The Banking And Financial Institutions (Corporate Governance) Regulation, 2021
These Regulations may be cited as the Banking (Corporate Governance) Institutions Financial and Regulations, 2021.
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- Tanzania
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- The Banking And Financial Institutions (Corporate Governance) Regulation, 2021
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- en
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About this statute
These Regulations may be cited as the Banking (Corporate Governance) Institutions Financial and Regulations, 2021. This section defines key terms used in the regulations. These Regulations aim to support confidence in banks and financial institutions, set corporate governance standards, and guide directors in carrying out their fiduciary responsibilities. Banks and financial institutions must establish a Board of Directors. The Board must have at least five members, with two thirds non-executive. Appointments must include at least two independent non-executive members with relevant experience and at least two Tanzanians. A person cannot serve on more than one bank or financial institution at the same time unless the Bank approves and there is no conflict of interest.
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Provisions of The Banking And Financial Institutions (Corporate Governance) Regulation, 2021
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AI-assisted research summary: These Regulations may be cited as the Banking (Corporate Governance) Institutions Financial and Regulations, 2021.
1. These Regulations may be cited as the Banking (Corporate Governance) Institutions Financial and Regulations, 2021. - 2
AI-assisted research summary: This section defines key terms used in the regulations.
2. In these Regulations, unless the context otherwise requires- "Act" means the Banking and Financial Institutions Act; "Bank" means the Bank of Tanzania; "bank" means an entity that is engaged in the banking business; "Board" means the Board of Directors of a bank or financial institution; "conflict of interest" means a situation in which someone in a position of trust has competing professional, business or personal interest, making it difficult to fulfil his duties impartially; "control functions" means the functions that provide objective assessment, reporting and assurance and includes risk management function, compliance function and the internal audit function; "corporate governance" means a set of relationships between a company’s management, its Board, its shareholders and other stakeholders, which provide the structure through which the objectives of the company are set, and the means of attaining those objectives Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Cap. 212 and monitoring performance, including how the Board and senior management: (a) set the bank's or financial institution's strategy and objectives; (b) select and oversee personnel; (c) operate the bank’s or financial institution’s business on a day-to•day basis; (d) protect the interests of depositors, meet shareholder obligations, and take into account the interests of other recognized stakeholders; (e) align corporate culture, corporate activities and behaviour with the expectation that the bank or financial institution will operate in a safe and sound manner, with integrity and in compliance with applicable laws and regulations; and (f) establish and oversee control functions. "director" means any person by whatever title or designation known, carrying out or empowered to carry out functions in relation to the direction of a bank or financial institution which are substantially the same as those carried out by a member of board of directors of a company incorporated under the Companies Act and Companies Decree; "duty of care” means the duty of Board members to decide and act on an informed and prudent basis with respect to the bank or financial institution; "duty of loyalty" means the duty of Board members to act in good faith and in the interest of the bank or financial institution and it should prevent individual Board members from acting in their own interest, or the interest of another individual or group, at the expense of the company and shareholders; "executive director" means a person who is involved in the day-to-day management of a bank or financial institution or is in full time salaried employment of the bank or financial institution or any of its subsidiaries or affiliates and sits on the Board of directors; "financial institution" means an entity engaged in the business of banking, but limited as to size, locations served, or permitted activities, as prescribed by the Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Bank or required by the terms and conditions of its licence; "independent director" means a director who: - (a) does not hold any executive or management position in a bank or financial institution; (b) does not have, directly or indirectly, a significant interest in the bank or financial institution including any parent or subsidiary in a consolidated group with the bank or financial institution; (c) has not been employed by the bank or financial institution or a banking group of which he currently forms part in any executive capacity for the preceding three years; (d) is not a member of the family of an individual who is, or has been in any of the past three years, employed by the bank or financial institution or the banking group in an executive capacity; (e) is not a professional advisor to the bank or financial institution or the banking group; (f) is free from any business or other relationship which seems to interfere with the individual’s capacity to act in an independent manner; and (g) does not receive remuneration contingent upon the performance of financial institution; the bank or "member of a family" means parent, spouse, brother, sister, child, uncle, aunt, nephew, niece, grandfather, grandmother, stepfather, stepmother, stepchild, and adopted child of the person concerned, and in case of an adopted child his adopter or adopters; "non-executive director" means a director who does not hold any executive or management position in a bank or financial institution; "remuneration committee" means a Board committee responsible for overseeing the compensation system's design and operations on behalf of the Board; "senior management" means a Chief Executive Officer, head of function, any other senior manager reporting to the Chief Executive Officer and any person, other than a member of the Board, who, individually or as a group- Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) (a) makes or participates in making decisions that affect the whole or a substantial part of the business of the bank of financial institution; (b) has the capacity to affect the bank’s or financial institution's financial standing; or (c) may affect the whole, or a substantial part, of the business of the bank or financial institution or its financial standing through their responsibility for- implementing strategies approved by the Board of the bank or financial institution; enforcing policies and (i) (ii) developing and implementing systems that identify, assess, manage or monitor risks in relation to the business of the bank or financial institution; or (iii)monitoring the appropriateness, adequacy and effectiveness of systems. risk management “significant interest” means a holding of five per cent or more of the voting shares of a bank or financial institution; “subsidiary” means a company that is owned or controlled by another company. Objectives - 3 Verify source ↗
Citation
AI-assisted research summary: These Regulations aim to support confidence in banks and financial institutions, set corporate governance standards, and guide directors in carrying out their fiduciary responsibilities.
