Instruction No. 25/GR/2023 on the Long-Term Structural Liquidity Ratio

Islamic Republic of Mauritania THE GOVERNOR Central Bank of Mauritania

Nouakchott, 21 DEC 2023

INSTRUCTION NO. 25/GR/2023 On the Long-Term Structural Liquidity Ratio

The Governor of the Central Bank of Mauritania

• Having regard to Law No. 73.118 of 30 May 1973 establishing the Central Bank of Mauritania;
• Having regard to Law No. 2018-034 of 08 August establishing the statute of the Central Bank of Mauritania;
• Having regard to Law No. 2018-036 bis of 16 August 2018 regulating credit institutions;
• Having regard to Decree No. 041/2022 dated 31 March 2022 appointing the Governor of the Central Bank of Mauritania;

DECIDES:

Article 1: This instruction defines the long-term structural liquidity ratio, specifies its composition, and determines the quantitative and qualitative prudential requirements to be met by banks regarding their funding structure and transformation risk management.

Chapter 1 - Definition of the Long-Term Structural Liquidity Ratio

Article 2: The long-term structural liquidity ratio is the percentage ratio between, in the numerator, available stable funding, and in the denominator, required stable funding, calculated over a one-year horizon.

Article 3: Banks must permanently maintain a long-term structural liquidity ratio of at least 100%. When the ratio falls below 100%, the bank is subject to the sanctions provided for in Instruction No. 05/GR/2020 and its amending texts. It must immediately inform the Central Bank of Mauritania and submit, within one month, a recovery plan to bring the ratio above the 100% threshold.

Article 4: The long-term structural liquidity ratio shall be calculated and declared in ouguiya quarterly, no later than the 9th day of the month following the end of the quarter.

Article 5: Available stable funding consists of equity and other liability items whose characteristics allow for a presumption of stability over a one-year horizon and availability. These items, valued at their book value, are weighted according to the coefficients set by this instruction.

Article 6: The residual maturity to be used for classifying equity and other liability items into the appropriate category is determined based on their contractual maturity or, when an early repayment clause exists for the counterparty in the form of a notice period or any other option, from the first date of exercise of the clause benefiting the counterparty.

Article 7: To calculate available stable funding, equity and other liability items are classified into the following categories:

a) 100% Weighting:

• Gross Core Equity and Gross Supplementary Equity as defined in Instruction No. 01/GR/2018 on minimum capital and rules for calculating net equity of credit institutions;
  • Gross Core Equity:
    • Share capital,
    • Capital premiums,
    • Reserves, excluding revaluation reserves,
    • Retained earnings (credit balance),
    • Net profit after approval by the Central Bank of Mauritania,
    • Other issued and fully paid instruments and related premiums after approval by the Central Bank of Mauritania.
  • Gross Supplementary Equity:
    • Issued and fully paid instruments and related premiums after approval by the Central Bank of Mauritania.
• Deposits, loans, and other liabilities with a residual maturity of one year or more, excluding repayment flows of less than one year related to these balance sheet items;

b) 90% Weighting:

• Demand and term deposits with a residual maturity of less than 1 year, up to an amount less than or equal to four (4) million ouguiya per client, belonging to individuals, professionals, and sole proprietorships, as defined in Article 5 paragraphs 1 and 2 of Instruction No. 02/GR/2019 on the minimum short-term liquidity ratio;

c) 50% Weighting:

• Demand and term deposits with a residual maturity of less than 1 year, for the amount exceeding four (4) million ouguiya per client, belonging to individuals, professionals, and sole proprietorships;
• Demand and term deposits and other financing with a residual maturity of less than 1 year from companies and other non-financial legal entities;
• Demand and term deposits and other financing with a residual maturity of less than 1 year from the State, public bodies, and multilateral development banks;
• Other financing with a residual maturity between 6 months and 1 year, notably those from central banks, credit institutions, and payment institutions;

d) 0% Weighting:

• Other liabilities without maturity;
• Other equity and liabilities recorded on the balance sheet, notably financing with a residual maturity of less than 6 months from central banks, credit institutions, and payment institutions;
• Liability elements considered interdependent within the meaning of Article 11 of this instruction;
• Amounts payable for the purchase of financial instruments or foreign exchange where settlement is anticipated or suspended before actual payment.

Article 8: Repayment flows of less than 1 year and less than 6 months related to equity and other liability items with a residual maturity of more than one year must be taken into account in categories c) or d) of Article 7, taking into account their maturity and the nature of the counterparty.

Article 9: Required stable funding refers to the portion of on-balance sheet assets and off-balance sheet exposures that, given their characteristics, must be financed from stable funding sources over a one-year horizon. It is calculated by applying the coefficients provided in Article 10 of this instruction to the book value of the given assets and commitments.

