Banking Law No. 13-003/AU of June 12, 2013

UNION OF THE COMOROS Unity - Solidarity - Development President of the Union Moroni, on: [Date] DECREE No. 13-003/AU Promulgating Law No. 13-003/AU of June 12, 2013, relating to banking law.

THE PRESIDENT OF THE UNION,

HAVING REGARD TO the Constitution of the Union of the Comores of December 23, 2001, as revised, particularly Article 17;

HEREBY DECREES:

Article 1: Law No. 13-003/AU, relating to banking law, adopted on June 12, 2013, by the Assembly of the Union of the Comores, is promulgated, the text of which follows:

"TITLE I - GENERAL PROVISIONS

CHAPTER I - SCOPE OF APPLICATION AND DEFINITIONS

ARTICLE 1: The provisions of this Law shall apply to financial institutions of Comorian law exercising their activity on the territory of the Union of the Comores.

The term "financial institutions" refers to credit institutions (banks, decentralized financial institutions, financial companies, specialized financial institutions) and financial intermediaries (investment firms, money changers, payment institutions, electronic money institutions, banking transaction intermediaries), as specified in Article 2 of this Law.

This Law does not apply to:

1. The Central Bank of the Comores;
2. The Public Treasury;
3. International financial institutions, foreign public aid or cooperation institutions, whose activity on the territory of the Union of the Comores is authorized by treaties, agreements, or international conventions to which the Union of the Comores is a party;
4. Insurance, reinsurance companies, and pension funds.

ARTICLE 2: Financial institutions are classified into two categories according to the operations authorized to them:

• Credit institutions;
• Financial intermediaries.

ARTICLE 3: A credit institution is a legal entity that habitually carries out deposit collection and credit granting operations as a profession.

Credit institutions comprise four sub-categories:

• Banks are legal entities that habitually exercise banking operations as well as related operations necessary for their activity, defined in Articles 5 and 6 of this Law;
• Decentralized Financial Institutions (DFIs) are legal entities that collect deposits from their members and grant them short and medium-term assistance;
• Financial companies are legal entities that cannot, except in exceptional cases, receive deposits of funds for less than three years from the public;
• Specialized financial institutions are public law legal entities with specific financing missions within the banking system.

ARTICLE 4: Financial intermediaries are legal or natural persons who professionally, for their own account, sell on credit, exchange currency, or habitually serve as intermediaries in banking transactions, as commission agents, brokers, or on behalf of others for financial operations, notably credit or investment.

The activity of intermediation in banking transactions and payment services is the activity consisting of presenting, proposing, or assisting in the conclusion of banking operations or payment services, or carrying out all preparatory work and advice for their implementation.

ARTICLE 5: The following constitute banking operations and may only be carried out by credit institutions defined in Article 3 of this Law:

• The habitual collection of deposits from the public;
• Making available to clients and managing legally accepted means of payment, defined in Article 9 of this Law;
• All credit operations, whatever their form, within the limits of the provisions of this Law defined in Article 10;
• The provision of Islamic financial products.

ARTICLE 6: The following constitute ancillary activities for banks and may be exercised by other financial institutions subject to authorization by the Central Bank:

• Operations on gold and precious metals;
• Book exchange or manual exchange operations, which constitute an immediate exchange of banknotes or currencies denominated in different currencies;
• Investment operations, namely taking participations in existing or forming companies and all acquisitions of securities issued by public or private persons;
• Advisory and assistance operations in financial management, wealth management, management and investment of securities and financial products, financial engineering operations, and, in general, all operations intended to facilitate the creation and development of companies, notably the search for financing and partners;
• Intermediation operations as commission agents, brokers, or otherwise in all or part of banking operations and operations referred to in this Article;
• Payment services (notably cash deposits, cash withdrawals, transfers, direct debits, fund transfers, payments made with an electronic payment means);
• The provision by a credit institution of Islamic products.

ARTICLE 7: An offshore operation for a bank is an operation as defined in Articles 5 and 6 of this Law, carried out outside the Union of the Comores by a bank whose registered office is located in the Union of the Comores.

