Final of Final Response To NBE's Examiners

National Bank of Ethiopia Draft Detail Examination Findings on NIB
Nib International Bank S.C.

Examination Findings Report (Draft)
Examination Cut-off Date: December 31, 2020
RISK/RMCF1
/CAMEL Findings Impact & Recommendation Response Commitment
I. Capital
Adequacy
1. There was no capital development Impact The Bank has accepted NBE examiners finding. Since the Bank has already
developed a capital
monitoring report; Weak control over capital
management policy that
development; requires quarterly review
of capital growth, the Bank
Recommendation:
has begun preparing the
Put in place such reporting required report (a sample
practice to properly manage report is attached).
internal capital growth;

2. There were discrepancies in Impact  Claim on banks The report will be audited
(Birr 916.75 million) and placement with other banks (Birr from now onwards before
computation of capital adequacy ratio Overstated capital adequacy
1,047.1 million) were reported to NBE in aggregate as Birr it has been submitted to
(RWA): some on balance sheet assets ratio; 1,963.85 million in line with the BSA format (code No. 2.2). NBE so as to enhance its
 Un-cleared effect foreign (Birr 13.65 million) and other asset quality in line with the
were considered as having zero Violation of NBE directives;
(Birr 1,336.97 million) were reported to NBE in aggregate under comment.
balance2; some on balance sheet Recommendation: code No. 8.5 as Birr 1,350.63 million.
3
assets were not accurately reflected ; Properly compute capital Errors were occurred while data were provided to NBE examiners
during their examination, i.e. loan and other asset balances were
adequacy ratio and put in place mistakenly overstated and understated by Birr 17.32 million
adequate control system to respectively. However, it has no impact on the overall capital to
risk weighted asset ratio since the two asset types have equal risk
verify it; weight, which is 100%.
3. Exposures to top twenty borrowers Impact The Bank always takes into consideration of the NBE’s Directives
1
Risk Management Control Functions
2
As at December 31, 2020, claims on banks and un-cleared effect foreign were Birr 916.75 million and Birr 13.65 million, respectively, but reported to NBE
with zero balance
3
Understated other loans by Birr 17.32 million which actually stood at Birr 30,266.92 million (as of December 31, 2020)
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accounted for 175.82% and 29.06% Deterioration in quality of large No. SBB/53/2012 which states that loans and advances granted to
a single borrower not to exceed 25% of the bank’s total capital.
of total capital and outstanding loans exposure may create negative
The maximum amount the bank granted for a single borrower as
respectively. Moreover, some of these impact on capital adequacy of the of December 31, 2020 was 17.67% of the bank’s total capital. As
such there is no any loan granted to a single borrower above the
credit facilities were adversely bank and exposure to
set limit. Moreover, there is no deviation from the set portfolio
classified during this examination, concentration risk; mix that is disclosed in our policy document. However, the
which indicates that the bank’s capital Recommendation concern of the Examiners about the concentration risk is
appreciated and noted. For the concerns reflected regarding the
is at risk. (See Annex Table 3); Give special attention to quality nine borrowers, we have given detailed explanation here below
of large exposures and properly under finding No.7.
manage credit concentration;
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4. Total capital stood at Birr 5,166.55 Impact Noted. The Bank in its 17th
shareholders extra ordinary
million and total risk weighted assets The decreasing trend of capital
meeting decided to raise its
were Birr 37,387.40 million. adequacy may limit the bank’s paid-up capital from Birr
2.2 billion to Birr 5 billion
Accordingly, Capital adequacy ratio risk absorbing capacity;
until June 2022.
stood at 13.82%, higher than the Recommendation Accordingly, the paid-up
minimum regulatory requirement of Maintain capital in proportion to capital has been increasing
from time to time which
8%, but lower than last year same expansion activities and undoubtedly enhances the
period of 14.90%; and peer average increasing risk exposure; risk absorbing capacity of
the Bank in parallel with
14.06%; asset growth.
In addition, as the Bank
has started to monitor its
capital development on
quarterly basis, such
declining trend in capital
in proportion to total risk
weighted asset would be
monitored in an ongoing
basis.
5. Prudential reports related to capital Impact Noted. The reports will be audited
from now onwards before
adequacy were not subject to audit; Weak control on capital &
they are submitted to NBE.
exposure to compliance risk;
Recommendation
Prudential reports should be
subject to internal audit
verification;
II. Asset
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Quality/Cre
dit Risk
Inherent 6. Review of 30 loan files with Impact
Credit Risk
outstanding balance of Birr Exposed to credit and a) Beaka General Business PLC.
10,629.88 million (34.48% of total operational risks, violation of 1. Audited Financial statement for the year ended June 30 ,2019
has already been presented and included in the credit analysis
loans & advance) indicated gross NBE directives and own during approval of T/L Br 14 million, renewal of the existing
weaknesses in credit administration policies& procedures; pre-shipment facility limit of Birr 270 million and OD facility
limit of Birr 50 million on 12/06/2020
(underwriting, monitoring and status Recommendation:
determination) as there were: Properly analyze and monitor 3. As mentioned in the CRS loan status of Beaka General
Business PLC. at UNB and BOA were under NPL. However,
1) Failure to collect and review recent loans and advance in line with
before approval of those loans we have collected letter from those
audited financial statements against NBE directives and own banks and found that status of the loans were regular.
NBE Directive No. SBB/69/2018; policies& procedures; 4. The actual ratio of Total Debt to Total Asset for 2018 & 2019
2) Failure to collect and review credit were 60% & 66% respectively instead of 100%. Cause of such
relatively high indebtedness was nature of the business (export
information against NBE directives
sector) that requires huge amount of borrowed money to hold
No. CRB/02/2019; sufficient quantity of stock for reasonable period of time and to
meet demand of foreign buyers.
3) Extending credit facilities to
a (6) Starting July, 2021
defaulted borrowers against NBE 6. Noted, It was due to extra time required by the borrower to
submit relevant documents as per the Bank’s requirement before
directives No. CRB/02/19;
expiry date of the facilities. However, the Bank is encouraging its
4) Extending loans to highly indebted borrowers and observing changes as they are presenting
documentations one month ahead of expiry date.
and loss making borrowers;
5) Granting loans and advance 8. Noted; however, all properties have been re-estimated on a (8) Starting July, 2021
29/09/20 and 22/06/21 respectively. In this regard the Bank re-
without making adequate credit
estimates all properties as per the schedule.
analysis;
b) Kerchanshe Trading PLC
6) Failure to renew overdraft and pre-
1. We have considered audited financial statement for the
shipment facilities on/before expiry analysis made between 2008 EC-2011EC. However, during
renewals of the facilities in November, 2020 we have used
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provisional financial statement since the document was under

dates; auditing to settle tax dues until the allowed period of December,
2020. The audited f/ statement has been collected in January, 2021
7) Inadequate collateral coverage
from the concerned auditor.
against the bank’s credit policy and Annex of under audit letter
3.We didn’t use CRS generated on August 21, 2020 instead the
procedure;
CRS considered for approval was generated on October 9 2020
8) Failure to timely re-estimate revealed that the facilities at BOA was under pass status;
collaterals against own policy and
4. Noted, nature of the business (export sector) that requires huge
procedure; amount of borrowed money to hold sufficient quantity of stock for
reasonable period of time and to meet demand of foreign buyers. b (6) Starting July, 2021
9) Failure to follow-up the
In this regard Debt to Asset ratio of the company reached 95%.
performance of the business; and
6. Noted, It was failure of the borrower to submit required
10)poor performance of overdraft
documents timely and to renew the facilities accordingly.
facilities;(See Annex 4) However, the Bank will avoid such discrepancies by requesting
borrowers to submit documentations one month ahead of expiry
date.
8. As per the comment the Building evidenced by LHC

No.AA000070700417F-2 was estimated on October 29, 2016.
However, we have recent estimation done on September 21, 2018
that is valid until September 20, 2021.
c) J.H Simex PLC

1. Noted to avoid such gap in the time ahead, the business has
been rescheduled considering previous year’s f/statements and
huge impact by COVID-19 at the time of rescheduling and based
on the revised circular of NBE that allows us to handle such cases
within limited period of time (until June 30, 2020) because of that
we have rushed out to reschedule the facility.
d) NEHAM International Business Plc.
3. Upon approval of the loan credit facilities at UB were in regular
status.
-Accrued interest balance as at December 31, 2020 was Birr
1,107,110 instead of 1,406,482. Hence based on the balance the
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loan should be classified as special mention.
7. The Bank’s credit policy & procedure allows granting loans

and advances at collateral deficit or even on clean basis, if the
credit history of the customer deserves to do so. Moreover e (6) Starting July, 2021
collateral coverage was 49% instead of 25%.
e) Mulege PLC
6. Noted, It was due to extra time required by the borrower to

submit relevant documents as per the Bank’s requirement before
expiry date of the facilities. However, the Bank is encouraging its
borrowers and observing changes as they are presenting
f) W.A Oil Factory & Distributor PLC.

3. The loan at our Bank was at substandard status in addition to
NPL in other banks. Therefore, it was necessary to approve
additional loan to rehabilitate the customer’s business.
7. The credit facility has been approved considering the

borrower’s capacity and credit history that is supported by our
Credit Policy & Procedure. In addition actual collateral coverage
was 79% instead of 4%.
g) Santa Maria Real Estates Hotel

Noted, as a fact the sector has severely affected by COVID-19
pandemic that results challenge for borrowers, despite the fact
that, the facilities were under regular status.
h) Yekatit paper converting PLC

2. Credit information has been collected on October, 22, 2018
under ref. 704751 that was below three months compared against
LAF date of 15 January, 2019 Annex
Noted; However, during approval of the guarantee on January 31,

2019 we had credit analysis done as mentioned herein above.
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i)Great city Hotel and Tourism PLC

Noted; for the inconsistency. It was due to clerical error.
However, both grades are bankable, in August, 2021
4. Noted, business line of the borrower (star rated hotel) has been
severely affected by political unrest and COVID-19. In addition
part of the liability forced the company considered as highly
indebted was payables to shareholders that were manageable.
Noted, it was clerical error when inputting the date on the
amendment contract following rescheduling (i.e loan repayment
start date was mentioned as Hidar 25, 2012 EC instead of Hidar j (6) Starting July, 2021
25, 2013EC), however, there is no issue on the basic loan contract
signed upon approval of the credit facility and to rectify the matter
by amending such contract.
j)Arfasa General Trading PLC
submit relevant documents as per the Bank’s requirement (before
expiry date of the facilities). However, the Bank is encouraging
its borrowers and observing changes as they are presenting
9. Noted, to avoid issues related to record keeping, however,
controlling staff has assigned and reporting stock status weekly to
the Branch. In addition the branch in collaboration with Corporate
Banking Department visits and follows the stock position of the
borrower periodically as supported by document.
K) Jemea Trading PLC.
4. Noted, nature of the business (export sector) that requires huge
amount of borrowed money to hold sufficient quantity of stock for
reasonable period of time and to meet demand of foreign buyers.
In this regard Debt to Asset ratio of the company reached 90%. k (6) Starting July, 2021
4. Noted, As per the audited financial statement of the year ended

July 7, 2020 the lion share of the cost was raw material of its
manufacturing business that has severely affected by shortage of
foreign currency, despite the fact that the loss has managed in
2020.
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9. Noted: the branch in collaboration with Corporate Banking

Department periodically visit and evaluate stock position of the
borrower, moreover stock list have been collected,
l) Steely R.M.I PLC
7.As per credit procedure of the Bank it is allowed to
exceptionally approve credit facilities against collateral that has
construction progress below 60% of the completion stage for
buildings take account of the quality of the building and loan
repayment capacity of borrower
1. Noted; despite information incorporated in our analysis refers
provisional f/ statement, the company has presented audited
financial statement for the year ended July 7, 2019 that has more
or less similar figures.
m) Rose Ethiopia PLC
The Bank has approved the rescheduling using the draft financial
statement until the auditing of the statement is completed and the n (6) Starting July, 2021
audited statement has collected subsequently. Moreover the
directive doesn’t compel banks to strictly use audited financial
statement upon rescheduling.
n) Degolo Commercial PLC
4. Noted, nature of the business (export sector) requires huge
amount of money to hold sufficient quantity of stock for
reasonable period of time to meet demand of buyers. Moreover, o (6) Starting July, 2021
In this regard Debt to Asset ratio of the company reached 97%.
documentations one month ahead of expiry date. Noted,
however, the OD utilization of the borrower has improved
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subsequently
o) Santamaria Construction PLC
submit relevant documents as per the Bank’s requirement (before p (6) Starting July, 2021
p) Desalegn G/Michael Buta
1. Noted; f/statement for the previous year was audited and
provisional supported by under audit letter from the auditor upon q (6) Starting July, 2021
approval of the facilities on December 11, 2020 since the
statement was under audit that has presented subsequently.
4. Noted, nature of the business (export sector) requires huge
amount of money to hold sufficient quantity of stock for
reasonable period of time and to meet demand of buyers. r (6) Starting July, 2021
q) Eney Investment PLC.
Noted, for CRS
r) Cabey PLC
s) Enock PLC
7. Outstanding balance of the credit facility was Birr
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50,182,076.50 that is by far below the stock amount of Birr

78,366,091.12
t) Ergendo Trading Ind. PLC
Noted, the insurance coverage has amended subsequently
7. Improper loan classification: due Impact i. Beaeka General:
-Noted. The facilities were renewed after their expiry dates due to
to improper follow up and weak Failure to determine inherent
delay in fulfillment of required documentations from the
repayments, loans of nine (9) credit risk and violation of NBE customer’s side. However, we appreciate the concern of the
examiners and the bank will exert its maximum effort to make
customers, with outstanding balance Directive;
customers bring their required documents prior to expiry dates.
of Birr 3,221.56 million, were Recommendation: -Recent Audited financial statement was presented and reviewed
reclassified from active to non- Determine accurate status of by the Bank while renewing the credit facilities.
loans & advances as per NBE - The maximum amount of OD account shown is on October 01,
performing, making the NPLs Birr 2020 which had a balance of Birr 105,604,333.29 and this amount
directives;
3,676.77 million [615.27+3,061.5 or above the limit is interest accrued and this balance categorizes the
credit facility under Substandard category specifically on that
12.46%] of total portfolio (See period. However, the balance of this OD facility limit on
Annex 6 and 7) December 31, 2020 was reduced to Birr 104,099,605.23 whose
interest amount is accrued for 84 days making the loan under
Special Mention Status on same date.
-Therefore, all other credit facilities statuses remain as they were.
ii. Kerchanshe trading:
- Noted. The facilities were renewed after their expiry dates due to
customer’s side. However, we appreciate the concern of the
-Renewal date of the facilities was in October 2020 and thus the
customer brought under Auditor letter since reasonable time is
required to generate audited financial statement which may extend
sometimes up to six months.
-The OD facility limit of Birr 50 million showed credit balance
twice within the year above the minimum requirement for
crediting OD account; i.e. on October 10, 2020 when the OD
account was at Nifas Silek Branch and on December 25, 2020
after the customer’s loan file was transferred to Bisrate Gebriel
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Branch.
-The maximum amount of OD account shown is on July 31, 2020
which had a balance of Birr 51,344,931.28 and this amount above
the limit is interest accrued and this balance categorizes the credit
facility under Special Mention Status. Moreover, the balance of
this OD facility limit on December 31, 2020 was Birr
50,571,249.66 whose interest amount is accrued only for 33 days
making the loan on Special Mention Status on same date.
iii. NEHAM International:
-The accrued interest amount of Birr 1,406,482 is the amount of
accrued interest shown at the time of generating the loan
statement which is three months after December 31, 2020.
However, the actual unpaid accrued interest amount on December
31, 2020 was Birr 1,107,109.59. This amount shall make the loan
under Special Mention category instead of reclassifying to
Substandard status.
iv. Rose Ethiopia:
Regarding this credit facility, it was rescheduled in February 2020
and the repayment schedule is set to be Birr 20,246,449 on semi-
annual basis and the first repayment date starts in August 2020.
Therefore, the arrears amount shown on December 31, 2020 was
Birr 15,746,446 which was lower than the periodic repayment
amount and accordingly it should be classified as special mention.
v. Degolo Commercial:
-Noted. The customer has shown credit balance on October 06,
2020 and this is only once within the year and hence, the customer
has fulfilled the minimum requirement for crediting an OD
account.
- Noted. The customer’s OD balance had amount exceeding its
approved limit during the period from February 2020 up to
September 2020 and this amount was accrued interest but the
customer paid these accrued interest amounts in subsequent
months and also the OD facility was reported below its limit
during the period from October 2020 up to December 31, 2020.
Therefore, the interest amounts were accrued for less than 90 days
making them to fall at regular status.
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-The two pre-shipment credit facilities were renewed on

December 31, 2020 and the outstanding balances of these two
facilities were below their limit on this reporting date. As a result,
they fell on Pass category.
-Noted. The status of the three term loans was Doubtful on
December 17, 2020’s as shown on LAF No. CBD/634/20
prepared for amalgamating and rescheduling these credit facilities.
However, rescheduling was approved on December 25, 2020. At
the end of December 2020 we classified the loan as Pass due to
the fact that payments were in process of collection.
vi. Desalagne G.Mikael:
-The customer presented under audit letter from external auditor
and provisional financial statements for fiscal year 2020 before
approving fresh facilities and renewal of existing credit facilities.
-Regarding Pre-shipment4 (Br. 25.11 million) which was
approved in April 2020 but whose disbursement made after four
months without obtaining re-approval decision is due to the
following reason:
- The credit facility has a revolving nature which shall be renewed
every six month. Therefore, all types of credit facilities that have
revolving nature do not require re-approval whether the customer
has either used or not the facility until its maturity period.
-Regarding the OD facility, the intention of the Bank was not to
credit the OD account using another credit facility rather the pre-
shipment facility was approved for Non-ECX items which shall
be disbursed in the customer’s OD account so that the fund will be
used to purchase the goods and the sales proceeds are also
expected to be channelled through our Bank using this same OD
account. For instance, the OD account had showed credit balance
from own source on 18/01/2020. This shows that the customer’s
ability to credit the OD account from own source.
-Regarding Pre-shipment1 (Br. 25 million), the accrued interest
amount of Birr 894,985.16 is the amount of accrued interest
shown at the time of generating the loan statement which is three
months after December 31, 2020. However, the actual unpaid
accrued interest amount on December 31, 2020 was Birr 338,847.
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This amount shall not make the loan under NPLs.

