BCRG Instruction on the Deposit Guarantee and Resolution Fund for Inclusive Financial Institutions

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REPUBLIC OF GUINEA CENTRAL BANK

Conakry, June 29, 2018

BCRG INSTRUCTION N° I/DGSIF/DSIMF /013 /2018 RELATING TO THE DEPOSIT GUARANTEE AND RESOLUTION FUND FOR INCLUSIVE FINANCIAL INSTITUTIONS

The Governor

Having regard to Ordinance N°D/2009/046/CNDD of February 07, 2009, on the statutes of the Central Bank of the Republic of Guinea;

Having regard to Decree N°D/2010/010/PRG/SGG of December 27, 2010, appointing the Governor of the Central Bank of the Republic of Guinea;

Having regard to Law N° L/2017/031/AN of July 04, 2017, relating to inclusive financial institutions in the Republic of Guinea, particularly Article 92 thereof.

DECIDES

Article 1 This instruction is applicable to Microfinance Institutions (hereinafter, "MFIs"), Electronic Money Institutions (hereinafter, "EMIs") and Postal Financial Services (hereinafter, "PFS").

SECTION 1: CREATION, LEGAL FORM, ORGANIZATION

Article 2: Creation, members A Deposit Guarantee and Resolution Fund is hereby created among approved IFIs, in the form of an Economic Interest Grouping or "EIG".

Its members are approved IFIs authorized to receive deposits from their clients in the form of demand or term deposit accounts, security deposits, electronic money accounts, funds awaiting payment or transfers.

Post Office Box N° 692 - Conakry - Telephone: (+224) 664 67 77 77 Fax: +224 669 08 88 88 - E-mail: secretariat.gouv@bcrg-guinee.org www.bcrg-guinee.org / 6, Boulevard du commerce C/Kaloum

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For MFI networks, the Apex Body represents the entire group (network of affiliated institutions and Apex Body).

Article 3: Statutes The statutes of the EIG "Deposit Guarantee and Resolution Fund for IFIs" or "FGDR" are validated by the BCRG.

Article 4: Certification of accounts The annual financial statements of the FGDR are certified by an Auditor appointed by the General Assembly of the FGDR and approved by the Approvals Committee.

Article 5: Supervision by the BCRG The FGDR transmits to the BCRG, no later than June 30:

• Its annual financial statements accompanied by the Auditor's report,
• The management report of the Board of Directors to the General Assembly,
• The minutes of the annual General Assembly decision.

It is subject to the supervision of the BCRG.

Article 6: Supervisor's right to alert When it considers that one of its members no longer presents sufficient solvency guarantees or that its management jeopardizes funds received from its clients, the FGDR may alert the Central Bank of the Republic of Guinea to the situation and request it to take all appropriate measures to avoid bankruptcy.

SECTION 2: FGDR FUNDING SOURCES AND MANAGEMENT OF RECEIVED FUNDS

Article 7: Minimum endowment (as % of members' deposits) Upon its creation, the FGDR is endowed by its members with an amount at least equal to 2% of the deposits of each of its members. This sum is paid once by each member, in the form of:

• Non-refundable endowment for at least 50% of the sum paid,
• Credit converted into a non-refundable endowment the following year, for the balance.

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Any new member joining the FGDR after its creation is required to pay its share of the minimum endowment under the conditions defined above.

Article 8: Annual call for member contributions In the event of an increase in the amount of deposits of each member, as defined on December 31 of each year, the difference is paid by the IFI, based on certified financial statements accepted by the BCRG,

In addition to the minimum endowment of 2%, the FGDR collects annual contributions from its members equal to 0.1% of each member's deposits, as of December 31 of the closed financial year.

Additional payments are made on July 1.

Article 9: Deposit base The deposit base consists of all deposits collected from clients for purposes other than credit repayment, including:

• Demand or term deposit accounts,
• Security deposits,
• Electronic money accounts,
• Funds awaiting payment or transfers.

Article 10: Additional contributions from members in delicate financial situations Members whose prudential situation shows non-compliance are required to pay an additional contribution, or "surcharge", according to the following calculation grid:

Solvency standard infraction rate (as of 31-12) % of regulatory ratio	Amount of additional contribution (as % of deposits as of 31-12)
Solvency ratio rate between [90% and 100%	Additional contribution equal to 0.2% of deposits
Solvency ratio rate between [80% and 90% [	Additional contribution equal to 0.4% of deposits
Solvency ratio rate between [70% and 80% [	Additional contribution equal to 0.6% of deposits

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Solvency ratio rate between [60% and 70% [	Additional contribution equal to 0.8% of deposits
Solvency ratio rate between [50% and 60% [	Additional contribution equal to 1% of deposits
Solvency ratio rate between [40% and 50% [	Additional contribution equal to 1.2% of deposits
Solvency ratio rate between [30% and 40% [	Additional contribution equal to 1.4% of deposits
Solvency ratio rate between [20% and 30% [	Additional contribution equal to 1.6% of deposits
Solvency ratio rate between [10% and 20% [	Additional contribution equal to 1.8% of deposits
Solvency ratio rate between [0% and 10% [	Additional contribution equal to 2% of deposits
Negative equity	Additional contribution equal to 5% of deposits

This non-refundable contribution is paid annually, pro rata to the observed infraction.

