Instruction No. 001-2025-CSBF on the Approval of Banks and Financial Institutions

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BANKY FOIBEN'I MADAGASIKARA
COMMISSION DE SUPERVISION BANCAIRE ET FINANCIERE

INSTRUCTION NO. 001/2025-CSBF RELATIVE TO THE APPROVAL OF BANKS AND FINANCIAL INSTITUTIONS --------------------

The Commission de Supervision Bancaire et Financière (CSBF), Having regard to Law No. 2020-011 of September 1, 2020 on banking law, Having regard to Law No. 2018-043 of February 13, 2019 on the fight against money laundering and the financing of terrorism, Having regard to Law No. 2023-026 of December 14, 2023 amending and supplementing certain provisions of Law No. 2018-043 of February 13, 2019 on the fight against money laundering and the financing of terrorism, Having regard to Instruction No. 001-2014/CSBF of March 17, 2014 on the shareholding of a territorial bank, Having regard to the opinion formulated by the Professional Association of Banks (APB) and financial institutions,

D E C I D E S

CHAPTER 1: GENERAL PROVISIONS

Article 1 - Purpose
The purpose of this instruction is to set the procedures and criteria for approval as a bank and financial institution.

Article 2 - Definitions
For the purposes of this instruction, the following terms are understood as:

• credit institution: any financial institution referred to in Article 14 of the aforementioned banking law;
• bank: any financial institution referred to in Article 15 of the aforementioned banking law;
• beneficial owner: any natural person in one of the following situations:
  • they own or control another person who initiated the transaction;
  • they are the beneficiary of the transaction carried out;
  • they exercise effective control over a legal person or a legal structure;
• legal structure: any legal relationship created by a person named "the settlor" when assets have been placed under the control of another person named "trustee", in the interest of a beneficiary or for a specific purpose;
• financial institution: any financial institution referred to in Article 18 of the aforementioned banking law;
• promoter: any person who initiates the project for the creation of the credit institution;
• reference financial partner (RFP): any shareholder or group of shareholders, and by virtue of an express or tacit agreement, who holds, directly or indirectly, voting rights at least equal to the blocking minority, allowing them to have significant influence in decision-making;
• reference technical partner: any shareholder or entity that, by virtue of an agreement, provides its expertise to meet the needs of the credit institution's business model.

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CHAPTER 2: APPROVAL PROCEDURES

Section 1: Application for Approval

Article 3 - Submission of the Approval Application Any promoter intending to create a bank or financial institution is required to submit to the General Secretariat of the CSBF (SG/CSBF) an application for approval addressed to the President of the CSBF, in accordance with the letter model provided in Annex 1 of this instruction, accompanied by the documents provided for in Article 4 below.

The approval application specifies the category of the establishment to be created and the envisaged activities among those provided for in Annex 2 of this instruction.

The promoter designates a duly authorized representative to follow up on the approval application with the SG/CSBF in accordance with the letter model provided in Annex 3 of this instruction.

The application file must be drafted or translated into French.

At the time of submission of the file, the SG/CSBF verifies whether all documents provided for in Article 4 below are submitted in paper and electronic versions.

Complete files will be acknowledged and subsequently processed. Any incomplete file is inadmissible.

Article 4 - Content of the Approval Application File Each approval application is accompanied by the information, documents provided for in Annex 4 of this instruction, and the original proof of payment of the application fees, fixed by Decree of the Ministry in charge of Finance.

All information and documents provided must be up-to-date and accurate at the time of the approval application. In the event of a change, the representative is required to inform the SG/CSBF and transmit the corresponding documents within ten (10) days from the date of said change.

Section 2: Analysis of the Approval Application

Article 5 - Processing of the Approval Application The SG/CSBF has a period of six (6) months to process the approval file, starting from the date of issuance of the acknowledgment of receipt provided for in Article 3, paragraph 6 of this instruction.

In verifying the conformity of the documents and information received according to the approval criteria mentioned in Articles 13 and 14 of this instruction, the SG/CSBF is authorized to:

• request any additional information deemed useful, without this suspending the six (6) month period referred to in paragraph 1 of this article;
• invite the authorized representative and/or the promoter to present the project and answer any potential questions.

A period of one (1) month, starting from the request of the SG/CSBF, is granted to the representative to provide the required additional documents and information.

All correspondence between the SG/CSBF and the representative is documented by any method leaving a written record.

