Comparative digest of African Central Banking Legislation

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% ■ '

UNITED" NATIONS

ECONOMIC AND

SOCIAL COUNCIL

Distr*

LIMITE

E/CU.I4/AMA/7

15 December 1965 Originals ENGLISH

ECONOMIC COIS1ISSION FOR APHICA Conference of Governors of African Central Banks Addis Aba"ba

15-22 February 1966

COMPARATIVE DIGEST OP AFRICAN CMTRAL BMKBTG LEGISLATION

M65-640

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TABLE OF CONMTTS

Paragraphs FOREWORD ... c ... o... o... 1 - 3 A. STRUCTURE AID ORGANIZATION OF AFRICAN CENTRAL BANKS ODSO 4-14 Head offices., "branches, agencies and correspondents .... 4-5 Organs of administration „*<,„.<,, DO ... 6 - 9 Capital and profits o. o.. =.e.o 0 0 o D a o „ 8 „..o 0.e o o a 10 - 12 Auditing and publication of accounts . o. o o. „ e o»o., -.»... 13 - 14 B. OPERATIONS OF AFRICAN CENTRAL BAMS „„ o, o o o .„...* 0 15 - 40 General operations ...a...*... B... 15 -22 Relations with "banks „ c =».,. e o. o 0.,. D a o.. „ o o „. B a o. D, o... „ 23 -29 Relations with government ... 30 - 31 Note issue and provisions relating to foreign exchange 32 - 40 Appendix I - Banque Centrale des Etats de l'Afrique

equatoriale et du Cameroun (BOC,E.AOEDC.)

Appendix II - Banc^ue Centrale des Stats de l'Afrique de

l'Ouest (B.C.E.A.O.)

Appendix III - Banque du Royaume du Burundi Appendix IV - The National Bank of Ethiopia Appendix V - Bank of Ghana

Appendix 71 - Banque de la Republique de Guinee Appendix VII - Reserve Bank of Malawi

Appendix VIII — Institut d'emiesion malgache (i.E.M.)

Appendix IX - Banque de la Republique du Mali

Appendix X - Bank of Morocco Appendix XI - Bank of Nigeria

Appendix XII - Reserve Bank of Rhodesia Appendix XIII - Bank of Sierra Leone Appendix XIV - The Somali National Bank Appendix XV - Bank of Sudan ■ Appendix XVI - Bank of Zambia

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^

FOREWORD

1, The present-paper deals with, the .constitutive laws and

of i6::African Central Sanfes, . On account :qf. the plur:inational nature

^o£'-two o.f. .them; (the Central Bank for; the seven French Speaking'West .

African countries;,;' the BC£AO, .and .•the-:.:Qen.tral Banlc for the five ".Equatorial African countries,■ • the BCEAEC) the-jnijfflber :of countrifs covered amounts to.-a. -total of twenty-six- Five African;-countries, namely Algeria, . ,.:-

Congo ;IiBGpoldville, Rwanda,. Tunisi^vandt^s United-Arab Republic have . be^n.left .out because the constitutive laws .of, their... central banks are

-not:-available at'ECA' hea%uaj?ters..r.j ;The relWv.ant'-'.texts-have' been/requested

from the interested Governments? ■$nd..:a .summary ^ogjthe legislative provisions

relating to these five central banks/trill be .circulated, as soon|S;. .

possible,. as a second;-appond,fex to,th|s;>paper«. . .. . . ■ .

2*, There remain, in Africa9 five independent countries which do not

"have, as yet9 a'centrai Bank of their own? namely Gambia, Liberia,-Kenya, Tanganyika and Uganda- "Liberia has:"speciai arrangements whereby certain

central banking functions, and in particular 'the provision :of no*eej;-ff6r domestic currency circulations is entrusted to a local agency of a foreign bank, the Bank of Liberia, an affiliate of the First National City Bank of New York. Although Liberia has created by legislative act a currency, of its owns the Liberian dollar., having the same gold content as the United States dollar, the issue of the national currency has been

so far confined to fractional coins,, which circulate in the country

concurrently with US coins. The note circulation, however, consis-fes

entirely of US dollars whose availability to satisfy the currency

requirements of the country is therefore normally related to the balance

of payments position of Liberia..

3, A special word ought finally to be said for the three central banks operating in the former French territories in. West and Equatorial Africa. ...

and in Madagascar. Quite apart from the already mentioned multinational nature-of two of them,. (the.BCEAO is,the Bank of issue for Mauritania,.

Senegal, Ivory Coast, Higer, Upper Volta, Dahomey and Togo and the

BCEAEC is the Bank of issue for Cameroon, Gabon, Congo Brazzaville,

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Chad and Central African Republic), they have peculiar features which

distinguish .them from-.fthe jyther. national-banks in.-Africa,- ,,£hes^ . (■

special1-:features-/can;, be identified not: only..in-/their^ structure jxi% h,.

organisation, but...also; artd-especially -in their;-.mode of; operation. ■-. IJfeus the-'::head"..b;ffices :o.f ...thar two- multinational -banks ar-e lpca.ted;in Paris..

■■aita-E'-'all :th^ee banks-:..-.h:av-e' a :si;gnificant French representation on. th^eir.

Board- of"iDiteotorai ,5b.".e,.basi:d .di.s_tin.guishing features,howeyer-^.which

make"- thesie:'■Banks fundamentally Ms similar- from.-their African.; sisters^;

■relate1 to .:the.formulat.i6n- and implementation of the monetaryy .credit.., '

■-azt& "exchange1 control policies- traditionally... entrust'ed to central banks- 'These are-normally ^deliberated upon by. xnd-epQ^eA* .national^ .decision

but:inthe ■.cas.e--.'df,;the-it^hre."ejfrane zone .central .banks .they are. instead the

result of bilateral negotiations between th«interested, parties and Stance, This is true for. instance of the overall control of credits of the

management ..of foreign exchange reserves :ind of the operation of foreign exchange ^controls- A more detailed analysis of this follows in the

subsequent paragraphs of this paper.

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A.. SmrCTaHE.MD ORGANIZATION OF; AFRICAN C"MTRAli3AHIdS"

and1 Correspondents. "^ \ " -■ -;'"■■■' ■"

4.""' The legislative provisions ' are' "in this respect quite'unifor'm, with

the h."ead offices "being generally located in the.- capital 'city. The

only 'exceptions are Malawi, whose Central "Bank has its Head office in Blantyre, and the two multinational■Central Bank's for "West "and Equatorial

Africa for which'the head office's, as 'alTBadj—iirdica-f-ecLy -are "temporarily"

.located, in iParis, ' All' banks hp.vo the power to establish1" "ageneies and

"branches and to appoint agents' and correspondents," general'lj'^by "decision

of the Board of Directors. In the case of the BCEAO, however, the

establishment of agencies and "branches requires the'approval of the Government'in "'whose, territories they are to be opened, while in the case of'■ the BCEAEC the statutes require the approval of the French. Minister of Finance'and Overseas Territories', :N"o provision whatsoever for the opening of agencies and branches is contained' in'the statutes ■ of" the1 Malagasy Central Bank,, but it "may be ass'uflVed tnh't this";action can be taken as part' of the normal powers" confsrred.::upon tha- 3oard of; Directors-,

5, Only in the case of"the Central Bank"of Somalia ddes;the-constitutive

Iat/ contemplate the possibility of establishing representative1 offices abroad,. For all other1Central Banks the statutes or constitutive laws contemplate the appointment of agents or correspondents outside the country.

