Circular No. 20/2018 on the Approval of Credit Institutions and Representative Offices of Foreign Credit Institutions

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[Logo: BRB]

BANQUE DE LA REPUBLIQUE DU BURUNDI

THE GOVERNOR

CIRCULAR NO. 20/2018 RELATING TO THE APPROVAL OF CREDIT INSTITUTIONS AND REPRESENTATIVE OFFICES OF FOREIGN CREDIT INSTITUTIONS ISSUED PURSUANT TO LAW NO. 1/17 OF AUGUST 22, 2017 GOVERNING BANKING ACTIVITIES

Having regard to Law No. 1/34 of December 2, 2008 establishing the Statutes of the Banque de la République du Burundi, particularly Articles 7 (paragraphs 4 and 6) and 8;

Having regard to Law No. 1/17 of August 22, 2017 governing banking activities, particularly Articles 3, 4, 5, 15, 17, 18, 19, 20, 23, 24, 27, 31, 33, 43, 44, 45, 46, 49, 50 and 63;

Having reviewed Circular No. 20/09 relating to the approval of banks and financial institutions;

The Banque de la République du Burundi, hereinafter referred to as the "Central Bank", issues:

CHAPTER I: GENERAL PROVISIONS

Article 1: Purpose

The purpose of this Circular is to specify the procedure and documents required for the approval of credit institutions and representative offices of foreign credit institutions.

Article 2: Definitions

For the purposes of this Circular, the following terms are defined as:

reference shareholder, a shareholder or group of shareholders holding individually at least 5% of the voting rights and designated by the credit institution;

qualified shareholder, any group of shareholders resulting from an express agreement, which holds, directly or indirectly, a share of the capital of the institution conferring at least fifty percent (50%) of the voting rights or allowing it to control the institution;

representative office, an entity of a foreign credit institution allowing it to develop an activity of information, liaison, and representation, without however

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conducting banking operations within the host country;

person affiliated with a credit institution, any natural or legal person, or group of persons linked, having with it at least one of the following qualities or relationships:

• director or executive;
• qualified shareholder;
• shareholder holding at least 5% of the voting rights;
• enterprise in which the affiliated person holds, directly or indirectly, at least 25% of the voting rights;
• any enterprise in which the persons referred to in bullets 1, 2, and 3 are executives, directors, or hold, directly or indirectly, at least 25% of the voting rights;
• spouses, direct line relatives, or first-degree allies of any of the persons referred to in bullets 1, 2, and 3, as well as the enterprises in which they are executives, directors, or hold, directly or indirectly, at least 25% of the voting rights;
• enterprise that, alone or with others, the credit institution controls directly or indirectly;
• enterprise controlled directly or indirectly by a person or entity that controls the credit institution;
• any other person that the Central Bank deems affiliated.

CHAPTER II: CREDIT INSTITUTIONS

Article 3: Composition of the approval application file

In support of their approval application, applicants must present to the Central Bank a complete file comprising in particular:

• a letter of approval application addressed to the Governor of the Central Bank;
• a proof of payment of file fees;
• a Resolution of the General Meeting constituting the new company and the decision of the competent body for corporate shareholders authorizing them to take part in the capital of the credit institution;
• a tax identification number and commercial register of the applicant company;
• an original of the notarized statutes of the applicant company;
• proof of release of the minimum regulatory capital by shareholders via a deposit certificate, in a local bank, of the amount of said capital;

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• a list of shareholders and their shareholdings;
• a list of Executives and Directors;
• elements allowing an assessment of the honorability, integrity, and competence conditions of Executives and Directors as provided for in Article 15 of Law No. 1/17 of August 22, 2017 governing banking activities and the Circular relating to their approval;
• an original of the notarized statutes, certified financial statements of the last three accounting years for corporate shareholders called to hold, directly or indirectly, at least 5% of the voting rights or capital of the credit institution;
• a copy of the valid national identity card or passport, a detailed curriculum vitae, and a criminal record extract for natural persons called to hold, directly or indirectly, at least 5% of the voting rights or capital of the credit institution;
• a business plan describing in particular the contribution to satisfying a local or general economic need, the type and volume of operations envisaged, and including forecasts supported by projected balance sheets and income statements over a period of three (3) years;
• a detailed organizational chart clearly indicating the organization and lines of responsibility within the future credit institution;
• a description of the technical, human, and financial means it intends to implement to support its activity program;
• a General Operations Regulation;
• an Internal Order Regulation;
• an address of the registered office (physical address, e-mail, P.O. Box, Website, telephone number, etc.);
• a trade name, if applicable.

Article 4: For the approval of subsidiaries

In addition to the elements contained in Articles 3 and 5, subsidiaries must provide an agreement from the banking supervisory authority of the country of origin.