-Similarly, the accrued interest amount of Birr 523,571.94 on Pre-
shipment2 (Br. 15 million) is the amount of accrued interest
shown at the time of generating the loan statement which is three
months after December 31, 2020. Rather the accrued interest
amount for this facility was Birr 198,165 which doesn’t make the
loan at NPLs category.
-Accordingly, all other credit facilities status would remain as
they were.
vii. Cabey:
-Regarding the OD facility limit of Birr 50 million, the customer
has fulfilled the Bank’s and NBE’s minimum requirement for
crediting the OD account at least once in a year. However, the
Bank appreciates the concern of the examiners and advises the
customer to improve its OD utilization.
-On OD facility limit of Birr 122 million, the OD statement has
clearly shown that the customer has credited the facility on June
15, 2020 from its own source.
-As a result, all the other facilities status remains as they were.
viii. Zeru G.Libanos:
- Noted. The facility was renewed after its expiry date due to
customer’s side. However, we appreciate the concern of the
- Arrears amount of Birr 3,778,992 stated for Term Loan 1 was
not correct rather the correct arrears amount was Birr
1,252,841.00 which is exactly one repayment amount that has
lagged behind since November 08, 2020. Thus, this arrears
amount makes the loan to remain unpaid for 53 days; i.e. Special
Mention status on December 31, 2020.
-Thus, there is no need to re-classify the status of other facilities

to substandard in connection with the mentioned credit facility.
ix. Ergendo Trading P.L.C:
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-The company is a long-time customer of the Bank and has built

positive credit history that can be seen from its current credit
exposure of Birr 192 million and has so far settled 23 term loans,
two overdrawal facilities and one merchandise loan totaling Birr
106.5 million.
The possibility of the company’s loan to be non-performing is
very remote. Because of their good repayment habit, the company
and its general manager have long years’ experience in the
business, and interpersonal quality is dependable.
As mentioned that Birr 20 million has credited to the account,
however, the credit balance was registered from the borrowers
own source.
-Therefore, all other credit facilities status remains intact.
8. Loan loss reserve: The bank held Impact
-As we have clearly stated our responses under finding No. 7, we
loan loss provisions of Birr 558.77 May inflate income and capital
have classified all loans and advances in line with the NBE’s
million (15.20% of NPLs, including of the bank; violation of NBE Directives No. SBB/69/2018 and adequate provisions have been
held.
Birr 3,061.50 million newly directives;
reclassified loans by NBE Recommendation:
Examiners). Additional provision of Ensure that all loans and
Birr 204.97 million is required for advances are properly classified
newly re-classified loans and and adequate provisions are held
advances. (See Annex 7); as per NBE directives;
9. Guarantee Issuance and Impact The Bank follows similar procedure being done for approval of
Management: Weak internal control; exposure loans and advances during issuance and monitoring of guarantee
There were weak management and facilities.
control over issuance of guarantee to financial loss and reputational Noted; all the basic information upon approval of the guarantee
due to the following factors: risk; were incorporated in the LAF. Moreover, during approval of
 there was practice of issuing the guarantee on January 31, 2019 we had credit analysis
guarantees without making credit Recommendation done as mentioned herein above.
worthiness analysis against own Strengthen internal control;
The risk embeds with issuance of guarantee facilities compared
policy and procedures4; to granting of loans and advances are minimal. However,
4
Eg. Yekatit Paper Converting PLC
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 As at end of December 2020, the outstanding balance of the facilities is below the capacity of
outstanding amount of issued the Bank that could have issued.
guarantee was birr 896.23 million,
which accounted 2.91% and 17.35% Strong controlling mechanism has been established by the Bank,
of total loans and capital of the bank; however, some staff members from their personal interest
 Birr 10.51 million forged guarantees were found to be involved in fraudulent activities. Following
were issued since previous onsite such activities the Bank has been taking appropriate
examination; disciplinary measures to the extent of terminating
 The bank has paid birr 27.905 million employment contracts.
guarantee claims since previous
onsite examination; there was also Out of the claimed amount settled by the Bank all have been
birr 4.6 million claimed guarantee collected except Birr 5.4 million, which is under process for
under litigation; collection.
 There were repeated complaints on the
bank as it was not paying guarantee Noted, there were some complaints from beneficiaries as
claims in line with the agreed mentioned. However, all outstanding claims except the one
contracts; and that is under litigation have been settled by the Bank and
 The bank was banned6from issuing subsequently collected from clients.
new guarantee due to its weak
management and control practice  Noted; the Bank has amended its credit procedure that led it
over issued guarantees and failure to
for delay in settlement of claims and currently we are settling
settle claims on same;
all claims upon receipt.
10. Credit Concentration: There were Impact
relatively high concentration risk Exposed to concentration risk;
due to the following factors: violation of own limits;
1) The highest share of credit Recommendation
1. The highest concentration of the Bank’s portfolio for DTS 1) Starting from July 2021.
portfolio (29.28%) was held by Properly manage concentration sector is within the approved limit of 20% instead of 29.28%,
Domestic Trade & Service risk; comply with own limits; however, concentration is higher than the limit of 15% for
building and construction. In this regard the Bank give due
followed by Building and consideration for the issue and manage the risk within the
7
Construction (18.1% ); portfolio limit.
5
Of which birr 12.01 million was recovered from defaulting customers
6
On Hidar 7, 2013 E.C, though the ban was later lifted in March 2021
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2) Product-wise, the highest share

goes to term loans (77.2%)
against internal limit of 72%, 2. The Bank’s internal limit doesn’t restrict ratio of term loan to
be 72%, instead the Bank prefers the highest amount of
followed by Overdraft facility
portfolio goes to term loans that helps to improve asset
(11.17%); quality of loans and advances through scheduled periodic 3)The Bank is committed
3) In view of term, the highest installments. to focus on approval of
short and medium credit
share was held by long term loan 3. Following the existing challenges of COVID-19 pandemic, facilities (starting from
(42.2%) against NBE’s slowdown in business performance and following temporary July 2021)
amendments given by NBE directive No. SBB/69/2018 loan
maximum limit of 20% set under tenure of significant amount of loans and advances has been
directives No. SBB/69/2018, amended (rescheduled) to be paid in relatively long period of
time. However, the Bank continues its effort of respecting
followed by short term loans the set ratio.
(25.17%8); and
4) Top twenty borrowers held
4. Noted, those top twenty borrowers are engaged in
175.82% of the bank’s total worthwhile business lines justified by loan repayment
capacity, though, the Bank works to reduce such
capital and 29.06% of total loans
concentrations by diversifying its credit facilities to various
& advances; (See Annex 3 and customers. Regarding regulatory requirements we didn’t
8) observe any deviations.
7
Against internal limit of 15%
8
Against NBE’s minimum limit of 40%
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11. Related party transactions: The Impact The Bank holds related parties information in excel sheet since Effective second quarter of
the Bank’s existing Core Banking System doesn’t support to 2021/22 plan period
bank did not identify related party Violation of NBE Directive;
extract the required data. However, the new Core banking
while conducting transaction with Recommendation reimplementation project (R10 - R20) will enable the Bank for
capturing such information.
its customers; related parties Comply with the Directive;
database was not established against
article 9 of NBE Directive No.
SBB/53/2012;
12. Investments: Impact: 1) Noted. However, Investment in Zebidar Hulegeb Industrial All equity investment
S.co (Jemar) and Gineb Gebeya trade share co were made on decisions will be reported
1) Equity investment decisions Exposed to operational risk and 20/06/2012and 14/09/2015 respectively, which is before the from now onwards in line
effective date of NBE directive No. SBB/65/17.
were not reported to NBE Violation of NBE Directive; with the Directive.
against article 5.1 of the Recommendation: 2) The Bank has accepted NBE examiners finding.
The missing elements will
NBE Directive No. Comply with NBE Directive be incorporated in the
SBB/65/179; guideline as per the
recommendation latest by
2) Investment guideline of the September 30, 2021.
bank was incomprehensive10
against NBE Directive No.
SBB/65/2017;
13. Placement with other Banks: Impact: 1. The reason is that most of the FCY inflows and outflows are The Bank will prepare the
in USD. However, the comment is well noted and the Bank respective procedure up to
1) Placement with foreign banks Inadequate management of risks will work on diversifying our currency holdings with September 30, 2021.
correspondent banks.
was not diversified in terms of related to placement with other
2. There is a policy governing administration of placement with
currency as more than 90.8% banks ; other bank in our IBO policy and Procedure manual.
However, the Bank will prepare the respective procedure as
was held in USD; and Recommendation: recommended.
2) Absence of procedures for Put in place such policies and
administration of placement procedure
9
For instance, Zebidar Hulegeb Industrial S.co (Jemar) and Gineb Gebeya trade share co.
10
Reporting procedures and stress testing were not addressed.
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with other bank.

14. Sundry Debtors and Un-Cleared Impact The Bank has accepted NBE examiners finding; and enough Age analysis will be
provision will be held accordingly. regularly conducted from
Effects: Sundry debtors and un- overstated income and violation
now onwards as per the
cleared effects (local and foreign) of NBE Directive; recommendation quarterly
basis.
which were outstanding for more Recommendation
than 90 days stood at Birr 39.22 Conduct age analysis regularly
million, out of which Birr 34.69 and hold adequate provision in
million were sundry debtors. The line with NBE directive;
bank held provision of Birr 29.78
million for sundry debtors.
Whereas, the age analysis of these
assets suggested that additional
provisions of Birr 1.1 million is
required in accordance with article
10(5) of NBE Directives No
SBB/69/2018. In addition, the bank
did not perform quarterly age
analysis on regular basis and hold
adequate provisioning for long
outstanding items (more than 90
days) against NBE directives
NoSBB/69/2018 ;( See Annex 10 ).
15. Restructured Loans: Inadequate Impact 1. The bank did not restructure any loan by capitalizing accrued
administration & follow-up practice Weak credit risk administration interest with its principal balance during the stated period. But
due to COVID-19 impact, we have renegotiated loans as per
of restructured loans due to the and monitoring; deterioration of
direction given by the NBE by holding accrued interest amounts
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following factors: credit quality; violation of NBE in a receivable account from one up to six months. However,
1) Between October 01, 2019 & directive and own policies and we have collected these interest amounts fully within the given
period.
December 31, 2020 the bank procedures;
rescheduled loan of 1,030 Recommendation
2. As it is disclosed on the NBE’s findings, 38 borrowers were
borrowers with an outstanding Strengthen credit administration
under NPLs category as of December 31, 2020. The Bank
balance of Birr 7,451.98 million and follow-up; comply with NBE
assumed things or situations would become normal when we
which was 24.17% of the total directive and own policy and restructured the loans. However, some borrowers especially
portfolio. Eight (8) of these loan procedure ; those who are found in areas where there is political instability
accounts were rescheduled are not running their business as we assumed. Thus, we will
through capitalizing the continue to find other solutions for resolving problems of these
accumulated past due interest borrowers to make sure their loans become healthy rather than
foreclosing their properties. There is subsequent change in
and ninety six (96) of them were
status of these 33 loan accounts as of March 31, 2020 and June
rescheduled by partially
30, 2021.
capitalizing accrued interests
- In order to reclassify those accounts, we need to have
against own policies and list of borrowers.
procedures; - The fifteen borrowers downgraded from active to NPLs
2) Out of the total restructured by the NBE’s examiners were restructured as per the direction
loans, loans of thirty eight (38) given by the NBE for those businesses affected by COVID-19.
borrowers with outstanding Hence, there is no need to re-classify or downgrade these loans
balance of Birr 59.85 million to a non-performing status. All accrued interest amounts were
collected fully in subsequent months.
were still under NPLs category,
3. With respect to restructured loans, the major problems were
indicating weak administration
emanated from different socio-economic and political situations
and follow-up; eight (8) loan
prevailing in the country, which is beyond the required
accounts with outstanding administration and follow-up
balance of Birr 18.79 million 4. We have a record centrally at head office in spreadsheet.
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were downgraded from active to However, we are working to avail such information with
non-performing loans. systems support in the future.

5. Slow declining in the level of loan balances of restructured
Moreover, fifteen (15) non-
loans is related to the current overall business slack down and
performing loan accounts11 were
existence of political instability in different parts of the country.
categorized as active loan
Additionally, most of the loans restructured in the previous
without collecting all past due
financial year had semi-annual and annual repayment 4)Effective from Second
interest during rescheduling modalities that were not expected to make frequent repayments quarter of the plan
against article 6.1.6 of NBE period 2021/22
during the review period and hence, the balance of these loans
directive No SBB/69/2018; exhibited slow declining trend.
3) Weak follow-up over
rescheduled loans & advances;
4) No centralized record of
restructured loans & advances;
and
5) The outstanding balance of
restructured loans at time of
restructuring and as of
December 31, 2020 were Birr
7,494.22 million and Birr
7,451.98 million, respectively
(declined by only 0.56%), which
11
Alem Bahiru, Alemayehu Merid and or Yimegfor Abi, Ashema Bedada Buli, Aster Tadesse Shume, Atnafu Family Trading PLC, Yalemzeref Tadesse,
Yehmedar Family School Plc, Yemisrach Mulatu, Yeshi Kebede, Yeshiwork Yimer, Yewondosen Daniel H/Mariam, Yichalal Shoes And Leather Plc,
Yiftusera Abebe Awoke, Yikummengist Nega and Yinem Gen.Trading & Realestae PLC.
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indicated that there was weak

credit administration and follow-
up practice over restructured
loan;
16. Acquired/Foreclosed Properties: Impact: 16(1) Accepted
1) Absence of centralized database Exposed to credit and However, the Bank has developed the Acquired Property
Management system with the internal capacity and implemented
to control and follow-up operational risks, Violation of starting from the 3rd quarter of the financial year 2020/21,
acquired and foreclosed assets; NBE Directive;
16(2)
2) Failure to accurately report Recommendation:
-Our Bank has accurately reported information on foreclosed and
foreclosed properties12 to NBE Strengthen control and follow up sold properties as per the NBE’s directives No. SBB/69/2018
article 2.12.1. which requires reporting of foreclosed and sold
against Directive No. over acquired assets and properties during 18 months before the reporting date. Therefore,
SBB/69/2018; and Comply with NBE Directive; as per the list of customers shown, except Fantahun Moges, the
rest of customers are excluded from the report since their date of 3) all effort will be exerted
3) Acquired Assets of Birr 34.36 foreclosure doesn’t fall into the 18 months’ time period. during the current budget
were kept for long period year.
without being foreclosed; 3) Noted, but with regard to disposing of acquired properties, bids
are floated at least once in a quarter.
12
Fantahun Moges, Melaku Yazezew, Getachew Sheferaw, Temechew Bekele, Sebisebe Timerga and G.H.B Pasta & Floor Factory Plc were missing
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17. Fixed Assets: Impact 1) Finding is noted. However, it was happened due late delivery All effort will be exerted
of the tags. to solve such discrepancies
1) Some fixed assets were not Violation of own
during the 1st quarter.
2) The finding for personal ledger records is noted.
registered and given tag policy/procedure and exposed to
Fixed asset counts are made periodically at the end of every
number against own policy and operational risk; year.
procedure; Recommendation Annex: Annual inventory count sheet is attached for

reference.
2) Failure to maintain personal Comply with own policy
3) The Bank has developed the Fixed Asset Management
/procedure; system with the internal capacity and implemented starting
fixed asset ledgers; did not
from the 3rd quarter of the financial year 2020/21,
conduct annual fixed asset
count/inventory against own
policy and procedure; and
3) No centralized fixed asset
management system; &
practice;
Quality of 18. Board13 did not review credit risk Impact

Credit Risk The Board reviews and discusses the Bank’s credit risk
assessment reports; Inadequate board oversight and assessment reports as part of its regular quarterly performance
Management
review meetings.
System exposure to credit risk;
Recommendation
Strengthen board oversight;
19. The loan review function was not in Impact The loan review function
There were some contributory factors like COVID 19 and will continue reviewing all
line with article 4 of the NBE Weak credit risk oversight and political instability to assess loan files which inhibited to review loans and advances under
all loans and advances under NPLs as per NBE Directives. As a
Directive No. SBB/69/2018 as all violation of NBE Directive; NPLs as per the dictates of
result such review was made on materiality basis.
NBE Directive No.
loans & advances under NPLs were Recommendation
SBB/69/2018 as used to be
not reviewed; Comply NBE Directive; done prior to the
mentioned problems like
13
4th quarter of FY 2019/20 and 1st , 2nd quarter of FY 2020/21
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COVID 19.
20. Credit risk assessment report was Impact Noted. Effective from 1st quarter
Our assessment reports have incorporated all the factors of 2021/22 budget year.
not comprehensive as it did not Inadequate credit risk
mentioned under finding together with other NPLs loans.
cover counter party loans, assessment, weak determination
However, separate heading as counter party loans, renegotiated
renegotiated loans, loans under of inherent credit risks; loans, loans under recovery and exceptionally approved loans was
recovery and exceptionally approved Recommendation not stipulated in reports and we will address in same manner in
loans; Ensure comprehensiveness of our upcoming reports.
credit risk assessment report;
21. Failure to classify loans and Impact
All loans and advances are classified in a proper manner and
advances in their appropriate status Weak inherent credit risk adequate provision is held on timely basis in line with the NBE’s
Directives No. SBB/69/2018.
against NBE Directive which determination; exposure to
resulted in under estimation of credit regulatory risk;
risk and provisioning; Recommendation
Ensure that all loans & advances
are properly reviewed and
classified and adequate provision
is held as per NBE Directive;
22. The bank has revised and Impact:
implemented lending interest rate Violation of NBE directives;
prior to notifying the NBE as per Recommendation:
NBE Directives No. Comply with regulatory
NBE/INT/12/2017; requirements;
23. Failure to properly monitor the Impact: The Bank shall focus
14
Noted; The Bank has been working to comply as per the directive, (concentrate) on extending
share of short, medium, and long Exposed to credit risk; violation however, due to impact of COVID-19 pandemic some loans were short and medium term
The share of short, medium and long term loan from total outstanding loans and advances were 25.17%, 32.63% & 42.20%, respectively against article 5 &
14
6 of the NBE Directive No.SBB/69/2018.
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term outstanding loans; of NBE directives; rescheduled that have affected our effort. credit facilities starting
from July 2021.
Recommendation:
Abide NBE directives;
24. Inadequate credit origination, Impact: During the current plan
Noted, however, the Bank has well-articulated credit policy and period 2021/22.
administration and monitoring Exposed to credit and regulatory procedure that urges all operating staff to consider risks related to
credit facilities up on origination and follow-up of the facilities
practices; risks; Recommendation:
subsequently. Moreover, the Bank will further improve its credit
Monitor and administer credit originating, administrating and monitoring process.
facility Properly;
25. Inadequate credit MIS: the loan Impact As part of the T24 R20 Re-
The loan statement shows approved amount as well as loan status, implementation project,
statement did not show approved Weak information base for credit however when the loan is overdue (they are few in number) the loan statement is now
approved amount is required to be checked in another screen
loan amount and loan status; risk management; being handled to be more
besides to the loan statement. Currently the bank is updating its
core banking system and the issue will be solved. informative and more
the system did not show accurate Recommendation
The system produces consolidated reports however, our system is descriptive. To be
loan status & amount due; loan Strengthen credit MIS; highly conservative (it downgrades loans and advances to the next completed by end of
asset classification status) despite left over balance is even in October, 2021
classifications & provisions were
decimal numbers counting when that penny is due. To manage
computed manually and the system such issues we manually classify our assets.
do not produce consolidated reports; Accepted the finding that the loan statement does not include the
mentioned fields in the T24 R10 CBS.
26. There were no comprehensive15 Impact Noted September 30, 2021
We have large exposure limit as justified in the credit procedure
credit risk tolerance limits; Inadequate credit concentration (Loan portfolio Manual). As per the procedure the risk tolerance
limit has set based on economic sector, geographic area, loan
risk management;
maturity, and credit product, single and related party and off
Recommendation balance sheet exposures.
Set comprehensive credit risk But, the Bank is currently in the process of enhancing the existing
risk appetite statement through reviewing the Bank’s overall risk
limits;
limits. In doing so limits will be set for loans to assets, loan to
total capital and large exposure.
27. Collaterals were not centrally Impact commencing from second
Noted, The Bank approves loans and advances centrally either at quarter of the plan period
15
No limit for loans to assets, loan to total capital and large exposure
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recorded at head office level; Inadequate collateral Head Office or District Offices, however, account opening and 2021/22
collateral registrations are managed at branch level. Accordingly,
administration; the updated database is also managed at the Bank’s Credit
Portfolio Management and Workout Department.
Recommendation:
Establish central database for The Bank shall consider establishing central database for
collateral as per your recommendation.
collaterals;
28. There were recurring audit findings Impact
in relation to credit underwriting and Exposure to operational and
administration: credit risks; violation of NBE  Noted, Majority of the identified uncollected fees and
charges were collected and the remaining few were in the
 failure to collect different fees & Directives and own policy and process of collection. In view of that, the Bank has been
taking appropriate measures on staff involved in such
charges16; procedure  Commencing from 2nd
violations.
 Noted, we are under way of establishing central system that quarter of 2021/22 FY.
 failure to renew insurance policy Recommendation
are capable of sending alert messages and to manage  Starting July, 2021
on/before expiry date; Strengthen internal process & centrally;  Starting July, 2021
 The Bank has strong stand of collecting credit information  Starting July, 2021
 failure to collect and review credit controlling system; comply with and will further strengthen the practice;
information; own policy and procedures  Noted; credit risk rating is one of the requirements by the The Bank is also
Bank and incorporated in our credit procedure to apply committed to finalize and
 absence of credit risk rating analysis; during approval of credit facilities. Therefore, such practice
implement the guide line
will be strengthen;
 absence of loan contract during  Noted; The Bank has separate amendment contract format on disciplinary measures
being used upon rescheduling and we will strengthen signing related to repetitive audit
rescheduling of loans & advance; findings on or before
of such contracts;
 issued guarantee without LAF;  It is not the practice of the Bank, however, some branch August 31, 2021.
managers were involved in issuance of such guarantees
 absence of tax clearance; and illegally and appropriate measures have been taken on those
staff;
 Absence of pledge contract;  Tax clearance is one of the priority given documents and the
Bank collects such documents before providing any credit
facilities
 The bank disburses loans and advances and issues guarantees
after the contractual agreement is concluded.
III. Quality of
Risk
16
Stamp duty charges, loan processing fees, collateral estimation fees, loan transfer fees, credit information fees and guarantee commissions
Page 25 of 108
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Managemen
t/Risk
Managemen
t Control
Functions
Operational 29. There were missing, unrevised and Impact Noted
Management Exposure to operational risks; 
All missing, unrevised and draft policies and procedures will
draft operational policies and be developed, revised and finalized latest till the end of
procedures; inadequate MIS; September 2021.  The Bank is committed
Recommendations
 All unrevised policies and procedures will be revised latest by
Strengthen internal control to include all sensitive
inadequate board and management end of August 2021.
 There exists defined scope of work for Risk & Compliance areas of activities in the
oversight; limited scope of internal systems and operations
Risk & Compliance and
Management and Internal Audit functions.
audit and risk & compliance management; Internal Audit scope
 All key positions (those were identified as vacant during the during the plan period
management functions; existence of 2020/21.
examination period) were filled.
key vacant posts; failure to timely Efforts are being made to rectify findings related to IT by
rectify/address internal audit executing various IT related projects like upgrading the existing
findings and NBE concerns; core banking system, implementation and acquisition of hard
existence of various IT related ware infrastructures, etc.
findings; violations of NBE

directives and own policies and
procedures, etc.
Board 30. The board bylaw (TOR) was not Impact The newly elected Board is currently reviewing and revising the End of 1st quarter of the
Oversight existing board bylaw. However, the Bank’s Board operates with current plan period.
revised in line with NBE directives Impaired quality and in and as per the provisions, duties, responsibilities, and mandates
given to it by the Commercial Code of Ethiopia, NBE Corporate
No. SBB/76/2020 and SBB/71/2019; effectiveness of board oversight;
Governance and other relevant directives, and the Bank’s
It was also not comprehensive as it Recommendation Memorandum of Association and Articles of Association. It
should also be noted that the listed Board responsibilities are still
did not state the following roles as Revise the board bylaws to part of the Board’s endeavors as stated above and will be
specifically stated and addressed during the ongoing revision.
the board’s responsibility: ensure its comprehensiveness;
 Ensuring capital adequacy on
an ongoing basis;
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 Reviewing and approving code

of conduct for the board and
senior management;
 Ensuring that all
departments/business lines have
prepared risk register;
 Proposing external auditors and
their service fees; and
 Ensuring that appropriate and
timely actions were taken to
address supervisory concerns;
following up implementations
of NBE’s, external & internal
auditors’ as well as risk &
compliance functions’
recommendations;
31. The board was not functioning as Impact  The Board conducts its regular supervisory and oversight 1st quarter of the FY
roles during each budget year as per the mandates, duties, 2021/22
per its bylaws (TOR): Weak board oversight; impaired responsibilities and obligations attached to it in line with but
not limited to the relevant NBE directives, Bank’s AOA &
 Did not prepare its own action proper implementation of
MOA, own Bylaws etc. However, the preparation of action
plan; strategic plan; plan is well noted and will be addressed effective the
2021/22 FY.
 Did not ensure existence of Recommendation  The Board has approved and implemented succession
Strengthen board oversight; planning policy document and it is being used by the Bank.
effective management
 Please refer to the first bullet.
succession plan;  The Board reviews the performance of its subcommittees as
part of the quarterly overall performance review evaluation
 Did not review and approve its meeting. Please note that respective subcommittees review
sub-committees’ annual action reports designated to their areas and present same to the full
Page 27 of 108
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plan; board during such overall performance review meetings.

