Law No. 1/17 of August 22, 2017 Regulating Banking Activities

REPUBLIC OF BURUNDI

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PRESIDENT'S OFFICE

LAW NO. 1/17 OF AUGUST 22, 2017 REGULATING BANKING ACTIVITIES

THE PRESIDENT OF THE REPUBLIC,

Having regard to the Constitution of the Republic of Burundi;

Having regard to the law of June 29, 1962, maintaining in force certain legislative and regulatory acts issued by the supervisory authority;

Having regard to Law No. 1/010 of May 13, 2004, establishing the Civil Procedure Code;

Having regard to Law No. 1/08 of March 17, 2005, establishing the Code on Judicial Organization and Competence;

Having regard to Law No. 1/07 of March 15, 2006, on bankruptcy;

Having regard to Law No. 1/02 of February 4, 2008, on the fight against money laundering and the financing of terrorism;

Having regard to Law No. 1/34 of December 2, 2008, establishing the Statutes of the Bank of the Republic of Burundi;

Having regard to Law No. 1/05 of April 22, 2009, revising the Penal Code;

Having regard to Law No. 1/06 of March 25, 2010, on the Legal Regime of Competition;

Having regard to Law No. 1/07 of April 26, 2010, establishing the Commercial Code;

Having regard to Law No. 1/09 of May 30, 2011, establishing the Code of Private and Publicly Participated Companies;

Having regard to Law No. 1/02 of January 7, 2014, establishing the Insurance Code of Burundi;

Having regard to Law No. 1/22 of July 25, 2014, regulating the Recourse and Direct Action of the State and Municipalities against their Agents and Employees;

Having regard to Law No. 1/01 of January 5, 2016, revising Decree-Law No. 1/41 of July 9, 1993, defining credit-leasing operations and provisions applicable to credit-leasing contracts and regulating the conditions for exercising these activities;

Having regard to Law No. 1/10 of August 12, 2016, regulating Conventional Movable Securities in Burundi;

Having reviewed Law No. 1/017 of October 23, 2003, modifying Decree-Law No. 1/038 of July 7, 1993, regulating Banks and Financial Institutions;

Having deliberated the Council of Ministers;

Having adopted by the National Assembly and the Senate;

PROMULGATES:

TITLE I. GENERAL PROVISIONS

CHAPTER I: SCOPE AND DEFINITIONS

Article 1: Scope

This law applies to subject institutions as defined in Article 3.

The National Postal Service and microfinance institutions exercise their banking and/or microfinance activities under the conditions provided for by this law and the specific regulation of the Central Bank.

Article 2: Non-subject Institutions

The following are not subject to this law:

1. The Public Treasury;
2. The Central Bank;
3. Insurance companies and the Insurance Regulation and Control Agency;
4. Social security and provident funds and their regulatory authority;
5. The Financial Market Regulatory Authority and the actors of said market, other than credit institutions.

However, each of these bodies and establishments, as well as any other financial institution operating in Burundi, is required to communicate to the Central Bank, upon its request, the information necessary for the exercise of its mission, according to the models, frequency, and media fixed by the Central Bank.

Article 3: Definitions

For the purposes of this law, the following terms are understood as:

qualified shareholder, any grouping 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 of the voting rights or allowing it to control the institution;

executive or delegated administrator, any person sitting on the Board of Directors and part of the management team on a daily basis in an institution;

non-executive administrator, any administrator not exercising management functions in an institution;

independent administrator, any non-executive administrator who does not have, with the institution or the group to which it belongs, interest links likely to compromise their freedom of judgment, such as a shareholder holding at least one share, even symbolic, without being a reference or qualified shareholder, who is elected member of the Board of Directors for their expertise in the banking or finance field, notably in accounting, economics, taxation, and law;

factoring, a financing and debt collection method that can be used by a company and consists of entrusting the management of its debts to a third-party entity (specialized credit institution) to obtain, among other advantages, early repayment;

commercial agents, persons acting on behalf and in the name of subject institutions as provided for in Articles 11 and 49;

bank, a legal person belonging or not to a group of linked persons, which carries out as a habitual profession and primarily the operations cited in Article 4;