The principle is that assets to be backed by stable funding are those that must be renewed, particularly in the context of the bank's continuity of operations, or that cannot be sold or pledged as collateral over a one-year period without significant cost.

Article 10: To calculate required stable funding, assets and off-balance sheet items are classified into the following categories:

a) 0% Weighting:

• Cash holdings;
• Holdings at the Central Bank of Mauritania, including mandatory reserves outside project accounts;
• Asset elements considered interdependent within the meaning of Article 11 of this instruction.

b) 5% Weighting:

• Securities issued or guaranteed by the State or the Central Bank, and refinancable at the Central Bank;
• Islamic securities issued by the State refinancable at the Central Bank.

These securities must not be subject to any legal, regulatory, or contractual restrictions affecting their immediate availability, notably through pledging.

• Irrevocable financing commitments;
• Provided guarantee commitments.

c) 10% Weighting:

• Unencumbered loans granted to credit institutions or payment institutions with a residual maturity of less than 6 months, guaranteed by negotiable securities issued or guaranteed by the State or the Central Bank of Mauritania or Islamic securities issued by the State, if the bank can use the securities during the loan period.

d) 15% Weighting:

• Term deposits and other unencumbered loans granted to credit institutions or payment institutions with a residual maturity of less than 6 months.

e) 50% Weighting:

• Negotiable securities issued or guaranteed by the State or the Central Bank or Islamic securities issued by the State encumbered for a period of 6 months to less than 1 year;
• Term deposits and unencumbered loans granted to credit institutions, payment institutions, or central banks with a residual maturity of 6 months to less than 1 year;
• Guarantee deposits held with other banks for operational purposes;
• Other assets with a residual maturity of less than 1 year, notably loans granted to economic agents other than credit institutions and payment institutions.

f) 65% Weighting:

• Residential real estate loans to individuals with a residual maturity of more than 1 year, meeting the weighting provided for in Article 33 of Instruction 03/GR/2019 on the calculation of risk-weighted assets and the capital adequacy ratio of banks and financial institutions.

g) 85% Weighting:

• Other unencumbered loans, with no default of more than 90 days, granted to economic agents other than credit institutions and payment institutions with a residual maturity equal to or greater than 1 year;
• Unencumbered securities, other than those classified in high-quality liquid assets provided for in Article 3 of Instruction No. 02/GR/2019 on the minimum short-term liquidity ratio, with a residual maturity equal to or greater than 1 year;
• Physical commodities and gold.

h) 100% Weighting:

• Encumbered assets for a period equal to or greater than 1 year;
• All assets not covered by the preceding articles and notably:
  • Loans granted to credit institutions and payment institutions with a duration equal to or greater than 1 year;
  • Doubtful receivables net of provisions;
  • Non-negotiable shares on an organized market;
  • Defaulted securities net of provisions;
  • Tangible fixed assets;
  • Participation and subsidiary shares and related receivables;
  • Items deducted from equity under Article 6 of Instruction 01/GR/2018 on minimum capital and rules for calculating net equity of credit institutions;
  • Insurance assets.

Article 11: With the authorization of the Central Bank of Mauritania, assets and liability items considered interdependent may benefit from a 0% weighting for the calculation of available stable funding and required stable funding.

An asset item and a liability item are considered interdependent when the funding is allocated and exclusively intended to finance the asset in question. All of the following conditions must be met:

• the bank acts solely as an intermediary transferring funds from the considered liability item to the corresponding interdependent asset;
• the interdependent asset and liability item are clearly identified and have the same principal amount;
• the interdependent asset and liability item have identical or very close maturities, with a maximum difference of twenty days between the asset maturity and the commitment maturity;
• the interdependent liability item is imposed by a regulatory text or contractual clause and is not used to finance other assets;
• principal payment flows from the asset are not used for purposes other than repaying the interdependent liability item;
• the counterparties are different for the asset and the interdependent liability item.

Article 12: Banks are required to declare their long-term structural liquidity ratio to the Central Bank of Mauritania using the model in Annex 1, on a semi-annual basis, and according to the transmission procedures provided for the submission of the monthly prudential documents package.

As necessary, the Central Bank of Mauritania may require a bank to submit a long-term structural liquidity ratio declaration at a more frequent interval.

Chapter 2 - Qualitative Requirements for the Identification and Management of Funding and Transformation Risks

Article 13: Banks shall monitor the asymmetry of the contractual maturities of their asset and liability items by measuring the gaps (shortfalls) between contractual liquidity inflows and outflows by maturity buckets, distinguishing at a minimum maturities of one month, three months, six months, one year, and five years. They shall also monitor, where applicable, currency asymmetries.

