Whereas, loans or advances shall be regularly reviewed and classified in a manner consistent with accepted principles of international accounting- and regulatory standards;

Whereas, exposures, which are not performing in accordance with contractual repayment terms shall be recognized and reported in a manner consistent with international accounting and regulatory standards;

Whereas, the National Bank intends to adopt an adequate legal framework that protect s banks from overstating profits by accruing uncollected interest on loans or advances, which are classified as not performing;

Whereas, timely and accurate provisions and write-off shall reflect realistic repayment and recovery expectations and, in accordance with International Financial Reporting Standards (IFRS), shall include appropriate expectations about future events based on reasonable and supportable information to accurately reflect expected credit losses;

Whereas, the National Bank has to give consistent direction to banks on the manner of exposure classification and provisioning;

Now, therefore, in accordance with Article 21(1c), 21(2) and 66(2) of Banking Business Proclamation No. 592/2008 (as Amended by Proclamation No. 1159/2019), the National Bank of Ethiopia has issued this Directive.