Central Bank of Somalia Regulation on Bank Licensing

Licensing and Supervision Department
Waaxda Shati-siinta iyo Kormeerka
CBS/BS/REG/07/22
Licensing & Supervision Department
March 2022
Regulation (Bank Licensing)
Revised March 2022

TABLE OF CONTENTS

Objectives ___________________________________________________________ 1
Scope_______________________________________________________________ 2
Definitions ___________________________________________________________ 2
Bank License Application _______________________________________________ 2
License Categories ____________________________________________________ 3
License Requirements (Decision Criteria)___________________________________ 4
Renewal of Bank License _______________________________________________ 6
Effective Date ________________________________________________________ 7
Schedule 1 __________________________________________________________ 8
Schedule 2 _________________________________________________________ 13
Schedule 3. 1 _______________________________________________________ 17
Schedule 3. 2 _______________________________________________________ 19
Schedule 4. _________________________________________________________ 21
Attachment 1: Capital requirements_______________________________________ 22 Attachment 2: Banking licensing conditions (summary) ________________________ 23
Objectives
1.1 This regulation sets out the Central Bank of Somalia’s (the “CBS”) criteria on licensing banks
pursuant to its authority set forth in Sections 5(c), 38(1) and 52(1) of the Central Bank of Somalia Act, 2012, and Section 34 (Supervisory Standards) of the Financial Institution Law, 2012 (“FIL”), for the purpose of implementing Sections 4 (Application for license), 5 (Evaluation of the application for a license), 6 (Grant or refusal of license), 7 (Validity and renewal of license), and 11 (Branches of foreign banks) of the FIL.
1.2 This regulation replaces “Regulation on Bank Licensing, 2014 (CBS/BS/REG/01)” to strengthen the
CBS’ licensing standards to promote effective regulation and supervision of licensees to foster and maintain a stable and competitive market-based financial system.
1.3 This regulation is in line with the CBS’ statutory objectives as set forth in the Central Bank of Somalia
Act, 2012.
1.4 This regulation is in line with the Core Principles for Effective Banking Supervision as issued by the
Basel Committee on Banking Supervision.
Scope
2.1 This regulation applies to all persons intending to engage in banking business (as defined in Section

in Somalia.

Definitions
3.1 All terms used in this regulation have the same meaning as defined in “Chapter I” of the
Financial Institutions Law, 2012. For the purpose of licensing of banks by the CBS, the following defined terms have the following meaning:
3.1.1 Banking Business means the business of: (a) accepting from members of the public of
money on deposit repayable on demand or at the expiry of a fixed period or after notice; (b) accepting from members of the public of money on current account and payment on and acceptance of cheques; (c) employing of money held on deposit or a current account, or any part of the money, by lending, investment or in any other manner for the account and at the risk of the person so employing the money; and (d) any other activity as is permitted under this Law and as the Central Bank may prescribe.
3.1.2 Foreign Entity means a Branch, a Subsidiary or a Representative Office of a Supervised
Institution incorporated outside of Somalia that has been lawfully granted an authorization (license) to carry out banking business within Somalia under the supervision of the CBS.

Foreign Branch is an operating entity which does not have a separate legal status and
is thus integral part of a Supervised Institution (foreign parent bank) incorporated outside of Somalia.
Subsidiary is an independent legal entity owned by a Supervised Institution (foreign
bank) which is incorporated outside of Somalia but operates within Somalia.
Home Authority is the supervisory authority located in one Country responsible for the
supervision on a consolidated basis of a Supervised Institution operating in another Country.
Host Authority is the supervisory authority located in one Country, in which Supervised
Institution incorporated in the other Country has a Foreign Entity.
Supervisory Concerns matters that can adversely affect the operations of the
Supervised Institutions to be conducted in a safe and sound manner in compliance with applicable laws and regulations.

Bank License Application
4.1 A person who intends to engage in banking business in Somalia must first obtain a license
issued by the CBS.

