Bank of the Republic of Haiti
CIRCULAR
No. 92-1

TO FINANCIAL INSTITUTIONS

In application of, in particular, Articles 59, 101 to 105, 161 to 163, and 166 of the Law of May 14, 2012, on banks and other financial institutions, financial institutions are required to comply with the following provisions regarding the consolidated supervision of their financial situation and operations.

1. Definitions

The following definitions apply to this Circular:

a) Relevant activities of an entity: activities of the entity that have a significant impact on its returns.

b) Joint ventures: a partnership in which the parties that exercise joint control over the enterprise, called joint venturers, have rights to the net assets thereof, which is the case unless otherwise provided for companies incorporated as corporations.

c) Consolidation: a method of presenting financial information of a group consisting of combining the individual financial statements of the group's parent company, subsidiaries over which it exercises exclusive control within the meaning of IFRS 10, joint ventures and joint operations over which it exercises joint control within the meaning of IFRS 11, and entities over which it exercises significant influence within the meaning of IAS 28, by aggregating them and making various adjustments to synthesize them into consolidated financial statements presenting the group's accounts as if it were a single entity.

d) Control within the meaning of IFRS 10: an investor controls an entity when, and only when, the following three conditions are met: (i) it has power over the entity; (ii) it is exposed, or has rights, to variable returns from its involvement with the entity; (iii) it has the ability to use its power over the entity to affect those returns. The possession of power results notably from the possession of the majority of voting rights in the entity or a portion of voting rights sufficient, in the event of dilution thereof, to confer in practice on the holder, directly or indirectly, the ability to direct unilaterally the relevant activities of the entity.

e) Joint control within the meaning of IFRS 11: sharing of control of an entity by a limited number of parties, pursuant to an agreement, and whose decisions regarding relevant activities require unanimous consent of the parties sharing control.

---

f) Consolidated entities: the set of entities included in the consolidation scope.

g) Joint operation: a partnership in which the parties that exercise joint control over the enterprise have rights to the assets, and obligations regarding the liabilities, related thereto, which is the case notably in the event of pooling resources for the exercise of joint activities without establishing a legal vehicle for this purpose.

h) Consolidated financial statements: financial statements of a group in which the assets, liabilities, equity, income, expenses, and cash flows of the parent company and its subsidiaries are presented as those of a single economic entity.

i) Group: a set composed of a parent company and entities over which it exercises exclusive or joint control or over which it exercises significant influence.

j) Financial group: a group comprising at least one financial institution, whose companies are primarily active in the financial sector and form an economic unit, or which it is appropriate to assume due to other circumstances that one or several companies under individual supervision are in fact or legally required to provide assistance to a company of the group.

k) Significant influence within the meaning of IAS 28: power to participate in the decision-making on the financial and operating policies of the entity, without however exercising exclusive control or joint control over these policies; significant influence is presumed when an investor holds, directly or indirectly, more than 20% of the voting rights.

l) Full integration: a method of consolidating the accounts of subsidiaries, over which the parent company exercises exclusive control, and which consists of:

i. combining the asset, liability, equity, income, expense, and cash flow elements of the parent company and its subsidiaries,

ii. offsetting (eliminating) the book value of the parent company's holdings in each subsidiary and the parent company's share in the equity of each subsidiary,

iii. entirely eliminating intra-group assets, liabilities, equity, expenses, income, and cash flows related to transactions between entities of the group.

m) Equity method: a consolidation method at the parent company level of the accounts of joint ventures and joint operations over which it exercises joint control as well as entities over which it exercises significant influence, and which consists of substituting the book value of the shares held in the parent company's balance sheet with its share of equity in the concerned entities and integrating into the consolidated results of the parent company its share of the results of the entities thus consolidated.

n) Percentage of control: share of effective and potential voting rights held in an entity directly by the parent company and by the subsidiaries over which it exercises exclusive control.

o) Percentage of interests: Share of capital held directly or indirectly by the consolidating entity in the entities it consolidates.

p) Parent company: entity at the head of a group, at the level of which consolidated financial statements are prepared, also called the consolidating entity.

---

q) Consolidated supervision: set of remote, documentary, and on-site controls carried out by the BRH on a group comprising at least one financial institution covered by this Circular, with the object of evaluating the financial situation and risks of the group as a whole and compliance with prudential standards to be observed at the consolidated level in accordance with the regulations issued by the BRH.

2. Production of consolidated financial statements by financial institutions

Financial institutions that hold exclusive or joint control over other entities, regardless of their form, or that exercise significant influence over them, are required to prepare consolidated financial statements in accordance with the principles and consolidation methods set forth by the international accounting standards published by the International Accounting Standards Board (IASB). Financial institutions belonging to a group without being the parent company, and exercising themselves a power of control or significant influence over other entities of the group, must prepare consolidated financial statements at their level.

Consolidated financial statements are presented in the same format as that defined by the BRH for financial statements prepared on an individual basis.

Annual consolidated financial statements, finalized at the end of the financial year, must be produced by each concerned financial institution. These statements include the consolidated balance sheet, the consolidated statement of income, a consolidated statement of changes in shareholders' equity, and a consolidated statement of cash flows.

