COBAC Regulation R-93/11 on Credit Institutions' Equity Participations in Enterprises

COBAC Regulation R-93/11 on Credit Institutions' Equity Participations in Enterprises

The Central African Banking Commission, Having regard to the Convention of 16 October 1990 establishing a Central African Banking Commission; Having regard to Article 9 of the annex to the Convention of 16 October 1990; Having regard to the Convention of 17 January 1992 on harmonizing banking regulation in the States of Central Africa, Having regard to Article 9 of the annex to the Convention of 17 January 1992; DECIDES

Article 1. Credit institutions may acquire and hold equity participations in the capital of an enterprise, subject to the conditions and limits set out in this Regulation.

Article 2. For the purposes of this Regulation, participations are defined as securities conferring at least 10% of the capital or voting rights in an enterprise, or enabling the exercise, directly or indirectly, of tangible influence over the management and financial policy of an enterprise.

Article 3. Credit institutions' equity participations in enterprises must comply with both of the following limits: • each participation shall not exceed 15% of the net equity of the supervised institution; • the aggregate of all participations shall not exceed 75% of the net equity of the supervised institution; this limit shall be progressively reduced to 45% as from 1 January 1996.

Article 4. The following are exempt from the limits set out in Article 3: • participations held in supervised credit institutions; • participations in enterprises whose activity constitutes an extension of the holding institution's activities, or consist either in holding assets allocated to the operation of the institution, or in providing services necessary for its operation; • securities held on behalf of third parties pursuant to a formal agreement or subject to an irrevocable purchase commitment received from a third party, up to the amount of funds received by the institution as cover for the transaction.

Article 5. For the purposes of this Regulation: • the amount of net equity is calculated in accordance with COBAC Regulation R-93/02; • each participation is valued at its net book value.

Article 6. Credit institutions that do not comply with the limits set out in Article 2 above as of the date this Regulation enters into force must submit a temporary exemption request, supported by all relevant assessment elements, to the Banking Commission.

Article 7. In the event of a breach of the limits set out in Article 2, unless a special exemption is granted by the Banking Commission, the excess amount shall be deducted from the institution's equity for the application of COBAC Regulation R-93/02. If both limits under Article 2 are exceeded, only the higher of the two excess amounts shall be deducted from equity.

Article 8. This Regulation, which takes effect as from the date of signature, shall be notified by the Secretary General of the Banking Commission to the Ministers responsible for Finance and Credit, to all supervised credit institutions in the States of Central Africa, and to professional associations formed among these institutions.

Article 9. The Secretary General of the Banking Commission is responsible for implementing this Regulation.

Done at Yaoundé on 19 April 1993 For the Banking Commission, The President, Jean-Felix MAMALEPOT