Article 5: Additional elements of the file

In addition to the documents mentioned in Articles 3 and 4 of this Circular, the applicant company is required to provide, for each shareholder (or guarantor) holding at least 5% of the capital of the credit institution being created, the following information:

a. For a legal person:

The distribution of its shareholding and the identity of its shareholders holding at least 5% of the voting rights:

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• if the shareholders are legal persons, provide for each shareholder its name, legal form, nationality, registered office, and a copy of the national identity card of its executive;
• the resolution of the deliberative body authorizing the legal person to invest in the institution;
• if the shareholders are natural persons, provide for each shareholder a copy of their valid national identity card or passport.

b. For a natural person:

• the nature of their activities;
• their declared commitments according to the format in the annex, point 8.

In addition to the documents required under Articles 3, 4, 5, and 6 of this Circular, the Central Bank may require, for approval purposes, any additional information it deems useful to base its decision.

Article 6: Specific conditions for approval

With a view to preserving the balance of the financial structure of the credit institution and the proper functioning of the banking system, the Central Bank may:

• attach specific conditions to the approval for the exercise of certain operations defined by the corporate object of the applicant company;
• where applicable, subordinate the granting of approval to the subscription of commitments to be respected by the applicant company.

Article 7: Application for authorization

Credit institutions must request prior authorization from the Central Bank for any modification to the following elements:

• legal form;
• corporate name;
• trade name;
• commercial sign;
• address of the registered office;
• type of operations for which the credit institution was approved;
• composition of the Board of Directors;
• composition of the executive team;
• shareholdings of shareholders holding 25% of the share capital.

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Article 8: Obligation of reference shareholders and qualified shareholders

When applying for the approval of a credit institution, the applicant must designate and transmit to the Central Bank a reference shareholder or group of reference shareholders.

Reference shareholders, qualified shareholders, or parent companies commit vis-à-vis the Central Bank to participate in determining the efficient organization of the future credit institution and its good management, and to provide it with capital support to ensure solvency and cash support to ensure liquidity, according to the form in the annex, point 10, xiv.

Article 9: Grounds for refusal of approval

The Central Bank refuses the approval of a credit institution, particularly when it judges that the human, technical, or financial means provided are insufficient with regard to the business plan, that the exercise of the supervisory mission is likely to be hindered, or that the shareholders holding at least 5% of the voting rights, the proposed directors, and executives do not meet the approval criteria required by the laws and regulations in force.

Article 10: Withdrawal of approval

The Central Bank may proceed with the withdrawal of approval, without prejudice to the sanctions provided for by other legislative and regulatory texts, for the following cases:

• the discovery of a false or misleading declaration during the approval application;
• the non-use of the approval instrument within twelve (12) months after its obtaining.

Article 11: Modification of elements presented during the approval application

Any modification made to any element presented during the approval application requires prior non-objection from the Central Bank.

CHAPTER III: REPRESENTATIVE OFFICES OF A FOREIGN CREDIT INSTITUTION

Article 12: Opening, closing, or transfer of a representative office

The opening, closing, and transfer of a representative office of a foreign credit institution is subject to the prior approval of the Central Bank.

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Article 13: Documents required for the opening of a representative office

The approval application file for a representative office of a foreign credit institution comprises the following elements:

• address of the registered office;
• original letter from the supervisory authority of the country of origin authorizing the creation of the representative office in Burundi;
• certified copy of the valid license of the foreign credit institution to conduct banking operations as issued by the supervisory authority of the country of origin;
• annual reports, including the profit and loss account and balance sheet of the foreign credit institution for the last three (3) years.

Article 14: Activities authorized for a representative office

A representative office of a foreign credit institution may exercise the following activities in Burundi:

• promote the services of the foreign credit institution through marketing;
• serve as a point of contact and liaison between existing and potential clients in Burundi and the represented foreign credit institution as well as its offices and subsidiaries;
• organize and facilitate visits and meetings of the represented foreign credit institution with its clients in Burundi;
• conduct market research and collect information for the represented foreign credit institution;
• any other activity that may be approved by the Central Bank.

It is strictly prohibited for representative offices of foreign credit institutions to conduct any "authorized operations" for credit institutions, microfinance institutions, or payment institutions, as provided for in Articles 4 to 10 of Law No. 1/17 of August 22, 2017 governing banking activities.

Article 15: Control of representative offices

The Central Bank may conduct a control of the activities of the representative office to assess whether the representative office complies with the law governing banking activities and the regulatory texts issued by the Central Bank.

Article 16: Withdrawal of approval for a representative office

The Central Bank may withdraw the approval of a representative office in case of:

• violation of the provisions of laws and regulations in force in Burundi;
• non-use of the approval instrument within six (6) months after its obtaining;
• cessation of activities for at least six (6) months.

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CHAPTER IV: FINAL PROVISIONS

Article 17: Total release of capital

The total release of capital or endowment must occur within a maximum period of six months following the date of approval of the credit institution.

No natural or legal person may hold, directly or indirectly, a participation exceeding twenty-five percent (25%) of the voting rights of a credit institution.

This limit does not concern the State's participations in companies constituted as public or mixed companies or applicant companies constituted as subsidiaries of credit institutions.

Article 18: Notification and publication of the approval agreement

The decision granting the approval instrument is notified to the applicant company, to the Minister having supervision of the institution within its attributions, and to the professional association of the field of activity of the applicant company. It is also published, at the expense of the beneficiary, in the Official Bulletin of Burundi and in mass media.