4.2 The CBS license application process has two distinct phases. In phase 1, known as the
“assessment phase”, license applicants must engage with the CBS and submit all necessary documents as described in this Regulation and associated Schedules. Upon assessing these documents in addition to the readiness of the license applicant to commence banking business, the CBS will then issue a “no objection” letter to the license applicant to proceed to phase 2, known as the “application phase”. The following time frames apply:
i. Within sixty (60) days of receipt of initial bank license documents, the Central
Bank shall either inform the applicant that, in its view, the application is deemed to be complete or specify the additional information required for the CBS to issue a “no objection” letter.
ii. Once a “no objection” letter has been issued by the CBS, license applicants have
thirty (30) days to proceed to submit all application requirements.
iii. Within ninety (90) days of receipt of a complete bank license application, the
Central Bank will either grant or refuse to grant a license to the applicant.
iv. A notice that the Central Bank has refused to grant a bank license to an applicant
shall state the reasons for the refusal.
4.3 Companies incorporated as limited liability companies under the Companies Act of Somalia
and foreign banks wishing to set up a branch in Somalia are eligible to apply for a license from the CBS.
4.4 An application for bank license shall be made in writing in the form prescribed by the CBS in a
Schedule to this revised Regulation. The application must be accompanied by all required
supporting information and documents, and the prescribed application fee.
4.5 The CBS may require any other information from the applicant, shareholders, significant
shareholders, directors, officers and/or third parties that it deems necessary to complete its assessment of a bank license application.
5. License Categories
5.1 Under Chapter II (1) of the FIL, a person shall not, in Somalia: (a) transact any banking
business; (b) describe himself (in whatever terms) as authorized to transact banking business; or (c) behave, or otherwise hold himself out, in a manner which indicates (or which is reasonably likely to be understood as indicating) that he is authorized to transact banking business, unless he holds a valid license granted by the CBS for carrying out the specific banking business.
5.2 Pursuant to Section 6 (2) of the FIL, the CBS shall in each license granted specify banking
business activities for which the licensee has been permitted to transact and licensees shall not engage in any banking business activity not specified in its license.

5.3 Section 6 (3) of the FIL, where a conditional license is granted, CBS has the mandate to add,
change, revoke or substitute such conditions as it may consider appropriate, and the banks shall comply with those conditions.
5.4 The CBS utilizes two distinct categories of bank licenses subject to specific conditions and
criteria, depending on ownership structure and permissible activities:
i. banking business within Somalia described as “full banks”, subject to such
conditions as imposed and specified in 5.5, known as category “GR-BL.1, General Requirement for Bank License Category 1”.
ii. banking business within Somalia described as “restricted banks”, subject to such
conditions as imposed and specified in 5.6, known as category “GR-BL.2, General Requirement for Bank License Category 2”.
5.5 A licensee granted category “GR-BL.1” license may act as a “full bank” and may undertake
universal banking activities (unrestricted) and is permitted to offer all-encompassing universal banking services (commercial [both retail and business], corporate, wholesale, and investment/ merchant banking activities) but is prohibited in engaging in activities as prescribed in FIL, 2012 (Sections 64(3), 67, 68, 69, 70, 72, 101, 102, 103, 104, 105; 112;121).
5.6 Under Section 11 (1) of the FIL, a foreign bank which intends to carry on banking business in
Somalia through a branch, may on the form prescribed by the Central Bank of Somalia apply to the CBS for a license to set up a branch in Somalia. Where a license applicant is:
i. a branch of a bank licensed in a country or territory outside Somalia; or
ii. a subsidiary of a bank licensed in a country or territory outside Somalia
5.7 Such license applicants as referred in 5.6. (i) and (ii) may be granted a category “GR-BL.2”
license with permission to undertake restricted banking activities (restricted). Category “GRBL.2” license holders are prohibited to:
i. to carry out retail banking activities
ii. to engage in non-financial activities (see licensing conditions, Attachment 2)
iii. to engage in activities as prescribed in FIL, 2012 (Sections 64(3), 67, 68, 69, 70, 72,
101, 102, 103, 104, 105; 112;121).
5.8 Both license categories are subject to specific criteria and conditions as described in Section 6.
6. License Requirements (Decision Criteria)
6.1 The decision of the CBS as to whether to grant, or refuse to grant, a license (either category of
licenses) shall be based on the following criteria:
i. Application information: the CBS must be satisfied that there is no evidence that
materially false or misleading application information or supporting documents were furnished to the Central Bank by any person in connection with the application.

ii. Fit and Proper criteria, governance and management: the CBS must be satisfied
with the proposed management structure as well as the professional competence and integrity of the members of the board of directors, shareholders and management, deeming them to be fit and proper persons and capable of the efficient, safe and sound running of the proposed banking business.
iii. Ownership and control: the ownership of the bank is transparent; the capital
structure and earnings prospects of the applicant are adequate; all owners are identified; and the CBS is satisfied that significant shareholders, beneficial owners, and those exercising control or significant influence on the entity are duly identified.
iv. Financial resources: the financial status and history of the applicant and ultimate
owners are satisfactory; initial capital and actual/contingent future resources are transparent; the CBS must be satisfied that the applicant possesses and will continue to posses the necessary financial resources to effectively operate the banking business in terms of scope, scale and potential risks; the applicant must prove how minimum capital adequacy requirements will be met at all times.
v. Business plan: The business plan submitted during the license application process
must demonstrate a track record of business competence consistent with the proposed business activities; the business plan must contain detailed sections covering financial and human resources, systems, and experience and expertise. The plan must also discuss suitability to the Somali context and the country’s needs and that the proposed operations will serve the public interest. For a period of three (3) years following commencement of banking business, the bank shall operate in material accordance with the business plan that was submitted with the bank license application and upon which the CBS relied when granting a license and shall not engage in any business other than the activities specified in its license.
vi. Risk management: the applicant entity must provide evidence that it will put in place
the necessary risk management processes and internal controls, and these must be robust and comprehensive.
vii. AML/CFT and Know Your Customer Policy: The applicant must comply with the
requirements of Somalia’s AML/CFT Law of 2016, existing regulations, and guidelines and must evidence sufficient procures and policies to this effect.
viii. Other requirements: the CBS must be satisfied that the applicant has sufficient
capacity to keep records safe, including information security systems.
ix. Any other requirement that the CBS may deem fit.
6.2 In addition to 6.1, the following additional criteria apply for foreign branches (category “GRBL.2” licenses):
i. An official letter addressed to the Governor of the CBS from the Home Authority
affirming that:

