Instruction No. 002/97-CSBF of June 2, 1997 on the Approval of Credit Institutions

INSTRUCTION NO. 002/97-CSBF OF JUNE 2, 1997
ON THE APPROVAL OF CREDIT INSTITUTIONS

In accordance with Article 16 of Law No. 95-030 of February 22, 1996, the exercise of credit institution activities is subject to approval by the Banking and Financial Supervision Commission (CSBF). This instruction aims to specify the procedure for submitting and processing approval applications, as well as the information and documents to be provided.

Article I. Procedure for Submission and Processing of Approval Applications
1.1 Approval applications are prepared by a duly authorized person (corporate officer or expressly mandated representative). They must be submitted in duplicate to the General Secretariat of the Banking and Financial Supervision Commission, which is responsible for processing them and presenting them to the Commission. They are accompanied by the necessary elements for file review.
1.2 After processing by the General Secretariat, the file is submitted to Commission members for decision.
1.3 The applicant is notified of the completion of processing.
1.4 In accordance with Banking Law, the Commission has a one-month period from the completion of processing to rule. Only files containing all information requested in paragraph II below may be transmitted for decision.
1.5 For incomplete files, the General Secretariat informs the applicant in writing, indicating the necessary supplementary information.
1.6 Once the Commission has ruled on a file, its decision, signed by its President, is transmitted to the applicant.
1.7 The Commission's decision is reasoned. It specifies the category in which the institution is approved and, where necessary, states the banking operations it may conduct. It specifies the deadline for project implementation, as well as, where applicable, the particular conditions set by the Commission for the decision to take effect.

Article II. Content of Application Files
Generally, files must contain all elements capable of clarifying the decision of the Banking and Financial Supervision Commission.
They notably include:
2.1 an approval application letter in accordance with Annex 1;
2.2 a letter in accordance with Annex 2 and the information specified in Annex 2 bis for each capital provider;
2.3 a detailed and complete statement of the project and pursued objectives, containing the information and documents specified in Annex 3;
2.4 The information specified by the instruction regarding credit institution executives.

Article III. Implementation of Approved Projects
3.1 Before the expiration of the deadline set by the Commission, promoters whose projects have been approved must demonstrate their effective implementation under the conditions fixed in the decision notified to them.
3.2 In particular, promoters must demonstrate the effective establishment in Madagascar of the minimum capital required for the institution, either through deposits in Malagasy francs or foreign currencies in local banks or at the Central Bank, or through capital contributions in kind intended for the operation of the institution subject to the approval application.
3.3 To attest to the fulfillment of the above conditions, promoters must submit to the General Secretariat of the Commission a confirmation letter accompanied by documents such as:

• articles of incorporation or amendment,
• final statutes,
• original certificate of deposit or transfer of funds constituting the capital or endowment,
• extract from the commercial register.
  3.4 If project implementation is not demonstrated by the deadline set in the decision and no extension request has been made, the decision becomes void. In this case, if the applicant wishes to maintain its project, it must submit a new file with all elements provided by this instruction.

Done in Antananarivo, June 2, 1997.
For the Banking and Financial Supervision Commission,

The President,
GASTON RAVELOJAONA.
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Annex 1 to the Instruction
Model Letter for Approval, Authorization, or Declaration Applications To be addressed to the Governor of the Central Bank of Madagascar, President of the Banking and Financial Supervision Commission _____________ Mr. Governor,
In my capacity as ..................................................................1
, I have the honor to request from the Banking and Financial Supervision Commission:

• approval as ................................................... 2 for the company..................................
• approval of <name of foreign institution> to operate a branch in Madagascar
• authorization for..........................................................................................concerning <name of credit institution>
  I hereby submit the attached file, prepared in accordance with instruction no........................................
  Please accept, Mr. Governor, the expression of my high consideration.

