Establishing SOEs is one of the modes of government intervention in the economy. Such direct role of the government in the economy will have both positive and adverse effects in the commercial environment. It has positive contributions since public enterprises tried to achieve different social objectives as their primary roles. In contrast, as a result of being owned by the government, they are preferential treated in different manners that impede business activity of private undertaking in the same market. Such preferential advantages are not based on better performance, superior efficiency, better technology or superior management skills but are merely government-created. To overcome such adverse effects the OECD come up with a competition neutrality framework that connotes a similar set of rules to public enterprises and private undertaking. It further demonstrates major set of rules from different countries experiences. These are the similar rules in taxation regime, procurement rules, bankruptcy rules and proceeding, the general applicability of the competition law and its enforcement, and the prohibitions of subsidies including exclusive market advantages. Currently the Ethiopian government own public enterprises in different sectors of the economy that needs critical assessment from competition neutrality points of view. The Ethiopian banking sector in general and one of the state owned bank called CBE conducts are criticized as competition distorting. This triggers the study to explore the status of SOEs in light of the areas of competition neutrality framework particular emphasis to the banking sectors. The research was conducted based on qualitative research approach by analyzing laws, documents and data collected through interview. This research is particularly studied by exploring the legal and practical treatment of private and public banks from Ethiopian taxation regime, public procurement ,competition law and enforcement, bankruptcy laws and de facto/de jure exclusive markets. Moreover, it tried to pin point adverse effects of such anti competition neutrality rules on private banks. Therefore, the study found that, in Ethiopia, the state has no comprehensive competition policy that clearly demonstrates the competition neutrality stands of the government. This affects the entire rules and practices of different government bodies to act in favor of state owned enterprises. In some points, like the business taxation regime and bankruptcy rules, it is consistent with competition neutrality rules. In other areas the study reviled the existence of volume of anti competition neutrality rules. These are VAT withholding system, the public procurement practices of governmental bodies, the weak enforcement of the competition law against state aid, and the presence of different exclusive markets given to CBE that contravenes with the interest of private banks. It is a result of different related legal and institutional challenges. Accordingly, this research provides explicit recommendations to concerned organs ranging from enacting competition policy to a specific revision of anti competition neutrality laws and practice