RESOLUTION No. 79/1998 WHEREAS: Decree-Law No. 173 of May 28 th, 1997 on banks and non-banking financial institutions states in its Article 54 that Banco Central de Cuba is empowered to issue the rules, procedures and regulations that it deems necessary to implement banking supervision, audit and inspection of the financial institutions, representative offices and Banco Central de Cuba itself. WHEREAS: In conformity with the previous whereas, it is necessary to regulate the inspections that the Banking Supervision Committee should carry out to banks and non-banking financial institutions. WHEREAS: Decree-Law No 172 On Banco Central de Cuba dated May 28 th, 1997, in its clause b) of article 36, states that the President of Banco Central de Cuba is empowered to dictate the provisions binding for all the financial institutions and representative offices. WHEREAS: He who resolves was appointed as Minister of Government and President of Banco Central de Cuba by Agreement of the Council of State dated June 13 th, 1997. WHEREAS: By making use of the powers vested on me, To issue the following: I RESOLVE REGULATIONS ON BANKING SUPERVISION FOR BANKS, NON-BANKING FINANCIAL INSTITUTIONS AND REPRESENTATIVE OFFICES. CHAPTER 1 ON THE SUPERINTENDENT Article 1: The Superintendent is appointed by the Executive Committee of the Council of Ministers at the proposal of the President of Banco Central de Cuba. Article 2: The Superintendent is responsible for the supervision of the financial institutions and the representative offices established in the country. In performing his functions, the Superintendent has full autonomy and freedom of action in relation to any official of the financial institutions or representative offices, except in respect of the President of Banco Central de Cuba, to whom he submits reports rendering account of his actions and of the irregularities detected and making the pertinent recommendations.
Article 3: The main function of the Superintendent is to watch that the financial institutions and representative offices comply with the laws, decree-laws, regulations, bylaws and other provisions of law ruling them and to perform the widest supervision over all their operations and business as well; for it, according to the Decree-Law No. 172 of May 28 th, 1997, he should: 1. Establish the rules required to fulfill the Basic Principles for an Effective Banking Supervision issued by the Basel Committee. 2. Qualify the financial institutions in conformity with the regulations and rules enacted. 3. Decide the increase of capital or reserves to warrant the solvency of the banks and non-banking financial institutions when he deems it correct and shall fix in a pertinent communication the dead line for the fulfillment. 4. Regulate and approve the information and accounting system for the financial institutions, taking into account the general principles and rules of the Ministry of Finance and Prices. 5. Order the disclosure of the financial statements of the banks and non-banking financial institutions and other reliable information that can help to the analysis of the real situation and its main trends. 6. Evaluate with prior notice or by surprise all the documentation of the primary information, registers, books and balances of the banks and non-banking financial institutions, ordering the withholding of the documents and other elements related with the violations of the rules established by Banco Central de Cuba. 7. Propose and properly apply the plans for streamlining the financial institutions. 8. Watch over the fulfillment of the legislations in force and the provisions of Banco Central de Cuba. 9. Implement and apply the regulations and rules issued by the President of Banco Central de Cuba. The Superintendent should also: 10. Issue reports to the President of Banco Central de Cuba on the situation of the banks and nonbanking financial institutions, and report to the Board of Directors those cases which importance makes it necessary to be known by such a level, together with a judgment and proposals of actions to be taken in each of the cases. 11. Participate in the process of granting licenses for banks and non-banking financial institutions to operate within the national territory, free zones and industrial parks.
