Decree of November 14, 1980 Regulating the Operation of Banks and Banking Activities in Haiti

DECREE OF NOVEMBER 14, 1980 REGULATING THE OPERATION OF BANKS AND BANKING ACTIVITIES ON THE TERRITORY OF THE REPUBLIC OF HAITI (Moniteur no. 82 of Monday, November 17, 1980)

JEAN CLAUDE DUVALIER Life President of the Republic

Having viewed Articles 68, 76, 77, 78, 79, 83, 90, 93, 94, 149, 160, 161 of the Constitution; Having viewed the Law of August 16, 1979 on the Budget and Public Accounting; Having viewed the Law of August 17, 1979 creating the Bank of the Republic of Haiti (BRH) to which the monetary activities of the National Bank of the Republic of Haiti (BNRH) are transferred; Having viewed the Law of August 17, 1979 creating the National Credit Bank to which the banking and commercial activities of the National Bank of the Republic of Haiti (BNRH) are transferred; Having viewed the decree of the Legislative Chamber dated September 20, 1980, suspending the guarantees provided in Articles 17, 18, 19, 20, 25, 31, 34, 48, 70, 72, 93 (7th paragraph), 97, 109, 110, 119 (2nd paragraph), 147, 148, 151, 190, and 195 of the Constitution and granting Full Powers to the Head of the Executive Power, to enable him to take, by Decrees having the force of Laws, all measures he deems useful for the safeguarding of the integrity of the Territory and the Sovereignty of the State, for the consolidation of order and peace, for the maintenance of political, economic, and financial stability of the Nation, for the deepening of the well-being of the populations, and for the defense of the general interests of the Republic; Considering that the Haitian State has an interest in regulating the operation of Banks and banking activities throughout the territory of the Republic of Haiti; On the Report of the Secretary of State for Finance and Economic Affairs; And after deliberation in the Council of Secretaries of State;

DECREES;

TITLE I. SCOPE AND APPLICATION OF THE LAW

CHAPTER I. PRELIMINARIES

Article 1- This Decree regulates the operation of Banks and banking activities on the territory of the Republic of Haiti.

However, International Financial Institutions of which the Republic of Haiti is a Member, as well as the Bank of the Republic of Haiti, remain governed by the treaties, international conventions, Laws, and Regulations concerning them.

CHAPTER II. DEFINITIONS

ARTICLE 2.- An Enterprise or Establishment whose usual profession is the commerce of money, and which, for this purpose, receives funds from the public in the form of deposits, which it employs for its own account in credit operations, discounting, or financial operations, is considered a Bank.

ARTICLE 3.- By Funds Received from the Public, we mean the funds that Banks receive in any form from third parties, or on behalf of third parties, with the obligation to repay the full amount.

The following are not considered funds received from the public for the application of this Decree: a) funds received in exchange for securities issued or placed in accordance with the Law. b) sums left on account in a Bank by:

• the owner or the holder of at least 10% of the share capital;
• executives, directors, managers, and staff members; c) funds obtained through repurchase agreements, discounting of public or commercial instruments, or funds obtained in the form of loans or advances granted by financial institutions.

ARTICLE 4.- By Funds Received in the Form of Bank Deposits, we mean all funds in legal tender that any banking enterprise receives from any third party, with, by derogation from the stipulations of Law No. 26 of the Civil Code, the right to dispose of them for the needs of its own activity, under the condition of ensuring the depositor a cash service and notably paying only and always in legal tender, up to the balance of values thus received from the client, all orders for bank deposits are subject to set-off between the Depositor and the Depositary as provided by ARTICLES 1073 and 1084 of the Civil Code.

By DEMAND BANK DEPOSIT, we mean bank deposits mobilizable upon request of the depositor or only by check of the depositor.

By TERM BANK DEPOSIT, we mean bank deposits that are not mobilizable upon request or by check of the depositor; term deposits are subject to the stipulations of the parties regarding their amount, the interest they may yield for the benefit of the depositor, and the period during which the restitution of this deposit by the depositary is not due.

Under the terms of this Decree, the words LEGAL TENDER will mean any currency having legal tender on the territory of the Republic of Haiti or any currency declared by notice of the BRH as legal tender only in relations between: a) a private bank and one or more other private banks b) Private Banks and the BRH

ARTICLE 5- Banks are distinguished into: A. Commercial Banks, B. Investment Banks C. Savings Banks

ARTICLE 6- By Commercial Bank, this Decree designates banking establishments whose main activities consist of receiving from the public demand or term deposits of funds, and carrying out credit operations for short, medium, or long terms, according to the proportions fixed by the Bank of the Republic of Haiti.

Commercial Banks may not participate for more than 20% in the Capital of any enterprise, except for Banks, Financial Institutions, or Real Estate Companies necessary for their operation.

