Circular No. 111 on Standards for Components of Mandatory Reserves

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[Logo BRH] Bank of the Republic of Haiti CIRCULAR NO. 111

TO BANKS

Pursuant to Article 83 of the Law of May 14, 2012, concerning banks and other financial institutions, this Circular determines the standards regarding the components of mandatory reserves to which banks are subject.

1. Mandatory Reserve Regime

1.1. Formation of Mandatory Reserves

Mandatory reserves are constituted by: the balances of accounts opened in the name of banks at the Bank of the Republic of Haiti (BRH), their cash holdings in national and foreign currency, and deposits held by banks at the National Credit Bank (BNC).

The following are subject to mandatory reserves:

A- All balance sheet liabilities denominated in national and foreign currencies, with the exception of:

• liabilities to local banks subject to the same mandatory reserve requirements;
• liabilities to the BRH;
• funds received from Development Finance Companies (SFD) as loans for refinancing purposes;
• deferred revenues as defined in Circular No. 93 on the transmission of monthly financial statements;
• the counterpart of effects for immediate collection;
• acceptances in circulation as defined in Circular No. 93 on the transmission of monthly financial statements;
• hybrid equity elements considered as quasi-capital as defined in Circular No. 88 on capital adequacy;
• any other deduction provided for in current regulations.

B- All funds received in the form of securities, certificates of deposit, and others denominated in gourdes and foreign currencies by non-bank subsidiaries.

Non-bank subsidiaries are considered to be enterprises that habitually engage in one or more activities comparable to banking operations.

C- All national currency liabilities (off-balance sheet) representing the counterpart of foreign currency commitments recorded on the balance sheet.

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1.2. Particularities

The following are exempt from mandatory reserves:

a) Gourde resources captured and used to grant housing loans, that is, all loans and advances granted by a banking establishment for the acquisition, construction, repair, or improvement of residential real estate property. Residential real estate properties include single-family residences, multi-unit housing of any type for residential purposes, and land intended for residential construction and compliant with internationally accepted seismic standards. b) Gourde resources captured and used to grant loans for the acquisition, construction, repair, or improvement of residential, commercial, and industrial buildings. c) Gourde resources used, from August 1, 2010, for the granting of housing loans as defined in paragraphs (a) and (b) of this section. d) Sound housing loans before January 12, 2010, and restructured after this date. e) Gourde and dollar bank resources used to grant loans to a hotel institution from March 27, 2015, and restructured after this date. f) Bank gourde resources used to finance free trade zones. g) Bank gourde resources used to finance the production activities of agricultural and livestock enterprises. h) Resources from pension funds of public enterprises and autonomous bodies. i) All time deposits in gourdes bearing a base interest rate greater than or equal to 4% per year increased by the positive variation of the Average Acquisition Rate (TMA) from the beginning to the end of the holding period of said time deposit.

Furthermore, the BNC must subtract the balance of accounts of other banks (held on behalf of the BRH) domiciled with it in the calculation of its coverage.

2. Mandatory Reserve Requirement

The minimum amount of mandatory reserves that each banking establishment must constitute is calculated by applying the current mandatory reserve coefficients to the liable liabilities described in Section 1. The change in mandatory reserve coefficients is a function of monetary policy orientation. The BRH communicates to banks via circular the new applicable gourde and dollar mandatory reserve coefficients as well as their effective date.

The calculation of the mandatory reserve amount is performed by banking establishments based on the statistical liquidity report they submit daily to the BRH, which verifies the accuracy of the reserve amount submitted by each banking establishment. To the extent that a divergence is observed, the BRH intervenes to request explanations or even a correction of said report and has ninety (90) days to ensure the validity of the liquidity reports. After this deadline, banks may consider the amounts reported

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during this period as correct and must ensure compliance with their reserve obligations as described in this Circular.

3. Reports

Banks are required to submit the following reports to the BRH:

• Daily report on liquidity and coverage (Annex I) Submission deadline: the next business day by noon following the report reference date.
• Daily report on the calculation of deductible liability items subject to mandatory reserves (Annex II) Submission deadline: the next business day by noon following the report reference date.
• Monthly detailed list of beneficiaries of loans linked to BRH incentive programs (Annex III) Submission deadline: 3 days after the end of the month.
• Daily balance sheet used to prepare the daily report on liquidity and coverage Submission deadline: the next business day by noon following the report reference date.
• Monthly detailed list of pension fund accounts held on behalf of public enterprises and autonomous bodies Submission deadline: 3 days after the end of the month.

