ADDIS ABA) Licensing and Supervision of Banking Business Requirements for Persons with Significant Influence in a Bank Directives No. SBB/79/2021 (2™ Replacement) Whereas, ensuring sound practices, stability and long-term institutional success in financial system in general and the banking sector in particular is crucial. Whereas, public confidence in the financial system depends, among other things, on whether ‘inancial institutions including banks are owned, directed and managed by persons who are fit and proper; Whereas, it is necessary to enhance effectiveness and soundness of governance of banks; Whereas, there is a need (o ensure that the National Bank of Ethiopia exercises its responsibilities to assess whether banks are soundly and prudently managed and directed; Now, therefore, in accordance with articles 4(1g&h), 14(4a) and 65 (2) of Banking Business Proclaation No.592/2008 as amended by Proclamation No, 1159/2019, the National Bank of Ethiopia hereby issues these Directives, L. Short Title ‘These Directives may be cited as “Requirements for Persons with Significant Influence in a Bank Directives No. SBB/79/2021 (2™ Replacement)”. Defi i s For the purpose of these Directives, unless the context provides otherwise: 2.1. “bankrupé” is a person who has been declared bankrupt. by the court of law; 2.2 “chief executive officer” means a person by whatever title that person may be referred to, who is primarily responsible for the day-to-day management of the aflaits of a bank; “director” means any member of the board of directors of a bank by whatever title he/she may be referred to; 24 “financial institution” means an insurance company, a bank, a micro-finance institution, a capital goods finance company, 4 micro insyfance provider, a Sood 4nt tre OFF CET P.O.BOX $350/2048 FAX No. OTR A TELEGRAPHIC ADDRESS: NA TIONDAN K CODES-USED PETERSON "4 4" ED BENTLEY x26@ sthionetet Website, www.http.// www-nbe.gov.et “PHRASE ABC, 6* EDITIO.25 2.6 27 28 29 2.10 2A 2.12 213 PATER E Nheek WIA National Bank of Ethiopia ancial service provider or such postal saving, a money transfer institution, a digital fi other similar institution as determined by the National Bank; “fit and proper criteria” are criteria used to assess and determine whether persons with significant influence possess the integrity, financial soundness and competence and capacity to fuliill the responsibilities of their positions; influential shareholder” means a person who holds directly or indirectly two percent or more of the total subscribed capital of a bank; “managerial position means a position of at least a team leader, a division head or equivalent; “National Bank” means the National Bank of Ethiopia; Sone term” means a period not exceeding three (3) years; “person” means any natural or juridical person; “persons with significant influence” are influential shareholders, directors, chief executive officer and senior executive officers of a bank; “senior executive officer” means any officer of a bank who is deputy to the chief executive officer or is directly reporting to the board of directors; “technically insolvent person” is a person whose liabilities are greater than assets or whose significant part of assets have been foreclosed by a financial institution or sequestrated by court order. 3. Scope of Application The provisions of these Directives shall be applicable to all banks operating in Ethiopia. 4, General 4d 42 43. 44 Persons with significant influence shall meet all respective requirements and considerations set in these Directives. Appointment of directors, chief executive officer, senior executive officers, chief internal auditor, and chief risk and/or compliance officer shall be subject to approval by the National Bank, In appointing chief executive officer and senior executive officers, board of directors shall ensue that such persons fulfill requirement set in these Directives. ‘Any shareholding that makes a person influential shareholder shal] be approved by the National Bank.CARERS MhOk AIK sili National Bank of Ethiopia 5. Filand Proper Criteria 5.1 Knowledge, Experience and Age With respect to knowledge experience and age, directors, a chief executive officer and senior executive officers shall fulfill at a minimum, the following. 5.1.1 Board of Directors i) A director shall hold a minimam of first degree or equivalent from recognized higher leaming institution. ii) A board may preferably comprise of directors who as a group provide a - mixture of core competencies such as banking, finance, accounting, management, economics, legal, business administration, auditing, information technology, and investment management. iii) The board shall comprise of female directors provided that eligible candidates are available among the shareholders. iv) A director shall have adequate experience in business management, preferably in banking business, and/or shall take training in financial analysis, corporate governance, applicable laws, regulation, directives, risk ‘management, and intemal control after holding a seat on the board. vy) A director shall be at least 30 years old. 5.1.2 Chief Executive Officer A chief executive officer shall: i, hold a minimum of first degree fom recognized higher Icarning institution; and ii, have a minimum of 12 years’ experience in banking, of which, at least 5 years shall be as senior executive officer. 