Instruction No. 34 on the Exercise of Disciplinary Power by the Central Bank of Congo

BANQUE CENTRALE DU CONGO THE GOVERNOR

INSTRUCTION No. 34 TO SAVINGS AND CREDIT COOPERATIVES AND TO MICROFINANCE INSTITUTIONS RELATIVE TO THE EXERCISE OF THE DISCIPLINARY POWER OF THE CENTRAL BANK OF CONGO

The Central Bank of Congo,

Having regard to Law No. 005/2002 of May 7, 2002, relating to the constitution, organization, and functioning of the Central Bank of Congo, specifically Article 6;

Having regard to Law No. 003/2002 of February 2, 2002, relating to the activity and control of Credit Institutions, specifically Title VIII;

Having regard to Law No. 021/2002 of February 2, 2002, laying down provisions applicable to Savings and Credit Cooperatives, specifically Articles 97 to 101;

Having regard to Law No. 11/020 of September 15, 2011, fixing the rules relating to the microfinance activity in the Democratic Republic of Congo, specifically Articles 62 and 63;

Decrees the following provisions regarding the exercise of the disciplinary power of the Central Bank of Congo:

Article 1 Savings and Credit Cooperatives and Microfinance Institutions are required to scrupulously respect the legal and regulatory provisions governing their activities.

Non-compliance with these provisions exposes them to the sanctions provided for by the legal and regulatory texts in this matter.

Article 2 The Central Bank of Congo, by virtue of Articles 77 and 78 of the Banking Law, may impose one of the following sanctions when a Savings and Credit Cooperative or a Microfinance Institution subject to its supervision:

• has not complied with an injunction;
• has not taken into account a warning from the Central Bank of Congo;
• has not respected the commitments made during its approval or the obtaining of an authorization.

These disciplinary sanctions are:

• a warning;
• a censure;
• an interdiction to carry out certain operations or activities;
• the suspension or ex officio dismissal of responsible executives;
• the revocation of the statutory auditor;
• the withdrawal of approval.

Furthermore, the Central Bank of Congo may impose, either in place of or in addition to these sanctions, a monetary sanction as provided for in the sanctions matrix in the annex, which forms an integral part of this Instruction.

Article 3 Monetary sanctions, the grounds justifying them, as well as the deadlines by which they are collected or recovered, are notified to the Savings and Credit Cooperative or the Microfinance Institution.

Article 4 The application of the sanctions described above may follow the procedure prescribed by Articles 39, 77, and 78 of the Banking Law.

In the case of breaches or infractions involving an executive, an administrator, a statutory auditor, or an external auditor, the same procedure is applied.

The executive of the Savings and Credit Cooperative or the Microfinance Institution must submit their observations to the Central Bank of Congo within a deadline fixed by the aforementioned letter. This deadline cannot be less than five working days.

Article 5 When particular circumstances of urgency justify it, the Central Bank of Congo may impose the measures provided for in Articles 40, 41, 77, and 78 of the Banking Law without adversarial procedure.

Article 6 When a decision is issued under Articles 39, 77, and 78, the Central Bank of Congo may decide that the sanctions taken under this instruction will be published at the expense of the sanctioned legal entity.

Article 7 This Instruction enters into force on the date of its signature.

Done in Kinshasa, on January 19, 2018

Déogratias KASONGO NANANVEMBO Governor

563, Boulevard Colonel Tshatshi - Kinshasa - Gombe Email: sgouverneur@bcc.cd / svcgouv@bcc.cd / cabgouv@bcc.cd - Website: http://www.bcc.cd

MATRIX OF SANCTIONS FOR SAVINGS AND CREDIT COOPERATIVES AND FOR MICROFINANCE INSTITUTIONS

No.

I. Breaches relating to approval conditions

1.1. Non-respect of minimum capital Reference texts:

• Article 11 of the Banking Law
• Article 15 of the IMF Law
• Instruction No. 01a Sanctions:
• Warning and a 3-month deadline to adjust;
• Administrative fine of 0.5% of the shortfall in the required minimum capital, with a minimum equivalent in CDF of USD 500;
• Administrative fine of 0.5% of the shortfall in the required capitalization ratio, with a minimum equivalent in CDF of USD 500;
• Prohibition on distributing dividends to shareholders/members or remunerating shares to members;
• In case of non-adjustment within the allotted deadline: withdrawal of approval;

1.2. Non-full release of share capital Reference texts:

• Articles 15 and 21 of the COOPEC Law
• Article 15 of the IMF Law Sanctions:
• Warning and a 3-month deadline to adjust;
• Administrative fine of 0.5% of the required unreleased share capital, with a minimum equivalent in CDF of USD 500;
• In case of non-adjustment within the allotted deadline: withdrawal of approval;

