The National Bank of Ethiopia (NBE) has issued Directive No. SBB/95/2025, introducing Basel II and III principles into the country’s regulatory framework for commercial banks. The directive extends capital adequacy requirements to include a wider range of risks and aligns supervisory practices with internationally recognised banking standards.

The regulation requires banks to calculate capital adequacy based on credit, market, and operational risks, replacing the previous system that primarily focused on credit exposures. According to the NBE, the directive is intended to strengthen risk assessment and improve capital management across the banking sector.

The minimum capital adequacy ratios have been set at 11 percent of total risk-weighted assets, with tier 1 and common equity tier 1 capital ratios at nine and seven percent respectively. The framework also introduces capital charges for market risks related to foreign exchange, equity, and interest rate fluctuations. Banks are required to meet full compliance by December 31, 2026.

The directive forms part of the NBE’s ongoing financial sector reform efforts, which include updating supervisory standards and enhancing regulatory consistency. The move follows Ethiopia’s continued engagement in modernising its financial system and gradual steps toward greater integration with international financial practices.