the Home Authority grants its written consent or takes “no objection” to the
foreign bank establishing a Branch in Somalia (subject to the CBS granting license to set up such branch).
the Foreign Entity (including its proposed branch in Somalia) is, and will be,
subject to comprehensive supervision on a consolidated basis by its Home Authority in accordance with the Core Principles for Effective Banking Supervision of the Basel Committee.
The Home Authority agrees to exchange supervisory information with the
CBS as the Host Authority including the foreign bank’s future reports of onsite examination, published financial statements, and information on significant developments which adversely affect the foreign bank’s financial soundness and/or world-wide reputation.
ii. The CBS will ascertain the extent to which the Home Authority performs effective
consolidated supervision in line with CBS’ relevant Policies.
iii. The CBS will assess the extent to which the Home Authority has established crossborder cooperation with other Host Authorities.
iv. The CBS will assess the financial soundness of the Foreign Entity in addition to its
ownership, governance, reputation and resources as well as its suitability to the Somali context.
v. The CBS will assess the extent to which the Foreign Entity is committed to hiring local
technical staff.
vi. The CBS will assess the extent to which the Foreign Entity is committed to supporting
(local) full banks in targeted areas such as Correspondent Banking Relationships.
vii. The CBS will require the license applicant for a foreign bank branch to provide written
evidence from its parent bank that it will stand ready to provide additional financial support to the branch sufficient to enable it to meet its obligations as and when necessary.

Renewal of Bank License
7.1 Every bank license shall expire each year on December 31.
7.2 A bank’s application for license renewal shall be:
i. Submitted to the Central bank no later than October 2 each year.
ii. Made in writing in the form prescribed by the Central Bank in a Schedule to this
Regulation.
iii. Accompanied by all required supporting information and documents.

iv. Accompanied by the prescribed application fee.
7.3 The Central Bank may require any other information from the bank that it deems necessary to
complete its assessment of the application for renewal.
7.4 The Central Bank will renew a bank license, with or without amendments or restrictions, when it is
satisfied that the bank has complied with the FIL and regulations of the Central Bank and the annual license fee has been paid.
7.5 Within 90 days, the Central Bank shall either renew the bank’s license with or without amendments
or restrictions or notify the bank of its intent to revoke the bank’s license.
8. Effective Date
8.1 This revised Regulation shall become effective on the 2
nd of July 2022.
SCHEDULES

(1). Application for Bank License (both categories)
(2). Business Plan
(3). Affidavit of Probity (3.1 and 3.2)
(4). Physical Infrastructure
ATTACHEMENTS
(1). Capital requirements (for GR-BL.1 and GR-BL.2)
(2). Bank Licensing conditions (Summary)

CENTRAL BANK OF SOMALIA
Regulation (Bank Licensing), Revised March 2022 --------------------------
Schedule 1
Bank License Application
Form of Application
A Bank License Application should be submitted to the Central Bank only when complete information is available for all requirements of the application, including the necessary physical infrastructure. Information should be printed on plain white sheets of paper in the same order requested. Supporting documents should accompany the bank license application in the same order requested. All information requested must be submitted. Do not leave any requirements unaddressed. If the response to any requirement is no, none, not applicable, or not known, then so state and provide an explanation. Submitting inaccurate or incomplete information will delay the processing of the application and may result in the application being put on hold or refused. The application must be signed by the board of directors or a duly authorized executive officer of the applicant. Submit the original application with supporting documents, in [English], two complete official copies, and the application fee to Director, Bank Supervision Department, Central Bank of Somalia. Address inquiries concerning the preparation, submission, and status of an application to the Director, Bank Supervision Department, Central Bank of Somalia. Contact Person The applicant should designate one contact person to communicate on its behalf with the Central Bank regarding the pending application:

Name
Address
Telephone number
Information Required
Following is a list of information to be submitted as part of the application. Prior to completing its assessment of an application, the Central Bank may, by notice in writing, require additional information or documents. Legal Structure

