Liquid Assets Ratio Regulations, 2001

Jurisdiction: Tanzania
Citation: Government Notice 104 of 2001
Primary work: Banking and Financial Institutions Act
Date: 31 July 2002
Language: English
Type: Legislation
Download: Download PDF (239.2 KB)

Tanzania

Banking and Financial Institutions Act

Liquid Assets Ratio Regulations, 2001

Government Notice 104 of 2001

Published in Tanzania Government Gazette
Commenced on 1 September 2000
[This is the version of this document at 31 July 2002.]
[Note: This legislation has been thoroughly revised and consolidated under the supervision of the Attorney General's Office, in compliance with the Laws Revision Act No. 7 of 1994, the Revised Laws and Annual Revision Act (Chapter 356 (R.L.)), and the Interpretation of Laws and General Clauses Act No. 30 of 1972. This version is up-to-date as at 31st July 2002.]

[Section 51(1); G.N. No. 104 of 2001]

Part I – Preliminary provisions (regs 1-3)

1. Short title

These Regulations may be cited as the Liquid Assets Ratio Regulations.

2. Application

These Regulations shall apply to all licensed banks and financial institutions.

3. Interpretation

In these Regulations, unless the context otherwise requires—"the Act" means the Banking and Financial Institutions Act ¹;¹Cap. 342"borrowing from the general public" means obtaining funds through the frequent sale, placement or issuance of bonds, certificates, notes bills of exchange instruments or any other securities, excluding interbank borrowings, borrowings from the Bank, special deposits or borrowings from the Government for on lending to specified priority sectors, and other modes of borrowings as the bank may deem fit;"chronic deficiency in liquid assets" means deficiency or shortfall in the minimum required amount of liquid assets occurring in three consecutive weekly reporting periods;"demand liabilities" means current accounts, time deposits, savings deposits, deposits of banks, interbank borrowings payable at call or within seven days, banker's cheques and drafts issued, payment orders and transfers payable, foreign currency deposits and borrowings, other deposits, off balance sheet commitments maturing within one year and such other liability payable on demand as the Bank may deem fit;"liquid assets" include cash on hand, current account balances and currency deposits with the Bank of Tanzania as shown in the books of the Bank, balances with other banks with maturities of seven days or less or withdrawable on demand, cheques and items for clearing, foreign currency notes and coins including gold, treasury bills and other government securities maturing within one year and as long as they are unencumbered, commercial bills and promissory notes discounted at the Bank and such other assets as the Bank may include from time to time;"loan portfolio" means outstanding loans, advances, overdrafts, notes or bills discounted, export bills purchased, import bills, customer's liability on acceptances, or any other credit extended by a bank or financial institution excluding the undrawn or unveiled line of credit or contingent commitments;"other deposits" means funds received from customers by way of deposits which are not in the books of the depository bank or financial institution as either current, time or savings deposits.

Part II – Liquidity management (regs 4-7)

4. Liquidity and funding policies

The Board of every bank and financial institution shall be required to–

(a)establish and implement sound and prudent liquidity and funding policies which at minimum should meet benchmarks as prescribed in these Regulations;

(b)develop and implement effective techniques and procedures to monitor, measure and control the institution's liquidity requirements and position;

(c)determine the adequacy of policies, practices, procedures and internal controls especially those related to liquidity, earnings, foreign exchange and lending;

(d)determine the adequacy of liquid assets maintained in conformity with these regulations and other guidelines issued by the Bank; and

(e)initiate corrective measures when policies, procedures or internal controls are deficient or when violations of the banking laws and regulations have been noted.

5. Cash flows measurement

Every bank and financial institution shall accurately measure:

(a)The term profile of current and approaching cash flows generated by assets and liabilities, both on and off balance sheet;

(b)the extent to which potential cash outflows are supported by cash inflows over a specified period of time, maturing or near liquid assets and cash on hand;

(c)the extent to which potential cash outflows may be supported by the institution's ability to borrow or access discretionary funding sources; and

(d)the amount of statutory liquidity required.

