Instruction No. 004/2000 on Credit Institutions' Shareholdings

INSTRUCTION NO. 004/2000 on Credit Institutions' Shareholdings INSTRUCTION NO. 004/2000 on Credit Institutions' Shareholdings

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The Banking and Financial Supervision Commission (CSBF) of the Republic of Madagascar, Having regard to Law No. 95-030 dated February 22, 1996, on the activity and supervision of credit institutions, Having regard to Instruction No. 001/2000-CSBF dated February 1, 2000, on the available own funds of credit institutions, Having regard to Instruction No. 003/99-CSBF dated August 9, 1999, on the accounting plan for credit institutions, Having regard to Instruction No. 003/94/CCBEF dated December 29, 1994, on the risk segmentation of banks and financial institutions, as amended by Instruction No. 002/99-CSBF dated July 22, 1999, In application of the provisions of Article 8 of the aforementioned Law No. 95-030, which stipulates that credit institutions may only acquire or hold shareholdings in existing or newly established companies under the conditions defined by CSBF instructions. D E C I D E S: ARTICLE 1.- The acquisition and holding by credit institutions of shareholdings in company capital are subject to the conditions and limits defined by this instruction. ARTICLE 2.- Shareholdings held by credit institutions in company capital, as defined by the Accounting Plan for Credit Institutions (PCEC), must at no time exceed either of the following limits:

1. 15% of the credit institution's available own funds, without exceeding 15% of the company's capital for each shareholding or any other form of contribution that would enable the credit institution to exercise effective or potential influence over the company's management;
2. 60% of the credit institution's available own funds for the total shareholdings. Available own funds are those defined by CSBF instruction. The limits set forth in this article apply to the net book value of securities. ARTICLE 3.- The following are exempt from the limits stipulated in Article 2:

• shareholdings held in other credit institutions;
• shareholdings held within mutual financial institutions organized in a network. This shareholding is limited:

• to unions, or any intermediate grouping structure expected to eventually disappear to give rise to a union, for basic mutual financial institutions;
• to federations, or any intermediate grouping structure expected to eventually disappear to give rise to a federation, for unions.

• shareholdings held entirely or jointly with other credit institutions in companies whose main activity constitutes a continuation of the concerned credit institution's activity, as defined in Article 4 below, or consist either in owning assets allocated to its operations, housing for its staff and operation of its social initiatives, or providing services necessary for its operations.
• shareholdings held pursuant to a prior agreement with a third party, on behalf of that third party;
• shareholdings subject to an irrevocable purchase commitment received from a third party, up to the amount of funds received by the credit institution from that third party as coverage for the transaction. In all cases, shareholdings are included in the determination of incurred risks as defined in the instruction on risk segmentation. Article 4 - For the application of this instruction, services constituting a continuation of credit institution activities are considered to be complementary services, even non-banking, relating to banking operations as defined in Articles 3 to 6 of the aforementioned Law, including, among others, the completion of administrative formalities, stamp sales, registration of deeds, and insurance subscription for a credit file. ARTICLE 5.- When a credit institution finds itself in circumstances where the standards stipulated in Article 2 are not met for a specified period, appropriate measures, supported by a precise regularization schedule, must be submitted to the approval of the Commission President. An institution that breaches the regulation without obtaining the authorization referred to in the preceding paragraph, or proves unable to regularize its situation within the granted timeframe, or fails to comply with the CSBF's injunction, is subject to the sanctions and/or penalties provided for in Articles 49 and 52 of the aforementioned Law. ARTICLE 6 - The institutions subject to this regulation shall submit to the General Secretariat of the CSBF, as an annex to their periodic and year-end accounting documents, a statement of their portfolio of shareholdings and investment securities, according to the model attached as an annex, where applicable with a "nil" notation: For mutual financial institutions organized in a network, declarations are centralized, approved, and transmitted, like other regulatory statements, by the central body. ARTICLE 7 - These provisions repeal all contrary provisions of the same subject matter. The initial declarations prescribed in Article 6 will be based on the periodic accounting status finalized as of December 29, 2000. Credit institutions that have not met the standards set forth in Article 2 by this date will have a period of six (6) months from the date of this instruction to comply with the regulation, under penalty of the sanctions and/or penalties provided by Articles 49 and 52 of the aforementioned Law. Done in Antananarivo, on October 27, 2000. For the Banking and Financial Supervision Commission, THE PRESIDENT, Gaston E. RAVELOJAONA. Top of page