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Article 6 - Dismissal of the Approval Application When the representative does not respond to requests for additional information within the deadline required by the SG/CSBF, the President of the CSBF proceeds with the dismissal of the application.

In the case where the promoter intends to maintain their project, they submit a new application provided for in Article 3 of this instruction with all the elements required by Article 4 of this instruction. If the new application contains the same gaps or inconsistencies observed in the initial application, it will be dismissed following the procedure indicated in the previous paragraph.

Article 7 - Closure of the Application Processing The SG/CSBF closes the processing of the application, no later than the expiration of the six (6) month period provided for in Article 5, paragraph 1 of this instruction, and notifies the representative.

The application is presented to the CSBF for decision within a period of one (1) month after notification.

Section 3: Outcome of the Approval Application

Article 8 - Decision Making
After the closure of the application processing, the SG/CSBF submits the file to the CSBF. It takes the decision within a period of one (1) month from the receipt of the file.

The CSBF may invite the promoter, the representative, or the proposed executives to present the project and answer any potential questions that could clarify its decision-making.

Article 9 - Granting of Approval
The CSBF grants approval when the application satisfies all the approval criteria provided for in Articles 13 and 14 of this instruction.

The approval decision specifies the name of the establishment, its category, the authorized banking services, and the suspensive conditions for the approval.

It is notified by the President of the CSBF to the representative within a period of five (5) days from the date of the decision by the CSBF.

Article 10 - Fulfillment of Suspensive Conditions The establishment has a period fixed in the approval decision to fulfill the suspensive conditions. To justify the fulfillment of said conditions, the representative transmits to the SG/CSBF the required documents and information before the expiration of the aforementioned period, including:

• the constitutive or modifying deed of the company;
• the final statutes;
• the original certificate of deposit or transfer of funds constituting the capital or endowment;
• the extract from the registration in the trade and companies register.

The SG/CSBF conducts an on-site inspection to verify the realization of the project in accordance with the approval file, particularly the devices provided for allowing:

• a start-up under conditions ensuring the security of operations and the proper functioning of the banking and financial system;
• and the preservation of the interests of financial service consumers.

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The President of the CSBF notifies the authorized representative of the lifting of the suspensive conditions after verification of their effective fulfillment, based on the documents received and the results of the on-site inspection. The SG/CSBF proceeds with the registration of the CI in the register of approved CIs.

In the event of failure to fulfill the suspensive conditions within the period fixed in the approval decision, the representative may request an extension no later than one (1) month before the expiration of said period. The President of the CSBF may grant a new period not exceeding six (6) months.

The President of the CSBF declares the approval decision void when the suspensive conditions are not fulfilled:

• within the period fixed in the approval decision and no request for extension of time is made;
• within the new period provided for in the previous paragraph.

In the case where the promoter intends to maintain their project, they submit a new approval application with all the elements required by this instruction.

Article 11 - Refusal of Approval
The CSBF refuses approval when:

• the approval criteria provided for in Articles 13 and 14 of this instruction are not met;
• the approval file contains false documents, gaps, or inconsistencies reflecting the lack of professionalism of the promoter or the authorized representative.

The refusal of approval must be motivated and notified to the authorized representative.

Article 12 - Post-Approval Monitoring
During the first three (3) years of operation, the approved CI presents to the SG/CSBF a semi-annual report on the realization of the activity program provided in the approval application file.

If said report demonstrates that the situation of the CI no longer provides sufficient guarantees to meet its commitments or that it risks no longer complying with current regulations, the CSBF is authorized to take preventive, recovery measures, or disciplinary sanctions provided for by the banking law.

The President of the CSBF dispatches an on-site inspection within six (6) months after the exercise of the profession.

CHAPTER 3: APPROVAL CRITERIA

Article 13 - Common Approval Criteria for Banks and Financial Institutions The CSBF evaluates the aptitude of the requesting establishment to meet the following criteria:

13.1 Shareholding
a. transparency of the shareholding structure and the financial situation of each of the future shareholders called to hold more than 5% of the capital; b. shareholding structure of the requesting establishment and/or its group not hindering effective supervision, both on an individual and consolidated basis;
c. capacity and aptitude of shareholders to provide additional financial support when the situation of the establishment justifies it;

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d. justification of the origin of the financial resources of shareholders, in accordance with regulations on the fight against money laundering and the financing of terrorism.

13.2 Governance
a. conformity of governance and control structures with the prescriptions of the relevant regulation; b. proven competence and experience of the proposed directors and executives for the exercise of their functions.

