Instruction to Banks and Financial Institutions Regarding Risk Centralization

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BANQUE CENTRALE
DES ETATS DE L'AFRIQUE DE L'OUEST

The Governor

INSTRUCTION TO BANKS AND FINANCIAL INSTITUTIONS

OBJECT: Risk Centralization.

To date, the centralization of banking risks has been carried out in the West African Monetary Union under regulations established in 1959.

In order to adapt this centralization to the evolution of banking practices observed since that date and to meet new information needs arising, in particular, from reforms implemented starting in 1973, the Central Bank has decided to establish new rules regarding Risk Centralization, in application of the powers conferred upon it by Article 24 of its statutes and Article 46(a) of the banking law.

The provisions below replace the 1959 regulations.

GENERAL PROVISIONS

1°) - The risk centralization regime applies to registered banks and financial institutions, including public banks and financial institutions with special status.

2°) - Declarations are made in each Member State at the Main Office of the B.C.E.A.O.

3°) - Banks and financial institutions of each Union State centralize declarations for their entire network within the relevant state and submit to the Main Office of the B.C.E.A.O. a single individual declaration form per credit beneficiary.

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4°) - Credits granted to banks and financial institutions are not declared.

PROVISIONS REGARDING REGISTRATION

5°) - Upon the first declaration made on behalf of a beneficiary, the reporting institution communicates to the B.C.E.A.O. :

a) a registration declaration to the Risk Central Registry, prepared on form CR 208, provided by BCEAO (Annex 1), bearing the "registration" notation,

b) a risk declaration, CR 207 M, provided by BCEAO (Annex 2).

6°) - Activity and control indices, as well as registration numbers for new beneficiaries to be mandatorily recorded on individual risk declaration forms, are specified by the B.C.E.A.O. to reporting institutions.

7°) - Any modification to one of the characteristics concerning the identification of a beneficiary already registered in the Risk Central Registry is communicated by reporting institutions to the B.C.E.A.O. by sending a registration form bearing the "modification" notation.

The reporting institution must indicate, on the registration form thus prepared, the beneficiary's previous registration number for which the modification is requested.

8°) - When a reporting institution discovers, or is notified, that a registration declaration was established in error (beneficiary identity error, credit amounts below the minimum reportable threshold), it proceeds to cancel this declaration and prepares, for this purpose, a registration form bearing the "cancellation" notation.

The date of the relevant Centralization and the beneficiary's registration number are noted on the cancelling CR 208.

When the correction is due to an error regarding a beneficiary's identity, the reporting institution, in addition to cancelling the original erroneous declaration, establishes a new registration declaration on behalf of the true beneficiary.

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9°) - In cases where a company operates multiple activities, it must be declared for its principal activity.

10°) - All credits (personal or otherwise) granted to individual entrepreneurs are declared under the principal activity of their company.

11°) - The registration declaration form is prepared in three copies, one of which is returned to the reporting institution.

PROVISIONS REGARDING RISK DECLARATIONS

12°) - Risk declarations are monthly.

They must reach the Main Office of BCEAO no later than the 20th of the month following the date to which they relate. This date is set for the evening of the last day of the month.

However, when this day is fully a holiday, declarations are finalized on the first business day of the following month.

The Central Bank communicates, at the beginning of each year, the list of dates on which risk centralizations must be finalized.

13°) - Risk declarations are made in accordance with the indications of CR 207 M.

14°) - Declarations must mandatorily be made by each bank or financial institution :

• on behalf of any beneficiary whose credit usage with the reporting institution is equal to or exceeds the threshold set at..........................................for Banks and at..........................................for Financial Institutions.

• on behalf of any credit user listed on the summary statement of recorded risks (CR 210), even if credit usage at the concerned institution is below the prevailing declaration threshold.

For the determination of the threshold, short-, medium-, and long-term credit balances are taken into consideration, as well as guaranteed obligations and leasing operations.

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15°) - Only the B.C.E.A.O. may exclude from Risk Centralization credit beneficiaries whose usage falls below the declaration threshold.

If usage reaches the fixed threshold again, banks and financial institutions are required to resume their declarations.

16°) - Credits granted in "joint accounts" to multiple associated companies in a de facto or de jure grouping are made on behalf of the grouping, with mention of each co-participant.

17°) - Each participant in a syndicated credit must declare, under the appropriate headings, their share of the credit for which they effectively bear the cash flow burden.

18°) - Declarations cover, in principle, the principal. They may include bank charges only when these are difficult to isolate.

No set-off should be performed between the debtor and creditor accounts of the same holder, unless such set-off is carried out in application of a merger letter.

19°) - Doubtful and disputed claims are declared in the columns corresponding to their original term, with provisions not deducted.

20°) - Used credits are declared for their original term.

Declarations must relate to the amount of risks existing at maturity, taking into account the maturity of due instruments on that day and renewals.

21°) - Each submission of risk declarations must be accompanied by a summary schedule indicating the total amount of various information appearing on the risk declaration forms, as well as the number of forms transmitted (Annex VII).

FINAL PROVISIONS

22°) - Upon completion of the Centralization, the B.C.E.A.O. sends to each reporting institution a copy of the summary statement of recorded risks (CR 210) and a copy of the table

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23°) - Information provided in application of Article 22 is strictly personal to the bank or financial institution to which it has been communicated.

Any disclosure to third parties is strictly prohibited.

24°) - Banks and financial institutions are required to provide the B.C.E.A.O., upon its request, with any information concerning any natural or legal person that has been the subject of a declaration to the Risk Central Registry. ---