GOVERNMENT NOTICE No. 372 published on 12/12/2008 THE BANKING AND FINANCIAL INSTITUTIONS (PROMPT CORRECTIVE ACTION) REGULATIONS, 2008 ARRANGEMENT OF REGULATIONS Regulation Title PART I PRELIMINARY PROVISIONS 1. Short title 2. Application 3. Interpretation 4. Objectives PART II CORRECTIVE ACTIONS 5. adequately capitalized 6. adequately capitalized 7. 8. 9. significantly 10. significantly 11. Critically s 12. Submission of recapitalization plan 1
THE BANKING AND FINANCIAL INSTITUTIONS ACT (CAP.342) REGULATIONS (Made under sections 34 and 71) THE BANKING AND FINCIAL INSTITUTIONS (PROMPT CORRECTIVE ACTION) REGULATIONS, 2008 PART I PRELIMINARY PROVISIONS 1. These regulations may be cited as the Banking and Financial Institutions (Prompt Corrective Action) Regulations, 2008. Short title 2. These regulations shall apply to all banks and financial s. Application 3. In these Regulations, unless the context requires otherwise:- Interpretation Act means the Banking and Financial Institutions Act, 2006; adequately capitalized in relation to a bank or financial, means core capital of not less than ten percent of total risk- weighted assets, off balance sheet exposure and capital charges for market risk determined in accordance with the Banking and Financial Institutions (Capital Adequacy) Regulations, 2008; Bank means the Bank of Tanzania; bank has the meaning ascribed to it in the Act; critically in relation to a bank or financial, means core capital of less than four percent of risk- weighted assets, off balance sheet exposure and capital charges for market risk determined in accordance with the Banking and Financial Institutions (Capital Adequacy) Regulations, 2008; financial has the meaning ascribed to it in the Act; significantly in relation to a bank or financial, means core capital of less than six percent of total riskweighted assets, off balance sheet exposure and capital charges for market 2
risk determined in accordance with the Banking and Financial Institutions (Capital Adequacy) Regulations, 2008; core capital has the meaning ascribed to it in the Act; in relation to a bank or financial, means core capital of less than ten percent of total risk- weighted assets, off balance sheet exposure and capital charges for market risk determined in accordance with the Banking and Financial Institutions (Capital Adequacy) Regulations, 2008. 4. The objectives of these Regulations are to:- Objectives (a) ensure timely and effective actions to deal with a weakening bank or financial ; (b) enhance transparency by establishing the minimum actions the Bank shall take in addressing identified weaknesses in banks and financial s; and (c) maintain confidence in the Tanzanian banking sector. PART II CORRECTIVE ACTIONS 5. Where in the opinion of the Bank, an adequately capitalized bank or financial is likely to incur a loss which may result in it becoming, or is otherwise conducting its business in an unsound manner, the Bank shall:- adequately capitalized (a) notify and require the bank or financial to submit to the Bank, within such period as it may specify, a written plan of corrective action which:- (i) (ii) (iii) identifies the existing weaknesses in the administration or operations of the bank or financial ; determines in detail the corrective measures required to remedy such weaknesses; and offers a realistic time-table for taking such measures. (b) prohibit the bank or financial from declaring and paying any dividends which would, in the opinion of the Bank, likely cause the bank or financial fail to comply with the requirements prescribed under the Banking and Financial Institutions (Capital Adequacy) Regulations, 2008, and c) intensify its oversight and monitoring of the bank or financial in 3
GN No. 372 accordance with the principles of risk-based supervision. 6. In addition to any other actions prescribed in regulation 5, the Bank may - (i) impose civil money penalties; (ii) issue cease and desist orders; or adequately capitalized (iii) initiate suspension or removal of any director, officer or other person or persons in the position of management; 7. When a bank or financial is, the Bank shall:- (a) take the measures prescribed in regulation 5, and (b) require the bank or financial to submit to the Bank within forty five days of such notification a capital restoration plan which:- (i) (ii) specifies steps to be taken by the bank or financial to become adequately capitalized, and specifies the levels of capital to be attained during each quarter in which the plan will be in effect. 8. (1) In addition to actions prescribed in regulation 7, the Bank may appoint a suitably qualified person who shall:- (a) advise and assist the bank or financial in designing and fulfilling the capital restoration plan; and (b) regularly submit to the Bank a progress report of the plan. (2) The Bank shall fix remuneration of the person appointed in sub-regulation (1) and the bank or financial shall pay such remuneration. 9. When a bank or financial is significantly, the Bank shall: (a) take the measures prescribed in regulation 7; significantly (b) prohibit all transactions with connected parties except repayment to the bank or financial of any outstanding credit accommodation or any transaction specifically permitted by the Bank to facilitate recapitalization. (c) prohibit the bank or financial from awarding any bonuses or increments in the salary, emoluments and other benefits of its directors and officers; and (d) prohibit the bank or financial from opening any branches or other expansion of operations. 4
10. In addition to any other actions prescribed in regulation 9, the Bank may: (a) impose restrictions on the growth of assets, liabilities or both of the bank or financial ; significantly (b) restrict the rate of interest on deposits; or (c) require the bank or financial to cease lending or any other business activity. 11. (1) Where a bank or financial is critically, the Bank shall: (a) take the actions prescribed in regulation 9; Critically (b) assist the in handling the crisis. (2) Not later than ninety days after a bank or financial is determined by the Bank to be critically, the Bank shall appoint a statutory manager or liquidator unless: (a) core capital is greater than two percent of its total risk-weighted assets and off-balance sheet exposures; and (b) the bank or financial is operating in compliance with a capital restoration plan accepted by the Bank. 12. Where an or significantly bank or financial fails to submit a recapitalization plan, or such plan is not accepted by the Bank, the Bank shall, not later than ninety days from the date of the original notification, deem the bank or financial to be critically and take the actions prescribed in regulation 11. Submission of recapitalization plan Dar es Salaam BENNO J. NDULU 3 rd December 2008. Governor 5