Article 14: Banks shall monitor the concentration of their funding sources. They shall declare to the Central Bank of Mauritania according to the format of the funding structure provided. They shall also monitor and declare the sectoral concentration of their resources according to the nomenclature provided in Annex II of Instruction No. 05/GR/1998.

Banks shall monitor the evolution of their funding costs and be able to explain observed variations. They shall report the results obtained in the annual report on risk measurement and monitoring provided for in Article 23 of Instruction No. 01/GR/2012 defining the internal control provisions for credit institutions, and present these results to the permanent risk committee and the board of directors.

Article 15: Banks shall formalize a forward-looking funding plan enabling them to ensure they permanently have the necessary resources, including equity, for the continuity of their operations and the financing of their development. This funding plan shall be presented annually to the risk committee and the board of directors.

Article 16: Banks shall monitor the evolution of their pledged assets. They shall be able to provide a comprehensive list and the contracts that set the conditions for the allocation of these assets as collateral or guarantees.

Article 17: Transitional provisions applicable until 31 December 2024: From the date of signature of this instruction, banks must proceed with the quarterly declaration provided for in Article 4 according to the format in the annex to this instruction.

Article 18: This instruction shall enter into force on 1 January 2025.

Mohamed-Lemine DHEHBY The Governor

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Annex: CALCULATION OF THE LONG-TERM STRUCTURAL LIQUIDITY RATIO

