Framework Law on Banking Regulation

FRAMEWORK LAW ON BANKING REGULATION

Completed for printing on the presses of the BCEAO Printing House, September 2010.

TABLE OF CONTENTS TITLE I - SCOPE OF BANKING REGULATION..........5 TITLE II - AUTHORIZATION AND WITHDRAWAL OF AUTHORIZATION OF CREDIT INSTITUTIONS......................10 TITLE III - MANAGEMENT AND STAFF OF CREDIT INSTITUTIONS.....................15 TITLE IV - REGULATION OF CREDIT INSTITUTIONS...................................18 Chapter 1 - Legal Form....................................18 Chapter II - Capital and Special Reserve.............................19 Chapter III - Various Authorizations.................................21 Chapter IV - Operations.................................................23 Section 1 - Bank Operations.......................23 Section II - Operations of Financial Institutions with a Banking Character.......................................24 Chapter V - Accounting and Information for the Central Bank and the Banking Commission.........25 Chapter VI - Organization of the Profession......................27 TITLE V - RULES OF THE WEST AFRICAN MONETARY UNION............................................28 TITLE VI - SUPERVISION OF CREDIT INSTITUTIONS AND PROTECTION OF DEPOSITORS.....................29 Chapter 1 - Supervision of credit institutions....29 Chapter II - Protection of depositors.............................32 TITLE VII - SANCTIONS...................................................33 Chapter 1 - Disciplinary sanctions......................33 Chapter II - Criminal penalties.......................................33 Chapter III - Other sanctions.........................................35 TITLE VIII - PROVISIONS RELATING TO THE ORGANIZATION OF COLLECTIVE LIQUIDATION PROCEDURES.............................38 TITLE IX - VARIOUS AND TRANSITORY PROVISIONS........44 Chapter 1 - Various provisions............................44 Chapter II - Transitory provisions.................................46

TITLE I SCOPE OF BANKING REGULATION

Article 1 This law applies to credit institutions operating within the territory of ( )(1), regardless of their legal status, the location of their registered office or principal establishment within the West African Monetary Union, hereinafter referred to as "UMOA", and the nationality of the owners of their share capital or management.

Article 2 Legal entities that carry out banking operations as their usual profession are considered credit institutions. For the purposes of this law, banking operations consist of receiving funds from the public, credit operations, as well as making payment instruments available to clients and managing them. Credit institutions are authorized as banks or financial institutions with a banking character.

Article 3 Banks are authorized to carry out all banking operations defined in Article 2, paragraph 2.

Article 4 Financial institutions with a banking character are authorized to carry out the banking operations for which they are approved. They are classified, by instruction of the Central Bank, into various categories according to the nature of the banking operations they are authorized to carry out.

(1): State where the law or ordinance is promulgated, to be indicated throughout the rest of the text.

Article 5 Funds received from the public are considered to be funds collected by a person from a third party, notably in the form of deposits, with the right to dispose of them for their own account, but subject to the obligation to repay them. Funds from the issuance of cash certificates are considered received from the public. However, the following are not considered funds received from the public:

1. funds constituting a company's capital;
2. funds received from the management of a company, as well as from shareholders or partners holding at least ten percent (10%) of the share capital;
3. funds received from credit institutions in connection with credit operations;
4. funds received from a company's employees, provided that their total amount remains below ten percent (10%) of the company's equity.

Article 6 For the application of this law, a credit operation consists of any act by which a person, acting for consideration:

1. provides or promises to provide funds to another person;
2. assumes, in that person's interest, a signed commitment such as an aval, guarantee, or surety. Leasing operations are assimilated to credit operations, and generally, any leasing operation accompanied by a purchase option.

Article 7 Payment instruments are considered to be all instruments that, regardless of the medium or technical process used, enable any person to transfer funds. These include notably bank checks, traveler's checks, payment and withdrawal cards, transfers or direct debit notices, credit cards, and electronic fund transfers.

Article 8 The leasing operations referred to in Article 6 concern:

1. equipment, machinery, or tool leasing operations that, regardless of their classification, give the lessee the possibility to acquire all or part of the leased goods at an agreed date with the owner, for a price fixed by mutual agreement and taking into account payments made as rent;
2. operations, regardless of their classification, by which a company finances, for its own account, the purchase and/or construction of commercial real estate, in order to lease them to persons at whose request it has acted and who may become owners of all or part, no later than the expiration of the lease.

Article 9 Subject, where applicable, to compliance with specific legislative and regulatory authorizations and provisions relating to the exercise of certain activities or professions, credit institutions are also authorized to carry out the following operations, considered ancillary to their activities:

1. gold and precious metals transactions;
2. manual or book exchange operations;
3. investment operations, namely shareholdings in existing or forming companies and all acquisitions of securities issued by public or private entities;
4. advisory and assistance operations in financial management, wealth management, securities and financial product management and investment, financial engineering operations, and generally all operations designed to facilitate the creation and development of companies, notably financing and partnership sourcing;
5. simple leasing operations for movable or immovable property by financial institutions with a banking character, authorized to carry out leasing operations;
6. intermediary operations as commission agents, brokers, or otherwise in all or part of banking operations and operations covered by this article.

