Regulation on the Transition Bank

Banco Central de S. T. P.	NAP PERMANENT APPLICATION NORM	CODE
		SB 01
PROPOSER(S)	ENTRY INTO FORCE	ISSUANCE DATE	DOC NO.	PG 1/15
P.S.B.S.	22/02/2016	22/02/2016	04/2016

Subject: REGULATION ON THE TRANSITION BANK

Considering that the Transition Bank is a credit institution with the legal nature of a bank, established for the purpose of acquiring and managing assets, liabilities, off-balance sheet items, and assets under management of a banking institution under resolution regime, with a view to pursuing the objectives set out in paragraph 1 of Article 12 of Law 6/2015, "Law on Special Measures for Sanitation, Resolution and Liquidation of Banking Institutions."

Considering that, under paragraph 1(a) of Article 14 of the Law on Special Measures for Sanitation, Resolution and Liquidation of Banking Institutions, the Central Bank has the authority to determine the partial or total transfer of assets, liabilities, off-balance sheet items, and assets under management of an institution to one or more transition banks constituted for this purpose, with the objective of allowing their subsequent alienation to another institution authorized to carry out the activity in question.

Considering equally that the constitution of a transition bank constitutes a necessary solution when entities subject to the application of resolution measures are considered systemically important, imposing that the vital functions they exercise are not interrupted, provided that the option for the transition bank facilitates the conservation of the value of the originator entity or provides the necessary time for the supervisory and resolution authority to prepare other solutions with a view to the alienation of their respective assets and liabilities.

Taking into account the urgent need for the Supervisory and Resolution Authority to have a regulatory norm that defines the rules applicable to the creation and operation of transition banks, allowing it to develop the legal commands in aspects that are indispensable for their adequate practical application.

In these terms, the Board of Directors of the Central Bank of São Tomé and Príncipe, in the exercise of the powers conferred upon them by paragraphs d) and f) of paragraph 2 of Article 8 of its Organic Law, Law No. 8/92, combined with paragraph 5 of Article 18 of Law No. 06/2015, "Law on Special Measures for Sanitation, Resolution and Liquidation of Banking Institutions," determines the following:

Reviewed	Revocation Data:

Banco Central de S. T. P.	NAP PERMANENT APPLICATION NORM	CODE
		SB 01
PROPOSER(S)	ENTRY INTO FORCE	ISSUANCE DATE	DOC NO.	PG 2/15
P.S.B.S.	22/02/2016	22/02/2016	04/2016

Chapter I
General Provisions

Article 1.
Object and Scope

1 - This NAP establishes the rules necessary for the creation and operation of transition banks.

2 - The rules of this NAP are applicable to transition banks constituted by deliberation of the Central Bank of São Tomé and Príncipe within the scope of its legal powers to apply resolution measures to banking institutions;

3 - Banking institutions subject to resolution measures shall hereinafter be designated as "originator institutions."

Article 2.
Regime of Transition Banks

1 - Transition banks are credit institutions with limited duration, with the legal nature of a bank and constituted in the form of a public limited company, which are governed by the statutes approved by deliberation of the Central Bank, by specific legal and regulatory provisions and by the norms applicable to banks and, subsidiarily, by commercial legislation, with the necessary adaptations to the objectives and nature of these institutions.

2 - Transition banks have a duration of up to 12 months, renewable once based on well-founded reasons of public interest, namely if risks to financial stability remain or negotiations are pending with a view to the alienation of their respective assets, liabilities, off-balance sheet items and assets under their management.

3 - The share capital of transition banks may be constituted by the General Guarantee Fund, resources from the government body established for this purpose and/or private resources, to which the exercise of the rights and obligations of shareholders is entrusted.

4 - Transition banks are instituted to receive and administer the total or part of the assets, liabilities, off-balance sheet items and assets under management of an originator institution, developing

Reviewed	Revocation Data:

Banco Central de S. T. P.	NAP PERMANENT APPLICATION NORM	CODE
		SB 01
PROPOSER(S)	ENTRY INTO FORCE	ISSUANCE DATE	DOC NO.	PG 3/15
P.S.B.S.	22/02/2016	22/02/2016	04/2016

all or part of the activities of that institution with a view to pursuing the objectives set out in Article 12 of the Law on Special Measures for Sanitation, Resolution and Liquidation of Banking Institutions.

5 - The corporate name of transition banks must contain a mention that allows them to be distinguished from the corresponding originator institution.

Article 3.
Partial or Total Transfer of Activity to Transition Banks

1 - The Central Bank may determine the partial or total transfer of assets, liabilities, off-balance sheet items and assets under management of a banking institution to one or more transition banks constituted for this purpose, with the objective of allowing their subsequent alienation to another institution authorized to carry out the activity in question.

