Instruction No. 01/GR/2008 on Bank Lending Rates and Conditions

ISLAMIC REPUBLIC OF MAURITANIA
CENTRAL BANK OF MAURITANIA
THE GOVERNOR
INSTRUCTION No. 01/GR/2008
Honour -- Fraternity - Justice
Nouakchott, March 30, 2008
ON BANK LENDING RATES AND CONDITIONS

The Governor of the Central Bank of Mauritania

• Pursuant to Law No. 73 of May 30, 1973, establishing the Central Bank of Mauritania
• Pursuant to Ordinance No. 004/2007 of January 12, 2007, establishing the statute of the Central Bank of Mauritania
• Pursuant to Ordinance No. 020/2007 of March 13, 2007, on credit institutions, repealing and replacing Law 95/011 of July 17, 1995
• Pursuant to Decree No. 19/2007 of February 7, 2007, appointing the Governor of the Central Bank of Mauritania
• Pursuant to the Monetary Policy Council resolution dated March 30, 2008;
  Decides:

Article 1:
The lending rates of banks are defined by a single annual rate representing all costs associated with a credit transaction, regardless of its nature, known as the effective global rate (EGR). The effective global rate includes, in addition to the contractual interest rate, fees, commissions, and any other remuneration related to the granting of credit. However, tax levies and legal procedure costs incurred for the recovery of unpaid debts shall not be taken into consideration,

Article 2:
The maximum authorized effective global rate (EGR) corresponds to the Central Bank of Mauritania's key rate plus a margin to be defined by Central Bank instruction, called the Maximum Bank Margin (MBM). The Central Bank's key rate corresponds to the repo rate for treasury bills and Central Bank bills.

Article 3:
The effective global rate is freely negotiated between the borrower and the lender, subject to compliance with the ceiling set forth in Article 2. It must be explicitly stated in the loan agreement.

Article 4:
The calculation of the effective global rate for amortizable loans is performed taking into account the amortization terms of these loans, as agreed between credit institutions and their clients, in accordance with the attached annex.

Article 5:
The calculation of the effective global rate for overdraft loans is performed using the daily balance method, whereby each successive debit balance recorded in the account during the interval between two statements is multiplied by its duration in number of days. Credit institutions are required to explicitly state the applied effective global rate in any loan contract.

Article 6:
The effective global rate pertaining to discounting of bills or checks is calculated taking into account:

• the amount of interest, fees, commissions, or remuneration related to said operations, excluding those mentioned in Article 2 of this instruction;
• the amount of the discounted value;
• the number of days;
  (See annexes)

Article 7:
Any credit institution applying an effective global rate exceeding the ceiling set by this instruction shall be subject to a penalty equal to one and a half times the ceiling of the legal interest rate on the loan amount. The ceiling of the legal interest rate equals the repo rate for treasury bills and Central Bank bills to which the Maximum Bank Margin (MBM) is added.

Article 8:
The penalty provided for in Article 7 above applies to any credit institution that grants a loan at a rate exceeding the authorized effective global rate, or knowingly provides, in any capacity and by any means, directly or indirectly, its assistance in obtaining or granting a credit at a rate exceeding the ceiling rate as defined in Article 2 of this instruction.

Article 9:
When a loan is granted at a rate exceeding the authorized effective global rate, excessive charges are automatically offset against accrued interest and, if applicable, against the principal of the debt. If the debt is extinguished in principal and interest, unduly collected sums shall be refunded plus legal interest from the date of payment.

Article 10:
The level of commissions on banking operations is freely set by banks. However, they may not charge commissions or other fees related to credit operations that could result in exceeding the effective global rate (EGR) as defined in Article 2 of this instruction.

Article 11:
Each banking institution must communicate its bank rate schedule: debtor interest rates and commission levels, to the Central Bank of Mauritania at least ten (10) days before their effective date. At the end of each quarter, banks must submit to the Central Bank of Mauritania during the following month their average lending rates and the average effective global rate actually applied to their clientele. The Central Bank of Mauritania reserves the right to publish the data to be communicated under paragraphs 1 and 2 of this article.

Article 12:
Upon each modification of its bank rate schedule, the banking institution must notify, under the same conditions specified in the previous article, both the Central Bank of Mauritania and the clientele affected by said modification.

