Regulatory Alerts2004-06-07
Decision No. 006/2004-CSBF/P on the Risk Division Ratio of Credit Institutions
The President of the Commission for Banking and Financial Supervision (CSBF) amends Article 5 of Directive No. 003/94-CCBEF to update the risk division ratio weights for credit institutions based on currency, loan term, and beneficiary status. The revised regulation specifies distinct risk percentages for short-, medium-, and long-term loans, as well as doubtful and immobilized claims, distinguishing between free zone and non-free zone enterprises. Effective for the financial position as of end-July 2004, the decision mandates that unpaid maturities be reclassified as doubtful claims within 60 days and requires banks to enforce guarantees upon such reclassification.
COMMISSION FOR BANKING AND FINANCIAL SUPERVISION
The President
DECISION NO. 006/2004-CSBF/P on the Risk Division Ratio of Credit Institutions
The President of the Commission for Banking and Financial Supervision (CSBF), Having regard to Law No. 95-030 of February 22, 1996 on the activity and supervision of credit institutions, Having regard to Directive No. 003/94-CCBEF of December 29, 1994 on the division of risks for banks and financial institutions, as amended by Directive No. 002/99-CSBF of July 22, 1999, H E R E B Y D E C I D E S: Article 1: In application of the provisions of Article 43 of Law No. 95-030 of February 22, 1996, and in complement to the provisions adopted by Decision No. 002/2004-CSBF/P dated April 21, 2004, Article 5 of Directive No. 003/94-CCBEF of December 29, 1994 on the division of risks is amended as follows: « The risks defined in Article 3, net of the elements referred to in Article 4, are retained for the following risk weights: a) - for loans and advances in national currency:
| Nature of credits | If beneficiary is non-free zone enterprise | If beneficiary is free zone enterprise |
|---|---|---|
| Short-term credits | ||
| Discount of local commercial paper (F1) | 75% | 100% |
| Mobilization of claims on foreign entities (F2) | 50% | 80% |
| Mobilization of administrative claims (F3) | 75% | - |
| Advance on merchandise stocks (F4) | 75% | 75% |
| Advance on product stocks (F5) | 50% | 75% |
| Cash facility, overdraft (F6) | 100% | 120% |
| Mobilization of credit sales (F7) | 75% | - |
| Working capital loan (F8) | 50% | 50% |
| Pre-financing of product collection (F9) | 75% | - |
| Medium and long-term credits | ||
| Medium-term loans | 75%[1], otherwise 100% | 75%[1], otherwise 100% |
| Long-term loans | 75%[1], otherwise 100% | 75%[1], otherwise 100% |
| Restructured claims | 120% | 175% |
| Immobilized claims | 150% | 175% |
| Doubtful, disputed and litigious claims | 150% | 175% |
[1] If leasing operations or loans secured by a duly formalized first-rank real security
b) - for loans and advances in foreign currency:
| Nature of credits | If beneficiary is non-free zone enterprise | If beneficiary is free zone enterprise |
|---|---|---|
| Short-term credits | ||
| 1. - Cash facility, overdraft (F6) | 150% | 175% |
| 2. - Other short-term loans | 120% | 150% |
| Immobilized claims | 175% | 200% |
| Doubtful, disputed and litigious claims | 175% | 200% |
c) - for signature guarantees and other risks mentioned in Article 3, their respective risk weights of 20% and 100% remain unchanged. » Article 2: Unpaid maturities must be reclassified as doubtful and disputed claims in accordance with Article 3, paragraph 3.2 of Directive No. 004/97-CSBF of June 2, 1997 on risk provisioning rules, in particular unpaid maturities on discounted securities (F1, F2, F3 and F7) within a period of 60 days from the date of default recognition. All banks are required to enforce received guarantees and counter-guarantees upon reclassification as doubtful, disputed and litigious claims. These guarantees and counter-guarantees are not taken into account in determining the actual recovery value when evaluating provisions as stipulated in Article 4, paragraph 4.4, second dash, of Directive No. 004/97-CSBF of June 2, 1997 on risk provisioning rules. The provisions of this Decision apply for the determination of the risk division ratio as from the position finalized at end-July 2004. Done in Antananarivo, on June 7, 2004. The President,