12. Bring to the appropriate courts the charges for violation of the banking and financial rules established, ask for partial or total suspension of the licenses, and propose the appropriate fines or the prudential measures in conformity with the regulations in force. 13. Order -subject to authorization of the President of Banco Central de Cuba- the transitory, total or partial suspension or the close of the business of any financial institution for a maximum term that shall be submitted to periodical regulation by Banco Central de Cuba. 14. Apply the sanctions established in the Decree-Laws 172 and 173 of Banco Central de Cuba on Banks and Non-Banking Financial Institutions and other regulations in force for violations of their clauses committed by individuals and/or entities. 15. Enact the procedures required for the detection and prevention of illegal capital movements (money laundering). 16. Select, among the external auditors authorized by the Ministry of Finance and Prices, those who can certify the balance sheets of the financial institutions. 17. Watch that the external auditors fulfill the minimal requirements that, as far as the banking supervision is concerned, should be contained in the certifications of the financial statements of the financial institutions. 18. Establish the basic principles for the performance of the internal audits of banks and nonbanking financial institutions. 19. Coordinate with the Department of Legal Consultancy the legal steps required to establish the legal framework for banking supervision. 20. Cooperate, on a reciprocal basis, with the supervisory authorities, both from those countries where the main office of the foreign financial institutions established in Cuba is located and from those in which financial entities of the country are established, as well. 21. Carry out the special investigations asked for by the President of Banco Central de Cuba. Article 4: In order to carry out these activities the Superintendent shall be assisted by a Banking Supervision Committee, which has the purpose, among others, of evaluating the sound and steady development of banks and non-banking financial institutions, making timely relevant recommendations. Article 5: The Banking Supervision Committee shall keep a steadfast monitoring of the performance of the solvency and liquidity of each of the banks and non-banking financial institutions, in order to guarantee the individual financial soundness and to prevent the systemic risk of the same.
Article 6: The Banking Supervision Committee will perform the supervision through inspections to the banks, non-banking financial institutions and representative offices. CHAPTER II FUNCTIONS AND POWERS OF THE BANKING SUPERVISION COMMITTEE Article 7: The specific functions of the Banking Supervision Committee are the following: 1. To supervise the fulfillment of the regulations concerning monetary, credit, exchange and tax policies, as well as the procedures established by Banco Central de Cuba. 2. To supervise that all the required steps for the fulfillment of the rules and regulations set up regarding asset laundering are fulfilled by the banks and non-banking financial institutions. 3. To monitor that the financial institutions maintain a close surveillance on the risks derived from the credit operations according to the established rules for the rating of the credit portfolio, provisions and minimum reserve requirements. 4. To check that there is an effective control of risk spreading in the investment and credit portfolios. 5. To verify the fulfillment of what is regulated on interest rates, spreads, minimum capital and solvency ratios. 6. To examine prior notice or by surprise -with no limitations- the books, registers and other documents related with the operations of the banks and non-banking financial institutions subject to supervision, as well as the work documents and reports of both internal and external auditors. 7. To inform the Superintendent about those natural or legal persons who are performing activities of intermediation without prior authorization for it, proposing the measures that should be applied. 8. To propose the Superintendent the imposition of economic sanctions to the controlled banking and non-banking financial entities as well as to their executives and to those in managerial positions, if appropriate, according to the regulations in force. 9. To watch that the accounting standards and procedures are consistent with the general principles and standards established by the Ministry of Finance and Prices, as well as with the minimum plan of accounts established by Banco Central de Cuba.
10 To issue reports to the Superintendent on the situation of banks and non-banking financial institutions, together with a legal opinion and proposals of actions to be taken in each case. 11 To supervise the offshore banking centers established, as well as the operation of banks and non-banking financial institutions in free zones and industrial parks the operation of which in the national territory is authorized. 12. To keep updated the Manual of Procedures, the regulations, guidelines and other documents that shall govern the work of the inspectors in the performance of their functions. 13. To keep updated the Register of External Auditors for banks and non-banking financial institutions. 14. To verify the elaboration for periodic publication of the financial statements of banks and nonbanking financial institutions and other reliable information that serve for the purposes of analyzing the real situation and their main trends. 15. To collect, process and organize all the information that the financial institutions should periodically forward to the Risk Information Central Office of Banco Central de Cuba on: defaulting clients, clients who customarily break the principles of collection and payments, natural or legal persons who has been prosecuted for fraud, misappropriation, or any other kind of crime incompatible with the financial activities, cases of asset laundering and any other serious offenses and violations, and to disseminate such information on a periodical basis to the rest of the financial institutions of the country, the Organizations of the Central Administration of the State and other institutions requiring it. Article 8: The main powers of the Banking Supervision Committee are: 1. To have free access to the premises of the banking and non-banking financial institutions and the supervised agencies as well, only with the limitations of the due identification of the officials, of the working days and hours, and any other limitation justified by the special nature of the institution inspected, without prior notice. 2. To apply for and to examine, without any limitation, the financial statements, accounts and the operations or all kind of useful and necessary information from the inspected institutions for the performance of the supervising activity. 3. To take testimony from any person that can offer information in the investigations carried out by the supervisory authority.
