Bot Regulations 2008

..
THE GOVERNOR
Cable:. 41024'"BENkUU"
Tel. Gen: 255 22 22330000
Dlr: 25p 22 2233020/21
facsimile: 255 22 34085
E-mall: gbvernOroffice@hq.boHz.org
Ref. No. GA.302/389/01
All Commerclal Banks
CIRCULAR NO. 1
(Issued on 28th November, 2008}
UNITED REPUBLIC OF TANZANIA
BANK OF TANZANIA
P.O. Box 2939
DAR ES SAlAAM
November 28
1
2008
STATUTORY MINIMUM RESERVES AGAINST DEPOSITS AND BORR.OWINGS
In accordance with Section 45 .of the Bank of Tanzania Act, 2006, and
Sections 4 and 71 of .the Banking and Financial ltistltuttons Act. 2006, all
banks In Tanzania - Mainland and Zanzibar. are reqolred to maintain
statutory minimum reserves {SMR) on their total deposit liabilities and funds
borrowed from the general public, pursuant to their authority to carry on
banking buslr:tess.
1. GENERAL POLICY AND IMPLEMENTATION GUIDANCE
The statu.tory reserve requirement remains an Important instrument of
monetary control and financial. prudence in ranzanla. However, lfs '
utilization Is determined by long term objectives of monetary policy given
the current monetary conditions and Inflationary pressures, while the more
flexible open market operations are adopted for Implementing short- qnd
medium term objectives of monetary policy.
The existing inflatlonar.y ,.pressl)res In t b . ~ ecqnomy. qmldst the on-going
global financial crisis have necessitated the Bank of Tanzania to make some
odjustments to the l ~ v e l and composition of SMR.
'
J.
By this Circular, eaeh bank shall be required to maintain a statutory
minimum reserves account with the Bank of Tanzania In the amount and
manner In which the req'ulred cash reserves shall be calculated by banks as
prescribed In this Circular. Henceforth, statutory minimum reserves
requirement f.or each bank shall be:
1.1 Ten percen.t {1 0%) of the outstanding balance of Its total local and
foreign currehcy deposit liabilities {of non-government entitles) and
borrowings from the general public, all converted In local currency,
and.
'.
1.2 Twenty percent (20%) of total government deposits also converted In
local currency.
1.3 Under the above arrangements, cash In vault shall not form part of
t_be oyal!qble reserves. In the corr\putatlon of the required statutory
minimum reserves.
1.4 Only balances In excess of SMR shall be available for clearing
purposes. Any bank that wishes to withdraw the excess funds In Its
SMR account shall.seek and obtain approval from the. Director of
Supervision.
1.5 No bank shall be allowed to withdraw funds below Its statutory
minimum reserve requirement at the Bank of Tanztinla. Instead, banks
are encouraged to make effective use of the Inter-bank cash market
and other available liquidity bridging windows at the- Bank of
Tanzania, namely: Intra-day, discount window and lombard facilities.
2. CALCULATION OF THE REQUIRED STATUTORY MINiMUM RESERV&S,
SUBMISSION OF REPORT-5 AND PENALTY
2.1 Each bank shall calculate Its position dally, and shall. submit a
weekly report to the Bank of Tanzania not lofer than the second
Monday after the week. Such weekly reports shall be
accomplished In the prescribed format In this Circular entitled
11
Report
on Required and Available Reserves", a copy of wh!ch Is attocned
hereto as Annexure l.
2.2 In order to meet deadlines and avoid penalties for late reporting,
each bank shall require Its head .office and all branches or units to
record every transaction in their books of accounts on the same d9y,.
.
..
to balance their accounts at the end of that and submit the
necessary data to the head office by the fastest means.
2.3 Any bank which. _violates the requirements of this Circular shall be
Hable to penaltles.as follows:
(a) For failure to submit the
11
Report on Required .and Available
on time - A fine of shillings one million (TZS J ,000,000)
per day shall be_ Imposed for every day in which the failure
continues.
(b) ; For failure to maintain the minimum reserves required .under thls
Circular - an Interest charge equlvah:mt to the weighted
average yield of all Treasury bill maturities obtained In the most
recent auction shall be applied on the amount of deficiency fot
every day In which non"compllance continues.
(c) Misrepresentation or .submission of Incorrect Information In any
of the returns by any bank shall attract the penalty charge
amounting to shillings one million (TZS 1 ,000,000) per day of
existence of such misrepresentation or submission of incorrect
Information.
2.4 The penalty charges Imposed In section 2.3, subNsectlon (a), {b), and
(c) above shall be recovered by the Bank of, Tanzania from any
balances of or monies owed to .the bank concerned or as a civil debt.
3.0 REPEALING CLAUSE AND EfPEC.TIVE DATE
3.1. This Circular repeals Circular No.1 as amended on 12th November,
1999 and whlch became effective on 1Sih December, 1999.
3.2. This Circular also repeals the amendment on SMR requirement
equivalent to ten percent on total government which
became effective on 9th June, 2008 ..
3.3. The Circular shall take effect on 15th January, 2009.
Sincerely,

Prof. Benno Ndulu
GOVERNOR
I.
,. .
OF INSTITUTION ...........................................................
Ban.kCotfa ...........
BOT FOAM 16,3 (a)
Submission: 1. Dssdllns:Sacand Monday Ttllala a weakly report
after the reference week.
2. In trip/Jests to the Banking
supervision Dlraotorate
REPORT ON GOVERNMENT DEPOSITS
FOR THE WEEK ENDING .......... ; ...........
lin TShs Million}
PARTICULARS -MON TUE WED THU FRI
WEEKLY
AVERAGE
CENTRAL GOVERNMENT
A: DOMESTIC CURRENCY DEPOSITS (=1+2+3+4)
1. Demand daposlls
2; Time daooslls
3. Savln!ls depoe !Ia
4. Other deposits
B: FOREIGN CURRENCY DEPOSITS (converted Into Tshs>
G: TOTAL CENTRAL GOVERNMENT_ (A plus Bl
LOCAL GOVERNMENT
D: DOMESTIC CURRENCY DEPOSITS +2+3+4)
1. Demand deposits
2. Tlina deposits
3. Savlnos deooslts
4. Olhsr daoostts
-
E: FOREIGN CURRENCY DEPOSIT!;! (converted Into Tshs).
F: TOTAL LOCAL GOVERNMENT CD plus E)
G: GRAND T.OTAL GOVERNMENT (0 plus f)
H: MINIMUM REQUIRED RESERVES {20% of G)
Signature ........................... Signature ........................
(Managing Dlreotor/Qeneral Manager) (Direotor of Finance)
Date ............................. Date ................................
Nl'..ME OP INSTITUTION ....................... : ...................................
a or Form 1 B-3 (b)
Sank Coda ............
Thla fa 11 weekly report
Bubmteafon: 1. Dlfltdllne:aeoond Monday
after the reference week.
2. tn frfplfcs/e to tha Banking
Supervision Directorate
REPORT ON REQUIRED SMR AND AVAILABLE RESERVES AGAINST TOTAL DEPOSITS AND BORROWINGS
I tin TSha Million)
POR THE! WEEK ENOJNQ ......................
PARTICULARS MON rua WED THU FRS
Wi!EKLY
AVI!RAGE!
A: DOMESTIC CURRENCY DEPOSITS (Tshsl
1. Demand deposita
2. Tlma deposlfs ' ...
3, Sa\'lnoa deposita
4. Other di!QQ_alta
5; oEiP<iSiiB iiitiiirilia
B: BORROWINGS FROM THE PUBLIC (Tshs)
C: TOTAL DOMESTIC OIJRI:NCY DEPOSITS AND BORROWING CA_!lfUa fh
D: FOREIGN CURRENCY DEPOSITS (converted to Tshsl
1. Demand dePosita
2. Tlme deposita
3. Savings
4. Other deposlls
6. of Banks
E: FOREIGN OURRENCY BORROWINGS FROM THE PUBLIC (converted Into
F: TOTAl FOREIGN CURRENCY DEPOSITS AND BORROWING (D.JJius_El

H: REQUJAEO SMA ON DEPOSITS AND BORROWING C10% OF Gl
1: REQUIRED SMA ON GOVERNMETIT_DEf>_OSITS tFORM1B-3talllne HI
J:TOTAl STATUTORY MINIMUM ReQUIRED RESERVES (H+fl
Signature ............................ Slgnslurs .........................
(Managing IJirector/Qsnaral Manager) (Director of Flnan11a)
Oats ..... ""''"""'''""'''
Data ................................
..:;, .. ..:. ..... "::::.>;". ... :.' .. -:..... : .
THE BANKING AND FINANCIAL INSTITUTIONS (PUBLICATION OF
FINANCIAL STATEMENTS) REGULATIONS, 2008
ARRANGEMENT OF REGULATIONS
Regulation Title
PART I
PRELIMINARY PROVISIONS
1. Short title
2. Application
3. Interpretation
4. Objectives
PART II
PUBLICATION OF FINANCIAL STATEMENTS
5. Quarterly fmancial statements
6. Audited financiai statements
7. Exhibition of audited financial statements
PARTD;l
MISCELLANEOUS PROVISIONS
8. Failure to publish ftnancial statements
9. Penalty charge recovery
10. Penalty for misrepresentation
11. Sanctions. and penalties
12. Revocation
1
GOVERNMENT NOTICE NO ................... published on ........... .
THE BANKING AND FINANCIAL INSTITUTIONS ACT
(CAP. 342)
REGULATIONS
(Made under section. 71)
THE BANKING AND FINANCIAL INSTITUTIONS (PUBLICATION OF
FINANCIAL STATEMENTS) REGULATIONS, 2008
Short title
Appiication
Interpreta-
tion
Objectives
PART I
PRELIMINARY
1. These Regulations may be cited as the Banking and .financial
Institutions (Publication of Finan,cial Statements) Regulations, 2008 and
shall come into operation on the date of publication in the Gazette.
2. These Regulations shall apply to all banks and financial
institutions.
IIi these Regulations, unless the conteA.'i requires otherwise-
"Act" means the Banking and Financial Institqtions Act;
"Bank" means the Bank of Tanzania;
bank" has the meaning ascribed to it in the Act;
"director" has the meaning ascribed to it in the Act;
'"'financial institution" has the meaning ascribed to it in the Act;
"officer" has the meaning ascribed to it in the Act;
4. The objectives of these Regulations are to-
(a) e n ~ u . r e that every bank or financial institution maintains a level
transparency adequate to enable depositors and creditors and
the public at large to make informed decisions;
2
Quarterly
financial
statements
Audited
Financial
statements
Exhibition of
Audited
Financial
Statements.
(b) promote and maintain public confidence in the Tanzanian
banking sector; and
(c) enhance market discipline by providing financial information
to various stakeholders.
PART II
PUBLICAtiON OF FINANCIAL STATEMENTS
5.-(1) Every bank or financial institution shall publish its quarterly
financial state:n1ents and any other information in the form to be prescribed
by the Bank at least once in one newspaper of wide circulation in Tanzania.
(2) The quarterly financial statements under sub-regulation (I) shall
be published within forty-five days after the end of the quarter.
(3) A community bank shall, in addition to the requirements
prescribed in sub-regulation (1), display its quarterly financial statements in
public places within the areas in which the bank operates.
( 4) A copy of quarterly and annual audited finanCial statements duly
signed by the chl.ef Executive Officer, Head of Finance, Head of Internal
Audit arid attested by two non-executive board members and newspaper
cuttings thereof shall be submitted to the Bank in three days time after
publication.
6.-(1) Every bank or financial institution shail publish its annual
audited financial as prescribed by .the Bank at least once every
year.in the newspapers of wide circulation in Tanzania.
(2) The all.nuai audited finanCial statements shall be within
fifteen days after approval of the board of directors of the bank or financial
institution but not later than one hundred and five days after the end of the
financial year.
7. Every bank or financial institution shall at all times exhibit
copies of its last audited fimmcial statements in a conspicuous position in
the public part of its principal place of business and in its branches and
agencies.
PART III
Failure to publish
financial
.statements
8. Any bank or fmancial institution which fails to publish its
financial statements as required under these Regulations shall be liable
to a penalty of one million shillings for each day during which such
failure continues.
3
Penalty
recovery
Penalty for

Sanctions and
Penalties
Revocation
GN. No. 103
of 2.00i
9. The penalty charge to be imposed under regulation-8 may be
recovered by deducting from any balance of, or moneys owing to the
bank or financial institution concerned or collected by written notice.
10. Any bank or financial institution that makes a
misrepresentation in its financial statements shall be liable to a penalty
of one million shillings for each day until such misrepresentation is
corrected.
11. Without prejudice to the other penalties and aCtions
prescribed by the Act the Bank may impose on any bank or financial
institution any of the following sanctions for
(a) suspension from lending and investing activities;
(b) prohibition from participating in the inter bank clearing
ej(changes; .
(c) prohibition from isst1.ing letters of credit dr guarantee;
(d) suspension of capital expenditure;
(e) prohibition from establishing or opening new branches;
(f) suspension from access to the credit facilities of
the Bank;
(g) suspension of the declaration or payment of
dividends;
(h) prohibition from accepting deposits;
. (i) suspension or removal from office ofthe defaulting
director, or employee;
G) .disqualification of defaulting director or employee from
holding any_position or office in any bank or financial
institution in Tailza:nia;
(k) revocation or banking licence; or
(1) such other sanctions or penalties as the Bank may deem
appropriate.
12. The Publication of Financial Statements Regulations, 2000
are hereby revoked.

Dar ls Salaam,
;
BENNO J. NDULU
Governor
4
THE BANKING AND FINANCIAL INSTITUTIONS (INDEPENDENT AUDITORS)
REGULATIONS, 2008
Regulations Title
PART1
1. Short title
2. Applicatiqn
3. Interpretation
4. Objectives
PART II
APPOINTMENT OF lNDEPENDENT AUDITORS
5. Appointment of independent auditors
6. Change ofindependentauditor
PART III
DUTIES OF INDEPENDENT AUDITORS
7. Opinion of independent auditor
8. Additional duties
9. Special reports
1 0. Computation of capital position
11. Audit program
PART IV
APPLICATION BY INDEPENDENT AUDITORS
12. Application Letter
13. Assessment ofthe application
1
GOVERNMENT NOTICE NO .................. published on ........ .
(CAP.342)
REGULATIONS
(Made under Section 71)
THE BANKING AND FINANCIAL INSTITUTIONS (INDEPENDENT AUDITORS)
Short title
Application
Interpre-
tation
Cap.286
Cap. 212
Cap. 286
. REGULATIONS, 2008
PART I
1. These regulations may be cited as the Banking and Financial
Institutions (Independent Auditors) Regulations, 2008 and shall come into
operation on the date of publication in the Gazette.
2. These regulations shall apply to all banks, financial institutions and
approved independent auditors.
3. In these regulations, unless the context requires otherWise;
"Act" means the Banking and Financial Institutions Act;
"Bank" means the Bank ofTanzania;
"conflict of interest" means a situation in which someone in a position of trust,
has competing professional, business or personal interest, making it
difficult to fulfil his duties impartially;
"independent auditor" means an accounting or auditing firm which is recognized
by the National Board of Accountants and Auditors to be practicing in
auditing and related activities and has been approved by the Bank to audit
banks and financial institutions;
"statutory audit" means an audit performed in accordance with the requirements
of the Companies Act, and the National Board of Accountants and
Auditors;
"undercapitalized" means a bank or financial institution whose capital does not
meet the requirements of the Banking and Financial Institutions (Capital
3
Objectives
Appointment
of
independent
auditors
Change of
independent
auditor
Opinion of
Independent
auditor
Additional
duties
Adequacy) Regulations) 2008.
4. The objectives of these Regulations are to establish-
(a) criteria for approving independent auditors of banks and financial
institutions; and
(b) duties of banks, financial institutions and approved independent
auditors.
PART II
APPOINTMENT OF INDEPENDENT AUDITORS
5.-(1) Every bank or financial institution shall appoint annually an
independent auditor who has no conflict of interest and notify the Bank within
seven days of such appointment.
(2) Where a bank or fmancial-institution fails to appoint an independent
auditor under sub-regulation (1), or to fill any vacancy for an independent auditor
which may arise, the Banlc may appoint, on behalf of the bank or financial
institution, an independent auditor and fix his remuneration which shall be paid
by the bank or_financial institution.
(3) A bank or financial institution shall not remain without an
independent auditor for more than ninety days from the date when the position
falls vacant.
(4) An independent auditor shall not audit the same bank or financial
institution for a continuous period exceeding four years.
6. A bank or financial institution shall not in the course of performance
of the audit work, change its independent auditor except with the prior written
approval of the Bank.
PART III
DUTIES OF INDEPENDENT AUDITORS
7. A.n independent auditor shall provide ai1 opinion as to whether the
financial statements of the bank or financial institution-
( a) represent true and fair view of the financial position and
performance of the bank or financial institution; and
(b) have been prepared in accordance with International Financial
Reporting Standards.
8. Subject to section 22 of the Act, the Bank may require an independent
auditor to-
( a) submit directly to the Bank such additional information in relation to
his audit as the Bank may consider necessary;
(b) carry out any other special investigation and submit a report on any
of the matters arising thereof and the bank or financial institution
4
Special
reports
Cap. 197
Cap. 171
Computation
of capital
position
Audit
pJ:ogram
Application
Letter
Cap. 286
concerned shall-remunerate the auditor in respect of the discharge by
him of all or any of such additional duties.
9. The independent auditor shall iminediately report to the Bank if he
becomes aware of-
( a) any serious breach of or non-compliance with the provisions of the
Act, the Bank of Tanzania Act, Foreign Exchange Act, or
regulations, guidelines, circulars ordirectives issued by the Bank or
any other relevant legislations;
(b) any criminal offence involving fraud or other dishonesty committed
by a bank or fmancial institution or any of its officers or employees;
( c} any losses incurred which have caused the bank or financial
institution to be undercapitalized;
(d) any serious irregularities which may jeopardize the rights of a
depositor or creditor of a bank or financial institution; or
(e) circumstances that make him unable to confirm ability ofthe bank or
financial institution to settle claims of depositors or "creditors out of
its assets.
10. The independent auditor s1J.all compute capital position of the bank or
financial instiwtion as at the end of each financial year taking irito account the
requirements of the Act and all relevant prudential regulations issued by the Bank
and provide a statement on its adequacy as part of the notes to the accounts.
11. The audit program and reporting by an independent auditor shall,
among other things, include computation of capital adequacy, related parties
transactions, assessment of movement of loan provisions, liquidity ratios and
profitability outlook, consistent with the requirements of the Act, regulations and
circulars is.sued by the Bank.
PART IV
APPLICATION BY INDEPENDENT AUDITORS
12. Any auditing firm seeking to be approved by the Bank as an
independent auditor under these regulations shall submit an application letter
together with-
(a) a short history of the firm, details of its legal and National Board of
Accountants and Auditors registration status;
(b) details of the structure and organization of the firm, its principal
place of business and branches in Tanzania, and in the case of an
international audit of the head office including legal and
professional status of the parent firm;
(c) names, particulars and detailed curriculum vitae of partners and
senior professional staff demonstrating previous experience in the
audit of banks and financial institutions;
(d) list of major audit assignments that have been performed for the last
5
ASsessment
of the
application
Cap.286
Disqualification
from
appointment
three years and total fees received for the last year from each audit
assignment that was performed.
(e) details of any existing relationship either directly or indirectly
between the finn or partner and any bank or financial institution
regulated by the Bank;
(f) any other information the Bank may require.
13. When assessing an application the Bank shall consider whether the
firin has at least ten staff with education and experience in accountancy and
auditing, and at least four of whom are registered with National Board of
Accountants and Auditors ..
PARTV
DISQUALIFICATION FROM APPOINTMENT
14. An audit firm shall not qualify for appointment as an ip.dependent
auditor of a bank .or financial institution if any of its partner or member is-
( a) a director, officer or employee of any bank or financial institution;
or
(b) a business partner of a director, officer or employee of that bank
or financial institution; or
(c) an employee or employee of a director , officer or employee of
that bank or financial institution; or
(d) a director, officer or employee of an associate of that bank or
financial institution; or
(e) a person who, by himself or his business partner or his employee, .
regularly P.erforms the duties of secretary or accounting for that
bank or financial institution; or
(f) a firm or member of a firm of auditors of which any partner or
employee falls within the above categories. or
(g) any other person whose appointment as an independent auditor
may create conflict of interest.
Delisting
approved
auditors
of 15. An independent auditor shall be removed from office or from the
list of approved independent auditors if he-
( a) fails to compiy with the requirements prescribed in the Act and
these or
(b) fails to meet the requirements of International Standards of
Auditing.
PART VI
Notice 16. An independent auditor of a bank or financial institution shall
forthwith give written notice to the Bank, of-
6
(a) his resignation from office and the reasons thereof;
(b) his decision npt to seek re-appointment and the reasons thereof; or
(c) any qualification ofhis opinion on the financial statements.
Notification 17. An independent auditor shall notify the Bank within 30 days of
of changes in its organization structure involving the partners and staff specified
in regulation 12 and 13.
Notificati.on of
relationship
Revocation
GN. No. 102
of2001
18. An independent auditor shall immediately notify the Bank if the
finn or any partner establishes any relationship with a bank or finanCial
institution.
19. The Independent Auditors Regulations, 2001 are hereby revoked.
7
x
BENNO J. NDULU
Governor
THE BANKING AND FINANCIAL INSTITUTIONS (PHYSICAL
SECURITY MEASURES) REGULATIONS, 2008
Reguiation Title
PART I
1. Short title
2. Application
3. Interpretation

