Instruction No. 02/GR/UMAC on the Implementation of Multibanking in the Context of Electronic Money Issuance

BANK OF CENTRAL AFRICAN STATES — The Governor

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INSTRUCTION NO. 02/GR/UMAC ON THE IMPLEMENTATION OF MULTIBANKING IN THE CONTEXT OF ELECTRONIC MONEY ISSUANCE

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Whereas Regulation No. 02/03/CEMAC/UMAC/CM of March 28, 2003 on payment systems, instruments, and incidents;

Whereas Regulation No. 01/11-CEMAC-UMAC of September 18, 2011 on the exercise of electronic money issuance activities;

Whereas Instruction No. 01/GR of October 31, 2011 on BEAC supervision of electronic money payment systems;

Considering the need to promote the deepening and development of the financial system of the Economic and Monetary Community of Central Africa (CEMAC);

Considering the stated willingness of the CEMAC Authorities to work towards promoting greater financial inclusion for the population;

Considering the importance of improving the monetary policy framework and accelerating the sub-regional economic and financial integration process;

ISSUES THE INSTRUCTION WITH THE FOLLOWING CONTENT:

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Chapter I: Definitions

Article 1: In addition to the definitions provided in Regulation No. 01/11-CEMAC-UMAC of September 18, 2011 on the exercise of electronic money issuance activities, the following expressions shall have the meanings set forth below for the purposes of this Instruction:

a) Settlement Bank: entity responsible for settling transactions between participants in a Multibanking network;

b) BIN (Bank Identification Number): unique identification number of an electronic money issuer on a technical platform;

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c) Management Committee: body responsible for managing a Multibanking network;

d) Clearing: settlement of obligations of a set of counterparties, participants in a payment system, by determining the overall net position of each vis-à-vis all others, with only this net position being subject to payment;

e) Settlement Account: single mandatory account opened in the books of the settlement bank by each participant of a Multibanking network;

f) Operational Account: participant's account in value units (V.U.) on the technical manager's platform;

g) Regulated Institution: institution authorized to issue electronic money under Regulation No. 01/11-CEMAC-UMAC of September 18, 2011;

h) Guarantee Fund: financial mechanism established by the settlement bank to cover delays or defaults in settlement by Multibanking participants;

i) Technical Manager: service provider responsible for operating the technical platform ensuring interoperability of different electronic money issuers hosted on it within a multilateral relationship;

j) Multibanking: arrangement enabling electronic money issuers sharing the same technical manager to form an interoperable network on a single technical platform;

k) Technical Partner: service provider responsible for operating the technical platform within a bilateral relationship with an electronic money issuer;

l) Participant: regulated institution, member of a Multibanking network;

m) Regulator: Bank of Central African States (BEAC);

n) Network or Multibanking Network: arrangement enabling electronic money issuers sharing the same technical partner to interoperate on a single technical platform;

o) SYGMA (Automated High-Value Payment System): CEMAC's Real-Time Gross Settlement (RTGS) system, managed by the BEAC.

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Chapter II: Object

Article 2: This Instruction sets forth the rules governing Multibanking in the context of electronic money issuance activities within CEMAC. It specifically determines:

• the conditions and modalities for participation in Multibanking;
• the organization and functioning of Multibanking;
• the conditions and modalities for clearing and settlement within Multibanking;
• the management of the guarantee fund dedicated to Multibanking activities;
• the supervision of Multibanking.

Chapter III: Conditions and Modalities of Participation in Multibanking

Article 3: Any regulated institution holding an electronic money issuance authorization that wishes to become a participant in a Multibanking network must obtain prior approval from the regulator.

To this end, it shall submit to the National Directorate of the BEAC in its country of establishment, against receipt, a written application for approval to participate in a Multibanking network. This written request, addressed by the legal representative of the applicant to the Governor of the BEAC, must clearly indicate the technical manager and settlement bank partners in this multibanking project. It must be accompanied, under penalty of rejection, by signed copies of the framework agreement "technical manager/participant", including its annexes, and the settlement account agreement.

