Tensions are rising between Ethiopia’s private commercial banks and the National Bank of Ethiopia (NBE) as regulators prepare to enforce mandatory mergers for lenders unable to meet a new minimum capital threshold of five billion Birr by June 2026.
The directive, first introduced by the NBE in April 2021, more than doubled the capital requirement for commercial banks, granting a five-year window for compliance. With less than a year remaining, the central bank says it is ready to directly intervene in the sector, consolidating banks that fail to meet the target.
Speaking at the Ethiopian Finance Forum, held last week at the Commercial Bank of Ethiopia (CBE) headquarters, NBE Vice Governor Solomon Desta confirmed that the regulator will not hesitate to act.
“The NBE will decide which banks merge and will enforce that decision. Banks should prepare for this regulatory action,” Desta told industry leaders, sparking a mix of unease and nervous laughter in the room.
Private bank executives, however, have voiced strong opposition to the move, insisting that mergers must be approached strategically, not as a quick fix mandated by the regulator.
“We have no plans to merge with another bank,” said a senior manager at a mid-sized lender, speaking anonymously. “We’re already working toward fulfilling the five billion Birr minimum capital requirement. Mergers are not inherently bad, but they require the right environment and proper preparation.” His institution currently holds over 3.5 billion Birr in paid-up capital.
The manager warned that forced mergers risk triggering operational conflicts and inefficiencies if banks are not aligned in strategy and culture. He also pointed to foreign investment as a more viable alternative for capital enhancement. “If local capital mobilization is insufficient, partnering with foreign investors could enhance competitiveness,” he added, referencing provisions in Ethiopia’s amended Banking Business Proclamation.
Industry experts share similar reservations. Wolde Bulto, president of Gadaa Bank — which has a three-year extension on the capital deadline due to its status as a newly formed institution — noted that while mergers remain an option, they are not currently on Gadaa’s agenda. “We’re focusing on building our capital and pursuing strategic partnerships, including potential foreign investments,” he said.
As the June 2026 deadline draws closer, the standoff underscores a deeper debate over the future of Ethiopia’s banking sector: whether reform should be driven by regulatory mandates or market-led strategies designed to strengthen long-term stability and competitiveness.
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