Instruction No. 001-2026-CSBF on the Approval of Banks and Financial Institutions

[Logo: BANKY FOIBEN'I MADAGASIKARA]
BANKY FOIBEN'I MADAGASIKARA
COMMISSION DE SUPERVISION BANCAIRE ET FINANCIERE

INSTRUCTION NO. 001/2026-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, amended and supplemented by Law No. 2023-026 of February 1, 2024, on the fight against money laundering and the financing of terrorism,

Having regard to Decree No. 2024-1352 of July 3, 2024, implementing Law No. 2018-043 of February 13, 2019, amended and supplemented by Law No. 2023-026 of February 1, 2024, on the fight against money laundering and the financing of terrorism,

Having regard to Decree No. 2023-011 of January 4, 2023, repealing Decree No. 2019-2069 and appointing the Governor of Banky Foiben'i Madagasikara,

Having regard to Decree No. 2023-1477 of November 8, 2023, appointing the members of the Supervisory College of the Commission de Supervision Bancaire et Financière (CSBF),

Having regard to Decree No. 2025-420 of April 16, 2025, appointing the members of the Supervisory College of the Commission de Supervision Bancaire et Financière (CSBF),

Having regard to Instruction No. 001/2014-CSBF of March 17, 2014, on the shareholding of a territorial bank,

After consultation with 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 out 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 defined as:

• bank: any financial institution referred to in Article 15 of the aforementioned banking law;
• beneficial owner: any natural person who, ultimately, owns or controls a client and/or on whose behalf a transaction is conducted, or who exercises effective control over a legal person or legal arrangement;
• legal arrangement: any transaction by which one or more settlors transfer assets, rights, or securities, or a collection of present or future assets, rights, or securities, to one or more trustees who, holding them separate from their own estate, act for a determined purpose for the benefit of one or more beneficiaries. Trusts, as defined by the law on the fight against money laundering and the financing of terrorism in force, and all other similar structures constitute legal arrangements;
• financial institution: any financial institution referred to in Article 18 of the aforementioned banking law;
• significant influence: the power for a natural or legal person or a legal arrangement to participate in or influence decisions relating to the financial, strategic, and operational policies of the institution. This influence is presumed, regardless of the share of capital held, when any of the following criteria are met:
  • the ability, by agreement, contract, or statutes, to appoint, designate, or remove members of the administrative, management, or supervisory bodies;
  • decisive participation in decisions impacting the stability, operations, or organization of the institution;
• promoter: any person who initiates the project for the creation of the credit institution;
• reference financial partner (RFP): any shareholder or group of shareholders, by express or tacit convention, 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 for the implementation of the business plan of the bank or financial institution.

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 must 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 template provided in Annex 1 of this instruction, accompanied by the documents specified in Article 4 below.

The approval application must specify the category of the institution 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 template provided in Annex 3 of this instruction.

The application file must be drafted or translated into French.

Upon submission of the file, the SG/CSBF verifies whether all documents specified in Article 4 below are submitted in both paper and electronic versions. Complete files will be acknowledged within five (5) working days and will then be processed. Any incomplete file is inadmissible, and the SG/CSBF will notify the promoter accordingly.

Article 4 - Content of the Approval Application File Each approval application must be accompanied by the information and documents specified in Annex 4 of this instruction and the original proof of payment of the application fees, fixed by Order of the Ministry in charge of Finance.

All documents and information 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 twelve (12) months from the date of issuance of the acknowledgment of receipt provided for in Article 3, paragraph 6 of this instruction, to process the approval file.

In analyzing the file 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 twelve (12) month period referred to in paragraph 1 of this Article;
• invite the authorized representative, the promoter, and/or the shareholders to present the project and answer any potential questions.

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

Any correspondence between the SG/CSBF and the representative must be documented by any method leaving a written trace.

Article 6 - Dismissal of the Approval Application When the representative does not follow up on the requests for additional information within the deadline set by the SG/CSBF, the President of the CSBF proceeds to dismiss the application.