Article 4: Any regulated institution not holding an electronic money issuance authorization that wishes to join a Multibanking network must obtain prior authorization from the regulator, in accordance with Regulation No. 01/11-CEMAC-UMAC of September 18, 2011. In addition to the file prescribed by said Regulation, the applicant must attach, among other documents, a copy of the certification of the proposed technical manager, signed copies of the framework agreement "technical manager/participant", including its annexes, and the settlement account agreement.

Article 5: A technical manager wishing to establish a Multibanking network must first obtain certification from the regulator, valid solely for electronic money issuance activities.

The certification is issued by Decision of the BEAC Governor. It does not confer upon the technical manager the status of an electronic money issuer.

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Article 6: The application file for certification of the technical manager shall be submitted in duplicate, against receipt, to the National Directorate of the BEAC in the country of establishment of the applicant.

The file must include, under penalty of rejection:

• a written request addressed by the legal representative of the applicant to the BEAC Governor;
• documents establishing the qualifications and powers of the legal representatives;
• the document authorizing the technical manager to operate in its core business sector (operating license, approval, authorization, etc.);
• documents demonstrating financial and organizational capacity to efficiently manage the technical platform;
• a copy of the framework agreement, signed between the technical manager and the proposed settlement bank, including its annexes, in accordance with the model validated by the regulator;
• a copy of the draft framework agreement between the technical manager and the participant, including its annexes, in accordance with the model validated by the regulator;
• a product presentation indicating, among other things, the type of electronic instrument chosen, the technology employed, the operating licenses for the software(s), and any technical certifications already obtained;
• a presentation of the technical platform indicating the planned software and hardware architecture, as well as network and security architecture;
• a note on the internal control mechanism implemented to ensure management of risks related to the activity;
• procedures for all processes related to the operation of the Multibanking network;
• the draft internal rules of the Management Committee provided for in this Instruction.

Article 7: An electronic money issuer may belong to more than one Multibanking network, subject to the prior approval of the BEAC, obtained under the conditions set forth in Article 3 of this Instruction.

Chapter IV: Organization of Multibanking

Article 8: Multibanking is organized around the following actors:

• the participants;
• the technical manager;
• the settlement bank;
• the Management Committee.

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Article 9: Participants are the regulated institutions authorized by the regulator to issue electronic money within a Multibanking network. To this end, they are required to interoperate with other members of the Multibanking network.

Article 10: Every participant is required to maintain an account, designated as the "settlement account", in the books of the Multibanking network's settlement bank.

The settlement account referred to in the preceding paragraph of this Article is exclusively allocated to the settlement of operations within the Multibanking network.

Article 11: The technical manager ensures the interoperability of participants within the Multibanking network. It must possess a Multibanking technical platform enabling the creation of the main electronic money account as well as sub-accounts dedicated to tracking transactions between electronic money issuers.

Article 12: Every Multibanking network must have a settlement bank.

The settlement bank must be:

• a first-tier bank, demonstrating a rating of 1 or 2 according to the Central African Banking Commission (COBAC) rating system;
• a direct participant in SYGMA.

The settlement bank must sign a "settlement account" convention with each participant.

Article 13: The settlement bank must implement a technical mechanism enabling:

• the exchange of information with the technical manager through a secure and available link;
• participants to consult their settlement accounts in its books.

Article 14: The settlement bank may be a member of the network for which it also performs the function of settlement bank. In this eventuality, it must separate its operations as a participant from those related to its capacity as settlement bank.

Article 15: The settlement bank is remunerated by the technical manager under conditions mutually agreed upon.

Article 16: Every Multibanking network shall have a Management Committee, composed as follows:

• for each participant, two (2) representatives, including one (1) representative from the technical, commercial, financial, or administrative department and one (1) representative from the legal department;

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• for the technical manager, three (3) representatives, including one (1) representative from the technical department, one (1) representative from the commercial, financial, or administrative department, and one (1) representative from the legal department;
• for the settlement bank if not a member of the network, two (2) representatives, including one (1) representative from the accounting or financial department and one (1) representative from the legal department.

