Notice No. 4/2014 on the suitability, professional qualification and experience, incompatibilities and independence of members of the administrative and supervisory bodies of financial institutions (amended by Notice No. 4/2019)

466 II Series — No. 38 «O.G.» of the Republic of Cape Verde — March 14, 2019
2. It is understood that there is no duty to disclose when the operation in question does not yield any financial or other benefit for its participants or third parties.

Article 15.
(Significant interests or relationships)
Significant interests or relationships are deemed to exist for the purposes of paragraph 5 of Article 79 of the Financial Activities and Institutions Law when the situation:
a) Is likely to generate a financial gain or avoid a financial loss, to the detriment of the client; b) Entails a financial or other benefit to privilege the interests of another client over those of the client in question; c) Creates a conflicting situation with the interest of a client, affecting its results.

Article 16.
(Credit to members of governing bodies)

1. Without prejudice to the provisions of paragraphs 4 and 5, credit institutions may not grant credit, in any form or modality, including the provision of guarantees, whether directly or indirectly, to members of the administrative or supervisory bodies, nor to companies or other legal entities directly or indirectly controlled by them.
2. Indirect credit granting is presumed when the beneficiary is a spouse or first-degree relative of any member of the administrative or supervisory bodies, or a company directly or indirectly controlled by any of those persons. Such presumption may be rebutted before the grant of credit, before the board of directors of the respective financial institution, which is responsible for such verification, subject to prior notification to the Bank of Cape Verde.
3. For the purposes of this article, the acquisition of capital shares in companies or other legal entities referred to in the preceding paragraphs is equated to the granting of credit.
4. The provisions of the preceding paragraphs do not apply to operations of a social nature or purpose arising from personnel policy, nor to credit granted as a result of the use of credit cards linked to deposit accounts, under conditions similar to those applied to other clients of analogous profile and risk.
5. The provisions of paragraphs 1 to 3 do not apply to credit granting operations benefiting credit institutions, insurance companies, pension fund management companies, as well as insurance intermediaries that control or are controlled by any entity included in the supervisory perimeter on a consolidated basis.
6. Members of the administrative or supervisory body of a credit institution may not participate in the assessment and decision of credit granting operations to companies or other legal entities not included in paragraph 1, in which they are managers or hold qualifying participations, nor in the assessment and decision of cases covered by the preceding paragraph. In all these situations, approval by a majority of at least two-thirds of the remaining members of the administrative body and a favorable opinion from the supervisory body are required.

Chapter V
TRANSITIONAL AND FINAL PROVISIONS

Article 17.
(Transitional provision)
Financial institutions already authorized at the date of publication of this Notice have a period of 3 (three) months to comply with the provisions contained herein.

Article 18.
(Entry into force)
This Notice enters into force immediately after its publication in the Official Gazette.

Governor's Office of the Bank of Cape Verde, in Praia, October 6, 2014. — The Governor, Carlos Burgo.

Annex to Notice No. 3/2014 of the Bank of Cape Verde
ANNEX I
COMPLAINT FORM
I. Identification of the complained financial institution
Institution name
Branch
Address
Locality
II. Identification of the complainant
Full name
Address
Locality
Nationality
Identification document
Landline phone
Mobile phone
E-mail
III. Complaint
Scope of the complaint
Content of the complaint
––––––

Notice No. 4/2019
Amendment to Notice 4/2014 of October 17
Members of the Administrative and Supervisory Bodies of Financial Institutions

Articles 28 and following of the Financial Activities and Institutions Law (Law No. 62/VIII/2014 of April 23) establish the rules applicable to members of the administrative and supervisory bodies, particularly regarding suitability, independence and professional qualification requirements, stipulating the duties and codes of conduct under which they must operate.

Notice No. 4/2014 of October 17 by the Bank of Cape Verde, pursuant to paragraph 3 of Article 28 of Law 62/VIII/2014 of April 23, established additional suitability criteria and specified how this should be assessed during the selection process for members of the administrative and supervisory bodies. This Notice also, implementing paragraph 3 of Article 29 of the same legislation, determined the criteria for assessing professional qualification and experience, and further specified, pursuant to Articles 35 to 37 of Law 62/VIII/2014 of April 23, the proportion of independent members in both the administrative and supervisory bodies, and in particular the auditors responsible for auditing the financial statements of financial institutions.

