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.
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In on-site inspection a full scope examination where the supervisors
review 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. In addition, supervisors do verify compliance with laws and
regulations and assess the effectiveness of the institutions' internal control system.
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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 weekly, monthly, quarterly, semi-annually and annually
or on ad hoc basis if the circumstances so demand).
1: ACTS:
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Bank of Tanzania Act, 1965 as amended in 1978 was repealed and
replaced by the Bank of Tanzania Act, 2006, which expressly
specifies functions and objectives among others as to the regulation and supervision of
banks and financial institutions in Tanzania.
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The Banking and Financial Institutions Act,
2006 (BFIA, 2006) which consolidated 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.
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The Foreign Exchange Act,
1992 was passed by the Parliament 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: REGULATIONS:
- Banking and Financial Institutions Regulations, 1997:
The Regulations prescribe conditions of entry or exit into banking industry in Tanzania.
In general it
deals with licensing requirements for new entrants into the banking system.
- The Management of Risk Assets Regulations, 2001:
The Regulations came into effect on 1st May, 2001 and repealed "The Guidelines on
Management of Risk Assets, Classification of Loans and Other Risk Assets, Provisioning for
Losses and Accrual of Interest" issued on 18th October, 1991.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 Capital Adequacy Regulations, 2001:
The
Regulations came into effect on 1st May, 2001 and repealed "Guidelines for Measuring
Capital Adequacy" issued on 1st October, 1993 and the Addendum to to Circular No. 3
on Capital Adequacy issued on 27th March, 1996. The Regulations provide
for capital adequacy requirements for various forms of banking institutions
in Tanzania.
- The Liquid Assets Ratio
Regulations, 2000: These Regulations came into effect on 1st September,
2000. The main objective of the Regulations is to provide guidance on measuring and
monitoring liquidity of banks and financial institutions.
- The Publication of Financial
Statements Regulations, 2000: The Regulations came into effect on 1st
September, 2000. The main objective of the Regulations is keep the general public informed
on the condition and performance of banks and financial institutions. Quarterly
publications are required for un-audited balance sheet, income statement and cash flow
statement while audited financial statements are to be published once annually.
- The Independent Auditors
Regulations, 2000: These Regulations became effective on 1st September,
2000. The main objective of these Regulations is to 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 Credit Concentration and
Other Exposure Limits Regulations, 2001:
The Regulations came into effect
on 1st May, 2001 and repealed "The Guidelines on Concentration of Credit and Other
Exposure Limits" issue on 22nd December, 1992. 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.
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The 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 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.
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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,
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.5:Foreign Exchange Exposure
and Placements, Purchases, Sales and Balances which sets limits on
placements with the correspondent banks by the banks and financial institutions,
and requires the institutions to maintain a net open position not exceeding 20% of the
core capital.
- 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 under the Banking and Financial Institutions Act, 1991. The aim is
to capture accurately and uniformly compiled information. It became effective on
30th June, 2000.
- 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.
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:-
Letter of Application in prescribed format.
Proposed Memorandum of Association (unregistered with the
Registrar of Companies).
Proposed Articles of Association (unregistered with the Registrar
of Companies).
Proof of Availability of Funds for Investment as Capital of the
Proposed Institution e.g bank certification.
List of Incorporators/Subscribers and Proposed Members of Board
of Directors and Other Senior Officers.
Information Sheet of Every Incorporator/Subscriber and Every
Proposed Member of the Board of Directors, and Senior Officer.
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.
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.
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.
Tax Clearance From the Income Tax Office
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.
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
Projected Annual Balance Sheets for the First Four Years of
Operations.
Projected Annual Income Statement for the First Four Years of
Operation.
Projected Annual Cash Flow Statements for the First Four Years of
Operation.
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
16/Dec/2008
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