Loan Concentration and Governance Disputes Expose Risk Pressures at Amhara Bank

Internal disputes and risk management concerns have surfaced at Amhara Bank, raising broader questions about governance practices and credit concentration in Ethiopia’s banking sector.

An investigation by The Reporter indicates that the bank is facing internal divisions among board members and senior management following the recent departure of former president Yohannes Ayalew (PhD). The leadership change came after disagreements related to lending practices, credit exposure, and the bank’s financial reporting.

Loan Concentration and Exposure Risks

According to internal assessments reviewed by the publication, a significant share of the bank’s credit portfolio is concentrated among a limited number of borrowers. Data from a risk exposure report suggests that the ten largest borrowers account for billions of birr in credit exposure, with some approaching the lending limits established by the National Bank of Ethiopia (NBE).

The report indicates that credit extended to the bank’s top borrowers—including companies such as Jerr PLC and Green Ethio Trading PLC—represents a substantial portion of total outstanding loans. Analysts warn that such concentration could expose banks to heightened risk if large borrowers face financial difficulties.

In addition, the internal review highlighted concerns regarding collateral coverage and loan restructuring practices, noting that some borrowers had repeatedly renegotiated repayment terms.

Audit Findings Raise Data Concerns

A confidential audit conducted by Tewodros & Fikre Audit Service Partnership reportedly identified discrepancies between system-generated balances and detailed records related to loans and advances. The audit also pointed to weaknesses in the bank’s credit risk model, including the use of collective risk assessments that group large corporate borrowers together with smaller retail loans.

The audit further suggested that the bank’s total loan balance exceeded a lending growth limit set by the central bank. According to the findings, the bank’s loan portfolio reached approximately 26.26 billion birr, exceeding the level permitted under regulatory thresholds.

Liquidity and Deposit Structure

The assessment also pointed to potential liquidity pressures. Over the past several months, Amhara Bank reportedly relied heavily on interbank borrowing to meet funding needs, including billions of birr sourced from other financial institutions.

The report also noted a high concentration of deposits among a limited group of large clients, which could increase vulnerability if major depositors withdraw funds.

Wider Industry Concerns

Financial analysts say the challenges highlighted at Amhara Bank reflect structural issues affecting the wider banking industry. Abdulmenan Mohammed (PhD), a financial sector analyst, said credit concentration among a small group of borrowers remains common across many Ethiopian banks.

According to Abdulmenan, lending practices that rely heavily on a limited group of large borrowers increase systemic risks, particularly when collateral coverage is limited and credit exposure spans multiple financial institutions.

Observers also point to regulatory and governance challenges, noting that stronger oversight and improved transparency could help strengthen risk management across the sector.

Former President Rejects Allegations

Responding to the allegations, former president Yohannes Ayalew rejected claims of irregularities during his tenure. He stated that the bank’s non-performing loan ratio had improved significantly while he was in office and said that the figures were verified by the National Bank of Ethiopia.

Yohannes described the accusations as unfounded and argued that his administration had worked to stabilize the bank by improving loan recovery and supporting borrowers in maintaining active businesses.

Calls for Independent Review

Industry insiders say the situation has highlighted the need for independent assessments and stronger regulatory oversight. Some observers argue that transparency around bank governance, credit exposure, and regulatory enforcement could help maintain confidence among depositors, investors, and shareholders.

Regulators at the National Bank of Ethiopia have not publicly commented on the allegations.

Source: The Reporter