-■Organs- ofr Administration -. ■ ■ , ., ■ : ,.-,-,-;:■-> ,..,.■

6.- In all cased;; the basic- policy making'powers are vested in-.a Board of Directors. Its membership and compositlon,.-the-termB- of appointment o.f. the J)irect,ors,.themirLiinum number of. meetings to be hel4 annually and the. 'procedures for voting-differ,, however, .widely... _ Generally^the Board is composed of--a Governor and .a Deputy Governor appointed .directly by

the :GoY.ernmen;t,-. ;pius a varying.number i of Directors. The Governor generally 'actsas^ChairTtiP-H .-of. the Board and ,.is. therefore -empowered to call its

-me.etings.,.-.whether on-his .oiffi-initiative-or, at the request of a qualified

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number of Directors.. The Chairman., slso possesses, in the majority'of

cases, "a'casting vote in case of tM',. .'In some cases, 'however, (Malawi, Ethiopia) the. iLapu^y..Governor., is "not'■■an ex officio'-member., of the Board and.

only sits at the meetings when he is called upon to replace the absent Governor. ' The position is quite different in two of the Central Banks-

;.for the franc zone African countries (the"'BCEAO and't'he' IBM) where the

Chairman1 is appointed by the Board itself among it's members'" ".nd acts1 as.a "primus.inter pares"with only one deliberative vote like* all other1

"components of the ■ Board ."■ Only "the' Chairman "of- the 'BCEAEC,"'.-"¥h'o is also President of. the Bank, being appointed by" the French Ministers of

Finance and Overseas Territories, 'possesses' a casting vote.: The terms

of. appointment of the Governor" and Deputy Governor1 "of "the "Board vary 1 between "a" minimum of three and a maximum "of seven years1," while ■ the

terms, of "office of the Directors are, "in "the majority," of three years duration" (5 years in Rhodesia/'and 4 years in the "BCEA.EC, Sudan and

Madagascar).- No specific terms are established for Directors, in the

BCSAO, in Ethiopia, Morocco, Guinea and Mali,

. *7v : Norma;lly..:the statutes or■ Qonstitutiv©-,laws of central banks stipulate the minimum number of meetings to be held by the Board of Directors

.-. annually - 4 meetings in Morocco, the BC3AEC and the BCEAO,:. 10 meetings in Ghana, Sierra Leone Nigeria and Zambia, 12'"meetings in" Sudan, Ethiopia' and Somalia,, weakly meetings" "in "Burundi and'no fixed minimum number in Madagascar s Malawi and Rhodesia -. Special provisions "'"cover the question

of attendance at meetings, stipulating the minimum number, of Directors which constitutes a quorum and permits ;_tjie_B<?ar^£Jp deliberates validly.

The/presence-of,,, the Governor/Chairman.., is .at times, requested as,.a condition

-.for reaching tb.© quorum-■ .. [,-, ... . ... ;.. . .. ? _,..,,. .. .. - ...

■"■ ; '81/'1 The responsibility1 for ths'^day-to^day. administration .of. central '■"banks -its ■generally entrusted to the iGovernor (sometimes-.-called. President,

■■"■■' especially' in- French speaking .countries) -who- exerts it.-.under;,the control

' ■"1-'of'-feheBoard-..';He normally, represents .the Bank ■ in-it.s-.relatipns to-third

' ■pWrt'iW'-and-has. the right, of appointment and'removal-.of the.* staff •■■ This

V:'!" is, however, ■ not ;the case in two of. the: three-franc zp#e central Banks

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(the BCSAO and the TBM):-where these functions are- exercfs'-ed1 'By a ;General

Manager;"i?mb "is "riot a member of the Board--f' In" the BCKABO:;the :functions'"

normally reserved t.d "-th&'dbverno'r ■ are ' exercised by a ■"■fi^siderit -assisted

"by a "General Manager, as in the case 'of "Somalia1. :; ■1;: ~ "'■"■r /:-.

9» Special administrative organs- are to,be found-rin,-exceptional -.cases.

■.£hus in Burundi ;th.-ere. is a Regency Counodi;? ^composed.-^of. the members .of..

-Board :plus four extra appointees,,; to -which 'are reserved certain ,-.■_.-

;but important "power's1 'in' the., determinations -.of jthe- Bank1 s ..operations ■,■; A Managing Committee .-.consisting of a limited number -g-£;iP;irect.ors-/Selected: from the Board'.is .to. Ipe found in Morocco to

advise^'the; Govern.;o-r. in- the day-to-day conduct of business.. In thev.;

BCEAO,; there-areM-finally seven National ^Monet.-ary Committees, one constituent .coimtryj whose main function.-ia that...of making proposal^

to the Board of the Bank on the overall credit ceilings established annually by .the Bank for each member country

>and Profits :.-.. - . . ■

10, "'Ih-practically all" cases the capital" of ceri'traT-banks is entirely subscribed and'bwie'd- by; tfie national Government s-« Tkdre-a-i'e only two1"'

exceptions-represented l>y tke:'BCEABC, where the original capital of the

■;":Ban'k" has heen provided ;%y; "aPFrench public ^a-gency9 tbe CaiSfie 'Gentrale ''' ■';'de-:'ia Franoe d'Outrem&r, ■;i-h1 tWe form of -an- endowment 9 "and ;by Madagascar

where the capital has been subscriped "in equal amounts by the1French

■and Malagasy Governments.*.? ■ ■■ ■■ : ■ ' ■ " ■ ■■;.-■

r'-i;'-i:11-* Increases of '■■ capita;!3 either by way of new subscriptions or,.^7. .'■' capitalization of'reserves., 'have generally to1'be decided upon by .the "■

■"iBe^as-d^-mostly'with the- approval of the controlling Government .depart.-- ■■

men.t? represented almost invariably by the Ministry "of Finance*1 ,l- .;.;:.- .

12m Net profit's are generally defined'as the residual item after'1' "'■ '' meeting all current expenditures depreciation of asset's, provision1 for

bad and doubtful debtss contributions to staff retirement and other internal funds and all other contingencies.' Central banks' profits are

normally exempted from taxation (the tax exemption is general for profits,

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■Pake 6' V -.■■.■■■

and only in certain cases the exemption is extended to cover other taxes,

imposts and duties). ■ In. practically-.all cases first priority is given,

in/the distribution of profits5 to the establishment of., adequate . general

reserve iun&s - up to a limit varying between one to three, times .the .

amount of the capital - while the residual profits are practically Always ibeserv.ed. to Government^;.. ■■ Special-allocations^; of r\profits are .-.' ' contemplated;.; only, in cer.tainr oases, suph - as the " redemption" .of-1 Government obligations1; issued' to., pay.,49^ the initial -expenses piVthe. central, banks".

inv61ved1.;XSierra,!ijebne)79r;,fpr.1;thG cost1 of.^mintings..:.printing, and shipping the initial, stock, of national^.notes. and coins -(Ghana). 9 the financing.-.of investments* and ■ the '^acquisition . of ^.participations" (BCEAO) or^ t.he- .dl.st.ri- buti.on.'.of .bonuses among the member-s./of :;t^he. staff (Morocco) - In!tlie ;r-~

case of.'t-he 'BCEAECj -..the ,profits, remaining rfaf ter-establishment .rpf : an'. ^-:v . adequate^ general-,.reserve, fund rever.t- to .the French Treasury- -■'-.;■■.■: .-■.:-"■

Auditing:and Publication of ;-;AJQCGunt;s ■' ■ ■ - ' ' ' ■.-.■■■.■■■

13. Following the British tradition9 all'central banks of English"speaking

countries in Africa have recourse to. external auditorsjjipp-oin^ted by; jfche ■ Board, or. by. the competent Government, department .for the. auditing of their.accounts. In.countries.of. French tradition^ Instead, as well.as . in Somalia, the constitutive laws.or.statutes of ;central banfes^provide for the: establishment of. special organs of internal .control, and auditing.

The law creating the . Bank. :of Morocco, ^among o.thor«5 envisages . the' existence of a Government1Commissioner to control the activities of the Bank and.

of a Board of Auditors to control its accounts. . . , ..,.-., 14. In all .cases,., central banks., are required to submit, regular statements of their,"accounts v They must also, publish, annual reports describing . . their,■activities, and..resuming monetary, credit and- economic. developments during the c.ours-e. of "the, preceding .financial t year in the respective . countries^, accompanied by an audited balance sheet and profit and =

loss statements' as of:" the close of the respective financial'year. " .

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OP

General Operations

15,: The: range, .of-.o^e^ations .permitted to African central banks.by:,"

-..Gpnstituiiivea^ws.-Qr. statutes tends; to be .basically the s.a$e,.but presents wide differences of detail. Invariably, .all. central ..banks .can..accep£., deposits,,. d.eal in gold and foreign exchange, acquire discount or .'rediscount bills of exchange and promissory notes and other documents

arising from credit operations. Treasury Bills andother Government

Secur.q.ties?-..or grant .advances against the collateral of tlie fboye credit

instruments, . ■ . ■ .... . .'

16.. .The.differences relate .essentially...to the length of .the maturities

,w^irch make commpr.c.i-al, . agricultural ? industrial or ...Government paper ,; .

eligible,.for.Baak^^count, or rediscount,operations' .or.qualifies, JJaem as■rcsqlXa^er.al f qr;,.Q-eiatr,al:...bank ■ advances.. Three..to six months maximum mat^r|ty;:..of.,pr-edil4nstruments.to qualify ..for .re^iscpunt. is .the., prevalent rule, but ...longer maturities - up to...one..ye:ar -...are,..nat. infrequent 9 while in- two-cases even- medium-term paper is eligible for_ discount and ^ rediscount or as collateral for advances (in the case of the BCEAO

and the BCEAEC, 'up. to a maximum"of' five '"years),. Frequently'the eligible maturities are"lower for commercial"paper than for paper created for_

the financing'of "agricultural, mining'"and industrial operations..

