Regulation on the Authorization Application for Financial Institutions

Banco Central de S.T.P.	P A P PERMANENT APPLICATION STANDARD	CODE
		RD 09
PROPOSER(S)	ENTRY INTO FORCE	DATE OF ISSUE	DOC. NO.	PAGE
PSBS	02/01/2012	30/12/2011	29/ 2011	1/8

Subject: Regulation on the Authorization Application for Financial Institutions.

Considering it necessary to adapt the current procedures for processing authorization applications for financial institutions wishing to operate in São Tomé and Príncipe, in light of the growth of the National Financial System;

Considering it necessary to update the set of rules clarifying the requirements for obtaining said authorization;

Considering it further necessary to regulate the procedures regarding subsequent changes following the grant of authorization, in line with current regulations.

In the exercise of powers granted by Article 38 of its Organic Law and Articles 8 et seq. of Law No. 9/92, dated August 3, the Central Bank of São Tomé and Príncipe (BCSTP) determines:

Article 1.
Share Capital

1. The minimum share capital for establishing a commercial bank is Dbs. 83,300,000,000 (eighty-three billion three hundred million dobras), equivalent to Eur. 3,400,000 (three million four hundred thousand euros).
2. The minimum share capital for establishing a development or investment bank is Dbs. 124,950,000,000 (one hundred twenty-four billion nine hundred fifty million dobras), equivalent to Eur. 5,100,000 (five million one hundred thousand euros).
3. The minimum share capital for establishing a commercial and development or investment bank is Dbs. 166,600,000,000 (one hundred sixty-six billion six hundred million dobras), equivalent to Eur. 6,800,000 (six million eight hundred thousand euros).
4. The minimum share capital for establishing an offshore bank is established in special legislation.
5. The authorized bank's own funds must always be equal to or greater than the minimum authorized capital.

Banco Central de S.T.P.	P A P PERMANENT APPLICATION STANDARD	CODE
		RD 09
PROPOSER(S)	ENTRY INTO FORCE	DATE OF ISSUE	DOC. NO.	PAGE
PSBS	02 /01 /2012	30/12/2011	29 / 2011	2/8

Article 2.
Application for License

1. The application to operate as a bank or any subsequent amendment shall be submitted in Portuguese, in writing, in triplicate, and signed by the bank's founding shareholders.
2. If the application concerns a branch of a foreign bank, it shall be signed by a duly authorized representative of the head office.
3. Upon submission, a non-refundable processing fee shall be paid in the amount of:
   a) Dbs. 1,715,000,000 (one billion seven hundred fifteen million dobras), equivalent to Eur. 70,000 (seventy thousand euros) for banks under Nos. 1 to 3 of the preceding article; b) Dbs. 2,450,000,000 (two billion four hundred fifty million dobras), equivalent to Eur. 100,000 (one hundred thousand euros) for banks under No. 4 of the preceding article.

Article 3.
Deposit of Share Capital

1. The minimum share capital required by law for the institution's operation shall be deposited with the BCSTP or an account designated by it, by the founding shareholders, no later than fifteen (15) business days after the issuance of the preliminary authorization to conduct banking activities.
2. Failure to timely comply with the foregoing shall result in immediate nullity of the application.

Article 4.
Representation of Founding Shareholders

1. The founding shareholders shall appoint a duly authorized proxy to represent them before the Central Bank, granting it necessary powers for the proper conduct and conclusion of the licensing process.
2. Individual shareholders may not hold more than sixty percent (60%) of the institution's share capital.
3. All communications regarding the licensing process shall be transmitted and received through the appointed representative, who must speak and write Portuguese correctly and keep address and contact details up to date.