CHAPTER III ON THE FORM AND FUNCTIONING OF SUPERVISION WORK Article 9: The supervision of the institutions shall be performed as follows: In situ: with the physical presence of the inspectors in the installations supervised, who shall perform their functions under the laws in force, based on the balance sheets, reports, statements, book entries, statistics, indexes, indicators, interviews and working documents, and reports of internal and external audits, to which they shall have unrestricted access. At a distance: through the periodic reception of the balance sheets and financial statements, as well as reports, indexes and indicators required in order to perform the various analyses. Article 10: For the purpose of getting to know the general performance and the financial situation of the banks and non-banking financial institutions, financial analyses that allow to measure their managerial efficiency and the risks inherent to this activity including credit, liquidity, interest rate, exchange rate, and operational risks, among others- shall be elaborated, according to the methodology established for such a purpose. Article 11: With the purpose of reflecting the financial situation of an institution in an integral and uniform fashion, a system of qualification is adopted which brings a general framework to evaluate and summarize all of the financial, operational and managerial factors, as well as the fulfillment of the rules and regulations that allow to perform the supervision task. Article 12: When the supervised institutions foresee a modification of its capital by their own decision, they shall give written notice to Banco Central de Cuba at least thirty (30) calendar days before such modification goes into effect, according to the provisions in Article 29 of Decree-Law No. 173 On Banks and non-banking financial institutions of May 28 th, 1997. Article 13: At the time of beginning the supervision, the inspector appointed as responsible should go before highest rank officer present at the institution to be inspected and give him a letter of presentation which identified the former as an official of the Banking Supervision Committee Article 14: To develop their work, the bank inspectors shall have access to all the ledgers and auxiliary ledgers, documents, vouchers, files and correspondence, irrespective of its class, and in general to any existing document in possession of the inspected institution, in order to determine at their judgment the veracity and correctness of all the assets, liabilities, nominal and contingency capital accounts, as well as any other items comprised in the inspection. Only the chief inspector shall be authorized to issue opinions during the inspection and to clarify with the official of the Institution inspected the subjects that he deems necessary.
Article 15: While performing their functions of inspection and supervision, the bank inspectors shall be subject to the responsibilities established by the regulations in force in relation to their actions. If the inspectors, in their actions as such, do not fulfill the provisions contained in these Regulations and that unreasonably delay the elaboration and delivery of the corresponding reports, they shall incur in the responsibilities enforced in conformity with of Banco Central de Cuba regulations in force. Those inspectors who omit the notification of the irregularities they detect in the inspections shall incur in the same responsibilities, irrespective of the other penalties that could be applied to them. Article 16: The work papers of the inspection (it shall be considered as such the documents, diskettes, and other means) shall be under the custody of the Bank Supervision Committee and only the officials and employees of the Committee and other duly authorized officials of Banco Central de Cuba can have access to them. Article 17: The bank inspectors and any other personnel that -due to their functions o by express authorization- have access to the reports related to banks and non-banking financial institutions, shall keep a very strict confidentiality about them because of the secret nature conferred to them by the law. Under no circumstances the participation of persons unconnected with the inspection is permitted, unless duly authorized. Article 18: The inspection report shall contain the entire outcome of the examination performed, it has a confidential nature and a copy of it shall be delivered to the inspected organization within the 30 natural days following the completion of such inspection. Likewise, a copy shall always be sent to the Head Office of the organizations inspected, and -in case they were located abroad- an additional copy shall be sent to it. Article 19: When the bank inspectors detect irregularities that could affect the stability or solvency of the inspected entities placing a risk upon the interests of their depositors and creditors, they should immediately inform Supervisor, who shall act as he deems convenient. Article 20: In cases of voluntary winding-up, intervention, reorganization and forced winding-up of a bank or a non-banking financial institution, the bank inspectors shall decide that the notices be posted in visible places at the offices and branches of the entity in liquidation and shall timely decide the means to be used to issue the public warning.
