Banking Regulation 2024 Comparisons

The principal laws and regulations governing the banking sector are the following:

• Framework law on banking regulation (BCEAO) (Loi cadre portant réglementation bancaire (BCEAO));
• Law 2008-26 of 28 July 2008 on banking regulation (Loi 2008-26 du 28 juillet 2008 portant réglementation bancaire); and
• Collective Agreement on Banks and Financial Institutions in Senegal (Convention collective des banques et établissements financiers au Sénégal).

The regulator responsible for supervising banks in Senegal is the Banque Centrale des Etats d’Afrique de l’Ouest (the Main Agency of the Central Bank of West African States) (hereinafter referred to as the Central Bank or the BCEAO).

All these texts are currently being revised to produce a new banking law for the West African Monetary Union (WAMU).

In Senegal, the banking authorisation regime is regulated by Law 2008-26 of 28 July 2008 on banking regulation (Law of 2008).

According to this law, credit institutions can apply for a bank licence or a financial institution licence, which differ slightly in the activities they allow institutions to carry out. Financial institutions are categorised in five different categories, namely:

• Category 1: financial lending institutions;
• Category 2: financial institutions for leasing or rental with call option;
• Category 3: financial factoring institutions;
• Category 4: financial institutions providing guarantees; and
• Category 5: financial payment institutions.

In general, banks may carry out the classic banking operations, namely the receipt of funds from the public, credit operations, the provision to customers and the management of payment methods. Regarding financial institutions, they are allowed to carry out only the activities for which they are classified and may not carry out activities from another category without a preliminary approval (Article 17, Law of 2008).

In addition, credit institutions are authorised to carry out the following activities and services:

• transactions in gold and precious metals;
• manual or scriptural exchange operations;
• investment transactions;
• advisory and assistance transactions in financial management, asset management, management and investment of securities and financial products, financial engineering transactions, simple leasing of movable or immovable property by financial institutions; and
• intermediary operations as commission agents and brokers (Article 9, Law of 2008).

Regarding the approval process, applications for authorisation are submitted to the Minister of Finance and the Central Bank, which examine them with regard to the conditions and obligations provided for by the Law of 2008 (Article 15). The Central Bank examines in particular the firm’s programme of activities, the financial and technical resources, the plan of development of the network of branches, agencies and counters, as well as the firm’s capacity to realise its development goals. The Central Bank also receives all the information on the status of the persons who have provided the capital, as well as on the fitness and experience of the persons responsible for managing and directing the firm.

The approval is issued by order of the Minister of Finance, after approval by the Banking Commission of the WAMU. If, after a period of six months from the application to the Central Bank, it has not taken a position on the request, the approval is deemed to have been refused (Article 16, Law of 2008). If given, the approval is registered on the list of banks and financial institutions, which was established and is updated by the Banking Commission and published in the Journal Officiel de la République du Sénégal.

During the life of a bank, operations that have a significant impact on its shareholder structure are governed by Articles 39 to 41 of the Law of 2008.

To this end, merger operations by absorption or creation of a new company or demerger are subject to prior authorisation by the Minister of Finance, after approval by the Banking Commission. Moreover, under Article 39, any acquisition or transfer of a holding that would have the effect of raising the holding of any one person (directly or through an intermediary) or of any group of persons acting in concert, first above the blocking minority, then above the majority of voting rights in the credit institution, is subject to the same obligation of prior authorisation by the Minister of Finance; also, any acquisition or transfer of a holding that would have the effect of lowering the holding below those thresholds is subject to the same requirement.

In addition, banks and financial institutions with their registered office abroad are required to notify the Banking Commission of any operation referred to above that concerns them.

Pursuant to Article 2 of Instruction No 19-12-2011 of 27 December 2011 establishing the list of Documents and Information Constituting the Prior Authorisation File for the Modification of the Shareholding Structure of Credit Institutions (“the Instruction”), the prior authorisation file must be submitted in four copies to central bank of the member state in which the credit institution is located, following the format provided for in Annex 2 of the Instruction, and it must include a written request addressed to the Minister of Finance of the Republic of Senegal, as well as the documents and information listed in Annex 1 of the Instruction.

The application for prior authorisation, which is processed in the same way as for authorisation, is addressed to the Minister of Finance and filed with the National Directorate of the BCEAO. Authorisation from the Minister of Finance, after receiving the assent of the Banking Commission, is required before the planned operation is carried out.

