Instruction IGR/2012 Establishing the Maximum Risk Division Coefficient and Defining Control and Significant Influence

ISLAMIC REPUBLIC OF MAURITANIA CENTRAL BANK OF MAURITANIA ~:DSJ HONOR-FRATERNITY-JUSTICE 01 APR 2012 Instruction IGR/2012 ESTABLISHING THE MAXIMUM RISK DIVISION COEFFICIENT AND DEFINING THE NOTIONS OF CONTROL AND SIGNIFICANT INFLUENCE

The Governor of the Central Bank of Mauritania: Having regard to Law No. 73.118 of May 30, 1973 establishing the Central Bank of Mauritania; Having regard to Ordinance No. 004/2007 of January 12, 2007 establishing the statute of the Central Bank of Mauritania; Having regard to Ordinance No. 020/2007 of March 13, 2007 on credit institutions, repealing and replacing Law No. 95/118 of July 17, 1995; Having regard to Decree No. 102/2009 of August 13, 2009 appointing the Governor of the Central Bank of Mauritania; Decides

Article 1: Credit institutions shall permanently comply with a maximum risk division coefficient of twenty-five percent (25%) between the total risks incurred on the same beneficiary, weighted by their degree of risk, and the amount of their net equity.

Article 2: The total amount of risks incurred on beneficiaries with weighted risks equal to or greater than ten percent (10%) of the credit institution's net equity shall not exceed eight (8) times the amount of net equity.

Article 3: For the application of this instruction, risk is understood as the entirety of weighted on-balance sheet and off-balance sheet elements subject to counterparty default risk, excluding those deducted in the calculation of net equity. The same beneficiary of commitments refers to an individual or legal person, or a group of natural and legal persons as defined in Article 5. Net equity is calculated in accordance with the instruction establishing a minimum capital and the rules for calculating net equity of credit institutions. The calculation elements performed under Articles 1 and 2 of this instruction are extracted from the accounting records of the credit institution.

Article 4: In application of Article 28 of Ordinance No. 20-2007, natural or legal persons exercise:

• exclusive control over another legal person when they hold the majority of its capital or voting rights;
• direct or indirect joint control over another legal person when they hold, together with other natural or legal persons, under an explicit or implicit pact, the majority of its capital or voting rights and/or the collegiate power to appoint the majority of members of administrative bodies and persons exercising management functions;
• significant influence over another legal person when they can influence the decisions of its administrative and management bodies; significant influence is presumed when natural or legal persons hold alone or jointly at least 25% of the capital or voting rights, or directly or indirectly hold a share of capital or voting rights enabling them to participate in the administration or management of an enterprise or its subsidiaries.

Article 5: For the application of this instruction, the following are considered as the same beneficiary:

1. Natural and legal persons meeting the definition of Article 4.
2. Two companies linked by a contract conferring upon one the power of administration, management, or control over the other.
3. Persons participating in the administration and management of individual companies or societies belonging to the same group.
4. The entirety of persons related to a credit institution that constitute the same group in accordance with Instruction No. 8/GR/2012 regulating the relations of credit institutions with related persons.
5. Spouses and first-degree descendants of natural persons meeting the criteria of this article.
6. Natural or legal persons linked such that financial difficulties encountered by one or some of them entail financial difficulties in the other or some of the others. Such links are presumed to exist between two or more natural or legal persons, notably in the following cases:
   • they meet the criteria of paragraphs 1 to 5 of this article;
   • they are subject to common de facto management;
   • they are linked by cross-guarantee contracts or maintain predominant business relations (subcontracting, franchising) creating a link of economic dependence such that the financial difficulties of one would spread to the other.
7. Any natural or legal person requested by the Central Bank of Mauritania to be included in a group's perimeter for the application of this instruction.

Article 6: Risks incurred, possibly reduced by provisions approved by the Central Bank of Mauritania, notably include:

• treasury and interbank operations;
• loans distributed to customers, including current accounts (overdrafts);
• immediate credit bills/notes;
• hire-purchase and leasing operations;
• participation and subsidiary shares;
• participatory loans and shares;
• investment securities;
• repayment guarantees for loans distributed by other institutions;
• commitments given in favor of or on behalf of customers;
• counter-guarantees received from credit institutions.

Article 7: The following securities and guarantees may be deducted from these risks, provided they are constituted for a duration at least equal to that of the risks they cover:

• cash guarantee deposits in ouguiyas or treasury bills issued by the credit institution and pledged to its benefit;
• formal guarantees issued by the State;
• counter-guarantees received from a credit institution approved by the Central Bank of Mauritania;
• counter-guarantees received from a foreign credit institution, after prior agreement of the Central Bank of Mauritania. When a risk is only partially covered by guarantees, the uncovered portion remains subject to the weighting rate applicable to the original risk. When a guarantee is deducted from risks, the exposure to the guarantor is taken into account and weighted according to the provisions of Article 6 of this instruction. The Central Bank of Mauritania may request communication of contracts relating to securities and guarantees deducted from risks. When it considers that they do not meet sufficient conditions, the Central Bank of Mauritania may oppose their inclusion.