Article 19: Issuance of the approval instrument

The approval is materialized by an instrument delivered to the new credit institution or representative office upon payment of the fees fixed by the relevant regulation. The display of the approval instrument in a place accessible to the public is a prerequisite for the start of activities.

Article 20: Entry into force

This Circular replaces Circular No. 20/2009 of November 4, 2009, and enters into force on the day of its publication on the website of the Central Bank and in the Official Bulletin of Burundi.

Done in Bujumbura, on 17.08.2018

Jean CIZA Governor.-

[Stamp: BANQUE DE LA REPUBLIQUE DU BURUNDI - GOVERNOR - BRB]

1, Avenue du Gouvernement- P.O. Box 705 BUJUMBURA - Tel: (257) 22-20 40 00 / 22 22 27 44- Fax: (257) 223128 - Email: brb@brb.bi

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ANNEX TO CIRCULAR NO. 20/2018

Subject: Shareholder Evaluation Form for Shareholders Holding at Least 5% of Voting Rights

Note: Before filling out this form, please read carefully the content of point 11.

1. THE INSTITUTION IN FORMATION

Name or Company Name:---------------------------------------------------------------------------------------

Category: -------------------------------------------------------------------------------------------------------

2. PERSONAL INFORMATION

i. Name:---------------------------------------------------------------------------------------------------------- ii. First Name:------------------------------------------------------------------------------------------------------- For a legal person, provide the name or company name of the entity. iii. Other names or aliases previously borne:-------------------------------------------------------

iv. Date and place of birth:--------------------------------------------------------------------------------- --------------------------------------------------------------------------For a legal person, indicate the year of creation v. Nationality and mode of acquisition¹:-----------------------------------------------------------------------

For a legal person, indicate the country of registration vi. Tax Identification Number:-------------------------------------------------------------------------- vii. ID Card Number and Date:------------------------------------------------------------------

For a legal person, indicate the registration number viii. Passport Number and Date of Issue:----------------------------------------------------------

ix. Postal Address: -------------------------------------------------------------------------------------------- x. Previous Postal Address: --------------------------------------------------------------------------------- xi. E-mail:-------------------------------------------------------------------------------------------------------- xii. Telephone Number:-------------------------------------------------------------------------------------- xiii. Education: --------------------------------------------------------------------------------------------------

¹ By mode of acquisition, please understand: Birth, naturalization, or by marriage

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Year	Institution	Qualification Obtained

xiv. Names of bankers during the last five years:------------------------------------------------

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3. PROFESSIONAL OCCUPATIONS

Period	Employer	Positions Held	Essential Responsibilities	Reasons for Resignation

4. DESCRIPTION OF FUNCTIONS PREVIOUSLY AND CURRENTLY EXERCISED IN BURUNDI AND ABROAD:--------------------------------------------------------------------------------------------------

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5. REFERENCE PERSONS

	Name and Surname	Postal Address	e-mail	Tel No.	Functions (if any)	Relationship with Applicant
1
2
3
4

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6. SHARES HELD IN OTHER ACTIVE OR FORMING COMPANIES

Company Name	Date of Registration	Number of Shares	%	Past Shareholding	Observations
				a	b

a: indicate the date of closure of the company or sale of shares b: report the reason for closure or sale of shares

7. AFFILIATION TO PROFESSIONAL, SPORTS, AND CHARITABLE ASSOCIATIONS

Name		Functions Exercised	Previous Functions	Observations
			c	d

C: date of cessation of functions D: reason for cessation of functions

8. CURRENT DEBTS

Name of Borrower²	Lending Institution	Type of Credit	Credit Amount	Disbursement Date	Monthly Installment	Guarantee Offered	Value of Guarantee	Balance Due (BIF)	Status³

² Indicate personal loans and those contracted by persons related to the respondent of this questionnaire. ³ Mention if repayment is regular or not

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9. ORIGIN OF FUNDS

i. Please indicate details on the source of funds that you, as a shareholder holding at least 5% of the voting rights, wish to invest in the institution in formation. a)------------------------------------------------------------------------------------------------------------------ b)------------------------------------------------------------------------------------------------------------------ c)------------------------------------------------------------------------------------------------------------------

ii. Please swear that you, as a shareholder holding at least 5% of the voting rights in the institution in formation, guarantee that the funds invested therein are not of criminal origin.

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10. ADDITIONAL QUESTIONS

If the shareholder holding at least 5% of voting rights is a natural person

i. Have you, yourself or an entity related to you, already applied for approval locally or abroad which was not granted or was subsequently withdrawn? If yes, please give the reasons.

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ii. Have you ever been found guilty of a financial crime, fraud, or any other misconduct in Burundi or abroad? If so, would you like to give details on the jurisdiction of conviction, the offense, the penalty imposed, and the date of conviction?

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iii. Have you, in any country, already been dismissed from your position or subjected to disciplinary proceedings by your employer or removed from a professional list? If yes, give details.

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Have you already been diagnosed