ARTICLE 8: Funds received from the public are funds collected by a person from a third party, notably in the form of deposits, with the right to use for their own account, but under the obligation to repay them. Funds resulting from the issuance of treasury bills are considered received from the public.

However, the following are not considered funds received from the public:

• Funds received in exchange for securities issued or placed with the public;
• Funds obtained through repurchase agreements or discounting of public or commercial bills, or loans or advances from financial institutions;
• Funds received from directors or other managers of a company holding at least 10 percent of the share capital;
• Employee deposits not exceeding 10 percent of the share capital;
• Funds received to form or increase the capital of a credit or financial institution.

ARTICLE 9: Means of payment are considered all instruments, regardless of the support or technical process used, that allow any person to transfer funds.

ARTICLE 10: A credit operation is any act by which a credit institution makes or promises to make funds available to another person or takes, in the interest of that person, an engagement by signature such as an aval, guarantee, or surety.

Overdrafts, hire-purchase operations, and factoring are assimilated to credit operations.

CHAPTER II - GENERAL RULES APPLICABLE TO FINANCIAL INSTITUTIONS

ARTICLE 11:

• Banks must take the form of a fixed-capital public limited company (société anonyme);
• Decentralized financial institutions must take the form of mutuals, cooperatives, or companies;
• Other credit institutions and financial intermediaries may take the legal form appropriate to their activities.

The mention of capital and legal form, the Central Bank authorization number, and the registered office address of financial institutions must appear on their official documents.

ARTICLE 12: The minimum capital of financial institutions must be fully paid up on the date of their authorization.

Its amount is equal to a sum fixed by the Central Bank's regulations.

Social shares and shares issued must be in registered form and transferable with the approval of the Board of Directors or the General Meeting of Shareholders and according to the conditions fixed by the statutes.

ARTICLE 13: Two or more Decentralized Financial Institutions may form a Union among themselves, which must have legal personality. It represents them notably before the monetary authorities.

It is notably responsible for:

• Ensuring the cohesion of its network and the proper functioning of affiliated Decentralized Financial Institutions (DFIs);
• Ensuring the application of legislative and regulatory provisions;
• Defining internal management procedures;
• Providing all documentation requested by the Central Bank;
• Managing liquidity surpluses and the solidarity fund of affiliated DFIs, and mobilizing external resources;
• Providing technical assistance to affiliated DFIs;
• Taking all measures to support any affiliated fund in difficulty, with the aim of protecting depositors. It may, depending on the circumstances, place any affiliated fund with serious financial difficulties under guardianship.

Without prejudice to the prerogatives of the Central Bank, the Union is responsible for the periodic control of affiliated DFIs. To this end, it must establish an annual control program and transmit to the Central Bank at the end of each fiscal year an annual report relating to the controls carried out.

ARTICLE 14: A Decentralized Financial Institution (DFI) or a Union of Decentralized Financial Institutions (DFI) may obtain the status of bank under the conditions fixed by the Central Bank.

ARTICLE 15: Unions of Decentralized Financial Institutions (DFIs) as well as Decentralized Financial Institutions (DFIs) must each be administered by a Board of Directors, which may delegate part of its powers to the executive body.

ARTICLE 16: Any person participating in the administration, direction, management, and control of a financial institution is bound by professional secrecy, under penalty of the sanctions provided for in Article 76 of this Law.

The use of confidential information known to them in the course of their activity to directly or indirectly carry out operations for their own account or to benefit other persons is also prohibited and subject to the same criminal sanctions.

ARTICLE 17: Except in cases where the law provides otherwise, professional secrecy is not enforceable against the Central Bank in the exercise of its mission of supervision of the financial system, nor against the Judicial Authority acting within the framework of a criminal procedure.

TITLE II - AUTHORIZATION

CHAPTER I - AUTHORIZATION PROCEDURE AND ITS EFFECTS

ARTICLE 18: No one may, without having been previously authorized by the Central Bank and registered in the register of credit institutions or financial intermediaries, exercise the activities defined in Articles 5 and 6 of this Law or claim the status of financial institution, bank, banker, credit institution, or financial intermediary.

