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Banking Supervision

Supervisory Methodologies, Acts, Regulations and Circulars in Place

The Bank of Tanzania uses both on-site and off-site inspection in supervising banks and financial institutions.

    Supervisory Methodologies

    On-site inspection:

    Full scope or targeted examination on individual banks or financial institutions. The risk management framework of the individual bank or financial institution especially Credit, Liquidity, Interest Rate, Foreign Exchange and Operational Risks are reviewed. Apart from the risk framework review of the five key components of the institutions, that is Capital adequacy, Asset quality, Management quality, Earnings capability and Liquidity (CAMEL) at least once a year for every institution done on site. In addition, supervisors do verify compliance with laws and regulations and assess the effectiveness of the institutions' internal control system.

     

             Off-site inspection:

    In the off-site inspection assessment of financial soundness through analysis of the statistical and other returns covering key areas of the institutions is done. From the analysis an Early Warning Report is produced. The statistical returns are submitted periodically (i.e. Daily, Weekly, Bi-weekly, monthly, quarterly, semi-annually and annually or on ad hoc basis if the circumstances so demand).

    1: ACTS:

  • ∑    The Bank of Tanzania Act, 2006, was enacted in 2006, the Act specifies functions and objectives among others as to the regulation and supervision of banks and financial institutions in Tanzania.

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    The Act is to provide more responsive regulatory role of the Bank of Tanzania in relation to the formulation and implementation of monetary policy; to provide for the supervision of banks and financial institutions and to provide for other related matters.

     

             The Banking and Financial Institutions Act, 2006 (BFIA, 2006), (Cap 342), emanated from the Banking and Financial Institutions Act, 1991 which was repealed and replaced by BFIA, 2006. BFIA, 2006 consolidates the law relating to business of banking, to harmonize the operations of all financial institutions in Tanzania, to foster sound banking activities, to regulate credit operations and provide for other matters incidental to or connected with those purposes.

     

    The Act is to provide for comprehensive regulation of banks and financial institutions; to provide for regulations and supervision of activities of savings and credit co-operative societies and schemes with a view to maintaining the stability, safety and soundness of the financial system aimed at reduction of risk of loss to depositors; to provide for repeal of the Banking and Financial Institutions Act, (Cap. 342) and to provide for other related matters.

     

    The Foreign Exchange Act, 1992 was enacted by the Parliament of the United Republic of Tanzania for the purpose of making better provisions for the more efficient administration and management of dealings and other acts in relation to gold, foreign currency, securities, payments, debts, import, export, transfer or settlement of property and for the purposes incidental to and connected to those.

    2: BANKING AND FINANCIAL INSTITUTIONS REGULATIONS:

    The Regulations apply to all banks and financial institutions

             Banking and Financial Institutions (Licensing) Regulations, 2008:

    The Regulations prescribe minimum conditions of entry or exit into banking industry in Tanzania, opening representative office, subsidiary, new branches or equity investment; appointing and change of Directors and Senior Management. Generality, the regulations deals with licensing requirements for new entrants into the banking system. The Regulations prescribe financial requirements in order to establish a bank or financial institution, minimum capital requirements and disclosure of sources of capital, change in shareholding contributions to the countryís economy, banking licensing application process and conditions to be fulfilled after grant of the banking licence.

             The Banking and Financial Institutions (Capital Adequacy) Regulations, 2008

    The Regulations came into effect in December, 2008 and repealed the Capital Adequacy Regulations, 2001. The Regulations provide minimum capital requirements for various forms of banking institutions in Tanzania (i.e. minimum capital for banks, other financial institutions, microfinance companies and microcredit activities). Further, the Regulations detail the capital adequacy requirements including items for consideration in core and total capital adequacy ratios.

             The Banking and Financial Institutions (Management of Risk Assets) Regulations, 2008:

    The Regulations came into effect in December, 2008 and repealed the Management of Risk Assets, Regulations 2001. The Regulations provide for the minimum conditions for credit and investment function in a bank or an institution. At a minimum putting in place risk management policies for risk assets administration (i.e. identify, measure, monitor and manage) the risk arising from their business and ensure timely and adequate action are taken on problem assets, maintain risk management standards that conform to internal norms and promote and maintain public confidence in the banking sector.