Article 13:
Each banking institution must ensure sufficient publicity for its rates concerning lending conditions. To this end, it must make available to the public brochures detailing the maximum rates applied to loans as well as on standard banking operations. The institution must update these brochures upon any modification of its lending rates or commissions and inform its clients at least ten days before their effective date. It must also display in the lobby or a public-accessible area at its headquarters and each of its branches, its maximum rates charged for banking operations in sufficiently legible characters in Arabic and French.

Article 14:
Each bank is required to comply with the rate schedule it freely set in accordance with the provisions of this instruction.
The application of a rate schedule that has not been previously communicated to the Central Bank is considered as providing knowingly false information or refusing to provide information to the Central Bank.

Article 15:
The lending conditions determined in accordance with this instruction do not apply to amortizable loans, to loans of any nature, to agreements signed as part of restructuring existing or new loans, and to all other facilities agreed upon between the bank and its client before their effective date.

Article 16:
Violations of the provisions of this instruction regarding compliance with the maximum effective global rate are subject to the sanctions provided for in Articles 7, 8, and 9 above. Refusal to communicate the rate schedule or providing knowingly false information to the Central Bank exposes the offender to a fine ranging from five hundred thousand ouguiyas (500,000.00 UM) to five million ouguiyas (5,000,000.00 UM). Without prejudice to the sanctions provided for in paragraph 1, this fine shall be renewed each month for an amount equal to that applied in paragraph 2 above until the credit institution regularizes its situation regarding the obligations to which it is subject under Articles 14 and 15 of this instruction. The sanctions provided for by this instruction are notified to the concerned institutions by the Banking and Financial Supervision Directorate and executed by automatic debit from the account of the concerned institution held at the Central Bank, or failing that, by garnishment after a simple summons notified by a bailiff. The notification decision specifies the execution deadline for the sanction, which cannot be less than eight days from the date of dispatch of the notification.

Article 17:
All prior provisions contrary to or duplicating this text are hereby repealed.

Article 18:
The provisions of this instruction enter into force as of March 16, 2008.

ANNEX

Formula for calculating the annual effective global rate

I - Calculation of the periodic rate k: order number of a loan; k': order number of a repayment or charge payment; Pk: amount of loan no. k; Rk': amount of repayment or charge payment no. k'; Σ: summation; n: order number of the last loan; n': order number of the last repayment or last charge payment; tk: time interval separating the date of the first loan and the date of loan k; tk': time interval, expressed in number of unit periods separating the loan and those of repayments or charge payments up to n'; i: is the periodic rate or actuarial rate; it can be calculated, either analytically by successive approximations, or by a computer program when the equations are known. Note:
1- Payments made by both parties are not necessarily equal, nor are they necessarily at regular and equal intervals.
2- The initial maturity of the loan is that of the first loan.
3- The time interval used for calculating the EGR corresponds to a unit period. It can be expressed in months or fractions of months, in quarters or fractions of quarters, in half-years, or in fractions of half-years, in years or in fractions of years.

II - Calculation of the effective global rate
TEG = (1 + i)^N - 1 (ratio of civil year to unit period) or:
TEG is the effective global rate and i is the periodic rate.
Note: If the unit period is equal to the year, the EGR corresponds to the periodic rate.

III - Calculation of the effective global rate on overdrafts

Number of Days (NJ)	Balance Value (SV)	Nominal Value (ND)	Nominal Rate (Ti)	Interest in Course
Ni	SVi	NDi	Ti	...
Nn	SVn	NDn	Tn	In
SUM Σ NJi	Σ SVi	Σ NDi	Σ Li

• Ti: if the rate remains fixed

CD: OVERDRAFT Commission
CM: MOVEMENTS Commission
F: FEES
ND: DEBITOR COUNT
NJ: NUMBER of days
SV: BALANCE VALUE
AVG BAL: AVERAGE BALANCE
ND = Σ(i=1..n){SVi * NJi}
AVG BAL = ND / NJ
EGR = PRODUCT(INTERESTS + C.D + C.M + F + ...) / AVG BAL

IV- Calculation of discount rate
V: Nominal Value
E: Discount
F: Fees t: discount rate (expressed per day)
A: Agios n: number of days
A = E + F
E = Vtn/360