Instruction No. 001/2014-CSBF on the Shareholding of a Territorial Bank

INSTRUCTION NO. 001/2014-CSBF
ON THE SHAREHOLDING OF A TERRITORIAL BANK

The Banking and Financial Supervision Commission (CSBF) Having regard to the amended Act No. 94-044 of June 10, 1994 establishing the Statutes of the Central Bank of Madagascar Having regard to the amended Act No. 95-030 of February 22, 1996 on the activity and supervision of credit institutions, known as the Banking Act, Having regard to Decree No. 2007-013 of January 9, 2007 setting the minimum capital of credit institutions and the nominal value of participation securities, Having regard to Decree No. 2013-776 of October 16, 2013 appointing the General Director of the Central Bank of Madagascar, Having regard to Decree No. 2013-777 of October 16, 2013 appointing the Acting Governor of the Central Bank of Madagascar, Having regard to Decree No. 2013-559 of July 23, 2013 appointing the members of the CSBF, Having regard to Instruction No. 002/97-CSBF of June 2, 1997 on the approval of credit institutions. Having regard to Instruction No. 003/97-CSBF of June 2, 1997 on modifications to the elements considered during approval. Pursuant to Article 19 of the Banking Act, which empowers the CSBF to assess a credit institution's ability to achieve its development objectives under conditions required for the proper functioning of the banking system and depositor security, Having regard to the opinion issued by the Professional Association of Banks pursuant to Article 36, final paragraph, of the Banking Act, HEREBY DECIDES

Article 1
This instruction requires the participation of a reference financial partner in the shareholding structure of a territorial bank.
The provisions of this instruction apply within the framework of an approval application for status as a territorial bank, as provided by Articles 16 and following of the Banking Act, and in case of a substantial modification to its shareholding, pursuant to Article 56 of the aforementioned Act.

Article 2
Pursuant to Article 19 of the Banking Act, the CSBF is endowed with the broadest powers in evaluating the share capital structure of a territorial bank.
It is authorized to reject an approval application for status as a territorial bank, on the one hand, and to decline authorization for a proposed modification of the shareholding of an existing territorial bank, on the other hand, if the applicant does not fully comply with the obligations of this instruction.

Article 3
Every territorial bank must have, within its shareholding structure, a reference financial partner.
A reference financial partner is considered to be any shareholder or group of shareholders, pursuant to an express or tacit agreement, who holds, directly or indirectly, voting rights at least equal to the blocking minority, enabling them to exert significant influence in decision-making. To this end, they must be represented on the Board of Directors.

Article 4
The financial capacity, know-how, and banking/financial experience of the reference financial partner must be internationally recognized.
The CSBF evaluates the financial capacity, know-how, and experience of the reference financial partner based on the scale and technical complexity of the envisaged activities. To this end, the reference financial partner must possess:

• relevant qualifications and experience for the types of operations planned, along with a solid understanding of the activities the bank intends to undertake and the associated risks,
• sufficiently robust and constant financial capacity guaranteeing the provision of required support as stipulated in Article 79 of the Banking Act.
  The reference financial partner must provide its expertise to the bank for day-to-day management. Competence transfer may occur through tools (methods, procedures...), supplemented by support from management personnel and/or remote monitoring of operations.

Article 5
Prior to taking its shareholding, the reference financial partner must submit a letter of comfort to the Governor of the Central Bank, conforming to the model in the annex, wherein it commits to maintaining its participation long-term, providing financial support if necessary, ensuring regular supervision of the institution's management, and ensuring that the latter remains capable of complying with applicable regulations at all times.

Article 6
Promoters are required, to support their application for approval as a territorial bank, to provide the letter of comfort referred to in the preceding article, along with information on shareholders listed in Annex 2 bis of Instruction No. 002/97-CSBF cited above, to comply with this instruction.

Article 7
Territorial banks already in operation on the date of notification of this instruction to the Professional Association of Banks have a period of eighteen (18) months from that date to comply with these provisions.

Article 8
This instruction enters into force upon its notification to the Professional Association of Banks.
Done in Antananarivo on March 17, 2014
Vonimanitra RAZAFIMBELO
Acting Governor

Annex
Model of Letter of Comfort to be addressed to the Governor of the Central Bank of Madagascar, President of the Banking and Financial Supervision Commission by reference financial partners

Dear Governor,
In my capacity as ..................., I have the honor to submit herewith the information requested by the Banking and Financial Supervision Commission regarding the shareholding acquisition that <name of capital provider> intends to make in the share capital of <name of credit institution>. I certify the accuracy of this information and declare that, to my knowledge, there are no other important facts that the Banking and Financial Supervision Commission should be informed of. I commit to notifying the Commission without delay of any change in circumstances that would significantly alter the communicated information. I commit to providing <name of credit institution> with the necessary support when justified by its situation, pursuant to Article 79 of the Banking Act; maintaining long-term the participation of <name of capital provider> within the share capital; ensuring regular supervision of the institution's management; and ensuring that it remains capable of complying with applicable regulations at all times. Please accept, Governor, the expression of my high consideration. Done in .. on Signature certified (and, if applicable, stamped) 1 Indicate the signatory's title: President, General Manager, Managing Director, other executive officer, authorized representative (attach certified proof of such authorization).