Plummeting profits at the Cooperative Bank of Oromia (CBO) are a result of mismanagement of the bank's letter of credit (L/C) and telegraphic transfer operations.

The privately owned Ethiopian bank has reported an eightfold decline in profits from 312 million Ethiopian birr (ETB 312 million - US$13 million) to less than ETB40 million (US$1.7 million).

L/C criticism

Falling profits are substantially due to big losses in the bank's L/C operations caused by shortages of foreign currency required to meet payment obligations in time.

The bank has drawn criticism for its practice of opening L/Cs without having sufficient foreign currency at hand to pay overseas suppliers of goods to Ethiopian importers.

Executive suspensions

Excessive L/C openings in 2015 precipitated the suspension by the National Bank of Ethiopia of former CBO chairman, Abera Deressa, and several senior bank officials.

The bank had failed to meet demands for US$10 million of L/C proceeds that had fallen due at the time.

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