Under Senegalese legislation, corporate governance requirements are also regulated by the Law of 2008.

The following conditions apply to banks:

• Banks may be incorporated in two legal forms, namely as:
1. public limited companies with fixed capital (société anonyme); or
2. co-operative or mutual companies with variable capital after special authorisation by the Minister of Finance.
• They cannot take the form of a one-person company.
• Exceptionally, they may take the form of other legal entities.
• They must have their registered office in the territory of one of the member states of the West African Economic and Monetary Union (WAEMU).

As for financial institutions, the following conditions apply:

• Financial institutions may be incorporated as:
1. public limited companies with fixed capital;
2. limited liability companies (société anonyme); or
3. co-operative or mutual companies with variable capital.
• They cannot take the form of a one-person company.
• They must have their registered office in the territory of one of the member states of the WAEMU.

Under Senegalese law, credit institutions are required to establish a corporate governance mechanism in line with good practice and adapted to their size, their structure, and the nature and complexity of their activities (Article 4 of Circular No 01-2017/CB/C of 27 September 2017 relating to the Governance of Credit Institutions and Financial Companies in the WAEMU.

The registration and oversight of directors and senior management is generally regulated by the Law of 2008 and more specifically by Circular no 02-2017/CB/C of 27 September 2017 on the Conditions of Exercise of the Functions of Directors and Officers in Credit Institutions and Financial Companies of the WAEMU.

The provisions of the Law of 2008 regulate the status of directors and require the directors to be of Senegalese nationality or of the nationality of one of the other member states of the WAEMU.

However, the Minister of Finance may, on advice of the Banking Commission, grant individual exemptions to the nationality requirement. In such a case, a director must hold at least one master’s degree or an equivalent diploma and must have at least five years of professional experience in the banking sector, finance sector or any other field relevant to the functions envisaged (Article 24, Law of 2008).

In order to obtain an individual exemption to the nationality requirement, the credit institution must send to the Minister of Finance a request for approval specifying:

• the full identity and nationality of the person for whom the exemption is requested;
• the relevant position;
• the reason for using a non-WAEMU national to fill the position; and
• for the profiles of management positions other than Chief Executive Officer and Deputy Chief Executive Officer, a formal indication by the credit institution that the proposed employment contract does not raise any objections from the national employment authorities.

The request sent to the National Directorate of the BCEAO must contain the following documents:

• an extract from the criminal record of the person concerned;
• a declaration on honour;
• official documents establishing the identity and nationality of the person concerned;
• a detailed curriculum vitae indicating the training received and the acquisition of at least five years’ professional experience in the field of banking, finance or any other field of competence deemed compatible with the duties envisaged;
• the precise addresses of previous employers;
• copies of the required diplomas;
• the draft employment contract for executives, except for the Chief Executive Officer and the Deputy Chief Executive Officer; and
• a conflict of interest declaration.

Persons involved in the direction, administration, management, control or operation of credit institutions are bound by professional banking secrecy (Article 30).

Under Senegalese law, employees of banks are bound by the provisions of the Senegalese Labour Code and the provisions of the Interprofessional National Collective Agreement, as well as by the specific provisions of the Collective Agreement on Banks and Financial Institutions in Senegal.

In fact, under Senegalese labour law, employees are classified into different categories, which correspond to different remuneration scales. The Collective Agreement on Banks and Financial Institutions provides for specific classifications of bank employees according to the job they hold. As such, bank employees are classified into:

• workers and employees, further classified into seven different subcategories;
• agents, classified into four subcategories; and
• executives, classified into four subcategories.

Depending on the category into which the bank or financial institution employee is classified, a specific remuneration is provided for by the Ministry of Labour, which sets up the categorical salary scales in the private sector. The basic salaries provided for by the Ministry for the different categories are mandatory and cannot be reduced by the employer.

The legislation in force in Senegal against money laundering is composed of national laws and community and international standards. In this regard, it should be noted that the reference national law in this regard is Law No 2018/03 of 23 February 2018 on the fight against money laundering and terrorist financing, which transposes into domestic law the Uniform Anti-Money Laundering Bill adopted by Decision No 26/CM/WAEMU of 2 July 2015 (the AML/CFT Law).

Persons subject to AML/CFT obligations are listed in Articles 5 and 6 of the AML/CFT Law, including financial institutions.