PART II
REQUlllliD MINIMUM SECURITY MEASURES.
5. Minimum requirements in security policy
6. Burglary and robbery
7. Training on security measure!)
8. Appointment of security officer
9. Responsibility of Board of Directors
10. Minimum security devices
1 i: Exemption
12; Maintenance of records
13. Reporting to the BaTilc
14. Interrial audit
15. rooms
16. Attributes of a strong room
PART III
17. Sanctions and penalties
1
financial institution;
"robbery" means taking something of value from a person by means of
force, violence or intimidation.
Objectives 4. The principal objective of these regulations is to prescribe
Minimum
requirements
in security
policy
. minimum.:.security measures to be instituted by all banks and financial
institutions for the purpose of-
( a) preventing acts of robbery and burglary;
(b) assisting in identifying and apprehending persons who comniit
acts of robbery or bm:glary;
(c) preventing injury and loss oflives to staff and customers;
(d) preventing damage or loss of assets, which could result into
major to individual in.Stitutions, the banking sector and
the national economy, and;
(e). creating security awareness among management and staff in all
banks and financial institutions thereby promoting a security
conscious working environment.
PART II
REQUIRED MINIMUM SECURITY MEASURES
5.-(1) Every bank or financial institution shall have a written
physical security policy and procedure manual, which shall be submitted to
the Bank for review and clearance.
(2) The physical security policy and procedure manual under sub-
regulation (I) shall at least address the following-
( a) security measures for transporting of cash and other valuables;
(b) measures for ensuring the safekeeping of all currency,
negotiable instruments, and other valuable items;
(c) measures for ensuring security of strong rooms/vaults;
(d) procedures for assisting in identification of persons committing
acts of robbery or burglary against the bank or financial
institution;
(e) for preserving evidence that may aid identification
and prosecution of persons committing acts of robbery or
burglary against the bank or financial institution;
(f) provide for initial and periodic training of management and
staff in their responsibilities under the .security program for
proper employee conduct during and after a robbery or
burglary;
(g) procedures for selecting, testing, operating and maintaining
appropriate security devices as specified in regulation 1 0;
(h) criteria and procedures for selecting security company or.
3
Burglary and
robbery
Training on
security
measures
Appointment
of Security
Officer
Responsibility
of
Board of
Directors
Minimum
Security
Devices
Exemption
Maintenance
of records
(h) criteria and procedures for selecting security company or
institution to provide security services to a bank or financial
institution should such services be needed; and
(i) provide for need of having security program.
6. The physical security policy and procedure manual shall
exhaustively address of burglary and robbery.
7. Every bank or financial institution shall train its Management and
staff on physical security measures and such training shall cover the
importance of security measures, including at minimmn.
(a) how the secm:jty systems and devices work;
(b) what to do in the event of robbery or burglary;
(c) how to be a.good witness;
(d) how to preserve evidence;
(e) how to deal with messages and kidnappings; and
(f) what measures to take in the evt:?nt of fire o1,1tbreak.
8. Every bank or financial institution shall appoint or designate a
suitable officer who shall be responsible fo.r day-to-day security matters of
the bank or financial institution.
9. The Board of Directors of every bank or financial institution
shall ensure effective implementation and administration of the security
program and other security issues.
10. Every bank or fmancial institution shall install at minimum
security devices as indicated in the First Schedule to these Regulations.
11. Upon prior written request from a bank or financial institution
the Bank may grant exemption from complying with the provision of
regulation 1 0.
12.-(1) Every bank or financial.institution shall maintain records on
implementation, administration and effectiveness of the security policy,
security program and other security issues.
(2) The records under sub-regulation (1) shall at least cover the
information reflected in the Second Schedule to these Regulations.
4
Internal Audit
Manual
Strong Rooms
Attributes of a
strongroom
Sanctions and
. penalties
14. Every bank or financial :institution shall include in its internal
audit manual comprehensive procedures for auditing its physical security
measures.
15. Every bank or financial institution shall ensure that its banking
halls are built in a manner that limits customer's visibility and access to cash
vaults, safes or strong rooms.
16. Notwithstanding the location or set up of banks and financial
institutions' strong rooms as prescribed under regulation 15, every bank or
fmancial institution shall ensure its strong rooms are built in accordance to
the best or international construction standards and should include-
( a) fire alarm security system;
(b) intrusion detection Security Systems;
(c) 24 hours surveillance cameras (CCTVs);
(d) secured locks and keys to avoid duplication; and
(e) Secured safes and storage equipments, which are rust free,
water resistant and fire proof.
PART IV
17. Without prejudice to other penalties and sanctions prescribed by
the Act the violation of any of the provisions of these regulations shall
attract one or more of the following sanctions and penalties-
( a) suspension of the right to establish or open new branches;
(b) suspension of the right to accept deposits;
(c) revocation ofbanking.license;
(d) suspension from office of the defaulting director, officer or
employee;
(e) perpetual disqualification from holding any position or office in
any bank or financial institution under the supervision of the
Bank; and
(f) imposition of other penalties on the bank or financial
institutions in such amounts as may be determined by the Bank
to be appropriate and reasonable;
5
FIRST SCHEDULE
(Made under Regulation 10)
MINIMUM SECURITY DEVICES
Every bank or financial institution shall install and appropriately maintain and operate in all its banking
premises, the following security devices:- . .
I. A means of protecting cash and other liquid assets, such means may include vault, .safe or other
secure space;
2. A combination lock for all safe and vault or strong room doors, with at least dual control;
3. Time locks or time delay locks for safe and strong.;.room doors, with special time for opening
and closing;
4. An alarm system or other appropriate device for promptly notifying the nearest responsible law
enforcement agency or a contracted security company or institution, of an attempted or
perpetrated robbery, burglary
5. Intruder Alarm System;
6. Surveillance cameras or any other device for monitoring movements;
7. Panic buttons for all tellers;
8. Bullet proof glass for tellers' cubicles;
9. A means of controlling unauthorised persons to access various areas in a bank or financial
institution.
6
SECOND SCHEDULE
RECORDS ON IMPLEMENTATION. ADMINISTRATION AND EFFECTIVENESS OF THE
SECURITY PROGRAM AND OTHER SECURITY. ISSUES
Every bank or financial institution shall maintain records covering at least the following:-
I. Incidences of robbery or burglary the bank or financial institution experienced during the year.
Please provide details; .
2.
1
Type of security devices the bank or-financial institution has installed. Please list;
3. Frequency during the year the bank or institution tested each of its security devices to
detennine its effectiveness and efficiency;
4. Frequency during the year the bank or financial institution canied. out maintenanc-e of its security
devices;
5. Plans the bank or financial institution has to improve testing and maintenance of security devices
in the coming year;
6. Frequency during the year the bank or financial institution carried out training of its management
and staff on security issues;
7. Type of training on security matters during the year the bank or financial institution
for its management and staff;
8. Members of management and staff who were trained during the year. Please list them by titles or
positions;
9. Plans on training of security inatters the bank or financial institution has for next year;
I 0. General annual security vulnerability assessment;
11. Any other security issues the bank or financial institution would wish to repOJ;t.
. . .. ,. _,_
-.
7
X
BENNO J. NDULU
(]overnor
./
l
Tiffi BANKING AND FINANCIAL INSTITUTIONS (PRO:MPT CORRECTIVE
ACTION) RRGTJT.ATTONS, 2008
Regulation Title
PART!
PRELIMINARYPROVISIONS
I. Short title
2. Application
3. Interpretation
4. Objectives
PART II
CORRECTIVE ACTIONS
5. Mandatory actions for adequately capitalized institution
6. Discretionary actions for adequately capitalized institution
7. Mandatory actions for institution
8. Discretionary actions for undercapitalized institution
9. Mandatory actions for significantly undercapitalized institution
I 0. Discretionary actions for significantly undercapitalized institution
11. Critically undercapitalized institutions
12. Submission ofrecapitaHzation plan
. 1
GOVERN1\.1ENTNOTICE.NO ... ; .............. published on ........ .
TIIE BANKING AND FINANCIAL INSTITUTIONS ACT
(CAP. 342)
REGULATIONS
(Made under sections 34 and 71)
TH:E BANKING AND FINANCIAL INSTITUTIONS (PROMPT CoRRECTIVE
ACTION) 2008
PART I
Short title 1. These regulations may be cited as the financial
Institutions (Prompt Corrective Action) Regulations, 2008 and shall come
into operations qri the date of publication in the Gaze tie.
Application 2. These regulations shall apply to all banks and financial
institutions.
Interpreta- 3. In these Regulations, unless the context requires otherwise-
tion
"adequately capitalized" in to a bank or financial institution,
means core capital of not less than ten percent of total risk-
weighted assets, and off balance sheet exposur-es determined in
accordance with the Banking and Financial Institutions {Capital
Adequacy) Regulations, 2008;
''Bank" means the Ban:k ofTanzania;
"bank" has the meaning ascribed to it in the Act;
"critically undercapitalized" in relation to a bank or financial institution,
means core capital of less than four percent of risk wei-ghted assets
and off balance sheet exposure determined in accordance with the
Banking and Financial Institutions '(Capital Adequacy)
Regulations, 2008;
"core capital" has the meaning ascribed to it in the Act;
"financial institution" has the meaning ascribed to it in the Act;
2
Objectives .
Mandatoxy
actions for

capitalized
institution
"signific?IJ.tly undercapitalized" in relation to a bank or financial
institution, means core capital of.less than six percent of total "risk-
weighted assets, off balance sheet exposure and capital charges for
market risk determined in accordance with the Capital Adequacy
Regulations, 2008;
"undercapitali7;ed'-; in: relation to a bank or. financial instilulion, means .
core capital of less than ten percent of total risk weighted assets
and off balance she.et exposures determined in acc.ordance with the
Banking and Financial fustitutions (Capital Adequacy)
Regulations, 2008.
( a) ensure timely and effective actions to deal with a weakening
bank or fmancial institution;
(b) enhance transparency by establishing the minimum actions
the Bank shall take in addressing identified weaknesses in
banks and financial institutions; and
(c) maintain in the Tanzanian banking sector.
PART II
<::;ORRECTIVE ACTIONS
5. Where in the opinion of the Bank, an adequately capitalized
bank or financial institution is likely to incur a loss which may result in
it bec_omingundercapitalized, or is otherwise conducting its business in an
unsound manner, the Bank shall-
(a) notify and require the bank or financial institution to submit
to the Bank, within such period as it may spedfy, a written
plan of corrective action which-
(i) identifies the existing weaknesses in the
administration or operations of the bank or
(iii)
(iv)
(v)
(vi)
determines in detail the corrective
required to remedy such weaknesses; and
offers a realistic time-table for taking such
measures.
identifies the existing weaknesses
administration or operations of the
determines in deta:il the corrective
required to remedy such weaknesses; and
offers a realistic time-table for taking such
measures.
meas_ures
in the
bank or
measures
(b) prohibit the bank or financial institution from declaring and
paying any dividends which would, iri the opinion of the
:Sank, likely cause the bank or financial institution fail to
comply with the requirements prescribed under the Banking
Discretii:nar
y actions for
adequately
capitalized
institution
Mandatory
actions for
undercapitali
zed
institution
Discretionar
y actions for
undercapitali
zed
institution
Mandatory
actions for
significantly
undercapitali
zed
institution
may-
and Financial Institutions (Capital Adequacy) Regulations,
1008;and .
(c) inteirsify its oversight and monitoring of the bank or financial
institution in accordance with the principles of risk-based
supervision.
6. In addition to actions prescribed in regulation S, the Bank
(a) .impose :civil money penalties;
(b) issue cease and desist orders; or
(c) initiate suspension or removal of any director, officer or other
person or persons in the position of management;
7. Where a bank or financial institution is undercapitalized, the
Bank shall-
(a) take the measures prescribed in regulation 5, and
(b) require the bank or financial institution to submit to the Bank
within forty five days of such notification a capital
restoration plan which:
(i) specifies steps to be taken by the bank or financial
institution to become adequately capitalized; and
(ii) specifies the levels of capital to be at:tained during
each quarter in which the plan will be in effect.
8.-(1) Irt addition to actions prescribed in regulation 7, the Bank
may appoint a suitably qualified person who shaH-
(a) advise-and assist the bank or financial institution in designing
and fulfilling the capital restoration plan; and
(b) regtilarly submit to the Bank a progress report of the plan.
(2) The Bank shall fix remuneration of the person appointed in
sub-regulation (l) and the bank or financial institution shall pay such
remuneration.
9. Where a bank or financial institution is significantly
undercapitalized, the Bank shall-
(a) take the measures prescribed in regulation 7;
(b }- prohibit all transactions with connected parties except
to the bank or financial institution of any
outstanding -credit accommodation or any transaction
specifically permitted by the Bank to facilitate
recap i taliza ti on.
(c) prohibit the bank or financial institution from awarding any
bonuses or .increments in the salary, emoluments and other
4
Discretionar
y actions for
significantly
undcrCllpitali
zed
institution
Critically
undercapitali
zed
institution
Submission
of recapitali-
zation plan
benefits of its directors and officers; and
(d) prohibinhe bank or financial institution from opening any
.branches or other expansion of operations.
10. In addition to any other actions prescribed in regulation the
Bank may-
(a) impose restrictions on the growth of liabilities or l?oth
ofthe bank or financial institution;
(b) restricfthe rate of interest on deposits; or.
(c) require the l;:>arik or financial institution to cease lending or
any other business activity.
ll.-(1) Where a bank or financial institution is cr:iticalJy
1.1ndercapitalized, the Bank shal1-
(a) take the actions prescribed in regulation 9;
(b) assist the institution in handling the crisis.
(2) Not later than ninety days after a bank or financial institution
is determined by the Bank to be critically undercapitalized, 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 exposure; and
(b) the bank or financial institution is operating in compliance
with a capital restorati6n plan accepted by the Bank.
12. Where an und_ercapitalized or significantly undercapitalized
bapk or financial institution fails to submit a recapitalization plan, or such
plan is not accepted by the the Bank shall, not later than ninety days
from the date of the original notification, deem the bank or financial
institution to be critically undercapitalizt?d and take the actions prescribed
in regulation 11.

