Friday, September 22, 2023

Be careful in November and December Memeher Dereje

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Interview with Memeher Dereje Zeweyneye. Be careful in November and December Memeher Dereja. The philosophical underpinnings that support state intervention in the banking sector using various tools (bank nationalization is a direct form of intervention) are crumbling. There is no justification for giving state-owned banks additional privileges to maintain their dominant position in banking and cause significant market distortions. Distortions aside, the existence of such “too big to fail” and “too important to fail” banks pose a significant systemic risk to the industry. This is due to exposure. Even more baffling is that since 2003, Ethiopia has issued a series of declarations aimed at promoting competition in trade and services and protecting consumers, while the number of state-owned banks in the banking sector has increased. Dominance and preferential treatment are tolerated. In the era of foreign bank entry, the Public Banking Law must contain provisions on bank competition. The aim is to set rules that create a level playing field for all banks. As for state-owned banks, several points are very important. First, the gradual withdrawal of the privileges granted to them. Second, follow the same regulatory regime as commercial banks. Promoting competition in the banking industry does not mean allowing unlimited competition. Global experience shows that while many countries have rules prohibiting collusion of a dominant position, banks’ competition policies vary between encouraging competition and allowing concentration.

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