Nevertheless, the total amount of its participations, including those made in the enterprises mentioned in the previous paragraph, cannot exceed the amount of the own resources (capital and reserves) of each commercial bank. They are furthermore authorized to make mortgage loans up to 50% of their own resources.

However, the BRH is authorized to modify the aforementioned rates according to the economic situation.

ARTICLE 7- Investment Banks are those whose main activity is, in addition to granting long-term credit to enterprises, the taking and management of participations in existing or forming businesses.

The resources of these Banks come from their own capital and medium and long-term deposits. They use only their own funds for the taking and management of their participations in enterprises.

ARTICLE 8- By Savings Bank, this Decree designates all Banks receiving only savings account deposits and term deposits within the limits fixed by the BRH. They are authorized to carry out mortgage loans and medium and long-term credit operations.

They must be Societies under Haitian law.

ARTICLE 9- In cases not provided for in the provisions of ARTICLES 2, 3, 4 of this chapter, the Bank of the Republic of Haiti (BRH) will judge to what extent it is important to extend the application of the Law to entities engaged in activities assimilable to banking operations.

ARTICLE 10- Under the terms of this Decree, Foreign Banks are considered to be Banks which, regardless of the location of their registered office, are directly or indirectly under the control of foreign natural or legal persons.

Banks are considered to be under the control of foreign natural or legal persons if more than half of their capital belongs to foreign nationals.

TITLE II OPERATING CONDITIONS

CHAPTER I AUTHORIZATION TO OPERATE

ARTICLE 11- The exercise of the banking profession is permitted to both natural and legal persons. However, companies whose object is the operation of a bank will only be authorized to function if they are organized under the provisions of this Decree.

It will not be permitted for bankrupt persons not rehabilitated to exercise the profession of Banker, nor for individuals who have been convicted of common law crimes, forgery and use of false private commercial or banking documents, theft, breach of trust, fraud, extortion of funds or valuables, issuance in bad faith of checks without provision, or offenses against the credit of the State.

ARTICLE 12- The application for authorization to operate a Banking Enterprise will be submitted in one original and two copies to the State Secretariat for Finance and Economic Affairs, which will immediately forward a copy of this application to the Bank of the Republic of Haiti (BRH) and to the State Secretariat for Commerce and Industry.

ARTICLE 13- Any application for authorization to operate submitted by a banking enterprise organized according to Haitian Laws must be accompanied by the following information and documents:

• name, first name, profession, domicile, nationality of the founder(s)
• the trade name, in the case of a Company;
• the operations it intends to engage in and the category chosen in accordance with ARTICLES 5, 6, 7, and 8 of this Decree;
• the legal domicile of the Registered Office and the indication of cities or places of business where this enterprise proposes to establish its offices;
• the amount of capital paid to enable the Bank to begin operations;
• a copy of the Articles of Association and related Amendments, the number of Members of its Board of Directors, their name, first name, profession, domicile, and nationality, the number of shares they hold;
• the name, first name, domicile, and nationality of executive officials;
• all financial information that the BRH may request

ARTICLE 14- Any bank having its Registered Office outside the Haitian territory and wishing to establish itself in Haiti must submit to the Bank of the Republic of Haiti (BRH) the following documents:

1. the deed of incorporation and statutes ensuring its operation in the country of origin;
2. the authorization to operate in the Country of origin;
3. proof that the Company is authorized by its statutes and the Laws of the Country of origin to establish a branch or agency on foreign territory;
4. the names of the legal representative(s) in charge of the management of the branch or agency established on the territory of the Republic of Haiti, its faculties and powers;
5. the annual reports of this bank corresponding to its three last years of existence
6. the declaration of the Capital allocated to this branch or agency intended to ensure its operation or its operations.

ARTICLE 15 - The application for authorization to operate, and all documents submitted pursuant to articles 12 and 13 above, must be signed by the legal representative of the Bank or the Soliciting Establishment.

ARTICLE 16- In examining the application for authorization to operate, the Bank of the Republic of Haiti (BRH) will conduct the necessary investigations to ensure the validity of the documents submitted, the financial status and antecedents of the applicant, the qualities and experience of its Management, the adequacy of its Capital structure and the operations it proposes to undertake, and its ability to meet the needs of the clientele it intends to serve.

ARTICLE 17- Any reasoned opinion from the BRH and the State Secretariat for Commerce and Industry must be communicated to the State Secretariat for Finance and Economic Affairs within a period not exceeding 30 days.

ARTICLE 18- Within 10 days at the latest after receipt of the application or, if additional information has been requested, after receipt of this information, the State Secretariat for Finance and Economic Affairs will notify the applicant that the authorization has been granted or refused, if applicable. In the case of refusal, the State Secretariat for Finance and Economic Affairs may indicate to the applicant only the technical reasons that justified this refusal.

