Two Banks under formation in Ethiopia, Noah International Bank and Tsehay International Bank, submitted letters to the National Bank requesting the dissolution and release of equity raised by shareholders and placed in blocked accounts with the central bank.
Promoters of both banks cited the recent directive from the central bank that raised the required capital for banks from 75 million to 500 million as the reason behind the decision for dissolution.
Noah Bank had raised 80 million birr and Tsehay Bank 100 million, which was previously adequate but far from the current requirements of 500 million. Promoters of the two banks claimed that the banks did not have the ability to raise the required levels of capital.
Shareholders of the bank decided on dissolution instead of leaving their money frozen in the hopes of eventually meeting the requirement said one of the promoters for Tsehay Bank.The directive to raise the capital to 500 million came ten days before Tsehay bank filed an application for a permit with the central bank after the 128 founding shareholders mobilized more then 25 million of what was required by the previous system.
The money can be made productive in other investment rather than being locked away in a closed account according to one of the investors of Tsehay.
An option available for investors is to purchase shares of already established banks who are expected to float shares to meet the central bank requirement according to a promoter.
The central bank is expected to allow shareholders to take their money back although some industry observers are advising that the national bank should push for consolidation.
Source: Addis Fortune