The AML/CFT Law introduced a risk-based approach, requiring financial institutions to have policies of procedures and internal controls to effectively mitigate and manage AML/CFT risks. Articles 23 and 24 of the AML/CFT Law impose several obligations, including:

• the centralisation and retention of information on the identity of customers, principals, agents and beneficial owners;
• the monitoring of suspicious transactions;
• the appointment of internal managers responsible for the application of anti-money laundering programmes;
• the continuous training of personnel;
• the implementation of an internal control system for the effective application and effectiveness of the measures adopted to control risks; and
• the implementation of measures relating to the detection of unusual or suspicious transactions and compliance with the obligation to report suspicions to the National Financial Intelligence Processing Unit.

In addition to the obligations listed above, banks have an obligation of vigilance with respect to their customers. Indeed, the law obliges banks to have up-to-date knowledge of all their customers, including their income and assets, and to monitor their operations. In this respect, Article 18 of the AML/CFT Law provides the following: “Before entering into a business relationship with a customer or assisting them in the preparation or execution of a transaction, the persons mentioned in Articles 5 and 6 of this Law shall identify the customer and, where applicable, the beneficial owner of the business relationship by appropriate means and shall verify these identification elements on presentation of any reliable written document.” Article 19 of the AML/CFT Law provides the following: “Before entering into a business relationship with a customer, the persons referred to in Articles 5 and 6 of this Law shall collect and analyse the items of information, from among those included in the list drawn up for this purpose by the supervisory authority, that are necessary for the knowledge of their customer as well as the purpose and nature of the business relationship, in order to assess the risk of money laundering and terrorist financing.”

In addition, financial institutions, when entering into a business relationship or conducting transactions with or on behalf of foreign politically exposed persons (PEPs), are required to take specific measures to:

(i) implement adequate and appropriate risk-based procedures to determine whether the customer or a beneficial owner of the customer is a PEP;

(ii) obtain authorisation from the appropriate level of management before entering into a business relationship with the customer;

(iii) take any appropriate risk-based measures to establish the origin of the assets and the source of the funds involved in the business relationship or transaction; and

(iv) ensure enhanced ongoing monitoring of the business relationship.

Finally, financial institutions are required to identify and assess the risk of money laundering or terrorist financing, which may result from:

• the development of new products and business practices, including new distribution methods; and
• the use of new or emerging technologies, related to new or existing products (Article 37 of the AML/CFT Law).

Failure to comply with these procedures exposes the institution to the administrative, disciplinary and criminal sanctions provided for in Articles 112 et seq of the AML/CFT Law.

The depositor protection regime is governed by Decision no 088-03-2014 of 21 March 2014 on the creation of the Depositors’ Guarantee Fund in the WAMU; by the Articles of Association of the Depositors’ Guarantee Fund in the WAEMU; and Decision no 009 of 30/06/2017/CM/WAEMU setting the rates of contribution of members to the Depositors’ Guarantee Fund in the WAEMU and the compensation limit for eligible deposit holders.

All licensed credit institutions have the obligation to adhere to a depositor protection regime, namely the Depositors’ Guarantee Fund (the Fund) (Article 65, Law of 2008).

The Fund’s purpose is to protect small depositors against the loss of their savings in the event of suspension of payments by a credit institution or a Decentralised Financial System (SFD). The Fund’s mission is to guarantee the deposits of clients of the credit institutions and SFDs licensed in the WAEMU. As such, the Fund is, among other things, responsible for indemnifying the depositors, to the limit of an amount set by the Council of Ministers of the WAEMU, against the unavailability of their funds.

The Fund is administered by its Board of Directors and its Management.

The limits for compensation to the depositors are set by the Council of Ministers on the proposal of the Board of Directors. Hence, the limits for compensation are as follows:

• XOF1,400,000 per depositor for all deposits held in the books of a member credit institution; and
• XOF300,000 per depositor for all deposits held in the books of a member SFD.

The scheme is funded by members’ (namely all the credit institutions and SFDs affiliated to the Fund) contributions, investment income and, where applicable, donations, grants and loans, as well as any other resources compatible with the purpose of the Fund (Article 27 of the Articles of Association).

In the event that the Fund’s resources are insufficient, additional contributions are sought from member institutions, under the conditions defined by the circular of the Fund (Article 28 of the Articles of Association).

Senegal is no exception to other countries with respect to bank secrecy, to which licensed credit institutions in Senegal are bound. Hence, bank secrecy requirements are regulated in Senegal, and the provisions are mainly provided for in the Law of 2008.