5.1.3 Senior Executive Officers (a) A senior executive officer, if deputy to the chief executive officer, shall: i, hold a minimum of first degree from recognized higher learning institution; and ii, have a minimum of 10 years’ experience in banking, of which, at a minimum 4 years shall be experience as department manager or equivalent. However, if the position is on Information Technology (IT) or related fields, necessarily be banking relateddale CARERS Nee 191 National Bank of Ethiopit shall take a minintum of 5 days training on core banking business functions cluding credit, saving, international banking and other core functions once he/she assumes the position of senior executive officer and certificate of training shall be filed to the National Bank accordingly, (b) A senior executive officer, if directly reporting to the board of directors (imainly chief internal auditor and chief risk &/or compliance officer), shall: i. hold a minimum of first degree from recognized higher learning institution; and ii, have a minimum of 8 years’ experience in banking, of which, at a minimum 3 years shall be in managerial position. 5.2 Integrity Persons with significant influence shall be honest, reputable and diligent. In determining, integrity of persons with significant influence, all relevant factors shall be considered, including but not limited to: 5.2.1 whether the person has a record or evidence of previous conduct and activities where he/she/it has been convicted for a criminal offense under any law designed to protect members of the public from dishonesty or fraud whether in Ethiopia or elsewhere; 5.2.2 whether the person has a record of withholding information from public authorities, submission of incorrect financial or other statements, prior refusal of regulatory/supervisory approval and failure to comply with requirements of regulatory/supervisory body, other corrective actions or interventions by public authority; and 5.2.3 in case of chief executive officer and senior executive officers, whether the person has a record of disciplinary measures or any dispute with previous employers, or compliance with a code of conduct which has led to the imposition of a penalty under employment law or any other disciplinary ‘measures imposed by trade or professional associations. 5.3. Financial Soundness Persons with significant influence shall be financially sound. In determining financial soundness of persons with significant influence, all relevant factors shall be considered, including but not limited to:PATER, 1h OTH National Bank of Ethiopia 5.3.1 whether he/she or the legal person in which he/she is a director or chict executive officer or senior executive officer or owner has instituted bankruptey proceedings or declared bankrupt, whether in Ethiopia or elsewhere, or his/her or the compaiy’s assets have been sequestrated because of bankruptey or been foreclosed by a bank because of failure to repay a loan; 5.3.2 whether he/she ot the legal person in which he/she is a director or chief executive officer or senior executive officer or owner has been convicted of default on repayments of bank or other credits or tax payment; 5.3.3 whether he/she or the legal person in which he/she is a director or chief executive officer or senior executive officer or owner carries non-performing loans, as defined by directives of the National Bank, from any financial institution; 5.34 whether the person’s purchase of shares in a financial institution has been funded or to be funded by another person who is actually bankrupted or technically insolvent because of irresponsible or reckless management, fraud or illegal business practice; whether the person’s minimum net worth at the time of acquisition of shares is fat least greater than shares acquired or to be acquired from a financial institution; and 5.3.6 whether a person's account has been closed and not reinstated by any bank, in line with relevant directives of the National Bank, because of drawing checks without sufficient funds. 6. Ongoing Fitness and Propriety Test, and Action by the National Bank ‘The National Bank may conduet fitness and propriety test on persons with significant influence ‘of a bank on an ongoing basis, Where such a test indicates that a person with significant influence has failed to fulfill the fitness and propriety test as set out in these Directives, the National Bank may: 6.1 suspend voting rights of influential shareholder; and 6.2 suspend and/or remove a director, chief executive officer or senior executive officer 7, Subsequent Notification Requirements 7.4 Persons with significant influence are required to immediately notify the National Bank any events that might change their assessment as fit and proper 7.2 If board of directors, chief executive officer, senior