 Updates and briefings are given whenever there are issues
 Did not regularly review its that require the consent and attention of the Board.
sub-committees’ performance;  TOR revision and approval will be part of the activities to be
covered by the newly approved Board during the 1 st quarter.
 Absence of updating and However, please note that the Board has established more
subcommittees than the requirements set in the NBE
briefings practices during board corporate governance.
The office of the Board communicates relevant resolutions to the
meetings;
office of the president subsequent to each Board meeting and also
 Did not define its sub- follows on the execution of same by the management.
committees’ roles and

responsibilities17; and
 There was no board’s
resolutions and
recommendations
implementation plan tracker
(resolution action plan);
32. The board of directors did not Impact
Following the comments given during the previous NBE onsite
establish formal description of Violation of NBE directives; examination the Board has clearly defined matters specifically
reserved for its decision against article 10.5.1 of NBE directives
matters specifically reserved for its inadequate board oversight;
No. SBB/71/2019
decision against article 10.5.1 of Recommendation
Annex
NBE directives No. SBB/71/2019; Comply with NBE directives;
33. The board did not put in place clear Impact The Board has approved and implemented a Share Administration
Policy document and ensured that the management prepares and
policy and procedures for Violation of NBE directives; implements a procedure for same. This policy and procedure
documents also prescribe what the relationship between the Bank
shareholders’ relation with the bank inadequate board oversight;
and its shareholders should be like in addition to the routine share
against article 10.4.16 of NBE Recommendation management issue.
directives No. SBB/71/2019; Comply with NBE directives;

17
It did not review and approve its sub-committees’ TOR; moreover, there was no TOR for some sub-committees, e.g Board operations, resource, systems,
and Asset care & project committees
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34. The board was not active in 2020 Impact The Board was active. However, some meetings were conducted
using different platforms like zoom following the pandemic. The
against own TOR and NBE Violation of NBE directives; Board also ensured and followed up that subcommittees should do
same in executing their responsibilities by using appropriate
directives as it conducted only four inadequate board oversight;
platforms and mediums.
meetings (on Jan 6, May 6, Sept 16 Recommendation
Annex minutes
and Oct 16); Comply with NBE directives;
35. Positions18 of the president and Impact
As stated above under item number 31, the Board has approved
V/presidents were not filled in line Violation of own policy; weak and implemented the Bank’s succession planning policy. The
potential successors for the President are all V/Presidents and for
with the bank’s succession plan succession plan implementation;
the V/Presidents are Department Directors. Accordingly, both the
policy which dictates manning Recommendation President and V/Presidents, except V/President Information
Systems (whom the Bank filled from outside after a tiresome and
should be done from an already Comply with own policy; relentless effort for same), were filled by the potential successors
from the pool as per the talent & succession management policy
established succession pool; implement succession plan;
of the Bank.
36. The board has not properly Impact
The Board regularly evaluates and monitors the status and
followed up progress of the new Weak board oversight; impaired progress of the strategic plan implementation against the various
imperatives and initiatives set forward in relation to same. The
strategic plan implementation19; proper strategic plan
status update report was also decided to be included as part of the
implementation; Bank’s quarterly performance report and same is regularly sent to
NBE as well.
Recommendation
37. Revised and approved20 interest Impact The Bank through its letter reference No. NIB/HO/P/164/19,
NIB/HO/P/260/19 and NIB/HO/P/147/20 dated May 29, 2019,
rates but failed to notify the NBE Violation of NBE directives; August 31, 2019, and May 18, 2020 respectively notofied the
NBE for revision and approval of interest rate (terms and tariffs).
against NBE Directives No. Recommendation
(Copy is annexed)
NBE/INT/12/2017; Comply with NBE directives;
38. The board did not discuss Covid-19 Impact The Board has conducted the required discussion on the COVID-
19 impact assessment report produced by Risk and Compliance
18
Which the bank filled in line with its new organizational structure
19
No regular periodic reports and discussions on the implementation status of the plan: planned activities and their respective status as well as challenges
encountered
20
Under minutes No. 025A/2018/-19 and 001/2020
Page 29 of 108
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impact assessment report produced Inadequate board oversight; Management Department. We have attached Board’s Risk &
Compliance Sub-Committee Minutes No. 04/2020 and Minutes
by the risk and compliance exposed to financial loss and No. 05/2020 for your review in this regard. Moreover, updates
and briefings were also being given in relation to same as to what
department and required mitigation liquidity risk;
the Bank is doing pertaining to various stakeholders including but
mechanism from the management on Recommendation not limited to its employees, the government etc.
same; Improve board oversight;

39. No discussion on audit, risk & Impact The Board will start
The Board discusses on the mentioned reports except for the good discussing on the good
compliance, loan review, ALCO, Weak board oversight; exposure governance and anti-rent seeking report as part of the regular governance and anti-rent
performance review reports. Moreover, as for the rectification of
good governance and anti-rent compliance and operational seeking report as of this
irregularities and various findings, the Board follows up and urges
branches and head office units where the irregularities were budget year’s 1st quarter.
seeking reports; it also did not risks;
reported to prepare and report on rectification action plan and
require management to timely Recommendation status report. Same is done through its audit subcommittee.
rectify irregularities identified in the Strengthen board oversight;
aforementioned reports;
40. The board did not ensure effective Impact
As per the comments given by the NBE following the previous
functioning of its sub-committees21; Violation of NBE directives; onsite examination, the Board has put in place a semiannual
performance assessment system and practice at an individual,
there were no effectiveness inadequate board oversight;
subcommittee, and full board level.
assessment system & practice for the Recommendation
Annex
board, its sub-committees and Comply with NBE directives;
individual directors against NBE Strengthen board oversight;
directive No. SBB/71/2019;
41. Board members were not trained on Impact The board of directors were trained on:
 Corporate Governance and Board Development The remaining trainings
major banking operation areas such Impaired board capacity; Excellence in Dubai from August 19-22, 2019. will be given by the end of
as financial analysis, risk Recommendation  Leading Team to Success from Oct. 25-26, 2019 at the 1st quarter of 2021/22
Bishoftu
management, internal control and Provide adequate trainings to the
applicable laws, regulations and board of directors;  Managing change in a very Dynamic Business
21
Did not receive and discuss their respective performances, some of them were not active (e.g Board system, asset care & project management, resource
committees), some committees have no TOR (e.g Board operations and resource sub-committees).
Page 30 of 108
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directives against article 10.2.2 of Environment on Oct. 25,2020 at Entoto Park –

Kuriftu
NBE Directive No. SBB/71/2019;
 Business Law on February 5, 2021
 How Business Disruption can Accelerate a New Kind of

Technology Leadership on Aug. 12, 2020 from
Harvard Business School – Virtual
 Resilient Leadership and Stress on June 02, 2020.

From Ireland – IBMF – Virtual
 Recently Corporate Governance and NBE Directives

was given to existing and new Board of Directors
August 8, 2021
42. Inadequate loan review functions Impact

against article 4 of NBE directive Impaired board oversight;  The loan review function shall be well staffed within the
No. SBB/69/2018: Violation of NBE directives; budget year

 There were some contributory factors like COVID 19 and
 Not adequately staffed22; Recommendation
political instability to assess loan files which inhibited to
 Did not review all NPLs23 and Comply with NBE directive;
review all loans and advances under NPLs as per NBE
sample24 of other loans and improve loan review function;
Directives. As a result such review was made on materiality
advances; basis.
 Reports first to the executive  The management is given the room for discussion on the
management instead of the board report as an exit conference and timely action and should
which undermines the function’s not be considered as undermining the loan review function’s
independence; and independence.
22
Staffed with only three staffs
23
Reviewed on sample bases
24
In addition to large exposures
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 Did not ensure proper  The loan review function has always been giving an
classification of loans & assurance for proper classification of loans & advances,
proper utilization of overdraft facilities, and adequacy of
advances, proper utilization of
provisions for loans that are reviewed on sample bases and
overdraft facilities, and
reported.
adequacy of provisions;
43. Inadequate board audit sub- Impact a) The Bank will revise the
Board Audit Committee’s
committee oversight: Impaired board oversight;
a) It will be one of the first activities to be done in the 1st TOR in line with the
 Its TOR was not revised in line Violation of NBE directives; quarter of 2021/22 financial year Strategic Plan & NBE
Directives
with the bank’s new strategic Recommendation
b) It will be one of the first activities to be done in the 1st No.SBB/76/2020 and will
plan and NBE directives No. Comply with NBE directive and quarter of 2021/22 financial year be finalized in the 1st
own TOR; improve audit sub- quarter of 2021/22
SBB/76/2020;
c) The Bank has been following centralized audit function financial year.
 Has not approved the revised committee’s performance; b) The approval of the
supported by Risk-Based Audit Approach .Thus, using this
Internal Audit procedure
internal audit procedure; audit approach, we have identified & included the scope of
the internal audit function into the audit universe which is is under process. It will be
 Did not adopt risk-based internal subject to adjustment periodically to make it more finalized within the first
audit methodology against NBE comprehensive. quarter of 2021/22.
c) Based on the
directives No. SBB/76/2020; For determining of risk when scheduling audit work, the recommendation of the
 Did not review related party following nine risk factors were used: NBE examiners, the
Department will
transactions to ensure such Quality of Internal Control System; strengthen the Bank’s risk
transactions were made at arm’s Size of Operation; based audit practices by
Complexity of business; using risk based audit
length against NBE directives Legislative & management interest;
guidelines, NBE
Liquidity of assets or probability of fraud and corruption;
No. SBB/76/2020; Potential for cost savings and service improvement; Directive No.
Time since last audit; SBB/76/2020 & best
 Did not review and evaluate practices. Approval of the
Management competence; and
internal audit function’s scope, Distance from Head Office. (for branches ) risk based audit plan of
2021/22 prepared based
adequacy of resources, plan and
on the Directive No.
performance; d) Based on the recommendation of the NBE examiners, the SBB/76/2020 is under
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RISK/RMCF
 Did not regularly report its Department will strengthen the Bank’s risk based audit process and will be
practices by using risk based audit guidelines, NBE Directive finalized until end of
performance to the board against No. SBB/76/2020 & best practices. Approval of the risk based August 2021.
own TOR and NBE directives audit plan of 2021/22 prepared based on the Directive No. d) Review of related party’s
SBB/76/2020 is under process and will be finalized until end transaction was already
No. SBB/71/2019;
of August 2021. made during the last
 Did not assess objectivity, period and the report is in
e) The Board audit committee reviews and evaluate scope of progress. The Bank
performance and independence
internal function, and plan and performance of the internal includes this activity in
of external audit; did not ensure audit of the Bank. It also assures adequacy of resources at all the audit plan prepared
timely rectification of audit times. for the prevailing
financial year. After the
findings and effectiveness of f) The Board Audit Committee reports its performance to the report is finalized the
internal control system25 against Board quarterly. Board Audit Committee
will properly review the
NBE directives No. g) The Board Audit Committee assessed objectivity, performance related party transactions
SBB/71/2019; and and independency of External Audit when the bank selected and ensure they are in line
External Auditor. with NBE directives No.
 Failure to regularly conduct The Board Audit Committee ensures timely rectification of SBB/76/2020 at all times.
monthly meetings26 against NBE audit findings on quarterly basis and discusses on the e) The Board audit
effectiveness of the internal control system and gives direction committee of the Bank
directives No. SBB/71/2019; to strengthen the gaps observed. will also continue
internal audit function mostly performing of these
h) The BoDs Audit committee conducts regular meetings every mentioned tasks in the
dwells on special investigations;
month as per NBE’s corporate Governance directives prevailing fiscal year.
SBB/71/2019. As reported by NBE examiners, the committee f) -
has conducted 22 monthly meetings (22 out of 24) in the last g) The Board Audit
year. The reason for not conducting 2 meetings was due to the Committee will actively
fact that the period under consideration of outbreak of participate in assessing
COVID-19 and the restriction imposed by the government not overall performance of
to conduct meeting. external Auditor when the
Bank demands to hire
Did not discuss management’s response to audit findings and rectification status of same; there were recurrent audit findings and fraud cases
25
Did not conduct meetings in March, May, August, September and October 2020; did not discuss 1st and 2nd quarters’ (2020/21 FY) audit reports;
26
moreover, there were no discussion on quarterly audit reports in 2019
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RISK/RMCF
External Auditor.
The Board Audit

Committee has a great
concern on the measures
to be taken for the
reported findings and any
loopholes observed to the
internal control system of
the Bank.
h) The Board Audit
Committee will always
conduct monthly
meetings in line with the
NBE Directives No.
SBB/71/2019
44. Inadequate board risk & compliance Impact

sub-committee oversight: Impaired board oversight;
 The Board’s Risk & Compliance Sub-Committee TOR will be
 Did not revise its TOR against Violation of NBE directives;
revised during the current budget year;
September 30, 2021
article 7.3, which requires the TOR Recommendation  The Board’s Risk & Compliance Sub-Committee regularly
to be revised annually; Comply with NBE directive and reviews and evaluates Risk & Compliance Management
 Did not review and evaluate risk & own TOR; improve sub- function’s scope, adequacy of resources, plan and performance.
compliance management committee’s performance; To this effect, we have attached the Sub-Committee’s Minutes
No. 04/2019, 09/2019, 02/2020, 06/2020 and 04/2021.
function’s scope, adequacy of
 The Bank through its letter reference No.
resources, plan and performance;
NIB/HO/RCMD/006/202 dispatched the updated Risk
 Very limited discussions on
Management Program to the NBE’s Banking Supervision
quarterly risk assessment reports27;
27
The committee members raise only few questions based on the presentation made to them; they did not read the report and provide constructive and/or
analytical comments on the reports’ quality, comprehensiveness (whether inherent risks are being adequately identified and quality of risk management is
being properly assessed), and whether findings were being timely rectified by management
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RISK/RMCF
 Did not report its performance to Directorate as of June 01, 2021.
the board against own TOR and  The Department made the necessary assessment on the new
strategic plan of the Bank through a risk assessment report titled
NBE directives No. SBB/71/2019;
“Assessment of NIB’s Strategic Vision (Progresses and
 Failed to notify the NBE its
Achievements)”. We have attached same document for your
revised risk management program
review. The Department in collaboration with Internal Audit
against NBE’s risk management Department also undertook a number of project reviews with
guideline; the aim of appraising the Bank’s project management
 Did not ensure that the risk effectiveness. We have attached the Combined Assurance report
management function is getting on Arat kilo building project and the T-24 re-implementation
adequate data from business units28 Project for your review.
for its effective function; weak

MIS; and
 No assessments were made on the
new strategic plan implementation
and overall project management
effectiveness;
45. Board operations29 and resource30 Impact
 The sub-committees were active and have conducted TORs will be revised
sub-committees were not active Impaired board oversight; their meetings regularly. However, as indicated above during the 1st quarter of the
against NBE directives No. Violation of NBE directives some of the meetings were conducted through electronic current budget year
platforms due to the pandemic. Moreover, as for the
SBB/71/2019; board system, asset Recommendation TORs, they will be revisited along with the bylaws of
the Board by during the first quarter.
care & project management, and Comply with NBE directive;
sharia advisory committees were improve sub-committee’s  The Shari’ah advisory board committee, having three
28
Loss data framework was not implemented due to shortage of data from business units, the function was also not getting incident reports from branches and
head office units despite developing & distributing reporting format for same purpose
29
Conducted only five meetings from January 2019 to December 2020; moreover, their minutes were not sequentially numbered
30
Conducted only three meetings in 2020 which were also not signed
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RISK/RMCF
also not functional; moreover, TOR performance members has been established and become functional.
So far, it has conducted 11 (Eleven) meetings. Besides,
was not developed for these sub- it has also approved TOR and Charter, which are
implemented since February 2021.
committees;
Management 46. Executive management (EM) Impact
Oversight 31
Noted The Charter shall be
charter was not revised in line with Lack of well framed discussions
updated until end of
the bank’s new strategic plan, and resolutions; Impaired December 31, 2021
organizational structure and revised management oversight;
policies and procedures;
Recommendation
Update executive management
charter;
47. The management did not develop Impact
Noted The Bank will address the
individual and institutional values as Violation own charter;
case in the to-be-revised
well as behavioral expectations inadequate employee awareness charter, until end of
December 31, 2021.
against its own charter; over the stated issues;
Recommendation
Develop such documents as
required in the charter;
48. Management did not prepare action Impact Disagree All work units and the
Following the incidence of COVID 19, a task force was staff are committed to
plan and/or mitigation mechanisms Inadequate oversight; exposure established for this purpose and the Management has prepared an collaborate with the
action plan in April 2019/’20 FY to mitigate the impact of
to minimize the impact of Covid-19 to liquidity, foreign exchange respective teams and exert
COVID-19 problem.
Copy of document of Action Plan is attached herewith as maximum effort in
in line with the assessment result and operational risks;
evidence. discharging the duties and
and recommendations of the risk & Recommendation responsibilities at
compliance department; Strengthen management enhanced manner during
the current financial year
31
Issued in 2017
Page 36 of 108
RISK/RMCF
oversight; give due emphasis to too.
risk assessment reports;

