Instruction No. 2013-01 on the Approval of Credit Institutions and Modifications to Elements Considered for Approval

CENTRAL BANK OF DJIBOUTI INSTRUCTION NO. 2013-01 ON THE APPROVAL OF CREDIT INSTITUTIONS AND MODIFICATIONS TO ELEMENTS CONSIDERED FOR APPROVAL

The Acting Governor of the Central Bank of Djibouti, Having regard to Law No. 181/AN/11/6th L of January 22, 2011 amending the statutes of the Central Bank of Djibouti; Having regard to Law No. 119/AN/11/6th L of January 22, 2011 on the establishment and supervision of credit institutions and financial auxiliaries; Having regard to Circular No. 02/BCD/2012 of October 30, 2012 on application procedures for the approval of credit institutions; Having regard to Decree No. 2013-009/PRE of January 29, 2013 appointing the Acting Governor of the Central Bank of Djibouti; Decrees:

Chapter 1: Criteria assessed by the Central Bank of Djibouti for granting approval: Article 1: Persons applying to the Central Bank of Djibouti for approval as a credit institution must compile and transmit all information listed in Circular No. 02/BCD/2012 of the Central Bank of Djibouti dated October 30, 2012.

Article 2: To rule on the application submitted to it, the Central Bank of Djibouti examines in particular the points mentioned in Article 19, paragraph 2 of Law No. 119/AN/11/6th L, under the following conditions:

• legal form of the institution: it ensures the suitability of the legal form for the envisaged activity;
• amount and distribution of capital: institutions must have a minimum paid-up capital, in accordance with the prevailing legislative and regulatory provisions, and their assets must at all times exceed their liabilities to third parties by an amount at least equal to the minimum required capital, without shareholders' contributions being offset, directly or indirectly, by loans granted for the purpose of repurchasing capital;
• identity and quality of capital contributors, as well as their guarantors where applicable;
• compliance with prohibition rules (Article 18 of Law No. 119/AN/11/6th L);
• effective determination of activity orientation by at least two persons: the integrity, experience, and competence of the two responsible managers must be established (Article 24 of Law No. 119/AN/11/6th L);
• activity program, organization, and technical and financial means implemented;
• means implemented for controlling operations (Law No. 110/AN/11/6th L of May 25, 2011 on combating terrorist financing);
• aptitude of the institution to achieve its development objectives under conditions ensuring client security;
• capacity of the applicant to comply with the provisions of Article 19 of the banking law;
• capital links that may exist between the corporate applicant and other legal entities are not of a nature to hinder prudent supervision. In processing the approval application, the Central Bank is authorized to request all documents and information it deems necessary.

Article 3: If, within twelve months following the granting of approval, no use has been made of this approval by the holder, the approval is deemed to have lapsed. (Prior authorization of the Central Bank)

Article 4: When it deems it useful, the Central Bank of Djibouti may attach suspensive conditions to its approval. The Central Bank may grant provisional approval for a period limited to six months, subject to the applicant fulfilling its commitments vis-à-vis the Central Bank of Djibouti.

Article 5: Prior authorization from the Central Bank is required for each of the following operations:

• modification of legal form, name, corporate name, or trade name;
• merger by absorption or creation of a new company or a split-up (scission);
• acquisition of a shareholding in a credit institution having its registered office in the Republic of Djibouti, which would have the effect of directly or indirectly bringing a related person's shareholding in the same credit institution to more than 33% and then to more than 50%; the same applies to any modification in capital distribution resulting in a change exceeding 10% in the ownership of that same capital. In case of non-compliance with this provision, the operation is considered null and void.

Article 6: Approval may be limited to the exercise of certain operations only when it appears that the human, technical, or financial means of the applicant are insufficient regarding the operations they intend to carry out.

Chapter 3: Acquisitions or extensions of shareholdings in the capital of credit institutions Article 7: Approved credit institutions must submit to the Central Bank of Djibouti any modifications to be made to their capital structure or to any element taken into account upon granting approval, under the conditions defined below.

