Instruction No. 005/2000 on the Exercise by Credit Institutions of Non-Banking Activities

INSTRUCTION NO. 005/2000 on the Exercise by Credit Institutions of Non-Banking Activities

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, Having regard to Instruction No. 003/99-CSBF of August 9, 1999 on the accounting plan for credit institutions, Having regard to Instruction No. 002/2000-CSBF of February 1, 2000 on the conditions for periodic and annual closing, and the publication of accounting documents of credit institutions, Pursuant to Article 8 of the aforementioned Law No. 95-030, which stipulates that credit institutions may not habitually exercise activities other than those referred to in Articles 3 to 7 of said Law except under the conditions defined by CSBF instructions, HAS DECIDED:

ARTICLE 1. - The exercise by credit institutions of activities other than those set out in Articles 3 to 7 of the aforementioned Law No. 95-030 is subject to the conditions and limits defined by this Instruction.

ARTICLE 2. - In addition to their main activity and related operations defined in Articles 3 to 7 of the aforementioned Law, credit institutions may, subject to compliance with the rules applicable to these operations and those to which the institution is subject:

• manage movable and immovable assets not allocated to operations;
• provide their clients with all services that, while not related to their activity, constitute a continuation of credit institution activities;
• offer service provisions that constitute the incidental use of means primarily allocated to banking operations.

ARTICLE 3 - For the application of this Instruction, movable and immovable assets not allocated to operations include:

• assets from which the institution, as the final successful bidder during debt recovery, may derive profit, even without transfer of ownership;
• immovable assets owned by the institution, either directly or indirectly through holding shares in real estate companies, which are not necessary for its banking activity and have not been acquired for resale. This category notably includes residential buildings let out under simple leases.
  These fixed assets are recorded in account 4211 "Non-operating Fixed Assets" of the Accounting Plan for Credit Institutions.

ARTICLE 4 - For the application of this Instruction, services constituting a continuation of credit institution activities are considered to be complementary services, even non-banking, relating to banking operations as defined in Articles 3 to 6 of the aforementioned Law, notably the completion of administrative formalities, stamp sales, registration of deeds, and insurance subscription for a credit file.

ARTICLE 5 - For the application of this Instruction, services constituting the incidental use of means primarily allocated to operations include outsourced work or client-facing services such as data processing, teletransmission, fund transport, sales of property insurance products, and remote monitoring.
The revenue generated by these services is recorded in account 74 "Ancillary Products" of the Accounting Plan for Credit Institutions.

ARTICLE 6 - The exercise of activities set out in Articles 2 to 5 must be compatible with licensing conditions, on the one hand, and banking sector requirements, notably maintaining the institution's reputation and protecting depositors' interests, on the other. The institution must also comply with applicable legal and regulatory provisions, particularly regarding offered goods and services. Any breach of the provisions of this Article may be sanctioned by the Commission in accordance with Articles 49 and 52 of the aforementioned Law.
The institution must be able to demonstrate at all times the existence of an organization adapted to the needs of these activities and ensure regular control or monitoring of the risks associated with them.

ARTICLE 7 - During the periodic declaration of the income statement, in accordance with Instruction No. 002/2000-CSBF of February 1, 2000, the total amount of revenue from activities authorized under Article 2 must not exceed 10% of the net banking income of the preceding financial year.
This limit applies to the ratio between: - ancillary revenue, excluding recharged expenses, obtained during the financial year - and the difference between banking operating income and expenses of the preceding financial year.

ARTICLE 8 - Subject institutions shall submit to the General Secretariat of the CSBF, as an annex to their periodic and year-end accounting documents, a compliance statement regarding the limit stipulated in Article 7, following the model attached.
For institutions affiliated with a central body, declarations are centralized, approved, and transmitted by that body, like other regulatory statements.

ARTICLE 9 - The initial declarations prescribed in Article 8 will be made based on the next statement finalized as of June 29, 2001.
Done in Antananarivo, on October 27, 2000
For the Banking and Financial Supervision Commission, THE PRESIDENT, Gaston E. RAVELOJAONA Top of page