3. The objectives of these Regulations are to: (a) promote and maintain public confidence in banks and financial institutions; (b) establish standards for corporate governance processes and structures; and (c) provide guidance to directors for proper discharge of their fiduciary responsibilities. PART II GOVERNANCE OF BANKS AND FINANCIAL INSTITUTIONS Establishment of Board
Part
PART II
- 4 Verify source ↗
5. Members of Board
AI-assisted research summary: Banks and financial institutions must establish a Board of Directors.
4. Banks and financial institutions shall establish Board of Directors which shall be the governing body of the bank or financial institution. Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Members of Board - 5 Verify source ↗
Members of Board
AI-assisted research summary: The Board must have at least five members, with two thirds non-executive. Appointments must include at least two independent non-executive members with relevant experience and at least two Tanzanians. A person cannot serve on more than one bank or financial institution at the same time unless the Bank approves and there is no conflict of interest.
5.-(1) The Board shall be composed of not less than five members, two thirds of whom shall be non-executive. (2) In appointing members of the Board, the appointing authority shall ensure that at least - (a) two of the non-executive members are independent and have requisite experience in banking, law or finance, accounting, auditing, economics; and (b) two of the members are Tanzanians. (3) A person shall not simultaneously serve as a Board member or in any executive capacity in more than one bank or financial institution in Tanzania. (4) Notwithstanding sub-regulation (3), and subject to prior approval of the Bank, a person may simultaneously serve as a Board member or in any executive capacity in more than one bank or financial institution, provided there is no conflict of interest. Chairperson - 6 Verify source ↗
Chairperson
AI-assisted research summary: The Board chairperson must be a non-executive member and must not sit on the Audit Committee, Credit Committee, or chair any Board Committee.
6.-(1) The chairperson of the Board shall- Formation of Committees (a) be a non-executive member of the Board; (b) not be a member ·of Audit Committee or Credit Committee of the Board; and (c) not serve as chairperson of any Board Committee. - 7 Verify source ↗
Formation of Committees
AI-assisted research summary: The Board may create and appoint committees from among its members, and it must form an Audit Committee, Credit Committee, Remuneration Committee, and any other necessary committees.
7.-(1) The Board may, subject to such terms and conditions as it may determine, form and appoint from among its members, such number of committees as it deems necessary for better carrying out of its oversight roles and other responsibilities. (2) The Board shall form an Audit Committee, Credit Committee, Remuneration Committee and such other Committees as it may deem necessary for the discharge of its functions. Committee charter - 8 Verify source ↗
Committee charter
AI-assisted research summary: Each Committee must have a charter or other instrument covering its mandate, scope, working procedures, reporting to the Board, and any tenure limits.
8. Each Committee shall have a charter or other instrument that sets out its mandate, scope and working procedures including the manner in which Committee will report to the Board and any tenure limits for serving on the Committee. Committee members - 9 Verify source ↗
Committee members
AI-assisted research summary: Board committees must include non-executive directors, have at least three members, and the audit committee must have at least two independent members with relevant financial experience.
9.-(1) The Board Committees shall consist of non- the number of Committee executive directors, and members shall not be less than three. Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) (2) Subject to sub-regulation (1), at least two of the Audit Committee members shall be independent members having accounting, auditing or related financial management experience. (3) A member of the Audit Committee shall not simultaneously serve as a member of other Board Committees. Disclosure of Committees - 10 Verify source ↗
Disclosure of Committees
AI-assisted research summary: The Board must disclose its committees, their mandates, and their composition in the audited financial statements.