If the promoter intends to maintain the project, they must submit a new application as provided for in Article 3 of this instruction, with all elements required by Article 4 of this instruction. If the new application contains the same deficiencies or inconsistencies observed in the initial application, it will be dismissed according to 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 twelve (12) month period provided for in Article 5, paragraph 1 of this instruction, and notifies the representative.

Section 3: Outcome of the Approval Application

Article 8 - Decision Making
After the closure of the application processing, the SG/CSBF submits the file as is to the next meeting of the CSBF, which takes its decision within a period of one (1) month.

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

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

The approval decision specifies the name of the institution, 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 five (5) working days from the date of the CSBF's decision.

Article 10 - Fulfillment of Suspensive Conditions The institution has a period set 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 deed of incorporation or modification 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 at the Trade and Companies Register.

The SG/CSBF conducts an on-site visit to verify the realization of the project in accordance with the approval file, particularly the provisions 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.

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 visit. The SG/CSBF proceeds to register the institution in the Register of Approved Institutions.

In the event that the suspensive conditions are not fulfilled within the period set 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 set in the approval decision and no request for extension is made one (1) month before its expiration;
• within the new period provided for in the previous paragraph.

In the event that the promoter intends to maintain the project, they must submit a new approval application with all 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, deficiencies, or inconsistencies reflecting the lack of professionalism of the promoter or the authorized representative.

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

Article 12 - Post-Approval Monitoring
During the first three (3) years of operation, the approved institution submits a semi-annual report to the SG/CSBF regarding the implementation of the business plan provided in the approval application file. An on-site inspection may also be dispatched to the institution to verify this.

If the aforementioned report or the conclusions of the inspection demonstrate that the institution's situation no longer provides sufficient guarantees to meet its commitments, the CSBF is authorized to take any measures it deems appropriate to bring the institution into compliance. In particular, in the event that the institution risks no longer complying with current regulations, the CSBF is authorized to take preventive, corrective, or disciplinary sanctions measures provided for by banking law.

CHAPTER 3: APPROVAL CRITERIA

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

13.1 Shareholding a. transparency of the shareholding structure and the financial situation of each future shareholder called to hold 5% or more of the capital; b. the shareholding structure of the requesting institution and/or its group of affiliation, which does not hinder effective supervision, both on an individual and consolidated basis, and allows for the clear, precise, and unambiguous identification of beneficial owners according to the modalities provided in Annex 5;
c. capacity and suitability of shareholders and the beneficial owners thereof to provide additional financial support when the institution's situation justifies it, which are assessed based on the documents required in Annex 4 and the letters of commitment provided in Annexes 6 and 6 bis;
d. justification of the origin of the financial resources of shareholders and the beneficial owners thereof, in accordance with regulations on the fight against money laundering, the financing of terrorism, and the proliferation of weapons of mass destruction; e. honorability, integrity, and reputation, verified inter alia through responses to the questionnaire provided in Annex 7, of the following persons:
- natural person shareholders holding 5% or more of the capital and the beneficial owners thereof;
- beneficial owners of legal person shareholders or legal arrangements holding 5% or more of the capital or voting rights, or exercising, directly and/or indirectly, individually and/or jointly, effective control or significant influence.

13.2 Governance a. compliance of governance and control structures with the relevant regulatory provisions; b. proven competence and experience, honorability, integrity, and reputation, verified inter alia through responses to the questionnaire provided in Annex 7, of the persons proposed to hold the following positions:
- members of the Board of Directors, whose composition must ensure collective competence reflected by a diversity of experiences and profiles, enabling sound and prudent management of the institution and effective supervision of its activities while promoting independent and objective decision-making within the Board;
- corporate executives;
- heads of internal control functions, including risk management, compliance, and internal audit;
- as well as any other natural person for whom the CSBF deems the evaluation necessary due to their influence, responsibilities, or significant impact on the institution's risk profile.
c. honorability, integrity, and reputation, verified inter alia through responses to the questionnaire provided in Annex 7, of the proposed statutory auditors, proven competence and experience of the entity and its main stakeholders;

The suitability and honorability (fit and proper) of the persons and entities referred to in paragraphs 13.1 and 13.2 above constitute permanent requirements.