More than four years after the approval of the Notice, it becomes necessary to amend it, in order to explicitly address aspects that the supervisory authority has been considering, based on guidelines issued by international organizations, when verifying the suitability of proposed members to the administrative and supervisory bodies, making the suitability assessment criteria clearer.

Indeed, a set of guidelines issued by the European Banking Authority (EBA) concerning the verification of the suitability of members of the administrative and supervisory bodies is listed, in harmony with the provisions of paragraph 1 of Article 59 of Law No. 61/VIII/2014 of April 23, according to which the regulation of the financial system tends to adopt recommendations issued by international organizations aimed at strengthening the security and stability of the international financial system.

Another aspect to be revised with this amendment concerns the shareholding threshold from which a person elected, holding, or acting on behalf of or for the benefit of holders of qualifying participations, to serve as a member of the administrative and supervisory body, is no longer considered independent, increasing from 2% to 5%, adapting to the provisions of Law No. 62/VIII/2014 of April 23.

Furthermore, additional criteria are added to paragraph 3 of Article 5 of the aforementioned Notice for assessing the independence of members of the administrative and supervisory body, which already result from the Corporate Governance Code of Financial Institutions.

For its part, Notice No. 4/2014 of October 17 by the Bank of Cape Verde provides that financial institutions must develop a selection and evaluation policy for members of the administrative and supervisory bodies that takes into account the nature, size and complexity of the activity developed by the institution and contains certain minimum elements. However, the Bank of Cape Verde believes that the provision in question should be reviewed and clarified, in order to provide more guidance to financial institutions so they can ensure the development and implementation of a selection and evaluation policy for members of the administrative and supervisory bodies appropriate to their guiding purpose.

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II Series — No. 38 «O.G.» of the Republic of Cape Verde — March 14, 2019 467 Finally, and with the aim of speeding up the assessment of registration processes submitted to the supervisory authority, it is clarified that the documents supporting the respective process must be submitted simultaneously, under penalty of return and consequent non-assessment. Thus, the Bank of Cape Verde, using the competence conferred upon it by letter c) of paragraph 1 of Article 42 of its Organic Law, approved by Law No. 10/VI/2002 of July 15, paragraph 3 of Article 28, paragraph 2 of Article 35 and paragraph 2 of Article 37 of Law No. 62/VIII/2014 of April 23, determines the following:

Article 1.
Amendment to Notice No. 4/2014 of October 17
Articles 4 and letter a) of paragraph 3 of Article 5 of Notice No. 4/2014 of October 17 are amended, which shall henceforth read as follows:

Article 4.
Development and approval of the selection and evaluation policy

1. Institutions must first verify that all members of the administrative and supervisory bodies are fit to perform their respective functions by meeting the suitability, professional qualification, experience and independence requirements legally determined as necessary for the exercise of their functions.
2. The shareholders of each institution must approve an internal policy for the selection and evaluation of members of the administrative and supervisory bodies.
3. The internal selection and evaluation policy developed and approved under this Notice shall only be reviewed to the extent necessary to update or adapt it to new legal or regulatory requirements.

Article 5.
[…]

1. […].
2. […].
3. […]:
   a) Be a holder or act on behalf of or for the benefit of holders of qualifying participations equal to or greater than 5% of the company's capital; b) (…).

Article 2.
Amendment to Notice No. 4/2014 of October 17
Letters h), i), j) and k) are added to paragraph 2 of Article 2, and paragraphs 3, 4, 5 are added to Article 2, Articles 4-A and 4-B are added, letters c), d), e) and f) are added to paragraph 3 of Article 5, and paragraph 4 is added to Article 8 of Notice No. 4/2014 of October 17, with the following wording:

Article 2.
[…]

