Bank Capture: The Troubling Phenomenon Festering Beneath The Industry’s Shiny Veneer

“Banking is working against Ethiopia’s development aspirations.”

Heated boardroom disputes, allegations of corruption, widespread abuse of shareholder power, indecisive management, and discrepancies in bookkeeping are just some of the elements of a festering crisis that threatens the banking industry and exposes glaring shortcomings in its regulation.

An investigation conducted by The Reporter reveals that a number of the country’s commercial banks are struggling with a risk management crisis that features uncomfortably high non-performing loan (NPL) levels, thin or clean-base collateral, liquidity worries, and alarming loan rescheduling practices all tied to the concentration of deposits and credit in the hands of a few influential borrowers.

Industry observers warn that ultimately, the crisis is not only creating deep distortions in banks themselves, but also propping up a lopsided economy where a small network of shareholder-borrowers benefit at the expense of minority shareholders, genuine entrepreneurs, and entire industries grappling with a lack of access to finance.

Although the Ethiopian banking industry is no stranger to controversy, evidence and testimony obtained by The Reporter in recent weeks suggest its problems have deepened and spread, though most of the details remain behind closed boardroom doors, away from the prying eyes of shareholders, regulators, and the wider public.

Among the banks where the crisis is currently most pronounced is Amhara Bank, which spent three years under formation before joining the industry with a record-breaking 4.8 billion Birr in paid-up capital in January 2022.

The past four years have seen a mixed performance and consecutive leadership emergencies at the bank, which reported 460 million Birr in losses in 2022/23 before posting profits before tax of 655 million Birr last fiscal year.

At present, the bank’s board and management appear split into two camps, with each claiming to be trying to save the bank while accusing the other of working to protect the interests of top borrowers and influential shareholders.

The bank’s troubles came to light following the controversial departure of president Yohannes Ayalew (PhD) last month.

An assessment of the bank’s overall standing conducted in the wake of the president’s resignation revealed a deep-seated crisis with massive potential consequences for the bank and the industry, sources told The Reporter.

 

In the bank’s 2024/5 report, Yohannes lauded his management team for pulling the NPL ratio from a concerning 15 percent to four percent.

“This success was achieved through a coordinated and intensive debt collection and recovery campaign, supported by our branch managers, customer relations managers and leaders at all levels, including myself through extensive daily reporting and monitoring,” reads his message to shareholders.

Yohannes was brought on board Amhara Bank in September 2024 in the wake of controversy surrounding former board chairperson Melaku Fenta, other directors, and members of management. Yohannes was fresh from a stint as president of the state-owned Development Bank of Ethiopia (DBE), where he oversaw a remarkable turnaround, when he signed on to lead Amhara Bank.

Shareholders had hoped he would be able to replicate the success, but Yohannes resigned from his post as president on January 31 as a result of internal disputes after steering the bank out of a mire and posting a sizable profit the year prior.

He has since joined Tsedey Bank as president.

However, a group of concerned stakeholders within Amhara Bank claim that the results of an internal assessment contrast sharply with the annual reports submitted to regulators at the National Bank of Ethiopia (NBE).

They allege discrepancies and irregularities in bookkeeping, and say they have taken their concerns to the NBE, Parliament, and even the Ombudsman.

A confidential audit report presented to Amhara Bank’s management and board in October 2025 hints at underlying problems at the bank that were omitted from an annual report published at around the same time.

The report, compiled by Tewodros & Fikre Audit Service Partnership, reveals discrepancies between ledger balance (system report) and corresponding detailed balances (valuation of physical count).

Auditors say inconsistencies in loan and advances, such as the bank’s disbursed loans being greater than the amount granted, made the process difficult and raised questions about the integrity of the bank’s data.

Auditors flagged inconsistencies in loan classification, and warned that loans with second-degree collateral, and no repayment of principal over months and years, are exposing the bank to high levels of risk.

The auditor also discovered flaws in the bank’s credit loss model.

“We observed that the bank applies the group or collective credit assessment method to compute loan impairment loss for all loan portfolios by grouping loans merely based on similarity of their economic sectors. The model has the following shortcomings. It overlooks the unique credit-risk of those large interconnected corporate borrowers by merely grouping them with retail and personal loans,” reads the audit report obtained by The Reporter.

There were other issues, too.

“We noted that the bank’s loan and advances balance exceeded the limit set by the National Bank of Ethiopia, which states that net movement of loans during the year should not exceed 18 percent of the balance as at June 30, 2024. The maximum loan balance expected as at June 30, 2025 is 24.06 billion Birr, but the actual outstanding balance is 26.26 billion Birr, surpassing the limit by 10.79 percent,” reads the report.