Article 17: The presidency of the Management Committee is held by the technical manager, which designates a representative for this purpose.

The secretariat of the Management Committee is held by the settlement bank.

Article 18: Any new member joining the Multibanking network is automatically a member of the Management Committee.

Article 19: The Management Committee is the body responsible for managing the Multibanking network. Its missions include, in particular:

a) ruling on:

• questions related to the tariff aspects of Multibanking network services;
• questions related to the sharing of costs and revenues resulting from Multibanking network activities;
• incidents related to the functioning of the Multibanking network and taking appropriate measures;

b) ensuring customer service quality;

c) participating, where applicable, in the resolution of any conflicts arising between Multibanking network actors.

The Management Committee ensures the proper sizing of the Multibanking network's guarantee fund relative to the network's needs and, where applicable, takes all necessary measures for its replenishment. To this end, it defines the amount of the Multibanking network's guarantee fund upon its establishment and during subsequent contributions.

The Management Committee determines the allocation key among participants in the Multibanking network and communicates each participant's contribution share.

The Management Committee must, furthermore, ensure that the Multibanking network's guarantee fund is properly managed by the settlement bank. To this end, the latter presents an activity report at each Management Committee meeting.

Article 20: The Management Committee shall meet at least once per quarter, upon convocation by its president or, in the event of the president's inability to act, according to the modalities specified in its internal rules.

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The Management Committee deliberates validly when at least two-thirds of its members are present or represented.

Decisions of the Management Committee are taken consensually, strictly in the interest of the proper functioning of the network. In the event of a proven disagreement, the president's vote is decisive.

Minutes of the Management Committee's deliberations are forwarded to the regulator.

Article 21: The organization and functioning of the Management Committee are detailed in internal rules adopted by the Committee, subject to regulatory approval.

Chapter V: Functioning of the Multibanking Network

Article 22: The technical manager must identify each participant by a BIN.

Article 23: The technical manager must uniquely identify holders and link them to a BIN.

Article 24: Acceptors and distributors must be uniquely identified within a participant. They must be linked to at least one participant.

Article 25: A holder may make deposits or withdrawals at any acceptor within the Multibanking network, regardless of the participant with which they subscribed to the electronic money service.

Article 26: Acceptors and distributors are not obligated to subscribe with all network members other than their domiciliary banks.

Article 27: Participants' operational accounts with the technical manager must be accessible in real-time by the account holders to ensure continuous monitoring of the outstanding electronic money issued.

Chapter VI: Clearing and Settlement between Participants of a Multibanking Network

Article 28: Every participant in a Multibanking network is required to settle its net debit balance resulting from multilateral clearing.

Article 29: Within the framework of Multibanking, the daily cutoff for transactions on the technical platform is set at the latest at midnight.

The technical manager must transmit, on the following day at the latest by 10:00 AM, the clearing files to the settlement bank and to the participants.

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Article 30: Each participant has a maximum of twenty-four (24) hours, starting from the time of receipt of the clearing file, to settle its transactions with the settlement bank through SYGMA.

On the day following the receipt of the clearing file, the settlement bank proceeds at 11:00 AM to the settlement of clearing balances.

Article 31: The technical manager and the settlement bank are each responsible, within their respective scopes, for the proper settlement of Multibanking network operations clearing.

Chapter VII: Multibanking Network Guarantee Fund

Article 32: Every Multibanking network must have a guarantee fund, the establishment of which falls under the responsibility of the settlement bank. To this end, the settlement bank is required to open in its books an account designated as the "electronic money operations guarantee account" to cover potential payment delays or defaults by a participant within the framework of clearing within the Multibanking network.