10. The Board shall disclose the committees it has established, their mandates and their composition in the audited financial statements. Maintenance of records Tenure of office Cooling-off period Persons not to be appointed as director - 11 Verify source ↗
Maintenance of records
AI-assisted research summary: Board and Committees must keep appropriate records of their deliberations and decisions.
11. Board and Committees shall maintain appropriate records of their deliberations and decisions. - 12 Verify source ↗
Tenure of office
AI-assisted research summary: Bank board members and chief executive officers cannot serve more than 10 consecutive years, and former holders face a 3-year bar on reappointment in the same bank or its subsidiaries.
12.-(1) A Board member or a Chief Executive Officer of a bank or financial institution shall not hold office for a consecutive period of more than ten years. (2) Where a bank or financial institution is a product of merger, acquisition, takeover or any other form of combination, the period of ten years referred to under sub- regulation (I) shall include the pre and post combination years of a Board member or Chief Executive Officer. (3) A person who has served as Board member or Chief Executive Officer of a bank or financial institution for a consecutive period of ten years shall not qualify for appointment in his former bank or financial institution, or its subsidiaries in any capacity until after a period of three years. (4) A Board member or chief executive officer of a bank or financial institution who has served for a period of ten years or more by the date these Regulations come into effect shall have a moratorium period of two years before ceasing to function in that capacity. - 13 Verify source ↗
Cooling-off period
AI-assisted research summary: A person may not be appointed as a director for two years after ceasing to be a director of another bank or financial institution, unless the Bank gives permission.
13. A person shall not be appointed as a director during the two-year period from the date when such person ceased to be a director of another bank or financial institution unless the permission of the Bank is obtained. - 14 Verify source ↗
Members of National Assembly, House of Representative and Local
AI-assisted research summary: Certain elected officeholders may not be appointed as directors of a bank or financial institution.
14. A member of National Assembly or House of Representatives or councilor of local government authority shall not be appointed as a director of a bank or financial institution. Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Reporting of vacancy and exceptional events Selection process Approval for appointment in senior management or Board membership Undertaking by member of Board - 15 Verify source ↗
Reporting of vacancy and exceptional events
AI-assisted research summary: A bank or financial institution must notify the Bank in writing within seven days if there is a senior management or board vacancy, or an exceptional event affecting proper banking conduct, legal compliance, or stakeholder interests.
15. A bank or financial institution shall, in writing and within seven days, notify the Bank of any- (a) vacancy in a post of senior management or member of the Board; and (b) exceptional events that constitute a departure from the proper conduct of banking business, infringement of the provisions of the law or violation of the interests of stakeholders. - 16 Verify source ↗
(1) The Board shall have a clear process for
AI-assisted research summary: The Board must have a clear process for identifying, assessing, and selecting Board candidates, and banks or financial institutions must consider specified suitability factors when assessing a person for Board appointment.
16.-(1) The Board shall have a clear process for identifying, assessing and selecting Board candidates. (2) In assessing suitability of a person to be appointed to the Board, a bank or financial institution shall consider - (a) honesty, integrity, diligence, fairness, competence, capability and financial soundness of the candidate; (b) possession of knowledge, skills, experience and independence of mind given his responsibilities on the Board and in the business and risk profile of bank or financial institution; (c) availability of sufficient time to fully discharge his responsibilities; (d) conviction of an offence involving fraud or dishonesty; (a) non-involvement as a member of the management of Board in a bank or financial institution whose registration or licence has been revoked or cancelled or which has gone into liquidation; (b) absence of default record of any credit accommodation taken by him or his related parties from any bank or financial institution; and (c) absence of bankruptcy record or suspension of payments or composition with his creditors. - 17 Verify source ↗
A bank or financial institution shall not appoint
AI-assisted research summary: A bank or financial institution must not appoint a person to senior management or the board, or give that person responsibilities, unless it has prior approval from the Bank.
17. A bank or financial institution shall not appoint any person in senior management position or Board member and assign that person responsibilities unless it has obtained prior approval of the Bank. - 18 Verify source ↗
Undertaking by member of Board
AI-assisted research summary: A Board member must give the Bank a written undertaking to comply with listed banking laws and to help maintain a safe, sound, and profitable bank or financial institution.