Article 5.
Processing of the Application

The authorization application for a bank's operation must be supported by the following information:

Banco Central de S.T.P.	P A P PERMANENT APPLICATION STANDARD	CODE
		RD 09
PROPOSER(S)	ENTRY INTO FORCE	DATE OF ISSUE	DOC. NO.	PAGE
PSBS	02/01/2012	30/12/2011	29/ 2011	3/8

1. Data regarding the new bank:
   a) Minutes of the meeting of founding shareholders, deliberating on the establishment of the bank; b) Name and type of the bank; c) Number and type of shares; d) Proposed capital amount, disaggregated into the amount subscribed by founding shareholders and the amount already paid up. e) Articles of association and internal regulations of the bank, approved by founding shareholders and in compliance with Financial Institutions Law requirements.
2. Data regarding shareholders with participations of less than ten percent (10%) in share capital:
   a) Name and address; b) Participation in the bank's capital, i.e., number and type of shares, acquisition value per share, total acquisition value, percentage participation in the bank; c) Participation in companies, partnerships, associations, or any other group of persons acting together with a common purpose, organized or not, as a formal entity;
3. Data regarding individual shareholders:
   a) Nationality, identity card or passport number and date of issue; b) Employer name and position held. c) Financial situation as specified by the Central Bank.
4. Data regarding corporate shareholders:
   a) Identification of individual persons holding ten percent (10%) or more of shares or controlling the corporate entity.
5. Data regarding shareholders, individual or corporate, holding ten percent (10%) or more of voting shares, who have control or exercise influence over the bank's administration:
   a) Information required in No. 2 above; b) Business or professional activities over the past ten years; c) Information on whether they are or have been shareholders holding ten percent (10%) or more of capital, or administrators of a bank in São Tomé and Príncipe or any other country; d) Economic and financial position over the past three fiscal years, supported by an externally audited report and accounts, according to the format prescribed by the Central Bank and duly signed; e) Sources of funds used for share acquisition, specifying in detail whether derived from asset sales or loan borrowing.
6. Data regarding candidates for members of the administration, management, oversight, and internal audit bodies; and for senior positions in accounting, credit, and treasury:
   a) Name and address; b) Nationality, identity card or passport number and date of issue; c) Professional or business activities over the past ten years, included in a detailed and complete curriculum vitae;

Banco Central de S.T.P.	P A P PERMANENT APPLICATION STANDARD	CODE
		RD 09
PROPOSER(S)	ENTRY INTO FORCE	DATE OF ISSUE	DOC. NO.	PAGE
PSBS	02 /01 /2012	30/12/2011	29 / 2011	4/8

d) Information on whether the candidate is or has been a shareholder holding ten percent (10%) or more of shares in a financial institution, as defined above, or an administrator of a bank in São Tomé and Príncipe or another country; e) Participation in companies, partnerships, associations, or groups of persons acting with common objectives, as formal or informal activity; f) Copy of proposed employment contracts with the Administration.  

7. Members of the governing bodies responsible for institution management must be residents and remain full-time in the country.
8. List of members of the Board of Administration and Oversight, term duration, and remuneration.
9. List of Internal Audit members.
10. List of persons affiliated with the bank, as stipulated by law and other regulations.
11. A feasibility study (business plan and projection of financial statements) for the bank's first three years of operation.

Article 6.
Feasibility Study

The feasibility study referred to in No. 11 of the preceding article shall contain a descriptive section, addressing various issues and projecting financial statements using models provided by the Central Bank.

Article 7.
Descriptive Section of the Feasibility Study

The descriptive section shall contain the following:

1. Assumptions – Description of assumptions considered in preparing the business plan, such as general economic conditions in São Tomé and Príncipe, existing competition level, growth projections, interest rates on assets (e.g., granted credit and investments) and liabilities (e.g., deposits and borrowed loans).
2. Organizational Structure – Description of the bank's organizational structure and administration, commenting on the Board of Administration, permanent committees, administrators, operational and administrative divisions with subdivisions and functions, supervisory positions, lines of authority and hierarchy, and staff projections.
3. Operational Activities – Commentary on the types and volume of financial activities planned, according to institution type and license requested. These comments shall clearly demonstrate the bank's capacity to conduct activities in terms of administration, experience, technological and system support, organization, and personnel.

