Financial Institution’s Licence Revocation and Ownership Restrictions
The United Republic has implemented measures to maintain the stability and integrity of its financial institutions. The Banking and Financial Institutions Act (BFIA) outlines the circumstances under which a financial institution’s licence can be revoked, as well as restrictions on ownership.
Revocation of Licence
A financial institution’s licence can be revoked if it fails to commence operations within 12 months from the date of grant, unless extended in writing by the Bank. Other grounds for revocation include:
- Failure to comply with prudential requirements
- Providing false or misleading information when applying for a licence
- Engaging in unsafe or unsound practices that threaten its financial condition or are detrimental to depositors
The Bank may also suspend or revoke a licence if it is engaged in a pattern of unsafe or unsound practices, has refused to permit an inspection or provide required information, or is insolvent. Additionally, the licence of a foreign bank or financial institution can be suspended or revoked if its parent company’s licence has been suspended or revoked by its home country supervisory authority.
Notice of Revocation
When a licence is revoked, the Bank must immediately:
- Arrange for publication of a notice in the Gazette
- Publish a notice in newspapers of general circulation
- Take other steps necessary to inform the public of the revocation
Restrictions on Ownership
The BFIA places restrictions on ownership of financial institutions. No person can own or control more than 20% of the voting shares of a bank or financial institution, except as provided in the Act. Any transfer of ownership or control that results in ownership or control of five percent or more of voting shares must be approved by the Bank.
The Bank may approve a transfer if it is satisfied that the transferee is fit and proper to own or control a financial institution. In determining whether to approve a transfer, the Bank will consider factors such as:
- The ability to supervise the entity
- Its financial condition and ownership structure
- Any risks to the bank or financial institution
- Its proven track record
Restrictions on Foreign Ownership
If a foreign bank, financial institution, or holding company wishes to acquire a beneficial interest in shares of a United Republic bank or financial institution, it must demonstrate that its home country supervisory authority is effective and adequate. The Bank will also consider whether the bank or financial institution is:
- In good standing
- Supervised by its home country supervisory authority on a consolidated basis
- Free from obstacles to receiving information regarding the entity
Designation of Micro-Finance Companies and Housing Finance Companies
Micro-finance companies and housing finance companies must use the acronyms “MFC” and “HFC”, respectively, after their commercial names before the term “Limited”.
Overall, the BFIA aims to ensure that financial institutions in the United Republic are stable, efficient, and serve the needs of the economy and its citizens.