2 - The Central Bank may also determine the partial or total transfer of assets, liabilities, off-balance sheet items and assets under management of two or more banking institutions included in the same group to one or more transition banks, with the same purpose provided for in the previous paragraph.

Chapter II
Constitution of Transition Banks

Article 4.
Deliberation on the Constitution of Transition Banks

1 - The transition bank is instituted by deliberation of the Central Bank, observing the provisions of the Regulation on the Application for Authorization to Operate Financial Institutions regarding the licensing process, with the due adaptations.

2 - In the deliberation provided for in the previous paragraph, the Central Bank approves the statutes of the transition bank, which must contain, at a minimum, the elements provided for in Article 5 of this NAP.

3 - Without prejudice to compliance with other legal obligations of notification and information, the Central Bank communicates to the holders of the share capital, as quickly as possible, the deliberation on the constitution of transition banks, including their respective statutes.

Reviewed	Revocation Data:

Banco Central de S. T. P.	NAP PERMANENT APPLICATION NORM	CODE
		SB 01
PROPOSER(S)	ENTRY INTO FORCE	ISSUANCE DATE	DOC NO.	PG 4/15
P.S.B.S.	22/02/2016	22/02/2016	04/2016

Article 5.
Statutes of the Transition Bank

The statutes of the transition bank must contain, at least, the following elements:

a) The corporate name of the transition bank;

b) The registered office;

c) The corporate object of the transition bank;

d) The value of the share capital and the form of representation of shareholdings;

e) The competences and duties of the management and supervisory bodies of the transition bank;

f) Mode of appointment and dismissal of members of the corporate bodies;

g) The obligation of periodic reporting to the Central Bank, under the terms defined;

h) Binding of the members of the Board of Directors of the transition bank to the guidelines and recommendations transmitted by the Central Bank;

i) Prohibited operations for the transition bank, with a view to pursuing the objectives provided for in paragraph 4 of Article 2;

j) Mode of approval of the annual report and accounts;

k) Mode of amendment of the Statutes.

2 - Amendments to the statute of the transition bank are approved in a general meeting, with prior authorization from the Central Bank.

Article 6.
Share Capital of Transition Banks

1 - The transition bank must have share capital not less than the minimum provided for in the Regulation on the Application for Authorization to Operate Financial Institutions and comply with the norms applicable to banks.

Reviewed	Revocation Data:

Banco Central de S. T. P.	NAP PERMANENT APPLICATION NORM	CODE
		SB 01
PROPOSER(S)	ENTRY INTO FORCE	ISSUANCE DATE	DOC NO.	PG 5/15
P.S.B.S.	22/02/2016	22/02/2016	04/2016

2 - The General Guarantee Fund or Government Body designated for this purpose or the private investor, proceeds to the realization of the share capital of the transition bank using their funds.

Article 7.
Commencement of Activity

1 - Once constituted, the transition bank may immediately commence activity without prior compliance with the legal requirements related to commercial registration and other formal procedures provided by law, without prejudice to the subsequent compliance with the same in the shortest possible time.

2 - The Central Bank carries out the special registration of the transition bank under the terms provided for in the Regulation on the Application for Authorization to Operate Financial Institutions.

Chapter III
Organization

Article 8.
Structure

The transition bank has the following bodies:

a) General Assembly;

b) Board of Directors;

c) Supervisory Board.

Article 9.
Certification of Accounts

The General Assembly, upon proposal of the Supervisory Board, must designate an Auditor or Official Accountant or even a Society of Official Accountants who is responsible for issuing the legal certification of accounts.

Reviewed	Revocation Data:

Banco Central de S. T. P.	NAP PERMANENT APPLICATION NORM	CODE
		SB 01
PROPOSER(S)	ENTRY INTO FORCE	ISSUANCE DATE	DOC NO.	PG 6/15
P.S.B.S.	22/02/2016	22/02/2016	04/2016

Article 10.
Appointment and Dismissal of Members of Management and Supervisory Bodies

1 - The appointment of members of the management and supervisory bodies of the transition bank is made by deliberation of the Central Bank, upon proposal of the entity/entities holding the share capital.

2 - The appointment of members of the management and supervisory bodies of transition banks obeys the provisions of the Norm on Qualification of Administrators regarding suitability, availability and professional qualification.

3 - It is incompatible with the quality of member of a corporate body of the transition bank the accumulation of any functions in the originator institution, whether as a member of the corporate bodies or as an employee, as well as the maintenance of any other type of contractual link with the said company capable of generating conflicts of interest.

4 - The Central Bank, on its own initiative or upon a well-founded proposal of the entity/entities holding the share capital, may deliberate the dismissal of functions of one or more members of the Board of Directors and the Supervisory Board.

