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Banking and Financial Sector Regulation in Tanzania

 

In Tanzania, investment Act on baking sector is based on Tanzania Investment Act of 1997 and Banking and Financial institutions act of 2006. The Acts are enforced by Tanzania Investment Center (TIC) and Bank of Tanzania (BOT) respectively. TIC acts as a primary agency for the Government to coordinate, encourage, promote and facilitate investment. The center advices the government on investment policies and other related matters. TIC assist banking investors to obtain all necessary permits, licenses approvals, authorization and registration. Bank of Tanzania (BOT) with the authority given by the government under Banking and Financial Act 2006 is responsible in regulating activities of all types of banks in Tanzania.

Bank Of Tanzania (BOT), headquarters in Dar es Salaam

Banking and financial Act includes regulations that necessary are required to be followed by banks and financial institutions, failure to comply with regulations may lead to revoke of license.  The regulations/restriction measures under Banking and Financial Act and in Subsidiary legislation are;

·         License requirements: A person/Firm may not engage in the banking business or  accept deposits from the general public unless that person or firm  has a license issued by the Bank of Tanzania in accordance with the provisions of this Part.

·     Limits on investments and prohibited banks: In order to invest in banking sector in Tanzania the financial institution should have a capital of at least 1 billion, with approval of Bank of Tanzania. the aggregate equity investments in all companies shall not exceed 25% of the core capital and  if the equity investment in any single company shall not exceed 10% of the core capital of the investing banking. A bank which has a core capital of less than 1 billion Tshs or a financial institution which has a core capital of less than 500 million Tshs shall not invest in the equity of other companies. However, the equity investment in any single company other than a bureaux de change and a credit card company shall not exceed 5% of the total subscribed share capital of the investee company.

·         Equity investment and credit limits: The total equity investments and credit accommodations to any single company or enterprise shall not exceed 25% of the core capital of the investing bank.

·         Credit Limitation Individuals or group: The total amount of credit accommodation which any bank or financial institution may grant to any person or group of related borrowers shall not exceed the limits prescribed. Secured by collateral the value of which is at least 125% of the Credit accommodation secured by it (Full secured) 25%.  Secured by collateral the value of which is less than 125% of the Credit accommodation secured by it (Partly secured) 10% and 5% for unsecured .Single borrower's limit prescribed in regulation every bank and financial institution shall observe a quantitative limit on the aggregate amount of credit accommodations that may be granted to all borrowers whose credit accommodations, inclusive of interest due and unpaid, have reached the ceilings prescribed in the said regulation. Such aggregate credit limit shall be twenty-five percent of the outstanding credit accommodations to all customers, or hundred percent of the core capital of the lending bank or financial institution, whichever is lower.

 

·         Credit limitation to directors and shareholders: No bank or financial institution shall grant, directly or indirectly, any credit accommodation to any of its directors alternate directors, shareholders, or their related interests unless such credit accommodation has been unanimously approved by all remaining members of the board of directors in a meeting where the director or alternate director who stands to benefit from the credit has inhibited himself from attending .The Bank has been notified of such board approval not later than seven days prior to its implementation. The aggregate amount of credit accommodations inclusive of interest due and unpaid which any bank or financial institution may grant to its directors, alternate directors, shareholders, or their related interests shall not exceed twenty five percent of its core capital.

 

·         Credit limit of officers and employees: Notwithstanding the single borrower's credit limit prescribed, banks and financial institutions shall observe the following regarding credit accommodations to their officers or employees.  The aggregate amount of credit accommodation inclusive of interest due and unpaid which any bank or financial institution may grant to its officers or their related interests shall not exceed twenty-five percent of its core capital.

 

·         Penalty for violation of the credit limits:   Any director, officer or employee of a bank who recommends, sanctions, votes for or causes the approval of any loan or credit accommodation in violation of the credit limits prescribed in these Regulations may be suspended from office. If such director, officer or employee is directly or indirectly a party or beneficiary to the said credit facility, the director, officer or employee concerned shall be perpetually disqualified from holding any position or office in any bank or financial institution under the supervision of the Bank. The penalties prescribed in this regulation shall be without prejudice to any other punitive measures which may be applied against the defaulting director, officer or employee.

 

·         Limit on the underwriting business of a bank: A bank which is authorized by the Bank to engage in the business of underwriting debt or equity securities in accordance with the Banking and Financial Institutions Regulations, 1997 shall not undertake underwriting commitments for its own account in an aggregate amount exceeding one hundred percent of its core capital.

 

·         Investment in immovable property: Any bank or financial institution may purchase, acquire or lease immovable property only as may be necessary for its business as a bank or financial institution, including reasonable provision for anticipated future expansion and housing of its officers or employees. As long as it does not exceed 50% of its core capital. Apply to the acquisition of any immovable property in settlement of a debt to the bank.

 

In case of foreign representative bank, BOT shall authorize bank incorporated outside the United Republic of Tanzania to establish the foreign institution operations domestically. Foreign institution is required to adhere with conditions, if the affairs are conducted contrary to the directions or failure to comply with the regulations, BOT may order a wound up or a closure.

Furthermore, Foreigners intending to open and reside in Tanzania for business purposes, should be issued with Residence permit Class A, B or C by Tanzania Immigration Department, Ministry of Foreign Affairs and East Africa Cooperation.


NOTE: As the member of WTO, Tanzania had made no Commitments on Banking and Financial sector in the Schedule of commitment under GATS. Only has commitment in Tourism Sector.



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