1. […].
2. […]:
   a) (…); b) (…); c) (…); d) (…); e) (…); f) (…); g) (…); h) Dismissal, termination of an employment relationship or removal from a position requiring a special relationship of trust, weighing the reasons; i) Inclusion of non-compliance entries in the credit risk registry or in any other analogous records, by the competent authority for that purpose; j) Personal insolvency, regardless of its classification; k) Civil actions, administrative proceedings or criminal proceedings, as well as other circumstances that, given the specific case, may have a significant impact on the financial solidity of the person in question.
3. In its evaluative judgment, the Bank of Cape Verde must take into account, in light of the preventive purposes of this article, in addition to the facts stated in the preceding paragraph or others of an analogous nature, any and all circumstances whose knowledge is legally accessible to it and that, due to their severity, frequency or any other relevant characteristics, allow for a prognostic judgment regarding the guarantees the person in question offers concerning the sound and prudent management of the financial institution.
4. For the purposes of the preceding paragraph, at least the following situations must be taken into consideration, depending on their severity:
   a) Insolvency, declared in Cape Verde or abroad, of the interested person or of a company controlled by them or in which they have been, de jure or de facto, an administrator, director, manager, or member of the supervisory body; b) Indictment, committal for trial, or conviction, in Cape Verde or abroad, for crimes against property, crimes of forgery and falsity, crimes against the administration of justice, crimes committed in the exercise of public functions, tax crimes, crimes especially related to the exercise of financial and insurance activities and the use of payment instruments, as well as crimes provided for in the Commercial Companies Code; c) Indictment or conviction, in Cape Verde or abroad, for infringements of the rules governing the activity of financial institutions, as well as the rules governing the securities market and insurance or reinsurance activity, including insurance and reinsurance mediation; d) Infringements of disciplinary, ethical or professional conduct rules, within the scope of regulated professional activities; e) Facts that have led to judicial removal, or judicial confirmation of removal for just cause, of members of the administrative and supervisory bodies of any commercial company; f) Facts committed in the capacity of administrator, director or manager of any commercial company that have led to a conviction for damages caused to the company, its shareholders, corporate creditors or third parties.
5. Conviction, even if final, for unlawful acts of a criminal, regulatory or other nature does not necessarily result in the loss of suitability to exercise functions in financial institutions. Its relevance must be weighed, among other factors, based on the nature of the offense committed and its connection to financial activity, its occasional or repeated character, the level of personal involvement of the interested person, the benefit obtained by them or by persons directly related to them, the damage caused to the institutions, their clients, creditors or the financial system, and any eventual violation of duties related to the supervision of the Bank of Cape Verde.

Article 4-A
Minimum content of the selection and evaluation policy

1. The internal selection and evaluation policy for members of the administrative and supervisory bodies takes into account the nature, size and complexity of the activity developed by the institution and includes, at least:
   a) Identification of the employee or function responsible for assessing the suitability, professional qualification, experience and independence of a member of the body or a candidate for membership in the body in question; b) The internal procedure applicable for assessing the fitness of a specific member of the administrative or supervisory body; c) The fitness requirements required considering the special characteristics of the institution; d) The information and supporting documents that a member or candidate must present to the institution so that it can assess their fitness; e) If the appointment of the member is the responsibility of the shareholders, the measures taken to ensure they are aware of the requirements for holding the position and the relevant profile of the candidate, prior to their appointment; f) The situations in which fitness re-evaluation must be carried out, along with measures to identify such situations, including the obligation for members of the administrative and supervisory bodies to immediately notify the institution of any material change in their situation or any change likely to affect their own compliance with the requirements imposed on them; g) The ways in which the institution provides academic and/or professional training opportunities if members of its administrative and supervisory bodies have specific learning and development needs; h) Rules applicable regarding the prevention, disclosure and remediation of conflicts of interest; i) Identification of the body or person responsible for periodically reviewing the selection and evaluation policy for members of the administrative and supervisory bodies and formulating recommendations for its improvement.
2. The internal selection and evaluation policy for members of the administrative and supervisory bodies must promote diversity of qualifications and skills necessary for the exercise of the function, setting objectives for the representation of men and women and designing a strategy aimed at increasing the number of people from the underrepresented gender to achieve said objectives.
3. Internal policies for assessing the fitness of members of the administrative and supervisory bodies may be contained in a single document or in separate documents depending on the body to which they relate.

Article 4-B
Implementation and relevance of the selection and evaluation policy

1. Persons to be appointed to the administrative and supervisory bodies must present the institution, prior to their appointment, with a written declaration containing all relevant and necessary information to attest to their fitness to perform the functions to which they propose, not only under the terms determined by the institution's selection and evaluation policy, but also under the terms of the registration process to be conducted with the Bank of Cape Verde.
2. Appointed persons must communicate to the financial institution any facts subsequent to the appointment or registration that alter the content of the declaration provided for in the preceding paragraph.
3. When the position is to be filled by election, the declaration referred to in paragraph 1 must be made available by the administrative body to the shareholders as part of the preparatory information