18. A member of the Board shall make and submit to the Bank a written undertaking that he shall: (a) fulfill his obligations towards maintaining a safe, ·sound and profitable bank or financial institution; and Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Induction and training programs Conflict of interest (b) comply with the provisions of the Banking and Financial Institutions Act, Bank of Tanzania Act, Foreign Exchange Act, regulations, guidelines and directives issued by the Bank from time to time. - 19 Verify source ↗
Induction and training programs
AI-assisted research summary: Banks and financial institutions must make sure directors get induction and ongoing training, and they must report on that training to the Bank within 30 days after year-end.
19.-(1) A bank or financial institution shall ensure that directors participate in induction programmes and have access to ongoing training on relevant issues. (2) A bank or financial institution shall, within thirty days from end of the year, submit a report to the Bank on induction programs and trainings under sub-regulation (1) conducted in the previous year. - 20 Verify source ↗
Conflict of interest
AI-assisted research summary: Board members must avoid conflicts of interest. Banks or financial institutions may appoint a practicing professional as a director only if that person is not employed by, or a partner in, a firm auditing or advising the institution, and that director must act with high integrity and avoid self-serving conduct.
20.-(1) A Board member shall not have any conflict of interest that may impede his ability to perform his duties objectively. (2) The Board shall ensure identification of potential conflicts of developed, implemented and monitored. that policies for interest are (3) Notwithstanding the requirements of sub- regulation (1), a bank or financial institution may appoint a practicing professional as a director provided that he is not employed by or partner in a firm, which is engaged to conduct audit of or consultancy work for the bank or financial institution. (4) A practicing professional who is appointed as a director of a bank or financial institution shall exercise the highest degree of integrity and professionalism and shall avoid being involved or appearing to be involved in any self-serving practices and conflict of interest situations. Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Regular assessment - 21 Verify source ↗
Regular assessments
AI-assisted research summary: The Board must regularly assess itself, its committees, and individual board members, and a bank or financial institution must send the assessment report to the Bank within 30 days after the assessment is finished.
21.-(1) The Board shall, either alone or with the assistance of external expert, carry out assessment of the Board, its Committees and individual Board members by- (a) periodically reviewing its structure, size and composition; (b) assessing the ongoing suitability and performance of each Board member at least once annually; (c) either separately or as part of these assessments, reviewing effectiveness of governance practices and procedures, determining where improvements may be needed, and making any necessary changes. (2) A bank or financial institution shall the submit the report of the assessment made under sub- regulation (1) to the Bank within thirty days from completion of the assessment. PART IV RESPONSIBILITIES OF THE BOARD AND LIABILITIES OF DIRECTORS Responsibiliti es of board Appointment and oversight of senior management
Part
PART IV
- 22 Verify source ↗
Responsibilities of the board
AI-assisted research summary: The Board must oversee all affairs of the bank or financial institution, including risk management, approving business strategies and policies, hiring senior management, and making sure senior management carries out board-approved strategies and policies.
22. The Board shall be responsible for providing oversight on all affairs of the bank or financial institution including: - (a) risk management; (b) approval of overall business strategies and policies; (c) hiring capable senior management; and (d) ensuring senior management implements strategies and policies approved by the Board. - 23 Verify source ↗
Appointment and oversight of senior management
AI-assisted research summary: The Board must appoint senior management and oversee their performance, standards, accountability, skills, and succession planning.
23. The Board shall appoint senior management and- (a) monitor performance of the senior management to ensure that their actions are consistent with the strategies, policies and risk appetite approved by the Board; (b) set appropriate performance and remuneration standards for senior management consistent with the long term strategic objectives and the financial soundness of the bank or financial institution; (c) hold members of senior management accountable for their actions; Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) (d) ensure that senior management’s knowledge and expertise remain relevant given the nature of the business and the bank's risk profile; and (e) ensure that there is appropriate succession plan for senior management positions. Approval of strategies, plans and policies - 24 Verify source ↗
Approval of strategies, plans and policies
AI-assisted research summary: The Board must approve strategies, business plans and policies, and monitor how management implements them. A bank or financial institution must submit those strategies, business plans and policies to the Bank within 30 days after approval.