Name of bank.
Type of business: commercial bank, mortgage bank, merchant bank, branch of foreign
bank.
Location of the main office in Somalia.
Location of all other offices of the bank, including those planned during the first three
years after licensing: branches, agencies, representative offices, mobile, etc.
Duly certified certificate of incorporation.
Notarized duly certified Memorandum and Articles of Association.
Duly certified resolution of the Board of Directors authorizing the submission of this bank
license application.
Capital Structure
Provide information on the capital structure of the bank. Show the proposed amount
of paid- in capital including the amount previously paid-in or subscribed. Affirm that no capital will be contributed in-kind. Identify the type, number and par value of each class of shares proposed to be issued. Ownership Structure
Identify all shareholders of the bank with the following information:
i. Name – list all current and former names (including trade names)
by which the shareholder has been known;
ii. Nationality;
iii. Address – postal and physical;
iv. Shareholding – Number and type of shares to be held, number of
shares to be held expressed as a percent of the total number of shares of the bank that are proposed to be outstanding; par value; purchase price per share; and total purchase price;
v. Affirm that the shares of the bank will be registered in the name
of the identified shareholders; and
vi. Provide a copy of any agreement(s) between the shareholders
regarding the bank.
Significant (5%) shareholders -- individual persons
Name, address, nationality, country identification number, passport number and
data date and place of birth.
Number and type of shares to be held in the bank, par value, price per share, total
price, and resulting percentage ownership.
Personal balance sheet and statement of income for the two years preceding the
date of the application.
Affidavit of probity – individual
Information on all memberships in companies, partnerships, professional or trade
associations. List: name, address, type of entity, and description of activities.
Information on legal entities and other business concerns in which the applicant has

an interest as a significant shareholder, partner, proprietor, director, officer, or guarantor. List: name, address, type of interest, amount and percentage of any shareholding, credit rating, balance sheet and income statement for the two years preceding the date of the application. Significant (5%) shareholders – legal entities
16. Name, address, country of incorporation, country identification number
17. Legal form; date of incorporation or formation.
18. Number and type of shares to be held in the bank, par value, price per share, total
price, and resulting percentage ownership.
19. Signed financial statements (balance sheet and statement of income) for the two
years immediately preceding the date of the application, audited if available.
20. List of significant shareholders, partners, directors and senior officers: Name,
address, positionwith the applicant, amount and percentage of shareholding in the applicant, if any.
21. Credit rating assigned by an internationally recognized rating agency, if available.
22. If a significant shareholder is part of a corporate group, then provide a schematic
presentationshowing:
❖ The ownership structure of the corporate group; ❖ All other members of the group and the corporate, financial, and other linkages thatexist between the members of the group; ❖ The position of the bank in relation to the other members of the group; and ❖ All interests held in and by each member of the group and the nature of business ofeach entity.
23. Most recent annual report.
24. Affidavit of probity – legal entity
25. Experience in the ownership, oversight or management of banks or other financial
institutionslocated anywhere in the world.
Significant shareholders - all
26. List all persons (individuals or legal entities) who are related persons and/or
associates of the significant shareholder as those terms are defined in the FIL.
27. Provide complete information on the source of funds to be used by each significant
shareholder to purchase the shares of stock in the bank, including the specific amount of funds required by each significant shareholder and the specific source(s) of those funds.
28. Provide evidence of availability of capital such as copies of bank statements.
29. If assets will be sold, then identify the assets and provide complete information
on theproposed sale, including copies of pertinent documents.

If funds will be borrowed, then provide complete information on the loan including
identification of the lender(s), amount to be borrowed, amount of the loan as a percentage of the total purchase price, collateral to be pledged, and all terms of the transaction. Specifically identify how the loan will be repaid. If future dividends, salary, or any other funds or income from the bank are anticipated to be used to service the debt, then provide complete details. Affirm that the stock of the bank will not be used as collateral for any loan to purchase the stock. Management Structure
Provide the organization structure for the bank, in a schematic format.
Identify the members of the board of directors, audit committee, and two executive
officers, and other senior officers. For each person submit the following information:
❖ Name
❖ Proposed position with the bank – director, audit committee member, executive officer, orsenior officer ❖ A detailed curriculum vitae ❖ Affidavit of probity ❖ Copies of existing or proposed employment contracts or other related agreements.
Identify all persons (individual or legal entity) who will be a related person or
associate as those terms are defined in the FIL due to the bank’s directors, audit committee members, executive officers, and senior officers. Business Plan
A business plan covering the first three years of operation of the proposed institution
must be submitted in the format prescribed by the Central Bank in Schedule 2 to this Regulation on Bank Licensing. Summary requirements for license “GR-BL.2” applicants (foreign branches) Significant shareholder – foreign bank
An official letter addressed to the Governor of the Central Bank of Somalia must be
received directly from the home country supervisor affirming that:
❖ The Home Authority grants its written consent or takes “no objection” to the foreign bank establishing a branch in Somalia subject to the Central Bank granting a license. ❖ The foreign bank (including its proposed branch in Somalia) is, and will be, subject to comprehensive supervision on a consolidated basis by its home country supervisor in accordance with the relevant principles of the Basel Accords. ❖ The Home Authority agrees to exchange supervisory information with the Central Bank including the foreign bank’s future reports of on-site examination, published financial statements, and information on significant developments which adversely affect the foreign bank’s financial soundness and/or world-wide reputation. ❖ The Home Authority discloses any Supervisory Concerns in relation to the