17. Differences in the maximum maturities allowed^to .centra^banks..by their constitutive laws or statutes are also to be found in connexion with" the purchase" of Government securities" with 3. range varying from

10" years (Ethiopia)1 "to 25 years "-'(Zambia1, Malawi ^.d^igeria) . The '

acquisition of Government securities expressed as'a percentage of the demand liabilities of the interested central" banks, is, moreover, often limited in absolute (Burundi) .and relative terms5...(Malawi>.;....Sierra.l^ne and" Nigeria-)"-;^ The- same- is'true ffer;Treasury. Bills whose-maximum .;...

n'?is generally-9&;-or 180 days. :■ ; ■. ■ ' . s . ■ ■ ' ■ ■■

18. In.certain cases the provisions of the constitutive laws or statutes

are deliberately wide and "general■, leaving it to the Board to .establish

detailed regulations or reserving these matters to the by-laws,.

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19« In certain cals:&s: the'. constxtUtSe Mws ;"0r statutesriof central banks

specifically indicate that they can transact "business only with "banks, the Government and Government agenciesj while dealihgs'withprivate-^-1

• individuals aM-"-!"firms"-'8£n-"''^ tke.f

■ coifip'eterit ^Goêrriment-^department1; i I-Kôiher e'ases dealings, witfc^pVxâte

customers" are::"::expr@B^iy- author! Z'e"&.;^'."\ .."■-■ .La: ■•$-.r ■.■.■ .:■■:-.;:■■■■ '■-.'■■. j.;o ■?■';.•■■■

20. Standard provisions, 'common""to"" pf act'icaiiy'1 ail central banks^'-'concern the obligation not" to engage'direcihy'in business; ftot'46'Wqtiire^'eal estate of buildings except "'to the extent 'that'this "'is^necessary'f63?"the operation of the banks ~"io establisV::the''divfie"es at ^^q^

for branches - or rendered imperative by the need to obtain'

in-re'spe'!ct 'of :doubtf%l or ■ iiisolv-ent-debtors j ■ not- to-aicquilre'-stock • or ■ otherf-paft:i6i:pations: except^fbr-^financial'-'and devei-e^aentalvinsti'tati sponsored--dr-^gLiaranteed by:(the"Government aiid-de©ign^d--"-io furtheiv the afiSsxof cred-i-i? and .monetary policy. ol"-the ceri'tr-al;..:'banfe^,.roa?--:-gen"erally

■--fco-'pfomote'-ecdn'oinic ^evelopmenij-'and-alwaj's wlth^the :^utJaoriza,tion of

■ fhe ■■■ ddrnp-et eiif -Government. department j' the "Ministry" of . finance. - ^. ■ ■• ;-r ' 21. .Most central banks are", entrusted'with the iask of "■^lfig

servicing "clearing, house facilities'at the locationof their head"offices or in any other place where such clearing" services niignt 'be required*

The three franc zone central banks are also requested to organize'"credit

intelligence centres" to enable banks to.get quick and complete information .on'-the':" creditworthiness- of

22, It is also generally provided in the constitutive" laws or statutes that no interest should be paid oil curueni" account balances' held by'

:'"■ .\--i-: l'\.--r r-' -i . :' ■'■:■■':'■)■ &■ vyi- " ■ ■;■■ , r .-.■'■. ■■'.= ■=" ■ ■" . ■} ■ .

customers and that central banks should not grant unsecured advanbes

or advances against the security of stock. "

Relations. with..,Banks ... ■ ' . .. . ■ . ■ .

23* All/;e,^Btral ;::banksr;^r.e.-empowered to,.regulate the.pattern, of,rates

on the market by fixing their own ..discount....and. rediscount rates and the rates applying, to their loans and advances. This power is normally reserved to the Board, but' at times'the approval, of the' competent " ■

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Government ■'department is required. In one cases that of Ethiopia,, the Central''Bank'can'regulate the rates applied "by commercial banks and other' "credit"institutions on their credit operations,.

24* As the sole monetary authorities in their respective countries,,.-., central hanks are normally empowered to impose minimum ratio of reserves, to "be usually held in the form of .deposits with them? to the demand .and time liabilities of commercial banks and other credit institutions. The determination .of the level of reserves-is usually left to' the Board of the Bankj with or without provision for prior approval by the Minister .of Finance ^ but' in two cases - Sudan and Ethiopia - an upper limit of

20p on the aggregate of demand and time liabilities is prescribed by the law. No'provision for the imposition of reserve requirements is

■■c.onta'iridd in the Statutes of the BCEAEC,"of the Malagasy Central Bank ancUof :the Banks of Sierra Leone ^Mali ■ and. Guinea. In Hhodesia reserve

.requirements can be established by the Central Bank both in relation to

a demand and-1 time liabilities^-" and to^the amount of'discount and advances o^, discount operations conducted by commercial banks* ' : '"^ ''■

to intervene more directly in the conduct of business by ...

commercial banks and other credit institutions are conferred upon a....

limited number of African central banks. Thus in Ethiopia the Central.

Bank can prescribe the purposes for which loans can be grant.ed., establish credit ceilings for each category of loan operations of commercial banks9 or over-all"ceilings on their total credit activity?. and fix. maximum.

periods for which credits can be granted. In Sudan the central bank ..has^the .power.: to direct, commercial-banks to submit for its approval

any loan., application : in excess of a.specified amount ■ and- to fix crecLit ceilings to the activity of the banks. . - / . " .:

■ 26> A special case is that of the franc zone.■■central banks where_...credit, control in the constituent countries is mainly exercised through the application of annual .credit ceilings for each country. Only in..the

BCEAO are.there to be found seven National Monetary Committees.(one for

each member country) to make specific, recommendations on the- size ofr. ,;

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^

such .ceilings. Quite apart ,from this exception,,. ;hqwe.v.e.r.s .the .final. ..: ;.

determination of the ceilings rests with the Boards of Directors of.. .,. ■-.

each Bank. The global ceiling for e?ch country ,i.s;..,then. applied .in a -, capillary form9 individually for each commercial hank and firm of

any sizfeor importance."' 'vThe"'"'execution is "entrusted to the National

•tbrietary ComMttes in' the "BCSAO", and to "the agencies'*of the "central" .

"b'anks-'in"" Equatorial1-Africa'"and Madagascar, "" ' ..-.-...■

27- Some, central han3£s?.,in addition to establishing reserve, requirements9

are also empowered to- fix the minimum ratio which liquid assets of :

commercial hanks have to.bear(to their, liahiliti.es,. ..This liquidity ■ ".

requirement is in fact no^ ,an instrument of credit control, . but merely-,-

a safeguard measure designed, to assure, in so far as.possibles the

ability of hanks to face, sudden and large withdrawals on their deposits,

28,..;...:.Fd?na.lly,.:a:. certain numher:;-;of, ..central r;teJ^^.ri& ; enfeust'©d:;-:-with the : r task, of ,rb.anlsi^g Q^tr&l^t^s^fe^is.ion.- ■, This :-is,.4r,ue.;.of ■/theftce.nteal-:, ;-..

'bt&j&l^j.^^^r-rM$l±>-;.?uinB^sr:--E^?-oilâJ -|he.?BCEAOsq&&jtkftJ:BCEftECi.■-1 The powers confe^r,ed.upgn^1fheê;-b^k^,;inelvê hat-ofrioariydiig;..6TitînSfe(>tS^ns of. commercial "banks and other credit institutions in order to ..Qxainine ,.

their 'books'and accounts3 to make sure that they operate within the

provisions of the law and maintain at all times their solvency. In some cases the powers conferred upon the central banks include that ' of approving the opening of any agency or branch of commercial banks.., their mergers" or liquidation, and of authorizing the licensing of new ■

banks- Ethiopia and 'Guinea,

29 • All-central .banks ? almost without exception are"1 entitled'to ' request comm^cial.:banks and other credit'institutions to submit: periodic reports

on their accounts and activities. - " ■■■ -: " ' " ■■'-■■ . . ■ : .'" ■ ■ ...I':.

