|
The Public Financial Enterprises Agency (PFEA), an
entity supervising state-owned financial
institutions, instructed the Commercial Bank of
Ethiopia (CBE) to reschedule loan payments for
defaulters that are still able to service their
debts.
The Bank, which has one billion Birr in
Non-Performing Loans (NPLs), was also told to
immediately foreclose properties of defaulters that
are not ready to pay their debts, and put those
assets on the auction bloc, sources disclosed.
“Banks are reluctant to foreclose and auction
properties of defaulters,” sources at the PFEA told
Fortune. “This will no longer continue.”
Eyob Tesfaye (PhD),
director general of the PFEA, made the decision
after the bank submitted its plan for recovering
defaulted loans to the Agency two weeks ago.
The three state-owned banks – CBE, Development Bank
of Ethiopia (DBE) and Construction and Business Bank
(CBB) – are trying to recover close to four billion
Birr in defaulted loans disbursed in the last 10
years. Of the three, DBE has the largest amount of
bad loans, totaling 2.5 bln Br. The CBB is the best
performing state bank in this category, with just
half a billion Birr in NPLs.
“These banks, especially DBE, are in danger as they
have a slim possibility of recovering these loans,”
an industry observer told Fortune.
The PFEA two weeks ago requested that the three
banks divulge the amount of bad loans they have, the
identities of the defaulters and their plans for
recovery. Though all have submitted what was
requested, the Agency has re-requested DBE to submit
another, claiming that the first was inadequate.
According to sources, DBE only disclosed 15 of its
30 defaulters.
“They cannot sit in an ivory tower; they should go
and recover public money, Eyob told Fortune.
“At the same time, the customers cannot munch the
best part of the meat and then walk away freely.”
Eyob, however, declined
to confirm or deny the amount of bad loans held by
the CBE or the instructions reportedly issued by his
office to the bank.
The CBE, which had NPLs totaling five per cent of
its portfolio two years ago, is currently struggling
to lower its NPLs down from 12pc.
“The Agency instructed the CBE to make a loan
reschedule agreement in accordance with the
directive of the National Bank of Ethiopia (NBE),” a
senior management member at the CBE told Fortune.
“It is a decision intended to safeguard the
government’s welfare by focusing on the recovery of
the loans.”
DBE, which requested to re-report its current
default situation, has a five per cent of its
portfolio in default. CBB, which has made fewer bad
loans, has not been given any orders from the
Agency, according to the source.
“DBE’s defaulters are few because it does not have
many customers given that it requires large
collateral like buildings and huge residences,” a
source at the Agency told Fortune.
|