Banks will send these reports via the SIF module. In the event of system unavailability or any other situation preventing the sending of the report, it must be forwarded to the BRH in paper version, either on a secure electronic medium.

Banks are strictly prohibited from modifying the declaration form attached to this Circular.

4. Sanctions

In the event of non-compliance with the obligations defined in this Circular, banks are subject to the following penalties:

a) Penalty for late submission of the liquidity and coverage report

Failure to provide, within the required deadline, the compliance reports provided for in Section 3 of this Circular, the offending bank will be subject to a penalty of fifty thousand gourdes

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(HTG 50,000.00) per day of infraction and per report. The penalty period extends from the day of the infraction until the day the information is made available to the BRH.

b) Penalty for insufficient mandatory reserves

Any insufficiency of mandatory reserves will be subject to a penalty of 36% per annum calculated on a daily basis. This percentage will be applied to the reserve deficit position of the day, without prior notice to the offending bank.

c) Reliability of information

The amounts declared in the liquidity and coverage reports must at all times be the same as those recorded in the banks' accounting books. Any duly established difference will be subject to a penalty of 10% of the amount of this difference, notwithstanding subsequent reserve adjustments and associated penalties. The penalty will be debited to one of the accounts of the offending bank held at the BRH.

d) Penalty in case of modification of forms

Any bank that has modified the declaration form will be sanctioned by a letter of reprimand and a penalty of fifty thousand gourdes (HTG 50,000.00). In case of recidivism, the penalty will be doubled.

e) Others

Any bank that has recorded under other names operations subject to mandatory reserves according to this Circular, with the aim of excluding them from said reserves, will be liable for a penalty of 25% of the amount of the operation, notwithstanding the adjustments to the reserve calculation and associated penalties. This penalty will be deducted from the balance of one of the offending bank's accounts at the BRH.

5. Repeal and Entry into Force

This Circular repeals Circulars No. 72-3 of September 1, 1998, and 78-1 of March 27, 2000.

This Circular enters into force on December 1, 2017.

Port-au-Prince, September 25, 2017

[Signature] Jean Baden Dubois Governor

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List of Annexes

Annex I: Daily Report on Liquidity and Coverage Annex II: Calculation Sheet for Deductible Items of Liability Subject to Mandatory Reserves (on a daily basis) Annex III: Monthly Detailed List of Beneficiaries of Loans Linked to BRH Incentive Programs o Annex III.1: Housing Loans o Annex III.2: Loans to the Hotel Sector o Annex III.3: Loans to the Agricultural Sector o Annex III.4: Loans to Free Trade Zones o Annex III.5: Indexed Time Deposits o Annex III.6: Other Programs Subject to Exemption

Annex IV: Monthly Detailed List of Pension Fund Accounts Held on Behalf of Public Enterprises and Autonomous Bodies

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ANNEX I DAILY REPORT ON LIQUIDITY AND COVERAGE

Bank		Date of Report Submission
Day of		Update
Reference Rate

	Foreign Currency (in dollars)	Convertible Currencies (in gourdes)	Total (in gourdes)
A) Total Bank Liabilities

B) Deductible Items
B1) Liabilities to Other Banks
B2) Liabilities to BRH
B3) Funds Received from SFD
B4) Deferred Revenues (Ref: Circ 93)
B5) Effects for Collection
B6) Acceptances in Circulation (Ref: Circ 93)
B7) Subordinated Obligations
B8) Other Financial Products (indexed time deposits, ...)
B9) Special Programs Financed from Equity (Housing Loans, Hotel Sector, Agricultural Sector, Free Zone)
B10) Pension Funds
B11) Others, to be specified
11.1 Psugo Obligations
11.2 Others

C) Off-Balance Sheet Items Subject to Legal Reserves
C1) Forward Purchase of Currencies
C2) Others

D) Total Items Subject to Legal Reserve (A-B+C)		Gourdes
D1) Deposits of Non-Financial Public Entities
D2) Other Liabilities		Currencies

E) Reserve Rates
E1) Reserve Rate on D1
E2) Reserve Rate on D2

F) Mandatory Reserves Before Mode of Constitution (F1 + F2)
F1) Mandatory Reserves on Public Entity Deposits (D1*E1)
F2) Mandatory Reserves on Other Liabilities (D2*E2)

G) Mode of Constitution of Reserves on Foreign Currency Liabilities

H) Constitution of Reserves on Foreign Currency Liabilities (F*G)

I) Mandatory Reserves After Adjustment (F+H)

J) Mandatory Reserve Coverage (J1+J2+J3-J4)
J1) Banknotes and Coin
J2) Balance at Central Bank
J3) Balance at BNC
J4) Others, to be specified
4.1 Post-Sandy Haitian Treasury Obligations
4.2 Others

