Instruction No. 003/2000-CSBF on Credit Institutions' Commitments in Favor of Their Shareholders or Partners, Directors and Officers, Staff, and Statutory Auditors

INSTRUCTION NO. 003/2000-CSBF on Credit Institutions' Commitments in Favor of Their Shareholders or Partners, Directors and Officers, Staff, and Statutory Auditors ____________________________ The Banking and Financial Supervision Commission (CSBF) of the Republic of Madagascar, Having regard to Law No. 95-030 of February 22, 1996 on the activity and supervision of credit institutions, Having regard to Instruction No. 001/2000-CSBF of February 1, 2000 on the available own funds of credit institutions, In application of Article 41, paragraph 4, of the aforementioned Law No. 95-030, which stipulates in particular that the CSBF establishes by instruction the rules regarding the conditions under which credit institutions may grant loans to their staff, directors and officers, shareholders, administrators, and statutory auditors, D E C I D E S:
ARTICLE 1.- The provisions of this instruction apply to direct or indirect commitments of credit institutions in favor of their shareholders or partners, directors and officers, staff, and statutory auditors or persons holding such functions, in the form of:

• distributed loans,
• credit lease and hire-purchase operations,
• investment and participation securities,
• commitments by signature.
  The direct commitments are those in favor of the aforementioned persons. The indirect commitments are those in favor of legal or natural persons linked to the aforementioned persons, as defined by the currently effective instruction on risk segmentation.

ARTICLE 2.- The cumulative commitments, direct or indirect, of a credit institution in favor of:

• persons serving on its Board of Directors, unless the institution is licensed as a mutual financial institution,
• its directors and officers (as defined in Article 23 of the banking law), namely at least two persons responsible for effectively determining the institution's strategic direction,
• its statutory auditors or persons holding such functions
  may not exceed in total 10% of the amount of the institution's available own funds, as defined by Instruction No. 001/2000-CSBF of February 1, 2000.
  A credit institution licensed as a mutual financial institution establishes directives adopted by the General Meeting concerning this matter. It submits a copy to the CSBF, as well as all subsequent amendments.
  Commitments are taken into account at their net amount after authorized deductions under the currently effective instruction on risk coverage.
  Commitments by signature are included at the proportions fixed by said instruction.

ARTICLE 3.- The Board of Directors or the body acting in its place, by special resolution, establishes the rules and conditions applicable to direct or indirect commitments in favor of staff and the decision-making powers possibly delegated to the General Management. The General Management reports at least quarterly to the deliberative body, on the one hand, on requests processed under its delegation and the characteristics of granted agreements, and on the other hand, on the overall situation of staff financing, any recorded incidents, and measures taken.

ARTICLE 4.- Direct or indirect commitments in favor of statutory auditors, or persons holding such functions, must be authorized by the Board of Directors or the body acting in its place.

ARTICLE 5.- Direct or indirect commitments of credit institutions in favor of their directors and officers, statutory auditors, or persons holding such functions, must be granted under the institution's normal conditions.
Each institution's internal procedures must exclude the participation of beneficiaries in the granting process.

ARTICLE 6.- A special report on the status of the institution's commitments governed by this instruction and their distribution by beneficiary category as per Article 2 and by transaction type is presented by the Statutory Auditor or the body acting in its place to the General Meeting upon approval of the annual accounts.

ARTICLE 7.- Subjected institutions submit to the General Secretariat of the CSBF:

• as an annex to their periodic financial statements, following the attached template, where applicable with a "nil" notation, the statement of their commitments as of the reporting date in favor of beneficiaries specified in Article 2,
• as an annex to their year-end financial documents, the report prescribed in Article 6.
  Declarations concerning institutions affiliated to a central body are submitted to the General Secretariat of the CSBF by the central body.

ARTICLE 8.- In case of exceeding the limit set in Article 2, the institution concerned takes, where applicable upon injunction by the CSBF issued under Article 47 of Law No. 95-030 of February 22, 1996 and within the time limit that may be granted, appropriate measures to regularize its situation, and informs the General Secretariat of the CSBF. Pending this regularization, the concerned institution may not make new grants in favor of beneficiaries specified in Article 2.
An institution that violates the regulation, fails to comply with the CSBF's injunction, or proves unable to regularize its situation, is subject to the sanctions and/or penalties provided for in Articles 49 and 52 of Law No. 95-030.

ARTICLE 9.- The CSBF may authorize a subject institution to temporarily derogate from the provisions of this instruction, granting it a time limit to regularize its situation.

ARTICLE 10.- These provisions, which repeal all contrary prior provisions, enter into force upon notification to the Professional Association of Credit Institutions. The initial declarations prescribed in Article 7 will be attached to financial statements finalized as of July 31, 2000.
Done in Antananarivo, on May 24, 2000
For the Banking and Financial Supervision Commission, THE PRESIDENT,