Whereas, related party transactions are often exposed to conflict of interest and can potentially be unfair or fraudulent, threatening the soundness of a bank’s business;

Whereas, there is a need to prevent abuses arising from transactions with related parties and address the risk of conflict of interest;

Whereas, any practice of extending credit to financially unstable related parties will have the potential to increase non-performing loans and jeopardize a bank’s financial soundness;

Whereas, it is important to ensure that a bank’s transactions with related parties are adequately monitored and conducted at arm’s-length; Now, therefore, in accordance with sub-article 22 (1) and sub-article 66 (2) of the Banking Business Proclamation No. 592/2008 (as Amended by (Proclamation No.1159/2019), the National Bank of Ethiopia has issued this Directive.