ARTICLE 19-The authorization to operate will be confirmed by a Certificate published in the Moniteur and in a major-circulation daily newspaper of the country in the form of a notice from the State Secretariat for Finance and Economic Affairs. This authorization to operate is not enforceable against third parties before its publication.

ARTICLE 20- No bank organized according to Haitian Laws may, without the authorization of the Bank of the Republic of Haiti (BRH) a) change its trade name as registered and inscribed on the list of Banks; b) undertake activities other than those consistent with the object of its establishment; c) merge with another bank; d) take control of a bank, either by acquiring the majority of shares, or by granting it advances of funds exceeding 50% of the Capital, reserves, and undistributed profits of the beneficiary Bank: e) modify its capital f) amend its statutes g) cede or lease the entirety or a significant part of its assets

ARTICLE 21- All approved banks, whether organized according to Haitian laws or authorized to function as branches, agencies, or counters of Foreign Banks, are required to notify the State Secretariat for Finance and Economic Affairs of any modification concerning the information provided by them pursuant to articles 13 and 14 during the processing of their application.

ARTICLE 22- The Bank of the Republic of Haiti (BRH) will approve changes to the Statutes or Capital of Foreign Banks insofar as these changes are not contrary to Haitian legislation governing their operation on the territory of the Republic.

ARTICLE 23- The persons, enterprises, and establishments whose activity is regulated by the provisions of this Decree are required to register with the BRH.

ARTICLE 24- Any authorization to operate issued under this Decree must be displayed and exhibited in a visible place at the premises of the enterprise or establishment holding it, in a part of this premises accessible to the public, both at its Principal Headquarters and in its branches or agencies, if any.

ARTICLE 25- Any bank operating in Haiti must solicit the authorization of the BRH to open an office, counter, agency, or branch elsewhere than at its registered office or principal establishment. Any unfavorable response to this request must be motivated.

ARTICLE 26- The State Secretariat for Finance and Economic Affairs, at the request of the BRH, may revoke the authorization to operate of a Bank if it: a) has not begun its operations within twelve (12) months following the approval granted, unless the BRH has extended this period by written notification; b) seriously or repeatedly violates the provisions of this Decree, the instructions of the State Secretariat for Finance and Economic Affairs, or the terms of its authorization to operate; c) ceases to exercise its activity

ARTICLE 27- Before revoking an authorization to operate, the State Secretariat for Finance and Economic Affairs will give notice of its intention to do so to the concerned enterprise, and grant it a period of (30) days at most to justify, if necessary, the reasons for reconsidering this intention.

ARTICLE 28- When an authorization to operate has been revoked, the State Secretariat for Finance and Economic Affairs will notify the BRH and the State Secretariat for Commerce and Industry. It will give notice as soon as possible, to the Moniteur and, if applicable, in a major-circulation daily newspaper of the city where the Principal Office of the concerned Bank is established, and will take any other measure necessary to inform the public. The costs arising from these notices are borne by the bank thus removed from the list of banks.

ARTICLE 29- Whenever the BRH has reason to believe that a person or company is conducting banking operations without the authorization required by law, it will require the examination of the books, accounts, and files of this person or company to ensure that this is the case.

ARTICLE 30- Any person or company conducting banking operations without an authorization to operate and refusing to produce for examination the required books, accounts, and files, will be subject to a fine of TWENTY THOUSAND TO FIFTY THOUSAND GOURDES.

ARTICLE 31- Any person or company caught in the act of conducting banking operations without being in possession of an authorization issued under this Decree, will be subject to the same fine provided for in the previous article.

CHAPTER II PRESCRIPTIONS RELATING TO CAPITAL, RESERVES, AND PROFIT DISTRIBUTION

SECTION I. CAPITAL OF BANKS

ARTICLE 32- Any natural or legal person practicing banking on the territory of the Republic must prove the constitution for this purpose of a MINIMUM CAPITAL which varies according to the specialization mentioned in article 5 of this Decree. Mention of this Capital must be made in all acts, letters, and documents of this bank.

ARTICLE 33- The Minimum Capital of commercial banks is FIVE MILLION GOURDES (G 5,000,000.00) fully paid. This figure may be increased for Banks of this category whose total amount of balance sheet commitments and off-balance sheet commitments exceeds ONE HUNDRED (100) MILLION GOURDES as per two (2) consecutive fiscal years.

The Minimum Capital of investment banks is SEVEN MILLION FIVE HUNDRED THOUSAND GOURDES (G. 7,500,000.00) subscribed in its entirety and paid at a rate of 90% of its amount. This figure may be increased for banks of this category whose total amount of balance sheet commitments and off-balance sheet commitments exceeds an amount to be determined by the BRH.