49. Weak internal control system as Impact Noted
32
The Bank has a strong internal control system. Moreover, when
there were repeated frauds , high Inadequate oversight; exposure there are disciplinary issues and whenever integrity problems are Starting from September
observed, the Bank has zero level of tolerance. Besides, the Bank
staff integrity problems and to operational risk and financial 30, 2021
is working on fraud risk management training sessions for its staff
recurrent audit findings; loss; on Banking Ethics related issues. Furthermore, the Bank will also
make operational its already developed whistle blower policy and
Recommendation procedures which are believed to significantly reduce such fraud
incidents.
Strengthen management
oversight; ensure effective
internal control system;
50. Management did not discuss loan Impact During 2021/’22 FY.
th st
Noted
review reports of the 4 and 1 Inadequate oversight; exposure Management will further strengthen its oversight over such issues
by regular and timely discussion/review of reports; by preparing
quarters ended June 30, 2020 and to operational and compliance
action plan, and by submitting minutes of same to NBE
September 30, 2020, respectively; risks;
failure to prepare action plan to Recommendation
implement findings and Strengthen management
recommendations of internal audit oversight;
and risk & compliance management
functions; it also did not timely
discuss other oversight reports and
submit minutes of same for NBE’s
quarterly ratings;
51. The bank did not achieve its major Impact Comment Noted The Bank will exert
maximum effort to
operational targets: May impair growth of the bank; Due to the Pandemic as well as other external factors, the FY improve its foreign
32
There were fraud cases amounting birr 55.95 million, since previous onsite examination, out of which Birr 33.26 million remained outstanding as at
December 31, 2020
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 Underperformed FCY has negative impact on the 2020/21 has been very challenging both at national & at Bank currency mobilization
level. Thus the Bank's performances have slightly been affected. performance.
generation (57.2%), gross bank’s shock absorbing capacity;
profit (31.9%), branch Recommendation When looking at the details, the underperformance on Forex The following strategies
generation is mainly caused by the rampant Covid-19 around the were also designed for
opening (58.9%), mobile Improve performance the bank globe & the subsequent effect on all economic sectors & implementation
specifically on foreign trade and tourism.
banking service subscribers in all its aspects;
 Prizing or rewarding
(35.5%), staff recruitment In general, political instability in some part of the Country, a
system through lottery
decline in FDI inflow, the impact of COVID 19 on export
(55.7%), and new account business, exchange Rate Disparity b/n the formal and informal campaign will be
markets, slowdown of economic activities and reduction of strengthened for
opening (24.3%); interest rate for business which are highly impacted by COVID-19 potential customers who
 Most of its districts33 have have affected the performance of the Bank. exchange FCY.
 Prices will be changed
underperformed their However, starting from the 3rd quarter, the Bank's profitability &
by reviewing macro-
deposit mobilization effort has shown a great improvement & the
respective deposit loan provision has fruitfully met the target set for the 2020/21 FY. economic development
In order to enhance the resource mobilization and minimize the and industry move.
mobilization targets by over
reliance on few districts, it is decided to open three additional activities on selected
50%, indicating over reliance districts and the progress is underway. businesses like Hotel
and Tourism which are
on few districts and/or branch The process of making customers to use Mobile Banking also highly affected by
performances; similarly, 156 showed an improvement, and able to meet about 83.4% of the
COVID-19
target set for the financial year.
of the 337 branches,  Enhancing capacity of
With regard to branch opening endeavor, the Bank has targeted to the bank staff through
underperformed their achieve different objectives. Branches are opened either for extensive training will
respective deposit Deposit Mobilization, Loan Provision, Foreign currency be done.
generation; or to address the interests of the society in a specific  Deposit mobilization
mobilization targets by over strategy is already
area. In that respect, almost all branches are doing to achieve
50%; those specific objectives and when evaluating their economic crafted and resource will
profitability most of them are successful. Moreover, it should be be mobilized
 Against the targets set in the accordingly with well-
noted that most of the loss making branches are newly opened
new strategic plan, for the year ones that require some time to break even. organized and
strategically manner.
ended June 30, 2020, the bank
Thus the Bank is
underperformed deposit committed to further
33
Central, Hawasa, North West, South East and Tana
Page 38 of 108
RISK/RMCF
mobilization, total assets, enhance its effort for a

better result during the
loans & advances and profit
plan period 2021/22.
before tax by 19.29%,
11.54%, 9% and 8.5%,
respectively; and
 Moreover, 250 branches were
loss making;
52. Periodic performance reports were Impact The Bank prepares its annual plan/budget with due emphasis to The Bank will address the
the Strategic Plan (SP) and developments in external environment. issue of comparing against
not comprehensive: did not compare Inadequate performance
While doing so, there might be changes over the targets set on the targets in the coming
operational performances against evaluation; unable to timely SP. Once the annual plan is approved, the Bank prepares reporting period (for all
monitoring and periodic performance evaluation reports as parameters)
their respective targets in the identify and address problems;
comprehensive as possible by comparing major performance
strategic plan, and disbursement, Recommendation parameters against critical targets set in the annual plan (Including (Plan period of 2021/22)
collection as well as interest free Improve comprehensiveness of IFB).
deposit mobilization performances performance reports; Moreover, the performance evaluation is done through extensive
discussions with all players in the Bank & attempt is made to
were not assessed against their
identify critical challenges and possible solutions.
respective plan;
53. Failure to finalize and implement Impact Noted
a)With regard to delay of construction Projects:
various projects as per their Exposure to operational risk and a)The Hawassa project is
-There was minor Time Extension problem at HQ Building (few
months) as related to COVID-19; however the building has been now in good track and will
scheduled time: Head quarter and financial loss; be expected to be
completed and has become functional since April 2021.
Hawassa buildings, upgrading core Recommendation completed during the
-With regard to Hawassa project, there has been delay due to current plan budget year.
banking system (T24); moreover, Improve project implementation shortage of import materials associated with COVID-19 and
dearth of FCY.
they did not implement BSC performance;
b)With regard to upgrading Core Banking System (T24),
evaluation system; upgrading project of T24 from R10 to R20, TAFJ is underway b)Currently, utmost effort
is being made to complete
C) The Bank has implemented Balanced Score Card (BSC) to all
Management staff including Branch Managers and performance the project as per revised
appraisal will be undertaken through BSC at the end of the Budget plan by end of October,
2021.
Page 39 of 108
RISK/RMCF
year. c) ISC will be

implemented on wards.
54. Failed to handle inactive unclaimed Impact Noted During 1st quarter of
34 2021/22 plan period.
liabilities in line with article 4 of Violation of NBE directives; Collecting detail data of claimants such as third name, tax
identification number, and full address which need to be reported
NBE directives No. SBB/75/2020; Recommendation
in line with Article 4.2 and Annex I of the Directive was finalized
Comply with NBE directives; and currently it is under review by the Bank’s Internal Audit
Department for accuracy of the cases. As a result, publishing the
list will be done soon in a widely circulated newspaper and media.
55. Management has not prepared risk Impact Noted

The necessary risk register templates were prepared and
register that identifies inherent risks Violation of NBE directives; dispatched to all head office work units. Accordingly,
Departments have also started the practice of filling out the risk
and internal control and/or risk exposure to operational risk; September 30, 2021
register and forwarding same to Risk & Compliance Management
mitigations against article 7.2 of Recommendation Department as well as Internal Audit Department.
(sample attached)
NBE directives No. SBB/76/2020; Comply with NBE directives;
56. All management sub-committees, Impact Noted
Besides EMC, ALCO, Recruitment, Procurement, Credit, and
except EMC, have no TORs; Unable to appraise The TORs shall be revised
Discipline committees, each have their own TORs, which is
incorporated in their respective working manuals. to make them more
moreover, EMC has never evaluated performances; impaired comprehensive until
performances of these sub- management performance; September 30, 2021.
committees; Recommendation
Develop TORs and periodically
34
As at September 30, 2020, inactive unclaimed liabilities (aged over 15 years) stood at birr 10.64 million
Page 40 of 108
RISK/RMCF
evaluate sub-committees’
performances;
57. Failure to file certificate of Impact Certificate on Corporate Governance and Board Development
Excellence are filed and communicated to NBE
trainings taken by the board against Violation of NBE directives;
The training certificates were submitted to NBE i.e. through letter
article 10.2.3 of NBE directives No. Recommendation
REF. NIB/LDD/015/20 dated Feb. 24, 2020.
SBB/71/2019; Comply with NBE directives;
58. Failure to provide anti-fraud Impact Anti-Fraud Trainings Supporting document is
Annexed
training to all employees and Violation of NBE directives;  150 staff on November 24, 2020
members of the board of directors exposure to operational risk;  125 staff on November 12, 2020
 200 staff of the Bank on April 6-9, 2021
against article 4.4 of NBE directives Recommendation  84 staff on January 29, 2021
 98 staff of the Bank on March 13, 2021
No. SBB/59/2014; Comply with NBE directives;
 Two staff from April 5-7, 2021
 Two staff from April 19-23, 2021
 Two Staff from April 19-21, 2021
59. Management has not filled key Impact:

Currently all key positions (those were identified as vacant during
vacant posts in various functions in Impaired operational the examination period) are filled.
line with the approved manning management;
35
chart ;
Recommendation:
Fill key vacant post timely;
60. The president was rated only by the Impact BSC that incorporates major operational performances for The President’s Evaluation
36 measuring senior Management including the President has been shall, as much as
board chairman ; major operational Inadequate performance
prepared (copy attached). Moreover, the Board discusses on the practically possible, be
37
performances were not considered evaluation; overall performance of the Bank and the president prior to made by all Board
reviewing and approving the salary steps increment and bonus for members.
35
The posts of senior credit review officer, credit review officer, foreign accounts & reconciliation division manager, two customer relationship managers,
senior credit & operational risk officer, five senior credit appraisal officer, core infrastructure division manager, core application support division manager,
facilities maintenance division manager, network administration division manager, branch manager II, nineteen branch managers I, etc
36
No minute under which the board discussed on performance of the president to evaluate him
Page 41 of 108
RISK/RMCF
as criteria to evaluate senior Recommendation: the president and the executive team.
management members, including Let the board members

the president; participate in the evaluation of
the president; Improve
performance evaluation by
enhancing the evaluation
criteria;
Internal 61. Board audit sub-committee’s Impact a) The Bank includes this
Audit activity in the audit plan
oversight was not adequate against Quality of internal control
Function a) Review of related party’s transaction was already made by prepared for 2021/22 BY.
NBE Directive No. SBB/76/2020; system is impaired; Exposure to Internal Audit Department during the 4 th quarter of 2020/21 b) The Board Audit
BY and the report is in progress. Committee will always
a) Did not review related party operational and compliance
conduct monthly meeting
transitions and keep the board risks; in line with NBE
informed on status of such Recommendation b) The BoDs Audit committee conducts regular meetings every Directives No.
month as per NBE’s corporate Governance directives SBB/71/2019
transactions; Strengthen the committee’s c) the bank has Audit
SBB/71/2019. As reported by NBE examiners, the
b) Did not conduct monthly meeting oversight; committee has conducted 22 monthly meetings (22 out of 24) Analysis and Follow up
in the last year. The reason for not conducting two meetings division dedicated to
38
in line with NBE Directive and make the necessary
was due to the fact that the period under consideration was
c) Did not set rectification time the outbreak of COVID-19. follow ups on Audit
findings and work
limit for internal audit findings, towards giving final
c) Time period of audit rectification is already set as 15 days
as a result some findings takes from the date of audit report and it is also mentioned on the solution to all reported
bank’s Audit Charter. (Annex I) cases.
long period of time without
d) The Board Audit
getting solution; d) The Board audit committee ensures that the internal Audit Committee will always
ensure the availability of
37
Such as NPLs position, deposit mobilization, loans and advances, profit, capital, compliance (with rules, regulations, NBE directives and own policies and
procedures), strength of internal control system, adequacy of policies, procedures & guidelines, timely rectification of findings identified by internal audit,
risk & compliance functions and NBE directives, etc
38
Only 17 discussions were conducted within 2 years.
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RISK/RMCF
d) Did not ensure that internal audit function has adequate resources at all times. All resources adequate resources to
required to the audit function were approved by the audit properly conduct the
function has adequate resources;
committee in the yearly budget. internal audit function of
e) Did not review external auditors the Bank
e) The Board Audit subcommittee works jointly with the Banks e) The Board Audit
management letter and response;
management and the external auditor in relation with the Committee will keep on
f) Did not review objectivity, management letter and comments forwarded by the external reviewing External
performance and independence auditor Auditors Management
letter.
of external auditor; f) The Board Audit Committee assessed objectivity, f) The Board Audit
g) Most of NBE’s previous findings performance and independency of External Auditors when Committee will actively
the bank selected an external auditor. participate in assessing
were not rectified; the overall performance
h) Did not ensure that all g) The Board and management have given a due focus for the of External Auditor when
NBE findings and most of them were addressed as a result of the Bank demands to hire
departments/business units have the concerted effort. External Auditor.
prepared risk register; and g) During the 1st & 2nd
h) The risk register is being prepared and focus will be given to quarter of 2021/22 BY,
i) Did not ensure risk based internal
ensure that all departments/business units have prepared the Bank will work hard
audit system; same. to rectify any outstanding
i) The Bank has been following centralized audit function findings.
supported by risk based Audit approach. Thus, using this h) The Bank is preparing a
audit approach, we have identified & included the scope of risk register of all
internal audit function in to the audit universe which is business units in line with
subject to adjustment periodically to make it more the NBE Directives. It
comprehensive. will be finalized during
the 1st quarter of 2021/22
For determining risk when scheduling audit work, the BY.
following nine risk factors are taken into account: i) Based on the
recommendation of NBE
 Quality of Internal Control System; Examiners, the Bank will
 Size of Operation; strengthen the Bank’s risk
 Complexity of business;
based audit practices by
 Legislative & management interest;
using risk based audit
 Liquidity of assets or probability of fraud and
corruption; guideline, NBE
 Potential for cost savings and service improvement; Directives No
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RISK/RMCF
 Time since last audit; SBB/76/2020 & best

 Management competence; and practices. Approval of the
 Distance from Head Office. (for branches ) risk based audit plan of
2021/22 prepared based
on the directives
SBB/76/2020 is under
process and will be
finalized until August
2021.
62. The board audit sub-committee’s Impact The Bank will revise the TOR of Board Audit Committee in line During the 1st quarter of
with the Strategic Plan & NBE Directives No.SBB/76/2020 and 2021/22 financial year.
TOR was not revised in line with Violation of NBE directives;
will be finalized soon.
the new strategic plan and NBE lack of comprehensive guideline;
Directive No. SBB/76/2020; Recommendation
Revise the TOR in line with new
strategic plan and NBE
directive;
63. Board audit sub-committee did not Impact The Board Audit Committee reports its performance to the Board The Board audit
quarterly. committee of the Bank will
regularly report its performance to Violation of NBE directives;
continue reporting of its
the whole board against NBE Recommendation performance to the Board
against its own TOR and
Directive No. SBB/76/2020 and Comply with NBE directives;
NBE Directives
own TOR; No.SBB/71/2019 on
quarterly basis.
64. Limited internal audit coverage as Impact With regard to limited internal audit coverage of operations, the Board sub-committees’
Department has been using risk based audit plan to conduct the performances, strategic
strategic plan performance, board Weak internal control system;
audit activities. Besides, AML/CFT and legal department plan performance, overall
sub-committees’ performances, exposure to operational and (foreclosure) were audited in the last two years.(Annex II&III) credit risk management
system & regulatory
AML/CFT assessment , overall compliance risks;
returns will be audited in
credit risk management system; Recommendation the 2nd & 3rd quarter of the
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RISK/RMCF
loan review function, and regulatory Widen the scope of internal audit 2021/22 as per annual
audit plan.
returns ,and foreclosure & disposal function;
activities were not audited;
65. Internal audit reports indicated Impact Comment Noted. The Bank is committed to:
existence of persistent operational Exposed to high operational risk; Most of the findings were rectified. Strong Rectification and Make rectify all
discrepancies in cash management, Recommendation follow-up activity including timely response for internal control outstanding issues on or
irregularities are practiced and implemented. before December 31, 2021.
deposits, suspense accounts, Strengthen internal control
account opening and administration system and timely respond to ( Evidence is attached) Develop and revise
formats and manuals based
of loans & advances; internal control irregularities; on feedbacks from
different findings to
finalize and implement the
guide line on disciplinary
measures related to
repetitive audit findings on
or before September 30,
2021.
66. The revised internal audit procedure Impact Noted Until end of 1st quarter of
2021/22.
was not approved (still at draft level) Impaired internal audit function; The revised internal audit procedure will get the Board’s approval
against article 8.3 of NBE Directive Limited board oversight; soon.
No. SBB/76/2020; Recommendation

Strengthen board oversight,
timely revise and approve the
procedure;
67. Lack of training for auditors on IT Impact Auditors were given trainings on The Bank will provide the
 Modern Internal Audit from Oct. 30-31, 2020. remaining trainings by the
technical layer controlling , Inadequate internal control due  Practical IT Audit from Nov. 4-5,2020 end of the 1st quarter
AML/CFT, fraud detection and to inadequate capacity;  Risk Based Internal Audit from April 19-23, 2021. 2021/22
 Anti-Money Laundering and CFT from April 19-23
auditing , performance auditing, Recommendation  IFRS Training
Page 45 of 108
RISK/RMCF
project audit, corporate governance, Provide adequate training;  Interest Free Banking on August 25 & 26, 2020
 Anti-Fraud Investigation October 30-31,2019
ethics, IFRS, international banking,  Risk based IT Audit November 4 & 5, 2019
and new products like interest free
banking, agent banking etc.
68. Internal audit was not fully risk Impact The Bank has been following centralized audit function supported Based on the
by Risk-Based Audit Approach .Thus, using this audit approach, recommendation of the
based ; Exposed to operational risk;
the Department has identified and included the scope of the NBE examiners, the Bank
Recommendation internal audit function in the audit universe which is subject to will strengthen the risk
adjustment periodically to make it more comprehensive. based audit practices of the
Develop risk based internal
Bank by adopting risk
audit; For determining of risk when scheduling audit work, the based audit guidelines,
following nine risk factors were considered: NBE Directive No.
SBB/76/2020 and best
 Quality of Internal Control System; practices effective from 2nd
 Size of Operation;
quarter of the plan period
 Complexity of business;
 Legislative & management interest; 2021/22.
 Liquidity of assets or probability of fraud and
corruption;
 Potential for cost savings and service improvement;
 Time since last audit;
 Management competence; and
 Distance from Head Office. (for branches)
69. Absence of resident auditors at Impact Noted:
branches; Impaired internal audit function; The Bank replaced /rename/ resident auditors as Branch
Controllers considering controlling is a management function and
Recommendation to make them independent, the Branch Controllers reporting is
restructured to Retail & SME Banking Department. In addition,
Adequately staff the function;
the Bank assigned Branch Controllers at branches with high
volume of transactions and District Offices. But, branches with
low volume of transactions were handled by the established pool
controlling staff centrally at the district office.
70. There were under plan performance Impact Noted During the 2021/22 plan
budget year.
for the year 2018/2019 (plan 120, Inability to identify and control
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actual 110) and 2019/2020 (plan 160 operational risk /discrepancies; The Bank will perform the audit engagement as per the NBE
examiners recommendation.
,actual 146); Recommendation
Widen the scope and
performance of internal audit
function;
71. The internal control system was not Impact The Bank will work on
The internal control system of the Bank is strong that supports strengthening the internal
strengthened as there were various Exposure to operational and
controlling mechanisms, however, some staff were found control system and making
fraudulent cases (amounting to birr compliance risk; guilty of involving in illegitimate acts by producing illegal its staff aware of such
incidents through different
3.5 million39 outstanding), un- Recommendation guarantee documents and bypassed the Bank’s working
training programs until
procedural guarantee issuances and Strengthen internal control policy and procedure manuals. Those issues were found
Dec 2021.
using our controlling mechanisms and the Bank has taken
staff integrity problems; system; appropriate measures on those guilty staff members.
72. Internal audit did not review Impact Reviewing the accuracy,
Noted. reliability, timeliness and
accuracy, reliability, timeliness and Exposure to operational risk;
The Bank’s Internal Audit usually reviewed financial and completeness of
completeness of transactions as well violation of NBE directives ; operation reports including regulatory reports. In this regard, a full transactions as well as
scope of audit has been carried out at Finance & Accounts financial and operational
as financial and operational Recommendation:
Department. (Annex V) information/reports
information/reports produced, Strengthen internal audit produced, including
including regulatory reports against function; regulatory reports are
scheduled to be audited in
article 5(12) (i) of Directive No. the 2nd quarter of the
SBB/76/2020; 2021/22 as per the Bank’s
annual audit plan.
39
As of December 2020.
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Risk and 73. Compliance assessment report was Impact Noted December 31, 2021
Compliance
not comprehensive as human Exposure to operational and  The comprehensiveness of compliance assessment report will
Management
Function resources, procurement system, Compliance risk; be improved and the captioned report will be conducted during
the current budget year. However, compliance with NBE
international banking and Recommendation Directives & own policies and procedures were regularly
compliance with NBE directives & Ensure comprehensiveness of reviewed on a quarterly basis and same can be verified from the
quarterly Risk and Compliance reports sent to the NBE.
own policy and procedure were not compliance management ;
reviewed;
74. Compliance management division Impact Noted September 30, 2021
did not have a comprehensive Inadequate Compliance  The existing check list will be further refined during the current
compliance checklist to make a management; budget year.
continuous check and control on all Recommendation