Relations-; with- theGovernment - ^' ■ ■■"-: ' ■'■ ■ "■ : -1" " ■ ■ - ■■■■■- •'""' ■-

30. Inall cases central "fa anke are'appointed by' their constituive laws or

statutes to act as"hankers", :.-:gents ' and' financial advisers to Governments

and:"-;Government-agencies.'--This includes th!e ' carrying out on behalf of

Governments ■ of ■'■fill banking 'trans' act ions'," "tire execution of collections

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and-payments* the'--under%fi'ting and management of all^'&ebt issued or:

guaranteed "by "tlie "GovernmentI'the^lending oif financial and^p'os^ibly ■■■':--"}"r;- legal counsel 'for' foreign borrowing- operations % ;arid the':provisi6n"':oi'!-'::1' ; safe" custody1 Services* "'■ '■' ''■ ' " -'■-■'-- ""&"' ' '■"■■•■'■'■ " -vj .": ■.".■-'■:■.' ■;

31* In addition to the operations involving the purchase, sale,_

discount and rediscount of Treasury Bills' and Government securities of longer maturities, practically all central- Banks are empowered to grant -temporary -advances -.to Governments to ena"ble-"themL:to.-:over6ome . .

contingent' cash shortages*:^ ■-'Hiese'advances,. to be ^repaid-'.normally ^.'-■ '.. ■■ ■■

within; the-.financial year -for ;which they are granted or mthin:"a" maxfmunr ■■■

period of [six months after .the closing .of .the ^'financial year, ■.-are" in."--' '- ''■

prae/feicaily all cases limited in their .■total" amount ''to.'-a percentage-- .■:!= ■ of fi-scal revenue .during ^the. .fiscal year-in whiGh.;they-are granted .oxv-:;:'-:^:

in the preceding one* The lowest: percentage .— 5 - is'to be found-.-irt -.'■■ "

Sierra Leone,' -. Ten as the percentage .applying to Malawi,- Ghana --. in-■-■■■.:"-1* ■ exceptional circumstances the 3aiifc.-..of Ghana' can he authorized to.raise ■ the percentage, to 15 - ,. the B.CEAO countries, Mali, Quinea,. Ma4agasscar, ■-..

Somalia and Morocco j 12.5$ applies -to Nigeria, T0> to Sudaci and.-.Ethiopia and finally 2Of0 to Zambia and Rhodesia* Kp suoh provisions are contained in

the statutes ,of tixe BCEAEC? and in the CQAStitutive law of th& Banque du Royaume du. Burundi. In "both..these cases .only limitations on the amount.

of securities held. in. the Central Bank's portfolio are to be found, as ?r_,

already indicated. . . v>.. , . .... . ' .

Hote Issu;e and Provisions' 'relating to :^°r-&l ffl-^Exchari^e' -! ■ '"" ' ' -!l :] - ':-'-'-H.

32* "■-Central ■banks" "are1 in all cases the sole authority ''empowered"to" is"stie notes and coins in nr.tional currency- The; constitutive' laws, or" tfiJher1" ' " ~

logislative instruments, normallj-^ define 'the gold" or: internatiohai '•''"' ' parity7 of'"the 'currency concerned. The parity can'normally :bJe changed* '"

ohly'by''a'6t: of"■'Government,"''while it;" l'a:> customarily stipulated'' that

any profit'!'6r""'lbs"s'resulting from a ^nange'in the par value" of'"tne

national1 ^currBricy 'OT^-b^foreign'■curr^enci'Vs in "the1 reserve:;6f ■c-"entraJl- ' ' :;-"

banks'-is for "bne"-a"cc6unt'-d)fx Governments "wftcr'cash the profits-' or''mUke ":-" '■■

good:"the; losses t-bJ"the Jc'en''tr:ai banks','' ■-'■ 'r': '-v"51- " ■■■■■'■■ ■"■"■■■■:" -■:-"-'-1 •-.■■■ ■■'-■■.-

(14)

.gk=^~^vra'^^

Page 12

33* The1 banks: are' normally authorized' to." deal, "both; in- gold and'-foreign exchange'.-assets, 'such .:as bank accounts,, securities-and other-credit .■

instruments-. ' Central" franks are -also;-authorized' to fix the:"rates of -.

exchange of the national currency in relation to f or-eign;: .currencies — within given limits. .For countries who .are- members :of .the,.International

Monetary Fund these, limits, .are represented by a margin of. 1$ above or

below .parity. . . ,w. .... . ■■ ■ ■ ... .... :;.,„. ■■ . .;

34» Central" Banks hold and manage the- foreign 'exchange reserves' of their-:

respective, countries. The authorized composition.of these reserves varies somewhat'from1 country to'country, but normally includes gold9 foreign currencies'," balances 'in'-foreign currencies, foreign. Treasury'Bills and : other Government-securities, foreign bills 'of exchange and otherj credit instro&ents1'* A provision'is usually inserted in1 the constitutive law' or statute^"to 'the'"effect that the foreign currencies' and the credit ■ instruments in 'foreign exchange Qualify for reserve only in so far as- the currencies involved are freely convertible- . "

35* Minimum percentages of reserves are customarily prescribed by the

constitutive laws or statutes and are usually related to currency in .

h~:>: .'...:■ ■- r--::: '-:,y.~ '-■'■ .'.v.' r ■■:.■■".';■ .r h^^^ "/:cT bc& ,. '; ■■.■■_ ■;;■.- ■'-'"''-■' "\ ....

circulation and other demand liabilities of central "b-anks- The minimum foreign" exchange cover for currency in circulation .and other demand

liabilities is fixed at 2Ofo in Sudan, 25f<>_in Rhodesia and Ethiopia, . CfOfo in Nigeria, and 5Ofo in Malawi and Sierra Leone. In Zambia, the foreign exchange cover is.fixed at 50$ of the sight liabilities of the Bank at the time of ^r.:ans."f.Br...':fe.a:-.it. .oi...it.a_£ihax.a.LQ'£"ltiie. &&£&}&:■ Ji£.;J$fa&~... ..

former Bank.p.f ^Rhodesia-, and -Iyasa,land, \and-25^; on:any increment of sigh$\

liabilities,-.thereafter-'. The minimum foreign exchange cover: is, instead, ,

related only.jto notes in circulation in. Somalia (ip.G$) .and-in Morocco ■ r (i/9). .There is no provision for the-'maintenance of: .a:; minimum; foreign; -

exchange, cover in Burundi Mali,. -i-Guinea and Ghana. In the-latter count3?y- the issue department of the central bank;is-authorized to ho^d-^gainst- currency

in circulati.on? not only foreign assets, but also Treasury-.Bills-afid ether securities of th3 Ghanaian. Governmentr up-to a limit- of- 4C^-:of. its note

liability. This percentage may be increased in exceptional-circumstances to 60.

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Page 13

i&; finally the- special" case of the' BCEAO,' ?the BCEAO, the

BCEAEC and. .the.. Malagasy- Institute 'b^'Issue, where no provision for foreign exchange cover is- stipulated by:the' law; This Is due to the fact that all countries belonging to the th9ee central tanks have'special

.arrangements with the French Treasury Consisting first and foremost of an- unlimited guarantee .of convertibility of the local currency

into French francs- This guarantee-is implemented through the.instrument of the --ero--called "operations' aecount": which each constituent country

maintains "wi^h its: central" Wk, " All" foreign exchange, and; Frencl' franc '

earning^ of member countries arc deposited into this.account to their credit,- and' all 'drawings in'"foreign" exchange .and French francs are:,, debited to this account. "When in" need, member 'countries - have, unlimited right-to"draw on this account, whether for internal purposes or for- -■

conversion into Fre:ncli francs. The balance of the operations account can in fact become negative, the result being only that of imposing on the debtor member country the burden of paying interest.

37* Although the position of the operations account cannot be taken to be representative of the balance of payments position of member countries, in fact it can be said that the balance of the account is somehow .equivalent to the foreign exchange resources of franc zone African countries. Indeed when'Guinea and Mali decided to withdraw from.the BCEAO and set up their own independent central banks/ the

operations account was taken as a measure of the share of the assets ■ ■ of the BCEAO they were entitled to.

38, It should finally be added that the allocation of foreign exchange, other than French francs, to member countries belonging to the three franc zone central banks under consideration, is the result of annual negotiations between the. interested countries and France,

39- Only in the case of the BCEAO- the statutes of the "bank envisage

remedial measures in the face of dwindling foreign exchange resources

of member countries, as represented by the level of their operations

account. It is in fact stipulated that the Board should consider

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B^qf. 1 4/aea/t

Pa'ge 14

restrictive.,.measures-.--.such as, the- raising';.of ■'the'v discount" rate 'and/of":

the lowering^of ..the over-all credit:ceilings - when the ratio of

foreign e&change reserves;to demand liabilities--1df:-:thk Bank should1 ' drop or/be expected to,.d37Op/b-elow 2C$9■and shouM Bs" 'compelled to■' adopt, them.- :in p.a.T^icul^ ?-^fep:'::lo"w:ering of credit ceilings -""s'iiotild the ratio fall below.. %£$> In thro^ ;_con:s-e-cutive years'." "" J~"' ■"""" ■ '■"' .