24.-(1) The Board shall approve strategies, business plans and policies and monitor management's performance in implementing them. (2) The bank or financial institution shall, within thirty days after approval, submit to the Bank the strategies, business plans and policies. Promotion of sound corporate culture - 25 Verify source ↗
Promotion of sound corporate culture
AI-assisted research summary: The Board must promote sound corporate culture by setting corporate values, building a strong risk culture, communicating values and standards, and ensuring staff know disciplinary action can follow breaches.
25. The Board shall, for the purpose of promoting sound corporate culture- (a) set corporate values to be adhered to by the Board, senior management and other employees; (b) create a strong risk culture by- (i) conveying the Board’s expectation that it does not support excessive risk-taking; and (ii) ensuring that all employees operate within the agreed risk appetite and risk limits; (c) ensure that appropriate steps are taken to communicate throughout the corporate values, professional standards or code of conduct; and the bank or financial institution (d) ensure that senior management and employees are aware that appropriate disciplinary or other actions shall be taken for breach of professional standards or code of conduct. - 26 Verify source ↗
Setting lines of responsibility and accountability
AI-assisted research summary: The Board must establish lines of responsibility and accountability and communicate them throughout the bank or financial institution.
26. The Board shall establish lines of responsibility and accountability, which shall be communicated throughout the bank or financial institution. - 27 Verify source ↗
Policies on insider transaction
AI-assisted research summary: Board members must exercise duty of care and loyalty toward the bank or financial institution, following applicable laws and supervisory standards.
27. Members of the Board shall exercise their duty of care and loyalty to the bank or financial institution in accordance with applicable laws and supervisory standards. - 28 Verify source ↗
Duty of care and loyalty
AI-assisted research summary: The Board must approve and oversee implementation of the bank’s capital adequacy assessment process and capital plan.
28. The Board shall approve and oversee the implementation of capital adequacy assessment process and capital plan of the bank or financial institution. Setting lines of responsibility and accountability Duty of care and loyalty Capital adequacy assessment and capital plan Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Risk management Risk Management, compliance and audit functions Annual review of risk management policies Approval of new activities Stakeholders interests Liabilities of Directors - 29 Verify source ↗
Capital adequacy assessment and capital plan
AI-assisted research summary: The Board must be responsible for managing risks in a bank or financial institution under the applicable risk management guidelines.
29. The Board shall be responsible for managing risks in a bank or financial institution pursuant to Risk Management Guidelines for Banks and Financial Institutions. - 30 Verify source ↗
Risk management
AI-assisted research summary: The Board must properly position, staff, and resource risk management, compliance, and audit functions, and use their work as independent checks on management information.
30.-(1) The Board shall ensure that departments or units responsible for risk management, compliance and audit are properly positioned, staffed and resourced; and carry out their responsibilities independently and effectively. (2) The Board shall utilize the work of risk management, compliance and audit functions as independent checks on the information received from management on the operations and performance of the bank or financial institution. - 31 Verify source ↗
Risk Management, compliance and audit functions
AI-assisted research summary: The Board must review risk-related policies and set exposure limits for risks and activity segments at least once a year.
31. The Board shall review all policies relating to various types of risks and determine the exposure limits for such risks and activity segments at least once a year. - 32 Verify source ↗
Annual review of risk management policies
AI-assisted research summary: The Board must be kept informed of all new activities and must approve strategic activities of the bank or financial institution.
32. The Board shall ensure that it is informed of all new activities and approves strategic activities of the bank or financial institution. - 33 Verify source ↗
Approval of new activities
AI-assisted research summary: The Board must consider the legitimate interests of depositors, shareholders, and other relevant stakeholders when carrying out its responsibilities.
33. The Board shall, in discharging its responsibilities, take into account the legitimate interests of depositors, shareholders and other relevant stakeholders. - 34 Verify source ↗
Stakeholders interests
AI-assisted research summary: A director must follow several conduct rules, including safeguarding the institution, keeping secrecy, avoiding fraud and self-dealing, and using independent judgment.