Signature certified (and possibly stamped)
1 Indicate the signatory's title: President, General Manager, Managing Director, Other corporate officer, authorized representative (attach certified proof of authorization). 2 Territorial bank, extra-territorial bank, financial institution, mutual financial institution, or specialized financial institution. [Top of page]

Annex 2 to the Instruction
Model Letter
To be addressed to the Governor of the Central Bank of Madagascar, President of the Banking and Financial Supervision Commission by capital providers with information listed in Annex 2 bis _____________ Mr. Governor,
In my capacity as...................................1
, I have the honor to submit herewith the information requested by the Banking and Financial Supervision Commission regarding the capital participation that <name of capital provider> proposes to acquire in the 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 undertake to notify the Commission without delay of any change in circumstances that would significantly modify the information provided. I have noted the provisions of the first paragraph of Article 79 of the Banking Law of February 22, 1996, under which the President of the Banking and Financial Supervision Commission may invite shareholders or partners of an institution to provide it with necessary support when its situation justifies it. Please accept, Mr. Governor, the expression of my high consideration.

Done in ...................................................., on..........................................
Signature certified (and possibly stamped)
1 Indicate the signatory's title: President, General Manager, Managing Director, Other corporate officer, authorized representative (attach certified proof of authorization). [Top of page]

Annex 2 bis to the Instruction
INFORMATION TO BE PROVIDED BY CAPITAL PROVIDERS CALLED TO HOLD AT LEAST 5% OF THE CAPITAL OR VOTING RIGHTS OF A CREDIT INSTITUTION (to be transmitted with the letter whose model appears in Annex 2)

1. Name and address of the institution for which this information is provided.
2. Amount and percentage of the planned participation, equivalent in voting rights. Explain the legal and financial terms of the operation.
3. Indicate the amount and percentage of participations and voting rights:

• that the capital provider holds or will hold through other persons acting on its behalf;
• that are or will be held by one or more third parties with whom it acts;
• that the capital provider or one of the aforementioned persons, by virtue of an agreement, has the right to acquire at its sole initiative or that are subject to a firm or optional sale commitment.
  Explain the precise content of agreements; communicate conventions concluded on these points.

4. Identity:
   4.1. In the case of a legal entity:

• Indicate the name, legal form, and registered office address of the capital provider. Communicate its statutes.
• Indicate, if applicable, whether the operation is subject to specific formalities in the country of origin or by virtue of statutory provisions. Justify applicable regulation with certification from the banking supervisory authority confirming compliance with these formalities.
• Provide the amount and distribution of the legal entity's capital. If applicable, indicate that of the parent company and intermediate holdings, and produce a group description and organizational chart (indicating capital and voting rights percentages).
• Provide a detailed description of the capital provider's activities and produce certified financial statements for the last three fiscal years. If part of a group, provide the same information for the consolidated group or, in the absence of consolidation, for each entity in the group.
• If the capital provider or its group entities have the status of a credit institution, attach applicable regulations for these activities and indicate supervisory authority coordinates. Also indicate, if possible, the global ranking and rank among other institutions in the country of activity. Communicate the list of existing worldwide locations, particularly in developing countries. Provide the same information on credit institutions:
• in which the capital provider, or its group, holds a participation equal to or greater than 10% of the capital or voting rights;
• in which the capital provider, or its group, held a similar participation during the last five years and has since divested; indicate reasons and conditions of the divestment.
• List the main executives of the capital provider.
• Specify the internal and external control procedures existing at the capital provider.
  4.2. In the case of a natural person:
• Indicate name, first names, date and place of birth, nationality, and address. Specify professional background and current functions.
• Provide a detailed financial situation certified by all legal means.
• Specify whether this person will be designated as one of the institution's executives.
• Communicate all information specified in point 4.1 applicable to the capital provider.