The application for authorization is addressed to the Central Bank, which examines it and notifies the requesting company of the decision taken;

The application for authorization must specify notably the legal status, share capital, location of the registered office on the national territory of the requesting company, the locations where it proposes to open branches, agencies, or counters in response to existing or foreseeable needs in the regions concerned, the names and qualifications of persons responsible for its administration, direction, or management, its financial solidity, the experience it may have acquired, the activities it intends to exercise, and financial prospects;

The Central Bank assesses the ability of the requesting company to achieve its development objectives, taking into account, among other things, the impact of the authorization on the proper functioning of the banking system and on the protection of depositors in accordance with the provisions of Title III, Chapter 2 of this Law.

It may require that all information or documents it deems useful to enlighten its decision be submitted, particularly regarding the quality of persons who provided the capital, the quality of their guarantors, the origin of funds intended to constitute the share capital, as well as the competence and honorability of persons responsible for its administration and direction;

If the registered office of the financial institution is abroad, the application for authorization must specify the location of the main establishment on the national territory;

Authorization may be subject to specific conditions fixed by the Central Bank;

The conditions of authorization may be subsequently modified at the initiative of the Central Bank or at the request of the authorized institution. In this case, the Central Bank processes the modification request and rules as in the case of an authorization application;

Once authorized, the financial institution is registered, as appropriate, on the register of credit institutions or on that of financial intermediaries;

The Central Bank is responsible for the publication of the authorization.

ARTICLE 19: Authorization is pronounced by decision of the Board of Directors of the Central Bank.

Authorization is deemed refused if it is not pronounced within a period of six (6) months from the 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 corporate purpose of the applicant.

Authorization is recorded by registration in the register of credit institutions, decentralized financial institutions, and financial intermediaries.

These registers are established and kept up to date by the Central Bank, which assigns a registration number to each financial institution.

The lists of credit institutions, decentralized financial institutions, and financial intermediaries, as well as the modifications to which they are subject, including cancellations, are published in the Official Journal, at the diligence of the Central Bank.

ARTICLE 20: For decentralized financial institutions, authorization may be granted to an institution or to a Union of decentralized financial institutions.

1. In the case where the application for authorization is formulated by a Union for its affiliated institutions, the Central Bank may, at its own initiative, grant authorization either individually to each institution or collectively to the entire network. The Central Bank will specify by regulatory means the application modalities of this paragraph.

2. Any decentralized financial institution authorized individually and subsequently affiliated to a Union benefits from collective authorization from the date of its affiliation;

3. The loss of the status of affiliated institution entails the automatic withdrawal of its authorization. The institution concerned must cease all activities from the date of notification of the withdrawal of authorization. To resume its activities, it must apply for a new authorization under the conditions set by this Law. Failing this, the institution must comply, as appropriate, with the provisions of Title IV, Chapter 3 of this Law.

ARTICLE 21:

1. Every credit institution must designate at least two responsible executives for the direction of the institution;
2. These executives or managers are subject to the authorization of the Central Bank, which assesses notably the honorability and experience of the persons in charge of the direction;
3. The Central Bank will fix by regulatory means the conditions for the authorization of executives or managers of authorized financial institutions;
4. The provisions cited in paragraph 1 are applicable to decentralized financial institutions that have reached a certain activity threshold fixed by the Central Bank's regulations and to Unions;
5. Every financial institution must possess and keep up to date with the Central Bank the list of persons exercising functions of administration, direction, and/or management of its headquarters, branches, subsidiaries, agencies, and counters.

ARTICLE 22:

1. No natural or legal person may: a) be an administrator, executive, or manager of a financial institution; b) exercise one of the activities defined in Articles 5 and 6 of this Law; c) propose to the public the creation of a financial institution; d) take participations in the capital of a financial institution if it has been, under the legislation in force in the Union of the Comores or abroad: i. declared bankrupt and has not been rehabilitated; ii. convicted by a final judgment as an author or accomplice of any of the following offenses: - counterfeiting of currency; - counterfeiting or falsification of public or commercial bills, shares, bonds, interest coupons, or banknotes; - counterfeiting or falsification of seals, stamps, punches, or marks; - forgery and use of forgery in public or private writing, commerce, or banking; - corruption of public officials or extortion; - aggravated theft, extortion of funds or valuables, misappropriation of public funds, breach of trust, fraud, or handling; - fictitious circulation of commercial bills or other securities or infringement of provisions relating to means and payment systems, notably issuance of checks without provision; - bankruptcy or assimilated offenses; - tax fraud; - common law crimes; - infringement of regulations on external financial relations and exchange control; - infringement of legislation against money laundering, terrorist financing, and trafficking in arms or products intended for the proliferation of weapons of mass destruction; - crimes and misdemeanors against the security of the State; e) claim the status of financial institution, bank, or banker, credit institution, or financial intermediary as defined in Articles 4 and 5 of this Law; f) exercise the activities defined in Articles 5 and 6 of this Law; g) create the appearance of this status by the use of terms such as bank, banker, decentralized financial institution in its corporate name, trade name, advertising, or in any manner in its activity.