Article 8: Prior authorization from the Central Bank of Djibouti is required for any operation:

• allowing a person acting alone or in concert with others to acquire more than 5% of the capital of a credit institution;
• or implying that an approved institution becomes, or ceases to be, a subsidiary of such person(s).

Article 9: When the approval application originates from a credit institution having its registered office abroad (for example, for the creation of a subsidiary), this application must be accompanied by the opinion of the home country authority authorized to issue such an opinion.

Article 10: The Central Bank of Djibouti has a period of two months, after acknowledging receipt of the application, to notify its decision to the acquiring candidate. When the Central Bank of Djibouti deems it necessary to collect additional information to process the application, the aforementioned period may be extended to three months. The Central Bank of Djibouti informs the applicant in writing.

reputation and experience of future responsible managers; Article 11: The Central Bank of Djibouti proceeds to examine the shareholding proposal by evaluating in particular the following criteria:

• reputation of the acquirer;
• financial solidity of the acquirer, taking into account the type of activities exercised and envisaged within the credit institution;
• capacity of the credit institution to permanently meet its prudential obligations and to have a structure that allows effective supervision;
• absence of suspicion of operations or attempts at money laundering. If, by the end of the period allotted to it, the Central Bank of Djibouti has not objected in writing to the envisaged operation, it is deemed approved.

Article 12:

Article 13: The Central Bank of Djibouti may submit its favorable opinion subject to all conditions it deems useful to guarantee sound and prudent management of the approved institution and the proper functioning of the banking system.

Article 14: If the Central Bank of Djibouti decides to oppose the envisaged operation, it informs, in writing, both the applicant and the concerned institution, no later than within the processing period allotted to it. It states the reasons for its decision.

Chapter 4: Transfers of shareholdings in the capital of credit institutions (art. LB20 II, art. 31-4) Article 15: Operations involving the transfer by a credit institution of more than 20% of its assets corresponding to its operations in the Republic of Djibouti are subject to prior authorization from the Central Bank.

Article 16: A credit institution having its registered office on Djiboutian territory and wishing to establish a branch in another State to provide banking services must submit the following information:

• name of the State;
• an activity program indicating in particular the types of operations envisaged and the structure of the branch's organization;
• names of the managers in charge of the branch;
• deposit guarantee mechanisms for clients of the branch.

Chapter 4.5: Modifications in the status of credit institutions Article 17: The following modifications must be authorized by the Central Bank of Djibouti prior to their implementation:

• legal form;
• name or corporate name;
• trade name;
• address of their registered office or main establishment in Djibouti;
• number of their registration in the commercial register;
• type of banking operations for which the institution was approved.

Article 18: The following modifications must be declared to the Central Bank of Djibouti within fifteen working days:

• amount of share capital;
• rules for calculating voting rights;
• composition of the board of directors;
• address of the registered office;
• modification of credit policy.

Article 19: The withdrawal of approval of a credit institution is pronounced by the Central Bank:

• either at the request of the credit institution;
• or by the initiative of supervisory authorities when the credit institution no longer meets the conditions for its approval or fails to comply, despite unsuccessful warnings, with prudential standards and regulations;
• when the institution has ceased all activity for more than six months;
• when the institution no longer meets the conditions. Withdrawal results in the deletion of the credit institution from the list of approved credit institutions as defined in Article 22 of Law No. 119/AN/11/6th L. Credit institutions must cease their activity within the period set by the withdrawal decision. The opinion of the sanctions commission for credit institutions is required in the cases provided for in the second and fourth paragraphs above.

Article 20: The decision to withdraw approval is notified to the credit institution and subsequently published in a national press journal of the Republic of Djibouti.

Article 21: The opening, closure, transformation, and transfer of a counter or agency in the Republic of Djibouti are notified to the Central Bank.

Article 22: Designation and cessation of functions of directors:

• the designation of any new person called upon to ensure the effective determination of a company's activity orientation must be immediately declared to the Central Bank. This declaration is accompanied by all elements allowing assessment of the person's integrity and experience (Article 24 of Law No. 119/AN/11/6th L);
• the cessation of functions of directors must be brought to the attention of the Central Bank (paragraph 4 of Article 24 of Law No. 119/AN/11/6th L).