Auditors also highlighted issues with cash shortages during branch inspections, as well as with right-of-way compensation tied to the bank’s efforts to secure land for the construction of its headquarters in Addis Ababa.

A progress report presented by Yohannes on the eve of his departure provides a more comprehensive, but equally concerning, review of Amhara Bank’s financial standing.

It indicates that Amhara Bank disbursed 11.7 billion Birr in loans between July and December 2025. Construction (3.3 billion), domestic trade (2.8 billion), and export (2.8 billion) accounted for the majority, while just 37 million Birr in credit went to agriculture.

The report reveals that only a few borrowers control the vast majority of the bank’s credit, with some of them dangerously close to the NBE’s 25-percent limit on single borrowers. It highlights a spike in the number of loans restructured, which stood at 28 in 2025.

A board member accuses Yohannes of propagating the favoritism, abuse of shareholder power, and irresponsible lending he was brought in to reverse.

“When Yohannes came to the bank, we were relieved given his reputation from DBE. We gave him free reign to do what he could to rescue the bank. But when these shady figures emerged in the months leading up to his departure, we were alarmed. Some of us began to question his decisions. The reports he submitted to the NBE and the internal memo presented to us by auditors are very different,” the board member told The Reporter, speaking anonymously.

The board member accuses Yohannes of disregarding a warning from the central bank.

“NBE wrote a warning letter to Amhara Bank, stating the bank had exceeded the credit ceiling. This letter was received by Yohannes on January 28, 2026. Withholding it from the board, he requested the board to approve billions in fresh loans for certain businesses. We objected. We further demanded Yohannes and other members of the board take strong action to force the top borrowers to repay their overdue loans,” said the board member.

“Yohannes and members of the board who have ties to the borrowers refused to do so. Then we proceeded to notify the NBE. Meanwhile, a committee formed by members of the board and management began to review documents, reports, audits, and loans case by case.”

This team finally produced a lengthy document: ‘Comprehensive Risk Exposure Assessment Report on the Bank’s Current Position,’ which has been submitted to the NBE governor, Parliament, and the Ombudsman.

“This report revealed what we fear most. This crisis is not only risking the existence of Amhara Bank, but also that of its shareholders, clients, and the public who trusted in us,” the board member told The Reporter.

The Findings

The comprehensive report uncovered several issues, many of which contrast with the information provided in Amhara Bank’s annual reports and other official documents submitted to the NBE.

The bank maintains a high concentration of loans and advances extended to few top borrowers, while collateral coverage and overall recoverability are minimal. Borrowers are highly leveraged with substantial loan exposures at other banks.

The ten largest borrowers were approved for 11.7 billion Birr, inclusive of letters of credit (LCs), with a total exposure reaching 7.7 billion Birr. When considering the subsequent 10 borrowers, the total sum increases to 15.8 billion Birr, with a cumulative exposure of 11.5 billion Birr, which accounts for 143.5 percent of the loan concentration or approximately 30 percent.

Some borrowers are approaching the NBE’s maximum exposure limit, while others have exceeded it when considering credit routed through affiliates and sister companies.

For instance, Jerr PLC and Green Ethio Trading together account for as much as 28.5 percent of Amhara Bank’s total outstanding credit.

The NBE states that two or more natural or legal persons shall be considered as a group of connected counterparties if one of them, directly or indirectly, has control over the others.

Yoseph Manaye owns 88 percent of Green Ethio Trading PLC’s shares. At the same time, he is managing director of Jerr PLC, and company documents indicate a strong affiliation between the two firms. Both are involved in international trade, transportation, and manufacturing.

Jerr PLC’s loan exposure at Amhara Bank stands near 2.2 billion Birr, with collateral (including the Debrework Tower property near Mexico Square) covering less than half the amount, excluding LCs. Jerr PLC’s exposure at other commercial banks totals 4.7 billion Birr.

Its sister company, Green Ethio Trading PLC, also has 1.5 billion Birr in deferred LCs at Amhara Bank.

Jerr PLC reported 60 million Birr in losses in 2024/5 despite generating nearly nine billion Birr in revenue over the period.

The risk exposure assessment found that Jerr PLC repeatedly took temporary loans from the bank to settle LCs. Despite its hefty outstanding obligations, the company remained eligible to receive more credit from Amhara Bank as of January 31.

The assessment details that temporary LC settlement term loans were extended routinely to top borrowers. This includes 150 million Birr disbursed to an individual named Abiy Masresha, who, operating as a sole proprietor, has a loan exposure of 1.09 billion Birr with the bank.