.. __
<?> . .. - .. .
BENNO J. NDULU
Governor
. ; .necember,2008
5
I
7
/
THE BANKING AND FINANCIAL INSTITUTIONS (LICENSING)
REGULATIONS, 2008
Regulations Title
1. Sheri Title
2. Application
3. Interpretation
4. Objectives
5. Financial Capacity
PART l
PART II
CRITERIA FOR LICENSING
6. Integrity in Financial and Business Dealings
7. Character and Experience
8. Proof of Source of Capital
9. Contribution to the country,s economy
10. Disclosure of Intended Products and Services
11. Training and Succ.ession Plan :>is-
12. Feasibiiity Studies.
13. Pre-flling Meeting
14. Application Letter
15. Other Documents
16. Legal opinion
17. Principal Contact
18. Granting of Licence
PART III
APPLICATION FOR LICENCE
-;;:
1
I
PART IV
CONDITIONS NECESSARY TO BE FULFILLED AFTER GRANT OF A LICENCE
19. Submission of Memorandum and Articles of Association
20. Deposit of Paid Up Capital
21. Commencement of Business
22. Undertaking by Board
PARTV
ORGANIZATION, OWNERSHIP AND MINIMUM CAPITAL
23. Legal form of Licensed Institution
24. Board Membership
25. Changes ofDirectors and senior Management
26. Restrictions on Ownership
27. Employment of non-Tanzanians
28. Minimmn Capital
PART VI
MINIMUM CONDITIONS FOR OPENING REPRESENTATIVE OFFICE, BRANCH,
AGENCY, ADDITIONAL OFFICE OR SUBSIDIARY
29. OpeningofSubsidiary and Branch
30. Application for Opening Subsidiaries and Branches
31. Supporting Documentation
32. Activities of a Subsidiary
33. Representative Office _
34.
35.
36.
37.
38.
- - 39.
40.
41.
42.
PART VII
SCOPE OF. AUTHORITY FOR LICENSED INSTITUTIONS
Powers of a Licensed Institution
Relationship With Foreign Banks
Management Agreements
Fiduciary Functions
Additional Actjvities
Acquisition of a Company Engaged in Allied Undertakings
Investment in a Company Engaged in Allied Undertakings
Establishment of Foreign Branch or Subsidiary
Segregation of Assets
2
43. Sanctions
44. Revocation
PART VIII
~
SCHEDULES
3
,1
I
I
I
I
I
:
GOVERNMENT NOTICE NO ........................ published on .................... .
f
Short title
Application
Interpretation
_,
[CAP 342]
REGULATIONS
(Made under section 71)
THE BANKING AND FINANCIAL INSTITUTIONS (LICENSING)
REGULATIONS, 2008
PART 1
PRELIMINAR ?-PROVISIONS
1. These Regulations may be cited as the Banking and Financial
Institutions (Licensing) Regulations, 2008 and shall come into operation
on the date of publication in the Gazette;
2. These regulations shall apply to all banks and financial
institutions.
3. In these regulations unless the context requires otherwise:
"allied undertakings" include such activities as may be specified by the
Bank to be allied or related to the business of banking;
"bank" and "banking business" have the meaning ascribed to them inthe
Act;
"conflict of interest" means a situation in which someone in a position of
trust has competing professional, business or personal interest,
making it difficult to fulfil his duties impartially;
"core capital" or "tier 1 capital" has the meaning ascribed to it in the Act;
"disclosed reserves" has the meaning ascribed to it in the Act;
"financial intermediation" has the meaning ascribed to it in the Act;
"fit and proper person" means a person with t h ~ attributes required of a
member of the board of directors and management of a bank or
financial institution as per the criteria set out in the First Schedule
to these Regulations;
,.
Objectives
Financial
capacity
"licensed institution" means any institution which has been licensed by
the Bank to carry out banking business; .
"member of a family" means a parent, spouse, brother, sister, .child, uncle,.
aunt, nephew, niece, stepfather,. stepmother? stepchild,. adopter and
adopted child of the person concerned, and in case of an adopted
child his adopter; .
"person" has the meaning ascribed to it in the Act; .
"related party"
(a) in relation a body corporate means-
(i) its holding company or its subsidiary;
(ii) a subsidiary of its holding company;
(iii) a holding c o ~ party of its associates;
(iv) any person who controls the company or body
corporate whether alone or with his related party or
with other related parties of it;
(b) in relation to an individual means-
(i) any member of his family;
(ii) any company or other body corporate controlled
directly or indirectly by him whether alone or
with his related parties; and
(iii) any related party of his related parties.
"supplementary capital" or "tier 2 Capital" has the meaning ascribed to it
in the Act;
"subordimited debt" means a debt satisfYing conditions as may be
determined by the Bank for inclusion as supplementary capital;
"total capital" has the meaning ascribed to it in the Act.
( a) establish licensing criteria and conditions to ensure that only
soqnd and prudently managed banks and financial institutions
are.Iicensed tooperate in Tanzania;
(b) specify procedures that the Bank shall use to investigate and
scrutinise banking business licence applications.
PART II
CRITERIA FOR LICENSING
5.-(1) The Bank shall investigate and scrutinize the financial
capacity of the applicants.
(2) The soundness of an applica11-fs financial position, their
business affiliatm; and the financial condition of those businesses shall be
measured on-
( a) levels of capital as shown on balance sheets;
(b) the potential financial support t h a ~ t1laY be made availahl.c
shoUld the licensed institution require capital injection for
whatever reason, including losses in its operations.
5
Integrity
financial
business

Ch;'lf8.cter

(3) The Bank, shall ability of the and their
to pay their from their income,
they as.sign to tp,e1r and their net:-worthin
relation to other liapilities. .
.... (4) +t jn the interest of the Bank to e.stablish that shares in
a licem>ed are not purchaseQ. with borrowed money.
(5) (4) shall not apply to licensed bank or financial
instit:tJtio4 going .PJJP,lic, provided that t9 be purchased at the Initial
:Publio Ofter sta.ge shall P.ot be pledged as collateral.
(6).The applic::$t shall indicate and declare to the Bank sources of
fun4s f()r b11ying
in 6. The J3a,nk shall review the history of the applicant to determ.ine
and their reputation, in banking operations, financial
arid integrity in past and present business practices.
a,nd 7.-(1) The Bank shall make an assessment, in with the
criteria set out in the First Schedule to these Regulations as to whether the
propos members of the board of directors or senior management of a
proposed il.lstitution are fit and proper persons.
(2) The shall evaluate the proposed members of the board of
directors or senior management team with' respect to their experience l;l,nd
apility to manage fun4s, institute proper credit collection
accounting i11temal audit
progrru,nmes a.rld manag_ement infonnation
(3) The Bank may interview the boqrd or senior
management team members and enquire as to past performance,
reputation. and skills.
( 4) The Bank shall make an assessment of proposed board or
senior management team members regarding their fortrl.al education,
professional qualifications, work experience, reputation, crirp.inal record
and conflict of intereSt.
(5) The Bank shall requiry board or senior management team
members to comprise people of Sl)fficiently strong who are able
to oversee the licensed institution's operations effectively by having the
requisite ballking experience.
(6) The Bank further assess whether individuals proposed as
h<;>l;ll'q or ll1anagement team tl;te necessary
organizational and decision-making skills, and ability to
demonstrate reliability and sound
Proof of source

8. Every shareholder of a proposed institution shall provide to the
Bank assurance that the proposed paid up capital shall be fully paid up
prior to the Bank's issuance of a permit or an authority to commence
banking operations.
6
Contribution to
the country's
economy
9.-(1) Every application shall convey to the Bank intentions of the
proposed institution with regard to contributions towards the country's
economic development.
(2) The Bank shall take into account the extent to which lending
policies and internal controls of the applicant are designed to promote
directly or indirectly the financial or economic activities in the rural sector
including rural-based industries, mining and tourism.
Disclosure
intended
products
services
of 10. Each applicant shall indicate the financial products and
and services to be offered and how such. products and services shall be of
benefit to the country.
Training and
su_ccession plan
Feasibility
studies
11.-.(1) Every applicant shall submit a training plan for imparting
banking skills and expertise to staff indicating specific time frame.
(2) The applicant shall submit a clear plan and strategies on mode,
time and contents of the extent to Tanzanian staff shall occupy
senior management positions in the licensed institution.
12.-(1) Every applicant shall provide details of feasibility studies,
business plans and projected balance sheets, income statements and cash-
flow statements for four years.
(2) At minimum each applicant shall provide-
( a) draft policies and procedural manuals establishing how the
licensed fmancial institution shall operate in a manner
consistent With the principles established in Risk
Management Guidelines issued by the Bank;
(b) description of accounting system information and
communication technology to be used in the operations of the
institution and proposed future investment;
(c) number of employees, job descriptions of senior management
positions and an organization ch.art;
(d) of internal control procedures that the licensed
institution shall implement;
(e) narrative description of shareholders, board and senior
management and strategy for the successful operation of the
licensed institution;
(f) plans and strategy on supporting rural based activities;
(g) Sources.offunds of shareholders and subscribers;
(3) Every shail submit business plan and financial
projections prepared in accordanc_e with the guidelines provided in the
Fourth Schedule to these Regulations.
7
Pre-filing
meeting
Application
letter
Other documents
Legal opinion
Principal contact
PART III
APPLlCATION FC>It LICENCE
l3.-(1) A pre-filing meeting between promoters and the Bank
be held prior to formal submis::;ion of the application.
. (2). An application shall not by considered until such a meeting is
held or a waiver is granted.
14. A pt!f$On tp carry on b:'!.nking busine$.S in Tanzania
shall submit to t4e a of application as prescribed in the Second
Schedule to tb.eseRegula.tions.
l5. An a,pplication shall be signed by the directors of the applicant
or a person authorized by the appilcant and submitted together with-
( a) authe11ticat.ed legal documents or board rysolution authorizing
the signatory; .
(b) .one copy of each of the d9cllinents listed in the Third
Sdledule to these Regulaticms;
(c) banker's cheque for three million shillings or any other
amop.p.t as may be determined by the Bank from time to time,
to the Bank as'non-refinlciable application fee; :md
(d) evidence regarding sotirce and availability of funds to
subscribe to the capital. of the bank or financial institution.
16. The Banl:c may require the applicant to provide legal opinion
on any issue related to the of the licen-se as it may determine.
17. An applicant shall designate and inform the Bank its principal
contact and of the proposed institution.
Granting
licence
of 18.-(1) The Ba.nlc shC!J-1, within ninety days aft-er receipt of a
complete application or where further information has been required, after
receipt of such iiUQnnation, grant a licence or reject the application.
Submission of
MEMARTS
(2) In case of rejection,, the Bank shall in writing provide the
applic:ap.t an of the .ground upon which the rejection is based.
(3) A licence once remain in force suspended
or revoked as provided in Act.
PART IV
CONDITIONS NECESSARY TO BE FULFILLED AFTER
GRANT OF A LICENCE
19.-(1) An applicant shall obtain the Bank's approval before filing
and registering its Memorandum and Articles of Association with the
Registrar of Companies.
8
Oeposit of .paid
up tapital
Commencement
.
Undertaking by .
board
. , .,;/(:
(2) ){' c&py' of:iY.I:grnofkndbtn and ArtiCles qf Association registered
shall be submitted to the Bank. after being registered by the Registrar of
companies.
20. A licensed institution, not later than thirty days after grant of
shall deposit if4 paid up capital either in Tanzanian shilHngs or
ih foreign currency, in a Tanzanian. registered barik or financial institution,
in Treasury Bills or other Government securitie,s of not more than 364
held with the Bank.
21. A licensed institution shall not .commence business untU all
senior management staff have been vetted and the business premises,
security facilities, communication facilities, processing equipments,
accounting. and internal control systems are. in place arid have been
inspected or reviewed by the-.Bank.
22.-(1) Every memtJer of the board of directors of a licensed
institution shall execute a legally binding undertaking to fulfil his
obligations towards maintaiq,ing a safe, sound and profitable institution .
.: (2) Without prejudice to sub-regulation (1) a member shall also
undertake to comply with the provisiorts of the Act, Bank of Tanzania
Act, other laws, Regulations, policies,' circulars, orders and instructions
made there under.
PARTV
ORGANISATION, OWNERSHIP AND MINIMUM CAPITAL
Legal form of
licensed
institUtion
Board

Z3. A licensed. institution shall be organized in the foim of a
company lllp.ited by shares and incorporated tinder the laws ofTanzania ..
24.-.(1) The of directors of a shall have a
membership of not less than five, tWo of whom shall have banJdng or
related and, majoritY ofwlJ.om shall be non-executive.
(2) chairperson of the licensed institution)ihall be a non-
exec').ltive member
Change of . .. 25.-(1) A licensed institution shall not appoint any per$on to the
. and. post of sen..ior mamtgement 6r board of qirectors without obtaining .prior
approval of the<Bank,
Restrictions on
ownership
(2) A licensed Shall, within seven days of the departure
of any meJ:I?.l:>er,of the sehior" or board of directors, notify the
Bank of such departure together with rea:Sons thereof.
26: ... (1) A person shrui:not own or control directly or indirectly a
beneficial interest of more than twenty percent of the voting shares of any
9
Ero.ployment
bank or financialinstituti_on, as provided undyr 15 of th
Act. . ., ' . . . I
. (2) For bf (i) indirect. OW11er$hip d
1
control shall mean ownersh.iji or .Control through relaJec;l parties. . !
. . . . . . . I
of non.,
' 27. A licensed $.hali not employ a non- o:
any of such p<1ison unless it seeks and obtains prio1
.
Tani:ifli<l.!lS
. Minimum

' (2) Tq!( n4mber o:f non-Taw;anians in the shall nq1
exceed. at aily
. 28.-(l).Every licensed institution shall operations with
a core, c.apjt?l i_p. the and Finaridal (Capital
Regulatiqns, 2608 or such higher .amount as the Bank may

(2) Where is remitted in foreign currency, it shall be
. reflected in the books of the licensed institution in Tanzahian shilling
.. using rate on the date of rell.1ittance. ' .
PART VI
MINIMUM CONI)JTIONS FOR OPENING REPRESENTATNE OFFICE, BRANCH,
. . ... AGE;NCY,. . ' ; ..
Opening of
sub"sidiaries and
branches .
for
opening
:subsidiaries and
brail_ches

documentation
. .ADI)ITIONAL OFFICE OR SUBSIDIARY
A lipensed. institutioi1 shall not invest in capital expenditUre
for the purpose of open.ip.g a representative office, subsidiary, branch,
.agency or additional office in or outside TmlZallia. without the prior
a:pprqyaJ of e
30.. The B.ank may apprqve an application for opening a
subsidiary,, l:Jranch, a.gency or additional office only . after proven
successful, sound and operation ?Jid it may, aS a condition of
approval require additional capital.
31. - An a,ppliqati()n- for of a subsidiary, branch,
or an additional offi.cc bsuppor.t.ed by-
. . (a) projepted sheet ancf income statetnt;nt for the next
ihree yea,rs;
(b )-Pcinsolic;Iated .projected bahmce sheet and income statement fo:r
the next three years;
"(c) proposed organiza,tion stn,Icture;
(d) . bu.dget . and programme for the
establishment;
(e) names and particulars, including cuniculwn for persons
proposed to take up positions; and
(f) any other information 'the Bank may require.
Activities of a
subsidiary.
32. A subsidiary of licensed institution shall not
activities other than those'permitted by Section 24 ofthe Act.
Representative
office
Powers.ofa
licensed
institution
Cap. 212
Relationship
with foreign
banks
Management
igreements
FiducilU)'
fimctions
Additionai
activities
33.:-(l) A foreign bank or fmancial institution shall not op n .
representative office in Tanzania without prior approval of the Bank d=
where approval has been granted; such representative office shall no
conduct banking or finaiicial intermediation. . '
(2) .An application for establishment of a representative offic ir.:
Tanzania shall include a detailed budget for.the office,_ curriculum itae:
for the pr9posed officers and staff and other information as may "f?e'
required.by the Bank.
PART VII
SCOPE OF AUTHOIUTY FOR LICENSED INSTITUTIONS
34. A licensed institution shall have all such powers necessary to
carry out the permitted activities specified in section 24 of the . Act, in
additiop. to the general powers vested in companies incorporated under t e
Companies Act.
. 35. A _licensed institution shall not establish a relationship wifh
any correspondent bank or financial institution abroad without
approval of the Bank.
. 36. A management or technical assistance agreement involving
licensed institution shall be. subject to prior approval of the Bank an
go-yerned by the laws ofTanzania.
37. A licence institution with a core capital of not tess than twen
two billion five hundred million shillings may be authorized by the B
to. perform duties and of a trustee and such other fiduci
functions as the Bank may authorize.
38 . -(1) A licensed institution with a core capital of not less than
thirty shillings may be authorized by the Bank to-
( a} acquire up to one hundred per yent of the equity ofa company
organized primarily for the purpose of underwriting debt or
equity secUrities of other companies;
(b) acquire majority or all of the equity of a bank or 'financial
institution;
(c) in .the equity of a company which is engaged in
activities that are not allied o.r not related to bankirig; Provided
the equity investment of the bank shall not five
percent of the total subscribed share . capital of the investee
company
11
Acquisition of a
company .
. engage<! in allkd
undertakings
lnvestm,e11t in
com,pany
engaged in a!Jied
undertal,<ings
Establishment of
foreign b11\llch
or subsidiary
Segregation of
assets
(2) a licensed institution intends to deal in securities, it
shaH fo.rm a subsidiary for such purpose.
39 .. A licensed institution with a core capital. between fifteen
billion $billings and thirty billion shillings may, with the prior approval of
the Bank acquire up to one hundred per cent ofthe total subscribed share
capital of the company engaged in activities classified as allied
undertC!.kings.
_,
40. A Institutions with a core ranging ten
billion shillings to iess thm fifteen billion shillfugs may, w.lth the priQJ,".
approval of the Bank, invest in the of co[Ilpanies engaged in
activities classified as allied unde.rtakings sU:l;>ject to the limits provided in
the Banking and Financial Institutions (Credit Concentration a,nd Other
Exposure Limits) Regulations, 2008.
41. A licensed institutions with '!. core capital of not less than fifty
billion shillings may be authorized by the Bal;l,k to establish a l;)rqn,ch or a
subsidiary
42. A licerised institution author.ized by the Bank to act as an
agent shall account .for and keep money, and other valliables,
which it has received in such capacity d:uly separated from own. assets
and liabilities.
PAA'TVIII
MISCELLANEOUS.PROVISIONS
Sanctions
penalties
43. Without prejudice to the other penalties and actions prescribed
by the Act, the Bank mcty impose one or more of the following sanctions
where any ofthse provisions are contravened-
(a) penaltY 6n the licepsed institution or directors, officers or
(b)
(c)
. (d)
(e).
(f)
(g)
{h)
(i)
(j)
employees responsible for non-:compliance in such amounts
as ma_y be determ1ned by .the
prohibition from declaring or paying dividends;
of the priviiege to issue letters of credit or