Article 33: The calculation of the total amount of the guarantee fund is performed by the Management Committee based on, among other parameters:

• the number of participants in the Multibanking network;
• the number of transactions in the Multibanking network;
• the outstanding electronic money in circulation within the Multibanking network;
• the total amount of transactions in the Multibanking network.

Article 34: The modalities for calculating each participant's share for the establishment and replenishment of the guarantee fund include, in particular:

• the outstanding electronic money in circulation within the Multibanking network;
• the number of acceptors, distributors, and holders in the Multibanking network.

Article 35: In the event of a payment default or delay during clearing within the Multibanking network by a participant, the settlement bank must debit the electronic money operations guarantee account to ensure proper clearing settlement.

The concerned participant must reimburse the advance granted within twenty-four (24) hours, under penalty of a surcharge calculated at a penalty rate of five percent (5%) per day of delay, without exceeding three (3) days.

In the event of non-payment within three (3) days, the settlement bank must proceed to replenish the guarantee fund, without prejudice to the application of sanctions provided for

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by the applicable legal, regulatory, and contractual provisions regarding the defaulting participant.

Article 36: Sums derived from penalties are fully remitted to the regulator.

The settlement bank must process the payment of the penalty to the regulator at the latest within twenty-four (24) hours following the collection of the penalty. In the event of non-payment within this timeframe, the concerned sums are subject to a surcharge of five percent (5%) per day of delay.

Article 37: The guarantee fund may be remunerated according to modalities agreed upon between the participants and the settlement bank.

Article 38: Guarantee fund sums may only be invested in liquid and secure assets. The settlement bank is required to manage these funds with the diligence of a prudent manager.

Article 39: The modalities for the organization and functioning of the guarantee fund are detailed in the "participant / settlement bank" framework agreement.

Chapter VIII: Supervision of Multibanking

Article 40: Without prejudice to the application of the provisions of Instruction No. 01/GR regarding BEAC supervision of electronic money payment systems, Multibanking network actors are subject to specific reporting obligations.

Article 41: The technical manager must transmit to the regulator, on a monthly basis, a clearing statement and an incident report related to the functioning of the Multibanking network.

Article 42: The settlement bank must transmit to the regulator, on a monthly basis, a statement of settlements and suspense items, a statement of the guarantee fund account, and a payment incident report for the Multibanking network.

Article 43: Quarterly, the settlement bank transmits to the regulator a report on the management of the guarantee fund.

Article 44: Data related to Multibanking network activities are transmitted to the regulator electronically according to a reporting model to be defined among the various parties.

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Chapter IX: Final Provisions

Article 45: A participant's termination of participation in the Multibanking network may occur in the following cases:

• withdrawal by the regulator of its electronic money issuance authorization;
• denunciation by the participant of one of the framework agreements governing the Multibanking network;
• termination of its participation in SYGMA;
• failure by the participant to reimburse sums advanced by the guarantee fund under the conditions set forth in Article 35 of this Instruction;
• withdrawal by the monetary authority of the participant's credit institution approval;
• opening by COBAC of a banking liquidation procedure against the participant.

Article 46: Termination of network activities may occur in the following cases:

• withdrawal by the regulator of the technical manager's certification;
• opening of a judicial liquidation procedure against the technical manager;
• immediate non-replacement of the settlement bank when it no longer meets the conditions set forth in this Instruction;
• decision to dissolve the network taken by the Management Committee.

Termination of network activities triggers the application of the provisions of Article 33 of Regulation No. 01/11-CEMAC/UMAC/CM on the exercise of electronic money issuance activities. These provisions are implemented after the clearing of all pending operations, within a period of one (1) month.

Article 47: Regulated institutions already in operation that find themselves within a Multibanking network shall have a period of three (3) months, starting from the certification of their technical partner as technical manager, to comply with the provisions of this Instruction.

Article 48: This Instruction enters into force as of the date of its signature.

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Yaoundé, May 7, 2014

THE GOVERNOR

Lucas ABAGA NCHAMA

No.: SEQ.049/2014