Article 8: The following weighting rates apply to on-balance sheet and off-balance sheet elements:

1. Weighting rate: 0%

• Cash and equivalents
• Claims on the State
• Securities issued by the State
• Securities issued by public authorities guaranteed by the State
• Securitised claims by the State to the extent that the securitisation mechanism is guaranteed by the State and ensures full repayment of claims

2. Weighting rate: 20%

• On-balance sheet and off-balance sheet commitments to credit institutions with an initial duration of less than one year
• Counter-guarantees received from credit institutions when retained as a deduction under Article 5 of this instruction

3. Weighting rate: 30%

• Documentary credit openings

4. Weighting rate: 50%

• Claims on companies whose capital is majority-owned by the State
• On-balance sheet and off-balance sheet commitments to credit institutions with an initial duration of more than one year
• Confirmed credit openings
• Bailments, avals, other guarantees
• Secured bonds
• Other signature commitments
• Hire-purchase and lease with purchase option operations

5. Weighting rate: 100%

• Customer loans
• Customer current accounts (overdraft)
• Unpaid and immobilised claims
• Doubtful and litigious claims
• Immediate credit bills/notes
• Participation and subsidiary shares (not deducted from net equity)
• Participatory loans and shares for customers (not deducted from net equity)
• Investment securities
• Repayment guarantees for loans distributed by other institutions
• Any other element involving counterparty risk The Central Bank of Mauritania may oppose the application of a given weighting to a risk if it considers that the fixed conditions are not satisfactorily met.

Article 9: The risks defined in Article 6 are subject to internal management and surveillance, which must be organised, notably by setting limits on delegated loan or commitment decision powers, so that the ceiling amounts established in Articles 1 and 2 are permanently respected. Individual exposures and group exposures entering the declaration thresholds to the Central Bank of Mauritania provided in Article 11 of this instruction must be reported to the permanent internal audit committee and the board of directors at least semi-annually.

Article 10: Affected institutions are required to implement information and management means enabling them to identify, measure, and promptly produce individual and group commitments, notably to meet the requirements of this instruction.

Article 11: Affected institutions are required to submit monthly information to the Central Bank of Mauritania on their risk division according to the models presented in the annex, which are integral to this instruction. They must declare beneficiaries of risks as defined by this instruction and their commitments, where the gross risk amount before weighting is equal to or greater than 10% of their net equity. They are also required to declare commitments on persons related to the credit institution as defined by Instruction No. 8/GR/2012, without a minimum declaration threshold.

Article 12: In case of non-compliance with the standards set in Articles 1 and 2 of this instruction, the Central Bank of Mauritania may issue an injunction to the concerned credit institution to take, within a set period, all corrective measures necessary to comply with these standards. A credit institution that has not complied with an injunction, has not taken a warning into account, or has breached this regulation is subject to the sanctions provided by Ordinance No. 20-2007 and Instruction No. 18/GR/2008 of August 7, 2008 on sanctions.

Article 13: The provisions of this instruction take effect from the date of its signature. Article 14: This instruction repeals and replaces Instruction No. 09/GR/2008 and all contrary provisions.

CENTRAL BANK OF MAURITANIA Declaration regarding the maximum risk division coefficient and risks on related persons Summary sheet on compliance with risk division standards

• Amount of net equity approved by the Central Bank of Mauritania:
• Amount applicable for the risk declaration threshold: 10% of net equity
• Amount applicable for the maximum risk division coefficient: 25% of net equity
• Amount of eight times net equity:
• Number of beneficiaries with gross risks before weighting > 10% of net equity:
• Number of beneficiaries with net risks after weighting > 10% of net equity:
• Total net risks after weighting on beneficiaries with risks > 10% of net equity:
• Number of beneficiaries with net risks after weighting > 25% of net equity:
• Total net risks after weighting on beneficiaries with risks > 25% of net equity:
• Total net risks after weighting on related persons > 25% of net equity:

List of risk beneficiaries with gross risks before weighting > 10% of net equity (excluding related persons) Main List | Secondary List | In ouguiyas Individual beneficiaries or groups For groups, list of individual beneficiaries | Encours (Balance Sheet) | Hors-bilan (Off-Balance Sheet) | Totaux (Total)

List of related persons to the credit institution, risk beneficiaries (before weighting and without threshold limitation) Main List | Secondary List | In ouguiyas Individual beneficiaries or groups For groups, list of individual beneficiaries | Encours (Balance Sheet) | Hors-bilan (Off-Balance Sheet) | Totaux (Total)

Names of related persons entered into the group perimeter during the month: 1. 2. 3.

Calculation sheet for weighted commitments for beneficiaries >10% of net equity (including the group of related persons to the credit institution) Name of individual beneficiary or group: ......................................................................................... If it is a group, names of individual beneficiaries (beyond 12, attach an additional sheet):

1. 2. 3. 4.

Code	Monthly Statement Descriptions (1)	Net Balance	Guarantee Amount	Weighted Amount after Provisions (2)	Quotient
107	Credit institutions and financial institutions	20%
122	Securities received in repurchase agreements (overnight)	20%
123	Securities received in repurchase agreements (term) or purchased outright	20%
124	Customer loans	100%
131	Current accounts (overdraft)	100%
132	Restructured claims	100%
133	Immobilised claims	100%
134	Doubtful or litigious claims	100%
203	Immediate credit bills/notes	100%
216	Treasury bonds or equivalents	0%
217	Other securities	100%
218	Participation and subsidiary shares	100%
221	Immobilised claims and other assets	100%
228	Hire-purchase operations	50%
236	Shareholders or partners	100%
501	Commitments given in favor of or on behalf of financial intermediaries	20%
512	Documentary credit openings	30%
513	Other confirmed credit openings	50%
514	Bailments, avals and other guarantees	50%
515	Repayment guarantees for loans distributed by other institutions	100%
516	Other bailments, avals and guarantees	50%
517	Secured bonds	50%
518	Miscellaneous	100%
	Counter-guarantees received (3)	20%
	TOTAL

(1) Reference to codes of the detailed monthly statement (2) Deductions of guarantees must meet the conditions fixed by this instruction (3) This category includes the portion of loans counter-guaranteed by another credit institution.