Credit Institution Name:	Weighting	Gross Amount	Weighted Amount
I – AVAILABLE STABLE FUNDING
- Gross Core Equity [1]	100 %
- Gross Supplementary Equity [2]	100 %
- Term accounts and loans with residual maturity ≥ 1 year:
• Foreign banks and correspondent banks	100 %
• Financial institutions	100 %
- Repurchase agreements or outright sales with residual maturity ≥ 1 year:
• Refinancing with CBM	100 %
• Refinancing with other financial intermediaries	100 %
- Term accounts with residual maturity ≥ 1 year:
• Public and semi-public institutions	100 %
• Private sector enterprises	100 %
• Individuals	100 %
• Others	100 %
- Cash certificates ≥ 1 year	100 %
- Bonds and other resources with a residual maturity ≥ 1 year:
• Bond issuances	100 %
• Grants and earmarked funds	100 %
• Participatory loans	100 %
• Other resources	100 %
• Capital gains and regulated provisions	100 %
- Other resources with a residual maturity ≥ 1 year	100 %
Total 100% weighted category (a)
- Ordinary credit accounts with amounts less than or equal to 4 million ouguiya per account:
• Individuals	90 %
• Sole proprietorships and professionals	90 %
- Term accounts with residual maturity < 1 year in amounts less than or equal to 4 million ouguiya per account:
• Individuals	90 %
• Sole proprietorships and professionals	90 %
- Special regime savings accounts with amounts less than or equal to 4 million ouguiya per account:
• Individuals	90 %
• Sole proprietorships and professionals	90 %
Total 90% weighted category (b)
- Ordinary credit accounts:
• Individuals with amounts exceeding 4 million ouguiya per account	50 %
• Sole proprietorships and professionals with amounts exceeding 4 million per account	50 %
• Public and semi-public institutions	50 %
• Private companies	50 %
• Others	50 %
- Term accounts with residual maturity < 1 year:
• Individuals with amounts exceeding 4 million ouguiya per account	50 %
• Sole proprietorships and professionals with amounts exceeding 4 million ouguiya per account	50 %
• Public and semi-public institutions	50 %
• Private companies	50 %
• Others	50 %
- Other amounts due to customers	50 %
- Customer accounts payable after collection	50 %
- Correspondent accounts payable after collection	50 %
- Term accounts and loans with residual maturity ≥ 6 months and < 1 year:
• Foreign banks and correspondent banks	50 %
• Financial institutions	50 %
- Repurchase agreements or outright sales with residual maturity ≥ 6 months and < 1 year:
• Refinancing with CBM	50 %
• Refinancing with other financial intermediaries	50 %
- Repayments due ≥ 6 months and < 1 year:
• Supplementary equity	50 %
- Term accounts and loans with residual maturity < 1 year:
• Foreign banks and correspondent banks	50 %
• Financial institutions	50 %
• Public and semi-public institutions	50 %
• Private sector enterprises	50 %
• Individuals	50 %
• Others	50 %
- Repurchase agreements or outright sales with residual maturity < 1 year:
• Refinancing with CBM	50 %
• Refinancing with other financial intermediaries	50 %
• Cash certificates with a residual maturity of 1 year	50 %
• Other amounts due to customers	50 %
- Other loans and resources with a residual maturity < 1 year:
• Bond issuances	50 %
• Grants and earmarked funds	50 %
• Participatory loans	50 %
• Other resources	50 %
Total 50% weighted category (c)
Other liabilities with a residual maturity of less than 6 months from central banks, credit institutions, and payment institutions:
- Issuing institute, Public Treasury, CCP	0 %
- Accounts and loans with residual maturity < 6 months:
• Ordinary accounts foreign banks and correspondents	0 %
• Ordinary accounts financial institutions	0 %
• Overnight loans foreign banks and correspondents	0 %
• Overnight loans financial institutions	0 %
• Term accounts < 6 months foreign banks and correspondents	0 %
• Term accounts < 6 months financial institutions	0 %
- Repayments of term accounts and loans ≥ 6 months:
• Foreign banks and correspondent banks	0 %
• Financial institutions	0 %
- Repurchase agreements or outright sales with residual maturity < 6 months:
• Refinancing with CBM	0 %
• Refinancing with other financial intermediaries	0 %
• Provisions for risks and charges	0 %
- Other liability items without maturity	0 %
- Interdependent liability elements with other asset elements	0 %
Total 0% weighted category (d)
AVAILABLE STABLE FUNDING (A=a+b+c+d)
II – REQUIRED STABLE FUNDING
- Banknotes and coins	0 %
- Issuing institute, Public Treasury, CCP	0 %
- Securities received in overnight repurchase from CBM	0 %
- Interdependent asset elements with other liability elements	0 %
- Unencumbered Treasury bills and equivalents	5 %
- Irrevocable financing commitments	5 %
- Provided guarantee commitments	5 %
Total 5% weighted category (f)
- Unencumbered loans with a residual maturity < 6 months granted to credit institutions or payment institutions guaranteed by securities issued by the State or CBM	10 %
Total 10% weighted category (g)
- Term accounts and loans with a residual maturity < 6 months granted to:
• Foreign banks and correspondent banks	15 %
• Financial institutions	15 %
Total 15% weighted category (h)
- Unencumbered Treasury bills and equivalents > 6 months and ≤ 1 year	50 %
- Securities received in repurchase or outright purchased with a residual maturity > 6 months and ≤ 1 year:	50 %
- Term accounts and loans with a residual maturity > 6 months and ≤ 1 year granted to:
• Foreign banks and correspondent banks	50 %
• Financial institutions	50 %
- Guarantee deposits held by correspondents:
• Foreign banks and correspondent banks	50 %
- Other productive credits with a residual maturity ≤ 1 year:
• Trade receivables	50 %
• Other short-term credits	50 %
• Medium-term credits	50 %
• Long-term credits	50 %
• Unapplied values	50 %
• Ordinary debit accounts	50 %
• Other healthy direct credits	50 %
- Other assets with a residual maturity > 6 months and ≤ 1 year:	50 %
• Cheques to be collected	50 %
Total 50% weighted category (i)
- Residential real estate loans to individuals (article 7-f):	65 %
Total 65% weighted category (j)
- Other productive credits with a residual maturity > 1 year:
• Customer credits	85 %
• Short-term credits	85 %
• Medium-term credits	85 %
• Long-term credits	85 %
• Unencumbered securities excluding HQLA with a residual maturity > 1 year	85 %
• Physical commodities and gold	85 %
Total 85% weighted category (k)
- Encumbered assets for a residual duration ≥ 1 year:	100 %
- Loans with a duration equal to or greater than 1 year granted to:
• Foreign banks and correspondent banks	100 %
• Financial institutions	100 %
- Doubtful receivables net of provisions	100 %
- Non-negotiable shares on an organized market	100 %
- Defaulted securities net of provisions	100 %
- Tangible fixed assets net of depreciation	100 %
- Participation and subsidiary shares and related receivables	100 %
- Items deducted from prudential equity:
• Unpaid capital	100 %
• Retained earnings deficit	100 %
• Intangible assets	100 %
- Insurance assets	100 %
Total 100% weighted category (l)
REQUIRED STABLE FUNDING (B=e+f+g+h+i+j+k+l)
*LONG-TERM LIQUIDITY RATIO [(B/A)100]

[1] Gross core equity as defined in Instruction No. 01/GR/2018 on minimum capital and rules for calculating net equity of credit institutions: Total I.A+I.B [2] Gross supplementary equity as defined in Instruction No. 01/GR/2018 on minimum capital and rules for calculating net equity of credit institutions: Total II.E