Circular 125 on Conditions for Opening New Commercial Establishments

Bank of the Republic of Haiti CIRCULAR No. 125

TO FINANCIAL INSTITUTIONS

In application of Articles 72, 83, and 160 of the Law of May 14, 2012, on banks and other financial institutions, financial institutions are required to comply with the present rules regarding the conditions for opening new commercial establishments (branches, agencies, counters, online financial services, etc.).

1. Definitions

The following definitions apply within the framework of this circular:

a) Branch or Agency: A commercial establishment offering the client the full range of banking and financial services marketed by the financial institution.

b) Counter: A commercial establishment offering the client only limited services restricted to certain banking and financial services marketed by the financial institution and dependent on a branch.

c) Online Financial Services: The offer and distribution over the Internet network by the financial institutions covered by this circular of banking and financial services and products marketed as part of their activities.

2. General Provisions

By September 30 of each year at the latest, financial institutions must submit to the BRH (Bank of the Republic of Haiti) projects for the opening of new commercial establishments for the upcoming fiscal year. The program for the opening of new commercial establishments must be established in compliance with the coverage standard for fixed assets defined by the BRH.

Applications for opening must be submitted individually and must be submitted six (6) months before the planned opening date. Before the planned opening date of a new commercial establishment, the BRH reserves the right to conduct an inspection visit of the premises. Any advertising related to the opening of a new commercial establishment can only be carried out after authorization from the BRH.

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3. Opening of Branches or Agencies

Applications for authorization for the opening of new branches of banks, development finance companies, and leasing companies must be accompanied by a market study and profitability analysis including at least the following points:

A. Location and Accessibility

• Description of the establishment area (physical location and environment, access routes, commercial, residential, or high-traffic nature of the zone);
• Communication facilities (telephone and computer links, fund transfers);
• Security/protection of the building (particular attention will be paid to this point, and concerned institutions must provide, among other measures, an entrance for the loading and unloading of armored vans);
• Results of the building diagnosis for the premises to house the branch or agency in terms of seismic and cyclonic standards for buildings constructed before December 2021;
• Description of the seismic and cyclonic standards that will be used in case of building construction.

B. Socio-economic Data

• Population of the targeted zone (distribution by sex, age group, and types of economic activities);
• Growth rate and importance of the active population;
• Purchasing power (average real income per inhabitant, structure and level of expenditures, savings capacity and propensity).

C. Products and Services Offered

• Products and services that will be offered;
• New products envisaged;
• Pricing.

D. Target Market

• Category of clientele targeted;
• Weight (in terms of number, revenue) relative to the total population;
• Anticipated market share (expected activity volume);
• Marketing strategy adopted.

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E. Competition

• Description of the competitive environment: Banks, Other Financial Institutions;
• Current market niches and respective market shares.
• Products and services offered by competitors in the establishment zone.

F. Investment Budget

• Acquisition or rental costs of the premises;
• Rental improvements (premises layout, IT and telecommunications, security);
• Marketing and other costs related to the opening;
• Source of financing for investments (equity, customer resources, others);
• Operating expenses over five years (Salaries, general expenses, and others).

G. Profitability Analysis

• Projection of revenues and expenses over five years;
• Break-even point / Profitability threshold and critical size;
• Payback period, Net Present Value, and Internal Rate of Return (Average cost of funds, allocation, and expected yield);
• Impact on the activities, profitability, and financial structure of the financial institution.

H. Internal Control Mechanism

• Delegation of powers to establishment managers.
• Description of the organization of activities and responsibilities within the establishment.
• Organization of internal control at the establishment level.
• Control mechanism for the establishment at the headquarters level.

For paragraphs F and G, working assumptions must be submitted and at least two scenarios envisaged (Pessimistic, Optimistic).

Regarding other financial institutions, they must include the following information in their application: location, products and services offered, targeted market, investment budget, profitability analysis, and a description of the internal control mechanism.

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After obtaining authorization from the BRH, any financial institution has a period of six (6) months to start the operations of a new branch or agency. In case of non-compliance with this deadline, a new authorization must be requested.

4. Opening of Counters

Applications for authorization for the opening of counters must include the following information: location, products and services offered, description of counter control within the network.

5. Online Services

For online services, financial institutions are required to submit the following with their application:

a) A business plan; b) Cost-benefit analysis; c) Operational arrangements such as the adopted technology; d) Agreements concluded with technology service providers and/or commercial partners; e) A description of the systems and control procedures they propose to adopt to manage risks; f) Certification from a recognized firm attesting that requirements for access, transaction, and processing security are met; g) The security policy regarding the distribution of online services approved by the board of directors.

6. Report

Financial institutions are required to submit annually to the BRH the list of all their branches, agencies, counters, service points, and their geographical location, within thirty (30) days following the end of the fiscal year.

7. Sanctions

Failure to provide, within the required deadline, the report provided for in Section 6 of this circular, the financial institution is subject to a penalty of fifty thousand gourdes (HTG 50,000.00) per day of infraction. The penalty period extends from the day of the infraction until the day the information is made available to the BRH.

In case of non-compliance with the obligations established in Sections 2, 3, 4, and 5 of this circular, the BRH reserves the right to apply a fine of two hundred fifty thousand gourdes (HTG 250,000.00) per violation found and/or to take all administrative sanctions provided for in Article 109 of the aforementioned Law of May 14, 2012.

Any penalty will be debited to one of the accounts of the offending institution at the BRH.

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8. Transitional Provision

Financial institutions have a period of two (2) years from the date of entry into force of this circular to evaluate the structure of all buildings in which they conduct their activities and which are likely to receive clients. They will ensure the reinforcement of buildings according to generally accepted seismic and cyclonic standards.

During this period, financial institutions are required to send to the BRH, by December 30 of each year at the latest, a detailed report containing the list of buildings and the status of reinforcement measures.

9. Repeal and Entry into Force

This circular repeals the notice of November 22, 2001, and enters into force on January 13, 2022.

Port-au-Prince, January 13, 2022

Jean Baden Dubois Governor