     

    The objectives of these Regulations are generally to provide prudential guidance on management of risk assets and bases for providing for losses on loans and other risk assets.

             The Banking and Financial Institutions (Liquidity Management) Regulations, 2008:

    The Regulations came into effect in December, 2008 and repealed the Liquid Assets Ration Regulations, 2000. The main objectives of the Regulations are to provide guidance on measuring and monitoring liquidity of banks and financial institutions. i.e. to 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 development, to ensure that banks and financial institutions implement liquidity management standards that conform to international norms and maintain public by ensuring that banks and financial institutions have sufficient liquidity all the times.

             The Banking and Financial Institutions (Publication of Financial Statements) Regulations, 2008:

    The Regulations came into effect in December, 2008 and repealed The Publication of Financial Statements Regulations, 2000. The main objectives of the Regulations are to ensure that every bank or financial maintains a level transparency adequacy to enable depositors and creditors and the public at large to make informed decisions, promote and maintain public confidence in the Tanzanian banking sector and enhance market discipline by providing financial information to various stake holders. The regulations focus on keep the general public informed on the condition and performance of banks and financial institutions. Publications will be on Quarterly for un-audited balance sheet, income statement and cash flow statement while audited financial statements are to be published once annually. The publications should be in the paper of general circulation in Tanzania and in conspicuous position in the public part of its principal place of business and its branches and agencies.

             The Banking and Financial Institutions (Independent Auditors) Regulations, 2008:

    These Regulations became effective in December, 2008 and repealed the Independent Auditors Regulations, 2000. The main objectives of these Regulations are establish criteria for approving independent auditors of banks and financial institutions, and duties of the bank, financial and approved independent auditor. The Regulations guide banks and financial institutions to appoint independent auditors that are recognized and registered by the National Board of Accountants and Auditors and also by the Bank of Tanzania. Bank auditing requires more than commercial enterprise auditing and as such only audit firms that meet registration requirements by the Bank of Tanzania may be appointed to audit banks and financial institutions.

             The Banking and Financial Institutions (Credit Concentration and Other Exposure Limits) Regulations, 2008:

    These Regulations became effective in December, 2008 and repealed the Credit Concentration and Other Exposure Limits Regulations, 2001. The main objectives of these Regulations are to encourage risk diversification and limit excessive concentration of risk by any bank or financial institution, promote armís length relationship in dealing between a bank and its insiders, and prescribe limits for investment in equity and fixed assets. The Regulations provide for risk diversification and curtail excessive concentration of risk exposure of any bank or financial institution to one customer or group of customers, industry economic sector or activity, thereby stability of the financial system.

             The Banking and Financial Institutions (Foreign Exchange Exposure Limits) Regulations, 2008:

    These Regulations became effective in December, 2008 and repealed Circular Number 5 the Foreign Exposure and placement Purchases, Sales and Balances, 2000. The main objectives of these Regulations are to ensure that banks and financial institutions have in place adequate policies and procedures to identify, monitor and manage foreign exchange risk and maintain risk management standards that conform to established international norms. The Regulations

             The Banking and Financial Institutions (Physical Security Measures) Regulations, 2008:

    These Regulations became effective in December, 2008. The principal objective of these Regulations is to prescribe minimum security measures to be instituted by all banks and financial institutions for the purpose of: - preventing acts of robbery and burglary, assisting in identifying and apprehending persons who commit acts of robbery or burglary, preventing injury and loss of life to staff and customers, preventing damage or loss of assets, which could result into major losses to individual institutions, the banking sector and the national income, and creating security awareness among management and staff in all banks and financial institutions thereby promoting a security conscious working environment.

             The Banking and Financial Institutions (Prompt Corrective Action) Regulations, 2008:

    These Regulations became effective in December, 2008. The main objectives of these Regulations are to ensure timely and effective actions to deal with a weakening bank or financial institution, enhance transparency by establishing the minimum actions the Bank shall take in addressing identified weaknesses in banks and financial institutions, and maintain confidence in the Tanzanian banking sector.

