There were mixed feelings when the President of DBE was sacked. The lack of any meaningful transformation after BPR at the bank and its failure to correct the audit findings by NBE have been cited as possible reasons for this latest dismissal.

As the shudder at state banks continued, Wondwossen Teshome, president of the state-owned Development Bank of Ethiopia (DBE), was removed from the top most position in the bank late last week.

The action by the Public Financial Institutes Supervisory Agency (PFISA) created mixed feelings among people close to the industry; for some it is a tardy decision, for others an unbelievable one. PFISA considers it a relevant move, in line with the Agency's restructuring of the state-owned banks which it has been busy on this month.

Melaku Fenta, board chairman of the bank and director general of the Revenue and Customs Authority (RCuA) had appointed Wondwossen to the post in 2006 following the removal of the longest serving President of the Bank, Mogess Chemere.

But this time, PFISA headed by Eyob Tesfaye (PhD) is responsible to promote, demote and remove or assign officials at state banks.

About three weeks after Eyob unseated Abe Sano, the youngest president of the Commercial Bank of Ethiopia (CBE), he has turned to the top most man at DBE.

The removal of Abe came as a surprise because of his excellent performance during his tenure, shocking even experts in the banking sector.

The sacking of Wondwossen, however, does not seem to be as surprising.

"Though the bank began implementing Business Process Reengineering (BPR), its transformation is insignificant," sources at the agency told Fortune.

This is not the only reason that triggered the removal of DBE's chief. The bank's failure to correct the audit findings of the National Bank of Ethiopia (NBE) - a regulatory entity of financial institutions in the country - is another major factor, according to knowledgeable sources.

The audit report, which appeared at the end of 2007, criticized DBE for its extremely poor credit quality, huge provisions deficiency for asset impairments and delays in credit processing. The criticism further includes the appointment of the Bank's board and management members. In addition, the report also indicates that the bank has inadequate credit risk management and improper reversal of Non Performing Loans (NPLs) to performing ones.

At the beginning of 2008, DBE had 84.1pc sick loans. The Audit Service Corporation, the external auditor of DBE, had reported in June 2005 that the working procedures of the bank had defects that violate banking regulations.

In September this year, the supervisory agency rejected the proposal of the bank to have the ultimate power to reschedule the servicing of loans.

"I don't think this is an appropriate measure, because he brought a bright system that would transform the bank's performance," a senior staff at DBE told Fortune.

But this was a move not acceptable to the agency.

However, a source close to government financial issues appreciated the measure. According to the source, the bank contains over 80 loans amounting to nearly one billion Birr which require serious rescheduling.

Perhaps what did surprise many staff at DBE is Wondwossen's replacement. The agency appointed Esayas Bahere, vice president for Human Resource Management of CBE, another state-owned bank.

Esayas was not affected by the sacking two weeks ago of management members at CBE under Abe Sano's leadership.

The 99-year old DBE operates with various funds the government secures from loans and grants both from foreign and local sources. In its life time, this bank has exhausted its capital twice, according to information obtained from NBE.

However, in 2003, the government provided the bank with 1.5 billion Br to enable it to finance priority areas in the export sector.

DBE currently has eight main branches and 24 other branches and has over 900 employees.