Article 10 Venture capital financial institutions and equity investment financial institutions are subject to the provisions of this law, applicable to financial institutions with a banking character, subject to specific legislative or regulatory provisions. For the purposes of the regulation on fixed-capital investment firms, venture capital financial institutions and equity investment financial institutions are considered to be fixed-capital companies that regularly contribute, from their own or assimilated resources, to the strengthening of the equity and assimilated funds of other companies.

Article 11 This law does not apply:

1. to the Central Bank of West African States, hereinafter referred to as "the Central Bank";
2. to the Public Treasury;
3. to international financial institutions, nor to foreign public aid or cooperation agencies, whose activity within the territory of ( ) is authorized by international treaties, agreements, or conventions to which ( ) is a party;
4. to Management and Intermediation Companies, as well as other authorized actors of the UMOA regional financial market;
5. to decentralized financial systems, notably mutual or cooperative savings and credit institutions not authorized as credit institutions and subject to a special regime, subject to the provisions of Articles 54 and 104;
6. to (the Administration) (the Office) and the financial services of the Post and Telecommunications, subject to the provisions of Article 54. Articles 31 to 33 of this law do not apply to public credit institutions with a special status, the list of which is established by the UMOA Council of Ministers.

Article 12 The following are not considered credit institutions:

1. insurance, reinsurance companies, and pension funds;
2. notaries and ministerial officers within the scope of their functions. However, persons covered by this article are subject to the provisions of Article 103.

TITLE II AUTHORIZATION AND WITHDRAWAL OF AUTHORIZATION OF CREDIT INSTITUTIONS

Article 13 No one may, without prior authorization and registration on the list of banks or financial institutions with a banking character, exercise the activity defined in Article 2, nor claim the status of bank, banker, or financial institution with a banking character, nor create the appearance of this status, notably by using terms such as bank, banker, banking, or financial institution in its corporate name, trade name, advertising, or in any manner in its activity.

Article 14 The prohibitions defined in Article 13 do not prevent a company, regardless of its nature, from notably:

1. in the course of its professional activity, granting payment delays or advances to its counterparties;
2. concluding residential leasing contracts with a purchase option;
3. carrying out treasury operations with companies that have, directly or indirectly, capital links conferring on one of the affiliated companies effective control over the others;
4. issuing securities, as well as negotiable debt instruments, in accordance with prevailing legislative and regulatory provisions;
5. issuing certificates and cards issued for the purchase, from them, of a specific good or service.

Article 15 Authorization applications are addressed to the Minister in charge of Finance and filed with the Central Bank, which processes them. The Central Bank verifies whether the legal entities applying for authorization meet the conditions and obligations set out in Articles 25, 26, 29, 34, and 36. It ensures the suitability of the company's legal form to its banking or financial institution with a banking character activity. The Central Bank examines notably the company's business program and the technical and financial means it plans to implement, as well as its network development plan for branches, agencies, or counters, at the national and community levels. It also assesses the applicant company's ability to achieve its development objectives under conditions compatible with the sound functioning of the banking system and sufficient protection for clients. The Central Bank obtains all information on the quality of persons who provided the capital and, where applicable, their guarantors, as well as on the honorability and experience of persons called to direct, administer, or manage the credit institution and its branches. An instruction from the Central Bank determines the documents to be attached to the authorization application.

Article 16 Authorization is granted by decree of the Minister in charge of Finance, after a conforming opinion from the UMOA Banking Commission, hereinafter referred to as the Banking Commission. Authorization is deemed refused if not granted within six (6) months from receipt of the application by the Central Bank, unless a contrary opinion is given to the applicant. Authorization may be limited to the exercise of certain operations defined by the applicant's corporate object. Authorization is confirmed by registration on the list of banks or financial institutions with a banking character. These lists are established and maintained by the Banking Commission, which assigns an registration number to each bank or financial institution with a banking character. The lists of banks and financial institutions with a banking character, as well as the modifications they undergo, including cancellations, are published in the Official Gazette (of the concerned State), at the request of the Banking Commission.

Article 17 Financial institutions with a banking character, classified in a category, may not exercise the activities of another category without prior authorization granted as in matters of authorization. The withdrawal of this authorization is pronounced as in matters of withdrawal of authorization.