As such, the persons in charge of the management, administration, control or operation of credit institutions are bound by bank secrecy. Such persons are, more precisely, prohibited from disclosing any confidential information of which they have knowledge in the course of their activity, in order to conduct directly or indirectly operations for their own account or to benefit others (Article 30, Law of 2008).

That being said, bank secrecy is not enforceable against the Banking Commission, the Central Bank or a judicial authority acting in the context of criminal proceedings (Article 53, Law of 2008).

According to the above-mentioned provisions, a breach of bank secrecy, for banks, shall be sanctioned by a fine of XOF51-150 million and, for financial institutions, by a fine of XOF16-60 million.

A breach of confidential information of which the above-mentioned persons have knowledge in the course of their activity is sanctioned by imprisonment of one month to two years and/or a fine of XOD10-100 million. In the event of a repeated offence, the maximum penalty will be increased to five years’ imprisonment and a fine of XOF300 million.

The prudential system completes the Law of 2008. This prudential system was adopted by the WAEMU Council of Ministers on the proposal of the BCEAO, pursuant to Article 44 of the Banking Law.

In Senegal, in addition to the Law of 2008, Decision no 013-24-06/CM/WAEMU relating to the prudential framework applicable to credit institutions (“the Decision”) is intended to establish a prudential framework in force within the WAEMU and in particular in Senegal.

The preamble to the Decision states that the WAEMU community framework, and in particular the minimum capital requirements according to risks (credit, operational, market), are based on the Basel II and Basel III rules, and the Basel rules have been transposed taking into account the characteristics of the economies and specificities of the WAEMU banking system.

It consists of a series of provisions organised around three themes:

• the conditions for exercising the profession (minimum capital and its representation, special reserve, accounting regulations);
• the regulation of specific operations (shareholdings, fixed assets, loans to main shareholders, managers and shareholders, managers and staff); and
• management standards (coverage of risks by effective equity capital, of medium and long-term assets by stable resources, division of risks, liquidity rules, structure of liquidity rules, portfolio structure).

Among the requirements of the prudential system is the integration of operational risk into the process of supervising credit institutions. In this respect, the Banking Commission has proposed two approaches to the evaluation of operational risks based on weightings applied to an institution’s Net Banking Income. These weights are identical to those defined by the Basel Committee, namely 15% for the basic approach and a level varying between 12% and 18% for the standard approach.

Among other things, it requires institutions wishing to use the standard approach to set up an operational risk management function with strong involvement of the executive body, which defines the roles and responsibilities of each player.

In the area of credit risk, the precise assessment of risk under the standard approach is based primarily on the counterparty weightings set by the French banking commission, which is the ACPR (Autorité de contrôle prudentiel et de résolution). These weightings depend on the ratings established by External Credit Assessment Institutions or rating agencies. In addition, the Annex to the Decision also provides for the reinforcement of the core capital to be mobilised by the banks under Pillar 1 requirements (minimum capital requirements). Indeed, banks must hold a level of core capital corresponding to a minimum threshold of 5% of the amount of their exposure to credit, market and operational risks. This ratio is reinforced by the introduction of a conservation buffer established at a maximum level of 2.5% of the bank’s total exposure to risk, following the example of the threshold defined by Basel III.

By end-2022, WAEMU banks had to meet a minimum common equity tier 1 capital ratio of 7.5% and a minimum total capital ratio of 11.5%, both inclusive of a 2.5% capital conservation buffer.

Regarding the thresholds of banks’ share capital, Decision No 003 of 30/03/2015/CM/WAEMU fixing the minimum share capital of credit institutions of the member states of the WAEMU has set the minimum share capital of credit institutions of the member states of the WAEMU at XOF10 billion for banks and XOF3 billion for financial institutions of a banking nature.

Article 36 of the Law of 2008 stipulates that banks and financial institutions must at all times have equity capital at least equal to the minimum capital determined under Article 34.

The legal and regulatory framework governing the insolvency, recovery and resolution of banks is in general governed by the OHADA Uniform Act on the Organization of Collective Procedures (the Uniform Act) and more specifically by the Law of 2008.

The Uniform Act specifically organises three procedures for dealing with companies in difficulty: preventive settlement, judicial recovery and liquidation of assets.

