Christophe Rutumwako


LL.B., Faculty of Law,
Université Lumière de
Bujumbura (Bujumbura)

Arlène Kaneza


LL.B., Faculty of Law,
Université Lumière de
Bujumbura (Bujumbura)

The revision of the banking law of 23 October 2003 intervened last August. The new law brings deep changes in terms of regulation of banking and financial activities. It generally strengthens the powers of the Central Bank, and allows it to fully play the role which is vested.

Since the enactment of law No. 1/017 of October 23, 2003, national and international contexts have changed for instance the progressive insertion of the Burundian economy in the community of the East as well as the changes that occurred in the practices and international regulations in the field of banking supervision. There are many changes that require sufficient time to implement the new legislation. Thus, a period of twelve months is intended for that subject institutions comply.

  1. The main contributions of the new law

First, the new law has expanded its scope of application. Indeed, all entities performing one or more of Bank’s operations, including the granting of credit and the issue and/or the management of means of payment (banks, financial institutions, the National Post, the microfinance institutions and payment institutions, etc.) now will be governed by the same law.

Then, the appellation itself of the law has been changed to take a new name “Revisions to the law No. 1/017 of October 23, 2003 and law governing banking activities. Nevertheless, the legislator said that the aspects specific to a class of institutions will be specified by a legislative or regulatory text specific. The Act is intended to protect the interests of the customer and put the order in financial activity in Burundi by giving a same legal basis for all entities engaged in banking from which are now collectively referred to « credit institutions ». And on the other hand, in addition to credit institutions, another category of non-bank entities emerged: it’s ‘payment institutions’, may be authorized to provide payment services, including electronic money card of credit or debit and by mobile phone. On this last point, expected that the activity to be developed quickly and entering this financial market of new actors.

And then,  new words such as ‘shareholder reference, qualified shareholder, Director, Executive or Managing Director, independent Director, commercial agents, electronic currency, group of related persons, related person to a subject establishment”, are introduced and defined to facilitate the understanding of the users of this law.

Finally, another new feature is introduced by article 4 of the new law. Now, the law requires the translation into Kirundi of line of credit agreements and other documents which will probably allow understanding by customers of the content of the acts they sign with commercial banks.

  1. New bans

In addition to the prohibitions of the former Act, the new one added the formal ban on partnership to exclusive character of credit institutions with companies of international transfers or payment.

It also initiated the appeal against the decision of withdrawal of approval or authorization stating that litigation remains open to any interested person. However, in the event of withdrawal or refusal offending subject establishment, the damage is only a financial compensation, in the form of damages and interest to be borne by the Treasury or Central Bank and not in the possibility of to cancel the decision.

For foreign investors, there is reason to wonder if the requirements international investment are taken into account in the formulation of this solution. Actually, we can wonder about the choice of compensation as one remedy even as the United Nations International Law Commission requires restitution as first solution in particular in article 35 of its articles on the responsibility of States for internationally wrongful acts. Moreover, decisions of withdrawal of approval are not subject to appeal for revocation. Here again, he should question Community law (EAC) to see if this provision did not contradict the principle of a fair trial.

  1. New conditions of exercise

The new law is meticulous about the conditions of exercise of the subject including institutions with regard to the total liberation of capital that must take place within a maximum period of six months following the date of such approval, the composition of the Council of Directors, the terms of appointment of Directors representing the State, etc.

In addition, now credit institutions are obliged to appoint a shareholder or group of shareholders who can, if necessary, bring a financial support. And article 27 of the new Act says that no shareholder (physical or legal person) may not hold more than 25% of the capital of the credit institution. It is an effort to promote good governance in the sector, avoiding that the decision-making power is held by a limited number of shareholders. This article came to replace point 3 of paragraph 2 of article 30 of the Banking Act of 2003, this limitation does not concern public company with one shareholder, mixed company or in the form of subsidiaries of credit institutions.

Then in article 32, restrictions have been imposed to administrators and leaders in order to avoid the accumulation of functions in more than one institution, which could be detrimental to the good management and competition.

Besides, the law introduced general conditions for the exercise of payment institutions with which details will be developed in a specific regulation.

Even more, the law requires all subject institutions to detect suspicious activities related to money laundering and the financing of terrorism and to refuse the management or the transfer of funds thereto and pay an annual fee to the end of each fiscal year. The activity of risk and compliance laundering makes its appearance. In addition, the Central Bank must ensure, during the accreditation process of the origin of the funds to invest and the identity of the final contributors of capital to prevent the entry of capital from illicit activities.

  1. Treatment of institutions in difficulties

The fundamental reform at this level is the attribution to the Central Bank, powers that were reserved for commercial court for recovery (or reorganization), forced liquidation and recovery of the debts of the institution taxable person whose leaders guilty of serious misconduct are indebted to him.

The abandonment of the use of the consular tribunal is motivated by the particular character of the banking sector to which the bankruptcy laws and on the judicial administration are suppletive way (article 2 of both Acts) and by the concern to ensure the stability of the sector and protect the interests of depositors. Otherwise the new law provided other criteria that could lead to divestiture of a facility including given ratios of solvency and liquidity etc.

Article 99 of the new Act imposes the appointment by the Central Bank of a provisional administrator to manage the business in difficulty simultaneously at the divestiture decision. But this nomination is derogated by section 106, by allowing the Central Bank to begin itself the  restructuring process of an institution with a systemic importance in difficulties in order to preserve the stability of the financial system and the economy of the country.

Conclusion: The new banking Act has introduced innovations that certainly have advantages for its users because it has taken into account the socio-economic development of the country. But on the other hand, it has a few shortcomings by his rigor which may be an obstacle for including foreign investment.

Although the legislature has imposed the translation into Kirundi of the agreements signed with the banks, their understanding by customers requires the use of a professional specialized in the field of banking law. One should not lose sight that the one who will pay these additional costs is the consumer by adding additional fees.

Finally, to identify the subtleties of these new provisions and strategically arm yourself against unwanted effects, the intervention of a lawyer of the banking law is recommended for institutions subject to this law, men business or consumers who wish to take advantage of the new instrument at their disposal.


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