executive officers or external auditors of a bank, during the course of performing their duties, have reasonable doubt that a person with significant influence has failgdte~fufill the criteria in these Directives, they shall immediately report the matty jorCAPERS Ahee AIA National Bank of Ethiopia 8, Documents to be Submitted on Application 8.1 Written request shall be submitted to the National Bank along with the follo documents in order to conduct fitness and propriety test 8.L1 Por directors, chief executive officer and senior executive officers; ') an updated and signed curriculum vitae (including name, nationality, birth date, education, recent photograph, employment history, experience in business and fin: activities including any Ieadership position held) accompanied with authenticated copies of documents signifying education qualification and work experience; ii) copy of organizational structure approved by board of iii) copies of identification card and /or passport; and iv) copy of signed appointment minutes of the board of directors, 8.1.2 For all persons with significant influence: i) completed and signed fitness and propriety test questionnaire which is part hereof; ii) copy of tax identification number; ili) certificate of good conduct from relevant government organ; and iv) any other document that the National Bank deems necessary ial affairs, involvement in civic, social and charitable rectors; 3.2 Where the ditector is juridical person, both the company and the person representing the company shall be fit and proper. 8.3. In case of corporate directors and influential shareholders, the following documents shall be submitted: 8.3.1 copy of the company’s registered memorandum and articles of association; 8.3.2 copies of audited statements of the legal entity concemed, for three consecutive years (immediately preceding its application) or for each year it has been in operation, if less than three years; and 8.3.3 any other documents the National Bank deems necessary. 9.1 A person may not serve either on his own behalf or representing any other shareholder as agent, or by whatsoever means, as director of a bank for more than six consecutive years starting from the date he/she was appointed by ordinary general meeting of shareholders; however, he/she may be re-elected after a lapse of six consecutive yearsculllin CRPPRL Nee aah aultim National Bank of Ethiopia 92° Notwithstanding provisions of sub-article 9.1 hereinabove, if the ordinar 'Y general meeting of shareholders of a bank wishes to maintain continuity in the board and re- clect some of the existing board members, it may re-elect such ditectors for only one tmore term. The number of board members so re-elected shall, however, be limited to a ‘maximum of one-third of the board seats of the bank. 93. A bank shall notify the National Bank, in writing, any transfer or removal of seni 7 executive officers directly reporting to the board of directors from his/her current Position within 30 calendar days before such decision is implemented, clearly stating the reason for such decision. 10. Period of Limitation for Acting Officers 10-1 Appointment of a chief executive officer of a bank on acting basis on a vacant post shall be approved by the National Bank, 10.2 A person shall not assume chief executive officer, or senior executive officer position on acting basis for more than six months, 103 Appointment of a senior executive officer by a bank on acting basis on a vacant post shall be reported to the National Bank within three (3) working days of such appointment {04 Any expetience relevant to the provision of sub-article 10.2 hereinabove exceeding six months shall not be counted as managerial experience, 11. Repeal Directives No.SBB/70/2019 are hereby repealed and replaced by these Directives, 12. Effective Date These Directives shall enter into force as of June 15, 2021PATERL Mhek AD National Bank of Ethiopia CONFIDENTAL NATIONAL BANK OF ETHIOPIA ANNEX 1: GENERAL INFORMATION (Influential shareholder, director, chief executive officer, or senior executive officer - Underline), NB: In case the space provided is inadequate, use additional paper. L.Name of bank 2. Personal Information a) Full Name’ oe b) Date of Birth ©) Place of Birth: Nationality i {) Identification Card Number and Date of Issue: Passport Number and Date of Issue 2) Tax Payer Identification Number: h) Address: City’ Sub-City Zone: ___Woredat Kebele House No. Postal Address: ‘Telephone No: Fax: Email a ucatfonal Qualification: i) Summary of Work Experience: No. ‘Organization Position Duration umber of years k) Name(s) of your bankers for the last 5 years 43. Please list financial institutions in which you currently (as of completing these form) own shares in the following table. 