Decision No. 002/2004-CSBF/P on the Risk Division Ratio of Credit Institutions

COMMISSION FOR BANKING AND FINANCIAL SUPERVISION ______________________ The President __________ DECISION NO. 002/2004-CSBF/P on the Risk Division Ratio of Credit Institutions ____________________ The President of the Commission for Banking and Financial Supervision (CSBF), Having regard to Law No. 95-030 of February 22, 1996 on the activity and supervision of credit institutions, Having regard to Articles 43 (final paragraph) and 45 of Law No. 95-030 of February 22, 1996, which, on the one hand, empower the President "to take all decisions necessary for the proper functioning of the Commission and the optimal exercise of its assigned missions", and, on the other hand, authorize the Commission "to take all technical measures intended … more generally to ensure that credit institutions comply with sound management and prudential rules", Having regard to Instruction No. 003/94-CCBEF of December 29, 1994 on the division of risks for banks and financial institutions, amended by Instruction No. 002/99-CSBF of July 22, 1999, D E C I D E S :
Single Article:
In line with international practice, the risk division ratio stipulated in the new Article 8 of Instruction No. 002/99-CSBF of July 22, 1999 is reduced from thirty percent (30%) to twenty-five percent (25%), effective May 1, 2004. The procedures for taking into account counter-guarantees received from other credit institutions, stipulated in Article 4 of Instruction No. 003/94-CCBEF of December 29, 1994, are amended as follows:

• any global guarantee issued by other credit institutions to cover risks across multiple beneficiaries is no longer accepted in determining the risk base, effective August 1, 2004;
• any individual guarantee issued by other credit institutions after the date of this decision, covering risk for a single beneficiary, may be retained as a deduction from that beneficiary's risk base only up to eighty percent (80%);
• any individual guarantee issued by other credit institutions, valid on the date of this decision and covering risk for a single beneficiary, will be retained as a deduction from that beneficiary's risk base at eighty percent (80%), effective January 1, 2005.
  The first point of Article 5 of Instruction No. 003/94-CCBEF of December 29, 1994 is amended as follows: "20% of commitments by signature, including counter-guarantees for credits distributed by other credit institutions". The total of risks exceeding fifteen percent (15%) each of the available equity funds of a credit institution must not exceed ten (10) times its available equity funds. A declaration of these risks must be attached to the periodic report. Done in Antananarivo, on April 21, 2004. The President, Gaston E. RAVELOJAONA.