applicant and/ or its related parties.
36. The most recent report of on-site examination of the foreign bank.
37. The most recent annual audit report, including audited balance sheet and profit and
loss account and management letter, of the foreign bank.
38. An organization chart of the foreign bank showing lines of authority and reporting
from the branch in Somalia to the parent foreign bank, and specifically identifying the officers within the foreign bank who are responsible for the sound operation and financial condition of the proposed branch in Somalia.
39. The board of directors of the foreign bank shall execute and submit to the Central
Bank an undertaking to maintain within Somalia at all times and out of its own funds/ capital assigned tothe branch in Somalia in the minimum amount prescribed by CBS (see CBS capital requirements for Foreign Branches). A Memorandum of Understanding (MoU)
40. The Central Bank of Somalia and the Oversees Supervisory Authority must sign an
MoU, which must fulfill the following requirements:
a) The MoU must be consistent with the principles for the effective consolidated supervision of banking organizations as established in the Basel Committee’s Core Principles for Effective Banking Supervision. b) The MoU must also be in line with the principles of cooperation between banking supervisors as established in the Basel Committee’s Core Principles for Effective Banking Supervision. Collaboration and Ongoing Coordination
41. The Foreign Entity applying to establish a branch in Somalia must note that the CBS
requires that the Home Supervisory Authority or/and the Overseas Central Bank (if different) to commit to the following:
a) An explicit agreement that visits to the home authority for information purposes and exchanges of staff must be agreed as part of the licensing process as well as subsequent supervision. b) An explicit agreement that Host Authority Supervisors will be offered necessary training and technical support in order to reinforce sound banking supervisory practices in the Host Country (Somalia). c) That both authorities should conduct meetings as often as appropriate to discuss issues concerning the foreign branch and to alert each other in any emerging risks. Commitment to the development of the Somali Financial Sector
42. The Foreign Entity applying to establish a branch in Somalia must note that the CBS
requires that the license applicant to commit to the following:
d) An explicit commitment to hiring local technical and managerial staff. e) An explicit commitment to support local banks and financial institutions in targeted areas such as Correspondent Banking Relationships.

CENTRAL BANK OF SOMALIA
Regulation (Bank Licensing), Revised March 2022 --------------------------
Schedule 2
Business Plan
The business plan should cover the bank’s first three years of operation after licensing and should consist of the following two parts: (1) a narrative; and (2) pro forma financial statements. The requirements for each part are set forth below.

Narrative
1.1. Introduction

State the name and location of the bank including the location(s) of any branches or other
offices. Describe and provide a diagram of the bank’s corporate structure and include all entities within the structure (parents, subsidiaries, companies under common control, and other affiliates), if the bank will be part of a group. Briefly discuss how the organizing group (the founding shareholders/applicants) came together and the reasons for wanting to start a bank.
State the key strategic goals of the bank. Provide a basic statement on the nature and scale
of the proposed banking activities, development plans for the business, and arrangements for the management of the business. Describe the geographical area(s) and clients to be served by the bank and the types of products and services to be offered. Describe and submit statistical and other data which may have been collected in respect of the area to be served including: (1) population of the area; (2) schemes of agriculture, business, industrial development, etc.; and (3) competing banking facilities.
1.2. Feasibility Study
Identify the markets to be served by the bank and specifically address how the needs and
convenience of the community(ies) or sector(s) identified as the target market will be served. Describe the population of the area, schemes of agriculture, business, industrial development, etc., and existing banking facilities. Describe and submit a copy of the feasibility study that was performed, and which formed the basis for the decision to apply for a license to commence banking business in Somalia.
Address any anticipated changes in the market, factors influencing such changes, and
possible effectson the plan for the bank.
Describe how the bank intends to ensure that the interests of depositors, creditors, and the
public interest will be served by the banking business proposed in the business plan.
1.3. Assumptions
List and discuss all assumptions used in the preparation of the business plan, financial
projections, and sensitivity analysis such as economic conditions in Somalia, expectations of market changes, level of competition, growth forecasts, interest rates on earning assets

and interest-bearing liabilities. Provide support for the business plan’s financial projections for asset and liability growth, profitability, maintenance of adequate capital, capital ratios, liquidity, and dividends.