Preventive settlement is a procedure intended to avoid the insolvency or closure of business and to enable the discharge of the company’s liabilities by means of a preventive composition agreement. This procedure is applicable to any person who, whatever the nature of their debts, is in a difficult but not in an irremediably compromised economic and financial situation and thus allows the company to be exempted from the payment of most of its debts in order to prepare a recovery plan for the company.

The procedures of judicial recovery and liquidation of assets presuppose the cessation of payments of the company. There is a cessation of payments when “the debtor is unable to meet its current liabilities with its available assets”. Judicial recovery is a procedure designed to safeguard the company and for it to pay off its liabilities. In order to implement this procedure, the company must be likely to be saved. The liquidation of assets is a procedure whose purpose is to realise the debtor’s assets in order to pay off its liabilities. The purpose of the liquidation of assets is to ensure the best possible payment of the creditors of the company that is to disappear.

The procedures of preventive settlement, judicial recovery and liquidation of assets instituted by the Uniform Act can only be opened against a credit institution after the assent of the Banking Commission (Article 88, Law of 2008).

Regarding the procedure of liquidation of assets, in the event of the opening or pronouncement of liquidation proceedings against a credit institution, the Banking Commission shall take a decision on the withdrawal of authorisation and the winding up of the institution.

As for the FSB Key Attributes of Effective Resolution Regimes, there is no evidence of implementation by the Senegalese government of these attributes.

Under Senegalese law, the above-mentioned procedures concern all creditors, regardless of their particular situation (employees, preferential creditors, unsecured creditors, etc). In this respect, creditors cannot pursue the recovery of their claim against a defaulting debtor by starting an individual procedure. Collective procedures may be imposed on the creditors of a company in difficulty.

In the event of the liquidation of a credit institution, the bank account holders shall be reimbursed immediately after the creditors of legal costs and creditors of super-privileged wages, up to an amount determined by the competent judicial authority on the basis of the available resources (Article 97, Law of 2008). This does not apply to deposits of credit and other financial institutions.

A new draft WAEMU uniform law on banking regulation (the “Draft”) has been adopted by the WAEMU Council of Ministers. But this text has not yet completed its adoption process at community level and in Senegal. According to the information we have, it has not yet come into force.

The Draft applies to banks, financial credit institutions, payment institutions, electronic money institutions and bank holding companies operating in the territory of Senegal, irrespective of their legal form, the location of their registered office or principal place of business in the WAMU and the nationality of the owners of their share capital or their directors.

The Draft excludes from its scope international financial institutions and foreign public aid or co-operation institutions whose activities on Senegalese territory are authorised by international treaties, agreements or conventions to which Senegal is a party.

The Draft defines the concepts of banking activity and predominantly banking activities by differentiating between them. For one, it refers to an activity consisting of carrying out, as a profession, one or more of the authorised operations referred to in Title II of the law; and for the other, it refers to activities carried out by a banking group where the following two conditions are met:

• the group’s activities are mainly in the financial sector. In this case, the ratio between the balance sheet total of the entities in the financial sector and the balance sheet total of the group must exceed 40%; and
• entities in the banking sector have a higher weighting than other entities in the financial sector. In this case, the ratio between the balance sheet total of the entities in the banking sector and the balance sheet total of the entities in the financial sector is higher than the corresponding ratios for the other entities in the financial sector.

The Draft also specifies that only authorised institutions are authorised to carry out banking transactions (the receipt of funds from the public, credit transactions and the provision to customers or management of means of payment).

For information, a credit transaction is any act by which a person, acting for consideration:

• places or undertakes to place funds at the disposal of another person, with the latter being responsible for repaying them; or
• undertakes, in the interest of another person, to sign an undertaking such as an endorsement, a surety bond or any other guarantee.

The following are treated in the same way as credit transactions:

• leasing and, more generally, any rental transaction with a purchase option;
• factoring; and
• sale with right of repurchase of movable and immovable property, subject to regulatory prudential restrictions.

In Senegal, there are no specific banking regulatory requirements relating to ESG matters. Although no specific banking regulatory requirements are provided for under Senegalese legislation, credit institutions are encouraged to implement or strengthen their environmental, social and governance responsibility by implementing the international ESG standards. These ESG standards encourage, among other things, the quality of social dialogue, employment of disabled people, transparency of executive remuneration, the fight against corruption, etc.

Banks and financial institutions may, on a voluntary basis, implement ESG requirements adapted to their specific structure and activities.