National Bank of Ethiopia Unveils Interbank Market Platform to Boost Liquidity for Banks











National Bank of Ethiopia Launches Online Interbank Money Market Platform to Strengthen Financial Stability

Addis Ababa, Ethiopia – October 31, 2024 – In a landmark move, the National Bank of Ethiopia (NBE) announced the launch of an online Interbank Money Market platform designed to enhance liquidity management across the country’s banking sector. This initiative marks a crucial step in Ethiopia’s transition towards an interest-rate based monetary policy framework, allowing commercial banks to lend and borrow short-term funds seamlessly.

The newly introduced Interbank Money Market platform provides an efficient and transparent marketplace, enabling banks to address liquidity needs by engaging in short-term transactions. The market facilitates lending and borrowing with maturities of either one day or seven days, offering flexibility to banks in managing cash surpluses and covering shortfalls. By promoting efficient liquidity allocation, the platform is expected to foster financial stability and minimize systemic risks, aligning with the NBE’s broader goal of modernizing Ethiopia’s financial sector.

Key features of the platform include:

Immediate Access for Banks: The Interbank Money Market is live, enabling commercial banks to initiate short-term trading to balance liquidity and maintain stability within Ethiopia’s banking ecosystem.

Exclusive Operation via the Ethiopian Securities Exchange (ESX): To ensure security and transparency, transactions on the Interbank Money Market will be conducted exclusively through the NBE-approved ESX trading platform, allowing for rigorous regulatory oversight.

Compliance with the Interbank Money Market Directive: All participating banks are required to adhere to NBE’s standards and guidelines, fostering a well-regulated and ethical trading environment.

Eligibility Restrictions: Participation is limited to NBE-approved commercial banks that meet specific criteria, ensuring only qualified entities engage in interbank trading.

Interest Rate Corridor for Transactions: Banks will trade within an interest rate corridor based on the National Bank Rate (NBR), capped at NBR+3% and floor at NBR-3%. The NBE has reserved the right to intervene to maintain stability if market rates deviate from the NBR.

Encouragement of Active Participation: The NBE has urged all commercial banks to engage with the platform proactively, ensuring consistent liquidity management and contributing to the financial system’s overall resilience.

A Milestone in Ethiopia’s Financial Sector Reform

The NBE’s launch of this interbank platform aligns with international standards, aiming to give Ethiopian banks the tools to manage liquidity with greater independence and transparency. This online platform enables banks to adjust interest rates responsively, benefiting the broader economy by aligning market stability with the country’s macroeconomic objectives.

NBE Governor emphasized that the platform marks a pivotal shift in Ethiopia’s approach to financial stability, setting the stage for more robust policy interventions. By facilitating interbank lending and borrowing within a regulated framework, the NBE seeks to bolster Ethiopia’s financial ecosystem, ultimately supporting sustainable economic growth.

For further information on the Interbank Money Market platform, visit nbe.gov.et.