7 ‘Name of the Financial ‘Subscribed Shares owned Remarks institution Tn number | Share in the financial institution's total ‘subscribed capital (%)PATER! NheR 19h sain “National Bank of Ethiopia “+ Deseription of your past and current business activities in Ethiopia and abroad (if applicable) )_Cutrent shareholding or ownership in non-financial insti ‘Company itions/companies Amount of % of shareholding (in total | Remark shareholding shares of the company) Pest shareholding or ownership in a company (shares you owned in the past but had been re including financial institutions [ Company} Date of] Am \quished) of] % of sharchliing | Reason or] Remark ] name incorporation | shareholding | (in total shares of the termination of company) shareholding | ©) Borrowings (directly or indirectly) * P By 65 sk |e-3 stlog sz|2t.|/ S28]. ee | 222/32] 25/58 |f2| 22] 222| $22] ¢ eb | see) 22/ 28/22 | GBs) 28) 23! g288| 4 Zz 22s|Pe|¢s|/ae |g o/ 33) 528 B2a3 “Including all companies (09% or more owned by the applicant, the applicant's spouse and chien less Than 18 year. 1 kegal petson (only for influential shareholders in a bank), please complete the following table for the recent thee financial years (Please also attach audited financial statements) [Year Assets Liabilities | Net worth Remarks If you are new shareholder to the bank or existing shareholder planning (o increase your shareholding above hat you currently own, please provide details ofthe actual source(s) of funds that you, asa shareholder, would like t invest or use inthe acquisition of the shares in the bank.PREPRL Nhe k VIN ul © National Bank of Ethiopia ANNEX 2: PROPRIETY TEST QUESTIONNAIRE Please give yes or no answers for the following questions and if'your answer is “yes” please give particulars, Pull Name: (lofluential shareholder, director, chief executive officer, senior executive officer, hie intemal auditor, or chief risk andlor ‘compliance officer -Underline) Name of bank: 1. Have you or the legal person in which you were a director, chief executive officer, senior executive officer, or owner been charged or convicted of any criminal offence, particularly an offence relating to dishonesty or fraud, under any law whether in Ethiopia ot elsewhere? I'yes, give particulars 2. Have you or the legal person in which you were a director, chief executive officer, senior ‘executive officer, or owner ever been imposed with corrective actions or interventions by publi authority due to withholding information or submission of incorrect financial or other statements? yes, give particulars 3. Have you or the legal person in which you were a director, chief executive officer, senior 7 executive officer, or owner been refused approval by any fegulatory/supervisory body or Cc failed to comply with requirements of regulatory/supervisory body? Ifyes, give particulars 4. lave you over been in dlpate wih previous employers conceming fulfilment of position or o compliance witha code of conduct which has led tothe imposition of penalty under ‘employment la or ever been dismissed or requested to resign from any office of employment ot disciplinary measures imposed by trade or professions? Ifyes, give particulars 5. ave you been refised, wheter in Fiopia or elsewhere, te ight to erry on any trad, business or profession for which a specific eense, registration or other authority is required; lye, give particulars 6. Have you or the legal person in which you were a director, chief executive officer, senior executive officer, or owner be declared bankrupt whether in Ethiopia or elsewhere or have its assets been sequestrated because of bankruptey or foreclosed by a bank due to failure to repay a loan? Ityes, give particulars = 7. Have you or the legal person in which you were a director, chief executive officer, senior oO executive officer, oF owner been convicted of default on repayments of bank or other credits or tax payment? Iyes, give particularsPRTERL Nhe k AID sai "National Bank of Ethiopia 8, Have you or the legal person in which you were a director or chief executive officer, senior ‘executive officer, or owner been carrying non-performing loans or account been closed and not reinstated by any bank in line with relevant directives of the National Bank? If yes, give particulars —_ 9, Has your purchase of shares in a financial institution been funded of to be funded by another person or legal entity who is actually bankrupted or technically insolvent because of imesponsible or reckless management, fraud or illegal business practice? Ifyes, give particulars 10, Has your minimum net worth atthe time of acquisition of shares atleast greater than the shares acquired or to be acquired from a financial institution? tyes, give particulars if 11. Are you currently @ member of board of directors or chief executive officer in any of the financial = [~}_ [[] institutions? Ifyes, give particulars Declaration | am aware that under sub-article 6(b) of Article 58 of Banking Business Proclamation No. 592/2008, itis an offense to provide false or misleading statement. | certify that the information andlor statements given above are complete and accurate to the best of my knowledge, ‘and that there are no other facts relevant to this application of which the National Bank should be aware. I also undertake to inform the National Bank of any changes material tothe application. Name Signature Date _ IL x uw