1.3. Collection of public savings by Microcredit Enterprises Reference texts:

• Article 12 of the IMF Law Sanctions:
• Administrative fine of 0.5% of the total amount of savings collected;
• In case of non-adjustment within the allotted deadline: withdrawal of approval;

1.4. Exercise of ancillary activities without prior agreement of the CBC Reference texts:

• Article 8 of the COOPEC Law
• Article 7 of the IMF Law
• Article 38 of Instruction No. 002 Sanctions:
• Penalties of 0.5% of the institution's capital amount;
• Prohibition on exercising the concerned activity;
• In case of non-adjustment within the allotted deadline: withdrawal of approval;

1.5. Change of institution category without CBC agreement Reference texts:

• Article 29 of the Banking Law
• Article 17 of the IMF Law Sanctions:
• Administrative fine of 0.5% of the capital required for the unauthorized category, with a minimum equivalent in CDF of USD 10,000;
• In case of non-adjustment within the allotted deadline: withdrawal of approval;

1.6. Modification of statutes without prior authorization of the CBC Reference texts:

• Article 29 of the Banking Law
• Article 13 of the COOPEC Law
• Article 17 of the IMF Law Sanctions:
• Cancellation of modifications;
• Administrative fine equivalent in CDF of USD 500 for COOPEC;
• Administrative fine of 0.2% of the minimum capital amount required for IMFs;

1.7. Non-modification of statutes Reference texts:

• Article 29 of the Banking Law
• Article 13 of the COOPEC Law
• Article 17 of the IMF Law Sanctions:
• Administrative fine equivalent in CDF of USD 250 for COOPEC;
• Penalties of 0.2% of the minimum capital amount required for IMFs;

1.8. Merger or absorption operations without prior authorization of the CBC Reference texts:

• Article 29 of the Banking Law
• Article 83 of the COOPEC Law
• Article 17 of the IMF Law Sanctions:
• Administrative fine of 1% of own funds for COOPEC, with a minimum equivalent in CDF of USD 1,000;
• Administrative fine of 1% of minimum capital for IMFs, with a minimum equivalent in CDF of USD 2,500;
• Cancellation of the operation;
• In case of non-adjustment: withdrawal of approval;

1.9. Non-approval of an executive or non-communication to the CBC of the loss of quality of any executive Reference texts:

• Articles 10 and 14 of the Banking Law
• Article 6 of Instruction No. 007
• Article 20 of the IMF Law Sanctions:
• Cancellation of the nomination;
• Administrative fine equivalent in CDF of USD 500 for IMFs;
• Administrative fine equivalent in CDF of USD 100 per executive for COOPEC;

1.10. Cumulation of management and control functions by the same person Reference texts:

• Article 44 of the COOPEC Law
• Article 24 of the IMF Law Sanctions:
• Administrative fine equivalent in CDF of USD 500 for IMFs;
• Administrative fine equivalent in CDF of USD 250 for COOPEC;

1.11. Opening, transfer, or closure of agencies, counters, or points of operation without prior authorization of the CBC Reference texts:

• Articles 30 and 37 of Instruction No. 002
• Article 29 of the Banking Law
• Article 17 of the IMF Law Sanctions:
• Administrative fine equivalent in CDF of USD 1,000 for COOPEC;
• Administrative fine of 0.2% of the minimum capital required for IMFs, with a minimum equivalent in CDF of USD 2,500;
• Cancellation of the opening, transfer, or closure;
• Warning and a one-month deadline to adjust;
• Administrative fine equivalent in CDF of USD 2,500;
• In case of non-adjustment within the allotted deadline: withdrawal of approval;

1.12. Grouping of Savings and Credit Cooperatives without CBC agreement Reference texts:

• Title VIII of the COOPEC Law
• Article 29 of the Banking Law Sanctions:
• Administrative fine equivalent in CDF of USD 1,000;
• Administrative fine of 0.2% of the minimum capital required for IMFs, with a minimum equivalent in CDF of USD 2,500;

1.13. Taking a participation in another company or establishment without prior agreement of the CBC Reference texts:

• Article 29 of the Banking Law Sanctions:
• Cancellation of the operation;
• Administrative fine of 0.2% of the institution's capital, with a minimum equivalent of USD 1,000;

1.14. Placement operations involving securities issued or guaranteed by a foreign state, an international organization, or a foreign company without CBC authorization Reference texts:

• Article 12 of Instruction No. 007 Sanctions:
• Cancellation of the operation;

II. Breaches relating to the functioning of COOPEC

II.1. Non-renewal each year of one-third of the members of the statutory bodies Reference texts:

• Article 45 of the COOPEC Law Sanctions:
• Administrative fine equivalent in CDF of USD 100 per non-renewed executive;
• In case of non-adjustment within the allotted deadline: withdrawal of approval of all executives;