business units; Put in place such check list ;
75. TOR of the board risk and Impact  The TOR of the Board Risk and Compliance Sub-Committee is
scheduled to be revised during the current budget year.
compliance committee was not Violation of own and NBE
 The Bank through Letter reference No. September 30, 2021
revised against article 7.3 of the guidelines; NIB/HO/RCMD/006/202 dispatched the updated Risk
Management Program to the NBE’s Banking Supervision
TOR and revised their risk Recommendation
Directorate on June 01, 2021.
management program but did not Comply with own and NBE
submit for NBE’s review; guidelines;
76. Member of the board risk and Impact Noted The Bank is committed to
provide all the required
compliance committee did not take Limited board capacity;  The Bank has scheduled to deliver training on the area of trainings during the 1st &
training on legal, regulatory and Recommendation Enterprise risk management, legal, regulatory and other related 2nd quarter of FY 2021/22.
risks as well to the Board’s Risk & Compliance Sub-Committee
other related issues as well as risk Provide adequate training; members during the current budget year.
management as required under their
own TOR;
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77. Risk and compliance department has Impact Noted During 1st & 2nd Quarter of
the FY 2021/22
not been receiving incident reports Inadequate risk management;  The Bank has already dispatched a letter that instructs all HO
from HO units and branches despite exposure to operational risk; work units and branches to strictly forward incident reports to
RCMD. Moreover, the Bank has planned to provide relevant
developing and distributing Recommendation trainings in this regard.
reporting formats for same; Ensure such reporting;
78. Risk assessment report was not Impact Noted
comprehensive as the following Inadequate risk assessment  The Bank has made the necessary risk assessment reports
areas were not covered; e-banking practice and exposure to various related to E-Banking products, capital adequacy & December 31, 2021
management, foreign currency concentration, major foreign
products, frauds, capital adequacy & risks; currency movement against local currency and revaluation
management, foreign currency Recommendation gain/loss, foreign exchange risk stress testing, IT/system related
operational risks, social and political risks, related party
concentration, major foreign Ensure comprehensiveness of
transactions, project risk assessment, strategic and reputational
currency movement against local risk assessments risk assessment risks. To this effect, we have attached the risk assessment and
quarterly reports compiled as follows:
currency and revaluation gain/loss, system;
o For E-Banking products, we have attached our risk
foreign exchange risk stress testing, assessment report titled” Assessment report on the quality
IT/system related operational risks, of ATM and POS services provided by NIB”
o For capital adequacy & management, foreign currency
social and political risks, related concentration, major foreign currency movement against
party transactions, project risk local currency and revaluation gain/loss, foreign exchange
risk stress testing reports, related party transactions; we
assessment, strategic, reputational &
have attached “the Bank’s RCMD report for the 3rd quarter
legal risks; that ended March 31, 2021”.
o For IT/system related operational risks, we have attached
our risk review reports titled “IT Risk Assessment report
on Password Management Practice and Operating System
and Application Version Status of the Bank” and another
IT risk report titled “Assessment on the Implementation of
effective Physical Security On NIB’s Network
Infrastructures”
o For Political Risks, we have attached the risk assessment
report titled ”Assessment of the Current Macroeconomic
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Environment”
o For project risk assessment, we have attached the project
review reports titled “Combined Assurance report on Arat
kilo building project” and “Combined Assurance report on
T-24 re-implementation Project”.
o For strategic and Reputational risks, we have attached the
risk review report titled “Assessment of NIB’s Strategic
Vision (Progresses and Achievements)”.
The Bank has also planned to execute risk assessment in the area
of fraud and legal risks in the just started budget year of 2021/22.
79. The risk management department’s Impact Noted Scheduled to finalize until
December 31, 2021
task was not supported by Impaired risk management  The Bank is currently underway to automate the risk reporting
Information Technology system effectiveness; process.
(Software); Recommendation
Develop and implement such
system;
80. Absence of risk registers at all Impact Noted
departments/unit/business lines Violation of NBE directive; The Bank has already have risk register at HO department level.
against article 7(2) of Directive No. Recommendation Moreover, The Bank is working towards the implementation of
the Risk Control Self-Assessment across all its business lines. In
SBB/76/2020; Establish risk event recording this respect, it has already recruited Risk Champions from head
and reporting system; office work units. Hence, the availability of duly filled risk
register among these entities is expected to be realized in the
current budget year.
81. Risk management policies & Impact Disagree
procedures were not comprehensive Inadequate guideline for risk  The Bank’s Risk Management Policies and Procedures were
and/or focuses only on resource management; developed in alignment with NBE’s Risk Management
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mobilization and returns40; Recommendation Guidelines and international leading practices that exhaustively
attempted to cover various policy issues.
Ensure comprehensiveness of
(it could be referred from the revised Risk Management
risk management policies & Program sent to your end)
procedures;
82. Lack of training for risk and Impact Noted Corporate Governance and
other relevant trainings
compliance staffs on IFB, Limited staff capacity; The Risk and Compliance Staff were trained on: will be provided by the
AML/CFT, and corporate Recommendation:  Anti-Corruption Compliance and Mitigation from April end of the 1st quarter
22 -23, 2021 2021/22
governance; Provide adequate training;
 IT Risk Management from Nov. 2-3, 2020
83. There is no early warning or trigger Impact Noted Until end of 2nd quarter of
the FY 2021/22.
system established for breaches for Inadequate risk identification;  The Bank has identified various early warning indicators/ risk
the bank’s risk appetite or limits; exposure to various operational indicators in its Risk Management Program. However, the Bank
plans to refine this list during the revision of the Bank’s risk
risks; appetite document.
Recommendation
Develop and implement such
system;
84. There was no adequate distinct unit Impact Disagree
which is responsible to undertake Exposure to operational risk;  The Bank has IT Security and IS Audit Divisions, which are
risk assessment on IT system of the Recommendation entrusted to undertake IT risk exposures and security
vulnerabilities.
bank; Enhance the adequacy of IS;  Moreover, the Bank has also hired Senior Technology & Cyber
Risk Officer to undertake IT risk assessment on the IT system
of the Bank.
IV. MARKET
40
on products, services, compliance related trends etc.
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RISK
Foreign 85. The overall open foreign currency Impact Taking the magnitude of open foreign currency position in to The Bank will work to
Exchange consideration, the Bank has worked its level best and improved it make the position further
position was 47.43% short against Exposure to foreign exchange
Rate Risk to 21.35 % short on June 30, 2021 and 16.67% short on July 15, improved and becomes
NBE Directive No. SBB/27/2001; risk and violation of NBE 2021. within the regulatory limit
until 30 September 2021.
directive;
Recommendation
Comply with NBE directives;
86. The board has not been making Impact The Bank’s foreign exchange exposure and related activities are Oversight on same is being
part of the periodic performance report that the Board reviews. done and will be
adequate oversight over the bank’s Inadequate oversight; exposed to
However, emphasis should be given and should further be strengthened.
overall foreign exchange exposure regulatory risk; strengthened.
against article 3(2) Directives No. Recommendation
FXD/67/2020; Improved board oversight;
87. Approved/allocated foreign currency Impact The Bank approved foreign currency taking in to consideration of The Bank is committed to
its prospective FCY inflows in addition to the balance in its strictly comply with NBE
to customer’s without reviewing the Violation of the NBE Directive;
correspondent banks, export bills purchased, outstanding export directives.
bank’s foreign currency against Recommendation LCs, and remittances. However, due to the unforeseen challenges
the Bank faced during 2020/21 FY, such as the impact of COVID
article 3(2) of Directive No. Comply with NBE directives;
19 on export business, political instability in some part of the
41
FXD/67/202 ; Country, a decline in FDI inflow and exchange Rate Disparity b/n
the formal and informal markets made the foreign currency
generation performance to be far from the plan.
41
On 03/07/2020, 03/08/2020, 02/09/2020, 02/10/2020, 02/11/2020 and 02/12/2020
Page 52 of 108
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88. Board and management failed to Impact Daily Net Open Position status is being reported and reviewed by Shall further strengthen
Management and the Board. management and Board
discuss daily net open positions and Inadequate board and
oversight on same as of the
other foreign exchange related management oversight; ALCO discusses/reviews same issues at its bi-weekly meetings. 2021/22 FY.
reports; Recommendation
The issues are also incorporated in quarterly performance reports
Strengthen board and and are being discussed at Board-Management Joint Meetings
management oversight; every quarter.
89. Inadequate MIS as the system Impact In the existing reporting system (Insight), there is a report that
segregates the expired and outstanding LCs. Moreover, in the
doesn’t show LC outstanding lists in Exposure to operational and
coming release of T24 R20 core banking system, the issue is also
order to exclude expired LCs from compliance risks; being addressed as part of the T24 core banking system re-
implementation project which is planned to be completed by end
the position list; Recommendation
of October, 2021.
Enhance the adequacy of MIS;
90. Registered more than two Performa Impact The Bank will exert
Some cases of registering more than two proforma invoices for a maximum effort not to
invoices for a single customer and Violation of NBE Directive;
single customer might takes place since the NBE registration allow customers register
allocated foreign currency against Recommendation system does not support in preventing such issues. more than two proforma
invoices at the time of
registration through
FXD/67/2020; developing an in house
system that will prevent
such incidents until
December 31, 2021. In the
meantime, the Bank will
request NBE to review the
system so as to self-block
registration of two
proforma invoices for a
single customer without
manual intervention.
91. There were disproportionate42 Impact Due to the FCY shortage that we have faced in the financial year, The Bank will focus on
42
It has allocated only 20% of FCY request to some customers (eg ZA Engineering Plc, Ibrahim Mehame, etc) while some others got 100% of their FCY
request (Santa Maria Real Estate & House, Mandefro Asfaw, etc) under minute No. Q46/2020; approved same amount for different FCY request (eg. Mulu
Page 53 of 108
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(biased) foreign currency allocations Violation of the NBE Directive; we have made discussions with our customers to make them improving the FCY
understand the real situation in the ground and they gave us their generation capacity and
within non-priority sectors against Recommendation
consent in reducing the amount of FCY they have requested. address customers request
article 6(6) of Directive No. Comply with NBE directives; Approvals at reduced amount are thus given based on the in full.
customer’s consent.
FXD/67/2020;
Thus, there was no biasedness in this regard.
92. CAD documents were released to Impact Since our FCY generation was not as planned in the year, we had The Bank will work in
got a challenge in timely settlement of customers’ documents. On increasing our foreign
customers before effecting payments Violation of the NBE Directive;
the other hand, not releasing this shipping document costs the currency earnings and
amounting USD 274,991.87 against Recommendation customer huge amounts of storage charge, demurrage charge, comply with NBE
additional customs duty and even might result in confiscation. directive for the time to
Thus, in order to protect customers from these expenses, the Bank come.
FXD/67/202043; released some documents before effecting payment.
93. Long outstanding items related to Impact The bank is trying to reconcile such long outstanding items by All effort shall be exerted
communicating the respective correspondent banks. However, to resolve (minimize) such
foreign currency amounting USD Violation of the NBE Directive;
some evidences gathered were not adequate enough to settle some un-reconciled items during
72,274 and Euro 14,702 was not Recommendation of the items. Considering this, the Bank has assigned a dedicated the FY 2021/22.
staff and working on urgent settlement of these outstanding items.
timely reconciled against article 4(4) Comply with NBE directives;
44
of directives No. FXD/67/2020;
94. Absence of foreign currency Impact The Bank has prepared the manual as instructed in the directive,
discussed with the Bank’s Executive Management, and send to
allocation and management Violation of the NBE Directive;
NBE for approval. However, the approved manual is not yet
manual/guideline against article 3(1) Recommendation received from NBE. copy Annex
The manual has already been developed and sent to NBE for
of Directive No. FXD/67/2020; Comply with NBE directives;
approval
95. ALCO’s periodic monitoring did not Impact Noted, Effective from July 31,
2021.
include foreign exchange stress Inadequate risk management; Foreign exchange stress testing will be included on the monthly
testing; Recommendation ALCO report.
Strengthen the performances of

ALCO;
Abreham requested USD 395,000 and got only USD 10,000, Bereket G/Mariam requested USD 50,000 and got USD 10,000, etc) under Minute No. Q51/2020
43
Dated 10/05/2020,28/07/2020,08/08/2020,12/08/2020,27/08/2020,31/08/2020,21/09/2020,28/09/2020 and 20/11/2020
44
Dated 04/03/2016,30/06/2016/,30/09/2016,31/12/2016, 15/06/2018, 05/08/2018 and 27/12/2018
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96. Inadequate data base/records of Impact All the data are available in hard copy. However, the Bank is The Bank is committed to
trying to develop a system based database during the current FY. develop and finalize a
foreign currency exchange rate, list Violation of the NBE Directive;
system based database up
of foreign exchange purchase Recommendation to December 31, 2021.
requests, allocations and approval Comply with NBE directives;
committee minutes against article
4(8) of Directive No. FXD/67/2020;
97. No scenario analysis, and asset & Impact Noted. The Bank will exercise
Exposed to unidentified and un- The Bank will develop these tools and start practicing of same. such analyses and
liability mismatch analysis and cash
expected risks; projections starting from
flow projection to mitigate risk of Recommendation September 30, 2021.
Establish these tools and the
failure to meet commitments and an
corresponding practices;
unanticipated adverse movements in
foreign currency rates;
Interest Rate
Risk
98. Failure to conduct survey while Impact The Bank has strong practice of scanning the overall marketing,
political and international environments prior to issuing new terms
issuing new terms and tariffs for Weak market risk identification;
and tariff.
credit facilities/products; Recommendation Besides, the Bank has been revising terms and tariffs for credit
facilities/products by conducting survey to ensure competitiveness
Conduct such
with due consideration of the changing banking business
survey/assessment; environment through analyzing factors that affect the lending rates
including; the overall growth strategy of the Bank, lending rates
being charged by peer banks, the rise in cost of funds and
customer needs. Moreover, issues raised by customer during
customer satisfaction survey in relation with lending rates are also
incorporated.
99. The ratio of interest income to total Impact The impact of COVID-19 has been rampant until recently and Effort will be exerted to
heavily affected the export, tourism and remittance sector. The increase the share on Non-
income was 80% as at Dec 31, 2020; May be exposed to interest rate
three sectors are the primary sources for other fee based non- interest income during the
risk due to concentration; interest income that contribute some for the total income. current 2021/22 BY.
Recommendation
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RISK/RMCF
Properly diversify source of Due to that, the burden of income generation falls on Loans and
Advances by increasing the percentage contribution to the total
income;
income.
100. Inadequate board and management Impact
Both the Bank’s BoD as well as Senior Management undertake
oversight over interest rate risk; Inadequate interest rate risk
oversight of the interest rate risk exposure of the Bank by
control; reviewing and deliberating on the Bank’s quarterly Risk &
Compliance Management reports which addresses the interest rate
Recommendation
risk management work of the Bank.
Strengthen such oversight;
101. ALCO’s function was inadequate45 Impact Noted Effective end of 1st quarter
The Bank’s ALCO will expand its review coverage so as to September 30, 2021.
to manage interest rate risk; Exposure to market risk;
encompass the interest rate risk aspects including Net Interest
Recommendation: Margin volatility.
Strengthen ALCO’s
performance;
102.Inadequate interest rate stress testing Impact Noted September 30, 2021
practices; Exposure to interest rate risk;  The Bank undertakes stress test by assuming the impact of a 3%
Recommendation: increase in interest rate (i.e. taking the historical growth rate of
the country’s interest rate for deposit) on the interest rate risk
Conduct stress testing properly; exposure of the Bank. However, the Bank will improve this task
in the upcoming stress test reports.
103.Absence of adequate46 interest rate Impact Noted As a working document of

a changing and a dynamic
risk management procedures; Exposes to interest rate risk;  Though a separate procedure is not developed, an adequate business environment
Recommendation; interest rate risk management procedure has already been contents of the procedure
incorporated in the Bank’s Risk Management Procedure. In
45
No comprehensive discussion on interest rate risk and net interest margin volatility(Instability)
46
No tolerance limits, procedure to set or change terms & tariffs, assumptions & parameters to perform stress testing
Page 56 of 108
RISK/RMCF
Develop comprehensive policy addition, the Bank plans to set a tolerance limit for interest rate document will further be
risk during the enhancement of the Bank’s risk appetite reviewed according to
& procedure;
document that is due to occur in the current 2021/22 BY. NBE’s recommendation
during the FY 2021/22.
V. Operation
al Risk
Managemen
t
104.Board did not review47 operational Impact Both the Bank’s BoD as well as Senior Management undertake
oversight of the operational risk assessment of the Bank by
risk assessment report; Inadequate board oversight and
reviewing and deliberating on the Bank’s quarterly Risk &
exposure to operational risk; Compliance Management reports which addresses the operational
risk assessment and management work of the Bank.
Recommendation
47
4th quarter of FY 1920 and 1st , 2nd quarter of FY 2020/21 reports
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RISK/RMCF
105. Missing48,outdated49 and draft50 Impact Missing:  All remaining missed

policies and procedures
operational policies and Exposure to high operational  Fixed Asset Management procedures are incorporated will be developed latest
procedures/guidelines; risk; under property and warehouse Management, and till the end of
acquired property management and disposal procedures September 2021.
Recommendation:
of the bank.  All unrevised policies
Develop, update and get  Stress testing guideline has already been included in the and procedures will be
Bank’s risk management Procedure and program. revised latest by end of
approved policies &
 Swift operational manual has already been incorporated August 2021.
procedures/guidelines; inside the Bank’s international Banking operation  Draft policies and
manual. procedures will be
Outdated: approved and made
operational during the
ATM and POS acquiring policy, mobile banking operation policy, 1st & 2nd quarter of
internet banking operation policy have been incorporated under 2021/22 BY.
currently developed E-Channels policy and procedures.
Draft:
The Bank was planning to revise those mentioned IT related draft
policy and procedures after Core Banking upgrade and
implementing new Computing Infrastructure.
106.The board human resource Impact The Bank has Board Resource Committee which overview the
strategic and operational human resource related activities of the
committee were not functional; Exposure to operational risk and
Bank and it is functional. However, the naming of the committee
violation of NBE directive; is not Board Human Resource subcommittee but rather Board
Resources subcommittee.
Recommendation:
Minutes attached.
Establish active board human
resource committee as per NBE
48
Fixed asset management procedures, stress testing guideline, change management policies and procedures and SWIFT operation manual
49
Accounting policy & procedure, liquidity management guideline, ATM acquiring policy & procedure, POS acquiring policy & procedure, mobile banking
operation policy & procedure, internet banking operation policy & procedure and open foreign currency position policy & procedure
50
Linux server security configuration standard & procedure, window server security configuration standard & procedure, IT security incident management
guideline, cyber security control framework & guideline, information system security standard, application development process, DB batch up & recovery,
housekeeping,
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RISK/RMCF
directive;
107.There were significant numbers of Impact
Comment Noted
under plan-performances in different
Exposure to operational risk;
operational areas such as employee Due to the Pandemic as well as other external factors, the FY
Recommendation: 2020/21 has been very challenging both at national & at Bank
recruitment (55.70%), branch level. Thus the Bank's performances have slightly been affected.
expansion (59%), foreign currency Perform the operations in line
When looking at the details, the underperformance on Forex
generation (57.20%), and gross with plan; generation is mainly caused by the rampant Covid-19 around the
profit before provision for loan loss globe & the subsequent effect on all economic sectors &
specifically on foreign trade and tourism.
(31.90%);
In general, political instability in some part of the Country, a
decline in FDI inflow, the impact of COVID 19 on export
business, exchange Rate Disparity b/n the formal and informal
markets, slowdown of economic activities and reduction of
interest rate for business which are highly impacted by COVID-19
have affected the performance of the Bank.
However, starting from the 3rd quarter, the Bank's profitability &
deposit mobilization effort has shown a great improvement & the
loan provision has fruitfully met the target set for the 2020/21 FY.
In order to enhance the resource mobilization and minimize the
reliance on few districts, it is decided to open three additional
districts and the progress is underway.
The process of making customers to use Mobile Banking also

showed an improvement, and able to meet about 83.4% of the
target set for the financial year.
With regard to branch opening endeavor, the Bank has targeted to

achieve different objectives. Branches are opened either for
Deposit Mobilization, Loan Provision, Foreign currency
generation; or to address the interests of the society in a specific
area. In that respect, almost all branches are doing to achieve
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RISK/RMCF
those specific objectives and when evaluating their economic

profitability most of them are successful. Moreover, it should be
noted that most of the loss making branches are newly opened
ones that require some time to break even.
108.Inadequate operational risk Impact Comment noted
assessment as the report did not Exposure to operational risk But, the Bank has conducted a review entitled “Assessment of
address strategic and reputational Recommendation NIB’s Strategic Vision (Progresses and Achievements)”.
Annex attached.
risk assessment; Strengthen operational risk
management system
109.Existence of significant number of Impact
All vacant positions are already filled.
vacant posts51; Exposure to operational risk;
Recommendation
Fill vacant posts timely;
110.Some branches did not distribute Impact Comment noted Awareness creation to all
staff of the bank on proper
relevant policies, procedure and Exposure to operational risk and The relevant policies and procedures including NBE’s directives utilization of the portal
NBE directives to appropriate staffs violation of the Directives; in soft copies were available on the Bank’s portal for direct access will be done during the FY
to all branches and employees. 2021/22.
at branches52 against articles 4.1.4 Recommendation:
of NBE Directive No. SBB/66/2018; Distribute NBE directives and .
relevant policies & procedure to
concerned staff and comply with
the directive;
111.There were huge fraudulent Impact Comment Noted The Bank is committed to
strengthening the internal
activities committed by staffs and Exposure to operational risk; Strengthening the internal control system is a continuous process control system during the
51
23 posts of managerial level and 27 posts of senior level
52
Abinet Adebabay, GejaSefer, Hayahulet, Biserate Gebriel and Ayer Tena
Page 60 of 108
RISK/RMCF
litigation cases amounting Birr 33.33 Recommendation: and still being worked out. In relation to the fraudulent activities, current FY 2021/22.
the Bank is working on attitudinal change related issues.
million and Birr 3.27 million, Strengthen internal control
Moreover, administrative action has been taken on those staff
respectively; system; involved and some cases are also at legal hands for further action.
112.Relatively there were high staff Impact Noted: As a retention mechanism