Explain the results of the interest rate sensitivity analysis of the projections submitted or
other similaranalysis of the extent to which the forecasts will change when interest rates vary (the assumptions underlying the projections and the sensitivity analysis should be stated).
1.4. Corporate Governance
Describe the management-organizational structure. Address the board of directors,
permanent committees (specifically including the audit committee), executive officers, senior officers, operational and administrative divisions and their sub-divisions and functions, lines of authority and reporting relationships.
List all members of the board of directors, the audit committee, and any other permanent
committee of the board and show each person’s name, position, term, authority, responsibilities, and proposed remuneration.
List all executive and senior officers and show each person’s name, title, salary, incentive
compensation, fees, benefits and other proposed remuneration.
Provide copies of all proposed agreements for management, technical services, software
maintenance, and other services. If any agreement for lease or service is anticipated to be entered into with any related person or associate, then provide a written description of such transaction and include:
❖ Identification of the related person or associate ❖ Rates and terms; ❖ Comparative market data to evidence that the transaction will be on an arm’s-length basis; and ❖ A justification as to why the transaction with a related person or associate is proposed in light of its inherent conflict of interest and how the interests of the bank, its depositors, and the public will be protected and will benefit from the proposed transaction versus a transaction with a person or entity who is not a related person or associate.
Describe the operating systems of the bank including:
❖ Corporate policies and procedures: Lending and credit administration policies, Human resource and development, investments, deposits, marketing, capital, liquidity, anti-money- laundering measures, and anti-terrorist financing); ❖ Accounting standards; ❖ Books of account and record-keeping; ❖ Planning and budgeting; ❖ Management information system including reporting to management, the board of directors,shareholders, and the Central Bank; ❖ Information technology;

❖ Internal controls; and
❖ Internal and external audit.

Confirm that information systems will be capable of producing all required returns to the
Central Bank in an accurate and timely fashion.
Identify the independent external auditor who will be engaged for the annual audit of the
bank.Address staff projections, including recruitment and training.
1.5. Business Activities
Discuss the types and scale of deposit-taking and other banking business envisaged based
upon the applicant’s plans for the operation of the bank. This presentation should be supported by information which clearly shows the capability to undertake those activities in terms of board oversight, management, expertise, systems support, organization, and staff. Specifically address:
❖ Advances to be made and interest receivable, including plans for diversification; ❖ Investments to be made and earnings stating policy and categories of business to be financed; ❖ Deposit mobilization and interest payable stating separately the proposed major sources ofdeposits. ❖ Planned borrowing activity; ❖ Off-balance sheet activities; ❖ Operating expenses including rents, salaries, employee benefits, directors’ remuneration; ❖ Liquid and cash reserve assets; ❖ Capital structure; ❖ Provision for bad and doubtful debts; ❖ Fixed assets, including business premises; ❖ Other income, including commissions, discounts, and other; and ❖ Net operating profit/loss.
1.6. Needs of the Community
Describe the results of the study to identify:
❖ The community that the bank intends to serve; ❖ The banking, credit, and/or other financial services needs of the community served; ❖ The role of the bank in meeting the identified needs of the community to be served; and ❖ The competition (existing and potential). ❖ The suitability of the proposed banking activities to the Somali context in general.

1.7. Capital and Liquidity

Describe plans for financing growth, internally and externally, over the first three years of
operation.
Describe all additional sources of capital, including shareholders, that are available should
the need arise in the future.
Describe plans to ensure that the bank maintains adequate liquidity throughout the period
covered by the plan.
1.8. Risk Management
Describe the risk management processes: risk identification, measurement, monitoring, and
control. Describe plans for controlling the following risks, and specifically address the changes proposed in thebank’s operations by the applicant:
❖ Liquidity-, interest-rate-, and maturity-risk (asset and liability management); ❖ Credit risk; ❖ Operational risk; ❖ Market risk; ❖ All other risks to which the bank will be exposed when engaged in the business activitiesenvisaged by the business plan.
With regard to credit risk, specifically address proposed changes to:
❖ Credit policies (which must include limitations on loans to related persons and associates); ❖ Plans to minimize concentration risk through diversification and limitations on exposures toindividuals and groups of related borrowers; and ❖ Asset quality considerations such as underwriting, loan classification system, and provisioning forbad and doubtful loans.
1.9. Infrastructure and Internal Control
Provide information on the suitability of the premises. Address plans for future expansion,
including branch offices. Describe any changes planned to the operations systems, including corporate policies and procedures, accounting standards, record-keeping, reporting (including to the board of directors, officers, shareholders, and the Central Bank), computerization (including hardware, software, and maintenance), risk measurement and controls, internal controls, and internal and external audit. Provide evidence that systems will be capable of producing all required reports to the Central Bank in an accurate and timely fashion.
Discuss all plans for any transactions with any related person or associate.