V" in 'suiomp-ry, the. most salient aspects- -of .cpnt^sl- ■?■'■* -. '■'■■

."banking legislation"in Africa.. It should Ue ,no.te^-th^:t.:;only/in--,the"^ ":

case^of-'E-tMopia .are powers" conferred on the contra], -bank-rto: imp.os©:":' " ■■

selective'credit controls, an instrument which migfe-.t -i^ f&ct!'.prove■■■ th'e most flexible and appropriate to African conditions...,- A digest :of ■'■£-■■

available constitutive laws and statutes is ..contained,;in. the- fol-lowing pages9 with an appendix devoted to ;each Central ."bank.. ■ ■"_ '.-:■■■: .^■■■.i"-:."" ■' -■-

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^

Appendix I

■'-.. '" " .-; --•■

APPEUDIX I

BASQUE CEITRALE DES ETATS DE L1 AFRIQUE EQUATOEIALE

m DV CAIEROU¥ (3.C.E.A.E.C.)

A* Bstablistfflient .and 'Administration:-1

1. The Bank is a national organization established tinder public law

with head offices in Paris- The headquarters can be transferred by decision of the Board of Directors approved by the-French Ministers of.

Finance and of Overseas *£er-ritories-o t The Bank mayy with the authoriaa—

tion 6f the"" above ministers;, open agencies and ^ranches within1 its

sphere 6f scoiQp©tence (ittef member countries of the- Bank are

Chdd,1" Central Afrfcajn-'E^piTblicj Congo Brazzaville and Gabon}- 2. The Bank is administered by a Boar3 of Directors composed as

follows s ^'

. . - * r r •

(a) a President appointed by ;joint decree of the French Ministers of Finance and for Overseas Territories5

(b) two representatives"of ohe French Minister of Finance^

_(cjt two representatx-vbtj of che French kjjaisfeT-for'Overseas

(d) two Directors chosen f*or their experience- in economic and

- - nfonefsry inat-(-ers.j anointed by, io,int decree of, the French

Minis"t-&PB 6f FLnaaaae 'aarid for^OverseaiS territories |

("e) Six Dirs&tOTs representing the member countries chosen by

the- French Minister for Overseas Territories, of whom- three representing Camer-oon3 and three the other four Qountxies of

^ Equatorial Africa^

faro ^ireqtors appointed by the Bank of France^

general Manager of ihe Caisse Centrale de la France

. _ (h) the Chapman of the Board of tne BCEAO5

. ^ (i) a member^pf Lho Monetary Ccmmi+tee for the Franc feone.

The'Directors', other -thamrirhose appointed by. the BtGEAD and ^h& Caisse

-CentraXe,1 sebve u texm. of four years. fThe-3oard is, ve^tred with the

(18)

\ Appendix I

4

widest.powers for the admi^^tRationand management ,of the Bank. The Board meets af least four times -a ;.year' and' the meetings are1 called by

the ^r^sl^ent"''^^"^^"^ Chair-man. ^The^udritiff fbi? the meeting .is assured by nine- Dire"ct^rs3 ":and Votes, are "taken by i

with a>.casting vote for th.&:Chairrm;an .i.n_ c;as;;e ■A

Eoard'anii Pres^aent'.p^/^he^ank: iepr'esents the iL^s^reILatlonsr'^tli,.i;hird1"parties and- generally assures'the day-

ofv-tia:&,pBrik..: -He appoints-:,t^nci" êvêsvê^Bank

a^£-Hii^:^npti3^î: he^ is ] aîsê'd'^ a General' Manager appointiedi^ Qâ»e4'îiafci^-rdoinftiy\i3yvfi^.i^

Eihanc;© -and.' Ovfirsea^-.Serritoriss^^'^e'-.Geiieral Manager

capacity/ r ._. ... ■ .. ... 'I, ' ' :"^

." 4*1:1'-' The capital of the Bank is fixed at present1 at 3OQJ"J&£&P$0n CFA francs,

■.^...entirely ^rpvided by^ the .Caiss.e Centrale ■■de' la France d'Outremer, The

capital can be1 increased by Joint decree of the1 French Ministers of

,:^Finanae ^and Overseas."Territories., ■ . .. .■-..■ :■■ -'■

^■■.^'■-■'■TlBS^net (profitsyj.-.-after^Meetin'g-ali current expenditure, deprecia-

tio-iiy provisions and cthej? contingencies ar.e.-.allioAa£fc;ed to the extent

of 15 per ceht.;..to..:a, general-, reserve fund^-.s.o;ikcmg, as'rthis-. 'remains below :/half &$&' capitals the."r.emain<ied?.:being p.aiia;,,to-;the;-.French Treasury,

■;Ees-e.rvfes .can be used1 to increase ■th^vicapital of "the Bank,

.,6* . " The'B'anic mus\typrepare::m5nthly-statements of accounts to be published :.. in. th^ of'fibial gazette 'bd'th "in France and. in ;fche member countries.

Wiiihln" sii'months from" "the-end-of each financial, year a report on activities is submitted toi the. Board1'"for approval -■.The control and .. auditing of1''the^'Bank's operations' and accounts ■l:&,.:aSS'Ur'ed by a Board

of Auditors cb'M'pdsed by ■the"ifive .General 5i;r.eGtors;-,t5'4,Fin'anGes of .the

■ fdur. Equatorial countries fnd .of. Cameroon,- -and', 'tm additio.nal members appo-inted respectively':by ^the"French Minister" of ..Finance';an4 the French ■

!/:Minister' for Overseas' territories*. ' ' ' ' ' ,;-.-:,,

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^

The Bank can conduct *#e Following^

(a) effect transfers 'between prance and. anvcountry within its

jurisdictions .

(b) buy and sell gold and foreign currencies 5

(0) discount from banks bills of exchange with maturities not

exceeding six months and bearing at least two good signatures 5

(d) grant advances to Banks for a maximum period of six months

against the collateral of warehouse warrants, forward sales

of crops, bills of lading normally endorsed and accompanied by the usual documents, pledge of securities and other credit

instruments, deposit of gold and foreign currencies and

maritime mortgagess ■ . "

(e) exceptionally, the Bank may transact the operation under (c)

and (d) directly with firms and individuals, when such opera tions are in the public interest and help reduce the cost of credit^

(f) buy and sell and grant advances against obligations issued or guaranteed "by the French Government or ~by public agencies in Equatorial Africa and the Cameroon, with a maturity not exceeding six months| " •

(g) rediscount to banks paper representative of medium term credits with maturity not exceeding five years. In order to be eligible for rediscount these credits must finance production or house building and must be granted with the prior approval of the Bank, The maximum amount of rediscount facilities for medium term credits is fixed periodically by the Board of the Bank§

(h) accept deposits on current account which cannot bear any

interest §

(1) organize a "credit intelligence centre" in the territory under

its jurisdiction!

(j) acquire real property or shares only with its own funds. Sharesj

however, can only be purchased with the prior authorization of the French Ministers of Finance and Overseas Territories-

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Page 4

8. The Bank has the sole right to issue notes and coins, j

in CPA francs in the four countries of. Equatorial Africa and in the Cameroon. A mark on the notes identifies, for purely statistioal

purposes, "thV country ofJorigin"a:r issUev.'. '. "■" ■ : "■■"■■'■:-;r '■"-> '•'■■ {■?

- o •:•:■

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^^

Appendix II

-"&* &M$m GEHTMLM-BBS. ETATS -EETL1 AFRIQlfE DE: I^OI^T1 (B.C.E^.JdV)

l^::i: TEe^Bikfeis an ante¥n&ikorial organiza-tibn 'governed by:'-the ag sighed- by tlie seven ^^^cipa^ingr Countries (TT^Tiy CbaSt? Tipper J

^^: ITiger and Togoy!vfotfr^e subscription

located inr Paris, but can be transferred, to any o^f thie seven

oun^ri^B: by1 their unanimous decision. The Sank" has one a^erioy" in pa^i'cipat^ng-country anU ftay efeijablish additiohai branches '.''."

accor"dihg:td -it'^^eeds with the agreement of the interested^:g5verhmevnts<-.