Article 11.
Remuneration of Members of Management and Supervisory Bodies

The remuneration of the members of the management and supervisory bodies of the transition bank is authorized by the Central Bank upon proposal of the General Assembly.

Chapter IV
Selection and Assessment of Assets, Liabilities, Off-Balance Sheet Items and Assets Under Management

Article 12.
Selection of Assets to be Transferred

1 - A deliberation of the Central Bank must contain a description of all assets, liabilities, off-balance sheet items and assets under management that are the subject of transfer from the originator banking institution to the transition bank:

Reviewed	Revocation Data:

Banco Central de S. T. P.	NAP PERMANENT APPLICATION NORM	CODE
		SB 01
PROPOSER(S)	ENTRY INTO FORCE	ISSUANCE DATE	DOC NO.	PG 7/15
P.S.B.S.	22/02/2016	22/02/2016	04/2016

2 - The selection of all assets, liabilities, off-balance sheet items and assets under management provided for in the previous paragraph must obey the criterion previously established by the Central Bank, and may, depending on the situation in question, establish for each depositor a maximum limit of values to be transferred to the transition bank.

3 - The following cannot be transferred to the transition bank any obligations contracted by the originator banking institution towards:

a) Their respective shareholders, whose participation at the time of transfer is equal to or greater than 2% of the share capital, persons or entities that in the four years prior to the transfer had participation equal to or greater than 2% of the share capital, unless it is demonstrated that, directly or indirectly, they were not the cause of the financial difficulties of the institution, nor contributed to the worsening of such situation;

b) Members of the management or supervisory bodies, auditors, official accountants, audit firms or societies of official accountants or persons with similar status in other companies that are in a relationship of dominance or group with the institution;

c) Persons or entities that have been shareholders, exercised the functions or provided the services referred to in the previous letter in the four years prior to the creation of the transition bank, and whose action or omission was the cause of the financial difficulties of the banking institution or contributed to the worsening of such situation;

d) Spouses, relatives or in-laws in the first degree or third parties who act on behalf of the persons or entities referred to in the previous letters;

e) Those responsible for facts related to the banking institution, or who have benefited from them, directly or through an intermediary person, and who are the cause of the financial difficulties or have contributed, by action or omission within the scope of their responsibilities, to the worsening of such situation, in the opinion of the Central Bank.

4 - Nor may the elements constituting the own funds of the banking institution be transferred to the transition bank under the terms of the norm on the qualification of own funds in force.

5 - The deliberation referred to in paragraph 1 determines, without prejudice to subsequent correction based on the independent assessment referred to in the following article, the provisional transfer value of the assets, liabilities, off-balance sheet items and assets under management.

Reviewed	Revocation Data:

Banco Central de S. T. P.	NAP PERMANENT APPLICATION NORM	CODE
		SB 01
PROPOSER(S)	ENTRY INTO FORCE	ISSUANCE DATE	DOC NO.	PG 8/15
P.S.B.S.	22/02/2016	22/02/2016	04/2016

6 - The deliberation values the assets, liabilities, off-balance sheet items and assets under management based on their accounting value in the originator institution, unless there are proven reasons for them to be subject to adjustments based on prudential criteria, taking into account estimates of impairments in a timely manner.

7 - The management body organizes the initial financial statements, based on the provisional transfer value determined under the terms of the previous paragraphs.

Article 13.
Assessment by Independent Entity

1 - In the shortest possible time after the transfer of assets, liabilities, off-balance sheet items and assets under management to the transition bank, the Central Bank may designate an independent entity to proceed with their assessment, at the expense of the originator banking institution.

2 - The holders of the share capital advance, if necessary, the financial means for the payment of the assessment referred to in the previous paragraph, which will be reimbursed to them by the originator banking institution.

3 - The independent entity to be designated by the Central Bank must possess proven knowledge and experience in the assessment of financial assets and must not have provided any services to the originator banking institution in the 3 years prior to the Central Bank's deliberation on the constitution of the transition bank.

4 - The provisions of the previous paragraph are not applicable to services provided by independent entities by express determination of the Central Bank.

5 - The assessment by independent entity uses a valuation methodology based on market conditions and, subsidiarily, on fair value.

6 - For the exclusive purposes of the provisions of paragraph 1 of Article 13 of the Law on Special Measures for Sanitation, Resolution and Liquidation of Banking Institutions, the assessment is complemented by an estimate of the recovery level of the credits of each class of creditors, according to the priority order established in the law, in a scenario of liquidation of the originator institution, reported to the moment of application of the resolution measure.

7 - The assessment carried out under the terms of this article is transmitted by the Central Bank to the transition bank, to the holders of the share capital and to the originator banking institution.