Banco Central de S.T.P.	P A P PERMANENT APPLICATION STANDARD	CODE
		RD 09
PROPOSER(S)	ENTRY INTO FORCE	DATE OF ISSUE	DOC. NO.	PAGE
PSBS	02/01/2012	30/12/2011	29/ 2011	5/8

Specific mention shall be made regarding:
a) Types of credit to be offered, targeted economic sectors, and diversification plans; b) Plans for the deposit portfolio and loan mobilization; c) Methods for determining interest rates for credit and deposit modalities; d) Proposed activities involving contingent risks, computed in off-balance-sheet accounts.
4. Financial Projections – Presentation of financial projections supporting the business plan, regarding asset and liability growth, profitability, maintenance of adequate minimum capital level, solvency ratio, and dividends.
5. Risk Management – Description of the bank's risk management process: identification, measurement, monitoring, and control. Commentary on plans to control the following risks:
a) Asset and liability management including liquidity, interest rates, and maturities; b) Credit risk; c) Operational risk; d) Market risk; e) IT/Computer risk; f) All other risks to which the bank will be exposed when operating in the financial activities planned.
6. Regarding credit risk, specific mention:
a) Credit policies, including loans to shareholders, administrators, and related parties; b) Plans to minimize risk concentration through diversification and establishing limits on exposure to individual borrowers or related groups; c) Considerations on asset quality, such as recording and recognition of revenues, credit classification system, and provisions for portfolio losses.
7. Operational Systems – Description of the bank's operational systems, including accounting system, information recording, daily administrative management reports for the Board of Administration, shareholders, and Central Bank; risk measurement and control, internal audit, and adopted controls. Guarantee that operational systems will be established before the bank's activities commence and will be capable of producing all regulatory information and prudential reports adequately and promptly.
8. Security – Characterization and definition of a security plan or system according to international norms or standards governing this matter.
9. Others – Reference to bank facilities, indicating whether buildings and equipment were acquired or leased, analysis of any future expansion plan, including branch establishment. Analysis of plans for transactions with related parties. Guarantee of using international accounting standards and presentation of plans to hire an independent external auditor.

Banco Central de S.T.P.	P A P PERMANENT APPLICATION STANDARD	CODE
		RD 09
PROPOSER(S)	ENTRY INTO FORCE	DATE OF ISSUE	DOC. NO.	PAGE
PSBS	02 /01 /2012	30/12/2011	29 / 2011	6/8

Article 8.
Financial Statements and Business Plan

1. Based on the foregoing, the Board of Administration shall prepare and present a balance sheet and income statement, as well as any necessary supporting documents for the bank's operation during the first three full years of activity.
2. The Board of Administration shall specify the method to be used to regularly monitor the bank's performance compared to the business plan, as well as management's commitment to the plan, and the report to shareholders and the Central Bank.

Article 9.
Decision Period

1. The Central Bank shall deliberate on the authorization application within ninety (90) days, counted from the date the application is deemed complete.
2. The application is considered complete if, within thirty (30) business days after submitting the respective file to the Central Bank, no request for supplementary data is made by the latter; or if such a request is made, within thirty (30) days after submission of the requested data.

Article 10.
Preliminary and Final Authorization

1. Upon approval of the application, the Central Bank shall issue a preliminary authorization, which obligates founding shareholders to take necessary measures to convert it into final authorization.
2. Requirements for obtaining final operational authorization are as follows:
   a) Preparation and registration of articles of association; b) Full realization of capital by shareholders, according to articles approved by the Central Bank, via deposit with the Central Bank of any complementary amount; c) Establishment of the company, opening accounts at the Central Bank, and other legal formalities; d) Recruitment, training, and staffing of personnel; e) Leasing or acquisition of operational equipment and systems to be adopted by the bank, including for risk measurement/control, internal audit, and internal controls; f) Leasing or acquisition of facilities or real estate intended for the bank's operations; g) Hiring of an independent external auditor; h) Other specific requirements described in the preliminary authorization.
3. The maximum period to fulfill the aforementioned requirements is six months, extendable by three months from the date of preliminary authorization.

