Regulation No. 003/2023 on the Creation, Missions, Organization and Operation of the Deposit and Resolution Guarantee Fund

BANQUE DE LA REPUBLIQUE DU BURUNDI LE GOUVERNEUR

REGULATION NO. 003/2023 ON THE CREATION, MISSIONS, ORGANIZATION AND OPERATION OF THE DEPOSIT AND RESOLUTION GUARANTEE FUND

Having regard to Law No. 1/34 of December 2, 2008, establishing the Statutes of the Banque de la République du Burundi; Having regard to Law No. 1/17 of August 22, 2017, governing banking activities and its implementing texts; The Banque de la République du Burundi, hereinafter referred to as "BRB", hereby enacts this Regulation.

CHAPTER I: GENERAL PROVISIONS

Article 1: Object and Scope of Application of this Regulation

This Regulation establishes the creation, missions, organization, and operation of the Deposit and Resolution Guarantee Fund, FGDR in short, for credit institutions and microfinance institutions collecting public deposits.

Article 2: Definitions

For the purposes of this Regulation, the following terms are defined as:

1. Trust Account, an account held by a person in the name and for the account of a third party, referred to as the beneficiary;
2. Individual Account, an account opened by a natural or legal person who operates it themselves or mandates another person to act on their behalf and for their account;
3. Joint Account, an account opened jointly by two (2) or more natural or legal persons and which may allow each of the Co-Holders to operate the account as if they were the sole holder. The withdrawal or death of one of the Co-Holders of the joint account does not result in the blocking of the account;
4. Ineligible Deposits, deposits belonging to:
   • The State, a local authority, or a public institution,
   • A person holding shares representing more than five percent (5%) of voting rights in a credit institution or microfinance institution,
   • Directors, Managers, and Statutory Auditors of the insolvent institution subject to regulation,
   • An insurance company, pension fund, or collective investment fund,
   • A credit institution or microfinance institution;
5. Deposit, any credit balance resulting from funds left in account or transitional situations arising from banking operations, which the institution holds for the benefit of a natural or legal person;
6. Eligible Deposits, deposits other than those mentioned in point 4 above, held in a credit institution or microfinance institution. Also included are sums owed to customers for banking operations ongoing on the date of the closing of accounts;
7. Financial Safety Net, a mechanism aimed at preventing bank panics or bank runs. It includes, in particular, prudential supervision, deposit insurance, and the lender of last resort function assigned to the Central Bank;
8. Deposit and Resolution Guarantee Fund (FGDR), a deposit guarantee and resolution mechanism intended to compensate depositors in case of unavailability of their deposits or to contribute to a resolution in case of difficulties of an institution subject to regulation;
9. Institution Subject to Regulation, a credit institution or microfinance institution;
10. Coverage Limit, a maximum amount reimbursable by the FGDR to each eligible depositor as a settlement following the insolvency of an affiliated institution;
11. Coverage Level, a percentage of insured deposit accounts relative to the total deposit accounts of affiliated institutions;
12. New Institution, any credit institution or microfinance institution authorized by the BRB to collect public deposits, during the fiscal year preceding the date of collection of the first premiums;
13. Premium, an annual contribution paid by each institution subject to regulation to the FGDR, representing a percentage of the average volume of eligible monthly deposits of the previous fiscal year;
14. Supplementary Premium, a premium charged to an institution subject to regulation whose ratio of non-performing loans, without write-off, exceeds the annual average of the sector to which it belongs;
15. Entry Premium, an additional premium required from a new institution subject to regulation that joins the FGDR for the first time;
16. Resolution, a process consisting of rehabilitating a credit institution or microfinance institution in a situation of actual or foreseeable failure, the potential failure of which could have significant consequences on the stability of the financial system, with the aim of protecting eligible depositors of the affiliated institution, preserving the stability of the financial system, and limiting recourse to public support;
17. Coverage Value, a volume of insured deposits relative to the total volume of deposits of affiliated institutions.

Article 3: Creation of the FGDR

The FGDR is created and housed by the BRB, which simultaneously sets out the modalities and conditions of its operation.

Article 4: Missions of the FGDR

The main mission of the FGDR is to protect the deposits of clients of credit institutions and microfinance institutions authorized in Burundi to collect public deposits. The FGDR also contributes to resolution in case of difficulties of an institution subject to regulation.

The FGDR is, in particular, responsible for:

• collecting premiums from credit institutions and microfinance institutions collecting public deposits;
• mobilizing all other resources necessary for the execution of its missions;
• managing the available resources of the FGDR under the conditions set by this Regulation;
• compensating depositors of a credit institution or microfinance institution placed in liquidation, within the coverage limit defined in this Regulation.
• granting repayable assistance to affiliated institutions undergoing resolution procedures under conventional conditions.

