Regulatory Alerts2016-06-08
Directive No. 5 on Activities and Specific Liquidity Norm for Development Banks
The National Bank of Rwanda issued Directive No. 5 to define permissible and non-permissible activities for development banks, including project financing, trade finance, and equity investments while prohibiting retail deposits and pension fund management. The directive mandates that these institutions maintain a minimum liquidity ratio of 100 percent, calculated monthly using a standardized reporting format submitted to the central bank. All prior conflicting provisions are repealed, and the directive takes effect upon its signature on June 8, 2016.
National Bank of Rwanda Banki Nkuru y’u Rwanda
KN 6 Av.4 / P.O. Box 531 Kigali - Rwanda Tel: (+250) 788199000 / Website: www.bnr.rw / E-mail: info@bnr.rw / Swiftcode: BNRWRWRW / Twitter: @CentralBankRw
The Governor
DIRECTIVE Nº 5 ON THE ACTIVITIES AND SPECIFIC LIQUIDITY NORM FOR DEVELOPMENT BANKS
Pursuant to Law Nº 55/2007 of 30/11/2007 governing the Central Bank of Rwanda, especially in its articles 53 and 56;
Pursuant to Law Nº 007/2008 of 08/04/2008 concerning organization of banking especially in its article 9.
Article one: definition
In this “Directive”, unless the context otherwise requires Development bank shall mean:
a financial institution established with a specific mandate to finance strategic projects of the country to ensure its socio economic development.
Article 2: purpose of the Directive
The directive aims at defining the permissible and non permissible activities for development banks and development finance institutions and establishing specific liquidity norms for this category of banks.
Article 3: Permissible activities
Development banks shall engage in the following activities:
a. Funds mobilization for development financing; b. Financing development projects and infrastructures; c. Trade finance in line with financed development projects and programmes; d. Financing production value chain, commodity trading, coffee campaigns and other export promotion commodities; e. Issue guarantees in line with permissible activities; f. Provide technical assistance in relation to development projects and programmes; g. Investment in equities of companies and other financial instruments;
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h. Placements of funds as term deposits in licenced banks; i. Trading of foreign exchange with licensed banks; j. Undertake such other activities as may be prescribed or approved by the Central Bank from time to time.
Article 4: Non Permissible activities
The following shall be the non permissible activities for development banks:
a. Acceptance of demand, saving and time deposits, or any type of deposits. b. Management of pension funds/schemes. c. Acting as intermediary on stock exchange. d. Granting of retail loans such as personal loans, salary advances, overdraft... e. At no time shall a development bank be involved in financial derivatives except as hedging instrument.
Article 5: Liquidity requirements
A development bank shall compute and submit to the Central Bank on monthly basis, a report on liquidity status using the reporting format in appendix to this directive.
The ratio of liquidity shall be not less than 100%.
Article 6: Compliance with other laws, regulations and directives:
Development banks shall comply with provisions of laws, regulations and directives regulating banks licensed by the National Bank of Rwanda for other matters non stated in this directive.
Especially, Development Banks shall comply with the foreign exchange exposure limits as instructed from time to time by the Central Bank.
Article 7: repealing provision
All prior provisions contrary to this Directive are hereby repealed.
Article 8: commencement
This Directive shall come into force on the date of its signature.
Done at Kigali on 8/06/2016.
RWANGOMBWA John Governor
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Appendix to Directive Nº 5 on the activities and specific liquidity norm for development banks.
Liquidity ratio reporting format
| Bank: | |
|---|---|
| Date: | |
| Report: Liquidity ratio | |
| Frequency: Monthly | |
| Document code: |
| Amounts in Thousands of RWF | |
|---|---|
| Liquid assets held | end month |
| 1.Notes & coins | |
| 2.Balance with NBR | |
| 3. Treasury bills not exceeding 12 months | |
| 4.Other marketable government security | |
| 5.Discountable commercial bills, promissory notes | |
| 6. Net due from banks inside Rwanda | |
| 7.Net due from banks outside Rwanda | |
| I. Total liquid assets held | 0 |
| Cash outflows | Up to 1 month |
|---|---|
| Required cash outflows for expenses | |
| Required cash outflows for loan disbursements | |
| Required cash outflows for loan/debt servicing | 0 |
| 14.Repurchase agreement, borrowings and other credit accounts | |
| 27.Other operations with customers | 0 |
| 271.Repurchase agreement to the clients | |
| 272.Borrowings from clients | |
| 36.Issued debt securities | 0 |
| 361.Deposit receipts | |
| 362.Issued deposit certificates | |
| 363.Issued bonds | |
| 365.Other issued debt securities | |
| 54.Subordinated borrowings | |
| II. Total cash outflows | 0 |
| Cash inflows | Up to 1 month |
|---|---|
| Resale and securities borrowing agreements | |
| Credit or liquidity facilities | |
| Specified net inflows | 0 |
| a)from clients other than financial institutions | |
| b)from financial institutions | |
| specified deposits held at financial institutions for operational purposes | |
| other contractual cash inflows | |
| III. Total cash inflows | 0 |
| Total cash outflows(II) | 0 |
|---|---|
| Total cash inflows(III) | 0 |
| Total net cash outflows IV=(II)-(III) | 0 |
| Liquidity ratio: (I) divided by (IV), multiplied by 100 | #DIV/0! |
Note on colours:
| indicates cells to be filled in | |
|---|---|
| indicates cells with pre-programmed formulae |