Circular 106-1 – Free Zone Credits

BRH Bank of the Republic of Haiti CIRCULAR No. 106-1

TO BANKS

In accordance with Article 83 of the law of May 14, 2012, concerning banks and other financial institutions, the Bank of the Republic of Haiti establishes the standards regarding the components of mandatory reserves that banks must respect when granting commercial credits to free zones.

1. Preferential Regime

With the aim of reducing costs related to investments in duly authorized free zones, banks are exempted from the obligation to set up mandatory reserves on resources in gourdes used to finance free zones.

These credits aim at:

• the construction of buildings;
• the installation of all essential infrastructure for the proper operations of free zones (roads, drainage, water, electricity, etc.).

Once these credits are granted, they become an integral part of the banks' loan portfolios with all associated risks and, as such, they must satisfy all requirements of the existing prudential standards, notably Circular 87, Circular 83-4, and Circular 88.

To facilitate these credits, the BRH may grant advances to banks for a period of up to fifteen (15) years. The annual interest rate on advances will not exceed 3% at the date of their granting and will be maintained throughout the duration of said advances. In order to benefit from these advances, banks must provide the BRH with proof of the effective establishment of the credits, meaning they are available for disbursement.

Regarding loans granted from BRH financing, banks must apply a fixed interest rate not exceeding 7% per year for a period of fifteen (15) years from the date of credit granting. After this period, the interest rate will be variable and revisable by the bank according to market conditions.

The use of advances granted to banks by the BRH cannot be subject to exemption from mandatory reserves, as obligations towards the BRH are already deductible from liabilities subject to mandatory reserves.

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Each advance will be subject to a separate contract between the BRH and the concerned bank.

Funds granted by the BRH and not yet disbursed by the bank to borrowers pending disbursement cannot be considered as components of mandatory reserves and are not eligible for BRH bond placements. Furthermore, after receiving disbursements from the BRH, the bank has a period of three (3) business days to allocate these funds to clients.

2. Reports

Banks are required to submit to the BRH at the end of each quarter, namely March 31, June 30, September 30, and December 31, a detailed report on loans granted to free zones.

The report template, attached to this circular, must be annexed to compliance reports related to Circular 83-4 concerning credit risk concentration.

3. Sanctions

In case of non-compliance with Section 2 of this circular, the bank incurs late penalties in accordance with the provisions of the circular dealing with delays in the transmission of reports.

4. Entry into Force

This circular enters into force on June 15, 2016.

Port-au-Prince, June 7, 2016

Jean Baden Dubois Governor

Appendix: Credit Report/Free Zones

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Appendix 1

CREDIT REPORT/Free Zones Quarterly Report

Banking Institution: __________________________ As of: __________________________

		FREE ZONE CREDIT
CLIENTS	DISBURSEMENT DATE	OUTSTANDING BALANCE	INTEREST RATE	LOAN TERM	% OF TOTAL CREDITS

		OTHER INFORMATION
CLIENTS	NUMBER OF UNITS	NUMBER OF SQUARE METERS	OCCUPANCY RATE	NUMBER OF EMPLOYEES

Signature of two authorized executives: __________________________ __________________________

Position/Title: __________________________ __________________________

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