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