Article 5: Membership

Membership of credit institutions and microfinance institutions in operation and collecting public deposits is compulsory from the date of creation of the FGDR.

Any new institution automatically joins the FGDR upon notification of its authorization act and pays, in addition to other premiums required from affiliated institutions, an entry premium determined by circular of the BRB, for the five fiscal years following its admission to the FGDR.

Article 6: Loss of Affiliate Status

Any credit institution or microfinance institution loses its status as an affiliate of the FGDR upon notification of its withdrawal of authorization by the BRB.

CHAPTER II: MANAGEMENT OF THE FGDR

Article 7: Management of the FGDR

The daily management of the FGDR is ensured by an entity of the BRB.

Article 8: Management Costs

Charges related to the routine management of the FGDR are financed from the resources of the BRB as long as the FGDR has not yet reached financial autonomy.

Article 9: Business Continuity Plan

The FGDR must put in place a business continuity plan, regularly tested and updated.

Article 10: Collaboration with Other Partners and Actors of the Safety Net

In the context of the realization of the FGDR's missions, the BRB may:

• collaborate with the supervisory authorities of the home countries of subsidiaries of foreign credit institutions exercising banking activities in Burundi;
• negotiate and sign agreements for the exchange of information and/or experience with other deposit guarantee or resolution systems;
• join any regional or international deposit guarantee or resolution organization;
• conclude cooperation agreements with other deposit guarantee or resolution systems or with any other institution, if necessary.

CHAPTER III: GOVERNANCE BODIES OF THE FGDR

Article 11: Management Committee of the BRB

The FGDR is administered by the Management Committee of the BRB. In this capacity, the Management Committee of the BRB is responsible, in particular, for:

• setting up, by Order, Specialized Committees tasked with assisting in the exercise of the FGDR's missions;
• deciding on the modalities of intervention of the FGDR towards an affiliated institution undergoing resolution procedures, notably by determining the level of assistance to be granted and the applicable interest rate, as well as the repayment modalities for repayable assistance granted to a credit institution in difficulty;
• adopting the internal regulations of each Specialized Committee;
• validating the reports and decisions of the Compensation and Resolution Committee of the FGDR;
• validating the reports and decisions of the Investment Committee;
• validating the reports and decisions of the Control Committee;
• ensuring the follow-up of the execution of its decisions by the Entity in charge of the management of the FGDR;
• adopting the accounting rules governing the FGDR;
• approving the strategic allocation, investment policies, and placement strategies for the resources of the FGDR;
• approving the framework for information exchange with other partners and actors of the safety net;
• approving cooperation agreements concluded with other deposit guarantee or resolution systems or with any other institution;
• approving the conditions for recourse to external service providers.

Article 12: Advisory Committee

The Advisory Committee is set up by an Order of the Management Committee of the BRB and is composed of the following eleven (11) members:

• The 1st Vice-Governor of the BRB, President;
• The President in office of the Association of Banks and Financial Institutions (ABEF), Vice-President;
• The President in office of the Network of Microfinance Institutions (RIM), Member;
• Two Managers of credit institutions, other than the President in office of the Association of Banks and Financial Institutions, proposed by the ABEF, Members;
• Two Managers of microfinance institutions collecting deposits, other than the President in office of the Network of Microfinance Institutions, proposed by the RIM, Members;
• The Head of the BRB entity in charge of the Management of the FGDR, Secretary;
• The Director at the BRB having financial stability in their attributions, Member;
• The Director at the BRB having legal affairs in their attributions, Member;
• The Director at the BRB having financial operations in their attributions, Member.

Article 13: Term of Office of Advisory Committee Members

Members of the Advisory Committee representing credit institutions and microfinance institutions serve a term of four (4) years, renewable. The end of their functions in their respective institutions entails the end of their mandate on the Advisory Committee of the FGDR. This applies to those serving in the BRB.

Article 14: Powers of the Advisory Committee

The Advisory Committee is tasked with supporting the Management Committee of the BRB in matters of governance and management of the FGDR.

It provides guidance to the Management Committee of the BRB for the proper management and development of the FGDR.