II.2. Discrimination in granting credits in mutualist institutions Reference texts:

• Article 52 of the COOPEC Law Sanctions:
• Administrative fine equivalent in CDF of USD 500;
• Revision of the loan contract under the institution's general conditions;

II.3. Failure to hold the Ordinary General Meeting within three months following the closing of each financial year Reference texts:

• Article 32 of the COOPEC Law Sanctions:
• Warning and a one-month deadline to adjust;
• Administrative fine equivalent in CDF of USD 1,000;

II.4. Failure to hold meetings of statutory bodies according to the frequency retained in the Statutes and the Internal Rules of Procedure Reference texts:

• Article 36 of the COOPEC Law
• Article 16 of Instruction No. 007
• Article 13 of Instruction No. 008 Sanctions:
• Warning and a one-month deadline to adjust;
• Administrative fine equivalent in CDF of USD 500;

III. Breaches relating to the transmission of information

III.1. Late transmission of financial statements Reference texts:

• Article 79 of the Banking Law
• Articles 1 and 4 of Instruction No. 009 Sanctions:
• Administrative fine equivalent in CDF of USD 10 per day of delay;

III.2. Transmission of incomplete financial statements (non-completion of annexes) and/or incorrect information Reference texts:

• Article 79 of the Banking Law
• Article 100 of the COOPEC Law
• Article 1 of Instruction No. 009 Sanctions:
• Administrative fine equivalent in CDF of USD 10 per statement;

III.4. Non-transmission of restructuring plans resulting from controls within the deadline Reference texts:

• Article 79 of the Banking Law
• Article 98 of the COOPEC Law
• Article 63 of the IMF Law Sanctions:
• Administrative fine equivalent in CDF of USD 10 per day of delay;

III.5. Non-transmission of the activity report within the deadline Reference texts:

• Article 79 of the Banking Law
• Article 65 of the COOPEC Law
• Article 3 of Instruction No. 009 Sanctions:
• Administrative fine equivalent in CDF of USD 5 per day of delay;

III.6. Non-transmission of the certified balance sheet at year-end Reference texts:

• Article 79 of the Banking Law
• Article 65 of the COOPEC Law
• Article 1 of Instruction No. 009 Sanctions:
• Administrative fine equivalent in CDF of USD 5 per day of delay;

III.7. Non-transmission of the global internal control report at year-end Reference texts:

• Article 79 of the Banking Law
• Article 65 of the COOPEC Law
• Article 1 of Instruction No. 009 Sanctions:
• Administrative fine equivalent in CDF of USD 5 per day of delay;

III.8. Non-transmission of the governance memorandum at year-end Reference texts:

• Article 65 of the COOPEC Law
• Article 1 of Instruction No. 009 Sanctions:
• Administrative fine equivalent in CDF of USD 5 per day of delay;

III.9. Non-transmission of the updated business plan at year-end Reference texts:

• Article 79 of the Banking Law
• Article 65 of the COOPEC Law
• Article 1 of Instruction No. 009 Sanctions:
• Administrative fine equivalent in CDF of USD 5 per day of delay;

III.10. Non-transmission of the business continuity plan at year-end Reference texts:

• Article 79 of the Banking Law
• Article 65 of the COOPEC Law
• Article 1 of Instruction No. 009 Sanctions:
• Administrative fine equivalent in CDF of USD 5 per day of delay;

III.11. Non-transmission of the minutes of the Ordinary General Meeting Reference texts:

• Article 79 of the Banking Law
• Article 65 of the COOPEC Law
• Article 1 of Instruction No. 009 Sanctions:
• Administrative fine equivalent in CDF of USD 5 per day of delay;
• Deadline: 6th month following the closing of the previous financial year for Savings and Credit Cooperatives;
• Deadline: 4th month following the closing of the previous financial year for Microfinance Institutions;

IV. Breaches related to accounting obligations

IV.1. Transmission of financial statements non-compliant with IFRS Reference texts:

• Article 79 of the Banking Law
• Article 38 of the IMF Law
• Article 65 of the COOPEC Law
• Article 2 of Instruction No. 006
• Article 4 of Instruction No. 009 Sanctions:
• Administrative fine equivalent in CDF of USD 1,000 for COOPEC;
• Penalties equivalent in CDF of USD 2,500 for IMFs;

IV.2. Non-certification of annual financial statements Reference texts:

• Article 64 of the COOPEC Law
• Article 31 of the IMF Law
• Article 1 of Instruction No. 003 Sanctions:
• Administrative fine equivalent in CDF of USD 1,000 for COOPEC;
• Administrative fine equivalent in CDF of USD 2,500 for IMFs;

IV.3. Certification of financial statements by a statutory auditor not approved by the CBC Reference texts:

• Article 64 of the COOPEC Law
• Article 32 of the IMF Law Sanctions:
• Administrative fine equivalent in CDF of USD 1,000 for COOPEC;
• Administrative fine equivalent in CDF of USD 2,500 for IMFs;

IV.4. Non-respect of provisions relating to the mandate of Statutory Auditors Reference texts:

• Article 31 of the IMF Law
• Article 76 of the COOPEC Law Sanctions:
• Cancellation of the designation of the Statutory Auditor(s);
• Administrative fine equivalent in CDF of USD 1,000 for COOPEC;
• Administrative fine equivalent in CDF of USD 2,500 for IMFs;

V. Breaches related to consumer protection of financial services

V.1. Non-transmission of information relating to the cost and quality of financial services offered to clients Reference texts:

• Article 79 of the Banking Law
• Article 60 of the IMF Law Sanctions:
• Administrative fine equivalent in CDF of USD 250 for COOPEC;
• Administrative fine equivalent in CDF of USD 1,000 for IMFs;

V.2. Non-transmission of information to the Risk Central Bureau Reference texts:

• Article 79 of the Banking Law
• Article 1 of Instruction No. 5 on the Risk Central Bureau Sanctions:
• Administrative fine equivalent in CDF of USD 250 for COOPEC;
• Administrative fine equivalent in CDF of USD 1,000 for IMFs;

V.3. Observation of multiple cases of client over-indebtedness Reference texts:

• Article 79 of the Banking Law
• Article 60 of the IMF Law Sanctions:
• Administrative fine equivalent in CDF of USD 50 per case for COOPEC;
• Administrative fine equivalent in CDF of USD 100 per case for IMFs;

V.4. Non-display of credit granting conditions Reference texts:

• Article 79 of the Banking Law
• Article 60 of the IMF Law Sanctions:
• Administrative fine equivalent in CDF of USD 250 for COOPEC;
• Fine equivalent in CDF of USD 500 for IMFs;

V.5. Absence of a complaint handling mechanism Reference texts:

• Article 79 of the Banking Law
• Article 61 of the IMF Law Sanctions:
• Administrative fine equivalent in CDF of USD 200 for COOPEC;
• Fine equivalent in CDF of USD 500 for IMFs;

V.6. Non-preservation of the confidentiality of client/member personal data Reference texts:

• Article 79 of the Banking Law
• Article 60 of the IMF Law Sanctions:
• Administrative fine equivalent in CDF of USD 2,500 for COOPEC;
• Administrative fine equivalent in CDF of USD 500 for IMFs;

V.7. Non-registration of mortgages Reference texts:

• Article 79 of the Banking Law Sanctions:
• Administrative fine equivalent in CDF of USD 50 per case for COOPEC;
• Administrative fine equivalent in CDF of USD 100 per case for IMFs;

VI. Breaches related to prudential management standards

VI.1. Non-respect of prudential standards Reference texts:

• Article 59 of the COOPEC Law
• Article 35 of the IMF Law
• Instruction No. 002 Sanctions:
• Administrative fine of 1% of the amount of the shortfall or excess, with a minimum equivalent in CDF of USD 500 and a maximum of 0.5% of the minimum capital required for IMFs and 0.2% of the capital of COOPEC;

VI.2. Non-respect of the Instruction on the classification and provisioning of credits Reference texts:

• Instruction No. 003 Sanctions:
• Administrative fine of 0.5% of the amount of the shortfall or excess, with a minimum equivalent in CDF of USD 500 and a maximum of 0.5% of the minimum capital required for IMFs and 0.2% of the capital of COOPEC;

VII. Breaches related to other standards

VII.1. Non-respect of the internal control system Reference texts:

• Article 36 of the IMF Law
• Article 40 of the COOPEC Law
• Instruction No. 008 Sanctions:
• Administrative fine equivalent in CDF of USD 1,000 to 0.5% of the capital required for IMFs;
• Administrative fine equivalent in CDF of USD 500 to 0.2% of the institution's capital for COOPEC;

VII.2. Non-respect of the implementation of an internal control procedure Reference texts:

• Article 36 of the IMF Law
• Article 40 of the COOPEC Law
• Instruction No. 008 Sanctions:
• Administrative fine equivalent in CDF of USD 1,000 to 0.5% of the capital required for IMFs;
• Administrative fine equivalent in CDF of USD 500 to 0.2% of the institution's capital for COOPEC;

VII.3. Non-respect of the anti-money laundering and counter-financing of terrorism (AML/CFT) standards Reference texts:

• Article 4 of the Law on combating money laundering and counter-financing of terrorism
• Article 37 of the IMF Law
• Instruction No. 15 on AML/CFT Sanctions:
• Administrative fine equivalent in CDF of USD 1,000 to 0.5% of the capital required for IMFs;
• Administrative fine equivalent in CDF of USD 200 to 0.2% of the institution's capital for COOPEC;