Central Bank, Bank of the Republic of Burundi;

international top-tier bank, any bank rated by an international rating agency, recognized by the Central Bank and classified in one of the A rating ranges or an equivalent rating;

representative office, an entity of a foreign establishment allowing it to develop an activity of information, liaison, and representation, without however carrying out banking operations within the host country;

payment account, an account held in the name of one or more persons, used for the purpose of executing payment operations;

mortgage loan, any loan secured by a mortgage on existing or to-be-acquired real estate in favor of the lending credit institution; it may aim at the purchase, construction, remodeling, or renovation of real estate or the satisfaction of any other financing need;

non-performing credit, "a loan is considered non-performing when it remains unpaid for a period of 90 days or more";

dispossession, an act by which the Central Bank suspends the exercise of powers by the administrators and managers of a subject institution and, where applicable, by the General Assembly of shareholders;

subject institution, any establishment authorized by the Central Bank to carry out one or more banking activities, such as credit institutions, payment institutions, microfinance institutions, financing and guarantee funds, and the National Postal Service for its banking and/or microfinance activities subject to the authorization and control of the Central Bank under this law;

credit institutions, banks and financial institutions;

payment institution, a legal person, other than the Public Treasury, the Central Bank, a credit institution, the National Postal Service, or a microfinance institution, which is authorized by the Central Bank to provide payment services as defined in this law as a habitual profession;

financial institution, a legal person, belonging or not to a group of linked persons, which carries out as a habitual profession and primarily one or more operations among those provided for in Article 4;

subsidiary, a company in which more than fifty percent of the capital has been formed by contributions made by another company called the parent company which controls it;

group of linked persons, any group constituted by two or more natural or legal persons having interrelations such as common management, commercial or financial interdependence, such that the difficulties of one necessarily affect the other or others;

financial group, a set of companies owned directly or indirectly by a head company called the umbrella company, parent company, or holding company that animates and directs the group;

microfinance institution, an entity authorized by the Central Bank to exercise the microfinance activity in Burundi;

microfinance, credit operations, savings collection, payment services, and other specific financial services in favor of persons operating essentially outside the traditional banking circuit;

electronic money, a claim on the issuer represented by a monetary value:

• stored in electronic form;
• issued against the handover of funds of an amount whose value cannot be less than the monetary value issued for payment operations;
• accepted as a means of payment by third parties other than the issuer of electronic money;

means of payment, instruments such as checks, bills of exchange, promissory notes, electronic money stored on a prepaid card or server, transfers, direct debits, credit and debit cards, or any other means allowing persons to make payments, with the exception of banknotes and coins which, regardless of the support or technical process used, including monetary, telephone, and other information and communication techniques, allowing a person, holder or not of a payment account, to make payments and/or transfer funds in favor of another person or in their favor;

person related to a subject institution, any natural or legal person having with the institution at least one of the following qualities or relationships:

• administrator or manager;

• qualified shareholder;

• company in which they hold, directly or indirectly, at least twenty-five percent of the voting rights;

• company in which the administrator, manager, or qualified shareholder mentioned in the first two points are managers, administrators, or hold, directly or indirectly, at least twenty-five percent of the voting rights;

• spouse, direct line relative, or first-degree ally of any of the persons mentioned in the first two bullet points, as well as the companies in which they are managers, administrators, or hold, directly or indirectly, at least twenty-five percent of the voting rights;

• company that, alone or with others, the subject institution controls directly or indirectly;

• company controlled directly or indirectly by a person or entity that controls the subject institution;

• any other category of person that the Central Bank deems related;

payment services, the following services:

1. services allowing the deposit of cash into a payment account and the management operations of a payment account;
2. services allowing the withdrawal of cash from a payment account and the management operations of a payment account;
3. the execution of the following payment operations associated with a payment account:

• direct debits, including authorized unitary direct debits;
• payment operations carried out with a payment card or similar device;
• transfers, including standing orders;

4. the issuance of payment instruments and/or the acquisition of payment orders;
5. funds transfer services;
6. the execution of payment operations, when the payer's consent is given by means of any telecommunications, digital, or computer device and the payment is addressed to the operator of the telecommunications or computer system or network, acting solely as an intermediary between the payment service user and the supplier of goods or services;
7. the issuance of electronic money.