K) Surplus or Deficit (I-J)
Interbank Loans
Interbank Borrowings
Credit to Private Sector (CT)
Credit to Private Sector (MT, LT)
Credit to Public Sector
Demand Deposits
Savings Deposits
Time Deposits

Signature of Two Authorized Executives
Title / Position

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ANNEX I BNC DAILY REPORT ON LIQUIDITY AND COVERAGE

Bank		Date of Report Submission
Day of		Update
Reference Rate

	Foreign Currency (in dollars)	Convertible Currencies (in gourdes)	Total (in gourdes)
A) Total Bank Liabilities

B) Deductible Items
B1) Liabilities to Other Banks
B2) Liabilities to BRH
B3) Funds Received from SFD
B4) Deferred Revenues (Ref: Circ 93)
B5) Effects for Collection
B6) Acceptances in Circulation (Ref: Circ 93)
B7) Subordinated Obligations
B8) Other Financial Products (indexed time deposits, ...)
B9) Special Programs Financed from Equity (Housing Loans, Hotel Sector, Agricultural Sector, Free Zone)
B10) Pension Funds
B11) Others, to be specified
11.1 Psugo Obligations
11.2 Others

C) Off-Balance Sheet Items Subject to Legal Reserves
C1) Forward Purchase of Currencies
C2) Others

D) Total Items Subject to Legal Reserve (A-B+C)		Gourdes
D1) Deposits of Non-Financial Public Entities
D2) Other Liabilities		Currencies

E) Reserve Rates
E1) Reserve Rate on D1
E2) Reserve Rate on D2

F) Mandatory Reserves Before Mode of Constitution (F1 + F2)
F1) Mandatory Reserves on Public Entity Deposits (D1*E1)
F2) Mandatory Reserves on Other Liabilities (D2*E2)

G) Mode of Constitution of Reserves on Foreign Currency Liabilities

H) Constitution of Reserves on Foreign Currency Liabilities (F*G)

I) Mandatory Reserves After Adjustment (F+H)

J) Mandatory Reserve Coverage (J1+J2+J3-J4)
J1) Banknotes and Coin
J2) Balance at Central Bank
J3) Others, to be specified
J3.1 Post-Sandy Haitian Treasury Obligations
J3.2 Others
J4) Less: Deposits of Local Banks
Bank 1
Bank 2

K) Surplus or Deficit (I-J)
Interbank Loans
Interbank Borrowings
Credit to Private Sector (CT)
Credit to Private Sector (MT, LT)
Credit to Public Sector
Demand Deposits
Savings Deposits
Time Deposits

Signature of Two Authorized Executives
Title/Position

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ANNEX II

CALCULATION SHEET FOR DEDUCTIBLE ITEMS OF LIABILITY SUBJECT TO MANDATORY RESERVES

Banking Establishment: ____________________ As of: ____________________

A - Liabilities to Other Banks (B1)		xxxxxxxx
Bank 1	xxxxxxxx
Bank 2	xxxxxxxx
Bank 3	xxxxxxxx

B - Liabilities to BRH / Financing Programs and Others (B2)		xxxxxxxx
Free Zones	xxxxxxxx
Kay Type Housing Loans	xxxxxxxx
Pam	xxxxxxxx
Discount Loans	xxxxxxxx
Repurchase Agreement - BRH Bonds	xxxxxxxx
Others	xxxxxxxx

C - Funds Received from SFD (B3)		xxxxxxxx
Refinancing Program	xxxxxxxx
Total Deposits	xxxxxxxx
Time Deposits	xxxxxxxx
Others	xxxxxxxx

D - Hybrid Equity Elements (B7)		xxxxxxxx

E - Other Financial Products / Indexed Time Deposits (B8)		xxxxxxxx

F - Special Programs Financed from Equity (B9)		xxxxxxxx
Kay Type Housing Loans	xxxxxxxx
Pam	xxxxxxxx
Housing Loans from August 1, 2010	xxxxxxxx
Hotel Sector Loans from March 2015	xxxxxxxx
Agricultural Sector Loans	xxxxxxxx
Free Zone Loans	xxxxxxxx

G - Pension Funds (B10)		xxxxxxxx

H - Others (B11)		xxxxxxxx
PSUGO Obligations	xxxxxxxx
Others	xxxxxxxx

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ANNEX III.1. HOUSING LOANS MONTHLY REPORT

Banking Establishment: ____________________ As of: ____________________

(in thousands of gourdes)