In the exercise of its functions, the Advisory Committee gives technical advice to the Management Committee of the BRB in the following areas:

• investment policies, strategic allocation, and placement strategies for the available resources of the FGDR;
• the policy governing the contribution of the FGDR to the resolution of difficulties of an institution subject to regulation;
• operational modalities for compensating depositors;
• communication and information strategies aimed at raising public awareness of the role and activities of the FGDR;
• modalities for exchanging information with the various members of the financial safety net;
• applicable ethical rules;
• any other question related to the development of the FGDR.

Article 15: Meetings of the Advisory Committee

Upon summons by the President, the Advisory Committee holds ordinary meetings once per semester and as many extraordinary meetings as necessary.

Invitation letters, accompanied by the agenda items and working documents, are sent to committee members ten (10) working days in advance.

The Advisory Committee may invite, in a consultative capacity, another resource person, depending on their skills and/or responsibilities.

No subject institution may participate in the taking of a decision concerning it. Decisions of the Advisory Committee are taken by consensus and are submitted to the Management Committee of the BRB for validation.

Members of the Advisory Committee representing subject institutions do not participate in Advisory Committee meetings on subjects related to the resolution of difficulties of affiliated subject institutions.

Article 16: Compensation and Resolution Committee

The Management Committee of the BRB establishes, by Order, a Compensation and Resolution Committee to ensure all prerogatives of the FGDR in matters of Compensation and resolution.

This Committee is responsible, in particular, for approving the operational manual for compensating depositors and ensuring the follow-up of:

• the implementation of decisions taken by the BRB regarding the compensation of depositors of an institution subject to regulation;
• the implementation of the decision of the Management Committee of the BRB to grant repayable assistance to an institution subject to regulation in difficulty;
• the process of recovering FGDR claims in the event of liquidation of an institution subject to regulation;

The Compensation and Resolution Committee is composed of the following ten (10) members:

• An Advisor of the Management of the BRB, President;
• The Director at the BRB having financial stability in their attributions, Vice-President;
• The Head of the BRB entity in charge of the Management of the FGDR, Secretary;
• The Director at the BRB having legal affairs in their attributions, Member;
• The Director at the BRB having financial operations in their attributions, Member;
• The Head of the Financial Stability Service, Member;
• The Head of the Credit Institution Service, Member;
• The Head of the Microfinance Service, Member;
• The Head of the Financial Inclusion Service, Member;
• A Manager of the BRB Entity in charge of the Management of the FGDR, Member.

The Compensation and Resolution Committee meets upon summons by its President, or by the Vice-President in the absence of the President. This Committee holds ordinary meetings once per semester and as many extraordinary meetings as necessary.

The Compensation and Resolution Committee may invite, in a consultative capacity, another person whose skills and/or responsibilities prove useful.

Article 17: Investment Committee

The Management Committee of the BRB sets up, by Order, an Investment Committee to assist in the management of the financial resources of the FGDR.

This committee is responsible, in particular, for:

• examining the strategic allocation of assets, investment policy, and placement strategy before submission for approval by the Management Committee of the BRB and ensuring their implementation;
• examining the results and performance obtained regarding the management of FGDR financial resources.

The Investment Committee may invite, in a consultative capacity, another resource person, depending on whether their skills and/or responsibilities are useful to it.

The Committee meets, upon summons by its President, once per quarter and whenever circumstances require. The Committee may also meet, exceptionally, at the request of one of its members.

The Investment Committee is composed of the following five (5) members:

• The Director at the BRB having financial operations in their attributions, President;
• The Director at the BRB having financial stability in their attributions, Vice-President;
• The Head of the BRB entity in charge of the management of the FGDR, Secretary;
• The Head of the Money Market Service, Member;
• A Manager of the BRB Entity in charge of the management of the FGDR, Member.

Article 18: Control Committee of the FGDR

The Management Committee of the BRB establishes, by Order, a Control Committee tasked, in particular, with assisting in the evaluation of the adequacy and efficiency of the internal control device and the risk management device.

Furthermore, this committee is responsible for the following attributions:

• monitoring the activities of the entity in charge of the permanent control of the administrative and financial management of the FGDR;
• validating procedures related to control;
• monitoring the activities of the internal audit function and ensuring the proper conduct of missions performed and the independence of auditors;
• preparing the annual accounts of the FGDR submitted for approval by the governance bodies;
• preparing, for the Management Committee of the BRB, a report on the results of audit missions;
• preparing an annual report on the efficiency of internal control and audit functions.

The Control Committee is composed of the following four (4) members:

• The Head of Internal Audit at the BRB, President;
• The Head of the Risk Management Unit at the BRB, Secretary;
• A Manager in charge of risk management or internal audit representing the banking sector, Member;
• A Manager in charge of risk management or internal audit representing the microfinance sector, Member.

