Central Bank introduces new requirements for licensing financial institutions

Kigali: The Existing licensing regulation for banks, introduced in 2008, categorizes banks into commercial banks, with a minimum paid-up capital of Rwf5 Billion, Microfinance Banks, with a minimum paid-up capital of Rwf1.5 Billion and Development Banks with a minimum paid-up capital of Rwf3 Billion.

With Regard to the Insurance sector, the licensing regulation introduced in 2009 set the minimum capital for both Life and General Insurers at a minimum capital of Rwf1 Billion.

Since then, the banking and insurance sectors have evolved significantly with regards to size, risks and complexity. Sufficient Capital is critical to enable financial institutions deal with the above developments as well as for the safety and soundness of the financial sector and sustainable financing of the economy.

On this basis, the Board of the National Bank of Rwanda has reviewed the existing licensing regulations mainly with regard to the minimum required paid-up capital as well as categories of banks and insurers.

The revised Regulations establish new categories of Banks which are Cooperative Banks and Mortgage Banks while for Insurers, these are Re-insurers and Health Maintenance Organizations (HMOs). Microfinance Banks will shift from the Banking Regulatory framework to the Microfinance one to ensure proportionality in regulation and supervision.

The new paid-up capital for Commercial Banks is Rwf20 Billion and Rwf50 Billion for Development Banks. The Paid-up Capital for the new categories of cooperative and Mortgage Banks is set at Rwf10 Billion.

The new minimum paid-up capital for commercial banks is Rwf3 Billion and Rwf2 Billion for Life Insurance. Health Maintenance Organizations (HMOs) shall have a minimum paid-up capital of Rwf500 Million while Re-insurers shall have a minimum paid-up capital of Rwf5 Billion.

Banks have a 5 year transition period to build up the capital with a target to reach Rwf15 Billion in 3 years and the full Rwf20 Billion by year 5. General Insurers have 3 years and Life Insurers, 2 years to meet the required paid-up capital. The transition period will start running after the publication of the regulations in the Official Gazette of the Republic Of Rwanda.

The new entrants will be required to comply with the new paid-up capital requirements at the onset. (End)