COMMISSION BANCAIRE OF CENTRAL AFRICA

COBAC REGULATION R-2003/04 ON THE ACCOUNTING TREATMENT OF ASSET TRANSFER OPERATIONS

The Commission Bancaire of Central Africa,

Having regard to the Convention of 16 October 1990 establishing the Commission Bancaire of Central Africa;

Having regard to Articles 1 and 9 of the annex to the Convention of 16 October 1990;

Having regard to the Convention of 17 January 1992 on the Harmonisation of Banking Regulation in the States of Central Africa;

Having regard to Articles 32 and 36 of the annex to the Convention of 17 January 1992;

Having regard to Articles 31, 32 and 34 of the Convention governing the Monetary Union of Central Africa;

Having regard to COBAC Regulation R-98/01 on the chart of accounts for credit institutions;

Having regard to COBAC Regulation R-2001/07 on internal control in credit institutions;

Having regard to COBAC Regulation R-2003/01 on the organization of accounting for credit institutions;

HAS DECIDED AS FOLLOWS:

Article 1. Every credit institution, as defined in the Convention of 16 October 1990, is required to account for asset transfer operations it carries out on the assets listed below, in accordance with this Regulation, regardless of the form or designation of these operations.

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The assets covered by this Regulation are claims recorded on the balance sheet of a credit institution in the form of distributed loans or interbank facilities, as well as assets eligible for transfer on a market such as securities, Treasury bills, or other negotiable debt instruments.

Article 2. Asset transfers qualify as "perfect sales" for the purposes of this Regulation if they are carried out without any obligation or option for the transferor to repurchase, and are not accompanied by a guarantee against debtor default risk provided by the transferring institution or by enterprises fully consolidated within the same scope under COBAC Regulation R-2002/01.

Assets subject to a perfect sale cease to appear on the balance sheet of the transferring institution and are recorded, at their acquisition price, as assets of the acquiring institution.

Upon completion of a perfect sale, the transferring institution records in its income statement any gain or loss resulting from the transfer, equal to the difference between the sale price and the book value of the transferred asset.

Article 3. Asset transfers qualify as "firm purchases or sales" for the purposes of this Regulation if the acquiring institution receives from the transferor, or from enterprises fully consolidated within the same scope under COBAC Regulation R-2002/01, a guarantee against primary debtor default risk.

Transferred assets remain on the balance sheet of the transferring institution and do not appear as assets of the acquiring institution.

The acquiring institution records the disbursed amount, representing its claim against the transferor, as an asset; the latter records the received amount, representing its liability to the acquiring institution, as a liability.

Article 4. Asset transfers qualify as "repos" (repurchase agreements) for the purposes of this Regulation if they are accompanied by an agreement whereby the transferring institution commits to repurchase, and the acquiring institution commits to resell, the same assets at an agreed price and date.

Assets received under a repo are not recorded on the acquiring institution's balance sheet; the latter records the disbursed amount, equal to the acquisition price and representing its claim against the transferor, as an asset.

Assets given under a repo remain on the transferor's balance sheet, which records the received amount as a liability to the acquiring institution.

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When the acquiring institution re-pledges assets it has itself received under a repo, it records the received amount as a liability.

Upon maturity of the repo, the prescribed entries are reversed by both institutions.

Article 5. Asset transfers qualify as "dation in payment" for the purposes of this Regulation if a different asset than that originally due under the underlying obligation is delivered to a creditor.

For the transferring institution, the asset delivered in payment is removed from assets and a reduction in liability to the acquiring institution is recorded at the transfer price. If the book value of the delivered asset exceeds the transfer price, the difference constitutes a capital loss and is recorded as an expense. Conversely, if the book value of the delivered asset is lower than the transfer price, the difference constitutes a capital gain and is recorded as income.

For the acquiring institution, the asset delivered by the transferor enters its portfolio according to the rules applicable to assets of the same nature, at the transfer price, and the claim is reduced by the same amount. At each accounting cutoff date, the received asset is revalued in accordance with the provisions applicable to assets of the same nature.

Article 6. Credit institutions that violate the principles established by this Regulation are subject to sanctions under the prevailing banking regulations.

Article 7. All prior provisions contrary to this Regulation are repealed, effective from the date of entry into force.

Article 8. This Regulation shall be notified to the Ministers responsible for Finance and Credit, as well as to all accredited credit institutions in the States of Central Africa and their Professional Associations.

Article 9. The Secretary General of the Commission Bancaire of Central Africa is responsible for implementing this Regulation, which shall enter into force on 1 January 2004.

Done at Yaoundé, on 14 NOV. 2003

For the Commission Bancaire,

The President, Jean-Félix MAMALEPOT