13.3 Business Plan
a. relevance and clarity of policies and strategies in terms of commercial activity and market positioning; b. capacity to provide innovations to improve financial inclusion.

13.4 Financial Solidity and Sustainability
a. availability (i) of share capital respecting at least the minimum required by the relevant decree and (ii) of sufficient equity to face the volume and type of operations envisaged; b. viability, solidity, and sustainability of the project through financial forecasts;
c. permanent compliance with prudential rules;
d. existence of a preventive recovery plan provided for in Article 52 of the banking law.

13.5 Information System (IS)
a. performance, robustness in terms of security, and conformity of the IS relative to the needs required by the CSBF in terms of supervision; b. organization and device put in place for the accounting treatment of operations (i) allowing the production of reliable financial information and (ii) conforming to the size of the establishment, the volume, and the complexity of operations.

13.6 Control and Compliance Device
a. conformity of the internal control system to the corresponding regulation; b. certification of financial statements by one or two statutory auditors;
c. conformity of the device for the fight against money laundering and the financing of terrorism to current regulation.

Article 14 - Specific Approval Criteria According to CI Category In addition to the criteria provided for in Article 13 above, the requesting establishment must have the following elements.

14.1 Bank and Development Bank

• reference financial partner meeting the conditions provided for in the corresponding current instruction. Specifically for development banks, it must additionally have financial resources, notably long-term, for the financing of structural projects;
• and reference technical partner (according to the business plan), which must:
  • have the relevant qualifications and experience for the types of operations projected and a good knowledge of the skills;
  • commit to providing its expertise in the management of the bank and to proceeding with the transfer of skills;
  • ensure the implementation of skill transfer tools such as methods, procedures, support, remote monitoring;
  • specifically for development banks, additionally commit to providing its expertise in the proper realization of the development project initiated by the Government and financed by the bank.

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14.2 Savings Institution

• strategy and policy allowing to mobilize, secure savings, generate returns on investments, guarantee the viability and sustainability of the establishment;
• executives having the expertise, qualifications, and relevant experience in savings management and investment.

14.3 Specialized Credit Institution

• strategy, prevention, management, and monitoring policy of risks inherent to the envisaged activity;
• executives having the expertise, qualifications, and relevant experience in the field of envisaged activity.

14.4 Business Institution

• investment strategy defining the envisaged scope of intervention, capital raising policies, and different exit scenarios, guaranteeing the viability and sustainability of the establishment;
• executives having the expertise, qualifications, and relevant experience in financial analysis, asset management, and/or investment funds.

CHAPTER 4: TRANSITIONAL AND FINAL PROVISIONS

Article 15 Transitional Provisions
Any entity that has submitted a file for approval as a bank or financial institution before the entry into force of this instruction is required to bring its file into conformity with the provisions of this instruction within a period of six (6) months from the date of its entry into force.

This period may be extended by the President of the CSBF in case of a request justified by the representative.

Any unapproved entity exercising the activity of a financial institution has a period of one (1) year from the date of entry into force of this instruction to submit an approval application to regularize its situation.

Article 16 - Classification
Any CI already approved as a financial institution before the date of entry into force of this instruction must submit an application for classification into one of the categories of financial institution provided for by the banking law, within a period of one (1) year from the aforementioned date.

The file must include the information appearing in the annexes of this instruction, according to the category requested.

Article 17 - Entry into Force
This instruction, the annexes of which form an integral part, enters into force from the date of its notification to the Professional Association of Banks, financial institutions, and its publication on the website of Banky Foiben'i Madagasikara.

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Article 18 - Final Provisions
This instruction cancels all previous provisions, notably those of Instruction No. 002/97-CSBF of June 2, 1997 on the approval of credit institutions.

Done in Antananarivo, on APRIL 03, 2025

For the Commission de Supervision Bancaire et Financière, For the President,

NIAINA RABEARIVONY
First Vice-Governor of Banky Foiben'i Madagasikara

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Annex 1

Model of Letter for Approval Application as a ........¹ to be addressed to the Governor of Banky Foiben'i Madagasikara, President of the Commission de Supervision Bancaire et Financière

Mr. Governor,

In my capacity as ....................................², I have the honor to request from the Commission de Supervision Bancaire et Financière (CSBF) the approval as a ....................................¹ to carry out the following operations ³ :

• .................... ;
• ....................