1.10. Business Plan Monitoring

Discuss the methods that the board of directors will use to regularly monitor the bank’s
performance under the business plan and management’s adherence to the business plan.
1.11. Financial Projections
Based upon the preceding narrative section, submit a pro forma Balance Sheet and Income
Statement(and any necessary supporting schedules) for each of the first three years after licensing. CENTRAL BANK OF SOMALIA Regulation (Bank Licensing), Revised March 2022 --------------------------
Schedule 3. 1

Affidavit of Probity for Individual Persons
This affidavit of Probity is required to be executed by every person who is, or who applies to be, a significant shareholder, partner, director, executive officer, or senior officer of a bank, branch of a foreign bank, or money transfer business licensed in Somalia. Initials Affirmation of Probity

I have not conducted nor am I conducting banking business or money transfer business without
a valid license issued by the Central Bank.
I have not been convicted of the offense of fraud, dishonesty or misfeasance.
I have never been convicted of a criminal offense nor am I the subject of unresolved criminal
charges which are of direct relevance to fitness and properness.
I have not engaged in, nor do I engage in criminal or fraudulent acts.
I have not engaged in nor do I engage in money laundering or the financing of terrorism.
I have not been adjudicated or declared bankrupt nor am I currently subject to bankruptcy
proceedings nor am I a bankrupt who has recently been discharged.
I have no money judgments which have not been satisfied in full.
I have not been censured, disciplined or disqualified by any professional or regulatory body in
relation to any trade, business or profession.
I have not been refused or restricted from the right to carry on any trade, business or profession
for which a specific license, registration, or other authorization is required by law.
I have not been a significant shareholder, director or senior officer of a bank or other financial
institution in Somalia or elsewhere that has been liquidated, or that is under liquidation, statutory management, or reorganization pursuant to the FIL, or similar legislation in another jurisdiction.
I have never made false or misleading statements, false or misleading entries, or false or
misleading omissions, or altered, abstracted, concealed or destroyed any book of record or any report, slip, document, or statement of business affairs, transactions, condition, assets or account of the bank, or in applications, statements, reports, and returns to the Central Bank or other regulatory body in Somalia or elsewhere.
I have never obstructed an audit, examination, inspection, or other control of a bank, money
transfer business or other business activity.
I have not been a significant shareholder, director or senior officer of a bank or other financial
institution in Somalia or elsewhere who has been suspended from office; ordered to sell or otherwise dispose of an ownership interest in a financial institution; or been the subject of a formal enforcement action, prompt corrective action, or remedial measures by the Central Bank pursuant to the FIL or similar action by a foreign supervisory authority.
I have not been a significant shareholder, director or senior officer of a bank or other financial
institution in Somalia or elsewhere who has caused a loss at a financial institution located anywhere in the world as a result of insolvency, bankruptcy, credit default, mismanagement, incompetence, recklessness, and/or criminal activity. Signature:
Position with the bank:
Date:
Notarized witness:

CENTRAL BANK OF SOMALIA
Regulation (Bank Licensing), Revised March 2022 --------------------------
Schedule 3. 2

Affidavit of Probity for Legal Entities
This affidavit of Probity is required to be executed by the board of directors or duly authorized executive officer of a legal entity that is, or applies to be, a significant shareholder of a bank or moneytransfer business licensed in Somalia. Initials Affirmation of Probity The legal entity has not:

conducted banking business or money transfer business without a valid license issued by the
Central Bank.
been convicted of the offense of fraud, dishonesty or misfeasance.
engaged in criminal or fraudulent acts.
engaged in money laundering or the financing of terrorism.
been adjudicated or declared bankrupt; is not currently subject to bankruptcy proceedings;is
not a recently discharged bankrupt.
had money judgments which have not been satisfied in full.
been censured, disciplined or disqualified by any professional or regulatory body in relationto
any trade, business or profession.
been refused or restricted from the right to carry on any trade, business or profession forwhich
a specific license, registration, or other authorization is required by law.
been a significant shareholder of a bank or other financial institution in Somalia or elsewhere
that has been liquidated, or that is under liquidation, statutory management, or reorganization pursuant to the FIL, or similar legislation in another jurisdiction.
made false or misleading statements, false or misleading entries, or false or misleading
omissions, or altered, abstracted, concealed or destroyed any book of record or any report, slip, document, or statement of business affairs, transactions, condition, assets or accountof the

bank, or in applications, statements, reports, and returns to the Central Bank or otherregulatory body in Somalia or elsewhere.

obstructed an audit, examination, inspection, or other control of a bank, money transfer
business or other business activity.
been a significant shareholder of a bank or other financial institution in Somalia or elsewhere
who has been ordered to sell or otherwise dispose of an ownership interest in a financial institution; or been the subject of a formal enforcement action, prompt corrective action, or remedial measures by the Central Bank pursuant to the FIL or similar action by a foreign supervisory authority.
been a significant shareholder of a bank or other financial institution in Somalia or elsewhere
who has caused a loss at a financial institution located anywhere in the world asa result of insolvency, bankruptcy, credit default, mismanagement, incompetence, recklessness, and/or criminal activity. Signatures of members of the board of directors or a duly authorized executive officer:
Date:
Notarized witness:

CENTRAL BANK OF SOMALIA
Regulation (Bank Licensing), Revised March 2022 --------------------------
Schedule 4.