The usury rate is the effective global rate that subject institutions cannot exceed in credit granting operations. It is fixed by the Central Bank according to the types of credit and based on the evolution of the environment and market conditions.

CHAPTER II: AUTHORIZED OPERATIONS AND THEIR EXERCISE

Article 4: Operations Authorized to Banks

Banking operations are considered to be the receipt of funds from the public, the distribution of credits, and the making available to clients of means of payment and their management, carried out primarily as a habitual profession by credit institutions.

Credit opening agreements must be in Kirundi and French. The Central Bank dictates other documents to be translated into Kirundi.

In their operations of making means of payment available to clients, any exclusive partnership between credit institutions and payment or international transfer companies is prohibited.

1. Receipt of funds from the public:

Funds received from the public are considered to be funds that a subject institution collects from third parties with the right to dispose of them for its own account but with the obligation to return them.

However, the following are not considered funds received from the public:

• Funds received or left in account, in a company, by general partners, limited partners, partners or shareholders holding at least ten percent of the share capital, administrators, managers, directors, or other responsible persons;
• Funds that a company receives from its employees provided that their amount does not exceed ten percent of its equity; for the assessment of this threshold, funds received from employees under specific legal provisions are not taken into account;
• Funds received by credit institutions within the framework of advisory and assistance mandates in asset and portfolio management, financial engineering, and, generally, funds received to facilitate, for clients, the creation and development of their businesses, including funds deposited to form or increase the capital of a company;
• Funds collected by payment institutions from their clients.

2. Credit operations:

A credit operation, for the purposes of this law, is any act by which a person, acting for valuable consideration, makes or promises funds available to another person or takes, in the interest of that person, an engagement by signature such as a guarantee, suretyship, or any other guarantee.

Credit leasing, mortgage loans, factoring, credit sales financing, and, generally, any financing operation authorized by the Central Bank are assimilated to credit operations and, as such, placed under the control of the Central Bank. Such operations are subject, where applicable, to specific legislation or regulation.

Any entity operating in Burundi carrying out a financing and/or guarantee operation in favor of subjects is subject to the control of the Central Bank.

Article 5: Operations Authorized to Financial Institutions

Financial institutions may, in addition to granting credits, collect public deposits for a term of at least one year.

The exercise by a financial institution of any additional activity, in addition to that for which it was initially authorized, is subject to prior authorization from the Central Bank.

Financial institutions are authorized to open agencies and counters throughout the national territory, under the conditions provided for by the provisions of this law.

Article 6: Ancillary Operations Authorized to Credit Institutions

Credit institutions may carry out ancillary operations to their activities such as:

1. foreign exchange operations;
2. placement, subscription, purchase, management, custody, and sale of securities or any financial product for their own account or for the account of third parties;
3. advisory and assistance services in asset management;
4. advisory and assistance services in financial management, financial engineering, and, generally, all services intended to facilitate the creation and development of businesses;
5. simple leasing operations of movable or immovable goods for establishments authorized to carry out credit-leasing operations;

The exercise of these operations is carried out in compliance with the legislative and regulatory provisions governing them.

Article 7: Taking Participations

Credit institutions are authorized to take and hold participations in existing or newly created companies, in Burundi or abroad.

The Central Bank fixes by regulatory means the limits within which participations are taken and may oppose any investment likely to compromise the financial solidity of the institution, to prejudice the interest of depositors, or to hinder the effectiveness of prudential control.

Article 8: Exercise of Other Activities by Credit Institutions

Credit institutions may exercise, with prior authorization from the Central Bank, activities other than banking operations and ancillary operations referred to in Articles 4, 5, and 6. The conditions for exercising these activities are fixed by the regulation of the Central Bank. Such activities remain of limited importance compared to the overall usual activities of the institution and cannot prevent, restrict, or distort competition in the market in question.

Article 9: Operations Authorized to Payment Institutions

Payment institutions provide payment services as a habitual profession.

Accounts opened by payment institutions are exclusively used for payment operations.