53 As it is known the new entrant banks recruit staff from the the bank has already
turnover ; Exposure to operational risk;
industry for this and other reason staff resignation is inevitable. adjusted its pay scale.
Recommendation: However, the Bank’s staff turnover is not high as per the
international attrition rate index (i.e. 7 to 10%)
Manage turnover effectively;
113.Issuance of forged guarantee by Impact Noted; The Bank has well established Internal Audit Department The Bank will continue to
that supports controlling mechanisms of the Bank, however, some strengthening the existing
some branches; Exposure to reputational and
staff were found guilty of involving in illegitimate acts by internal control system for
legal risks; producing illegal guarantee documents and bypassed the Bank’s issuance of guarantee and
policies and procedures. Those issues were found using our other operations
Recommendation:
controlling mechanisms and the Bank has taken appropriate throughout the financial
Establish strong internal control measures on those guilty staff members. year.
system for issuance of guarantee
and other operations;
114.Frequent network failures and power Impact Accepted. The Bank is taking close
The network interruption is majorly related with the Ethio- follow-up with Ethio-
interruptions; Exposure to operational risk;
telecom service interruption. Since the Bank has backup Telecom to minimize the
Recommendation: generators and UPS for the data center, there were no major network downtime.
power interruptions.
Properly manage network
failures;
115.72.89% of the bank’s branches were Impact Comment Noted The Bank is committed
and will exert maximum
loss making; Negatively affect earnings The prevailing political un rest including economic, Social , effort to make majority of
performance; improper branch location and COVID 19 pandemic adverse these branches to be
situations have contributed for some branches to make low profit profitable.
Recommendation: performance.
53
about 334 staffs (accounted 5% of the total staffs employed) were left the bank from January 01,2020 to December 31,2020; of which 82 staffs were
professional & above
Page 61 of 108
RISK/RMCF
Enhance branches’ earning while opening branches, the Bank has targeted to achieve different
objectives. Branches are opened either for Deposit Mobilization,
capacity;
Loan Provision, Foreign currency generation; or to address the
interests of the society in a specific area. In this regard, almost all
branches are doing to achieve those specific objectives and when
evaluating their economic profitability most of them are
successful. Moreover, it should be noted that most of the loss
making branches are newly opened ones that require some time to
break even.
116.Relatively there were large long Impact The Bank has accepted NBE examiners finding. We will exert maximum
Impaired assets quality; effort in settling long
outstanding assets of Birr 73.90
exposure to financial loss; outstanding items on time
million; from now onwards; if not
Recommendation
settled, enough provision
will be provided in
Establish effective internal
accordance with pertinent
control system to settle long NBE Directives.
outstanding assets;
117.The bank was penalized Birr Impact Comment Noted The Bank will be
committed to ensure
240,000.00 for violation of NBE Exposed to financial loss; The penalty was related to two basic issues failure to timely compliance with
directives, since last onsite Recommendation submit a reports to NBE in connection with Foreign currency regulatory requirements by
purchases and actions not taken by branches on delinquent strengthening its follow up
examination; Ensure compliance with customers. However, disciplinary actions were taken on those on timely reporting and
regulatory requirements; staff who commits the violations accordingly. enhancing delinquent
management system across
all branches throughout the
year.
118.Violations of various NBE directives Impact Comment Noted The Bank is committed to
provide relevant trainings
and own policies and procedures; Weak risk management and  All NBE Directives have been dispatched to operating organs
related to all compliance
exposure to compliance risk; besides all internal policies and procedures were posted to the issues during the current
Bank’s portal for ease access to all staff.
Recommendation
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Strengthen risk management and  The Bank will further strengthen risk management and internal FY 2021/22
control systems and ensure compliance with regulatory
internal control systems and
requirement & own polices/procedures.
ensure compliance with
regulatory requirement & own
polices/procedures;
119.Internal audit reports indicated Impact Comment Noted:  To mitigate the existing
systems issue, we have
existence of persistent operational Exposure to operational risk and  Majority of the findings were rectified and we are done performance tuning
discrepancies which is an indication violation of NBE directives; working on the remaining few ones. Strong on the existing version of
Rectification follow-up activity including timely the systems and relatively
of high inherent operational risk and Recommendation
response for internal control irregularities are practiced significant changes are
weak operational risk management:- Strengthen internal control and implemented. achieved. Moreover, as
 Since our FCY generation was not as planned in the part the core banking
 Holding cash above limits; system and rectify the identified
year, we had got a challenge in timely settlement of system re-implementation
 Failure to authenticate irregularities timely and customers’ documents. On the other hand, not releasing project, the existing
genuineness of foreign compliance with NBE directives; this shipping document costs the customer huge mobile and internet
amounts of storage charge, demurrage charge, banking system will be
currencies; additional customs duty and even might result in replaced with a new and
 Failure to verify customers confiscation. Thus, in order to protect customers from enhanced version which
these expenses, the Bank released some documents is planned to be
from delinquent and UN before effecting payment. completed by end of
sanction list before opening  The Bank is working on attitudinal change related October, 2021.
issues.
accounts;
 Register book for dishonored cheques is practiced at the  Cyber security risk
 Released IBC documents bank management plan will be
before effecting payment to  The existing Mobile and Internet Banking systems are developed as part the
relatively very old. And the Bank is currently engaged Cyber Security program
suppliers; in the core banking system upgrade project. The mobile planned to be completed
 Existence of high staff and internet systems are part of the enhancement. end of Fourth Quarter;
integrity problems;  The Bank has an approved manning structure and

 Opening accounts without assignment of staff is being made accordingly.  Subsequent access
However, there might be changes in the structure management control
collecting articles and
considering the work volume and demand of the work procedure will be
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memorandum of association; unit at any point in time to assign a staff. Besides, all produced by end of first
work units of the Bank has minimum number of staff quarter, 2021/22 F.Y
 Opening of accounts without
assigned. Retail
customers’ signatures on The Bank is committed to
 With regard to absence of weapon for security guard, strengthening the internal
application;
the Bank has frequently requested the Federal Police to control system using
 Absence of register book for get permission for the purchase of additional guns and internal auditors, district
dishonored cheques; its accessories. and branch controllers.
 Frequent interruption of  Absence of cyber security risk management plan is We are also committed and
accepted. exert maximum effort to
mobile and internet banking
make a response timely on
services; all outstanding issues
 The access management control policy is already
 Shortage of manpower; included in the approved IT policy of the Bank. before December 31, 2021.
 Absence of weapon for Furthermore, We will

finalize and implement the
security guard;
already prepared guide line
 Absence of cyber security on disciplinary measures
risk management plan; and on repetitive audit findings
before August 31, 2021.
 Absence of access
management policy and Assignment of staff will be
made based on the work
procedure for T24 user; volume and demand of the
work units on continuous
basis.
120.Inadequate credit MIS: the system Impact Noted As part of the T24 R20 Re-
The loan statement does not include the mentioned fields in the implementation project,
did not show the correct loan status Exposure to operational risk;
T24 R10 CBS. the loan statement is now
& amount due; loan classification & Recommendation: being handled to be more
informative and more
provisions were calculated Improve/upgrade features of the
descriptive. To be
manually; the system did not bank’s system; completed by end of
produce consolidated report; every October, 2021
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monthly & quarterly returns were

produced manually and the system is
not audited since March 2015;
121. Relatively limited internal audit Impact With regard to Limited internal audit coverage of operations the Based on the
Department has been using the risk based audit plan to conduct recommendation of the
coverage54 and the function was Exposure to operational and
audit activities. Besides, AML/CFT and legal department NBE examiners, the Bank
not fully risk based; compliance risk; (foreclosure) has been audited during the last financial year. will strengthen the risk
(Annex II&III) based audit practices by
Recommendation
adopting risk based audit
Establish risk based internal guidelines, NBE Directive
audit and Strengthen the No. SBB/76/2020 and best
practices. Approval of the
coverage of internal audit risk based audit plan of
function; 2021/22 based on the
Directive No.
SBB/76/2020 is under
process and will be
approved until end of
August 2021
122. There were various complains Impact Comment Noted : The Bank is committed to
Exposure to reputational risk; work on customers’
raised by customers such as Complaints are compiled and reports on a monthly basis. handing activity and
inefficient service, ATM services Recommendation Direction will be given after discussed by executive management reduce at a minimum level
and the Board. before December 31, 2021
failure, shortage of manpower,
Rectify costumer complains and on a continuous basis.
absence of convenient work  Customer complaints handling policy and procedure are
timely; approved by the Bank; accordingly various complaints In addition, customer
place, absence of adequate raised by customers will be handled properly and timely complaint lodging and
parking area and frequent system as per the policy; management system will
be fully implemented until
& power interruption;
54
strategic plan performance, board sub-committees’ performances, AML/CFT assessment, overall credit risk management system; loan review function,
regulatory return and foreclosure & disposal activities were not audited
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September 30,2021
The Bank has also

establishing a call center at
Head Office to which
customers may refer up to
December 31, 2021.
VI. ML/TF
Risk
123. Ayer Tena branch has no UN Impact Comment Noted : The Bank has committed
to strengthening the
sanction lists to conduct proper The Bank has assigned staff at a department level to up-date and already established system
Exposure to compliance risk and
KYC assessment against article 4 makes ready the UN sanction list accessible from the Bank’s on UN sanction lists access
violation of proclamation; portal to all branches on daily basis. to all branches and conduct
of Proclamation No. 780/2013;
Recommendation appropriate KYC and
This assessment is also included in the account opening formats as comply with proclamation;
Establish UN sanction lists a mandatory requirement practice.
access to all branches of the (Evidences are attached)

bank and conduct appropriate
KYC and comply with
proclamation;
124. Failure to conduct ongoing Impact Comment Noted The Bank has committed
to strengthening the
customer due diligence with At corporate level the compliance unit conducts KYC/CDD on
Inadequate operational risk already practiced and
regard to source of fund to quarterly basis and reported to FIC regularly. implemented system and
assessment and violation of Conduct on going
deposit, transfer and loan
regulatory requirement; customer due diligence
repayment against article 6.6 of without fail and CDD will
Recommendation start performing by
Proclamation No. 780/2013;
Conduct ongoing customer due branches effective from
the beginning of 3rd quarter
diligence; of the FY 2021/22.
125. AML/CTF trainings were not Impact AML/CFT Compliance and Anti–Fraud trainings were
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provided to some relevant staffs Inadequate operational risk provided to:
of bank’s branches55 against management and violation of

 150 staff on November 24, 2020
Proclamation No. 780/2013 and proclamation and directives;  125 staff on November 12, 2020
article 42 of AML/CTF Recommendation  200 staff of the Bank on April 6-9, 2021
 84 staff on January 29, 2021
compliance Directive No.
 98 staff of the Bank on March 13, 2021
Provide adequate training to
01/2014;  Two staff from April 5-7, 2021
concerned staffs and comply  Two staff from April 19-23, 2021
with proclamation and  Two Staff from April 19-21, 2021
directives;
Supporting document is Annexed
126. Absence of money laundering and Impact Noted June 30, 2022
financing of terrorism risks  The Bank has compliance risk based approach document …
Inadequate ML/FT risk
assessment and periodic updating Periodic ML/FT risk assessment report will be produced during
management and violation of the current budget year.
against Proclamation
proclamation and directives;
No.780/2013 and AML/CTF  Furthermore, the Bank will update the Compliance-Risk based
Recommendation approach document during the current budget year.
Compliance Directive
No.01/2014; Produce comprehensive ML/FT
risk assessment report and abide
proclamation and directive;
127. Failure to identify and monitor Impact  The Bank has already collected PEP List from various Sources The bank is committed to
and dispatched it to all branches and working units for establish the recommended
politically exposed persons
Exposure to operational risk and appropriate action. database up to December
against proclamation 31, 2021.
violation of proclamation ; The document is attached in soft Copy.
No.780/2013;
Recommendation
55
Abinet adebabay, Haya hulet, biserate gebrel and ayertena
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Establish data base for PEPs and

comply the proclamation;
128. Failure to conduct enhanced Impact Noted The Bank is committed to

strengthening the already
customer due diligence practices  At corporate level, the Bank Conducted KYC/CDD on a practiced and
Exposure to ML/FT risk and
for higher risk customers against quarterly basis and same is reported to FIC. But it will be implemented system and
violation of proclamation ; further improved. Conduct on going
Proclamation No.780/2013;
Recommendation customer due diligence
without fail and ECDD
will start performing by
Identify customers based on branches effective
their risk level and conduct December 31, 2021
enhanced customer due diligence
and abide proclamation;
VII. IT
Related
Operational
Risks
129. Information Technology Impact 1) A separate IT Strategy

will be produced by end
Governance:  Not preparing a detailed IT
of second quarter,
1) No approved separate IT strategy strategy also holds the bank 1) The IT Strategy of the Bank is incorporated in the Bank’s 2021/22 F.Y
five year corporate strategy in a very comprehensive manner. 2) The cascaded plan will be
for five years; from exploring the rapid
Moreover, the strategy implementation consultant (KPMG) implemented in the
2) No separate annual IT plan; development of the had done a detailed analysis and produced IT diagnosis planned period of
3) No strong IT policy technology and the bank’s report as a major input to the corporate strategy. 2021/22 F.Y
2) There is a separate IT annual plan cascaded from the 3) The Bank is executing
implementation and IT governance; ability to cope up with this corporate strategy. progressive efforts for
4) No board approved policies and rapid development; 3) The Bank has already implemented core policy requirements. enhancement of the
The Bank will enhance the existing IT governance policy implementation.
procedures( they are draft);  By any circumstance third implementation. The Bank will enhance
5)Some features like reading flash or party companies should not 4) There is approved IS and IT security policies since March the IT governance process
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CD are not disabled on system have access to the database ; 2020. The procedure development is in progress. by adopting various
5) Accepted the finding on flash or CD disabling frameworks. We have
user’s computer; Recommendation
6) The ADDS is implemented but not fully deployed planned to start the
6)The bank implements ADDS but it 1. The bank should have an 7) Accepted the mobile banking interruptions. The existing implementation of
Mobile Banking system is relatively very old. COBIT framework by
is not fully applied for all user and approved IT strategy, plan,
8) Third party companies have only access to test environments end of third quarter
computer; policies and procedures; of the databases for the purpose of core banking re- 2021/22 F.Y.
7)Applications like core banking, e- 2. The bank should give a implementation. 4) The procedures are under
9) The internet Banking authentication is token-based. development and will be
banking are run smoothly and safely comprehensive training for 10) Some training has been provided to the IT staffs. finalized by end of first
but there is some interruption on staffs; quarter 2021/22 F.Y
5) The disabling of CD and
mobile banking; 3. The bank should enhance flash on user’s computers
8) Third Party Company has a e-banking applications and will be completed by end
of second quarter 2021/22
remote access directly to the service time; F.Y.
Database. 4. The bank should control 6) The ADDS
implementation will be
9) Internet banking is token based. system users and their
completed by end of third
This makes it inconvenient for computer by applying quarter 2021/22 F.Y
7) The Bank is currently
customers; policies and using
engaged in the core
10) The bank’s IT staffs didn’t get technology tools like banking system re-
on time training; It is not building ADDS; implementation project to
enhance and replace the
internal staffs’ capacity; existing mobile banking
system to a better version,
which is planned to be
completed by end of
October, 2021.
8)
9) As part of the T24 core
banking re-
implementation, soft
token authentication and
push notification based is
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being implemented.
10) Various IT
training planned for the
2021/2022 F.Y
130. Information Security: Impact 1) The cyber security or

information security
1)The bank has not implemented  The privacy and security of
1) The cyber security or information security management management framework
any of cyber security or data transmitted between frameworks is under implementation using ISO27001 by end of
2) The Bank has the mechanism to report incidents using a ITIL the 2021/22 F.Y.
information security applications is impaired;
compliant system called BMC 2) Awareness creation on
management frameworks; Recommendation 3) The security policy is implemented on the Kaspersky anti- how to use the system is
2)There is no incident reporting  The bank should work virus and more enhancements will be continuously planned for the first
conducted quarter of 2021/22 F.Y
mechanism; intensively on its 3) The security policy is
3)The bank doesn’t enforce the information security implemented on the
Kaspersky anti-virus and
security policy by implementing management; more enhancements will
a policy on the Kaspersky anti-  The information security be continuously
conducted
virus software. They used management should answer:
kaspersky for some computers 1) What is the information
only; security risk posture of the
organization?
2) Is the current architecture
supporting and adding value
to the security of the
organization?
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3) How might security

architecture be modified so
that it adds more value to
the organization?
4) Based on what we know
about what the organization
wants to accomplish in the
future, will the current
security architecture support
or hinder that?
131. IT Services Delivery & Operations Impact 1) The Bank has already adopted the ITIL framework and 1) The implementation of
implemented an IT Service Management system called BMC the IT Service
Management: Implementing IT service
to support the framework. management processes
1)There is no service management delivery management will help 2) The Bank has preventive maintenance plan contracted with are in progress and
third-party Company. continuous effort will be
framework and user support/ the bank’s staffs to get
3) Accepted exerted for their
help desk management; immediate support and having 4) Accepted enhancement
2)The bank doesn’t have preventive business continuity; is such 5) There is a sign-on sheet for monitoring users entering and 2) The contract is
leaving the data center. continuously renewed
maintenance plan; absence support and continuity 6) Accepted every fiscal year.
3)The data center is not well- is impaired; 3) The Bank has planned to
re-locate the existing data
structured; it has wood and glass Recommendation center by implementing a
on its wall. 1) The data center has to be up standard tier-3 data center
at the new HQ building
4)The data center location is not to the standard. Needs some starting end of the
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isolated from the working staff; upgrade on partitioning and 2021/22 F.Y
4) The Bank has planned to
5)The bank implement sign-on sheet wall cladding;
re-locate the existing data
to monitor users entering and 2) Prepare a sign-on sheet to center by implementing a
standard tier-3 data center
leaving the data center facility monitor users entering and
at the new HQ building
regularly; leaving the data center; starting end of the
6)Cabling in the data center is not 3) The banks should establish a 2021/22 F.Y
5)
well-structured and not labeled; service delivery 6) The Bank has planned to
management or help desk re-locate the existing data
center by implementing a
center; standard tier-3 data center
4) It is better to use biometric at the new HQ building
starting end of the
access control rather than 2021/22 F.Y
using card access control;
132.Acquisition & Implementation of Impact IT project office is organized at division level and reports to the
VP Information Systems.
IT systems: The absence of IT project office
 There is no IT project will limit the achievement of
management department in the projects on time and quality;
bank; Recommendation
All IT projects should be
handled by an IT project
management office;
133.Business Continuity and Disaster Impact 1)Accepted 1) The Bank has planned
to make the DR site fully
Recovery: IT operations are crucial aspect
2)Accepted functional by end of the
1)The bank has DR site. But it is not of most organizational 2021/22 F.Y.
3)Accepted 2) Call center office is
fully functional and the service operations. One of the main
being organized under the
is not tested; concerns is business continuity; supervision of VP Banking
Operations for all the
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2)Call-center is not available for the companies rely on their Bank’s systems including
the mobile banking service
Mobile Banking System; information systems to run their
by end of 2021/22 F.Y
3)The bank does not have a operations; in the absence of 3) The help desk center
will be organized under the
centralized and a dedicated help proper DR these could be
Call center office by end
desk center; negatively affected; of the 2021/22 F.Y
Recommendation
The bank should have a
centralized and a dedicated help
desk center with workshop for
performing maintenance and a
call center; the bank should test
its DR site and need to start up
services from DR;
134.IT AUDIT: The bank doesn’t have IT Impact The Bank has established IT Audit at a Division level since The Bank is highly
2013/14; and around ten audits have been conducted during committed to strengthen
audit; The bank couldn’t know and
2018/19 & 2019/20. (Annex VI). Among the reports the following the Information System
control the status of its IT are mentionable: Audit with regard to all
aspects in the future that
infrastructure and system;  IT Asset managements enables to cover more
Recommendation  Data base center management sensitive banking areas.
 Change management control
The bank should audit its IT
 Cyber security
infrastructure and system  IT hardware acquisition
periodically;
135.RISK MANAGEMENT Impact Recommendation well noted

The Bank for its Risk & Compliance Management Department
PROCESS: Even if the bank has risk The bank couldn’t know its IT
hired a Senior Technology and Cyber Risk Officer since 2019/20
management department, it doesn’t risk and prepare for its budget year with the aim of monitoring the Bank’s IT risks.
Accordingly, the Department has made a number of IT risk
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work on IT risk assessment, mitigation; assessments, undertaken various IT Risk Management Trainings
and awareness creation sessions to all concerned regarding the IT
mitigation, monitoring and reporting; Recommendation
risks of the Bank and the necessary remedial actions that ought to
 The bank should work be taken, and other related tasks as well.
However, IT risk related activities will further be strengthened
intensively on IT risk
as per the recommendation.
management;
 The bank should have a risk
management, mitigation,
monitoring and reporting
plan;
 Accordingly, the bank
should plan future IT
expansion and business
continuity;
136.CHANGE MANAGEMENT: Impact 1) Change Management
 The bank has a change management plan and various
1) The bank doesn’t have change Difficulty to manage system
activities have been done so far to implement changes.
management plan and still no changes and upgrades or  Following the 3rd corporate strategy the Bank has set a plan
activity to implement changes; modifications; to make changes both structurally and operationally.
 Based on this plan the bank has placed a new organizational
2) There is no documentation in Recommendation structure capable of shouldering the envisaged changes.
system change, upgrades and  There should be change  Change champions were identified trained and assigned to
assist employees of the bank in the change yet to come.
other changes; control process in system
 As part of the change process new policies were developed,
change and configuration. gaps in the existing policies and procedures were identified
and updated against best practices.
This process must be
 Various communication schedules on the bank’s values and
documented; overall culture were planned and executed as per the plan.
 The system should be able
to rollback if the new one 2) As part of the BMC, change management process is put in
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cannot work as expected; place.
 The documentation of the

change management process
needs to specify who is
responsible for performing
the following roles:
 Who can request change?
 Who can approve change? 2)The change management
procedure is under
 Who can develop approval process to be
changes? finalized by end of first
quarter 2021/22 F.Y.
 Who can test the changes
for compliance with
approved specifications?
 Who can move the
changes into production?
 Who will be documenting
the whole process?
VIII. Earn
ings
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137.The Bank’s major expenses were Impact Noted. The Bank will focuses on
Out of the non-interest expenses, salary and other employees managing non-core
non-interest which accounted 53.44% High non-core core expenses;
benefit represents 52%. controllable expense in a
of total expense; Recommendation However, with the aim of controlling and reducing controllable continuous manner in
Expense, the Bank has drafted a workable action plan. Based on order to keep noncore
Reduce such expenses;
this plan the Bank has managed to shift the increasing trend of expenses within acceptable
these expenses. limit.
Valuable proposals in this regard have also been developed and

approved by the Management. These proposals are currently
being pursued by the concerned organs of the bank and
encouraging change are expected in this regard
138.RoA and RoC stood at 2.34% and Impact Noted. Commencing from the
The Bank will work on enhancing customer service so as to next budget year.
21.48 % against last year same period Decreasing trend of
increase its market share in terms of major performance indicators
of 2.60 % and 24.28 %, respectively; profitability; impaired risk such as deposit mobilization, foreign currency generation, loan
and advances granted to customers etc., which in turn enhance the
absorbing ability of the bank;
overall performance of the Bank. In addition, we will work on
Recommendation reducing non-core controllable expenses in a continuous manner.
Improve earnings performance;
139.There were under provisioning of Birr Impact The Bank has held adequate provisioning as stated in our response Enough provisions will be
for finding No. 21. held on long outstanding
206.07 million for bad debts and long Overstated income and capital
items.
outstanding items against NBE position;
directive No.SBB/69/2018; Recommendation
IX. Liquidity
140.There were no liquidity management Impact Noted The bank is committed to

56 in place a new liquidity
policy and procedure ; Inadequate liquidity risk
56
Under draft level
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management; violation of NBE The Bank has liquidity management manual. However, policy and procedures until
considering the Bank’s newly implemented strategic plan, NBE the end of the 1st quarter
Directive;
Directives and the prevailing environment has thoroughly revised of 2021/2022 FY.
Recommendation its existing manual and has developed a new liquidity
management policy and procedure which is currently under draft
Comply with NBE Directive;
level and will be finalized soon.
develop liquidity management
policy and procedure;
141.There was no TOR for ALCO57; Impact It will be finalized till the
The Bank has TOR for its ALCO. However, considering the end of the 1st quarter of
Inadequate liquidity risk
Bank’s newly implemented SP and NBE recent Directives has 2021/2022 FY.
management; violation of NBE revised its existing TOR and prepared a new TOR for its ALCO,
which is now at draft level and will be finalized shortly.
Directive;
Recommendation
Comply with NBE Directive;
develop TOR for ALCO;
142.ALCO did not regularly report Impact Noted.