6. Internal inspection and audit

Every bank and financial institution shall intensify its internal inspection and audit for testing all aspects of liquidity management in order to–

(a)ensure that liquidity and funding policies and procedures are being adhered to;

(b)ensure effective controls apply to managing liquidity;

(c)verify the adequacy and accuracy of management information reports; and

(d)ensure that personnel involved in the liquidity management fully understand the institution's liquidity and funding policies and have the expertise required to make effective decisions consistent with the liquidity and funding policies.

7. Submission to board of directors

Every bank and financial institution is required to submit to the board of directors assessment of liquidity position on a timely and regular basis.

Part III – Required minimum liquid assets and maximum loans to deposits ratio (regs 8-11)

8. Liquid asset ratio

Every bank and financial institution shall maintain minimum liquid assets equivalent to not less than twenty percent of its demand liabilities as set out in the First Schedule hereto.

9. Qualifying balances with banks abroad

In determining total liquid assets as set out in the Second Schedule, balances with banks abroad will only qualify if they are withdrawable on demand and those that mature within 7 days, provided that they are in currencies which are freely convertible in international and exchange markets.

10. Computation and submission

(1)Every bank and financial institution shall compute the required minimum liquid assets as at close of business each Friday.

(2)The computation of the required and available liquid assets shall be—

(a)in the form prescribed in the Second Schedule;

(b)submitted to the Bank not later than the second Monday after the reference week.

11. Maximum loans to deposits ratio

Every bank and financial institution shall maintain at all times its gross loan portfolio at levels not exceeding eighty percent of its total depository liabilities, inclusive of deposits of banks and foreign currency deposits.

Part IV – Administrative sanctions and penalties (regs 12-14)

12. Penalties

Any bank or financial institution which—

(a)fails to maintain the minimum liquid assets required under these Regulations shall be levied a penalty of not less than two percent at the annual rate above the interest rate prevailing on the most recent ninety-one days treasury bills auction on the amount of deficiency of the reported week;

(b)fails to maintain the level of loan portfolio within the maximum loans to deposits ratio shall incur any of the sanctions or penalties provided under regulation 14 of these Regulations;

(c)fails to submit on time the report on computation of the required minimum and available liquid assets or does not submit such report shall incur any of the sanctions or penalties provided under regulation 14 or pay a default fine of one million shillings for every day in which the default continues.

13. Recovery of penalty

The penalty levied under regulation 12 shall be recovered as a civil debt or by deducting from any balance of moneys owing to that bank or financial institution.

14. Additional sanctions

The penalty levied on any bank or financial institution under regulation 12 shall be without prejudice to other sanctions which the Bank may impose on account of chronic liquidity deficiency or any persistent violation of these regulations such as, but not limited to, the following sanctions, namely—

(a)suspension from lending and investing activities;

(b)suspension from participating in the interbank clearing;

(c)prohibition from issuing letters of credit or guarantees;

(d)suspension of capital expenditure;

(e)prohibition from establishing or opening new branches;

(f)suspension from access to the credit facilities of the Bank;

(g)suspension of the declaration and or payment of dividends;

(h)prohibition from accepting deposits;

(i)suspension or removal from office of the erring director, or employee;

(j)perpetual disqualification from holding any position or office in any bank or financial institution under supervision of the Bank;

(k)revocation of banking licence; and

(l)such other sanctions or penalties as the Bank may deem appropriate.

Part V – Cancellation (reg 15)

15. Cancellation

[Cancels Circular No. 4 on Required Minimum Liquid Assets and Maximum Ration of Loans to Deposits.]

First Schedule (Regulation 8)

Liquid asset ratio

Liabilities	Required minimum liquid assets (as % age of liability)
Customers' deposit liabilities	20%
Current Account	20%
Time Deposits	20%
Savings Deposits	20%
Other Deposits	20%
Deposits of Banks	25%
Borrowings from the Public	20%
Interbank Loans (Payable on call demand, net of interbank loans receivable with maturity of 7 days or less)	20%
Banker's Cheques and Drafts Issued	20%
Payment Orders/Transfers Payable	20%
Foreign Currency Deposits and Borrowings	20%
Off balance sheet commitments (maturing within one year)	20%
Other liabilities (specify) (Maturing within one year)	20%

Second Schedule (Regulation 10)

Forms

[Editorial note: The forms have not been reproduced]

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History of this document

31 July 2002 this version

Consolidation

01 September 2000

Commenced