suspenSion of access to the c1-edit facilities of the Bank;
suspension oflellding and investment operations;
suspension of capital expenditur-e;
of the to accept new deposits;
suspension from office of the defaulting drrector, officer. or
employee;
di$qua1ification from holding any position or office in any
licen.S,ed or financ#l institution in Tanzania; and.
revocation of banking liccnct;:.
12
Revocation
GN. No. I !8
ofl997
G) revocation of banking licence.
44. The Banking and Financial Institutions Regulations, 1997 are
hereby revoked.
FIRST SCHEDULE
CRITERIA FOR DETERMINING THE CHARACTER AND EXPERIENCE REQUIRED FOR. A
MEMBER OF THE BOARD OF DIRECTORS AND SENIOR MANAGEME}l"T OF BANK OR
FINANCIAL INSTITUTION
1. In order to determine, for the purpose of these Regulations, the character and
moral suitability of persons proposed to be members of the Board or senior management,
the B<_tnk shall have regard to the following qualities, in so far as they are. reasonably
determinable, ofthe person concerned-
( a) adequate education background;
(b) general character;
(c) professional skills, competence and soundness of judgment for the
fulfilment of the responsibilities ofthe office in question; and
(d) the diligence with which the person concerned is likely to fulfil those
responsibilities.
2. For the purpose of and without prejudice to the generality of the provisions of
paragraph (1), the Bank may have regard to the previous conduct and activities of the
person concerned in the business or financial matters and, in particular to evidence that
such person-
( a)
(b)
(c)
(d)
(e)
has committed any act
was a director or in a senior management position of a bank or financial
institution that has been liquidated or is liquidation or statutory
management;
has COIJJ.mitted or been convicted of the offence of fraud or any other
offence of which dishonesty is an element;
has contravened the provision of any law designated for the protection of
members of the public against financial loss due to the dishonesty or
incompetence of, or malpractices by, persons engaged in the provision of
banking, insurance, investment or other fmancial services;
any other criteria, which the Ba.nl< may prescribe; from time to time.
4. The following documents shall be submitted to the Bank with respect to each
proposed director and senior management team, together with other documents the Bank
may require-
( a)
(b)
(c)
(d)
(e)
detailed curriculum vitae;
certified copies of academic and professional certificates;
photocopy of the pages of the pru1sport which contain personal information
including photograph, nationality, date and place of birth and issuer of the
passport;
two certified passport size photographs; and
references from two persons who are not relatives, vouching for good
moral character, integrity and performance.
13
The Governor
Bank
P.O. Box
Dar es Salaam
TANZANIA
SECOND SCHEDULE
Re: Application for a Licence to carry out Banking business
Sir,
We, the undersigned, hereby apply for a licence to establish a bank/financial in Tanzania to be
known as with principal place of business at
The proposed institution shall have an share capital of shillings and paid up
capital ()f which shall be contributed by the following subscribers:
Shares
1.
4.
3.
4;
5.
6.
7.
8.
9.
10
11.
12.
13.
14.
15.
16..
17
18.
19.
20.
Total
Name
Subscriber
of Number Amount
14
Amount
Paid-up
Percentage of
Ownership.
We jointly and severally make a fmn conunitment to deposit a total amount of paid up capital for the
proposed institution with any bank registered in Tanzania such deposit to be made n.ot later than thirty da)IS
after grant of this
In support ofthis application, we submit herewith the documents listed in the accompanying checklist. We
certify the correctness of all the information indicated in such documents to the best of our knowledge and
belief.
We hereby authorize the Bank of Tanzania and any of its authorized or staff members to make an
enquiry or obtain any information from any source for the purpose or' determining the correctness of all the
representations made in connection.with this application or of assessing its merits.
To facilitate communication between us, we have authorized ................. ;. to represent all ofus in: regard
to this application. It is understood any notice to him shall constitute sufficient notice to all of us.
Enclosed is a cheque for three million shillings being payment of our application fee.
Yours faithfully,
15
THIRD SCH]!;DULE
(Made underRegulatiop. 15)
Checkiist of Documents
I. Letter of in the form.
2. Proposed Memorandum and Articles of Association.
3. Proof of source and availability of funds for inves.tment as capital of the proposed institution.
4. List of subscripers and proposed members of board of directors and Chief Executive Officer.
5. Proof of of every. an<;! every proposed director and senior management officer.
This includes.detaiied currk:uhim vita,e, photocopy of the of the passport which contain personal
information and two recent passport photographs.
6. Audited balance sheet, inc;:ome stitement and cash flpw for the last three years, of every subscriber
who owns five per or rp.qre of the share capital of the proposed institution engaged in business
7. Certified copies of annual returns of every subscriber who owns five per cent or more of the share
capital of the proposed institution and every proposed member <;>f the board of directors and Chief
Executive Officer together with accompanyingschedules or fmancial statements filed duri,ng the last
three years with relevant Authority.
8. Certified copies of tax returns cif every subscriber who owns five per cent or more of the share
capital of the proposed institution and every proposed member of the board of directors and Chief
Executive Officer together with accompanying schedules or financial statements filed di.rring the last
three years with relevant Tax authorities iogether with respective Tax clearance
9. Statements J;Tom two persons who are not relatives vouching for the good moral character and
financial responsibility of the subscribers who owns five per cent or more of the share capital of the
propo.sed iruititution anc:l the proposed directors and Chief Executive Officer.
10. Home Col.llltry Regulator Certification if the applicant is a foreign bank or financial institution.
11. Declaration that the fu11cis to be invested have not been obtained criminally or associated with any
criminal activity:
12. Business plans for the first four years qf operations including the strategy for growth, branch
expansion plans, dividend payout policy, career development progranune for the staff and budget for
the first year. . .
13. Projected annual balance sheets, projected annual income statements and projected annual cash flow
statements for the first four years of operation,
Brief description of economic benefits to be derived by Tanzania and the community from the
proposed banl<: or fmancial institution.
16
FOURTH SCHEDULE
General guidelines preparation of Business plan
l. The business plan should be prepared by the promoters and will be reviewed by the Bank to
determine whether approval should be given to operate a bank or fmancial institution. The plan
should identify the institution's markets, its proposed services, management capabilities, growth
plan, and strategies for profitability.
2. The business plan should present data, which accurately reflect the economic condition of the
delineated market and address statutory and regulatory changes, which may affect the
operations of the proposed bank or financial institution. Proposal should reflect the realities of
the market place.
3. A business plan should contain sufficient information to demonstrate that the proposed bank or
financial institution has reasonable likelihood of success. In this regard a detailed listing of all
assumptions such as used in preparing the business plan should be attached to the submission
(e.g. a margin analysis and cost of funds). Therefore, organizers must ensure that the business
plan projections are well supported and goals and objectives are properly defmed -on initial
submission.
Market Analysis
4. Analyse the market to be served. Describ.e the market in which you expect to provide services
in terms of economic characteristics for example size, income and industry patterns.
Include anticipated changes in the market, the factors influencing those changes, and the effect
they will have on the proposed institution. to the extent necessary for making business
decision, describe differences in the product market to be served for example, differences in the
depository and credit market. Analysis will be base.d on use of the most current economic data
available. Sources of information used are reviewed for credibility and are important in
reviewing the data.
5. Ana,lyse the competition. List the competitors inside the market to be served, those outSide who
might affect the markets served and any potential competition. Give your perception and
analysis ofthe market st:r;ategies and expected results in terms of relative strength, market shares
and prices.
6. Explain. the strategies you wiii foiiow to capture a share of each product market and the results
expect to achieve. Use a sample format to present a summary ofyoqr expectations.
Plans and Objectives
7. Review major planning assumptions used in the analysis and in setting the plans and objectives
for a new institution. Tndudt' at least the following growth, of funds and
competition.
8. Projections should show the expected asset and liahilily mix, volume for each type of services,
fixed asset investments and officer and staff remuneration. Projections must be based on the
planning assumptions which must be submitted as part of the application, m!U'ket analysis, aud
strategies discussed above. Discuss the advantages and disadvantages of the proposed
asset/liabilities mix, including a net interest margin analysis, and any actions whiCh will be
taken to reduce major risks through appropriate finids management techniques and systems.
17
9. Discuss the fonnula or basis used to arrive at the proposed capital structure and an explanation
of why the promoters believe the proposed <miOUnt is sufficient in light of given market factors,
strategies, and expenses. Promoters are expected to raise an amount sufficient to effectively
compete in the market are and adequately support planned operations addition to all
organizational expenses. The Bank may require a higher amoljnt to maintain capital adequacy
to support operations projected through the end ofthe institution's fourth year.
10. Discuss pl;;tns for raisipg capital initially e;md to financ\? groWI:h wiFl;lin first four yea,rs.
Explain how the plans the institution in cqnfor$ity wjth Bank's Adequacy
Regulations, 2001 specifically addressing compliance with the capital guidelines.
. . . '. . . . '
Credit Policy apd Procequres
II. Credit policies are a set of broad statements establishing the concept and objective parameters
for type, limits for maturities, loan pricing criteria client and collateral stand<'U"dS to be fulfilled
by borrowers, aggregate and individual concentration limits, and loan authority and procedures
for collection and charge-offs.
12 Credit manual must be prepared comprising of detailed guidelines for implementing the stated
policies. The manual generally will address types of business desired, proper borrower financial
inforniation; :credit files maintenance; enforcement of repayment and periodic review
-and other reports to be generated and distributed.
13. Credit policies and manuals need to cover all the steps of credit production and administration
which include initiation, investigation and analysis, procedures for approval, rene'Yals and
extensions, documentation, perfection of collateral, funds disbursement and recovery.
14. The structure should in principle reflect the nattll'e and scope of the intended activities of the
ipstitution and the mechanism by which the management to govern the institution and
to monit.or as to what extent the objectives or the institution are achieved.
15. The structure should show the relfitionships between the board and management. It should also
show the composition of various departments of the institution. The structure sh,ould also
indicate the number of staff envisaged for each unit. Support units such as internal audit, legal
services and others should be indicated.
16. The promoters s}lould be able to show the names of specific p<:<rsons that are envisaged to take
certain key positions in the instit1,1tion. If the persons cannot yet be identified, promoters
should indicate the requirement ciearly in terms of training, experience and personal
characteristics.
17. Promoters are required to disclose how the proposed bank or financial institution will develop
the professional and technical skills of their staff and Tanzanians will be employed, trained and
occupy positions of senior or managerial ranks in the institution. All future plans should be
indicated.
Financial Projections
18. Promoters must prepare projected balance sheets, income.statements and ca5h flow statements.
They must submit statements that reflect their assets, liabilities, and capital projections for the
number of years projected to reach profitabilityj however, a minimum of four years must be
displayed.
19. At a minimum, the intbnnation ih the following Conu:; musL bt:: provided. Additional data
should be included to reflect important element or your planned asset and liability mix for
18
example, the loan and deposit schedules might be expanded. Average balances, rather than
year-end estimates, should be used. Average balances may be computed by projecting monthly
or quarterly account balances and averaging (annualizing) for the appropriate number of periods
used.
PROJECTED BALANCE SHEET
[In'OOO Tanzanian Shillings]
PARTICULARS Year
1
Assets
Cash
Balances with the Bank
Balances with other banks
- in Tanzania
- abroad
Investment in-debt securities:
-
Treasury bills
-
Other Securities (use separate schedule]
Loans, Advances and Overdrafts (Net]
- loans and Advances
- overdrafts
-
allowance for losses (as a deduction]
Bank Pre.mise.s. Furniture and Equipment
- use separate schedule 1
Other Assets (Use separate schedule]
TOTAL ASSETS
Liabilities
Deposit liabilities other than banks
-
current accounts
- savings deposits
- time deposits
Deposits from other banks
- in Tanzania
-
abroad
-
other deposits (use separate schedule]
Total deposits
Other liabilities (use separate schedule]
Capital.
Paid-up capital:
-
Ordinary
-
preference
Reserves:
-
share premium (discoWit]
-
retained earnings
- capital reserves
-
others (specify]
19
Year Year Year
~ 3 4
Total Equity
TOTAL LIAiULlTES AND CAPITAL
Off-balance sheet conimitment:S
PROJECTED INCOME STATEMENTS
[In'OOO TanZanian Shillings]
PARTICULARS Year
1
Total Interest Income
Interest Experises
- deposits (use separate schedule]
- borrowings
- Others (specify]
Total Interest Expenses
Net Interest Income
Provision for loan losses
Bad debt written off
Non-Interest Ip.come
- foreign exchange gain/losses
- commission and fees (use separate schedule]
- others (use separate schedule]
Total Non- Interest Income.
Non-Interest Expenses
- officers' salaries and benefits
- employees' salary and benefits
- expenses
- maintenance costs
- others (use separate schedule]
Total Non-Interest Expenses
Operating Income (Losses]
Extra Ordinary Int;ome/Losses (specify]
Net Income/Loss before Income Tax
Income taxes
Net Income/Loss after tax
20
Year Year Year
2 3 4
PROJECTED CASH FLOW STATEMENTS
[In'OOO Tanzanian Shillings]
PRACTICE Year
1
Part 1
Cash flow from ()perating activities
Net Income (Loss]
Acljustments to reconcile income
- provisions
- net change in loans and advances
- gains/Loss on sale of assets
- net change in deposits
- net change in short-term negotiable
securities
- net change in other liabilities
- net change in other assets
- others
Net cash provided operating activities
Part II
Cash flow from investing activities
- dividend received
- purchases of fixed assets
- purchases of investment securities
- proceeds from sales of investment
securities
-
Net cash provided (used) by investing activities
Part III
Cash flow from financing activities
- Repa)'!llent oflong-term debt
- Proceeds from issuance of long-term debt
- Proceeded f_i-om issuance of share capital
- Proceeds from sale of fixed assets
- Payment of cash dividends
- Net change in other borrowings
- Others (specify]
Net Cash provided( used) by tlilfu'"'lcing activities
21
Year Year Year
2 3 4
Part IV
Cash imd Cash Equivalents
Net decrease/increase in cash and cash equivalents .
,.
- Cash and Cash equivalents at the beginning
of the year
- Cash atid Cash equivalents, current year-to-