34.-(1) In the performance of his functions under the Act and these Regulations a director- (a) shall execute an undertaking that he shall- (i) jointly and severally ensure that the bank or financial institution operates in a safe, sound and profitable manner; and (ii) be liable for non-compliance with such undertaking. (b) shall be responsible for complying with secrecy provisions of the Act; (c) shall not involve himself in fraud or deliberate mismanagement; (d) shall ensure that all credit facilities granted to him or his related parties by the bank of financial institution Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Board meetings to which he is a member of the Board, are given at an arm's length basis; (e) shall refrain from attending a meeting which deliberates or approves a transaction in which he is beneficiary; (f) has a duty of care and loyalty to the bank or financial institution's interests and shall be liable for damage caused where he breaches that duty; (g) shall be liable for non-diligent and negligent performance of his duties as a director; and (h) shall be responsible for exercising rational and independent judgment. (2) A director who violates any provision of Acts or Regulations issued thereunder may be fined, removed from office, or disqualified from holding any position or office in any bank or financial institution. - 35 Verify source ↗
Liabilities of Directors
AI-assisted research summary: The Board must meet at least every three months, directors must attend most Board meetings, and video meetings are allowed only within stated limits. Directors with a personal interest in a Board matter must declare it and leave the meeting for that discussion.
35.-(1) The Board shall meet at least once every three months to discuss the affairs of a bank or financial institution. (2) A member of the Board shall attend at least seventy-five percent of the Board meetings of the bank or financial institution in each year. (3) A Board meeting may be held through: (a) physical appearance; (b) video conferencing; or (c) such other means as the Bank may prescribe or approve upon application by a bank or financial institution. (4) For the purpose of sub-regulation (3) (b), a bank or financial institution may hold its Board meetings through video conferencing provided that: (a) meetings held through video conferencing in a year shall not exceed twenty-five percent; (b) majority of directors attending such meetings are physically present; (c) director shall not attend all Board meetings in any given year through video conferencing. (5) A director who has, whether directly or indirectly, personal interest in a transaction that is tabled for discussion before the Board, or in a decision that the Board is about to make, shall declare his personal interest at the opening of the meeting at which the transaction is to be discussed. Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) (6) Upon declaration of his personal interest under sub-regulation (5), the director shall absent himself from the meeting and not be counted for purposes of determining a quorum required for that discussion. PARTY INSIDER TRANSACTIONS Policies on insider transaction - 36 Verify source ↗
Board meetings
AI-assisted research summary: The Board must set, apply, and regularly review policies for insider and related-party transactions, and make sure those transactions are on arm’s length terms and do not misappropriate or misapply the bank’s resources.
36. The Board shall establish, implement and regularly review policies that guide transactions with insiders and their related parties and ensure that- (a) such transactions are conducted on arm's length terms; and (b) corporate or business resources of the bank or financial institution are not misappropriated or misapplied. Transactions with insider - 37 Verify source ↗
Transactions with insiders
AI-assisted research summary: Banks and financial institutions must make insider transactions on terms no better than those offered to other customers.
37. A bank or financial institution shall ensure that a transaction with an insider shall be on terms not more favourable than would be available to other customers. Conditions for credit accommodatio ns to insider Credit limit to single insider Aggregate credit limit to insider - 38 Verify source ↗
Conditions for credit accommodations to insiders
AI-assisted research summary: A bank or financial institution must not give a credit accommodation to an insider unless all Board members approve it, and it must notify the Bank within seven days after granting it.
38.-(1) A bank or financial institution shall not directly or indirectly grant any credit accommodation to an insider unless the credit accommodation is approved by all members of the Board. (2) Where a bank or financial institution grants a credit accommodation to an insider in accordance with sub-regulation {l), it shall, within seven days from the date it grants the credit accommodation, notify the Bank. - 39 Verify source ↗
Credit limit to single insider
AI-assisted research summary: A bank or financial institution must not give an insider credit accommodation above 10% of the institution’s core capital.
39.-(1) The total amount of credit accommodation which any bank or financial institution may grant, directly or indirectly, to an insider shall not exceed ten percent of the core capital of the bank or financial institution. (2) The limit prescribed under sub-regulation (1) shall apply regardless of the type and value of security held. - 40 Verify source ↗
Aggregate credit limit to insider
AI-assisted research summary: A bank or financial institution must not give insider-related unsecured credit accommodation loans if the total exceeds 25% of its core capital.
40.-(1) A bank or financial institution shall not, insider’s credit indirectly, grant its to directly or Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Restriction on unsecured credit accommoda- tion Loans to employees accommodations whose aggregate amount exceeds twenty-five percent of its core capital. (2) The limit referred to under sub-regulation (1) shall apply to a person who has ceased to be an insider unless two years have elapsed from the date when such person ceased to be an insider. - 41 Verify source ↗
Restriction on unsecured credit accommodation
AI-assisted research summary: Banks and financial institutions must not give unsecured credit accommodation to insiders, except where regulation 42 allows it.