Most of the bank’s largest borrowers have repeated renegotiations without collecting accrued interest. These include Gomeju Oil, Jerr PLC, Beaeka Business PLC, Zemera Investment Group PLC, and Ahadu PLC, among others.

Zemera Investment Group PLC currently maintains a loan exposure with the Bank exceeding 850 million Birr, in addition to a 1.5 billion Birr loan exposure across other financial institutions, while Ovid Construction PLC holds construction term loans totaling 800 million Birr.

The assessment notes that while the bank holds 20 residential apartments on OVID sites as collateral,the company retains the ability to sell these completed units without a clear control mechanism for the bank.

It reveals the bank approved more than 1.6 billion Birr in exceptional loans between July 2025 and January 2026, the majority of which were equity contributions for construction machinery and equipment.

The assessment  found that while the bank’s NPL ratio stood at 5.1 percent as of January, the figure rises to 9.29 percent when accounting for reporting period differences and overdraft. This exceeds the NBE’s ceiling.

Amhara Bank’s deposit structure is highly dependent on top depositors, with 20 of the largest accounting for more than a quarter of the bank’s total.

The assessment found the bank is experiencing significant liquidity risk and failing to meet minimum liquidity requirements. Over the past seven months, Amhara Bank has sourced 35.1 billion Birr from interbank lending.

Of this, 15 billion Birr was borrowed in January alone.

The assessment warns of a rise in internal fraud incidents, and notes critical gaps in the core banking system.

 

The Breakdown

Abdulmenan Mohammed (PhD) is a financial analyst keeping a close watch on the Ethiopian financial sector. While he characterizes Amhara Bank’s current situation as extremely concerning, Abdulmenan argues the problems are industry-wide rather than a case of mismanagement at one commercial bank.

“Most loans disbursed by Ethiopian banks, including Amhara Bank, are concentrated in the hands of a few individual borrowers. This is very risky. There are no sufficient provisions backing the loans. The collateral is not enough for recovery. Further, the top borrowers continue to receive fresh loans regularly,” said the expert.

He notes that the NBE’s asset classification directive states that every bank’s credit committee must undertake a credit portfolio review every quarter.

“Amhara Bank has overstepped several NBE requirements. The board members who are enquiring about the failures now were there before and during Yohannes’ tenure. They were all part of the problem. Why didn’t they launch this inquiry before? Why now? Are they trying to absolve themselves by using Yohannes as a scapegoat?” asked Abdulmenan.

He argues Amhara Bank is the subject of a “capture” by management, directors, and its largest borrowers.

“The NBE should thoroughly screen the backgrounds of the board members,” said Abdulmenan. “Where were they when all this credit was repeatedly granted to a few borrowers? Did the management and president approve the loans without the board’s knowledge?”

He notes that much of the credit was provided on a clean basis, meaning no collateral.

“If the four top borrowers, like Gomeju, Beaeka, Jerr, and Ovid go bankrupt, then it will kill Amhara Bank,” said Abdulmenan.

The analyst argues the NBE is partly to blame for the situation.

“NBE failed to protect Ethiopian banks in two ways. First, it is incapable of regulating each bank’s performance in earnest. That’s why its officials are pushing to shrink the number of banks through merger and acquisition. Second, some NBE officials have shady relationships with commercial banks. Its assessments are not genuine. Formally, NBE undertakes on-site and off-site inspections to ensure each bank is in line with its requirements. All this time, NBE has been saying all the banks are healthy and stable, so why are the banks suffering from a crisis?” questioned Abdulmenan.

He says political influence also plays a part.

“Why do some companies, like Ovid, get access to credit from every bank? Why has the NBE changed four governors in the past six years?” said Abdulmenan. “In other countries, central banks publicize breaches and failures of banks. They also disclose penalties imposed on banks. This builds public confidence. NBE never publicizes penalties or measures it takes for breaches. They negotiate behind curtains. If NBE is supposed to protect the interests of the economy, industry, and shareholders, then why does it not disclose these things? It has even stopped publishing its banking sector stability report, which it started under the tenure of Mamo Mihretu.”

A board director at Amhara Bank, speaking anonymously, agrees with Abdulmenan’s take.

“A crisis like this will damage the bank’s image among shareholders, investors, and the wider public. But it’s better to expose these failures and save the bank,” said the board member, noting that other commercial banks (most recently Nib) have faced similar crises in the past.

The board member also alleges that some of the country’s other commercial banks are currently grappling with a similar scenario, but are doing so behind closed doors.