gr.
Es Salaam
0 .' .
..
22
. illjJ.JJ'h:
x__
l3ENNO J. NPULU
Governor
GUIDELINES FOR BOARD OF DIRECTORS OF BANKS AND
FINANCIAL INSTITUTIONS, 2008
BANK OF TANZANIA
1.0 INTRODUCTION
1.1 The proper conduct of a bank or financial institution (herein after referred to
as banking institution) requires that the board of directors function
appropriately and at high standards. The responsibility for the oversight and
direction of banking institutions rests with the Board of directors. In
discharging his responsibilities effectively, a director, must command a high
level of integrity, honesty, competence and ability to adhere to good corporate
governance principles. From a banking industry perspective, corporate
govern!l-nce involves the manner in which the business and affairs of
individual institutions are governed by their boards of directors and senior
management, and in particular, how banking institutions:
(a) set corporate objectives;
(b) operate the bank's business on a day-to-day basis;
(c) meet the obligation of accountability to their shareholders and take into
account the interests of other recognized stakeholders;
(d) align corporate activities and behavior with the expectation that banks will
operate in a safe and sound manner, and in compliance with applicable laws
and regulations; and
(e) Protect the interests of depositors.
1.2 The Bank of Tanzania has legitimate interest in ensuring that banking
institutions operate in a safe and sound manner. This goal can be largely
attained if boards of directors effectively discharge their oversight roles. To
assist board of directors of banking institutions, the Bank of Tanzania has
decided to issue these Guidelines which spell out minimum standards required
to be observed by directors of banking institutions. The objectives of these
Guidelines are to:
(a) promote and maintain public confidence in banking institutions;
(b) establish standards for corporate governance processes and structures;
(c) provide guidance to directors for proper discharge of their fiduciary
responsibilities.
1.3 These Guidelines are issued under Section 71 of the Banking and Financial
Institutions Act, 2006 and are intended to apply to directors of all banking
institutions in Tanzania.
2.0 THE DUTIES AND RESPONSIDILITIES OF BOARD OF DIRECTORS
2.1 Duties and Responsibilities of the Board
The board of directors of a banking institution has the following major duties:
(a) Appointment ofExecutive Officers
One of the fundamental duties of the board is to appoint competent executive
officers to manage the affairs of the banking institution while ensuring that
the banking institution has an appropriate plan for executive succession. The
board is obliged to appoint officers who portray high standards of ability,
experience and integrity. A related responsibility is to remove the officers
who prove incapable of effective and sound management.
(b) Effective Oversight of the Banking Institution's Affairs
The directors of a banking institution are responsible for safe custody and
investment of depositors' funds. Consequently, they must commit sufficient
time in the oversight of affairs of their institutions. Effective oversight entails
possession of necessary skills to make sound and independent judgments and
be able to apply immediate remedial measures when need arises. The board of
directors should exercise their fiduciary duty and authority to question and
insist upon straightforward explanations from management, and receive on
timely basis sufficient information to judge the performance of management.
In connection with effective oversight, directors are also responsible to
establish and ensure effective functioning of various board committees and
management in key areas.
(c) Regulatory Compliance
The business of banking is governed by a number of laws and regulations.
Directors' responsibility in this respect is to e.stablish policies and monitor
operations to ensure their banking institutions comply with laws and
regulations. To fulfill this responsibility, directors must have a cleat
understanding of the legal and regulatory framework under which their
banking institutions operate. They must exercise duty of care to see to it that
banking and other applicable laws and regulations are not violated and take
actions to avoid the recurrence of any violations.
(d) Setting and Reviewing Policies and Objectives
The board of directors must establish policies and objectives that will direct
the activities of a banking institution in all areas of operations. It is important
that these objectives and other organization's values should be communicated
throughout the organization. The policies must clearly quantify the acceptable
risk and specify the capital required for safe operation of the banking
institution. The board of directors should ensure that senior management
adheres to objectives set by the organization.
(e) To develop a strategic plan
The board of directors in collaboration with management is obliged to prepare
a strategic plan and adopt policies to achieve it. A strategic plan is a roadmap
to assist a banking institution to achieve its mission and objectives. The plan
should be reviewed whenever business and economic conditions call for
.2
change. The plan and the institution's mission m general should be
communicated to all employees.
(f) To ensure arm's length transactions with insiders
Banking institutions should have policies that guide transactions with insiders
and their related parties. Such policies should ensure, through adequate
procedures, that transactions with related parties, in particular with
shareholders, executive officers or members of the board and other. related
parties, are made on an arms-length basis and are not made on terms contrary
to the interest of the banking institution, its shareholders and depositors ..
Financial transactions with insiders and their related parties must be beyond
reproach and in full compliance with regulations concerning such transactions.
The board of directors should monitor compliance with policies and
procedures relating to insider transactions on a regular basis.
(g) Setting and enforcing clear lines of responsibility and accountability.
Boards of directors should clearly define the authorities and key
responsibilities for themselves as well as senior management. Clear lines of
responsibility are important in hastening implementation of decisions and
appropriate response. The executive management must be aware that they are
ultimately responsible to the board of directors for the performance of the
banking institution ..
(h) Maintenance of Adequate Capital
Directors are responsible for ensuring that the banking institution is adequately
capitalized at all times. This goes beyond meeting the minimum capital
required by the Banking and Financial Institutions Act, 2006. The board of
directors should also plan for capital needs commensurate with banking
institution's risk profile and projected future activities.
(i) Effective utilization oflnternal and External Auditors' work.
The board of directors should recognise and acknowledge that independent,
competent and qualified auditors, as well as internal control functions
(including the compliance and legal functions), are vital to the corporate
governance process in order to achieve corporate objectives. The board of
directors should utilize the work of the auditors as an independent check on
the information received from management on the operations and performance
of the banking institution.
The internal and external audit functions are of great importance in enhancing
the effectiveness of the board of directors and senior management by-
1. Utilizing, in a timely and effective manner, the findings and
recommendations of auditors;
3
2. Ensuring independence of the internal auditor through his reporting to the
board or board's audit committee;
3. Engaging external auditors to, among other things, assess and report on
the effectiveness of internal controls; and
4. Requiring timely corrective measures by management of problems
identified by auditors.
G) To ensure that the banking institution has a beneficial influence on the
economy of its community.
One reason for approving banking institutions' charters is to meet specific
community needs. Directors have a continuing responsibility to the
community to provide services that will be conducive for well balanced
economic growth.
2.2 Responsibilities and Legal Liabilities of Directors
Besides "the joint responsibilities of the board of directors-:
(a) each director is liable for non compliance with a memorandum of
undertaking to ensure safe and sound operations of his banking
institution.
(b) each director is responsible for complying with secrecy provisions of the
Banking and Financial Institutions Act 2006.
(c) each director should not involve himself in fraud or deliberate
mismanagement.
(d) each director is responsible for ensuring that all credit facilities granted to
him or his related parties by the banking institution to which he is a
member of the board of directors, are given at an arm's length basis.
(e) each director is responsible for inhibiting himself from attending a
meeting which intends to deliberate or approve a transaction in whicl:i he
is the beneficiary.
(f) a director may be fined, removed from office, or disqualified from
holding any position or office in any banking institution in case of
violation of provisions of the Banking and Financial Institutions Act,
2006 or regulations issued thereunder.
(g) each director has a duty of care and loyalty to the banking institution's
interests. Accordingly, a director is liable for damage caused when he
breaches a duty of care.
(h) a director is liable for non-diligent and negligent performance of the job
of director.
(i) each director is responsible for exercising rational and independent
judgment.
G).
2.3 Board meetings
4
(a)
(b)
The board of directors should meet at least quarterly, to discuss the business
affairs through reports as submitted by management in writing in a form
prescribed by the board of directors.
The reports should include, among others-
(i) a summary of balance sheet, income statement and performance
review against the budget, business plan, peers and the banking
sector;
(ii) the extent to which a banking institution is exposed to various
risks. At minimum the review should cover credit, liquidity,
interest rate, foreign exchange and operational risks;
(iii) Review of loan portfolio including problem credit facilities, related
part transactions and concentration of credits;
(iv) transactions that are significant with respect to the business of the
banking institution if designated as such by the senior management,
in line with the rules set down by the board of directors.
(v) the operations of the banking institution in the financial market
and, in its "nostro" accounts.
(vi) litigation issues
(vii) human iesources issues
(viii) internal control issues
(ix) major changes in assets and liabilities as well as details regarding
provisions for non performing assets; and
(x) compliance with laws, regulations, circulars, internal policies and
procedures.
(c) At least annually, the board of directors should set implementation targets
which are consistent with the banking institution's mission and the business
plan.
2.4 Attendance at meetings of the board of directors
(a) Every member of the board should attend at least seventy five percent
of the board meetings of the banking institution in each year. Each
banking institution is required to review each year the suitability of a
director who has failed to comply with the seventy five percent
attendance rule, without valid reasons.
(b) A director who has, whether directly or indirectly, a personal interest
in an existing or proposed transaction of the banking institution that is
5
brought for discussion before the board of directors, or in a decision
that the board of directors is about to make, should declare his personal
interest as aforesaid at the opening of the meeting of the board of
directors at which the transaction is to be discussed.
(c) A director who is an interested party as aforesaid in paragraph (b)
should not attend the meeting that discusses the matter that concerns
him, and should not be counted for purposes of determining a quorum
required for that discussion.
2.5 Evaluation of the Board of Directors
Board of directors should regularly review its mix of skills and experience and
other qualities in order to assess the effectiveness of the board and its
committees. Such review should be by means of peer and self-evaluation of
the board as a whole, its committee and the continuum of each and every
director including the chairman. The evaluation should be conducted annually
and the report thereon should-be made available to the Bank when requested.
2.6 Immediate reporting to the Bank
A report should immediately be submitted to the Bank if there occurs-
(a) A change in the composition of the board of directors or its
committees, including a change resulting from the resignation,
dismissal or demise of a director. The report should comprise a
statement by the Chairperson of the board of directors regarding the
reasons for the resignation or dismissal, as well as a signed statement
by the director regarding the reasons for his resignation or dismissal;
(b) Exceptional events that constitute a departure from the proper conduct
of banking business, or infringement of the provisions of the law, or
substantive violation of the interests of the institutions' stakeholders.
2.7 Terms of appointment, remuneration and retirement
The board of directors should put in place a policy spelling out clearly the
appointment, remuneration, and retirement terms for the members of the
board, of their institutions.
2.8 Risk management
(a)At least annually, the board of directors should review all policies relating
to various types of risks and determine the ceilings of exposure permitted
in the various risks and activity segments. Similarly, it shouldreview and
approve the organizational arrangements for managing and controlling the
institution's overall exposure to various risks in line with the Risk
Management Guidelines 2005 issued by the Banlc
6
(b )The board of directors should ensure that it is informed of all new activities
and approves strategic activities of the banking institution after it has clear
understanding of the. following:
(i) the risks involved in that new kind of activity,
(ii) the mechanisms the banking institution will use for the managing,
measuring and controlling of the risks,
(iii) the quantitative restrictions required in connection with the risks
embodied in the new activity,
(iv) the appropriate personnel, sources of fmance, and technical and
technological infrastructure for the new activity, and;
(v) the management of the new activity and whether can be adapted to the
existing situation in the banking institution.
3.0 COMPOSITION AND CONDUCT OF THE BOARD OF DIRECTORS
3.1 Number of members of the board of directors
A board of directors of a banking institution should be composed of the following:
(i) membership of not less than five, majority ofwhom must be non-executive
and have banking or related experience.;
(ii) The chairperson of the board must be a non-executive director;
(iii) Each banking institution should appoint at least two Tanzanians to its
board; and
(iv) A board member should not simultaneously serve as a board member or in
any executive capacity in other banking institution in Tanzania;
(v) To avoid conflict of interest, no individual who is a member of National
Assembly or House of Representatives or local government authority
should be appointed as director of a banking institution.
3.2 Ownership and Management
(i) No individual shareholder with a five per centum or more shareholding
in a banking institution should form part of management of the
banking institution.
(ii) No individual shareholder who had a significant interest in a failed
banking institution should acquire a significant interest in a
7
banking institution. Significant interest means a holding of five per
cent or more of the voting shares of a bank or financial institution.
(iii) No individual who was involved in the management of a failed
banking institution should be allowed to hold a position of
accountability in a banking institution.
3.3 Practicing Professionals
(i)
(ii)
In order to tap expertise of practicing professionals, a banking
institution may appoint such professionals as board directors
provided that they are not employed by or partners in a firm which
is engaged to conduct audit of or consultancy work for the banking
institution;
Practicing professionals who are appointed as directors of banking
institutions should exercise the highest degree of integrity and
professionalism. They must always avoid being involved or
appearing to be involved in any self-serving practices and conflict
of interest situations while serving as directors of a banking
institution.
3.4 Criteria for Fit and Proper Persons
Every banking institution should ensure that only fit and proper persons are
appointed to their boards. In assessing fitness and propriety of a person to be
appointed to the board of directors, every banking institution must consider his
honesty, integrity, diligence, fairness, cqmpetence, capability and financial
soundness. The following criteria should be used to determine a fit and proper
person-
(i)
(ii)
(iii)
(iv)
(v)
Possession of formal qualifications and management or business or
professional experience of at least five years, preferably, possession of
a proven track record in banking industry or related activities;
non- conviction in any criminal
non-involvement as a member of the management of board of
directors, with a banking institution whose registration or license has
been revoked or cancelled or which has gone into liquidation.
(absence of default record of any credit accommodation taken by him
or his related parties from any banking institution.
Absence of banlauptcy record or suspension of payments or
composition with his creditors.
3.5 Permanent Conflict oflnterests- Disqualification from Serving
(a) A person should not serve as a director if his business or permanent
occupation creates a permanent conflict of interests between him and the
8
institution, or if it is reasonable to assume that such conflict may exist
permanently.
(b) A person shall not be appointed a director if he was a director of another
banking institution and less than a year has passed since he ceased to serve
as a director of that institution unless the permission of the Bank is
obtained.
3.6 Undertaking by a director
(a) After receipt of the Bank's approval on the appointment or
reappointment of a director, the director concerned shall make a
written undertaking, which should be submitted to the banking
institution for onward transmission to the Bank undertaking:
(i) that he has read these guidelines and undertakes to act in
accordance with it.
(ii) That he shall fulfill his obligations towards maintaining a safe,
sound and profitable banking institution and to comply with the
provisions of the Banking and Financial Institutions Act, 2006
Bank of Tanzania Ayt, 2006, Foreign Exchange Act, 1992,
regulations and directives issued by the Bank from time to time.
4.0 BOARD COMMITTEES.
4.1 Types of Committees
While the final responsibility and accountability of the affairs of the banking
institution rest with the board of directors it may delegate some of its
responsibilities by forming committees. The board of directors should form an
audit committee and such other committees, as it may be necessary for
discharge of its functions.
4.2 Composition of Board committees
(a) The b o a r ~ of directors should specify the composition and functions of
every comrmttee formed and the terms and conditions upon which the
committee would exercise its functions; and
(b) The board committees should consist solely of non-executive directors,
and the number of committee members should not be less than three.
9
THE BANK.J;NG ANI) FINANCIAL INSTITUTIONS (LIQUIDITY MANAGEMENT)
2008
Regulation Title
1. Short Title
2. Application
3. Interpretation .
4. Objectives
PART I
PART II
LIQUIDITY REQUIREMENTS
5. Liquidity management policies
6. Contingency plans
7. Minimum Liquid Asset Ratio
8. Loans to Deposits Ratio
9. Bahinces abroad
10. Liquidity report
.11. Maturity profile
12. Compliance on solo and consolidated basis
PART III
13. sanctions and Penalties
14. Revocation
I
,.
,.. .
GOVERNMENT NOTICE NO ................... published-on ............ .
-
(CAP. 342)
REGULATIONS
(Made under section 71)
THE BANKING AND FINANCIAL INSTITUTIONS (LIQUIDITY MANAGEMENT)
REGULATIONS, 2008
Short title
Application
PART I
PRELIMJNARY PROVISIONS
1. These Regulations IU.ay be cited as the Banking and Financial
Institutions (Liquidity Managert:ent) Regulations, 2008 and shall come into
operation on the date of publication in the Gazette.
2. These Regulations shall apply to all banks and financial
institutions.
Interpretation "3. Irt these Regulations, unless the context requires otherwise-
" Act" means the Banking and Financial Institutions Act;
"Bank" means the Bank ofTanzania;
"demand liabilities" means current account deposits, time deposits, savings
deposits of banks, interbank borrowings payable at call or
within seven days, banker's cheques and drafts issued, payment
orders and transfers payable, foreign currency deposits and
borrowings, other deposits, off balance sheet commitments
maturing within one year and such other liabilities as the Bank may
determine;
2
Objectives
Liquidity
management
policies
"fimincial institution" has the meaning ascribed to. it in the Act;
"liquid .assets" _means cash on hand, current account balances and currency
deposits with the Bank as shown in the books of the Bank, balances
with other banks ~ t h maturities of seven d a y ~ or less or
withdrawable o:p. demand, cheques and items for clearing? foreign
currency notes and coins including gold, treasury bills and oth(!r
government securities maturing within one.year and as long as they
are unencumbered, commercial bills and promissory notes
discounted at the Bank and such other assets as the Bank may
determine;
"off-balance sheet exposure" has the meaning ascribed to it in the Act.
4. The objectives of these regulations are to-
(a) ensure that banks and financial institutions have in place
liquidity management policies adequate to enable them meet
all known obligations and commitments and plan for
unforeseen developments;
(b) ensure that banks and financial institutions implement liquidity
management standards t).iat conform to established
international norms; and
(c) maintain public coirlidence by ensuring that banks and
financial institutions have sufficient iiquidity at all times.
PART II
LIQUIDITY REQUIREMENTS
5.-(1) The board of directors of a bank or financial institution shall
adopt sound and prudent liquidity management and funding policies
consistent with the principles set out in the Risk Management Guidelines,
2005.
(2) The policies under sub-regulation (1) shall at least include-
( a) delegation of responsibility for management of overall
liquidity of the bank or financial institution to a specifically
identifiable group, which may be known as the Asset and
Liability Management Committee;
(b) establishment and implementation of effective techniques and
procedures to identify, measure, monitor and manage liquidity
risk both in individual currencies and overall;
(c) analysis of net funding requirements under alternative
scenarios; and
(d) contingent liquidity planning.
3