Banks holding exclusive or joint control over other entities are also required to produce quarterly consolidated financial statements, in the form of a balance sheet and a statement of income finalized at the date of the last day of each quarter.

3. Provisions regarding financial groups

Parent companies of financial groups, which directly or indirectly hold exclusive or joint control over a financial institution covered by this Circular without being themselves subject to it, are required to prepare annual consolidated financial statements allowing the BRH to exercise supervision over the overall situation and operations of the group on this basis. These statements must be prepared in accordance with the principles and consolidation methods set forth by the international accounting standards published by the International Accounting Standards Board (IASB) and include all documents specified in Section 2.

4. Verification of annual consolidated financial statements

The consolidated financial statements prepared by financial institutions and financial groups must be subject to verification by an independent auditor under the conditions defined by the Circular on the verification of annual financial statements. As prescribed in particular by that Circular,

• institutions and groups whose total consolidated balance sheet exceeds 100 billion gourdes are required to appoint two independent auditors, at least one of whom is a firm affiliated with a large international audit group;

---

• the audit report must in particular detail the scope and methods of consolidation and include the opinion of the independent auditor(s) on the regularity, sincerity of the accounts, and the fair presentation they give of the group's situation;

• for banks, the audit work must include an examination of the process for producing the quarterly consolidated financial statements transmitted to the BRH and result in the expression of an opinion on the reliability of these statements, on the conformity of the production process with the group's internal financial data, and on the quality of the internal control system for this process.

5. Transmission of consolidated financial statements to the BRH

The annual consolidated financial statements prepared by financial institutions and verified by their independent auditor(s) must be transmitted to the BRH no later than one hundred twenty (120) days after the end of the financial year. The following documents must be included in the submission:

a) the report of the independent auditor(s) and, if applicable, the certification letter of the quarterly consolidated financial statements transmitted to the BRH;

b) a description of the group, presenting its organizational chart, the consolidation scope, the percentage of control and interests of the group in each entity, and the consolidation methods applied for each consolidated entity;

c) the verified annual individual financial statements of each consolidated entity;

d) the reconciliation statement from individual accounts to consolidated accounts or consolidation spreadsheet.

The annual consolidated financial statements prepared by financial groups pursuant to Section 3 as well as the documents stipulated above must be transmitted within the same deadline by the concerned financial institution. By way of derogation from the foregoing, financial groups headquartered abroad are exempt from producing the individual statements of consolidated entities and the consolidation spreadsheet provided they prove that they are subject to consolidated prudential supervision by the supervisory authority of the country where the parent company's headquarters is located.

The quarterly consolidated financial statements to be prepared by the concerned banks must be transmitted to the BRH within fifteen (15) days following the end of each quarter.

6. Conditions for exercising consolidated supervision by the BRH

Pursuant to Article 102 of the Law of May 14, 2012, the consolidated supervision of a group by the BRH encompasses all companies of the group that are active in the financial sector. To this extent, the BRH may request from the concerned companies any information it deems useful for the exercise of this supervision and extend to these companies the on-site inspection missions it conducts for this purpose.

The BRH may request information from the parent company of a group, regardless of its status, on consolidated entities exercising activities outside the financial sector that it deems useful for the evaluation of the group's financial situation and risks.

The BRH may refer to the Order of Certified Professional Accountants of Haiti (OCPAH) for advice on the inclusion of a group entity in the consolidation scope or its exclusion from this scope, or on the consolidation method applied, and may request the concerned group to comply with this advice if necessary.

The prudential standards applicable at the consolidated level and their conditions of application are determined by the Circulars defining the various standards.

Financial institutions are required to immediately inform the BRH of any change in the scope or consolidation method concerning the group dependent on them or the financial group of which they are part.

7. Availability of information

Financial institutions and financial groups covered by this Circular are required to make available to the public and publish, if applicable, on their website their verified annual consolidated financial statements, including the audit report and notes related to the financial statements.

The information and documents for the preparation of annual consolidated financial statements, and if applicable quarterly, must be made available to the BRH and transmitted to it upon request. They must be retained for a minimum period of five (5) years.

8. Sanctions

In the event of late transmission to the BRH of annual and quarterly consolidated financial statements relative to the deadlines prescribed in Section 5, the concerned institutions are subject to a penalty of fifty thousand gourdes (HTG 50,000) per day of delay. The same penalty applies in the event of failure to transmit information requested by the BRH pursuant to Section 7, for the period elapsed between the date set for submission and the date of provision of this information.

The failure by a financial institution or a financial group to produce consolidated financial statements in accordance with the provisions of this Circular is subject to the administrative sanctions provided for in Article 109 of the Law of May 14, 2012.

When the above shortcomings concern a financial group, the sanctions apply to the financial institution controlled by the group.

9. Repeal and entry into force

The provisions of this Circular replace those of Circular No. 92 of April 9, 1998, and enter into force on February 1, 2022.

Port-au-Prince, January 13, 2022

Jean Baden Dubois
Governor