Relevant reports have been sent to the Board regularly. However,
liquidity risk profile to the board Inadequate liquidity risk
the Bank will improve frequency of reporting the liquidity risk
against NBE Directive No. oversight; Violation of NBE profile to the board.
SBB/57/201458; Directive;
Recommendation
Strengthen liquidity risk
oversight; comply with NBE
Directive;
57
Under draft level
58
Reported its liquidity risk profile to the board only 10 times within two years
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143.The Board did not review liquidity Impact Both the Bank’s BoD as well as Senior Management undertakes
oversight of the liquidity risk assessment of the Bank by
risk assessment reports; Inadequate board oversight over
reviewing and deliberating on the Bank’s quarterly Risk &
liquidity risk; Compliance Management reports which addresses the liquidity
risk assessment and management work of the Bank.
Recommendation
Strengthen liquidity risk
oversight;
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144.Absence of liquidity risk management Impact Disagree
tools such as maturity gap analysis, Weak liquidity risk  The Bank has developed a risk management tools that includes
liquidity cumulative limits and measurement, monitoring and the maturity gap analysis. In this respect, the Bank’s Treasury
and Risk and Compliance Management Departments developed
concentration limits; control; and accordingly prepared quarterly maturity gap analysis report,
Recommendation the former being guided by NBE Directive No. SBB/57/2014
while the latter following the Bank’s own maturity ladder
Introduce such tools;
assumptions.
 The Bank has its own liquidity cumulative limits as depicted in
the Bank’s Risk Management Procedure. There are also various
liquidity concentration limits that are currently under use by the
Bank. These include foreign deposit to liquid assets ratio, time
deposit to total deposit ratio, loan to deposit ratio and off-
balance sheet exposure and others.
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145.ALCO report was incomprehensive59; Impact Noted Commencing from the 1st
quarter of 2021/22 plan
Inadequate liquidity risk ALCO report will incorporate the maturity gap analysis on year.
monitoring and control; quarterly bases, that supports the liquidity risk monitoring and
control practices of the Bank;
Recommendation
Incorporate in the periodic
ALCO report;
146.Liquid asset to total deposit ratio was Impact Noted and the Bank will try to improve as recommended. The Bank will work to
enhance its liquidity
15.58%, which was very close to the Inadequate liquidity position;
position throughout the
regulatory minimum requirement of Recommendation plan period 2021/2022 FY.
15%; Improve liquidity position;
147.Loans to deposit ratio accounted Impact The Bank was set its internal limit considering the NBE Bills
purchase, since it is now lifted revising and setting appropriate
84.55% against internal limit of Exposed to liquidity risk;
limit which balance and optimally utilize available resources is
71.2%; violation of internal limit become crucial and the Bank will revise its internal limit
accordingly. However, the examiners comment is well noted.
Recommendation
Comply with internal limit;
148.ALCO and its risk assessment Impact ALCO and its risk assessment practice has been Audited by the
Internal Audit Department of the Bank and the observed findings
practice has never been audited; Impaired quality of ALCO’s
were also communicated to all concerned work units of the Bank
function; through covering letter reference numbers NIB/IAD/091/20
March 13, 2020. (Annex IV)
Recommendation
Liquidity risk management
process should be subject to
ANNEXES
Maturity gap analysis was not covered
59
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internal audit;
149.There were large negative cumulative Impact Starting from 1st quarter of
Recommendation well noted and the Bank will try to strengthen 2021/2022 FY.
maturity mismatches of Birr 58.74 Exposure to liquidity risk;
its liquidity management practice.
million, Birr 3,092.62 million, Birr Recommendation
6,073.71 million, Birr 2,989.16 Strengthen liquidity
million, Birr 2,250.81 million, Birr management of the bank;
22,814.96 million and Birr 2,179.37 develop cumulative limit.
million for the time buckets of 8-14
days, 15 days-1 month, 1-3 months,
3-6 months, 6-12 months, 1-3 years
and over 3 years, respectively;
Absence of cumulative limits.
ANNEXES Page 81 of 108

Annex 1
Nib International Bank S.C
Capital Adequacy Ratio
(In Millions of Birr)
As at December 31, 2020
Assets FV CCF Amt Wt RWA
On-Balance Sheet
Cash on hand (local & foreign currency) 1,562.89 0 -
Claims on Banks 916.75 20% 183.35
NBE reserve, payment & settlement and issue a/c 2,151.83 0 -
Page 82 of 108
Placements with other banks (< one year maturity) 1,047.10 20% 209.42
Un cleared effects foreign 13.65 100% 13.65

Others - -
Loan & advance (net): - -
Residential mortgage loan - -
Other Loans 30,284.24 100% 30,284.24
Fixed assets(Net) 3,287.30 100% 3,287.30
Investments 268.49 100% 268.49

NBE Bills 6,520.74 0% -
Supplies stock account 76.19 100% 76.19
Account receivables - -
Others 1,319.66 100% 1,319.66
Sub total 47,448.82 35,642.28
Off-Balance sheet
856.3
Letter of Credit 20% 171.28 100% 171.28
8
2,261.8
Loan Commitments 50% 1,130.92 100% 1,130.92
4
885.8
Guarantee issued 50% 442.93 100% 442.93
5
Sub total 4,004.0 1,745.12 1,745.12
7
51,452.8
Grand total RWA 49,193.94 37,387.40
9
Total Capital 5,166.55
Capital to RWA (%) 13.82%
Annex 2
Page 83 of 108
Structure and Trend of Capital
As at End: December 31, 2020
Description Dec-19 Dec-20 % change
Equity capital 3,000.89 3,737.29 24.5

Share Premium
Legal reserve 1,094.84 1,355.75 23.8
Special reserve 2.00 2.10 5.0
General reserve 173.92 73.51 (57.7)
Total Capital 4,269.65 5,166.55 21.0
Risk -weighted assets 28,652.63 37,387.40 30.5
Capital Adequacy ratio 14.90% 13.82% (7.3)
Page 84 of 108
Annex 3
List of top 20 Borrowers
S. No Name of Borrower Outstanding Balance
1 BEAEKA GENERAL BUSINESS PLC 860.09
2 KERCHANSHE TRADING PLC 804.15
3 AYAT S.C. 791.15
4 B.G.I. ETHIOPIA PLC. 772.16
5 MULEGE PLC 736.78
6 J.H SIMEX P.L.C 547.08
7 SANTA MARIYA REAL ESTATES HOTELS 454.99
8 W A OIL FACTORY AND DISTRIBUTER PLC T 454.85
9 451.23
NEHAM INTERNATIONAL BUSINESS PLC
10 GARAD PRIVATE LIMITED COMPANY 434.27
11 YEKATIT PAPER CONVERTING 339.99
12 SSC CONSTRUCTION PLC 366.79
13 GREAT CITY HOTEL AND TOURISM PLC 246.88
14 JEMEA TRADING PLC 266.28
15 ARFASA GENERAL TARDING PLC 289.76
16 SANTA MARIA CONSTRUCTION PLC 247.35
17 SIDAMO TERA BULDING CONSTRUCTION S 224.32
18 DEGOLO COMMERCIAL PLC. 230.92
19 ROSE ETHIOPIA PLC 212.01
20 STEELY R.M.I PLC 227.37
Sub- total 8,958.42
Total loans & advances 30,825.69
% age of total loans 29.06
Page 85 of 108
175.82
% age of total capital
Page 86 of 108
Annex 4
Summary of Credit Administration Weaknesses
As of September 31, 2020
1. BEAEKA General Business PLC

 Extended term loan of Birr 250 million, 150 million and Birr 14 million to a defaulted borrower 60 against NBE directives No.CRB/02/2019
article 8.2;
 Failure to collect and review recent audited financial statements61 against NBE Directives No. SBB/69/2018;
 Renewal of pre-shipment loan of Birr 200 million, Birr 49 million, Birr16 million and Birr 5 million after expiry date (expired on 31/05/20
renewed on 12/06/20) and OD facility limit of Birr 50 million (expired on 01/05/20 renewed on 12/06/20);
 Absence of timely estimation of collateral 62 held by the bank against own credit policy and procedure which state that all buildings held by the
bank must be re-evaluated every three year;
 Highly indebted business (100% of total assets was financed by debt) as per audited and provisional financial statement of June 30, 2018 and
June 30, 2019, respectively.
2. Kerchanshe Trading PLC
 Recent audited financial statements were not used for analysis during renewal of pre-shipment facility limit of Birr 300 million, Birr 300
million, Birr 50 million and OD facility limit of Birr 50 Million on November 07,2020 against NBE directives No. SBB/69/2018;
 Renewed pre-shipment and OD facility to defaulted borrower 63 against NBE directives No. CRB/02/19 article 8.2;
 Highly indebted business (above 95% of total asset was financed by debt as per audited financial statement of June 30,2019);
 Renewal of the existing pre-shipment facility limit of Birr 300 million and Birr 50 million and OD facility limit of Birr 50 million after due date
(expired on 05/09/20,09/09/20 and 13/07/2020, respectively, renewed on November 7,2020);
60
Information collected from NBE on September 21, 2020 October 20, 2018and June 26, 2020, as the borrower’s loan at UB, UB & BOA were classified as
doubtful, substandard and substandard, respectively.
61
For the year ended June 30, 2019 while approving T/L Br 14 million, renewal of the existing pre-shipment facility limit of Birr 270 million and OD facility
limit of Birr 50 million on 12/06/2020
62
Building evidenced by LHC No.AA00010801500 , 13220/97 and 223019/200 estimated on July 21,2017 but not re-estimated until December 31,2020
63
As per credit information on August 21, 2020 the borrower’s loan at BOA was classified as substandard
Page 87 of 108
 No timely estimation of collateral64 held by the bank against own policy and procedure.
3. J.H Simpex Plc
 Failure to collect and review recent audited financial statement for the year ended June 30, 2019 during rescheduling of TL of Birr 200 million
and Birr 300 million on June 16, 2020; against NBE directives No. SBB/69/2018.
4. NEHAM International Business Plc.
 Granted OD facility limit of Birr 25 million on June 19/2020, under LAF No. NIB/CRM/258/20 while the plc has NPLs in other Bank (UB)
against article 8.2 of NBE directive No. CRB/02/2019;
 Accrued interest arrears of Birr 1,406,482 for 105 days against own procedure; and
 High collateral risk which covered only 25.8% of the outstanding loan against own procedure (expired on Nov 20/2020, but renewed on Nov
26/2020).
5. Mullege Plc.
 Failure to renew pre-shipment facility limit timely against own procedure.
6. W.A Oil Factory & Distributer Plc.
 The Plc has NPLs in other Banks ( AB, BIB, ZB, BoA, & UB) as per information from CRB dated November 9/2020, while the bank granted
fresh T/L of Birr 52.1million on Dec 19/2020, under LAF No. NIB/CBD/562/20 against article 8.2 of NBE directive No. CRB/02/2019 ; and
 High collateral risk which covered only 4% of the outstanding Loan.
7. Santa Maria Real Estates Hotel
 Arrears of Birr 68,431,069 for 72 days against own procedure.
8. Yekatit paper converting PLC
 Failure to collect credit information while amalgamating T/L of birr 50 million and O/D facility limit of birr 40 million against NBE directives No.
CRB/02/2019;
 There was no analysis for letter of guarantee of Birr 2,925,600.00 that issued on January 31, 2019 and advance payment guarantee of Birr
1,138,500.00 issued on March 13, 2019.
9. Great city Hotel and Tourism PLC
 There was inconsistency65 in credit risk grading;
64
Building evidenced by LHC No.AA000070700417F-2 estimated on October 29,2016
65
Risk grade guideline format were “C” but the risk analysis classified under “B’’
Page 88 of 108
 Highly indebted business as per audited finical statements of December 31/2019 & September 30, 2020 of which 100% total asset financed by debt;
 The loan contract wrongly states that the repayment for T/L start on 25/03/2012 instead of 25/03/2013.
10. Arfasa General Trading PLC
 Failure to renew pre-shipment facilities (export advance against sales contract for ECX and export advance for coffee Non ECX Birr 150 million
each) before expire date (expired on 12/11/2020 but renewed on 27/11/2020);
 Failure to follow up business performance and failure to produce stock list for Pre-shipment facility.
11. Jemea Trading PLC
 Highly indebted ; 90% of total assets were financed by debt as per audited financial statement of July,2020;
 Failure to renew pre-shipment facility (export advance against sales contract for Non ECX limit of birr 100 million and export advance against sales
contract ECX facility limit of Birr 70 million ) before expire date (expired on 27/12/2020 but renewed on 12/01/2021);
 Granted additional loan while the business was loss making ; and
 Failure to follow up business performance and failure to produce stock list for Pre-shipment facility.
12. Steely R.M.I PLC

 Accepted under construction building of 40% complete as a collateral against its own credit procedure which requires minimum of 60% completion;
 Failure to collect recent audited financial statement while renewing the existing O/D facility limit of Birr 300 million on 23/06/2020 against NBE
directives NO.SBB/69/2018 article 8.366; and
 The loans was not adequately collateralized 67, against its own credit procedure;
13. Rose Ethiopia PLC

 Failure to collect recent audited financial statement while amalgamating two O/D facilities of birr 30million and birr 35million with T/L of birr
110million against NBE directives NO.SBB/69/2018 article 8.368 ;
14. Degolo Commercial PLC

 Failure to renew O/D and pre-shipment facility on or before expiry date (expired on 27/05/20, renewed on 25/12/20);
66
Used July 2019 provisional and July 2018 audited financial statement when approved loan in 23/06/2020
67
Collateral to loan ratio was 57.77% against the minimum required ratio of 100%
68
Used July 2019 provisional and July 2018 audited financial statement when approved loan in 28/02/2020
Page 89 of 108
 Extending credit facility for borrower with poor financial standing or highly indebted (Debt to Asset ratio of 97% and Debt to Equity ratio of
3481%); and
 Poor O/D facility utilization; its lowest debt balance exceeded approved limit for 8 consecutive months (February, 2020 to October, 2020).
15. Santa Maria Construction PLC
 Failure to renew O/D facility on or before expiry date (expired on 09/07/20, renewed on 05/09/20);
16. Desalegn Gebremichael Buta
 Highly indebted as 98.35% and 107.82% of total asset was financed by debt as per audited financial statement of July, 2020 & July 07,2019
respectively;
 Failure to collect and review recent audited financial statements while approving fresh Preshipment limits of Birr 30 million & Birr 20 million and
Renewal of OD facility limit of Birr 15 million and Preshipment limits of Birr 15 million & Birr 25 million under LAF No. NIB/CBD/604/20
against NBE Directives No. SBB/69/2018; and
 Renewal of Pre-shipment facility limits of Birr 25 million & Birr 15 million and OD facility limits of Birr 15 million & Birr 9 million after expiry
date69.
17. Eney Investment PLC
 Failure to renew OD facility limit of Birr 7million which increased to Birr 30 million on/or before expiry date (expired on March 30, 2020 but
renewed on June 05, 2020); and
 CRB information was not collected while renewing OD facility limit of Birr 7million on December 27, 2019 against NBE Directives No.
CBB/02/2019.
18. Cabey PLC
 Failure to renew the pre-shipment facility limits of Birr 100 million on or before expiry date (expired on 31/07/19 but renewed on 27/11/20);
19. Enock
 Inadequate coffee stock collateral for pre-shipment loans of Birr 150 million ( the stock amount was only Birr 78.36 million).
20. Ergando Trading IND.PLC
 Inadequate insurance coverage for collateral amount Birr 238.98 million (the insurance amount was Birr 62.12 million).
Annex 5
69
expired on June 26, 2020, but renewed on July 8, 2020;
Page 90 of 108
Nib International Bank S.C.
Loans and Advances Re-classified by NBE Examiner’s
At End of December 31, 2020
No. Client Facility Outstanding balance Classification by

NIB NBE
OD 50.57 SM Substandard
TL1 6.67 Pass Substandard
1 Kerchanshe Trading PLC TL2 19.71 Pass Substandard

Pre1 301.91 SM Substandard
Pre3 300.27 Pass Substandard
Total 804.08
Background
 Kerchanshe Trading plc was established in 2006 E.C to engage in different types of export trade business.
Loan Origination, monitoring and administration
 EMCC approved and renewed different credit facilities at different period;
 The credit facilities were availed to increase export performance and working capital requirement of the company.
Reason for classification
 Renewal of existing pre-shipment and OD facility after due date;
 Failure to review recent audited financial statement against NBE directives No SBB/69/2018;
 The pre-shipment facility limit of Birr 301.91 million and Birr 50.35 million were already classified as special mention by the bank;
 The OD facility shows credit balance only time throughout the year;
Page 91 of 108
 The highest and lowest debit balance of OD exceed the approved limit for 90 consecutive days from September to November 2020, thus, it should
be classified as “Substandard” as per sub-article (6.1)(6.1.4) of the directive No SBB/69/2018; and
 The other facilities were classified as “Substandard” in line with NBE directive No. SBB/69/2018 article 6.2of loan loss provisioning for multiple
facilities.
No. Client Facility Outstanding balance Classification by

NIB NBE
OD 104.09 SM Doubtful
TL1 5.77 SM Substandard
No. Client Exposure Classification
TL3 by
54.18 SM Substandard
TL4
NIB 21.83 NBE SM Substandard
2 BEAEKA General Business PLC. TL5 120.95 SM Substandard
4 ROSE ETHIOPIA P LC T/L (199.12) S/M Substandard
Total 199.12 TL7 15.15 SM Substandard
Total 860.05
Background
 BEAEKA general business plc was established in 2002 E.C to trade various businesses such as import/export, machinery rental, agricultural product,
printing press, spare parts and real estate.
Loan Origination, monitoring and administration
 EMCC approved and renewed different credit facilities at different period;
 The credit facilities were was availed to increase export performance, purchase construction machineries and working capital requirement of the
company.
Page 92 of 108
Reason for classification
 Renewal of existing pre-shipment and OD facility after due date;
 Failure to review recent audited financial statement against NBE directives No SBB/69/2018;
 All other facilities except the term loan of 157.11 million facility was classified as special mention by the bank;
 The highest and lowest debit balance of OD exceed the approved limit for 180 consecutive days from July to December 2020, thus, it should be
classified as “doubtful” as per sub-article (6.1)(6.1.4) of the directive No SBB/69/2018; and
 The other O/D facilities were classified as “Substandard” in line with NBE directive No.SBB/69/2018 article 6.2of loan loss provisioning for
multiple facilities.
No. Client Facility Outstanding Balance Classification by

NIB NBE
3 Neham International Business Plc T/L1 157.24 million SM Substandard
T/L2 187.01 million SM Substandard
T/L3 75.87 million SM Substandard
OD 25.10 million Pass Substandard
Pre 31.10 SM Substandard
Total 476.32million
Background
 The Plc was established in 1998E.C With an Initial Paid-up Capital of Birr 1.5 million by four founding shareholders and engaged in manufacturing,
Whole Sale, Transport & Export.
Loan Origination and Monitoring
 The customer was availed with term loan of Birr 408.7 million, Pre-shipment of Birr 30 million and overdraft facility of Birr 25 million on June 6 &
15/2020;
 The Pre-shipment facility was expired on January 1/2021, but not pays accrued interest on time.
Page 93 of 108
Reasons for Classification
The bank has classified all facilities as ‘Pass and SM’; However, the NBE examiners downgraded it one facility to “Substandard” as per article 6(1) (3) (iii)
of the NBE Directive No. SBB\69\2018 due to the following facts.
 The Pre-shipment facility statement does not separately show periodic accrued interest under “Balance Amount” column as it only shows outstanding
principal balance;
 Accrued interest arrears of Birr 1,406,482 for 105 days;
 Thus, pre-shipment facility should be classified as “Substandard” in line with article 6(1) (3) (b) (iii) of the NBE Directive No. SBB\69\2018; and
 The other facility (loan & advance) should also be classified “Substandard” as per article 5(5) of the NBE Directive No. SBB\69\2018.
No. Client Exposure Classification by