Article 11: Forced borrowing from its members In case of liquidity needs related to the implementation of the deposit guarantee, the FGDR may borrow from its members, up to 5% of the deposits (all types of accounts) of each of its members.

Any member is required to grant the requested credit within a maximum period of 30 calendar days from the notification of the loan.

The FGDR sets the loan conditions regarding duration (predetermined or variable) and rate (which cannot be negative). The conditions for forced borrowing are the same for all members.

The FGDR immediately informs the BCRG of the amount and conditions of the forced borrowing.

Article 12: Borrowing from the BCRG The BCRG may refinance the FGDR according to its needs, under conditions set by it, particularly in terms of rate, duration, conditions of use, and any guarantee for credit lines granted to the FGDR.

Article 13: Operating expenses The operating expenses of the EIG are borne by its members, independently of the contributions funding the deposit guarantee.

Contributions and loans paid under the deposit guarantee cannot be used to cover operating expenses.

The FGDR must present balanced accounts.

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Article 14: Management of Funds received under the deposit guarantee Funds received under the deposit guarantee are invested:

• In banks in the Republic of Guinea,
• In Treasury Bills issued by the Guinean State,
• In investments with the BCRG.

No bank investment may represent more than 15% of the sums received under the deposit guarantee. Investments in Treasury Bills may not exceed 35% of the sums received under the deposit guarantee.

The FGDR's investments are liquid.

Any term investment,

• Must be available for sale on the secondary market, or
• Must be convertible into a demand deposit under a prior agreement with the debtor, without the clauses governing the conversion to a demand deposit being able to impair the capital.

Income derived from the FGDR's investments feeds the said Fund and is not distributable to members.

Article 15: Selection of MFIs Only MFIs benefiting from a prudential rating of at least "B" according to the system used by the BCRG are admitted to the FGDR by decision of the BCRG.

The BCRG defines, based on objective prudential criteria, the list of MFIs admitted to the FGDR. It informs the FGDR, the MFI concerned, and its professional association.

The designated MFI becomes a member of the FGDR and regularizes its situation with the latter. The rights and obligations resulting from admission to the FGDR come into effect from the date of the BCRG's decision.

Any MFI admitted to the FGDR participates irreversibly, without possibility of exclusion.

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SECTION 3: FGDR INTERVENTION IN DEPOSIT PAYMENT AND RESOLUTION

Article 16: Triggering event for intervention (resolution and withdrawal of approval / liquidation) The BCRG notifies the FGDR of the opening of a resolution procedure or the withdrawal of approval of an IFI. This notification triggers the intervention of the FGDR.

Article 17: Modalities for reimbursement of deposits covered by the guarantee The FGDR:

• Has access to any accounting information it deems relevant to obtain the necessary information regarding the sums to be paid to clients,
• Organizes the reimbursement of depositors by all appropriate means,
• Has a period of 90 working days to make payments, starting from the notification to the BCRG.

Article 18: Guarantee ceiling amount The guarantee ceiling amount is set at five million (5,000,000) Guinean francs per client and per inclusive financial institution, all accounts combined.

It is increased no later than March 31 of each year, based on the inflation rate of the past year, effective April 1. The Governor of the BCRG notifies the FGDR of the updated guarantee amount.

Article 19: Subrogation in the rights of creditors The FGDR becomes a creditor of the IFI in resolution or liquidation, for the amount paid by it to clients.

Article 20: Right to pursue and litigation The FGDR may initiate any recovery action and any prosecution under the conditions provided for IFI creditors.

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Article 21: Specific mandate for the management of resolution or liquidation The FGDR may be entrusted by the BCRG with the mandate to carry out certain operations related to the forced restructuring or "resolution" of one of its members, on behalf of the BCRG which remains responsible for managing the process in application of Article 143 of the law relating to inclusive financial institutions.

Acceptance of the mandate is pronounced by decision of its Board of Directors, by a three-fifths (60%) majority of its members.

It then conducts operations in the general interest of the institution's creditors and in compliance with the best ethical practices.

It reports on its mission in accordance with the legal and regulatory provisions in force.

SECTION 4: FINAL PROVISIONS

Article 22: Entry into force This instruction enters into force on the day of its publication.

[Signature/Stamp] Dr Louncény Nabé