plans
(3) The liquidity management and funding policies under sub"
regulation (1) shall be reviewed, at least annually, or more frequently as
may be .necessary to ensure it remains appropriate and prudent.
6.-(1) A barik or financial institution shall submit to the Bank a copy
of the contingency plans approved by its board of directors for dealing with
liquidity stress scenarios.
(2) Contingency plans under sub-regulation (1) shall, at least,
. include-
(a) identification of a crisis management team and provision to
notify the Bank promptly of emerging liquidity problem;
(b} procedures to ensure that all necessary information is available
to enable senior management to make quick decisions
including mechanisms to facilitate constant monitoring and
reporting of signals;
(c) procedures for funding cash flow shortfalls in crisis situations,
including. .expected sources of funds, an assessment of the cost
of alternative funding strategies. and the impact on the capital
of the bank or financial institution;
(d) communications strategies to deal with staff, customers and
the public, including the media.
Minimum 7. Every bank or financial institution shall maintain minim lim
Liquid Asset liquid assets amounting to not less than twenty percent of its demand
Ratio liabilities.
Loan
Deposits
Ratio
Balances
abroad
to 8.-(1) Every bank or financial institution shall maintain at all times
its gross loan portfolio at levels not exceeding--eighty percent of its total
deposit liabilities.
(2) Total deposits under sub-regulation (1) shall include local and
foreign currency deposits of customers, banks financial institutions arid
special deposit.
9. Balances with banks abroad may be included in liquid assets
only after netting any amounts owed to that bank provided that they are-
( a) withdrawable on demand or mature within seven days; and
(b) denominated in a currency which is freely convertible and
transferable in international exchange markets.
4
Liquidity
report
Maturity
profile
Compliat1c:e ou
solo and
consolidated
basis
10. A bank or financial institution shall submit to the Bank
liquidity report, "in a prescribed form not .later than the second Monday .
following the reference week stated in the report.
11. A bank or financial institution shall prepare a maturity profile
of its assets and liabilities in. the format and frequency prescribed by the
J?ank.
12. Where. a bank or financial. institution directly or indirectly
controls another bank ur financial institution, the requirements of these
regulations shall be met hy each bank or financial institution on a solo
basi:::, and the parent company shall also comply on a solo and consolidated
basis.
PART III
Sanctions
penalties
and 13. Without prejudice to the other penalties and actions
Revocation
GN. No. 104
of2001
prescribed by the Act, the Bank may impose one or more of the following .
sanctions where any of the provisions of these Regulations are
contravened-
(a) imposition of penalties on the bank or fmancial institution or
directors, officers or employees responsible for the violation
in such amounts as may be determined by the Bank;
(b) prohibition from declaring or paying dividends;
(c) suspension of the privilege to issue letters of credit or
guarantee;
(d) suspension of access to the credit facilities of the Bank;
(e) suspension of lending and investment operations;
(f) suspension of capital expenditure;
(g) suspension of the privilege to accept new deposits;
(h) revocation of banking licence;
(i) suspension from office of the defaulting director, officer or
employee;_ and .
G) disqualification from holding any position or office in any
bank or financial institution.
14. The Liquid Assets Ratio Regulations, 2000 are hereby
revoked.
~ ~ ~ ~ -,(
BE'MW-.J.NDULU;
Governor
5
THE BANKING AND FINANCIAL Il'-.'ST!TUTIONS (MANAGEMENT OF RISK
. ASSETS) REGULATIONS, 2008
;_,
Regulation Title
PART I
1. Short title
2. Application
3. Interpretation
4. Objectives
PART II
MANAGEMENT OF RISK ASSETS
5. Risk Management policies
k Extensions or roll-overs
7. Charge-off of credit accommodation
8. Review of credit policy
6
~
9. Quarterly review arid classification
I 0. Past due loans .. and overdrafts.
PART III
CLASSIFICATION OF LOANS AND OTHER RISK ASSETS
11. Classification criteria
12. Credit accommodations fully secured by cash or near cash it-ems
13. Classification by quantitative criteria .
14. Classification by qualitative criteria
15. Current classification
16. Especially mentioned cla-ssification
17. Substandard classification
18. Doubtful classification
19. Loss classification
20. Multiple credit accommodations
21. Security consideration
22. Classifi-cation of other property and assets
23. Classification of receivables
24. Inter-office or inter-branch items
25. Classification of off balance sheet commitments
PART IV
PROVISIONING FOR LOSSES
26. Special non-distributable reserve
27. Minimum provisions
28. Valuation of other assets
29. Review by Bank
PARTV
30. Placing on non-accrual basis
31. Quarterly reports
32. Approval for annual provisions.
34. Revocation
2
GOVERN!vffiNT NO ......................... published on ............... .
. .:..,
(CAP. 342)
REGULATIONS
THE BAKING FINANCIAL INSTITUTIONS (MANAGEMENT OF RISK ASSETS)
REGULATIONS, 2008
Short title
Application
PART I
1. These be cited as the Banking Financial Institutions
(Management of Risk Assets) Regulations, 2008 and shall come into operation
on the date of publication in the Gazette.
2. These Regulations shall apply to all banks and financial institutions.
Interpretation 3. In these Regulations unless the context otherwise requires-
"bank" and "banking business" have the meaning ascribed to them in the Act;
"credit accommodation" means loans, overdrafts and advances, leasing,
acceptances, performance and bid bonds, letters of credit, guarantees,
foreign excharige contracts or any other form of a direct or indirect
financial obligation including interest due and unpaid to a bank or
"loro account" means a foreign currency account maintained in. a local bank or
financial institUtion by a bank in a foreign country and is used
primarily to facilitate foreign exchange transactions between the
3
. !
!
Objectives
Risk
management
policies
respective banks;
"non performing loan" means any credit accoinmodation for which contractual
repayment is ninety days or more past due or is classified as
substandard, doubtful or loss under the criteria prescribed in Regulation
11, and is placed on a non accrual basis;
"nostroaccount" means a foreign currency account kept by a domestic bank or
financial institution in a foreign bank abroad;
"off balance sheet items" hasthe meaning ascribed to it in the Act;
"other risk assets" means the total assets of a bank or financial institution minus
its loans, cash, gold, amounts due from the . Bank, Government
securities, securities issued by the Bank, Government securities issued
by other Government institutions which are unconditionally guaranteed
by the Government as to repayment of principal and interest at maturity
date, bank premises, furniture and equipment, and such assets as
may be declared by the Bank as non-risk;
"past due loans" has the meaning ascribed to it in R-egulation 1 0;
"related parties" may be used interchangeably with "connected party" and has
the meaning ascribed to it in the Act;
"unsecured loans" means credit accommodations granted without security or
when granted against security, any part of such credit accommodation
which at any given time exceeds the market value of assets comprising
the security given or which exceeds the value determined by
independent professional valuer and approved by the bank or financial
institution whenever it deems that no ascertainable market value exists
for the said assets ..
4. The objectives of these Regulations are to ensure that banks and
financial institutions have-
( a) adequate credit and investment policies to identify, measure,
monitor and manage the risk arising from their businesses, in
particular to ensure timely and adequate actions are taken on
problem assets;
(b) maintain risk management standards that conform to established
international norms; and
(c) promote and maintain public confidence in the banking sector.
PART IT
MANAGEMENT OF RISK ASSET'S
s.-(1) the board of directors of every bank br institution
shall ensure that appropriate policies on risk management are in place and
shall be fully responsible and acco1:1ntable for the execution of policies.
(2) The minimum contents of the policies .under sub-regulation (I)
4
Extensions or
. roll-overs
Charge off of
credit
accommodatio
n
Review of
credit policy
Quarterly
review and
classification
Past due loans
and over drafts
shall include.
(a) a credit policy establishing a framework for making credit and
investment decisions consistent with principles set forth in the
Risk Management Guidelines, 2005.
(b) a system for measuring, monitoring, internal risk rating and
provisioning consistent with principles -set forth in the Risk
Management Guidelines, 2005.
6. The credit policy referred to in regulation 5 shall ensure that any
matured or expired outstanding loan is not extended, renewed or rolled over,
until all interest and charges due plus at least ten percent of the principal are
paid. .
7. At every quarterly review, every bank or financial institution shall
charge off aU. credit accommodations and other risk assets that have remained
in the loss category for four consecutive quarters.
8. The board of directors of a bank or financial institution shall
review at least annually, the credit policy and submit it to the Bank, not later
than thirty days after its approval by the board.
-9.-(1) Every bank or financial institution shall review classify its
outstanding loans and other risk assets including contingent accounts or off
balance sheet items at least once every quarter.
(2) A bank or financial institution shall not upgrade a classified credit
accommodation into a better category without prior approval of the Bank.
(3) Notwithstanding sub-regulation (2) a bank or financial institution
shall downgrade credit accommodations which have demonstrated
weaknesses that warra.11t downgrading according to criteria specified in these
Regulations.
10.-(1) A credit accommodation with a specific repayment date shall
be considered past due when any contractual due has not been made.
(2) An overdraft or any other credit accommodation without the
specific payment due date shall be considered past due if-
( a) the credit accommodation exceeds-customer's borrowing limit;
(b) the customer's borrowing tenure has expired;
{c) deposits are insufficient to -cover interest calculated and due for
the period;
(d) a bill has been dishonoured; or
(e) a bill or account is not paid on due date.
(3) Loans which are payable in installments are considered past due
in their entirety if any of the installments have become due and unpaid for
5
Classifica-
tion criteria
Credit
accommodatio
ns fully
secured by
cash or near
cash items
Classifi-
cation by
quantitative
criteria
.Classification
by qualitative
criteria
Current
classification
thirty days or more.
PART III
CLASSIFICATION OF LOANS AND OTHER RISK ASSETS
11.-(1) Credit accommodations shall be classified into the following
five categories-
( a) current;
(b) especially Mentioned;
(c) substandard;
(d) doubtful; and
(e) loss.
(2) Non-performing credit accommodation shall include substandard,
doubtful, loss categories and shall be classified by bank and financial
institution according to the criteria prescribed in these Regulations.
(3) A bank or financial institution shall apply both qualitative and
quantitative criteria to all credit accommodations.
12. Credit accommodations which are fully secured, both as to
principal and interest, by cash or near cash such as treasury bills and notes
and bonds or certificates of indebtedness issued by the. Bank, shall be
classified on the same basis as other credit accommodation save that
provision against such accommodations would be required only where the
security itself is the object of an adverse claim.
13. Outstanding credit accommodations reviewed by quantitative
approach shall be -classified as follows:
Number of Days Past Classification
Due
91-180
181-270
271 and more
Substandard
Doubtful
Loss
14. In addition to classifying credit accommodation as either current
or past due, every bank and financial institution shall review qualitatively and
classify such credit accommodations into current, especially mentioned,
substandard, doubtful or loss.
15. Current credit accommodations are those which do not have a
greater than normal risk and do not possess the characteristics and
weaknesses of classified credit accommodations as described in these
6
Especially
mentioned
classification
weaknesses of classified credit accommodations. as described in these
regulations.
16. Especially mentioned credit accommodations are those that are
superior in quality to those classified as substandard, but which are
potentially weak and thus require closer management supervision and
inclu,des-
( a) credit acc()mmodations with technical defects and collateral
exceptions such as-
(i)
(ii)
(iii) .
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
of
.un-located collateral file and documents including but
not limited to title papers and deeds, mortgage
instruments and promissory notes;
improper execution of supporting deed of assignment,
pledge agreement or real mortgage;
. unregistered mortgage instruments;
collateral not covered by appraisal reports or appraisal
whose reports are unallocated;
credit accommodations where cmiesponding promissory
notes or credit agreements were signed by a person other
that the authorised officer of the borrowing firm;
credit accommodations secured by property the title to
which bears an un cancelled lien or encumbrance;
collateral not insured or with inadequate or expired
insurance coverage;
credit accommodations to companies not covered by
authenticated board resolutions authorizing the
borrowings; and
unsecured credit accommodations granted to Directors
and officers contrary to the provisions of subsection (2)
section 26 of the Act.
(b) credit accommodations not supported by up-to-date and
adequate financial statements or credit information and they
include:
(i) credit accommodations renewed, renegotiated or
restructured without updated financial statements or
income tax returns; and
(ii) credit accommodations without credit investigation. or
analysis reports or updated credit information
independently verified by the lender.
(c) credit accommodations that need the attention of management
for special or corrective action or both, and they include:
(i) credit accommodations wherein efforts to collect are
not evident or are deemed inadequate;
7
Substandard
classification
(ii) credit accommodations granted beyond the
discretionary limit of the approving authority;
(iii) drawings or availments against an expired credit line or
drawings or availmcnts without prior approval of the
appropriate executive Officers;
(iv) credit accommodations to borrowers who failed to
comply with conditionalities of the credit
accommodations such as failure to operate the account
satisfactorily.
(v) credit accommodations to firms with profitable
operations but belonging to a distressed industry;
(vi) combined indebtedness to the bank of a group of
persons, firms or companies that are related, linked or
conneCted to each other through common ownership,
management or control or through common family or
business interest where twenty-five per cent or more of
such combined indebtedness is past due;
(vii) credit accommodations to borrower who frequently
fails to respond to bank calls, visits or demand notices
to pay;
(viii) credit accommodatioiis the repayment of which may be
endangered by economic or market conditions or other
.factors which in the future may adversely affect the
borrowers' ability to meet scheduled repayments such
as declining or fluctuating operation, illiquidity,
increasing leverage trend or declining market prices
over a given period.
17.-(1) Credit accommodations classified as substandard are those
with weaknesses that jeopardise their liquidation such as weakness inherent
in loans especially mentioned which are more severe or which have
remained uncorrected over a period of ninety days or more.
(2) The weaknesses under sub-regulation (1) may include adverse
trend or developments of financial, managerial, economic or political nature
or a significant weakness in collateral.
(3) The basic characteristics of credit accommodations under
substandard classification are as follows-
( a) credit accommodations which are non-performing;
(b) credit accommodations which possess the technical defects and
weakness of loans especially mentioned and which have
remained uncorrected for ninety days or more since the
occurrence of deficiency;
(c) credit accommodations, whether current or past due, which have
8
Doubtful
classification
Loss
classification
become unsound due to unfavourable results of operations of the
borrower, significant under-capitalisation of the borrower, or
absence of favourable track record showing borrower's financial
responsibility;
(d) term loans to borrowers whose cash flows are not sufficient to
meet. currently maturing debts and or overdrafts whose funds
had been diverted or proceeds of the financed projects are not
used to repay the amount outstanding.
(e) credit accommodations to distressed industries repayments of
which are imperiled.
18. Credit accommodations having the following basic
characteristics shall be classified as doubtful.
(a) credit accommodations classified as substandard in the last
quarterly review without any significant improvement since
then in terms of full payment of interest due among other
things, except where such loans are well-secured by legally
enforceable collaterals, standby letters of credit and irrevocable
guarantees of top rated international banks, or the government
and that legal action has commenced and realization of
collateral within one year or enforcement of the gi.mrantees
within thirty days from demand can be expected;
(b) unsecured credit accommodations classified as substandard in
the last quarterly review which have been extended, renewed or
rolled over without repayment. of all interest and charges due
and at least ten per cent of the principal;
(c) past due loans secured by collaterals such as inventories,
receivables, equipment, and other chattels which have declined
in value materially, without the borrower offering additional
collateral and the borrower's financial condition does not justify
unsecured lending;
(d) past due loans secured by real mortgage title to which property
is subject to an adverse claim rendering settlement of the loan
through foreclosure doubtful or unviable;
(e) credit accommodations whose possibility of loss is extremely
high but for certain important and reasonably specific pending
factors that may work to the advantage and strengthening of the
asset, its classification as an estimated loss is deferred until a
more exact status is determined.
19. Credit accommodation having the following basic characteristics
shall be classified as loss-
( a) credit accommodations classified as doubtful in the last
9
Multiple credit
accommodatio
ns
Security
consideration
Classification
of other
property and
assets
Classification
of receivabl.es
quarterly review without any significant improvement since
then;
(b) credit accommodations to borrowers whose whereabouts are
unknown, or who are insolvent, whose earning power is
permanently impaired and the guarantors or co-obligors are
insolvent, or that their guarantees are not financially supported;
and
(c) credit accommodations considered as absolutely uncollectible.
20. Where a bank or financial institution has granted more than one
credit accommodation to a borrower or group of related parties, all such
credit accommodations shall be assigned the least favourable classification
given to any one of those credit accommodations.
21. The criteria for classifying credit accommodations shall apply
regardless of the type of security held.
22. Other property and assets owned or acquired in settlement of
loans previously contracted shall be classified as substandard except the
following which shall be classified as loss-
( a) the excess of the book value of the asset over the fair market
value determined by independent professional valuation;
(b) the entire book value of an asset or property whose title is being
contested in court or is definitely lost to another party;
(c) the entire book value of an asset or property which is not
saleable;
(d) the entire book value of an asset or property which remains
unsold for one year or more in the case of personal or movable
property three years or more, in the case of real property;
(e) the entire book value of an asset or property which a bank or
financial institution is deprived of actual possession or
beneficial ownership or over which the bank or financial
institution is unable to exercise the usufructuary right; and
(f) the amount of accrued interest and collection expenses which
were capitalized to form part of the value of the asset.
23.-(1) All receivables, except accrued interest receivable shall be
classified as follows-
Number of days past due
31-60
61-90
91-180
181 or more
10
Classification
Especially mentioned
Substandard
Doubtful
Loss
Inter-office or
inter-branch
items
Classification
of off balance
sheet
commitments
Special non-
distributable
reserve
Minimum
provisions
(2) Sundry debts and other accounts receivable arising from loans
shall have the same classification as their respective loan accounts.
24. Inter-office or inter-branch items, suspense accounts, frauds,
shortages, uncleared effects, miscellaneous intangible assets including
unlocated differences in nostro and loro accounts, and other assets not
specially treated in these Regulations, shall be classified as follows:
Number of days past due Classification
31-60
61-90
91-180
181 or more
Especially mentioned
Substandard
Doubtful
Loss
25.-(1) In undertaking review and appraisal of its off balance sheet
commitments such as guarantees, indemnities, performance bonds,
commercial letters of credit, differed letters of credit, and other contingent
items, every bank and financial institution shall, whenever practicable,
observe the same procedure and regulations prescribed for loans.
(2) The off balance sheet items under sub-regulation (1) shall be
grouped into unclassified and classified items.
(3) For the purposes of these Regulations classified items are those
which possess well-defined weaknesses and are subdivided into items
especially mentioned, substandard, doubtful and loss.
PART IV
PROVISIONING FOR LOSSES
26.-(1) Notwithstanding International Financial Reporting Standards,
