Sbi Drops Plan To Run Ethiopian Bank

The State Bank of India (SBI) has dropped its plan to manage the Commercial Bank of Ethiopia (CBE) since it failed to reach an agreement over jurisdiction of possible arbitration proceedings with Ethiopia.

SBI was keen on the arbitration taking place under the aegis of the London Court of Arbitration, while the state-owned CBE insisted that it take place under the Ethiopian laws.

"This was the primary reason for the proposed deal falling through," said banking industry sources.

SBI chairman Janaki Ballabh said, "There is no proposal under consideration at present for such a management contract." He declined to reveal any further details.

CBE is the largest commercial bank in Ethiopia with an asset base of more than $3 billion. It has over 171 branches and accounts for over 80 per cent of Ethiopia's total deposits.

Earlier, the two sides were discussing over a possible tie-up under which SBI would run CBE for three-five years at a fee.

A senior SBI executive was to be posted as chief executive officer, while a team of its executives would put in place a business plan as well as systems and procedures at the Ethiopian bank.

The brief entailed upgrading the quality of the assets and boosting the bottomline of CBE. Ernst &Young was advising CBE on the proposed deal. CBE was planning to tap SBI's expertise to adopt international practices.

SBI was also planning to train a competent Ethiopian management team that could take over CBE at the end of the contract.

CBE was set up in 1963 out of the split of the State Bank of Ethiopia into separate central and commercial banking operations.

It continued as the sole commercial bank in Ethiopia for around 14 years until the financial markets were opened up in 1994 to private participation. Apart from CBE, there are two state-owned and six private commercial banks in Ethiopia.