CHAPTER 1V ON DUTIES, OBLIGATIONS AND RIGHTS OF THE SUPERVISED ENTITIES Article 21: The banks and non-banking financial institutions shall provide the inspectors with all the information in their hands or of their officers, managerial personnel and employees which is directly or indirectly related to its operations. Article 22: The banks and non-banking financial institutions under supervision shall have the following duties in respect of the work of the bank inspectors: 1. To provide the necessary conditions for the inspectors to perform their job. 2. To allow the inspectors to perform any managerial activity aimed at fulfilling the purposes intended. Article 23: The banks and non-banking financial institutions established in the country shall provide the following information to the Superintendent of Banco Central de Cuba in the prescribed time. 1. Established financial statements with the periodicity defined. 2. Loan destination, loan portfolio classification. 3. Analysis of deposits. 4. Maturity distribution. 5. Interest rate development. 6. Foreign exchange positions. 7. Selected indicators. 8. Reserve Size and composition. 9. Other information required by the Banking Supervision Committee. Article 24: Every person who has or has had a position in the inspected entity shall be bound to render a declaration to the officers of the Banking Supervision Committee in the exercise of their supervisory functions.
Article 25: The banks and non-banking financial institutions under voluntary winding-up are bound to: 1. Present the reports requested on the progress of the actions undertaken with the periodicity determined by the Banking Supervision Committee. 2. Report to the Banking Supervision Committee in case its liquid assets were not enough to reimburse all depositors and creditors. Article 26: The banks and non-banking institutions under supervision shall have the obligation to contribute to finance the expenses of the Banking Supervision Committee according to the amounts and the way decided by Banco Central de Cuba. Article 27: The supervised entities shall submit the report on the inspection to the consideration of their appropriate top levels as soon as they receive it, and it shall communicate their acceptance or not of the indications contained in it within the not extendible term of thirty natural days counted as from the date of its receipt. In case of no acceptance, the supporting arguments shall be attached thereto. Article 28: As from the date of notification to the supervised entity of the modification or confirmation of the report, it shall be of binding fulfillment. Article 29: The entities under supervision shall have the following rights: 1. To ask for the approval of Banco Central de Cuba with respect to the participation of an external auditors firm in the certification of their financial statements. 2. To ask the bank inspectors to present the documents authorizing them to exercise the bank supervision. 3. To claim to the President of Banco Central de Cuba when in their opinion a procedure has been conducted in an irregular or disrespectful manner by the bank inspectors. 4. To claim to the President of Banco Central de Cuba in case of no agreement with the report resulting from the inspection undertaken or with the penalty proposed by the Superintendent. 5. To receive, from the Banking Supervision Committee, at the time of the temporary intervention, an inventory of all the assets and any other document reflecting the financial situation of the institution. 6. To receive from the Banking Supervision Committee, a document of delivery reflecting the financial situation at the time when the institutions are given back for their management and administration.
CHAPTER V VIOLATIONS AND PENALTIES Article 30: The banks and non-banking financial institutions shall be directly and unlimitedly responsible for the actions undertaken by their officials, officers and employees concerning the obligations imposed by the law, these regulations, and other legal provisions issued by Banco Central de Cuba, irrespective of the administrative or legal responsibilities in which they personally incur. FIRST SECTION VIOLATIONS Article 31: As to banks and non-banking financial institutions, the following are considered as violations: 1. To begin operations without being duly registered in the General Register of Banks and Nonbanking Financial institutions within the terms established in the license granted. 2. To make actions not stated in the granted license or which are not in line with the basic stipulations established in the aforementioned license. 3. To perform operations in the offshore banking center, free zones and industrial parks without a license. 4. To conduct operations in the offshore banking center, free zones and industrial parks, without the accounting and statistical operations being registered in that center. 5. To ignore the provisions established in the respective license and the provisions of Banco Central de Cuba in its advertising practices, as well as others enacted to regulate the functioning of banks and non-banking financial institutions. 6. To use in the business or corporate name any terminology that makes to believe that: a) The financial institution is acting on account of or in relation with the Cuban State or the Government of their provinces or municipalities. b) The financial institution carries out activities not authorized under the granted license. 7. To refuse to take payments in domestic currency when appropriate.