5. Indicate whether the capital provider, or its group entities, have been subject during the last ten years or are currently subject to professional, collective, administrative, or judicial procedures having or likely to have significant consequences. If affirmative, specify the subject matter, status, and eventual results of these procedures.
6. Explain the reasons for the capital participation and expected results. Provide all useful information.
7. Indicate whether the capital provider must be represented on the Board of Directors, or equivalent body, of the credit institution. If affirmative, specify the identity of this representative and ensure that this representative is not subject to the prohibitions set forth in Article 14 of the Banking Law.
8. Main banking relationships of the capital provider in Madagascar: Specify the duration of these relationships.
9. Provide any supplementary information likely to useful clarify the Commission's decision.
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Annex 3 to the Instruction
DESCRIPTION OF THE CREDIT INSTITUTION

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1. Information on the institution to be created:
   1.1. Name, trade name or corporate name, commercial name of the credit institution to be created;
   1.2. Category for which approval is requested (territorial bank, extra-territorial bank, financial institution1, mutual financial institution or specialized financial institution.) ; Justification of the nature of the requested approval;
   1.3. Planned date for operation implementation. Conditions and other factors likely to delay or jeopardize the implementation;
   1.4. Legal form and draft statutes;
   1.5. Nature of shares representing the capital; link between shareholding and exercise of voting rights;
   1.6. Amount of existing or to-be-established capital;
   The capital must comply with the terms of the decree on minimum capital for credit institutions.
   1.7. Distribution of capital and voting rights;
   Capital providers called to hold at least 5% of the capital or voting rights must provide information requested in Annex 2 bis.
   1.8. Indicate whether part of the capital will be subject to a public offering. If so, specify the procedure envisaged for the operation;
   1.9. Identity of at least two persons responsible for effectively determining the bank's direction. These persons must provide information requested by the instruction regarding credit institution executives;
   1.10. Identity of members of the deliberative body (Curriculum Vitae and criminal record extract dated less than three months to be attached to the file);
   1.11. If the legal entity for which approval is requested is already established, description of its activity and production of certified balance sheets and income statements for the last three fiscal years.
2. Information on project implementation:
   2.1. Document jointly signed by capital providers called to hold at least 5% of the capital, attesting their decision to establish a credit institution in Madagascar; Signatures to be certified;
   2.2. Document signed by main capital providers and certified, designating representatives to carry out necessary formalities;
   2.3. Possibly, prior authorization from the country of origin to make investments in Madagascar. If such authorization is not required, justify it.
3. Description of projected activity:
   3.1. Target clientele (individuals, businesses, institutional investors…);
   3.2. Nature of envisaged resources: respective share of equity, shareholder contributions, public deposits, interbank market borrowings…
   3.3. Nature and volume of different types of projected financing (loans, credit leasing, guarantees,…);
   3.4. Other activities (provision of payment instruments, wealth management, financial engineering, financial advice…);
   3.5. Evolution of staff and corresponding payroll by personnel category during the first three years, indicating nationality (expatriates or nationals). Distinguish between banking staff and service personnel;
   3.6. Projected balance sheets, income statements, and cash flow tables for the next three fiscal years. Prudential ratios and other management indicators at the end of each fiscal year;
   The documents and summary tables will be supported by detailed annual projected statements, presented according to the models prescribed by the Banking Accounting Plan; The parameters retained by promoters (interest rates for each category of resources and uses, bases for determining overheads and amortizations, allocation of projected results...) will be explained precisely;
   3.7. Projected organizational chart with required professional background for management personnel;
   3.8. Technical means committed to the project;
   3.9. Control mode of the institution:
   3.9.1. Internal control:

• Indicate the internal control structures and procedures to be implemented.
  3.9.2. External control:
• Identity of proposed statutory auditors;
• Nature and periodicity of missions assigned to statutory auditors;
• Comply with relevant provisions of the related instruction.
  3.9.3. Head office or parent company control (for subsidiaries of foreign institutions):
• Description of parent company control procedures over its branches or foreign subsidiaries;
• Description of supervision exercised by competent authorities in the country of origin over branches or foreign subsidiaries.
• Location of operating agencies whose opening is planned immediately and during the next three fiscal years.
  1 For financial institutions, specify the nature of envisaged activities.