“These banks, including Amhara bank, collect money from depositors and shareholders, promising benefits. The management and board sold that promise to a few wealthy individuals and businesses. They embezzled vast resources from the bank. They buy houses abroad with the loans. They take loans and forex to import very substandard machinery and stash the forex abroad. When we try to recover the loan, we find the machinery and collateral have no value,” said the board member.

“There are countless loopholes. For instance, the top borrowers at Amhara Bank create sister companies and transfer the debt. The loans are structured in a shady way, and never collected but reshuffled so they do not appear in company reports. Then management and board prepare reports that claim NPLs have dropped significantly,” the board member told The Reporter. “Then the same problematic borrowers receive more loans. This is the cycle. It shouldn’t be allowed to continue.”

The board member says they faced threats and intimidation after conducting the assessment and submitting the findings to the NBE and other relevant bodies.

A veteran banker who has decades of experience at several commercial banks told The Reporter that bank capture is a deep-rooted problem at all commercial banks in Ethiopia.

“The government can erase a public bank’s NPLs with law. But for private banks, the only option is saving the loan. However, if they give out loans without collateral or sufficient provisions, and if top borrowers continue to evade, how can the bank recover its money?” asked the banker.

He says Ethiopian banking has lost its system of checks and balances.

“Boards and management are supposed to ensure checks and balances. But they are in collusion. Board members benefit from management’s decisions, so they keep silent. Both end up protecting the problematic borrowers,” the banker told The Reporter.

He notes that legal avenues are also not ideal. If Amhara Bank, for example, opted to initiate a legal case against its borrowers, the process could take years before the bank sees any of its money returned.

“The bank has been giving huge loans to unhealthy companies,” said the banker. “Amhara is a fourth- generation bank. Only businesses rejected by the older banks come seeking loans from newcomers. Amhara Bank failed to screen these bad borrowers. For a new bank to make a mistake like that is suicide.”

He noted that part of the problem is regulation.

“NBE regulation was sound previously, especially under Teklewold [Atnafu] and Getahun Nana. More recently, the NBE has lost its tools. Its officials today are ready to compromise anything. They lack competency, character, and discipline,” said the veteran, attributing the increasing frequency of bank crises to this incompetence.

“The reason is, people who understand the loopholes are coming to bank positions. These people have been in NBE, they know how to bypass NBE laws. These people are now leading commercial banks in a bad way. They have the technical skills to obscure failures,” the banker told The Reporter.

He accuses the NBE’s banking supervision department of turning a blind eye, and urges regulators to deploy capable financial intelligence teams in collaboration with state security agencies.

“For instance, NBE has no mechanism in place, or is perhaps unwilling, to identify and deter unnecessary affiliation between bank management, board,  top borrowers, and influential shareholders,” said the banker.

He notes that despite the number of commercial banks swelling past 30 and the rapid growth of digital banking, the NBE still relies on outdated tools.

“It needs an overhaul and serious capacity building to cope and regulate modern banking,” said the veteran.

Another glaring issue in the industry is the politicization of banks.

“Look at the names of Amhara, Sidama, Oromia, and other banks. They’ve created a context where ethnically oriented shareholders, investors, and companies are geared to affiliate themselves only with their own group. Even in name they are detached from pure banking and associated with the ethno-political context in Ethiopia. Banks became a space for a political economy struggle. Political allegiance has become like currency in place of collateral, feasibility, and sound finance allocation. Banking is working against Ethiopia’s development interests” the banker told The Reporter.

 

Reply from the Former President

Responding to The Reporter’s inquiries, Yohannes refuted the accusations made against him by members of the Amhara Bank board and management, calling them “crazy.”

“I reduced Amhara Bank’s NPL from 15 percent to four percent during my tenure. This data is verified by the NBE, not by me. But now, these people are trying to falsify NBE data. They are crazy. They have no clue about NBE laws. I can interpret international law, let alone NBE rules,” said Yohannes.

He refutes the claim that he ignored a warning from the central bank, or that he tried to keep it from the board.

“After I left DBE, a similar group of people tried to fabricate reports and give me a bad name. Another group trying to undermine my great achievement, great track records and my reputation with bad claims. It all backfires at them,” said Yohannes.

“I turned the bank from bad to good. I did that by working with all borrowers to pay their existing loans. I helped those borrowers to improve their businesses so that they can pay. As long as their business is active, and they are paying their loans, they are eligible to take new loans. So we approved additional loans for them. That is how banking is done. But these people accusing me do not know about banking. Their only drive is hate,” said Yohannes.

Other insiders who spoke to The Reporter say they have questions about both sides, and called for an independent external body to assess and verify the bank’s problems.

NBE regulators did not respond to repeated requests for comment.