institution (like banks) by national bank of
Ethiopia is to provision for bad debt. Discuss its importance for financial institution?
First we can define bad debt
It refers the loans of outstanding balances owed that are longer deemed recoverable and
must be written off.
Bad debt is a type of account receivable for an organization that have become
uncollectible from the customer due to the customers inability to pay the amount of
money taken on credit from the organization.
Second we can define the meaning of which means an establishment that completes and
facilitates monetary transactions such as loans, mortgages, and deposits.
It essential for public they provide a market place for money and assets so that capital can
be efficiently allocated to where it is most useful.
Overdraft and loans or advances that do not have a pre-established repayment program, if
The debt remains outstanding for 360 consecutive days or more
The debt exceeds the borrowers approved limit for 360 consecutive days or more.
Interest is due and uncollected for 360 days or more.
For overdrafts, the account has been inactive for 360 consecutive days or more, the
account fails to show debit balance of 15% and above of approve limit at least once over
360 days preceding the date of loan review.
Generally financial institution provide consumers and commercial clients with a wide
range of services and different types of banking products.
The most common types of financial institution include
1, Commercial banks
2, Credit unions
3, Insurance Companies
4, Investment Companies
5, Brokerage firms
The most common importance of financial institutions are
To increase the productivity and income of vulnerable group, especially women and the
poor
To reduce poverty
To provide the financing that drives economic growth
To create fair and sustainable service distribution
To help existence business grow or diversify their and to encourage the development of
new business.
To create employment and income opportunities through the creation and expansion of
micro enterprise.
Keep capitalist economies running by matching people who need funds with those who
can lend or invest