8. To break the exclusive powers of Banco Nacional de Cuba of issuing bills and coins in the national monetary system, as well as to forge national or foreign currencies. 9. To have been the object of measures that limit the financial institution or any of its shareholders in the exercise of activities of financial intermediation, for having incurred in violations of the legal provisions in force in other countries, provided that such a violation is inconsistent with the performance of the financial intermediation developed in Cuba. 10. To have been any of the shareholders or executives of the financial institution the object of legal actions for violations of laws prevailing in the country, provided that such violations damage the prestige and confidence of such financial institution and are considered inconsistent with the performance of the intermediation activity developed in Cuba by the financial institution. 11. To fail to comply with the provisions on the recruitment of Cuban personnel in the representative offices established in the country. 12. To invest in the capital of domestic or foreign banking entities or of other nature without the due authorization of Banco Central de Cuba. 13. To modify the capital of the financial institution without written notice to Banco Central de Cuba at least thirty (30) days before doing so. 14. To fix solvency ratios and to own resources different from those established in the corresponding regulation for banks and non-banking financial institutions. 15. To assign amounts below the minimum percentages fixed by Banco Central de Cuba for the constitution of their legal reserves for risks and future losses. 16. To declare, settle or pay dividends or distribute them partially or in whole before the repayment or the creation of provisions enough to face a possible loss of capital. 17. To declare or pay dividends if there are reasons to believe that it is or shall be incapable of facing its liabilities as they mature after the payment of such dividends. 18. To retain for more than a year -by its own or by an intermediary- real states and chattels acquired as a consequence of the liquidation of its loans, as from the publication of the Decree- Law No. 173 On Banks and non-banking Financial institutions of May 28 th 1997, except with the express authorization of Banco Central de Cuba for public convenience. 19. To use -in order to expand its credits- the rediscounts, advances, or funds received from Banco Central de Cuba for reasons of transitory illiquidity.
20. To cease maintaining written contracts which express clearly the terms and conditions of the transactions of all the credit operations that conform a warranty of the financial institutions. 21. That the granting financial institution lacks of the original of the contracts that it should keep and should be available when required by Banco Central de Cuba. 22. To contract entities of external auditors which are not among those accepted by Banco Central de Cuba and the Ministry of Finance and Prices to certify its financial statements. 23. To fail to fulfill the requirements established by Banco Central de Cuba for the presentation of the financial statements. 24. To surpass the limits of risk accumulation when granting credits. 25. To grant credits to natural or legal persons directly or indirectly linked to its property or management in terms which are more favorable than those granted to third parties in similar operations, except for specific programs in favor of the employees of the financial institution itself previously approved by Banco Central de Cuba. 26. To fail to comply with the standards in force concerning risk limits, investments, contingency reserve, adequate capital, minimum reserve, liquidity ratio, interest rates in national currency, fees, exchange operations, operations, or any other operations that limit the size or structure of certain active or passive operations. 27. To fail to comply with the provisions established by Banco Central de Cuba on the computation procedures regarding the determination of the positions of the minimum reserve requirements and the interest rates that should be paid in case of inadequacy as well. 28. To fail to comply with the provisions established by Banco Central de Cuba on the ratio of the minimum reserve requirement fixed by Banco Central de Cuba and its deposit with it, or to incur in a repeated deficit of the same. 29. To hinder the activities of inspection by refusing to give information, to deliver it beyond the dead line or not to allow the access of the supervisory authorities to it, even though a written request of the Superintendent or of Banco Central de Cuba mediates. 30. To hinder in any other way the activities of supervision of Banco Central de Cuba. 31. To adulterate the information they are bound to deliver to shareholders, savers, clientborrowers and public in general.