Article 18 A credit institution that has obtained authorization in one UMOA member State and wishes to open branches and/or subsidiaries in one or more other member States benefiting from this authorization must, prior to the opening of said branches and/or subsidiaries, notify its intention by declaration. The statement of intent is addressed to the Banking Commission and filed with the Central Bank. The Central Bank sends a copy of the declaration to the Minister in charge of Finance of the host country and that of the home country, for information. The Central Bank determines, by instruction, the information that must be contained in the declaration as well as the documents to attach, notably a presentation of the implementation project including information on planned activities, management, organizational structure, internal control organization, and where applicable, the minimum capital required before operations begin. The statement of intent is processed by the Banking Commission. The authorization or refusal to establish is notified by the Banking Commission, which informs beforehand the Minister in charge of Finance of the home and host countries of the credit institution. The authorization or refusal to establish is notified within three (3) months from the date of filing the statement of intent and the complete application file with the Central Bank. The authorization to establish is confirmed by registration on the list of banks or financial institutions with a banking character, under the conditions defined in Article 16.

Article 19 Banks and financial institutions with a banking character must include their registration number on the list of banks or financial institutions with a banking character, under the same conditions, on the same documents, and subject to the same sanctions as in matters of the Commercial Register and Credit Registry.

Article 20 Withdrawal of authorization, at the request of the concerned credit institution or when it is established that said credit institution has not exercised any activity for at least one (1) year, is pronounced by decree of the Minister in charge of Finance, after a conforming opinion from the Banking Commission. Without prejudice to the provisions of Articles 39 and 40, any decision to transfer the registered office of a credit institution outside the UMOA or any merger by absorption, division, or creation of a new company resulting in transferring the registered office outside the UMOA or its dissolution, entails withdrawal of authorization. The withdrawal of authorization or establishment authorization for infringement of banking regulation or other applicable legislation is pronounced under the conditions provided in Article 66. The withdrawal of authorization or establishment authorization is confirmed by cancellation from the list of banks or financial institutions with a banking character.

Article 21 Applications for withdrawal of authorization or establishment authorization are addressed to the Minister in charge of Finance and filed with the Central Bank. They must notably include the liquidation plan, the depositors' repayment plan, the staff compensation plan, and the strategy for handling the credit institution's claims.

Article 22 Credit institutions must cease their operations within the period fixed by the withdrawal of authorization decision.

Article 23 The Banking Commission may decide that the withdrawal of authorization granted to a credit institution entails the withdrawal of establishment authorization for subsidiaries of said credit institution created in one or more UMOA member States, taking into account their particular financial and legal links and the consequences that may arise from this withdrawal. The Banking Commission informs, where applicable, the Central Bank and the Minister in charge of Finance of the subsidiary's host State of the decision to extend the withdrawal of authorization to it.

Article 24 The Minister in charge of Finance takes and notifies the regulatory acts required by the decisions and conforming opinions of the Banking Commission, under the conditions provided in Article 37 of the Annex to the Convention governing the Banking Commission.

TITLE III MANAGEMENT AND STAFF OF CREDIT INSTITUTIONS

If the subsidiaries' operations continue, they must apply for authorization under conditions defined by an instruction from the Central Bank. However, the withdrawal of authorization of a credit institution automatically extends to its branches.

Article 25 No one may direct, administer, or manage a credit institution, or one of its branches, without holding the nationality ( ) or that of a UMOA member State, unless they benefit, under an establishment convention, from assimilation to nationals ( ). The Minister in charge of Finance may grant individual derogations to the preceding paragraph, upon a conforming opinion from the Banking Commission. Managers for whom the derogation is requested must hold at least a Master's degree or equivalent and demonstrate at least five (5) years of professional experience in the banking, financial, or any other field deemed compatible with the intended functions. Any manager or director who has obtained a derogation from the nationality condition to operate in a credit institution within a UMOA member State is not required to apply for a new derogation when changing function, institution, or country.

Article 26 Any conviction for common law crimes, forgery or use of forged public documents, forgery or use of forged private, commercial, or banking documents, theft, fraud, or offenses punishable by fraud penalties, breach of trust, bankruptcy, misappropriation of public funds, theft by a public depositary, extortion of funds or valuables, corruption, issuance of checks without provision, infringement of regulations on external financial relations, infringement of anti-money laundering legislation, impairment of State credit, or concealment of goods obtained through these offenses, or any conviction for an offense assimilated by law to those listed above, automatically entails prohibition:

1. from directing, administering, or managing a credit institution or one of its branches;
2. from exercising one of the activities defined in Article 2;
3. from proposing to the public the creation of a credit institution;
4. from taking shareholdings in a credit institution. Any conviction for attempt or complicity in the commission of the offenses listed above entails the same prohibitions. The same prohibitions apply to unrehabilitated bankrupts, dismissed ministerial officers, and managers suspended or removed under Article 66. The above prohibitions apply automatically when the conviction, bankruptcy, dismissal, suspension, or resignation is pronounced abroad. In this case, the public prosecutor or the interested party may petition the competent court to determine whether the conditions for applying the above prohibitions are met; the court rules after verifying the regularity and compliance.