Any placement, even temporary, of funds in the name of the client in a savings, investment, or disposal product is excluded.

Also excluded is the disposal of funds for the account of payment institutions.

Article 10: Exercise of Other Activities by Payment Institutions

Payment institutions may exercise an activity other than the provision of payment services, subject to the applicable legislative and regulatory provisions for this activity.

For payment institutions exercising hybrid nature activities, activities other than payment services must be compatible with the requirements of the profession, notably the maintenance of the reputation of the payment institution, the primacy of client interests, and the play of competition in the market in question.

In the latter case, the Central Bank may require that a separate legal entity be created for payment service activities when the other activities of the payment institution harm or risk harming its financial health or the quality of control of the institution's compliance with its imposed obligations.

Article 11: Outsourcing of Activities

Subject institutions may outsource part of the activities and operations for which they have been authorized by entrusting them to subcontractors or commercial agents, under the conditions fixed by the regulation of the Central Bank.

By derogation from the relevant provisions of the Commercial Code, a commercial agent may receive mandates from several subject institutions, even competitors.

CHAPTER III: PROHIBITIONS

Article 12: Prohibition on Other Natural or Legal Persons from Carrying Out Operations of Subject Institutions

It is prohibited for any natural or legal person other than a subject institution to carry out the operations that it exercises habitually pursuant to Articles 4 and 9.

The Central Bank orders the immediate cessation of illegal operations in accordance with the provisions of Article 71.

Article 13: Legal Persons to Which the Prohibition Does Not Apply

The prohibition established in Article 12 does not apply:

1. to non-profit organizations that, within the framework of their mission and for social reasons, grant loans on their own resources at preferential conditions to certain of their members;
2. to companies that grant salary advances or loans of an exceptional nature to their employees for social reasons.

Article 14: Operations Authorized to Any Company

Despite the prohibition established in Article 12, any company may:

1. grant payment delays or advances to its contractors in the exercise of its professional activity;
2. conclude, on an occasional basis, lease contracts with an option to purchase;
3. carry out treasury operations with companies having, directly or indirectly, capital links conferring on one of them effective control power over the others;
4. issue securities and any other debt instruments;
5. issue vouchers and cards delivered for the purchase from the company of a specific good or service.

Article 15: Incapacity of Managers of a Subject Institution

No one may administer, direct, or manage in any way a subject institution if:

1. they have not been authorized by the Central Bank;

2. they have been declared personally bankrupt in Burundi or abroad and have not been rehabilitated;

3. they played a leading role in a company that, under their leadership, was declared bankrupt and has not been rehabilitated;

4. they are being prosecuted or have been convicted, in Burundi or abroad, as an author or accomplice and have not been rehabilitated for the following offenses:

• counterfeiting;
• counterfeiting or falsification of public securities or commercial instruments, shares, bonds, interest coupons, or banknotes;
• counterfeiting or falsification of seals, stamps, punches, or marks;
• forgery and use of forgery;
• violation of exchange and foreign trade rules;
• corruption and related offenses;
• theft, extortion, misappropriation or abuse of confidence, fraud, or handling stolen goods;
• issuing checks without provision;
• bankruptcy or assimilated offenses;
• money laundering, financing of terrorism, or any other economic and financial crime.

5. they are declared non-compliant with the regulation of the Central Bank;
6. they have violated the provisions of this law.

Article 16: Prohibition on Naming, Advertising, or Other Facts Likely to Cause Confusion

It is prohibited for any company, other than a subject institution, to use a name, trade name, advertising, or, generally, expressions making it appear that it is authorized as a credit institution, payment institution, or microfinance institution, or that could create confusion in this matter.

It is prohibited for a subject institution to imply that it belongs to a category other than that for which it has been authorized or to create confusion on this point.

TITLE II: CONDITIONS FOR GRANTING, EXERCISE, AND WITHDRAWAL OF AUTHORIZATION

CHAPTER I: GRANTING OF AUTHORIZATION OR PERMISSION

Article 17: Basic Principle of Authorization

Subject institutions must obtain authorization from the Central Bank before exercising their activities. The procedures for authorizing the requesting company are provided for by this law and the regulation of the Central Bank.

The act of