32. To fail to communicate to the General Board of Shareholders or the general Assembly those facts or circumstances whose communication have been ordered by the Superintendent of Banco Central de Cuba. 33. To fail to comply with the recommendations of binding fulfillment arising from the report elaborated by the Banking Supervision Committee. 34. To fail to fulfill the provisions established by Banco Central de Cuba regarding the financing of the supervisory expenses. 35. To break the provisions established on bank secrecy. 36. To fail to comply with the provisions established in the Resolution No. 91 of March 19 th, 1997 of the Minister-President of Banco Central de Cuba Guide for National Banking System Members to Detect and Prevent Illegal Capital Movements (Money Laundering). 37. Any other action or omission that fails to comply with the prescriptions established by Decree- Laws 172 and 173 of May 28 th, 1997 and other pertinent regulations. Article 32: Besides the prescriptions under the former Article, and excepting if expressly authorized by Banco Central de Cuba, non-banking financial institutions shall be forbidden to: 1. Receive deposits in current, savings and term accounts, as well as to perform in general those operations exclusively earmarked for banks by the law. 2. Place abroad, by means of credit, financing or investment operations, the resources obtained in the country. 3. Buy products, merchandise and goods that are not indispensable to its normal functioning. 4. Deliver in cash the amount for financing granted at short, medium or long terms. 5. Raise resources on account of third parties. 6. Perform purchase/sale operations directly in foreign exchange both in Cuba and abroad. SECOND SECTION PENALTIES Article 33: The financial institutions and representative offices that infringe what is set out in the Decree-Laws 172 On Banco Central de Cuba and 173 On Banks and non-banking Financial institutions, as well as the provisions prescribed by Banco Central de Cuba, can be penalized with
fines in conformity with the regulations in force, or be bound to suspend their activities temporarily or permanently. Article 34: Administrative sanctions according to the labor laws in force shall be applied to the officers, officials and employees of the financial institutions resulting responsible for the violations defined in Article 31, irrespective of the legal responsibilities stemming from said act. Article 35: The managerial and administrative personnel is exempted from responsibilities when they are members of an association of management, if they have not been present -for justified reasons- in the corresponding meetings, or if they have voted against or saved their vote in relation to the decisions or agreements that would have provoked the violations. Article 36: The Superintendent shall be in charge of making up the files and submit them to the competent courts in respect to a violation of the banking and financial standards, as well as to request a partial or total suspension of the licenses, and to propose the application of fines or precautionary measures applicable in conformity with the regulations in force. The application of penalties considered as of a serious nature, including that implying withdrawal of the due license, shall correspond to Banco Central de Cuba as proposed by the Banking Supervision Committee. Article 37: When, as a result of the application of such foreseen sanctions as the suspension or dismissal of the managing personnel of a financial institution, the necessity of ensuring the continuity of its administration and management arises, Banco Central de Cuba can order the temporary appointment of the members deemed necessary, assigning them their functions. CHAPTER VI ON THE RULES OF SURVEILLANCE FIRST SECTION SUBMISSION TO SURVEILLANCE RULES. CAUSES Article 38: Any financial institution can be submitted to the rules of surveillance if it incurring in any of the following situations: 1. To fail to comply with the obligations contained in the regulations concerning minimum capital required, and capital adequacy. 2. To diminish the capital of the financial institution under the minimum corporate capital required.
3. To grant credits to its own shareholders for covering the requirements of capital of the financial institution. 4. To fail to comply with the regulations of Banco Central de Cuba regarding the exchange control. 5. To fail to fulfill the adequate levels of profitability and efficiency in the management of the financial institution. 6. To fail to comply with the regulations of Banco Central de Cuba with respect to operations. 7. To fail to comply with the regulations of Banco Central de Cuba concerning legal reserves (minimum reserve requirements). 8. To fail to comply with the regulations of Banco Central de Cuba regarding reserves and provisions. 9. To need funds for reasons of transitory illiquidity provided its dead line is not over the sixty (60) days of the last three hundred and sixty (360) days. 10. To fail to comply with the regulations of Banco Central de Cuba by kind of risk. 11. To show a financial shortage for the fulfillment of its obligations with depositors and creditors. 12. To fail to take into account the regulations of Banco Central de Cuba as to monetary, credit and payment policy. REQUIREMENTS TO THE FINANCIAL INSTITUTION SUBMITTED TO SURVEILLANCE RULES Article 39: While under the surveillance rules, the competence and authority of the management of the financial institution are kept, without any other limitations than the ones resulting from this chapter. The financial institution submitted to the rules of surveillance should propose a plan of financial recovery that includes the measures that such institution deems adequate, within the seven (7) working days following the reception of the official note communicating such decision. The Superintendent shall approve or not the plan of recovery within the seven (7) working days following the receipt without impairment of its enforcing by the financial institution. Following its approval, an agreement formalizing the plan of recovery shall be signed.