41. A bank or financial institution shall not grant any unsecured credit accommodation to insiders except as set out under regulation 42. - 42 Verify source ↗
Loans to employees
AI-assisted research summary: A bank or financial institution must not give a salary advance to an officer or employee that is more than that person’s annual remuneration.
42.-(1) A bank or financial institution shall not grant salary advance to any of its officers or employees which exceed the annual remuneration of the borrowing officer or employee. (2) For the purpose of sub-regulation (I), annual remuneration of an officer or employee shall be the basic salary plus fixed allowances paid in cash to the officer or employee on a regular and periodic basis as part of his compensation for services rendered to the bank or financial institution. (3) The provisions of sub-regulation (2) shall not apply to benefit or entitlement which depends on a contingency such as medical benefits or allowances for attending seminars, meetings or other non-cash benefits. (4) Loans and advances to officers and employees of bank or financial institution granted as incentives shall be managed in accordance with a policy regarding administration of incentives. (5) Commercial loans and advances to officers and employees of a bank or financial institution shall be in the regular course of business and on terms not more favourable than would be available to other borrowers. PART VI RESPONSIBILITIES OF SENIOR MANAGEMENT Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Experience, competency and integrity Oversight and risk management Reporting to the Board
Part
PART VI
- 43 Verify source ↗
Experience, competencies and integrity
AI-assisted research summary: Senior management of a bank or financial institution must have the needed experience, competency, and integrity, and must be selected through a promotion or recruitment process that considers the qualifications for the role.
43. A member of senior management of a bank or financial institution shall- (a) have necessary experience, competency and integrity to manage the business and people under his supervision; and (b) be selected through promotion or recruitment process which takes into account the qualifications required for the position in question. - 44 Verify source ↗
Oversight and risk management
AI-assisted research summary: Senior managers of banks or financial institutions must oversee their teams, align activities with board-approved strategy and risk settings, implement risk controls, and not interfere with independent risk, compliance, or audit functions.
44.-In the performance of its function as overseer and risk manager, a member of senior management of a bank or financial institution shall- (a) provide adequate oversight of those they manage; (b) ensure that the activities of a bank or financial institution are consistent with the business strategy, risk appetite and the policies approved by the Board; (c) implement, consistent with the direction given by the Board, risk management systems, processes and controls for managing the risks to which the bank or financial institution is exposed and for complying with laws, regulations and internal policies including- (i) putting in place comprehensive and independent risk management, compliance and audit functions, as well as an effective overall system of internal controls; and (ii) recognizing and respecting the independent duties of the risk management, compliance and internal audit functions and shall not interfere in the execution of such duties. - 45 Verify source ↗
Reporting to the Board
AI-assisted research summary: Senior management must report specified matters to the Board.
45.-(1) For the purpose of ensuring effective performance of functions of the Board under these Regulations, senior management shall report to the Board on: (a) changes in business strategy, risk strategy or risk appetite; (b) bank performance and condition; (c) breaches of risk limits or compliance rules; (d) internal control failures; and (e) legal or regulatory concerns. PARTVII GOVERNANCEOFGROUP STRUCTURES Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Awareness of risks - 46 Verify source ↗
Awareness of risks
AI-assisted research summary: A bank or financial institution’s board must set up a mechanism to stay aware of risks and issues affecting the institution and its subsidiaries.
46. The Board of a bank or financial institution that owns a subsidiary bank or financial institution shall set a mechanism that will enable it to be aware of the risks and issues that might affect the bank or financial institution and its subsidiaries. Exercise of oversight Responsibiliti es of Board of parent company - 47 Verify source ↗
Exercise of oversight
AI-assisted research summary: The parent company’s board must exercise adequate oversight over subsidiaries, while the subsidiaries’ board keeps its own independent legal and governance responsibilities.
47. Board of the parent company shall, without prejudice to the independent legal and governance responsibilities of the Board of the subsidiaries, over subsidiaries. oversight adequate exercise - 48 Verify source ↗
Responsibilities of Board of parent company
AI-assisted research summary: The board of the parent company is responsible for setting up group governance, overseeing subsidiary structures, checking controls and risks, approving policies, and ensuring compliance monitoring resources are adequate.
