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The National Bank of Ethiopia (NBE) has been
rejecting the appointment of Araya Gebregziabher as
chief of Wegagen Bank, thus leaving the private
commercial firm to remain the only such company
operating without a renewed license for the past 10
months.
Financial regulations of the country first issued in
1994 to be enforced by the central bank require a
financial firm to renew its operating license
between July 1st and September 30th of the business
year. Failure to secure a renewed license from NBE
may lead such firms to face severe penalties that
may include closure.
The last time Wegagen Bank, one of the nine private
commercial banks established by 20 founding
shareholders with a paid-up capital of 30 million
Br, renewed its operating license by NBE was for the
Ethiopian fiscal year 1998. A change in the chief
executive officer of the Bank has lead to the
current quagmire.
The Board of Directors of Wegagen Bank, chaired by
Wondwossen Kebede, has decided to appoint Araya as
president of the Bank. This was a position the
latter had held temporarily since September 2006,
following the departure of the Bank’s second
president, Kidane Nikodimos, in May the same year.
However, the regulatory authorities at NBE have
rejected Araya’s appointment on the ground that he
does not meet the criteria set by a directive
amended in June 2006.
According to this directive, the chief of a
financial institution should at least hold a first
degree, and is required to have 10 years of
managerial experience in the banking sector. Araya
fulfilled the criteria that referred to educational
credentials. However, his experience in the finance
industry falls short of the requirement, as he has
served Wegagen for eight and a half years.
A graduate of economics from Addis Abeba University
(AAU) in the mid-1980s, Araya joined Wegagen Bank a
year and half after its establishment in June 1997.
In the first four years, he had served the Bank,
being responsible for business development and
planning. He was promoted to a position of Vice
President in 2004, heading the support services of
the Bank. He has been an acting President for the
past 14 months, only waiting to be named as the
third chief of a Bank whose paid-up capital has now
increased to 151 million Br, as well as its
shareholders number, 360.
Araya’s rejection by authorities at NBE has far more
impact on the Bank’s operation. The central bank,
the sole authority to regulate all financial
establishments in the country, put conditions on the
renewal of Wegagen’s operating license to its
Directors’ ability to appoint a man at the helm that
meets its criterion. The Bank continues to do
business with its 33 branches across the country,
even without a renewed license.
Nevertheless, authorities at NBE are not religious
in enforcing these rules indiscriminately. Despite
the appointment of Abie Sanu to lead the Commercial
Bank of Ethiopia (CBE), in 2006, without meeting
similar requirements of the directive, authorities
at the central bank have not only accepted his
appointment as President of the state-owned bank,
they have also renewed CBE’s licenses.
The youngest chief of the 12 commercial banks in the
industry, Abie has seven years behind him in the
financial industry at the time of his appointment,
working for CBE as a Loan Officer first and Head of
the Small and Medium Scale Loans Division at CBE. He
graduated from AAU in Accounting, in 1999.
“This is a double standard at a play,” said a senior
financial expert. “Authorities’ failure to enforce
their directive is a source of serious weakness on
the part of NBE.”
Getahun Nana, acting director of the Supervision
Directorate at NBE, has declined to comment. Neither
did Fortune succeed in soliciting comment
from senior officials at Wegagen Bank, including
Araya.
However, Governor Teklewold Atnafu and Wondeson
Kebede, chairman of Wegagen Bank, have had a series
of meetings in order to resolve the issue, according
to reliable sources. The outcome of the discussion,
however, has yet to be disclosed.
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