I address to you for this purpose the attached file, established in accordance with Instruction No. 001/2025-CSBF of April 3, 2025 on the approval of banks and financial institutions.

I certify the sincerity of this information and declare that, to my knowledge, there are no other important facts to be informed to the CSBF.

I commit to notifying the CSBF, within a period of ten (10) days, of any change that would significantly modify the information provided.

I have taken note of the provisions of Article 168, point 2.c. of Law No. 2020-011 of September 1, 2020 on banking law, under which the Supervisory College may invite shareholders to provide the credit institution with the necessary financial support when its situation justifies it.

Please accept, Mr. Governor, the assurance of my high consideration.

Done at ...................................................., on ....................................

Legalized Signature (and, if applicable, stamp)

¹ Category requested
² Authorized representative (attach a certified justification of this authorization conforming to the model in Annex 3).
³ Envisaged operations in accordance with Annex 2 according to the requested category

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Annex 2

LIST OF ACTIVITIES FOR EACH CI CATEGORY

CI	ACTIVITIES
BANKS
Banks	- Banking operations<br>- Ancillary operations:<br>• safe deposit box rental<br>• foreign exchange operations, operations on gold, precious metals<br>• taking stakes in existing or newly created companies<br>• advice and assistance in wealth or financial management, financial engineering, and generally, all services intended to facilitate the creation or development of companies<br>• any operation on financial instruments<br>• distribution of insurance products in accordance with insurance regulations<br>• financial advice, training, and education
Development Banks	- Credit operations<br>- Financing of structural projects initiated within the framework of the implementation of the general Government policy<br>- Ancillary operations authorized for them
FINANCIAL INSTITUTIONS
Savings Institutions	- Reception of public funds<br>- Ancillary operations authorized for them
Specialized Credit Institutions	- Credit operations, in particular operations assimilated to credit (leasing, factoring, participatory credit)<br>- Making payment means available to the public or managing payment means allowing any person to withdraw, deposit, transfer money, and make any payment<br>- Reception of guarantee deposits or provisions for a specific operation, as an accessory or direct corollary of the main activity<br>- Ancillary operations linked to their activities<br>- Not authorized to receive public funds
Business Institutions	- Taking stakes in existing or newly created companies<br>- Credit operations<br>- Ancillary operations linked to their activities<br>- Not authorized to receive public funds

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Annex 3

Model of Proof of Signature Authority

Mr. President,

We, the undersigned¹,
XXX
XXX

Acting in our capacity as founding shareholders of ....................................², principals, Declare to grant power, by the present, to "first name and last name of the representative", born on .................................... and residing at ...................................., acting as representative, to represent us and in accordance with our interests.

By this power of attorney, the representative is entitled to submit, follow, and sign all documents related to the approval application of ....................................² as a ....................................³ and to carry out all administrative formalities related therewith with any competent authority for this purpose.

To make it valid and effective.

Legalized Signatures of founding shareholders or their representatives

¹ First name and last name of shareholders holding more than 5% of the share capital and/or their representatives ² Envisaged corporate name ³ Envisaged category

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Annex 4

LIST OF DOCUMENTS AND INFORMATION TO PROVIDE FOR AN APPROVAL APPLICATION -------------------- N.B : All documents must be provided in French version, which are to be presented in order and according to the references below Excel versions of financial statements are to be sent by email to the SG/CSBF

1. COMMON DOCUMENTS

SECTIONS	REQUIRED DOCUMENTS AND INFORMATION	Y/N	Observations
			Columns reserved for SG-CSBF
I. GENERAL INFORMATION
1. Approval Application	1.1. Approval application duly signed by the authorized representative conforming to the model in Annex 1 with proof of mandate conforming to Annex 2
2. Authorized Representative	2.1. Letter signed by founders designating the authorized representative. If the authorized representative is a legal entity, indication of the representative<br>2.2. Certified copy of a valid ID
3. If the entity is not yet constituted	3.1. Envisaged name<br>3.2. Draft statutes, internal regulations, code of ethics and deontology<br>3.3. Draft shareholders' agreement, if applicable<br>3.4. Target organizational chart
4. If the entity is already constituted (unapproved entities exercising a CI activity, approved entities requiring a classification request)	4.1. Corporate name and acronym, legal form, registered office address, date of constitution<br>4.2. Identity of members of corporate bodies<br>4.3. Extract from the trade and companies register<br>4.4. Certified financial statements of the last three fiscal years or since