The financial institution should have to demonstrate, with the periodicity set up in such agreement, an improvement in its situation. Article 40: The signed agreement of recovery which the preceding Article refers to, is informed to the Board of Directors of Banco Central de Cuba by the Superintendent, who reports each fifteen (15) days about its implementation or its eventual postponement. Article 41: The Superintendent shall submit to the Board of directors of Banco Central de Cuba the proposal of application of the system of surveillance in case of serious reasons that were not contemplated in Article 38. Article 42: The decision of submitting a financial institution to the rules of surveillance is made known officially and kept strictly in confidence, communicating it only to the Board of Directors of Banco Central de Cuba. SECOND SECTION DURATION Article 43: The period of surveillance is for one hundred and twenty (120) days, which can be extended only once for an equal period and only if, in spite of the efforts made and improvements obtained, the causes pointed out in Article 38 still remain. This extension is not applicable to the cases specified in 2) and 3) thereof. THIRD SECTION POWERS OF THE SUPERVISION COMMITTEE Article 44: During the period of surveillance, the Supervision Committee is empowered to: 1. Assess the capital of the financial institution and perform studies that allow the possibility of rehabilitation. 2. To require from de management of the financial institution additional works that guarantee the terms of the agreement if possible arrears are foreseen. 3. Any other measure that the Superintendent deems as necessary. Article 45: During the surveillance period, the Superintendent can appoint an official with the following powers: 1. To require all the information that he deems useful, specially on credit portfolio, current accounts, maturities, financial statements and others.
2. To attend as an observer to the sessions of Directors or the General Shareholders Meeting. Article 46: The following are consequences of the submission to the rules of surveillance and shall remain until surveillance is concluded. 1. The permanent inspection of the financial institutions by the Banking Supervision Committee according to what is set up in the Decree-Laws No. 172 On Banco Central de Cuba and 173 On Banks and Non-Banking Financial Institutions of May 28 th, 1997. 2. The institution cannot assume new risks or they should be limited to their coverage. SECTION IV ON THE TERMINATION OF THE SURVEILLANCE PERIOD Article 47: The Superintendent shall order the termination of the surveillance period once it is verified that: 1. The causes that provoked its submission to surveillance have disappeared. 2. The financial institution incur in any other cause that provokes its intervention or forced liquidation, as foreseen in the articles of the Decree-Law 172 On Banco Central de Cuba and the regulations dictated by the latter in this respect. CHAPTER VII ON THE VOLUNTARY LIQUIDATION, INTERVENTION AND COMPULSORY LIQUIDATION Article 48: In order to take action in case of voluntary liquidation, intervention, or compulsory liquidation, the Superintendent and the Banking Supervision Committee shall refer to the provisions in Chapter VII sections I, II and III of the Decree-Law 173 On Banks and Non-Banking Financial institutions. FINAL PROVISIONS First: To empower the Superintendent of Banco Central de Cuba to set up the proceedings and additional rules required for the better implementation of the provisions in these regulations. Second: To make the Superintendent of Banco Central de Cuba responsible for the control and fulfillment of the provisions of these regulations.
LET IT TO BE KNOWN: To the Vice-Presidents, the Superintendent, the Auditor, and the Directors of Banco Central de Cuba, to the Presidents of the banks and non-banking financial institutions located in the country and to as many natural and legal persons as may be appropriate. LET IT TO BE PUBLISHED: At the Official Gazette of the Republic of Cuba for general knowledge and let it to be filed at Banco Central de Cuba s Secretary s Office. Done in the City of Havana, on August 21 st, 1998.