Reviewed	Revocation Data:

Banco Central de S. T. P.	NAP PERMANENT APPLICATION NORM	CODE
		SB 01
PROPOSER(S)	ENTRY INTO FORCE	ISSUANCE DATE	DOC NO.	PG 9/15
P.S.B.S.	22/02/2016	22/02/2016	04/2016

Article 14.
Transfers to Originator Institution

1 - After the transfer provided for in paragraph 1 of Article 12 of this NAP, the Central Bank may, at any time:

a) Transfer other assets, liabilities, off-balance sheet items and assets under management of the originator banking institution to the transition bank;

b) Transfer assets, liabilities, off-balance sheet items and assets under management of the transition bank to the originator banking institution.

2 - For the purposes of the previous paragraph of this Article, the transition bank, whenever it considers that there are well-founded reasons, must propose to the Central Bank that it determine the transfer of assets, liabilities, off-balance sheet items and assets under management to the originator banking institution, notably when it verifies that liabilities or other patrimonial or off-balance sheet elements have been incorporated into the transition bank that should be included in the categories provided for in paragraphs 2 and 3 of Article 12 of this NAP.

Chapter V
Financial Support from Shareholders

Article 15.
Financial Support from Shareholders

1 - The Central Bank determines the nature and amount of financial support to be granted by the holders of the share capital, if necessary, for the creation and development of the activity of the transition bank, namely through the granting of loans to the transition bank for any purpose, the provision of funds considered necessary for the realization of capital increase operations of the transition bank or the provision of guarantees.

2 - The amounts to be returned to the holders under the terms of paragraph 3 of Article 20 of this norm include, in addition to the nominal value of the financial support granted, a remuneration corresponding to the financing costs borne by them, added to a portion intended to cover the administrative and operational costs of that support, to be defined by the Central Bank.

Reviewed	Revocation Data:

Banco Central de S. T. P.	NAP PERMANENT APPLICATION NORM	CODE
		SB 01
PROPOSER(S)	ENTRY INTO FORCE	ISSUANCE DATE	DOC NO.	PG 10/15
P.S.B.S.	22/02/2016	22/02/2016	04/2016

3 - If the financial support granted by the holders of the share capital does not involve financing costs, the remuneration to be earned is determined based on the opportunity cost of the resources applied in that support, added to a portion intended to cover administrative and operational costs, to be defined by the Central Bank.

Chapter VI
Provision of Services by the Originator Banking Institution

Article 16.
Services to be Provided by the Originator Banking Institution

1 - At the time of its constitution, the transition bank transmits to the originator institution the indication of the services that it must continue to provide, without any interruption, for the regular development of the transferred activity.

2 - The services provided for in the previous paragraph must be provided by the originator institution regardless of the existence of a prior agreement regarding the form of payment.

3 - The transition bank, taking into account the evolution of its activity, may alter the scope and conditions of the services to be provided by the originator institution.

4 - The provisions of the previous paragraphs do not prevent that, for the purposes of exercising its activity, the transition bank may recruit collaborators or resort to the contracting of external services.

Chapter VII
Operation of the Transition Bank

Article 17.
Guiding Principles of the Activity of the Transition Bank

1 - The transition bank ensures the continuity of the provision of financial services inherent to the transferred activity, as well as the administration of the assets, liabilities, off-balance sheet items and assets under management received under the terms of paragraphs 1 and 2 of Article 3 and letter a) of paragraph 1 of Article 14 of this NAP,

Reviewed	Revocation Data:

Banco Central de S. T. P.	NAP PERMANENT APPLICATION NORM	CODE
		SB 01
PROPOSER(S)	ENTRY INTO FORCE	ISSUANCE DATE	DOC NO.	PG 11/15
P.S.B.S.	22/02/2016	22/02/2016	04/2016

with a view to the appreciation of the business developed, seeking to proceed with its alienation, as soon as circumstances advise, in terms that maximize the value of the assets in question.

2 - The transition bank regulates its activity with subordination to the principles of efficiency in cost management and risk limitation, in accordance with the guidelines defined by the Central Bank.

3 - In the alienation of patrimonial elements, the transition bank is guided by principles of transparency, non-discrimination among potential acquirers and maximization of the profits resulting from the sale.

Article 18.
Competences of the Management Body

In addition to the exercise of normal management powers, it is especially incumbent upon the management body:

a) Prepare and present activity plans, with semi-annual periodicity, to be submitted to the Central Bank and to the holders of the share capital.

b) Base its action on the objective of maximizing the value of the assets received with a view to promoting their alienation under favorable conditions;

c) Dynamize operational activity in terms that allow preserving the value of the business;

d) Comply with the guidelines and recommendations transmitted by the Central Bank, under the terms of their legal competences.

Article 19.
Periodic Report to be Presented by the Transition Bank

1 - Without prejudice to other legal duties of information to the Central Bank, at the act of deliberation provided for in Article 4 of