Interpretation

In these Regulations, unless the context otherwise requires“Act” means the Domestic Banks and Financial Institutions Act; CAP. 263. “Primary or Tier I Capital” includes– (a) allotted, called up and fully paid and outstanding common share capital or assigned capital, as the case may be including any amounts which may be paid in excess of the par or stated value of the shares; (b) fully paid perpetual non-cumulative preference shares and related surplus. These are preferred shares which– (i) do not have a maturity date; (ii) can be converted at the issuing bank’s option into common shares; 22 (iii) cannot be redeemed at the option of the shareholders; (iv) give the issuer the legal right to eliminate preferred dividends; (v) have no other provisions that will require future redemption of the issue; (c) the statutory reserve fund maintained under section 11 of the Act; CAP. 263. (d) any other disclosed reserves created or increased by appropriation of retained earnings and which are not ascribed to specific assets or potential loss; (e) published retained earnings of prior years; and (f) any other capital element or portion thereof as the Central Bank may declare by notice in the Gazette to be eligible for inclusion under this section for purposes of computing the required minimum proportions; Less– (g) goodwill and any other intangible assets, except such intangible assets which are readily marketable and have identifiable and consistent streams of cash flows which, in the determination of the Central Bank, may be included in capital under such terms and conditions as the Central Bank may specify; and (h) all losses irrespective of whether or not they have been published; “Secondary or Tier II Capital” includes– (a) general provisions for losses on loans or other assets which are not ascribed to specific loans or other assets, subject to a limit of 1.25% of the aggregate of risk weighted assets. Provision for losses on specific loans or other assets, or for any specific purposes are not eligible for inclusion in secondary capital; (b) fixed asset revaluation reserves arising from a formal independent revaluation of the financial institution’s real estate property but limited to one revaluation every five-year period and to not more than 25% of primary (c) hybrid debt capital instruments; that is, instruments that combine characteristics of equity capital and of debt such as perpetual cumulative preference shares, long-term preference shares maturing in not less than ten years, perpetual subordinated debt and mandatory convertible debt instruments. They should meet the following requirements– (i) they should be fully paid, unsecured, unencumbered, and subordinated to the claims of depositors and general creditors; (ii) they should not be redeemable at the discretion of the holder; (iii) they should be available to absorb losses; (iv) service obligations attached to the instrument should be deferrable; 24 (v) they should not be used as security for any loan granted by the bank; (d) conventional unsecured subordinated debt instruments with a minimum remaining term to maturity of not less than ten years and limited life preference shares redeemable in not less than ten years at the discretion of the issuer. Such instruments are limited to a maximum of 50% of primary capital and should meet the following requirements– (i) they should be subordinated to the claims of both depositors and general creditors; (ii) early repayment of such instruments should be at the option of the borrower only; (iii) such instruments should have a specific waiver of the right of offset against any amount owing to the bank by the holders.