As^-a^'i^ternatibnaT bb^y it; enjoys in each member :couhti^r "the privi

leges and immunities custbliarily extended to, internatidhal1" organizations-

2«i ^-'I'hevBank is admihis^r^d ;by a Board of Directdrsy seven National Mbri-e'tary:; Committees:"alnd■,%"General'Manager. " The Boarti of Directors

consists :o$r- 21. members-, 1'4 of whicii areJ appointed by tne African'^member . Governments' to; -tixe: extent :of two each^'-and seven are; appointed by :the-

French GoTrernment. : The Board designates" its Chairman ifba?" a term"'of two

years -fpllowing^a, sys.tem1 of rotation, among African member: Governments; , The^meetings of. the Board,a^ce called; by the Chairman ,on its 05m ■: .

initiative PJV.on the req.ue^.t of 1/3 of.the Directors,v,as:L©^teBj.as ■ ■.:■ .

necessary ]?ut a^.,:least: four■$imes..annually.^ .The^cLuorumia^T^biie-meetings

is assured by the presence of 2/3 of t^e: Boar46s:jmembersiOcTli.e Board; is

vested with the broadest powers for the administration and.management

J" of "ine-"Bank«'.- "'" " "' " "' "

3, The National Monetary:Committe.esr;3re composed q$ ,:fj-^e .m^ibers. which include the two Directors of each interested member Government,to the Board of the Bank, the others being appointed by the Government"of the

country'w^ere the Committee has its head'offices, The Chairman of the

Committee is one of the Directors to the/Board of the Bank, Decisions are taKen-rby the majority of the members present at any meeting./ The

(22)

Page zl-l-y^^,-rLi.

attributions of the National -MPnetary^Committees reside "basically in

the determination ofngjnnual cgedij^cjsiling-' for .feach.: |j|^£[^^

are essentially 6f a consultative nature* formally the proposals of the"National Monetary .Committees cond'#iiaing:^^^i3iM^^^;:;4i^siM^> ■■■•

d^ the

^h^;^^ tQ,v.Jhe.:,|3ener.a3:.. ...i;.

^^ . e,ntr,us ted,...,

the fin:^.^(^0isj9^;,;:-;iJ;n:|e^gf§ where,-^he de.£$.s^n£;Gjs, th"ej^t the, Cpmm^tte.es.g-.^he^^^^61 .have: to

^n;;the allppationvOf^.the^.pêr-raiLl^ credit/.ceilj araong ind^^rjâ^.. baRfe^:. and-- co_rporat^9ns :,pper%ting:r^n._)the^r.;,;r.esêc.tiye..

couH-^r^ef■*•>? -v!2he .$®i.3tiiag& for medium..,^erm,.credit../tO: each ...member.; apunt^y., are ;inst,e.ad,.,|fxed.=.4irgctly:--:bv :the^Bpard.

CoB^i.£;te,es.-..m^ co

4, .._:■ JherGenerai^^ana^,e;ropf r.the:.BCEiQ;;;is j

Directors., ^Jt-ts^ ort-.tlie. Spar/|-; inia.,cpnsultaJ:iY,e-capacity.?;,;ean .-/..

re,prje_siente_d0^^g,13r ;^h'e ■E'at.ional.-.MonetarY.-CpiiHnitteeSj^.-Q.r^a^ ■ the ?: -.-..y}^, ■>

services- of i^h^^B.ank ..and $&&$Fally ^^^

3p

member Governments"■■whd/sufescriML;"to°"it^in-Leq.tial amduhtSi"■■■•' l-i;'.ii6aii-1w9"' i"ii'"

increased-1- bo"tH';:"by°iiewft%iiBsfe^ptidns1fr&mi-m6iaVBr'^^SrMen^&1'br b^-ira^1-1 xa-!- of^c^pitMiM^ibn1 o'f'^Serve's,. ■■ ■t]?h§'"';capitRi of

pres'etLt::i&o-5^ million- ^j'

6. The profits of the banks after making allowance for current expendi ture, provision for bad and doubtful debts3 depreciation of assets and.

-are-'"disti?ibut:^d"'-is" followspl/r"''' ■-'■>: >"''r:A ■■'■■--:-" '■ - ' --: ■

..(a) .to finance investment and participations^ : . ..,...■• ,;

(b) to di.s.trib-ute among member governments up to a maximum of .

.15 per cent5 . .

(c) 15 P©3? cent to ;.a statutory reserve fund till this reaches an

v=.•■.■'; - -v.--idict io:v \sii: &Si''.ir:oa&r ■■■&£&.*:.l?&■$£5 -ic- -;.j ir,::r(,sii\r-:y&"-:' .;■■■. •■■■&•■''<$■.:■ ■

amount equal to half the capital of the Bank§

(23)

^ftasaSaia^

Page 3'

o:tne'r xe1lexvW;:Mticl2 .t-k4eiBank: may-.-deem p^tfibM:a^i ^s a;gaiia^ available for'

j/i';jc-a!>:. ■?;■-.. ■ ■

7» r The Bank is requested by its statutes to publish in each member

country a monthly statement of e,cco-unts and to submit to the Board an

" ■ • 5 sxi-:1^:--.1.; : .- ■■

annual report of activities within the six months following the end of the financial year, to be subsequently distributed^to the Heads of the member States 5 it also has the obligation to submit a,n audited state—

ment of accounts to the Board for approval at least once a year.

S* ..By^^ir^jue-^f-i-jits^

properties and income are c'rcrratod. £"or>.,?,lX- ■&3TCG3& dj^$e.3-,i.a^,d fees..,

B. Operations

9.- The Bank can conduct the following,

''"^■^(■a^-^^uy ^d^sll^gold' e^r&i^ffi

effec:t franswers■■ffi-$^^ to

discount" %lils; o:.; exchange and Wther credit "documents issued 1 "commercial"- pirrpoces with^aL^a"ttirityvh6t"' e&ee'ding sizv.

^rf6ll266U signatures- an^.,. on the

^^ otf

mortgages,/ by-credit instr^m-ents-1-feaa.dorS'edbfey 'eoinmo-dityiij x --.- l"L exchanges, or by credits granted for the purchase of machinery and equipment^

(f/ grant advances to banks against gojd pr foreign currencies .

g gj p

^ . or eligible commercial 'paj erj

(24)

Appendix^I Page 4 ;

redascounitand grant advane.es against,

g y pem^er. Governments maturing >i%^|ny

liabilities calculated as;';an average forthe:preceding; twelve

; ■ months <!■.... . .

(h) grant advances to member Governments not

and in such a way^ t%t; the tp-^ai amount outstandinf ^ |y given,finand'iaj vea^ shouit h6| be higher than, X0 per cen^

of the Bankrs deposit: liabilities or 10 per. cent, pf "the

"■'■<;'■ di^rent budgetary reoijpts of;-:tii:e dovernm^nt^during the '

■ ■■■■■■■-'- ■>pIrfeceding fxs-oal yearg .-.-■>■■■ ■ ■■'■ - ■ ■-■ ■ ■ ■■ .-.-■ ■■ ■

(i) discount drafts or promissory iioies drawn in favour of the ..

Treasury of 'mefliber -countries maturing within fpurlmon^Es and

"bearing a bank guararit,e% in'toCl

(j) rediscount paper represe.nâîveg of m#<Hum-rterm cêdi^s)granted b^.gpmiaercial lDanks,,-.uj) to, a<maximwt■■mat^rily ofafiê'^^trg and

■; provided the credits are made with: the,jprio^ appro^

,Bank.!ajad are designed to finance' investment pro^e^jts! l^

in the development plan of-, the interested member, coimtrj-;. or , ■: . to promote ;the export of .industrial products.: ^.'-- -

10.; The Bank fixes its1 discount and:rediscount rates. ' It, assures the .V

application of laws and regulations concerning the exercise of-banking,, ■

aoti^-fcies in1%$&■ member countries- 'It may request credii institutions;

to submit regular-informa^on^on theirJactivities and on their acc#i«vt;s, and to report ;all'G'redit© gxarited with a-yiew to organizing a ffcredi1f, intelligence sent^w* Moreover, °it advises-;a.ndi;helps CJovemments .

implement, regulations concerning the holding.4y bank® of minimum

liquidity' radios , and of minimum reserve reetuifements* -: ■

■>

11. 1?Ee $&rik. .. keeps the accounts of tfce member Governments and makes , and received payments on their behalf without charge. At the request

of member Governments the Bank assures, free of charge, the issue of

Treasury Bills.,, and other Government securities * the payment of coupons

(25)

Appendix II Page 5

and the transfer of money "between its branches and agencies- It manages the public debt and helps Governments in the negotiation of foreign loans, in the preparation of budgetary estimates, of balance of payments state-i- ments and of laws and regulations concerning foreign exchange control, 12, The Bank is the sole authority for the issue of notes and coins circulating in its area of jurisdiction. The currency issue by the Bank is the CFA (Communaute Financiere Africaine) franc which circulates in all member countries although bearing a mark to identify the original country of issue. The Bank can request all private and public companies to sell to it their balances in French francs or other foreign currencies against payment in CFA frqncs. If the ratio of foreign-exchange reserves

(of all seven member countries) to the demand liabilities of the Bank

has dropped below 20 per cent for three consecutive years or there are

reasons to think that this may happen in the near future, the Chairman

calls a Board meeting with a view to examining an increase of the

discount rate or a reduction of the credit ceilings. When this ratio

falls below 10 per cent during three consecutive years, the Chairman

of the Board notifies the IFational Monetary Committees and the Board

itself and calls a meeting of the Board for the purpose of reducing

credit ceilings and possibly increasing the discount rate.

