Norme Relative à la Capitalisation des CEC

Bank of the Republic of Haiti (BRH) 33
NORME RELATIVE À LA CAPITALISATION DES CEC

Pursuant to Article 15 of the law of June 26, 2002 on Savings and Credit Cooperatives (CECs), CECs are required to comply with this circular regarding capitalization.

The capitalization ratio constitutes a measurement instrument for the sufficiency of a CEC's equity, taking into account the counterparty risk of each of its balance sheet and off-balance sheet assets.

1. Calculation of Equity on the Asset Side

2. Components of Assets

Assets consist of all property owned by a CEC, i.e., its net worth, notably net debtor balances after accounting provisions and amortizations, available and realizable values, prepaid expenses, as well as certain off-balance sheet elements, particularly direct credit substitutes including guarantees and equivalent instruments that secure financial claims. These elements appear under the following designations:

Balance Sheet:

• Liquidity
• Investments and securities
• Credit portfolio
• Interest receivable
• Prepaid expenses
• Other debtors
• Fixed assets
• Other assets

Off-Balance Sheet:

• Off-balance sheet items

3. Components of Equity

Equity consists of member equity and CEC equity.

a) Member equity is composed of qualifying shares. It may also include permanent shares.

• Qualifying shares are nominal, indivisible, non-transferable to third parties, and are subscribed by each member, granting them voting rights.
• Permanent shares are issued when the CEC's statutes authorize them and are not accompanied by voting rights.

Bank of the Republic of Haiti (BRH) 34

b) CEC equity is constituted as follows:

• Reserve Funds:
• Legal reserves;
• Statutory reserves that may be required by a second-level body (Federation);
• Any other reserve funds provided for in the CEC's statutes.

Reserves are immune from seizure and non-transferable and under no circumstances can be shared among members.

• Social and Community Fund: It is composed of a portion of the surpluses and can only be funded after the constitution of legal reserves and, where applicable, statutory reserves required by a federation. The CEC may not allocate more than 10% of the amount attributed in dividends to this fund.

The CEC may not allocate sums to this fund until the required capitalization ratio has reached at least 12.5%.

Sums allocated to the fund must be used by the board of directors within three years of their allocation; otherwise, they will be paid into the reserve fund.

• Contingency Fund: This refers to the portion of accumulated surpluses by the CEC that have not been distributed. The allocation of annual CEC surpluses is determined by the general assembly. The deficit of the fiscal year is also recorded here.

• Share Premium Surplus: These consist of donations from national and/or international organizations that were used to acquire non-depreciable fixed assets or credit/guarantee funds transformed into equity.

4. Required Capitalization Ratio

The capitalization ratio is calculated as follows:

This ratio must be maintained at all times. To this end, and according to its own equity sufficiency, the CEC must transfer to the reserve fund, after deducting the 10% destined for the support fund *, its surpluses according to the following schedule:

Capitalization ratio less than 10%: payment of the entire remaining surpluses Capitalization ratio of 10% to 12.49%: payment of 50% of the remaining surpluses Capitalization ratio of 12.5% and more: minimum payment of 10% of the remaining surpluses

• The support fund is defined as a fund constituted by Popular Savings Banks and managed by the Bank of the Republic of Haiti (BRH). It is intended to help affiliated banks to support their growth or finance a project.

Bank of the Republic of Haiti (BRH) 35

5. Transitional Provisions

The BRH grants a period of three (3) years to CECs to comply with this standard.

6. Sanctions

In the event of violation of this circular, any CEC is subject to the following administrative sanction:

Reliability of Information

At all times, the amounts declared in the financial statements must be those appearing in the CEC's accounting books. Failure to comply with this directive, the BRH may, after inspection, apply an administrative sanction against the CEC in accordance with Articles 139 and 140 of the law of June 26, 2002.

Administrative sanctions imposed by the BRH must be addressed at the CEC's annual general meeting, pursuant to Article 43, paragraph g of the law of June 26, 2002.

7. Entry into Force of this Circular

The provisions of this circular enter into force on _______________.

Port-au-Prince, the _______________________ 2008

Charles CASTEL
Governor