The Committee meets at least once per semester upon summons by its president. The Control Committee may invite, in a consultative capacity, another resource person, for their skills and/or responsibilities.

Article 19: Entity in Charge of the Management of the FGDR

The Entity in charge of the management of the FGDR is set up by an Order of the Management Committee of the BRB.

In the context of the missions assigned to the FGDR, the Entity in charge of the management of the FGDR is responsible, in particular, for:

• establishing the strategic plan of the FGDR and submitting it to the Management Committee of the BRB for validation;
• proposing to the Management Committee of the BRB investment policies, strategic allocation, and placement strategies for the available resources of the FGDR;
• presenting periodic reports to the Management Committee of the BRB on the management and operation of the FGDR;
• presenting a report to the Management Committee of the BRB on the management of the financial resources of the FGDR;
• ensuring the calculation, collection of contributions from institutions subject to regulation, and various communications;
• preparing the operational manual for compensation which defines the process and operational modalities for compensating depositors within the prescribed deadlines;
• formalizing the policy governing the contribution of the FGDR to the resolution procedure of difficulties of an institution subject to regulation;
• ensuring the reliability and completeness of information communicated by institutions subject to regulation;
• preparing a repayment plan, testing it, and updating it regularly;
• proposing and ensuring the follow-up of partnership frameworks with other actors of the safety net;
• executing the decisions of the Management Committee of the BRB.

CHAPTER IV: RESOURCES OF THE FGDR

Article 20: Sources of the FGDR's Patrimony

The patrimony of the FGDR comes from the following sources:

• Premiums paid by credit institutions and microfinance institutions contributing to the FGDR;
• Income from FGDR investments;
• Subsidies and donations approved by the BRB;
• Any other loan for the benefit of the FGDR approved by the BRB.

Article 21: Investment of Resources

FGDR resources may be invested in Treasury Bills and Bonds, the ceilings, modalities, and maturities of which are validated by the Management Committee upon proposal of the FGDR Investment Committee.

Article 22: Accounting Rules

The FGDR must be equipped with its own accounting framework based on current accounting standards.

The accounting framework governing the FGDR is submitted for approval to the General Council of the BRB.

Article 23: Modalities for Calculating and Paying Premiums

The BRB determines by circular the procedures for calculating and paying premiums to the FGDR by institutions subject to regulation.

In particular, the circular must specify the following:

• the annual premium rate;
• the method of calculating the premium;
• the modalities for paying the premium;
• the method of calculating the supplementary premium;
• the method of calculating the entry premium for new institutions subject to regulation.

Article 24: Notification of Premium Amount and Claim

The BRB notifies, in writing, to each institution subject to regulation the annual premium due, no later than the 15th day of the fourth month following the closing of the fiscal year. The period after which the premium must be compulsorily collected by the BRB is ten (10) working days after the date of notification, if there is no claim.

Any institution subject to regulation may request, in writing, from the BRB, to revise the amount of its premium, with supporting evidence, within a period of five (5) working days, from the date of receipt of the notification.

The BRB may also review this amount, based on new elements brought to its knowledge subsequent to the collection of premiums, and after having collected the observations of the institution in question. The regularization takes place within fifteen (15) working days from the date of notification to the concerned institution.

Article 25: Exceptional Contributions

The BRB may, in the context of the FGDR's missions, decide to call for an additional contribution from institutions subject to regulation when the available funds of the FGDR are insufficient to ensure the compensation of depositors. It is the Compensation and Resolution Committee that proposes to the Management Committee the conditions for collecting such a contribution.

Article 26: Emergency Financing

When the financial resources of the FGDR prove insufficient to compensate eligible depositors, the BRB may provide the FGDR with a repayable emergency advance.

Article 27: Modalities for Settling Premiums

The premiums of each institution subject to regulation are automatically deducted (debited) from the accounts of the institutions subject to regulation opened at the BRB to the credit of the FGDR account, housed in the books of the BRB.

In the event of insufficient provisions to proceed with the automatic debit, a notification regarding this is made to the concerned institution to pay the said amount within five (5) working days from receipt of the notification. After this deadline, a penalty is applied under the conditions set by circular.

CHAPTER V: MODALITIES FOR COMPENSATION

Article 28: Coverage Limit by the FGDR

The FGDR reimburses eligible deposits of credit institutions and microfinance institutions, per depositor or beneficiary and per institution, within a coverage limit specified by circular by the BRB. From this amount is deducted any matured commitment on the day of the declaration of liquidation.

Article 29: Compensation of Depositors

Any declaration of liquidation...