48. The Board of the parent company shall be responsible for- (a) establishing a structure and a governance framework with clearly defined responsibilities, including those at the parent company level and at the subsidiary level; roles and (b) defining an appropriate subsidiary Board and management structure which takes into account different risks to which the group, its businesses and its subsidiaries are exposed; (c) assessing whether the group’s corporate governance framework includes adequate policies, processes and controls and addresses risks across the business and legal entity structures; (d) ensuring the group’s corporate governance framework includes appropriate processes and controls to identify and address potential intragroup conflicts of interest, such as those arising from intragroup transactions; (e) approving policies and clear strategies for establishing new structures and legal entities, and ensuring that they are consistent with the, policies and interests of the group; (f) assessing whether there are effective systems in place to facilitate exchange of information among the entities within the group; and (g) ensuring the group has sufficient resources to monitor compliance of subsidiaries with all applicable legal, regulatory and governance requirements. Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Complex or opaque structures Compensation - 49 Verify source ↗
Complex or opaque structures
AI-assisted research summary: The Board and senior management must take steps to avoid or reduce risks from complex or opaque structures.
49. The Board and senior management shall take the following actions to avoid or mitigate challenges posed by complex or opaque structures: (a) avoiding setting up unnecessarily complicated structures or excessive number of entities; (b) maintaining and reviewing policies, procedures governing and processes maintenance of those structures or activities; approval and the (c) maintaining a centralized process for approving the creation of new entities based on established criteria; (d) establishing adequate procedures and processes to identify and manage all risks arising from complex or opaque structures; and (e) ensuring that the activities and structures are subject to regular internal and external audit reviews. PART VIII COMPENSATION Compensation
Part
PART VIII
- 50 Verify source ↗
Approval of compensation
AI-assisted research summary: The Board must approve senior management compensation and oversee compensation policies and controls. Compensation structures must align with long-term performance, risk strategy, and the bank’s interests, and should help prevent conflicts of interest and risky pay incentives.
50.-(1) The Board shall approve the compensation of senior management and shall oversee development and operation of compensation policies, systems and related control processes by the management. (2) The compensation structure shall- (a) be consistent with the long term performance and in line with the business and risk strategy, objectives, values and long term interests of the bank or financial institution and incorporate measures to prevent conflicts of interests; and (b) facilitate adherence to risk appetite, promote appropriate risk• taking behaviour and encourage employees to act in the interest of the bank or financial institution. - 51 Verify source ↗
Evaluation of compensation
AI-assisted research summary: The Board must ensure compensation practices for uncertain future revenues are evaluated using both qualitative and quantitative key indicators.
51. The Board shall ensure that practices by which compensation is paid for potential future revenues whose timing and likelihood remain uncertain is evaluated by means of both qualitative and quantitative key indicators. PART IX GENERAL PROVISIONS Evaluation of compensation Banking and Financial Institutions (Corporate Governance) GN. NO. 767 (Contd.) Shareholding and management Sanctions
Part
PART IX
- 52 Verify source ↗
Shareholding and management
AI-assisted research summary: Certain shareholders and former significant-interest holders are barred from management or board leadership roles in a bank or financial institution.
52. For the purpose of ensuring proper management individual institutions, an of banks and financial shareholder - (a) with five per centum or more shareholding in a bank or financial institution shall not form part of management of the bank or financial institution; (b) with ten per centum or more shareholding in a bank or financial institution shall not be appointed as chairperson or deputy chairperson of the Board; and (c) who had a significant interest in a failed bank or financial institution shall not have a significant interest in a bank or financial institution.
Part
part of management of the bank or financial
- 53 Verify source ↗
Sanctions
AI-assisted research summary: The Bank may impose sanctions on a bank or financial institution for non-compliance.
53.-(1) Without prejudice to penalties and actions prescribed in the Act, the Bank may impose on any bank or financial institution any of the following sanctions for non- compliance- (a) a penalty of the amount to be determined by the Bank; (b) prohibition from declaring or paying dividends; (c) suspension of the privilege to issue letters of credit or guarantee; (d) suspension of access to credit facilities of the Bank; (e) suspension of lending and investment operations; (f) suspension of capital expenditure; (g) suspension of the privilege to accept new deposits; (h) revocation of banking licence; (i) suspension from office of the defaulting director, officer or employee; and (j) disqualification from holding any position or office in any bank or financial institution under supervision of the Bank. (2) The penalty referred to in paragraph (a) of sub- to directors, officers or regulation (1) may apply employees of the bank or financial institution. Dar es Salaam, FLORENS J. LUOGA, 17th September, 2021 Governor
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The Banking And Financial Institutions (Corporate Governance) Regulation, 2021
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