(26)

in

ll BXJHOKDJ, m en t "and1-

establish agencies and ■branches in" tlie country.'

£%. ■ :^.e. administration and management of the Bank is assured by the .,..,-,.., .., ..£reAident? a Board °f Directors and the'Regency'Gouncif.' "

:1c 3t:'S'-' "?a% ^eS;:id.entj;:i...a-nd. the,.Vic,e..President, whprass.is,ts.-:-33.iiav-aELd replaces him in case of absence^ are appointed by the King on,/t$te. rrepommendation .°lf'l.^h®..G°VIiC±1 of Ministers for a term of three years. The President

is_^in charge of the day-to-day operations "of 'the'Bank' and' executes the

.., (lec^sAons .and P°^icy directives .of ""the" Board and' the'Regency'^Council.

4> .^he^poiafr^jpf^lreciiprsj- is composed .pff., the ,P^eside^it,?. .whpr; tacts as

^ Chairman^ the Vice President and two other Directors. The latter are

^appointed hj the King on the recommendation of "the Minister of Finance i.;. ^or .a term.."'o:f "three years. The Board has the widest "powers'for the

administration and management of the Bank and'is 'competent" "to"' tiecide on all matters which are not specifically reserved by" the "law' to the

Regency Council. The President of the Banic acts as Chairman of the

Board and convenes its meetings- to be held at least once a" week, on his own initiative or at the request of one Director. " The "quorum at the meetings is assured by the President and two Directors.■ Yotes are

, taken by simple majority, with a casting vote for the President in case

of tie.

,pouncil is composed by all ^e^bers,. of ^he..,Bo.ard plus four members appointed by the King upon recommendation of. ,t,he. Ministers of Ki31,a3:lce and Ecoiiomjr and the Chambers of Commerce and Industry, for

,-a term.of ,tSree../ears' The Resident of the Bank acts "as Chairman of

the Council^ The Council is competent to decide on matters'specifically•

■reserved to it by the law, but'has to be consulted by the Board on

matters related with "banking, money,_ credit-and economic development.

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' Appendix III Page 2

I-t approves the by-laws of. the Bank. The Chairman calls the meetings of the Council on his own-initiative- or rait .the request of at least two members. Regular meetings must he conducted at least once a month.

Theguorum is assured by five members/ including the Resident" of the

■Bank. The .votes' are. taken by simple majority/'"^ith; a- casting vote for

the Chairman in case of tie. *' " ■ - ■—-.^-

6." '"■The .authorized capital of■the Bank latfb«s1JW:30 million- Burundi francs/'entirely subscribed" by" the^GbVernfilent M& paid" up -to the extent, o^^-'per^nt-upon Establishment-of 'the^Bank, and 75' P^" Gent thirty

"""&ays''later. ■ '■"' ■• '"' '■■ ' " ■ ■■''■-■ -:; ■■■.■■■■ ' - ■""■ ' -'

7tV. -Of tie net profits of the Bank^:detei^iie& after deduction of all

^c^urrent expenditure, depreciation and!^'ige^ocyntingencies? a«-'-least 50 per cent' is' allocated to a General'ReserviLFimd/ftill ■"this-equals

'■tHe'capiiali'the remainder'"is paid tor-therMrundi Treasury. jf

8. The control of the accounts"and activity:-'of the Banl^is-^assured

by a Board..of. Auditors" composed"of three m^er^-appoihted % the Minister of"finance. ' One of them is" desiknHet as Chairma;n-6'f the

Board of Auditors"'"and'"'eieroises the functidnW'of-Governmehii^Qmmissioner before"'the" Bank/^The'" Board of Auditors submits "a report on -tne accounts .^f.the"'Bank"to::'the Minister of Finance and the'Regency Council at least

once a.year;," The Chairman of the Board of" Auditors attends' -all meetings of the .Board of "Directors and the Regency Councils' and has :access to all bo'oks'and operations of" fh'e Bank\ he can" suspend' and"1 denounce to the Minister of Finance any' acts'' and "-decisions of'the Bank: %hich he deems contrary to the law, the statutes of the Bank: or -tHe national

" interest. The "Minister of -- Finance .has..a5.• :^ays i-to>decid&-on the merits

of the alleged- violations.:" ■ ■'. :':• -^■■;.1 ■.■- iyr-.-'l-.no-'- . '-6'i

V" 9." "'The profits of the Bank- are exempts'ifl?r"r&a direct '^axatidn. The 'Bank must prepare a monthly statement of" a;ccouritsllfor- publication in the'official gazette "and'a yearly statement'o^(;accouMis" and-^alanoe

sheet.and profit and loss account as of"the blose of each-Calendar year, certified"by the Board of Auditors,' for submission to' tKe:;liiEister of

Finance.

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Appendix III

/

Page 3 .

E. Operations v xj:;_.: ■ ' ■ ... ■■."! ■ "■■ . .,■■"■ ■■'. ■ ■■ ■ .- ■

10. ■ The Bank is empweVe$L'tb!'conduct the followlng'operations.s

(a) acquire/ sell, discount and rediscount bills, of exchange and

other credit instruments "bearing at le.ast three good signatures drawn for commercial purposes and maturing within_l§0 days$

(b) ^j£ran.t discount and rediscount facilities to. finance .industrial

and agricultural activities on the basis., of credit instruments having a maximum maturity of ■ l80^days and bearing, three good signatures, The limit on maturity can temporarily be extended

"by the Regency Council 5

(c) buy5 sell and discount Treasury Bills and medium-t.erm s.ecuri-.

ties issued or guaranteed ty the Burundi Governments.

(d) grant, advances to the Government and to any firm or individual

■■against -the^ledg.e of securities issued or guaranteed by the

"■■■■■■ ;:"": Burundi;GoVernmenf or'against the pledge of gold'or any claims'

■■' ■'■■■"- in .foreign' c'urrehc'ies^ "and"""to Government, agencies ancl any

JJ-1.-.1 otHeD?Vliristitutiond; whose""5blli"gati6ns are 'guaranteed by the

Burundi Government, on the conditions and in the' form ' . established.by,-the Regency Council.-.: -The total amount;:of-r . securities issued, or.[guacr;an.t:eed by the. Government in" the .hands ..:.■.. . o.f.:the Bank cannot at any;tjim.e exceed' an amount -of: 350- million

Burundi francs» This amount can ,be: modified b3T.u"

. between the Bank and the Minister .of Finance.,, on..,the....advice of the Eegency;_Ci3-uncii§

(e) accept deposits on current account and the custody of securi ties, gold ingots and coinsj 'foreign currencies and.credit

instruments denominated in foreign currencies 5

(f) execute orders■for the purchase and sale q£_ascwritiesf (g) rediscount abroad paper...frojn_jLt_^p^rtfolipj. .qbtain_foreign

loans and carry out .foreign exchange transactions abroad^

(h) deal in gold, precip.us...metals and foreign currencies 5

(i) provide facilities for the transfer of funds $

(29)

Appendix III ;J-r"' Page 4 " ■ "

with the approval of the Regency Council voting °n.ya::2/3 .,.,;_

majority., acquire the,shares, or otherwise participate..to the capital of financial institutions sponsored or guaranteed "by . . ■■' '. the'Governmenti df'^ab^iilre1 long-term securl'ties issued1 or

■"■n guaranteed "by the 'Government. .The aggregate 'of' shares and'

■ ■ long term securities held "by the Bank cannot'' exceed 100 per

cent of :capital plus reserves 5 '

(k) acquires build or 'lease the premises necessary^for its opera

tion, andutake mortgages on reaX1 estate "if the price offered for i:tL.ai;j-pUDiiEc ^auctions does not: cover; !the" "debt to the Bank 3, , : "'" " "■""

-(:i:)' issiie; ^guarantees agkxnst1' securities arid in "favour" of "third"

11. The Bank controls the activity of banks and other financial

institutions as well as the issuetof shares and securities- It manages

public financial institutions such as.the Burundi Savings Bank and the

Burundi Development Bank, which maintajn^ however? a separate legal personality and their own resources. ""'" 7-;

12. The Bank .ac.ts as banker and. agent to ,.th,e,;.Government^-::if manages the Supply ^and^S^atistical Offio.es on behalf of the Government^ -and, at the", request of ;the Governmen'tj.-.studies ■ anfcgives advice oh economic, financial and'.monetary matters. ." ,-,r.r ■. ., ■■ ■ ■■■. ' '.■■■

13- The':'Bank"Hasi:the sole right to issue notes and coins in Burundi

Francs.