Clients	Amount Disbursed	Loan Approval Date (dd/mm/yyyy)	Interest Rate	Loan Duration (in months)	Outstanding	Total
Housing Loans before August 1, 2010
Client # 1
Client # 2
Client # 3
............
Sub-total						xxxxxxxx
Housing Loans after August 1, 2010
Client # 1
Client # 2
Client # 3
............
Sub-total						xxxxxxxx
Restructured Housing Loans after August 1, 2010
Client # 1
Client # 2
Client # 3
............
Sub-total						xxxxxxxx
GRAND TOTAL						xxxxxxxx
Total Housing Loan Portfolio						xxxxxxxx
Housing Loans Financed from BRH Advances						xxxxxxxx
Housing Loans Financed from Other Resources						xxxxxxxx
Other Housing Loans						xxxxxxxx

Signature of Two Authorized Executives: ____________________ ____________________

Position/Title: ____________________ ____________________

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ANNEX III.2. LOANS TO THE HOTEL SECTOR MONTHLY REPORT

Banking Establishment: ____________________ As of: ____________________

(in thousands of gourdes)

Clients	Amount Disbursed	Loan Approval Date (dd/mm/yyyy)	Interest Rate	Loan Duration (in months)	Total
Loans to Hotel Sector before March 2015
Client # 1
Client # 2
Client # 3
Client # 4
............
Sub-total
Loans to Hotel Sector after March 2015
Client # 1
Client # 2
Client # 3
Client # 4
............
Sub-total
Total Loans to Hotel Sector

Signature of Two Authorized Executives: ____________________ ____________________

Position/Title: ____________________ ____________________

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ANNEX III.3. LOANS TO THE AGRICULTURAL SECTOR MONTHLY REPORT

Banking Establishment: ____________________ As of: ____________________

(in thousands of gourdes)

Clients	Activities	Municipality	Department	Approval Date	Interest Rate	Outstanding	% of Total Credits
	Outstanding Credits to Agricultural Enterprises
Client #1
Client #2
Client #3
Client #4
Client #5
............
	Outstanding Credits to Livestock Enterprises
Client #1
Client #2
Client #3
Client #4
Client #5
............

Signature of Two Authorized Executives: ____________________ ____________________

Position/Title: ____________________ ____________________

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ANNEX III.4. LOANS TO FREE TRADE ZONES MONTHLY REPORT

Banking Establishment: ____________________ As of: ____________________

(in thousands of gourdes)

Clients	Disbursement Date (dd/mm/yyyy)	Outstanding	Interest Rate	Loan Duration (months)	% of Total Credits	Total
Client # 1
Client # 2
Client # 3
Client # 4
Client # 5
............
Total						xxxxxxxx

OTHER INFORMATION

Clients	Number of Units	Number of Square Meters	Occupancy Rate	Number of Employees
Client # 1
Client # 2
Client # 3
Client # 4
Client # 5
............

Signature of Two Authorized Executives: ____________________ ____________________

Position/Title: ____________________ ____________________

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ANNEX III.5. INDEXED TIME DEPOSITS MONTHLY REPORT

Banking Establishment: ____________________ As of: ____________________

(in thousands of gourdes)

Clients	Amount	Interest Rate	Start Date (dd/mm/yyyy)	Maturity Date (dd/mm/yyyy)
Client # 1
Client # 2
Client # 3
Client # 4
Client # 5
............
Total	xxxxxxxx

Signature of Two Authorized Executives: ____________________ ____________________

Position/Title: ____________________ ____________________

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ANNEX III.6. OTHER PROGRAMS SUBJECT TO EXEMPTION MONTHLY REPORT

Banking Establishment: ____________________ As of: ____________________

(in thousands of gourdes)

Clients	Amount
Client # 1
Client # 2
Client # 3
Client # 4
Client # 5
............
Total	xxxxxxxx

Signature of Two Authorized Executives: ____________________ ____________________

Position/Title: ____________________ ____________________

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ANNEX IV PENSION FUND ACCOUNTS HELD ON BEHALF OF PUBLIC ENTERPRISES AND AUTONOMOUS BODIES MONTHLY REPORT

Banking Establishment: ____________________ As of: ____________________

(in thousands of gourdes)

PENSION FUND ACCOUNTS	Previous Month Balance	Current Month Balance
Public Enterprises # 1
Public Enterprises # 2
Public Enterprises # 3
Public Enterprises # 4
Public Enterprise # 5
............
Total	xxxxxxxx	xxxxxxxxxxxxx

Signature of Two Authorized Executives: ____________________ ____________________

Position/Title: ____________________ ____________________

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