Any violation of the above provisions is subject to the criminal sanctions provided for in Article 70 of this Law.

ARTICLE 23: Every financial institution is required to request prior authorization from the Central Bank for any:

1. Operation of taking participation, transfer, exchange, or any other operation that would result in modifying by more than 10% directly or indirectly the composition of the shareholding;
2. Modification affecting its legal status or corporate name;
3. Operation of merger or absorption;
4. Transfer or management by a financial institution of all or a significant part of its assets;
5. Reduction of its share capital or endowment.

Notwithstanding the above provisions, every financial institution is required to notify the Central Bank prior to any significant modification concerning among others its shareholding, organization, functioning, or financial situation, or any other event likely to modify the Central Bank's assessment of this financial institution.

CHAPTER II - WITHDRAWAL OF AUTHORIZATION AND CONSEQUENCES

ARTICLE 24: 1- The Board of Directors of the Central Bank may pronounce the withdrawal of authorization in the following cases: a) if the financial institution requests it; b) if it exercises no activity in the year following its authorization; c) if it contravenes the provisions of this Law, the Central Bank's regulatory texts, or any other legislation applicable to financial institutions.

2- The withdrawal of authorization is recorded by the cancellation from the register of financial institutions. Cancellation is brought to the attention of the public at the diligence of the Central Bank. The costs arising therefrom are borne by the financial institution.

Cancelled Financial Institutions must cease their activity within the period fixed by the withdrawal of authorization decision. A period will be granted by the Central Bank for the settlement of ongoing operations and contracts.

This period may be extended in the interest of depositors and other creditors of the financial institution.

3- The cancelled institution remains subject to the control of the Central Bank until the closure of the liquidation. It may only carry out operations strictly necessary for the settlement of its liabilities.

ARTICLE 25: When the withdrawal of authorization is requested by the financial institution, the Central Bank rules on this request within a period of thirty (30) calendar days.

TITLE III - SUPERVISION AND PRUDENTIAL REGULATION

CHAPTER I - SUPERVISION OF FINANCIAL INSTITUTIONS

ARTICLE 26: Financial institutions are subject to the control of the Central Bank.

The Central Bank is responsible for ensuring the proper functioning and the quality of the financial situation of the institutions under its control, the respect of the provisions applicable to them, and the protection of their depositors. It sanctions breaches observed.

It has for this mission regulatory, administrative, and disciplinary powers.

a). Regulatory Power: The Central Bank's regulation specifies, as necessary, the application provisions of this Law. It fixes notably the information required for the authorization of financial institutions and their executives, the models of accounting situations and various periodic statements that must be communicated by financial institutions. It also fixes the management rules to which financial institutions must submit, notably regarding liquidity, solvency, risk division, internal control, and risk management, exchange control, the fight against money laundering and terrorist financing.

b). Administrative Power: It issues the authorizations and permits provided for under this Law and proceeds to their withdrawal. It exercises control on documents and on-site. In this capacity, it defines the funding sources enabling it to ensure its mission of control of financial institutions.

c). Disciplinary Power: If a control reveals that a financial institution has infringed the rules applicable to it or has not complied with an injunction issued against it, the Central Bank may, without prejudice to applicable criminal sanctions, take disciplinary sanctions in accordance with the provisions of Chapter 2 of Title IV of this Law.

ARTICLE 27: The Central Bank's control covers all aspects relating to the organization and functioning of the institutions...