The Minimum Capital of savings banks is TWO MILLION FIVE HUNDRED THOUSAND GOURDES subscribed in its entirety and paid at a rate of 90% of its amount. This figure may be increased for banks of this category whose total amount of balance sheet commitments and off-balance sheet commitments exceeds fifty (50) MILLION GOURDES as per two (2) consecutive fiscal years.

ARTICLE 34- Foreign Banks must justify to the BRH the allocation to all their operations in Haiti of a minimum endowment of FIVE MILLION GOURDES (GDES 5,000,000.00). This endowment would be established for banks already installed before the publication of this decree by an initial contribution of three million five hundred thousand gourdes (GDES 3,500,000) to be completed over three years by equal terms of five hundred thousand Gourdes (GDES 500,000). The BRH has jurisdiction to assess the constituent elements of this minimum endowment. Unless a temporary derogation is granted by the BRH, this endowment cannot be offset in cash by advances or loans granted to the headquarters or subsidiaries, branches, agencies, or counters of the same Bank.

ARTICLE 35- Any Bank will maintain a Capital Reserve Account to which a percentage of its net profit will be transferred at the end of each fiscal year, as indicated in article 38.

ARTICLE 36- The amount of capital and that of the Reserve Account may only be reduced under the circumstances and according to the forms specifically provided for in articles 20 and 37 of this Decree.

SECTION II. RESERVES AND PROFITS

ARTICLE 37- The constitution of the Capital Reserve Account will be done as follows: a) Any Bank, before any declaration of dividend or any transfer of profit to its headquarters or elsewhere, will transfer to a Capital Reserve Account, from the amount of commercial profit, after the constitution of a provision for taxes to be paid, a value equal to an amount that will not be less than that specified in article 38; b) The Reserve Account will not be reduced unless the Bank of the Republic of Haiti authorizes a reduction, the value of which will be transferred as an increase in Capital or eventually applied to the absorption of eventual losses declared, duly controlled by the BRH, or any other operation subject to the appreciation of the BRH.

ARTICLE 38- At the end of each fiscal year, any Bank will transfer to its Reserve Account a value equal to at least 10% of its net commercial profit until the consolidated amount of the Authorized Capital or endowment, and the Reserve Account, reaches one and a half times the Authorized Capital. This reserve, in the case of a Company qualified as a bank, will merge with that provided for by the Law on Joint Stock Companies:

ARTICLE 39- In making the necessary calculations to ensure that a bank has satisfied the requirements of article 38, the following factors will be taken into account, to the satisfaction of the BRH: a) the amortization of real and personal assets (to be calculated at least once during each Fiscal Year); b) reserves for doubtful or uncollectible debts; c) accumulated losses from operations, including accumulated depreciation and uncollectible values that have not yet been eliminated, as well as losses on foreign exchange operations; d) start-up costs (expenses related to the organization or extension, or the purchase of the enterprise); e) all other elements that the BRH may prescribe by regulations.

ARTICLE 40- The BRH may recommend to Banks the adoption of measures aimed at the recovery of doubtful debts in order to improve the quality of the portfolio.

ARTICLE 41- Banks must comply with the decisions of the BRH which, in certain particular circumstances (such as difficulties in meeting current obligations), may order: a) to limit or prohibit the distribution of profits or any other benefits; b) to increase capital; c) to maintain up to 100% cash reserves against any increase in deposits or credits; d) to limit or prohibit the realization of new loans.

ARTICLE 42- No Bank may proceed with a distribution of benefits until the Reserves covering the annual amortizations mentioned in article 38 of this Decree have been constituted, or until its Capital, endowment, or Capital Reserve Account are affected by losses.

ARTICLE 43- The BRH may determine the minimum or maximum ratio that all Banks of the same category must maintain: a) between certain of their commitments and certain of their resources as well as b) between certain or the entirety of their employments and certain or the entirety of their resources. The BRH has jurisdiction to determine the constituent elements of each coefficient.

Pursuant to articles 29 to 32 of the Law of August 17, 1979 creating the Bank of the Republic of Haiti (BRH), the latter has jurisdiction to regulate the activity of Banks. To this end, it may require banking establishments to respect management rules aimed at ensuring the security of deposits entrusted to them and to promote a credit policy consistent with the national interest.

1. The Central Bank may notably establish liquidity rules aimed at constraining establishments to keep in an immediately available or easily mobilizable form a part of their short-term resources.
2. It may also enact rules aimed at ensuring that the amount of the own resources of banks is in proportion to the volume of funds entrusted to them or the risks they assume.
3. Any provision may likewise be taken to limit the risks of