The institution is required to notify the SG/CSBF without delay of any new fact or significant information that could cast doubt on their competence or honorability, including any event likely to modify the information provided in the suitability and honorability (fit and proper) questionnaire provided in Annex 7 or any other element impacting the ability to provide the necessary financial support provided for in point 13.1.c of Article 13.

Any modification of the shareholding or of the persons referred to in paragraphs 13.1 and 13.2 is subject to notification or prior authorization obligations provided for by applicable legal and regulatory provisions.

The institution must ensure that any new shareholder, beneficial owner, director, executive, or any other person falling within the scope of paragraphs 13.1 and 13.2 is subject to an assessment of their suitability and honorability (fit and proper), in accordance with the modalities provided for by this instruction and by applicable legal and regulatory provisions, before the acquisition of their shareholding or assumption of their function, as the case may be.

13.3 Business Plan a. relevance and clarity of commercial policies and strategies and market positioning; b. capacity to provide innovations to improve financial inclusion;
c. consistency between the business plan, the financial resources, and the operational means envisaged;
d. realism of the assumptions retained for financial projections, highlighting the project's ability to ensure sustainable profitability while respecting prudential requirements, particularly in terms of solvency, over a horizon of at least five (5) years; e. identification of the main risks linked to the business model and the measures envisaged to control them; f. performance of sensitivity analyses and crisis scenarios to evaluate the resilience of the business plan, the financial situation, and compliance with prudential requirements in the event of adverse events.

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 cover 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 restructuring plan provided for in Article 52 of the banking law; e. capacity of the institution to face potential losses during the start-up phase.

13.5 Information System (IS) a. performance, robustness in terms of security, and compliance of the IS with the relevant regulatory provisions and the requirements of 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 compliant with current regulations and (ii) consistent with the size of the institution, the volume, and the complexity of its operations;
c. existence of an information system equipped with governance and cybersecurity devices adapted to the nature, size, and complexity of the institution's activities.

13.6 Control and Compliance Device a. compliance of the internal control system with the corresponding regulation; b. certification of financial statements by one or two statutory auditors;
c. compliance of the device for the fight against money laundering, the financing of terrorism, and the proliferation of weapons of mass destruction with current regulations;
d. adequacy of the internal control device to current regulations and the institution's risk profile; e. capacity of the compliance device to identify, measure, monitor, and control the main risks.

13.7 Consumer Protection Device:
Existence of policies and procedures guaranteeing the protection of clients, particularly in terms of client information, transparency of conditions and pricing of products and services, as well as complaint handling, compliant with applicable regulations.

Article 14 - Specific Approval Criteria According to the Category of the Institution In addition to the criteria provided for in Article 13 above, the requesting institution 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, particularly long-term, for the financing of structural projects;
• and reference technical partner (according to the business plan), which must:
  • have relevant qualifications and experience for the types of operations projected and a good knowledge of the envisaged activities;
  • commit to providing its expertise in the management of the bank and to proceeding with the transfer of skills;
  • ensure the implementation of skills 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.

14.2 Savings Institution

• strategy and policy allowing to mobilize, secure savings, generate returns on investments, and guarantee the viability and sustainability of the institution;
• executives with 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 with expertise, qualifications, and relevant experience in the field of activity envisaged.

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 institution;
• executives with expertise, qualifications, and relevant experience in financial analysis, asset management, and/or investment funds.

CHAPTER 4: TRANSITIONAL AND FINAL PROVISIONS

Article 15 - Transitional Provisions
Banks and financial institutions already approved have a period of six (6) months from the date of entry into force of this instruction to comply with the new identification and evaluation requirements provided for in Article 13, points 13.1 and 13.2.

Any entity that has submitted an approval application as a bank or financial institution before the entry into force of this instruction is required to bring its file into compliance with the provisions of this instruction within a period set by the President of the CSBF. This period may be extended by the President of the CSBF in the event of a justified request by the representative.

Any unapproved entity exercising the activity of a financial institution has a period of six (6) months from the date of entry into force of this instruction to submit an approval application to regularize its situation.

Article 16 - Classification
Any institution 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 banking law, within a period of six (6) months from the aforementioned date.

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

Article 17 - Entry into Force
This instruction, of which the annexes form an integral part, enters into force...