every bank or financial institution shall classify credit accommodations and
other assets and establish specific provisions not less than those specified in
these Regulations.
(2) Where the provisions computed in accordance with International
Financial . Reporting Standards are less than those required by these
Regulations, a special non-distributable reserve shall be created through an
appropriation of distributable reserves to eliminate the shortfall.
27.-(1) Every bank or financial institution shall maintain specific
provisions for all credit accommodations and other risk assets which shall
not be less than the following percentages of the outstanding balance
consisting of principal, interest and all other charges and fees which have
11
Valuation of
other assets
Review by
Bank
Placing on
non-accrual
basis
Quarterly
reports
Approval for
annual
provisions
been capitalized-
( a) especially Mentioned
(b) substandard
(c) doubtful
(d) loss
five percent
ten percent
fifty percent
one hundred percent
(2) Every bank or financial institution shall establish adequate
provisions to cover expected losses where they exceed the provisions
established by the minimum percentages in sub-regulation (1).
28. Banks and financial institutions shall value all types of assets not
specifically mentioned in these Regulations in accordance with International
Financial Reporting Standards and establish the necessary impairment in
value.
29.-(1) The Bank shall periodically review the amount of allowance
for probable losses.
(2) Where the amount of the allowance for probable losses
established by a bank or financial institution is found to be inadequate, the
bank or financial institution shall increase that amount as directed by the
Bank and furnish evidence thereto.
PARTY
30.-(1) Every bank or financial institution shall place on a non-accrual
basis aU credit accommodations which are classified as substandard, doubtful
or loss.
(2) Any accrued but uncollected interest on credit accommodations
placed on non-accrual basis shall be reversed and placed in suspense.
(3) Any credit accommodation placed on a non-accrual basis may be
restored to an accrual basis upon full settlement of all delinquent principal
and interest out of funds drawn from a credit accommodation granted by
another institution.
31. Every bank or financial institution shall submit to the Bank
quarterly report on classification and provisioning of credit accommodations
and other risk assets including contingent accounts not later than the I 5th day
following the end of the reporting quarter.
32.-(1) Every bank or financial institution shall seek prior approval of
the Bank of its proposed annual provisions for probable losses before
12
Sanctions and
penalties
Revocation
G.N.38
of 2001
finalization of the annual accounts.
: (2) A bank or financial institution shall submit to the Bank its draft
balance sheet, profit and loss account, including a detailed account of the
provisions made when seeking approval under sub-regulation (1 ).
33. Without prejudice to the other penalties and actions prescribed by
the Act, the Bank may impose on any bank or financial institution any of the
following sanctions for non-compliance-
( a) imposition of penalty on the bank or financial institution or
directors, officers and employees responsible for the violation, in
such amounts as may be determined by the Bank to be
appropriate and reasonable;
(c) suspension of the privilege to issue letters of credit or guarantee;
(d) suspension of access to credit facilities of the Bank;
(i) suspension from office of the defaulting director, officer or
employee; and
U) disqualificatiore:from holding any position or office in any bank or
financial institution under the supervision of the Bank.
34. The Management of Risk Assets Regulations, 2001 are hereby
revoked.
13
~ ~ . X
BENNO J. NDULU
Governor
THE BAN}(]J>lG AND FINANCIAL INSTITUTIONS (CREDIT CONCENTRATION
AND OTHER EXPOSURE LIMITS) REGULA TI0NS,2008
Regulation Title
1. Short title
2. Application
3. Interpr-etation
4. Objectives
5. Board responsibility
PART I
PART II
CONCENTRATION RISK
6. Single borrower's limit
7. Exceptions to single s
8. Funding from parent bank
9. Credit accommodation to "1. banking group
1 0. Treatment of related _parties
11. exposures
12. Placements with banks in Tanzania
13. Placements abroad
PART III
INSIDER TRANSACTIONS
14. Monitoring of credit accommodation
15. Transactions with insiders
16. Conditions for credit accommodation to insiders
17. Cre<;lit limit to single insider
.18. Aggregate credit limit to insiders
19. Restriction on unsecured credit accommodation
20. Loans to employees
1
PART IV
.LIMITATION ON ,EQUITY INVESTMENTS AND UNDERWRITING
COMMITMENTS.
21. Prior approval for equity investments
22. Total-equity investment and credit accommodations
2 3 ~ Aggregate equity investments in all companies
24. Equity investment in allied undertaking
25. Equity investment in other companies
26. Capital requirements
27. Underwriting on bwh account
PARTV
LIMITATION AND REPORTING ON INVESTMENTS IN FIXED ASSETS
28. Restrictions on investments in fixed assets
29. Reporting requirements
PART VI
31. Revocation
2
GOVERNMENT NOTICE NO .................................... published on ............ .
THE B A N I ~ I N G AND fiNANCIAL INSTITUTIONS ACT
(CAP. 342)
REGULATIONS
THE BANKING AND FINANCIAL INSTITUTIONS (CREDIT CONCENTRATION
AND OTHER EXPOSURE LIMITS) REGULATIONS, 2008
PART I
Short title 1. These Regulatiorrs may be cited as the Banking and Financial
Application
Interpre-
tation
Institutions (Credit Concentration and Other Exposure Limits) Regulations,
2008 and shall come into operation on the date of publication in the Gazette.
2.
institutions.
These Regulations shall apply to all banks and financial
3. In.theseRegulations, unless the context requires otherwise:
,.adjusted net asset value" means the value of a business as determined by
deducting its liabilities from the current market or useful value of its
tangible and intangible assets disclosed in its books plus or minus
any adjustment arising from the calculation of present value of
expected earnings of the existing net assets of the enterprises;
"allied undertakings" include such activities as inay be specified by the
Bank :from time to time, to be allied or related to the business of
banking;
"associate companies,. means two or more companies linked directly or
indirectly to each other through any of the following means:
3
(a) ownership, control or power to vote, often percent or more of
the issued and outstanding voting shares of any of the
companies;
(b) interlocking directorship or officer-ship;
. (c). common owning ten per cent or more of the
issued and voting shares o.fthe companies;
(d) management contract or any arrangement granting. power to a
company to direct. or cause the . direction of the management
and policies of.another company; .and
(e) permanent proxy or voting trust in favour of a company
involving ten per ,cent or more of the issued and outstanding
voting shares ofanother :company;
(f) companies with cross-guarantee and;
(g) direct commercial interdependency, which cannot be
substituted in the .
''bank" has the meaning ascribed to it in the Act;
. ''banking business" has the meaning ascribed to it in the Act;
"conflict of interest" has . the meaning ascribed to it in the Banking and
Financial Institutions {Licensing) Regulations, 2008;
"core capital" has the meaning ascribed to it in the Act;
"credit accommodation" means loans, overdrafts and leases,
acceptances, performance and bid bonds, letters of credit,
_guarantees, foreign exchange contracts, and any other form of a
direct or indirect financial obligation including interest due and
unpaid to a bank or financial institution;
"credit risk" means the risk arising from the non payment of either principal
or interest of credit accommodation on a timely basis, or failure by
the customer or a person to honour his commitment under a credit,
guarantee or surety-ship agreement or the risk of default by a party
to a foreign exchange contract;
"direct credit accommodation" means credit facility in which the borrower
or obligor is a party on his own behalf, or as the-representative or agent of
others, ot as a mortgagor, guarantor, endorser or surety;
"disclosed reserves" has, the meaning ascribed to it in the Act;
"fmancial institUtion" has the meaning ascribed to it in the Act;
"financial intermediation" has the meaning ascribed to" it in the Act;
"fit and proper person, has the meaning ascribed to it in the Banking and
Financial Institutions (Licensing) Regulations, 2008;
4
I
"firm underwriting commitment" in respect to underwriting of securities,
means a finn guarantee or commitment made by a person or entity
to an issuer or holder of securities to .raise funds for the issuer or
holder by the distribution of. such securities for resale, or
subscription, either thfough an outright purchase ot a comniitment to
purchase the balance not subscribed or sold;
"first class international bank" has the meaning asc.ribed to it in the Act;
"foreign exchange plaQeril.ent" means foreign exchange: held or placed with
other banks or fmancial institutions outside Tanz;arua;
provisions
11
in .relation to supplementary capital or provisioning for
loan losses, means the amount that is taken up a:s a char..ge against
revenues or income without going through the process of reviewing
the weaknesses of individual loan accounts;
",general reserves" or ''retained earnings" means the accumulated and
undistributed profits which are free and not specifically eannark-ed
or appropriated for any purposes;
"indirect accommodation" means a credit facility given by a bank or
financial institution to a person's related interest;
means a natural person;
"intangible assets" means capitalized organization costs or pre-operating
expenses, prepaid and deferred char-ges, leasehold rights
and such other assets as may be specified by the Bank;
"investment bank" means a financia,l institution acting as underwriter Dr
agent that serves as an intermediary between an issuer of securities
and the public;
'<insider" means directors, officers or significant shareholders of a bank or
finan:cial institution and their related intere-sts;
"large exposure" means a credit faciiity to a single borrower which
represents ten per cent or more of the core capital of a bank or
finan_cial institution concerned;
"loan" or "advanceu includes any loan, discount, overdraft, lease financing,
export bills purchased, other bills received ot purchased, import
bill:;;, customer's liability on acceptances, drawings against uncleared
effects, encashment of cheques drawn a-gainst other bran-ches or
offices where the drawer's current account has insufficient cleared
and withdrawable balance or against other banks, or any other credit
extended to a person by a bank or financial institution, excluding
undrawn or unavailed balance of any line of credit;
"near cash" includes fixed deposits receipts or certificate, savings passbook
and any other deposit blocked in an account with a bank or financial
institution or bank or financial institution other than the lending
bank or financial institution;
5
"non-accruing loan" means a,ny loan where recognition of interest income
has been on a cash basis for financial reporting purposes;
"non-:performing loan" has the meaning ascribed to. it in the Banking and
Financial Institutions (Management of Risk Assets) Regulations,
2008;
"off balance sheet exposure" has the meaning ascribed to it in the
Act;
"other risk assets" b.as the meaning ascribed to it in the Banking and
Financial Institutions (Management of Risk Assets) Regulations,
2008';
"parent company" means a company which directly or indirectly owns,
controls, or holds with power to vote, more than fifty percent
of the issued and outstanding voting shares of another company;
"person" has the meaning ascribed t() it in Act;
"related parti'
(a) in relation to or other body corporate means-
(i) its holding company or its associates;
(ii) a subsidiary of its holding company;
(iii) a holding company of its a.ssociater;
(iv) any person who controls the company or body
corporate whether alone or with his related party
or with other related parties of it.
(b) in relation to an individual means-
(i) any member of his famiiy;
(ii) any company or other body corporate controlled
directly or indirectly by him whether alone or
with his related parties; and
(iii) any related party of his related parties,
"member of a means parent, spouse, brother, sister, child, uncle,
aunt, nephew, niece, stepfather, stepmother, stepchild, and adopted
child of the person concerned, and in case of an adopted child his
or adopters.
!'related individual" has the meaning ascribed to it in the Banking and
Financial Institutions (Licensing) Regulations, 2008;
"revaluation reserves" means the increment in the recorded or book value of
an institution's own premises, fixed assets, or long-term equity
investments arising .from formal revaluation of such assets to reflect
their current value, or an amount closer to their current value than
historical cost;
6
Objectives
Bpard
response-
bility
Single
borrower's
limit
"specific provisions" .in relation to provisioning for losses on loans or other
assel.s, means the amount taken up as a charge against revenues or
income after reviewing the weaknesses of specific loans or assets
followi:ng the prescribed in the Banking and Financial
Institutions (Management of Risk Assets) Regulations, 2008;
"subsidiary" has the meaning ascribed it in the Act;
"unsecured" bas the meaning ascribed to it hi the Act.
( a) encourage risk. diversification and limit excessive
concentration of risk by any bank or financial institution;
(b) promote. ann;s length relationship in dealings between a bank
or finaneial institution and its insiders; and
(c) prescribe limits for investments in equity and fixed assets.
PARTll
CONCENTRATION OF RJSK
5:-(1) The Board of Directors of every bank and financial
institution shall ensure that its risk management policies address the
identification, mea.Surernent, monitoring and management of its risk
concentration consistent with the principles set out in the Risk
Management Guidelines, 2005.
(2) Without prejudice to the generality of sub-regulation (1), the
policies shall include-
(a) procedures for identifying risk concentration;
(b) internal limits on risk concentration including corresponding
controls and procedures in confonnity with legal
and supervisory limits, and
(c) periodic reyiew of the effectiveness of monitoring and
reporting systerp.s for risk concentration.
6. The total amount of credit acconunodation, which any bank or
finandal institution other than a company and financial
cooperative may grant, directly or indirectly, to any P-erson and his related
parties shall not exceed the following limits-
7
Exceptions to
single
borrower.' s
limit
Funding
from parent
company
Collateral iXmit (as n percentage of
core c.@_itat_l
secured by collateral the- value of which
25%
is at least 12:5% of the -credit
.. accommodation deemed by it (Fully
secured)
Secured by collateral the value of which
is less. than 125% of the credit 10%
accommodation by it (Partly
secured)
Unsecured 5%
7.-(1) A bank or financial institution may exceed a limit prescribed
under 6 provided that the amount in excess of single borrower
3
s
limit is granted to, or guaranteed by the Government of the United
Republic of Tanzania or is secured against near or is
g-Uaranteed unc<?nditionally and irrevocably by a first class international
bank or against securities issued by the Goverrunent of the United
Republic of Tanzania or the Ban1c
(2) Where a bank or financial institution grants a credit
accommodation in accordance with sub-regulation (1 ), it shall, within
seven days from the date it approves the credit accommodation, notify the
Banlc
8.-(1.) A bank or financial which is a subsidiary of a
f<;>reign bank or financial institution may exclude from the aggregate and
single borrower's credit limits prescribed in these Regulations any credit
accommodation for which the parent company has provided funds and has
assumed both the credit and foreign exchange risks without recourse to the
subsidiary.
(2) Where a subsidiary of a foreign bank or financial institution
approves exclusion of any credit accommodation in accordance with sub-
. regulation (1 ), it shall, within seven d<1ys from the date of such approval,
notify the Bank.
Credit
accommodati
on to banking
group
9. The aggregate of all credit accommodations extended by a bank
or financial institution to its parent coinpany, subsidiaries and associate
companies, partners and partnerships shall not exceed the credit
concentration limit prescribed in regulation 6.
8
Treatment <>f
related
10. Where the Bank determines that the interests of two or more
pei'spns are interrelated for the purposes of Regulation 6, the total credit
accommodations to such persons shall 'be combined and deemed to be
extended to a single person.
parties
Large
exposures
Placements
with banks in
Tan.zania
Placements
abroad
Monitoring
of credit
accomrriodati
on
Transactions
with insiders
Conditions
for credit
accommodati
on to insiders
Credit limit
to single
insider
1 1 ~ /illY aggregate large exposures shall not exceed eight hundred
percent of core capital of the lending bank or financial institution.
12. Any placement between affiliated banks or financial
institutions in Tanzania shall be considered as insider transactions artd be
subject to Regulation 15.
13. Any foreign exchange placement abroad shall not be subject to
these Regulations.
PART III
INSIDER TRANSACTIONS
14. Every bank or financialinstitution shall put in place systems to
identify and monitor credit accommodation to its insiders.
15. All transactions of a bank or financial institution with any of
its insiders shall be on the terms not more favourable than would be
available to others.
16.-(1) A bank or financial institution shall not grant, directly or
indirectly, any credit accommodation to any of its insiders unless the credit
accommodation has been unanimously approved by all members of the
board of directors in a meeting where the director or alternate director who
stands to benefit from the credit has inhibited himself from attending.
. (2) Where a bank or financial institution grants a credit
accommodation to an insider in accordance with sub-regulation (1), it
shall, within seven days from the date it grants the accommodation, notify
the Bank.
17. The total amount of credit accommodations which any bank or
financial institution may grant, directly or indirectly, to any insider shall
not exceed ten percent of the core capital of the bank or financial
institution.
9
...
Aggregate
cn:dit l.imit to
insiders
Restriction
on unsecured
credit
accoinmodati
on
Loans to
employees
, 18. The aggregate amourit of credit. a:Gcommodritions which a11y
hank or fmancial institution may grant, directly qr indirectly, to its insiders
an in5ider who has ceased to be as such shall not exceed twenty five .
percent of-its core capitaL
19. A bank or financial institution shall not grant any unsecured
credit accommodation to insiders except as set out under regulation 20(1).
20.-(1) A bankor financial institution shall not grant salary
advances to any of its officers and employees, which exceed the annual
remuneration of the. borrowing officer, or employee. .
(2) For purposes of sub regulation (1),--the a.rinual remuneration of
an officer . .or employee shall refer to the basic salary plus cost of living
allowances which are fixed and paid in cash to the officer or employee on.
a regular and periodic basis as part of his compensation for services
rendered to the bank or financial institution.
(3) The pr<;>visions of sub-regulation (2) shall not apply to benefits
of which depends on a contingency such as medical and
hospitalization benefits or allowances for attending seminars, meetings or
other non cash benefits.
(4) Loans and advances to officers and employees of bank or
financial institution intended as incentives shall be managed in accordance
with a well-documented policy regarding administration of-such facilities.
(5) Commercial_ loans and advances to officers and employees of
bank or financial institution shall be in the regular course of business and
on the te!ffis not more favourable than would be available to other
borrowers .
PART IV
LIMITATIONS ON EQUITY INVESTMENTS AND UNDERWRITJ1,{G
Prior approval
for equity
investments
Total crquity
investment and
credit
accommodation
s
COMMITMENTS .
21. A bank or financial institution shall not engage in equity
inv:estment without obtaining prior approval of the Banlc.
. 22. The total equity investments and credit accommodations to
any single company shall not twenty five per cerit of the core
capital of the investing bank or financial institution.
10
Aggregate
equity
investments in
all companies
23. The aggregate equity investments in all companies shall not
exceed twenty five per cent of the core capital of the bank ot financial
institution.
Equity . 24. Subject to regulation 25, the equity investment in any single
investment ..
in. allied shall not exceed ten percent of the core capital of the bank or
undertaking financial mstitution.
Equity
investment in
other
companies .
Capital
requirements
Underwriting
on own account
The equity investmenl in any single company either than an
allied undertaking shall not exceed five per cent of the total subscribed
share capital of the investee company.
26. A bank or financial institution which has a core capital of
less than five billion shillings shall not invest in the equity of other
companies.
27. A financial institution which is licensed by the Bank to
engage primarily in the business of investment banking or underwriting
debt or equity securities s}lall not undertake underwriting commitments
for its own account in an aggregate amount exceeding eight hundred
percent of its core capital.
PARTV
!.IMITATION AND REPORTING ON INVESTMENTS IN FIXED ASSETS
Restrictions on
investments in
fixed assets
28. A bank or fmancial institution may purchase, acquire or lease
fixed assets where it is necessary for its business including reasonable
provision for anticipated future expansion and housing of its officers or
employees provided that-
( a) the totai investment of the bank or financial institution in
such fixed assets at depreciated net book value, shall not
exceed seventy percent of its core capital;
(b) the limitations under this reguiation shall not apply to-
(i) the acquisition of any asset in settlement of a debt
to the bank or financial institution provided that the
asset is sold within three years of its acquisition
date or within a period approved by the Bank; and
(ii) institutions carrying on the business of mortgage
financing and property . acquired for leasing
activities.
11