Physical Infrastructure
In addition to the requirements covered in this Regulation and Schedules, the CBS has to be satisfied that the necessary physical infrastructure, systems and manpower are verifiable through supervisory inspection. The CBS will only issue a “no objection” letter once these are assessed.

CENTRAL BANK OF SOMALIA
Regulation (Bank Licensing), Revised March 2022 -------------------------- Attachment 1: Capital requirements

Minimum Amount of Capital
i. Unless the Central Bank notifies a bank in writing of a higher capital requirement pursuant
to Sections 14(6) and 15(2) of the FIL, GR-BL.1 licensees shall at all times maintain in Somalia unimpaired paid-up capital in an amount which exceeds USD 7,000,000.

ii. Unless the Central Bank notifies a bank in writing of a higher capital requirement pursuant
to Sections 14(6) and 15(2) of the FIL, GR-BL.2 licensees shall at all times maintain in Somalia unimpaired assigned capital in an amount which exceeds USD 20,000,000.

iii. Unless the Central Bank notifies a bank in writing of a higher amount, GR-BL.1 licensees
shall maintain with the Central Bank of Somalia a security deposit of USD 1,500,000.

iv. Unless the Central Bank notifies a bank in writing of a higher amount, GR-BL.2 licensees
shall maintain with the Central Bank of Somalia a security deposit of USD 3,000,000.

v. Capital adequacy ratio should at all times not be less than 12% (for definitions refer to
relevant Regulation)
vi. Core capital ratio should at all times not be less 8% (for definitions refer to relevant
Regulation)

CENTRAL BANK OF SOMALIA
Regulation (Bank Licensing), Revised March 2022 -------------------------- Attachment 2: Banking licensing conditions (summary)

Bank Licensing Conditions
Definitions

Retail banking: activities and services targeted at retail customers (deposit taking, credit
facilitations, payment services etc.)
Business banking: activities and services targeted at businesses of all sizes, with
especial emphasis on the small end of the market.
Institutional banking: activities and services targeted at Institutions (locally, nationally);
usually wholesale banking services tailored to local governments, govt agencies (e.g., public sector infrastructure financing), commercial banks (loan syndications, specialized finance, credit structuring, joint ventures, partnerships etc.).
Corporate banking: the “big end” of business banking, focusing exclusively on
corporations o Corporate activities that may be needed by corporations – (i) (local) banking services and credit facilitation (from basic cheques issuance, bank drafts, overdrafts to more advanced investment/merchant banking [capital financing, debt, equity, advisory], (ii) payment and treasury services (cash management, managing foreign exchange activities [international remittances], (iii) trade and receivables finance, covering the whole trade cycle.
Universal banking: comprehensive set of financial services and products that cater to
all the financial services needs of individuals, corporations and institutions (“one-stopshop).
MSMLEs: Micro, Small, Medium, and Large Enterprises as defined below:
Size Micro Enterprise Small Enterprise Medium-Size Enterprise Large Enterprise Total assets < $ 10,000 $ 10,000 < $100,000 $ 100,000 < $500,000 > $500,000
Table 1: CBS (LSD) Definitions

Condition Category GR-BL.1 Category GR-BL.2
Category definitions Known as “full banks” Known as “restricted banks” Business activities may undertake universal banking activities (unrestricted) may undertake restricted banking activities Permissions all-encompassing universal banking services (commercial [both retail and business], corporate, wholesale, and investment/ merchant banking activities) Corporate banking (including Institutional banking and selected business banking)

corporate entities must hold
a valid certificate of incorporation and a valid tax compliance certificate. Prohibitions Sections 64(3), 67, 68, 69, 70, 72, 101, 102, 103, 104, 105; 112; 121 of the FIL (2012) i) Retail banking ii) Micro and Small enterprise banking as defined above iii) Sections 64(3), 68, 69, 70, 72, 101, 102, 103, 104, 105; 112; 121 of the FIL (2012) iv) Non-financial activities – equity portfolio investments in any nonfinancial activity greater than 10%. Commitments None i) Hiring of local technical staff ii) facilitating of CBRs for local “full banks” Notification requirements (as required by the FIL, 2012) Minimum capital requirement (Art. 14[3]); holding and computation of liquid assets (Art. 16[8]); submission and approval of audited annual accounts (Art. 20[5a]); under capitalized banks (Art. 46[1b]); approval of asset transfer transactions (Art. 74[1]). Minimum capital requirement (Art. 14[3]); holding and computation of liquid assets (Art. 16[8]); submission and approval of audited annual accounts (Art. 20[5a]); under capitalized banks (Art. 46[1b]); approval of asset transfer transactions (Art. 74[1]).

End *

Central Bank of Somalia Regulation on Bank Licensing

Lineage: In force