Banco Central de S.T.P.	P A P PERMANENT APPLICATION STANDARD	CODE
		RD 09
PROPOSER(S)	ENTRY INTO FORCE	DATE OF ISSUE	DOC. NO.	PAGE
PSBS	02/01/2012	30/12/2011	29/ 2011	7/8

4. The Central Bank shall be informed in writing as soon as all requirements are met. Within forty-five (45) days following such communication, the Central Bank shall confirm compliance and issue the final authorization for operation.
5. If requirements are not met within the established period, the Central Bank shall notify founding shareholders and cancel the provisional authorization.

Article 11.
Fees

1. The Central Bank shall charge a fee of Dbs. 490,000,000 (four hundred ninety million dobras), equivalent to Eur. 20,000 (twenty thousand euros) for issuing the final authorization.
2. Issuing a specific authorization to operate an agency implies payment of a fee amounting to Dbs. 49,000,000 (forty-nine million dobras), equivalent to Eur. 2,000 (two thousand euros).
3. Upon crediting administrators, directors, and equivalent positions, a unit fee of Dbs. 12,250,000 (twelve million two hundred fifty thousand dobras), equivalent to Eur. 500 (five hundred euros) shall be charged.
4. From the date of final operational authorization, the Central Bank shall charge an annual supervision fee at the end of the fiscal year amounting to Dbs. 122,500,000 (one hundred twenty-two million five hundred thousand dobras), equivalent to Eur. 5,000 (five thousand euros).
5. The amounts described in the preceding number may be updated by the Central Bank, provided that a communication is made according to current legal terms.

Article 12.
In the Case of Foreign Bank Branches

1. Only branches of foreign banks classified by international agencies as A, AA, or AAA are admitted.
2. Foreign bank branches shall submit the application with the following information:
   a) Certified copy of the Board of Administration meeting minutes containing the approved decision regarding the authorization application for the branch; b) Copies of financial statements, annual reports, and independent audit reports from the last three fiscal years; c) Detailed information as referenced in point 6, Article 5 of this NAP, for the branch administrators in STP; d) Indication of shareholders and administrators of the foreign bank, with summarized administrator curricula vitae, copy of valid identification document (ID Card or Passport). e) Other pertinent documents required for opening a new bank, including the feasibility study in detail as set out in the Descriptive Section, Article 7 of said NAP.

Banco Central de S.T.P.	P A P PERMANENT APPLICATION STANDARD	CODE
		RD 09
PROPOSER(S)	ENTRY INTO FORCE	DATE OF ISSUE	DOC. NO.	PAGE
PSBS	02 /01 /2012	30/12/2011	29 / 2011	8/8

3. The Central Bank of São Tomé and Príncipe shall request from the supervisory authority of the foreign bank's home country a letter confirming that:
   a) The foreign Bank is authorized to operate as a banking institution, accepting public deposits where the bank is established; b) The foreign Bank is a credible institution, complying with supervisory authority regulations, fully meeting capital requirements; has no serious infractions or administrative proceedings, and/or formal coercive actions underway or pending; c) The supervisory authority has granted formal authorization for the foreign bank to open a branch in São Tomé and Príncipe, subject to BCSTP approval. d) The foreign bank and its branch in São Tomé and Príncipe will be supervised on a consolidated basis by the supervisory authority, according to principles contained in the Basel Agreement; e) The supervisory authority agrees to inform the BCSTP of any relevant facts that may adversely affect the bank's economic and financial situation or reputation.
4. Foreign bank branches are subject to supervision by the Central Bank of São Tomé and Príncipe.

Article 13.
Special Register

1. Immediately after granting the operational authorization, the Central Bank shall update the special register of cadastral information for financial institutions, established by Article 39 of Law 8/92, including among others the following elements:
   a) Bank name; b) Head office and authorized branch addresses; c) Certified copy of the bank's articles of association and internal regulations; d) List of all bank administrators and description of their liability limits.
2. The special register of financial institutions' information shall be kept up to date and available for public consultation.

Article 14.
Revocation

NAP 19/2009 of December 31, 2009 is hereby revoked.

Article 15.
Entry into Force

This standard enters into force according to legal terms.

Central Bank of São Tomé and Príncipe, December 30, 2011. -