Sanctions and
penalties
Revocation
GN.No.36
of200"1
. Evyry bank or financial.institution shall report its investment
in fixed a3sets to the Bank in the fonn and frequency prescribed by the
Bank.
PART VII
30. . Without prejudice to the other penalties and actions
prescribed by the Act, the Bank may imp.ose on any bank or financial
any of the following sanctions for non-compliance:-
(a) imposition of penalty on the bank or financial institution or
directors, officers and employees responsible for
violation, in such amounts as may be determined by the
Ba.n:k. to be appropriate and reasonable;
(c) suspension of the priviiege to issue letters of credit or
guarantee;
(d) suspension of access to credit facilities of the Bank;
(i) suspension from office of the defaulting director, offl-cer or
employee; and
0) disqualification from hoiding any position or office in any
bank or financial institution under the supervision of the
Bank.
31. The Credit Concentration and Other Exposure Limits
Regl!-lations, 2001 are hereby revoked.
Salaam,
. 2l .... ;.2000
X
BENNO N. NDULU
Governor
12
THE BANKING AND FINANCIAL INSTITUTIONS (FOREIGN EXCHANGE
EXPOSURE LIMITS) REGULATIONS-, 2008
Regulation Title
PART I
1. Short title
2. Application
3. Interpretation
4. Objectives
PART II
ELIGIBILITY FOR FOREIGN .EXCHANGE OPERATIONS
5. Board responsibility
6. Foreign currency lending
7. Foreign exchange risk limit
8. Solo and consolidated application
9. Limits on placements
10. Penalty charge
11. Approval of correspondents
PART III
12. Reporting requirements
13. Failure to report
14. Misrepresentation of information
1
GOVERNMENT NOTICE NO ........... ; ..... published on ......... .
THE BANKING AND FINANCIAL INSTITUTIONS ACT,
(CAP. 342)
REGULATIONS
THE BANKING AND FINANCIAL INSTITUTIONS (FOREIGN EXCHANGE
. EXPOSURE LIMITS) REGULATIONS, 2008
Short title
Application
PART I
L These Regulations may be cited as the Banking and Financial
Institutions (Foreign Exchange Exposure Limits) Regulations 2008 and
shall come into operation on the date of pubiication in the Gazette.
-2. These Regulations shall apply to all banks and financial
institutions.
Interpretation 3. In these Regulations, unless the context requires otherwise-
"authorised for-eign exchange dealer" means a bank or financial institution
authorised to operate in the Inter-bank Foreign Exchange Market;
"core capital" or "tier I capital" and has the meaning ascribed to it in the
Act;
"correspondent bank" means a foreign bank which has correspondent
relationship with a bank or financial institution in Tanzania;
"first class international. bank" has the meaning ascribed to it in the Act;
"foreign currency" has the meaning ascribed to it in the Foreign Exchange
Cap. 271 Act;
"foreign currency assets" means all assets denominated in foreign
currency;
"foreign currency liabilities" means all liabilities denominated in foreign
currency;
2
"foreign exchange placement" means foreign exchange held or placed with
other banks or financial institutions outside Tanzania;
"interbank foreign exchange market (IFEM)" means foreign exchange
spot, forward or such other foreign exchange trading mechanism as
authorised to be undertaken in the United Republic of Taniania in
accordance with rules, guidelines, regulations and directives issued
by the Bank;
"long position" means the hoiding by a bank or financial institution of a
currency, security or other asset for its own account in excess of all
its contractual spot and forward transaction commitments in that
currency, security or other asset;
"net open position" means the net sum of all foreign currecy assets and
liabilities of a bank or financial institution inclusive of all of its
spot and forward transactions and off balance sheet items in that
- ~ - - - - - - - --- -----------fareign-eurrency;
Objectives
Board
responsibility
Foreign
ci.mency
lending
"off-balance sheet exposure" has the meaning ascribed to it in the Act;
"short position" means the holding by the bank or financial institution of a
currency, security or other asset for its own account less than all its
contractual- spot and forward transaction commitments in that
currency, security or other asset;
"shorthand method" means the calculation of overall foreign exchange risk
exposure by determining the greater of the sum of all net long
positions or the sum of all net short positions in each currency,
converted to Tanzania Shilling at the prevailing spot mid rate.
4. The objectives of these Regulations are to ensure that banks and
financial institutions-
(a) have in place adequate policies and procedures to identify,
monitor and manage foreign exchangerisk; and
{b) maintain risk management standards that conform to
established international norms.
PART II
ELIGIBILITY FOR FOREIGN EXCHANGE OPERATIONS
5. The board of directors of every bank or financial institution shall
ensure that policies consistent with principles set out in the Risk
Management Guidelines, 2005 are put in place and shall be fully
responsible and accountable for the execution of such policies.
6. A bank or financia.l institution lending in foreign currency shall
ensure that-
( a) borrowers have foreign currency income or have taken other
measures to mitigate foreigri exchange risk.
(b) foreign exchange credit facilities are granted to borrowers
operating and investing in Tanzania.
3
Foreign
exchange risk
limit
Solo and
consolidated
application
Limits on
placements
Penalty charge
Approval of
correspondents
7.-(1) The overall foreign exchange risk exposure of any bank or
financial institution calculated using the shorthand method shall not exceed
twenty percent of its core capital.
(2) The foreign exchange risk exposure in any single currency,
irrespective of short or long position, shall be determined by the individual
institution provided that the institution remains within the overall exposure
limit of twenty percent of its core capital.
8. Where a bank directly or indirectly controls another bank or
financial institution, the foreign exchange risk exposure limits shall be met
by each bank or financial institution on a solo basis, and the parent bank
shall comply with the foreign exchange requirement on a solo and
consolidated basis.
9.-(1} A bank or financial institution shall be authorised at any time
to place or deposit a maximum of sixty percent of its total foreign -exchange
placements with a foreign related or any other correspondent organisation
which has minimum long term international rating of A or above.
(2) A bank or financial institution shall place or deposit a maximum
of forty percent of its total foreign exchange placements with a foreign
related or correspondent organisation that has minimum long term
international rating of B or above.
(3) A bank or financial institution shall be allowed to place or
deposit a maximum of twenty percent of its total foreign exchange
placements in a non-rated foreign related or correspondent organisation.
(4) The aggregate foreign exchange placement in a country other
than a member. of Organization for Economic Co-operation and
Development shall be restricted to a maximum of twenty per cent of the
bank's or financial institution's. total foreign exchange placements.
(5) International rating agencies recognised by the Bank include
Fitch Ratings, Standard and Poors and Moody's.
10. Where a bank or financial institution fails to observe the limits
prescribed under regulations 7 or 9, it shall be liable to a penalty equivalent
to one tenth of one percent per day of the amount in excess.
11.-{1) In establishing correspondent relationships with any bank
abroad, a bank or financial institution shall comply with limits prescribed
under regulation 9.
(2) Notwithstanding provision, of sub-regulation (1) the bank or
financial institution shall notify the Bank not later than seven days after
establishment of such relationship and submit terms and conditions upon
which such correspondent relationship has been established.
4
Reporting
requirements
Failure to
report
Misrepresent
ation of
information
Sanctionl?
and Penalties
PART III
12. Every bank or financial institution shall report to the Bank in the
form and frequency prescribed by the Bank.
13. Where a bank or financial institution fails to submit any return as
under these Regulations, it shall be liable to a penalty of one million
shillings for every day in which the failure continues.
14. Where a bank or financial institution makes a misrepresentation
of information on any of the returns, it shall be liable to a penalty imposed
under regulation 13 or other sanctions as prescribed under these Regulations.
15. Without prejudice to the other penalties and actions prescribed by
the Act, the Bank may impose on any bank or financial institution any of the
following sanctions for non-complianc-e-
( a) imposition of penalty on the bank or financial institution or
directors, officers or employees responsible for the violation in
such amounts as may be determined by the Bank;
(b) prohibition from participating in the IFEM;
(c) prohibition from declaring or paying dividends;
(d) suspension of the privilege to issue letters of credit or guarantee;
(e) suspension ofaccess to the credit facilities ofthe Bank;
(f) suspension of lending and investment operations;
(g) suspension of capital expenditure;
(h) suspension of the privilege to accept new deposits;
(i) revocation of banking licence;
G) suspension from office of the defaulting director, officer or
employee; and
(k) disqualification from holding any position or office in any bank
or financial-institution under the supervision of the BaiLie.
?(
Dar Es .Salaam, .
f) "(I\ . .. - .. .... : .-,_ ...
BENNO J. NDULU
Governor
.. ;;., Decemhe'f"',.:;moo-
5
THE BANKING AND FINANCIAL INSTITUTIONS (CAPITAL ADEQUACY)
REGULATIONS, 2008
Regulation Title
PART I
1. Short title
2. Application
3. Interpretation
4. Objectives
PART II
CAPITAL ADEQUACY REQUIREMENTS
5. Minimum capital for banks
6. Minimum capital fcir other financial institutions
7. Minimum capital for conununity banks
8, Minimum capital for MFCs and FICOs
9. Additional period for increase of capital
10. Capital adequacy ratios
11. Risk weighted assets and off-balance sheet items
12. Available capital
13. Subordinated debt
14. Hybrid instruments or preferred stock
15. Additional capital requirements
16. Application .on solo and consolidated basis
Remedied measures
18. Capitai for market risks
19. Exemption from market risk requirements
20. Trading book
21. Computati9n of capital adequacy ratio
PART III
22. Reporting on capital adequacy
23. Market risk exposirre report
24. Independent Auditor's
GN. No.8
of2005
Objecti-ves
"financial cooperatives" has the meaning ascribed to it in the Banking
and Financial Institutions (Financial Cooperative Societies)
Regulations, 2005;
"long position" means the holding by a bank or financial institution of
a currency, or other asset for its own account in excess
of all its contractual spot and forward transaction commitments
in that currency, security or other asset;
"off-balance sheet exposure" has the meaning ascribed to it in the Act;
"market risk" means a current or prospective exposure to earnings or
capital arising from adverse movements in market prices of
foreign exchange, equity and commodity prices and interest
rates;
"micro finance company" has the meaning ascribed to it in the Act;
"net open position" means the net sum of all foreign exchange assets
and liabilities of a bank or financial institution inclusive of all
of its spot and forward transactions and off balance sheet items
in that foreign currency;
"short position" means the holding by the bank or financial institution
of a currency, security or other asset for its own account less
than all its contractual . spot and forward transaction
commitments in that currency, security or other asset;
significant interest" has the meaning ascribed to it in the Act;
"subordinated debt" means a debt with original fixed term maturity of
not less than 5 years and satisfying the Bank's conditions for
tier 2 capital as stipulated in regulation 14 ofthese regulations;
has the meaning a-scribed to it in the Act;
"supplementary capital" or "tier 2 capital" has the meaning ascribed
to it in the Act;
"total capital" has .the meaning ascribed to it in the Act;
''undercapitalized" means core capital of less than the minimum
capital required under these Regulations.
(a) ensure that ba.Il.h.."'S and financial institutions maintain a
level of capital which is adequate to protect them against
the risk of loss that may arise out of their business
activities;
(b) et1Sure that banks and financial institutions maintain
capital adequacy standards in line with internationally
accepted best practices; and .
(c) help promote and maintain public confidence in the
Tanzanian banking sector.
4
Minimum
capital for
banks
Minimum
capital for
other
financial
institutions
Minimum
capital for
community
banks
Minimum
capital for
MFCand
FICO
GN. No. 80
and 81
of2005
Additional
period for
increaSe of
capital
PART II
CAPITAL ADEQUACY REQUIREMENTS
5. Every bank shall commence operations with and maintain at
all times a minimum core capital of not less than five billion shillings
or such higher amount as the Bank may determine.
6.-(1) A financial institution other than a community bank,
microfinance company and financial cooperative shall coriunence
operations with a core capital not less than two billion five hundred
million shillings or such higher amount as the Bank may determine.
(2) A financial institution shall not accept deposits payable
upon demand or subject to withdrawal by cheque unless it has
minimum core capital of five billion shillings and has received the
prior approval of the Bank.
7.-(1) A community bank shall commence operations with a
core capital not less than two hundred and fifty million shillings or
such higher amount as the Bank may determine.
(2) A community bank shall not establish a branch, agency or
other office unless it has minimum core capital of five hundred
million shillings and has obtained prior approval of the Bank.
(3) Shareholders of the community bank shall increase the
core capital to not less than twice the minimum am:ount specified
under sub-regulation (1) within a period of five years from the date of
approval of its license, in accordance with a capital build-up
programme approved by the Bank at the time of licensing.
( 4) Every holder of a significant interest in a community bank
shall execute an undertaking to fulfill, inter alia, his obligations under
the capital build-up programme approved by the Bank, and to abide by
any order, instruction or directive which the Ba_nk may issue.
8. Every microfinance company or financial cooperative shall
commence operations with a minimum core capital as in
the Banking and Financial Institutions (Microfinance Companies and
Microcredit Activities) Regulations, 2005 and the Banking and
Financial Institutions (Financial Cooperative Societies) Regulations,
2005,
9. Where a financial institution fails to comply with
provisions of Regulations 6 or 7 at the date on which Regulations
come into operation, the Bank may prescribe an additional period
within which the financial shall increase its capital to the
amount required.
5
Capital
adequacy
ratios
Risk weigp.ted
assets and off-
balance sheet
items
Available
capital
Subordinated
debt
Hybrid
instruments or
preferred
stock
10. Every bank or financial institution shall maintain at all
times a minimurri core capital and total capital equivalent to ten
percent and twelve percent respectively of its total risk-weighted
assets and off balance sheet exposures.
11. The total risk-weighted assets and total risk-weighted off
balance sheet exposure shall be determined in accordance with
procedures as defined by the Bank.
12. In determining the amount of available capital for the
purposes of computing the minimum capital required under
regulations 5, 6, 7, 10 and 11, the bank or financial institution shall
consider the following-
( a) fifty percent of year profits where accounts are un
audited;
(b) one hundred percent of the year to date profits where
accounts have been audited subject to submission of the
signed accounts to the Bank;
(c) amount of investment of the bank or financial institution
in the capital of another company, firm, entity or
subsidiary to the extent of the reciprocal investment of
such company, firm, entity or subsidiary in the capital of
the bank or financial institution shall be deducted frorri
the capital ofthat bank or financial institution.
13. The aggregate amount of subordinated debt that may be
eligible and recognized by the Bank as supplementary capital is
limited to fifty percent of core capital, provided that such subordinated
debtshall-
(a) be discounted by a cumulative factor of twenty percent
per year dil.rin.g the last five years to maturity;
(b) be unsecured, uninsured and are not a deposit;
(c) have an original maturity of not less than five years;
(d) be subordinated to claims of all depositors and general
creditors of the bank or financial institution;
(e) not qe redeemable at the option of the holder. prior to
maturity, except with the prior approval of the Bank; and
(f) have no requirement for payments of principal or interest
except to the extent that the bank or financial institution
is solvent and shall remain solvent immediately thereafter
14.-(1) A bank or financial institution intending to include
hyb:rid instruments or preferred stocks not qualifying as tier 1 capital
in supplementary capital for the purposes of satisfying the
requirements of regulations 5, 6, 7, 10 and 11 shall apply to the Bank
6
Additional
capital
requirements
Application
on solo and
consolidated
basis
Remedial
measures
Capital for
Market risks
Exefi!ption
for approval.
(2) In considering an application under sub-regulation (1), the
Bank shall take into account whether the instruments satisfy the
requirements for eligible subordinated debt specified in regulati.on 13.
15.-( 1) The Bank may prescribe additional capital
requirements based on the risk profile of a bank or financial
institution.
(2) A bank or financial institution authorized to carry out the
function of a trustee, to establish a branch or subsidiary abroad, or to
perform additional activities specified in the Banking and Financial
Institutions (Licensing) Regulations, 2008 shall be required to satisfy
additiomi.J. capital requirements prescribed by the Bank.
16.-(1) Where a bank or financial institution owns or controls
another bank or financial institution, directly or indirectly, the capital
adequacy requirements shall be -satisfied by each bank or financial
institution on a solo basis, and the parent company shall comply with
the capital adequacy requirements on a solo and consolidated basis.
(2) For the purpose of computing the capital position, the
principal office ofeach bank and financial institution in Tanzania and
all its branches and agencies, regardless of country of domicile, shall
be considered as a single unit.
(3) For the purpose of this regulation parent company means
the bank or financial institution that controls another bank or financial
institution directly or indirectly.
17. Where, in the opinion of the Bank, a bank or financial
institution is undercapitalized, the Bank shall take measures
prescribed in the Banking and Financial Institutions (Prompt
Corrective Action) Regulations, 2008 to address the
undercapitalization and nothing . in such Regulations or these
R-egulations shall preclude the Bank from taking other remedial.
measures provided by the Act.
18. (1) Every bank or financial institution shall measure and
apply capital charges in respect of market risk
(2) Tl\e minimum capital requirements for foreign
exchange risk, interest rate and equity position risk shall be
determined by applying the Standardized Measurement Method
specified by the Basel Committee an Banking Supervision or such
other methods as the Bank may approve.
19. A bank or financial institution may apply to the Bank to be
7
from market
risk
requirements
Trading book
Computation
of capital
adequacy
ratio
Reporting on
capital
adequacy
Market risk
exposure
exempted from the capital adequacy requirements for market risk or
any part thereof, provided it can demonstrate that on a continuing
basis-
(a) its foreign currency business, defined as the greater of the
sum of its gross long positions and gross short positions
in all foreign currencies, does not exceed one hundred
percent of core capital, and the overall net open position
does not exceed two percent of core capital; and
(b) its total trading book assets do not exceed five percent of
total assets.
20. Financial including derivative products such
.as. thetrm:itngooo:K if- ----
they are-
( a) held for short-term resale;
(b) purchased with the intention of benefiting in the short
term . from actual or expected differences between their
buying andselling prices or from other prices or interest
rate variations;
(c) arising from broking or market-making;
(d) held in order to hedge other elements of the tradin-g book.
21.-(.1) The individual market risk capital charges calculated
under regulation 18 shall be multiplied by the reciprocal of the
minimum capital adequacy ratio of twelve percent and added to the
sum of risk-weighted assets.
(2) The capital adequacy ratios for a bank or financial
institution shall be calculated in relation to the sum mentioned in sub-
regulation (1) by using core capital and total capital to determine
whether the bank or financial institution satisfies the minimum
requirements.
PART III
22. Every bank or financial institution shall-
(a) compute in the prescribed riranner its capital position by
comparing its required capital with its available capital as
at the close of busines-s for the day;
(b) inClude in the computation of the required minimum
capital ?RY directive to increase its and
(c). maintain suitable and adequate records to facilitate
verification of its capital position.
23. A bank or financial institution shall, unless exempted
8
report
Independent
Auditor's
statement
Submission of
report to the
Bank
Sanctions and
Penalties
Revocation
GNNo. 37
of2001
under regulation 19, submit to the Bank a monthly report on its market
risk exposure within fifteen days following the end of the reference
month in accordance with the format prescribed by the Bank
24. Every bank or financial institution shall require its
independent auditor to compute its capital position as at the end of
each financial year, taking into account the requirements of the Act
and all Regulations issued thereunder and draw a note on the
adequacy of its capital in the Audited Financial Statement.
25. Every bank or financial institution shall submit to the
Bank information provided under regulation 24 not later than three
months after the close of the financial year.
26.-(1) Without prejudice to other penalties and actions
prescribed by the Act, failure to comply with any provision of these
Regulations shall attract one or more of the following sanctions-
( a) prohibition from declaring or paying dividends;
(b) suspension from opening new branches;
(c) suspension of access to the credit facilities of the Bank;
(d) suspension from lending and investment operations;
(e) suspension of the activity to issue letter of credit or
guarantee;
(g) revocation of banking license;
(h) suspension from office of the defaulting director, officer
or employee; and
(i) disqualification from holding any position or office in
any bank or financial institutions in Tanzania.
(2) Any director, officer or employee of a bank or financial
institution who intentionally sanctions or votes for the approval of any
credit accommodation, branch expansion or capital expenditure while
the bank or financial institution remains under suspension as provided
under paragraphs (b) to (f) of sub-regulation (1) shall be suspended
from office.
(3) The suspension from office prescribed under paragraph (h)
of sub-regulation (i) shall be without prejudice to any other punitive
measures the Bank may take against the defaulting director, officer or
employee.
27. The Capital Adequacy Regulations, 2001 are hereby
revoked.
~ - .
BENNO J. NDULU
Governor
9

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