The Legal And Regulatory Framework On Merger Of Banks In Ethiopia The Reality On The Ground And The Prospects In The Future

Merger of banks may be happen due to voluntarily or involuntarily grounds. When banksrnmerge by considering it as a strategy for business diversity and growth/synergy, it‘s based onrnvoluntary ground. On the other hand; it‘s due to involuntary grounds when banks arerncompelled to merge due to external factors like capital and other regulatory requirements setrnby the regulator mainly for efficiency of the sector and the protection of depositors. Hence;rnmerger in banking sector has got much attention in most jurisdictions currently.rnAt present; there are sufficient reasons that drive commercial banks in Ethiopia to be merged.rnAnd the process of bank merger; be it voluntary or involuntary , is complex and needs strictrnlegal and strong regulatory supervision as it may adversely affect the financial growth andrnstability of the country‘s economy. Poorly conceived or badly executed bank mergers canrnpresent risks to the participating banks, to the banking system and to other economic sectorsrnincluding that of depositors.rnTherefore; having adequate laws and prudential supervisory procedures regarding bankrnmergers is timely and important.rnThis paper explores the adequacy of the legal and regulatory framework governing thernmerger of commercial banks in Ethiopia. The finding of the study indicated that there arernsome legal and regulatory loops on and accordingly the study recommends issuance andrnamendment of laws and directives.

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