NIB NBE
4 ROSE ETHIOPIA P LC T/L (199.12) S/M Substandard
Total 199.12
Background
 ROSE ETHIOPI PLC was established in 1994 E.C under principal registration No.ንኢሚ/ግማ/01014/94, aiming at engaging in arrays of business
venture.
Loan Origination
 Under LAF No. NIB/CRM/064/20 dated 28/02/2020 HOCC-A approved 70 amalgamating two existing O/D and temporary O/D facilities of Birr 30
million and Birr 35 million with Term loan of birr 110million.
Monitoring and administration
 Under LAF No. NIB/CRM/064/20 dated 28/02/2020 amalgamating the existing O/D and temporary O/D facilities with Term loan and rescheduling it.
Reason for re-classification
The bank has classified the T/L as "Special mention" loan facility however; NBE examiner downgraded it to "Substandard" category as per NBE Directive
No. SBB/69/2018 due to the following fact.
70
On 28/02/2020
Page 94 of 108
 The borrower paid only birr 4.5 million interest at once out of expected repayment of birr 20.24 million; and
 T/L had arrears of Birr 15,746,449.00 for four consecutive months (120 days).
No. Client Exposure Classification by

NIB NBE
OD (11.02) SM Doubtful
5 DEGOLO COMMERCIAL P PEX1 (120.56) Pass Substandard
LC PEX2 (66.31) Pass Substandard
T/L1 (10.14) Pass Doubtful
Total 221.41
Background
 DOGOLO COMMERCIAL PLC was established in 1998 E.C and licensed in export of cereals, oilseeds, pulses and other agricultural raw
material;
Loan Origination
Page 95 of 108
 Under LAF No. NIB/CRM/328/19 dated 09/10/2019 HOCC-A approved 71 renewal of existing O/D, Non-coffee Non-ECX and Non-coffee-ECX
facilities limit of Birr 10.9, Birr 125 and Birr 70 million respectively for six months and approve truck term loan of birr 1.23 and conversion of
guarantee claim to term loan of birr 8.61 respectively; and
 Under LAF No. NIB/CRM/083/17 dated 30/03/17 HOCC-A approved 72 the term loan of birr 14 million for the purchase of ware house building
for its exportable items to smoothly facilitate its business.
Monitoring and administration

 Renewed the Poor performing O/D and export advance facilities on 25/12/20 for the next six months and one year period respectively, under
LAF No. NIB/CBD/652/20 dated 17/12/2010.
Reason for re-classification
The bank has classified the O/D loan facility as "Special mention" and three Term loans and two Pre-shipments facilities as ‘’Pass’’ status however, NBE
examiner downgraded it to "Doubtful" and ‘’Sub-standard’’ category as per NBE Directive No. SBB/69/2018 due to the following facts.
 The O/D facility has shown lowest credit balance only once over 360 days;
 Poor performance of O/D facility limit of Birr 10.9 million; its lowest debt balance exceeded approved limit for 8 consecutive months
(February, 2020 to September, 2020); Thus, it should be re-classified to "Doubtful" as per article 6.1.4 of NBE Directive No .SBB/69/2018.
 The two Pre-shipment facilities were classified as "Substandard" as per article 5.5 of NBE Directive No. SBB/69/2018; and
 The bank classified the three T/L’s as ‘’Pass’’ while they were actually classified as ‘’Doubtful’’ under the latest LAF No. CBD/634/20 dated
December 17, 2020 with convincing justification. Thus, they should remain classified as “Doubtful.”
71
On 18/10/2019
72
On 03/04/2017
Page 96 of 108
No. Client Facility O/S Classification by

NIB NBE
6 Desalegn Gebremichael T/L 1.28 Pass Substandard
Buta OD1 5.04 SM Substandard
OD2 14.86 Pass Substandard
OD3 4.77 Pass Substandard
Pre-shipment1 20.23 Pass Substandard
Pre-shipment5 20.20 SM Substandard
Pre-shipment6 10.08 SM Substandard
Total 175.29
Page 97 of 108
Background
 The Customer was licensed in 1997 E.C to engage in Export and Import business.
Loan Origination and Monitoring

 The credit facilities were extended at different period of time. There was no proper loan monitoring despite the poor utilization of credit facilities.
Reason for Classification
 Failure to collect and review recent audited financial statements while approving fresh Preshipment limits of Birr 30 million & Birr 20 million and
Renewal of OD facility limit of Birr 15 million and Preshipment limits of Birr 15 million & Birr 25 million under LAF No. NIB/CBD/604/20 against
NBE Directives No. SBB/69/2018;
 Preshipment4 was disbursed without making re-approval (approved on April 25,2020 but disbursed on August 14,2020) against own credit procedure;
 Poor overdraft facility utilization. The sources of repayments for OD facility limit of Birr 15 million were from disbursements of Pre-shipment loan
facilities. Thus, it should be re-classified as “Substandard” in line with NBE Directive No. SBB/69/2018 article 6.2;
 Accrued interest of Birr 894,985.16 on Preshipment1 (Birr 25 million) was not paid for 145 days. Thus, it should be re-classified as “Substandard” in
line with NBE Directive No. SBB/69/2018 article 6.1.3;
 Accrued interest of Birr 523,571.94 on Preshipment2 (Birr 15 million) was not paid for 143 days. Thus, it should be re-classified as “Substandard” in
line with NBE Directive No. SBB/69/2018 article 6.1.3; and
 The Term Loan and other credit facilities should also be classified as “Substandard” as per article 5(5) of the NBE Directive No. SBB/69/2018.
No Client Facility Loan Exposure Loan classification
NIB NBE
Page 98 of 108
7 Zeru G/Libanos T/L1 20.00 SM SS

T/L2 20.00 Pass Pass
Pre 100.00 Pass SS
Total 140.00
Background
 The borrower was licensed in 2000 E.C, to engage in a business of agricultural products trade;
Loan monitoring and administration

 Conversion of the existing OD facility limit of Birr 20 million in to T/L, under LAF/No.NIB/CBD/532/20, dated approved on 19-08-20 HOCC-A;
Loan Origination
 Under LAF No. NIB/CRM/192/19 dated 18-6-19 HOCC-A approved export T/L of Birr 20 million, export pre-shipment of Birr 100 million and
another export T/L of Birr 20 million, under LAF/No.NIB/CBD/532/20, dated approved on 19-08-20 HOCC-A.
 Under LAF No.NIB/CRM/192/19 dated 18-6-19 HOCC-A Approved; T/L limit of Birr 20 million for five years on quarterly repayment of Birr
1,463,503; Pre-shipment facility of Birr 100 million (exceptionally) renewable every year; and
 Under LAF/No.NIB/CBD/532/20, dated approved on 19-08-20 HOCC-A; T/L limit of birr 20 million for five years at quarterly repayment of Birr
3,254, 908.
Reasons of re-classification
 Failure to renew the pre-shipment facility limits of birr 100 million on or before expiry date (expired on 31/07/19 but renewed on 27/11/20);
 T/L1 has arrears of Birr 3,778,992 for 160 days. Thus, it should be classified as substandard based on article 6.1.3(a) of NBE directive
No.SBB/69/2018; and
 The rest facilities should also be classified as substandard in line with article 5.5.of NBE directive No.SBB/69/2018.
NIB NBE
8 T/L1 87.89 Pass SM
Page 99 of 108
Ergando Trading T/L2 20.00 Pass SM

IDU.P.L.C T/L3 10.00 Pass SM
OD 25.00 Pass SM
Total 142.89
Background
 Ergando Trading IDU PLC was licensed in 1996 E.C, trading industry to engage in manufacturing sector.
Loan monitoring and administration
 Amalgamation of Birr 30 million with the existing six outstanding T/L of Birr 57.89;
Loan Origination
 Under LAF No.NIB/CRM/127/19 dated 10-05-19 HOCC-A approved; T/L of Birr 87.89 million for ten years at quarterly repayment of Birr
4,765,290;
 Under LAF No. NIB/CRM/059/20 dated 14- 04-20 HOCC-A approved T/L of Birr 20 million for five years at quarterly repayment of birr
1,537,523; Renewal of existing OD facility limit of birr 25 million; and
 Under LAF No. NIB/CRM/303/20 dated 26-06-20 HOCC-A approved T/L of Birr 10 million for five years at quarterly repayment of Birr 768,762.
Reasons of Classification
 Poor OD facility utilization; it did not show credit balance from January to December 2020;
 The credit balance shown in April was the result of T/L disbursement of birr 20 million. Thus, it should be classified as substandard in line with
article 6.2 of NBE Directive No.SBB/69/2018;and
 The T/Ls should also be classified as substandard as per article 5.5 of the above mentioned Directive.
NIB NBE
9 Cabey T/L1 20.00 SM SM

T/L2 20.00 SM SM
T/L3 20.00 SM SM
Page 100 of 108

T/L4 20.00 SM SM
Total 80.00
Background
 Cabey PLC was licensed in 1989 E.C, to engage in import and export business.
Loan origination and monitoring
 Under LAF No.027/12 dated 20/02/12, HOMCC Approved T/L of Birr 20 for five years with monthly repayment of birr 1,540,856;
 Under LAF No. CBD/483/20 dated 10/10/20, HOCC-B renewed and Approved OD facility limit of Birr 122 million;
 Under LAF No. CBD/483/20 dated 10/10/20, HOCC-B renewed and Approved OD facility limit of Birr 50 million; and
 Under LAF No. NIB/CRM/120/18 dated 26/04/18 renewed and approved pre-shipment facility limit of Birr 100 million.
Reasons of reclassification
 Poor OD facility limit of Birr 50 million as it has shown credit balance only once from January to December 2020;
 Poor OD facility of limit of Birr 122 million as it did not shown credit balance from January to December 2020; the credit balance shown in June
2020 was the result of Birr 50 million. Thus, it should be classified as substandard as per article 5.5 of NBE directive No.SBB/69/2018; and
 The rest credit loans should also be classified as substandard in line with article 6.2 of NBE directive No.SBB/69/2018.
Annex 6
Additional Required Provisions
(In millions of Birr)
No Borrower Type of O/Stand Status By value Provision Required Shortfall/Excess
facility .
Balance NIB NBE NRV Unreco. Held Provision
Page 101 of 108

1 BEAEKA General OD 104.10 SM Doubtful 61.10 43.00 3.12 21.50 (18.38)

Business PLC. TL1 4.50 SM Substandar 2.64 1.86 0.13 0.37 (0.24)
TL2 16.65 SM dSubstandar 9.77 6.88 0.50 1.38 (0.88)
d
TL4 20.31 SM Substandar 11.92 8.39 0.61 1.68 (1.07)
d
TL6 80.00 SM Substandar 46.95 33.05 2.40 6.61 (4.21)
d
TL8 150.00 Pass Substandar 88.04 61.97 1.50 12.39 (10.89)
Pre1 4.85 SM dSubstandar 2.85 2.00 0.15 0.40 (0.26)
Pre2 195.61 SM d
Substandar 114.80 80.81 5.87 16.16 (10.29)
Pre3 48.47 SM Substandar
d 28.44 20.02 1.45 4.00 (2.55)
2 Kerchanshe Trading PLC OD 50.57 SM dSubstandar 29.68 20.89 1.52 4.18 (2.66)
TL1 6.47 Pass dSubstandar 3.80 2.67 0.06 0.53 (0.47)
d
d
Pre1 299.27 SM Substandar 175.64 123.63 8.98 24.73 (15.75)
d
Pre3 299.60 Pass Substandar 175.83 123.76 3.00 24.75 (21.76)
3 NEHAM T/L1 141.34 SM Substandar
d 82.95 58.39 4.24 11.68 (7.44)
INTERNATIONAL d
169.21 Pass Substandar 99.31 69.90 1.69 13.98 (12.29)
BUSINESS Plc.
T/L2 d
T/L3 68.19 SM Substandar 40.02 28.17 2.05 5.63 (3.59)

OD 25.00 Pass dSubstandar 14.67 10.33 0.25 2.07 (1.82)
Pre 30.00 SM dSubstandar 17.61 12.39 0.90 2.48 (1.58)
4 Rose Ethiopia PLC T/L 175.05 SM dSubstandar 102.74 72.31 5.25 14.46 (9.21)
d
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5 Degolo Commercial PLC Pre1 120.51 Pass Substandar 70.73 49.78 1.21 9.96 (8.75)
Pre2 66.29 Pass dSubstandar 38.90 27.38 0.66 5.48 (4.81)
OD 11.02 SM dDoubtful 6.47 4.55 0.33 2.28 (1.95)
TL1 8.61 Pass Doubtful 5.05 3.56 0.09 1.78 (1.69)
T/L2 10.36 Pass Doubtful 6.08 4.28 0.10 2.14 (2.04)
T/L3 1.18 Pass Doubtful 0.69 0.49 0.01 0.24 (0.23)
6 Desalegn G/Michael Buta T/L 1.25 pass Substandar 0.73 0.51 0.01 0.10 (0.09)
d
OD1 5.04 SM Substandar 2.96 2.08 0.15 0.42 (0.27)
OD2 14.86 pass Substandar
d 8.72 6.14 0.15 1.23 (1.08)
OD3 4.77 pass d
Substandar 2.80 1.97 0.05 0.39 (0.35)
Pre1 19.90 pass dSubstandar 11.68 8.22 0.20 1.64 (1.44)
d
Pre3 14.90 pass Substandar 8.74 6.15 0.15 1.23 (1.08)
d
Pre5 20.00 SM Substandar 11.74 8.26 0.60 1.65 (1.05)
d
Pre7 16.00 pass Substandar 9.39 6.61 0.16 1.32 (1.16)
d
7 Cabey PLC TL 13.13 SM Substandar 7.71 5.42 0.39 1.08 (0.69)
OD 95.27 SM dSubstandar 55.91 39.36 2.86 7.87 (5.01)
OD 49.01 SM Substandar
d 28.76 20.24 1.47 4.05 (2.58)
Pre 2.47 SM dSubstandar 1.45 1.02 0.07 0.20 (0.13)
8 Zeru G/LibanosAssefa TL1 16.78 SM d
Substandar 9.85 6.93 0.50 1.39 (0.88)
Pre 105.40 Pass dSubstandar 61.86 43.54 1.05 8.71 (7.65)
d
9 Ergando Trading TL1 83.08 Pass Substandar 48.76 34.32 0.83 6.86 (6.03)
IDU.P.L.C TL2 18.68 Pass Substandar
d 10.96 7.71 0.19 1.54 (1.36)
d
d
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OD 31.44 Pass Substandar 18.45 12.99 0.31 2.60 (2.28)

Total 3,061.50 d 1,796.80 1,264.71 64.74 269.70 (204.97)
Additional Required Provisions (204.97)
Adversely Reclassified Loans 3,061.50
Additional NPLs 3,061.50
Note
 NRV-Net Recoverable Value; Pre- Pre-shipment, O/D- Overdraft, T/L- Term Loan, Unreco.- Unrecovered Value, NPLs- Non-performing loans.
 Average recovery rate of 58.69% (December 31, 2020) was used for the purpose of provisioning calculation in the above table.
Annex 7

NPLs-Including Reclassified Loans by NBE Examiners
By Status Outstanding Adjustment By NBE Provisions for Loan Losses
Page 104 of 108

Reported By NIB Reduction Additio Adjusted Held By Estimated By NBE (Shortfall)/Excess

n Balance NIB
A B C=A-B
Pass 22,295.34 1,355.49 - 20,939.85 222.95 209.40 13.55
Special 6,608.9 1,706.01 4,902.92 198.27 147.09 51.18
Mention 3
Substandard 294.0 - 2,926.23 3,220.31 24.3 266.06 (241.77)
8 0
Doubtful 160.45 135.27 295.72 33.14 61.08 (27.94)
Loss 160.74 - 160.74 80.11 80.11 0.00
Total 29,519.54 3,061.50 3,061.50 29,519.54 558.77 763.74 (204.97)
Total NPLs 615.28 3,676.77
Provision 15.20 20.77

to NPLs
NPLs to
Loans (%) 2.08 12.46
Annex 8
Nib International Bank
Distribution of Loans & Advances
By Status % By Sector % By Product % BY Term %
Pass 75.10 Agriculture 0.55 Term Loan 77.20 Short term 25.17
Special Mention 22.90 Manufacturing 17.39 Overdraft 11.17 32.63
Page 105 of 108

Domestic trade 17.95 Medium

Term
International trade 29.28
Hotel & tourism 12.73
Trans & Communication 1.91
Building & construction 18.10
Consumer Loan 1.51
Others 2.00 Mining Pwr Water 0.56 Others 11.63 Long Term 42.20
Total 100.00 Total 100.00 Total 100.00 Total 100.00
Annex 9 Nib International Bank S.C

List of Investments in Share with Different Entities (Domestic Shares)
No Type of Investment % share Nature of Entities/Business Date of investment Return
Investment Amount Collected
1 27.20 26/07/2010 44.99 2.01
Pss(Priemer switch solutions) Financial Infrastructure
Page 106 of 108

2 5.00 06/02/2008 20.91 6.17

NIB Insurance S.C. Insurance
3 20/06/2012 33.60 -
8.80
Zebidar Hulegeb Industrial S.co (Jemar) General Business
4 6.70 22/03/2004 17.12 3.04
Aggar Micro Finance Micro Finance
5 3.20 11/07/2011 29.33 -
Eth Switch S.co Financial Infrastructure
6 12.70 14/09/2015 37.41 -
Gineb Gebeya trade share co. General Business
7 1.00 21/08/2015 10.00 1.51
Ethiopian Reinsurance s.co Insurance
Total 193.36 12.73
Net worth of the bank 5,599.61
% of the bank’s net worth 3.45%

Long Outstanding Items
AS of December 31, 2020
Un-cleared effects Sundry Debtors* T

otal
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Local Foreign
Age
91 - 180 days 0.86 0.01 0.23 1.10
181 – 365 days 1.06 - 7.25 8.31
> 365 days 1.42 1.18 27.21 29.81
Total 3.34 1.19 34.69 39.22
Provision held 2.12 1.18 29.78 33.09
Provision required 2.12 1.18 30.88 34.19
Shortfall - - 1.10 1.10

Comparative Income Statement
As of December 31, 2020
Description Dec. 2019 Dec. 2020 % Change
Page 108 of 109

Final of Final Response To NBE's Examiners

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Final of Final Response To NBE's Examiners

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National Bank of Ethiopia Draft Detail Examination Findings on NIB

Nib International Bank S.C.

internal capital growth;

manage credit concentration;

provisional financial statement since the document was under

8. As per the comment the Building evidenced by LHC

c) J.H Simex PLC

loan should be classified as special mention.

7. The Bank’s credit policy & procedure allows granting loans

6. Noted, It was due to extra time required by the borrower to

f) W.A Oil Factory & Distributor PLC.

7. The credit facility has been approved considering the

g) Santa Maria Real Estates Hotel

h) Yekatit paper converting PLC

Noted; However, during approval of the guarantee on January 31,

i)Great city Hotel and Tourism PLC

4. Noted, As per the audited financial statement of the year ended

6. Noted, It was due to extra time required by the borrower to

9. Noted: the branch in collaboration with Corporate Banking

50,182,076.50 that is by far below the stock amount of Birr

-The two pre-shipment credit facilities were renewed on

This amount shall not make the loan under NPLs.

-Thus, there is no need to re-classify the status of other facilities

-The company is a long-time customer of the Bank and has built

2) Product-wise, the highest share

with other bank.

non-performing loans. systems support in the future.

indicated that there was weak

procedure; Recommendation Annex: Annual inventory count sheet is attached for

Quality of 18. Board13 did not review credit risk Impact

6 of the NBE Directive No.SBB/69/2018.

findings; violations of NBE

 Reviewing and approving code

plan; board during such overall performance review meetings.

committees’ roles and

directives No. SBB/71/2019; Comply with NBE directives;

same; Improve board oversight;

directives against article 10.2.2 of Environment on Oct. 25,2020 at Entoto Park –

 How Business Disruption can Accelerate a New Kind of

 Resilient Leadership and Stress on June 02, 2020.

 Recently Corporate Governance and NBE Directives

42. Inadequate loan review functions Impact

No. SBB/69/2018: Violation of NBE directives; budget year

independence; and independence.

moreover, there were no discussion on quarterly audit reports in 2019

The Board Audit

44. Inadequate board risk & compliance Impact

 Did not report its performance to Directorate as of June 01, 2021.

adequate data from business units28 Project for your review.

for its effective function; weak

oversight; give due emphasis to too.

risk assessment reports;

mobilization, total assets, enhance its effort for a

year. c) ISC will be

55. Management has not prepared risk Impact Noted

59. Management has not filled key Impact:

management members, including Let the board members

 Time since last audit; SBB/76/2020 & best

No. SBB/76/2020; Recommendation

74. Compliance management division Impact Noted September 30, 2021

continuous check and control on all Recommendation

81. Risk management policies & Impact Disagree