             The Banking and Financial Institutions (Internal Control and Internal Audit) Regulations, 2005:

    The Regulations came into effect on 25th March 2005. They provide for internal controls and internal audit functions for banking institutions. The Regulations also prescribe roles of various stakeholders in as far as internal control and internal audit functions are concerned.

             The Banking and Financial Institutions (Microfinance Companies and Micro-credit Activities) Regulations, 2005:

    The Regulations came into effect on 25th March 2005. It provides for microfinance and micro-credit activities in Tanzania.

             The Foreign Exchange (Bureaux de Change) Regulations, 1999:

    The Regulations govern bureaux de change operations in Tanzania.

    3: CIRCULARS:

    • Circular No.1: Reserves Against Deposits and Borrowings, became effective in December, 2008 and repealed which requires banks to maintain statutory minimum reserves on their total deposits, including foreign currency deposits, received and funds borrowed from the general public. Non-bank financial institutions are not required to maintain minimum reserves.

     

    • Circular No.7: Instructions for Filling Regulatory Returns:

    The Circular became effective in December, 2009 and repealed Circular No.7: Instructions for Filling Reports Under the Banking and Financial Institutions Act, 1991. The Circular guides banks and financial institutions on how to properly fill returns submitted to the Bank of Tanzania the aim is to capture accurately and uniformly compiled information for its off-site regulation of banks and financial institutions, and for compilation of FSAP statistics. The returns are submitted periodically (i.e. Daily, Weekly, Bi-weekly, monthly, quarterly, semi-annually and annually).

  • Circular No. 8: The Money Laundering Control.
    This Circular became effective on 1st September, 2000 and aims at guiding banks and financial institutions on uncovering, reporting   and controlling money laundering. (Revoked Following enactmentment of the Anti-Money Laundering Act, 2006)

Licensing Conditions

Application Form for Bureaux de Change License (pdf)

Any individual or company wishing to establish a bank or financial institution in Tanzania must submit the following information to the Directorate:-

  1. Letter of Application in prescribed format.

  2. Proposed Memorandum of Association (unregistered with the Registrar of Companies).

  3. Proposed Articles of Association (unregistered with the Registrar of Companies).

  4. Proof of Availability of Funds for Investment as Capital of the Proposed Institution e.g bank certification.

  5. List of Incorporators/Subscribers and Proposed Members of Board of Directors and Other Senior Officers.

  6. Information Sheet of Every Incorporator/Subscriber and Every Proposed Member of the Board of Directors, and Senior Officer.

  7. Proof of Citizenship of Every Incorporator/Subscriber and Every Proposed Director and Senior Officer. This Includes Detailed Curricula Vitae (CV), Photocopy of the First Five Pages of a Passport, a Passport Size Photograph and Historical Background.

  8. Audited Balance Sheet and Income Statement of Every Incorporator/Subscriber and Every Proposed Member of the Board of Directors and Senior Officer who is Engaged in Business.

  9. Certified Copies of Annual Returns of Every Incorporator/Subscriber and Every Proposed Member of the Board of Directors and Senior Officer (together with accompanying schedules/financial statements) Filled During the Last Five Years with Income Tax Office for Income Taxation Purposes.

  10. Tax Clearance From the Income Tax Office

  11. Statement From Two Persons (not relatives) Vouching for the Good Moral Character and Financial Responsibility of the Incorporators/Subscribers and the Proposed Directors and Senior Officers.

  12. Business Plans for the First Four Years of Operations Including the Strategy for Growth, Branch Expansion Plans, Dividend Payout Policy and Career Development Programme for the Staff, Budgets for the First Year Must Also be Included

  13. Projected Annual Balance Sheets for the First Four Years of Operations.

  14. Projected Annual Income Statement for the First Four Years of Operation.

  15. Projected Annual Cash Flow Statements for the First Four Years of Operation.

  16. Discussion of Economic Benefits to be Derived by the Country and the Community From the Proposed Bank/Financial Institution.

Application Form for Bureaux de Change License (pdf)

Approved List of Auditors

Last updated on 13/Jul/2012

 

 

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