(30)

H^Vffi'iifiirirriiTiiTlY""

Appendix IV

THE NATlbHili BABK OP

A. Establishment and Administration

1. The Bank has" its principal offices in Addis Ababa. :iiriffay"estab-

■ lis&- braric"ii:roffiGes'-"i-n :t-he cduntry-^■ahW-desIg&a'te::borr'es'p^ndents-

the country and abroad. ;:ViV'-''5*!:fli!:-r >"-"-■■-;-— ' :-■- ■'■"...:i..-- ■.■ v,.-.: .

Bank:' "'a're vested "in', aboard' -of L-:j3i:rectors;}consis'tiJig Of''five, members s :flie Governor?; thre "Minister of-^Finance-'vand:-tiireei:I5irec"-tGrs* The Governor

■:i;s:;Csi.ppoint-edv:by~t:iie1 Emperor 'for^aKteiia of ■■five";y"ear"Si;:viHe;.'is the chief

executive'of::-tHe-;-:Bank'j: regponsl:l3l:;ev ::for its' -^day-i-to-day operation tinder

tHe control -of't&e Boards- He i^ assis-ted-'bTi-axDeputy:*-Governor, also t apfo-inted-'-'by :tlie-;©npeaBsr> "who is not':-a -full1 member-of the-Board, but replaces him in case of :.;.&!>sence.: The "Board'may'from-'tame'to time

de'legia:'te"anyo:f"'-its pow&ee", to1 the;-Governor"; 'The' "Governor .-aoifii 'as Chairka-rir'of the;-Board and convenes-Jit^;[;me§tings, to- '■ be -held at least onoe-a:'iiiGn1th^v6n his" ini-tiativeor:'a1t'the::::reques't-of at le'ast two *

Directors." The quorum ^at the'-meetl-ngs is''assured"'by-thr^e members.

Decisions are taken by?is'i'mpl-erma3oritys with "the- Ghairmaih- .having a .of

A- .Of the profits of the Bankj after meeting- all current expenditures

and allowing for depreciation, bad and doubtful debts and other contingencies9 86 per cemt is allocated to'a General Heserve Fund so long as this does not exceed the capital. The allocation to the

General'Reserve Fund is reduced to 20 per cent'thereafter. ' The remain ing profits are credited to the account of the Ministry of Finance.

g.»; _ ....Th-e.^ank^u^t :submit..to. the Imperial,Ethiopian Government a profit

&n41.io,ss .statement within .three mp.nt!h:si,rfrîn,the r|-nd of each finanoial year, which extends from 1st ..January,, ^p.. 31bJ êêmber and. ;.pu,blish, -.apt '

(31)

annual report of activities "cSktaining an audited and signed "balance

sheet and profit and loss statement. The Bank must also publish a monthly condensed balance sEeet. :;

B, Operations

^f ^. In .its.,relations with banks and..other financial institutions, Bank may conduct the following operations? .. , .... , _ .. . .

.^rf+ --i-Ja.),.1;purchase, ■. sell, discount, and rediscount bills" of .exchange,.

: - ... ..; ,,: promissory .notes;,, acceptances and other credit instruments .... ■ with.maturities not exceeding 180 davs ^issued for commercial . r purposes,...or to- finance;t^e storage.of non-perishable goods ...;- and.the. production-or processing, of agricultural, mineral

: , .. and.industrial products. In the latter case, if found in the '....interest of the.natipnal economy, the Bank may raise the

- maximum, maturity., from. 180 to .2JP days 5. . ,

,,(b) ...grant,.advanc.es o.r...lp.axis-not exceeding one. year against the

-;.. .. , ■ security, of the:.credit instruments referred to .under (a), and

,. .; ■. of Treasury,,Bil.^.s,rissued by the. Ethiopian Government

Mt,.(c..).." accept .deposits., and effect transfers.^,. ... iJIT ,.._...., . .-.,:

... . .(d.)-..rprovide ;4nter-J)ank clearing seryipes. ,__ .;....; _ . ..., _..i..,

7. ' The Bank can issue .regulations concerning its-own crfedit traaarfietions3 fncLj .those of-, banks and, other financial institutions^ .fix, its own rates of interests discount and rediscount, and prescribe minimum and maximum_* . ■■-.■■■■■■■ ■ ■-.■■■■■ .- ': ■ :■-■ " .. ■ . -:.:7r.'-- ■■.■..:..i. : ':■/

rates of interest for banks on both loans and deposits 5 request banks

to maintain" a" certain amount of reserve balances in the form of deposits with itself'not"exceedingj however, 20'per cent" of their deposit

liabilities'-"different.percentages may be prescribed for demand and time "deposit liabilities-5 prescribe minimum ratios of liquid assets

to short-term liabilities not exceeding, however, 30 per cent? prescribe the purpose for which loans, advances and investments of banks can be ma&ei :the maximum maturities and th& required collateral:for the grant

ing of"'ioa;ns£ and ceiling in = respect of any- type- of loansy?advances and

or of their aggregate-.-amount," " ■:■■■■".. ■:;-..^" ■ . ; ■.-.-■.

(32)

T^^^

ix JV,

Page 5 r™.'

8. . The Bank-is. :en;tr.us,ted.'[witli, the task,-d'X/Jicensang-ban&s"-,. -and of

■,^approving-the .opening-;, closing,.and.transfer-- o;f ■■ any-.;."branch .office of-"

banks .iwithia the -.Gouirtryy. "as :well[;as- rany.r."bankv merger. .'In order to

■■qualify fo;r &■ licence-, ■.appiio.ant'.^anks must. showyfehat..at least.51 "

,,: cent -.Qr£'Vt^.0apital ■as''':subs:erilDed;:-TDy..E1±Lio.pian. Bationalsv 'Banks - :;i operating, inthe country--have, to.- submit, to the-National Bank of ■

Ethiopia a monthly "balance siieet, and a. yearly, ."balance siieet .and-profit ' a^d;.ioss^ ac^countw. The, Bank..prescribes th-e form.^n. wjiijch, tljese acppunts

.are to .be presented and-.may request such additional information as ..it

deems necessary. ^ ... . . . .

9- The:,Bank ..exerQ-ises.iin Ethiopia the- powers .of Bank Bxami-her and a^uperyisor?' to "'insurer-that all banks ■and/finand-i-al institutions, comply

■witii.^h.e .rele.xant laws and regulations1.1.1 ' I".t 'Ma&9 for.. 'thiB".purp:ose;j: ■--

inspections of the -books and accounts of banks using its own""'

pr qualified accountants or auditors attd-s if wartfaWedy-'take measures including .the .temporary sus.p'.e-hsion of a bank .=■

,fro%;;carrying out'business: o.r--its1 liq.uidati.on- ■ ■■'■"■'

10. .The Bank acts as banker and fiscal agent to the Ethiopian Qovexn-*- . meiit.-. Tn this 'capacity it accepts deposits and effects payments for

the'-accbunt of'the Government § manages public, debt transactions, '

including the■ issue; and.'service of1 bonds and other' securities! collects and takes.-custody "of Gove:rnraent funds 5 purchases, sells, transfers, and t^kes custody of ■ cheques.s -Ibills of, exchange,'..securities, gold, .silver ■ .and foreign- exchange on behalf of the .Government5 and underwrltes-arid-- guarantees ,-validly .the lo:.ans:.publicly'.issued hy the Government; The1-'.

; Bank- can..grant temporarpy-oadv.ances ±0 the Government no-t to-'.exceed/at-; - any time 15 per cent of .the ordinary revenue .collected in the preceding fiscal year and repayable within six. .months.- from the. end of each fisc-al year. It can purchase'in the open market Treasury Bills with-maturity not exceeding twelve months and-accept them ■fdr--advances■to-borrowers other than the Government, provided, however, ..that .the .aggregate amount . of Treasury Bills held l>y the .Bank .may. at no time exceed 50 per cent