## tarea2025029-print-pdf

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### Preface and mission
- IMF Monetary and Capital Markets Department (MCM) conducted a Financial Sector Stability Review (FSSR) mission from January 31 through February 13, 2024, at the request of the Bank of the Republic of Burundi (BRB).
- Mission leadership and participants:
  - Led by David Blache (MCM).
  - Included Sébastien Clanet (MCM), François Gomez, Peter Lohmus, and Martìn Saldìas (external experts).
  - Jocelyn Koussere (IMF African Department - AFR) participated as an observer.
  - Ivan Guerra (MCM) provided research on financial sector quantitative data.
- IMF Statistics Department (STA) provided technical assistance on monetary statistics and financial soundness indicators (FSI) from January 11 through 24, 2023 and supplied Appendix 3 on the FSIs.
- Mission objectives:
  - Diagnostic assessment of the financial system oversight framework.
  - Review progress in implementing TA recommendations of 2019–2024.
  - Develop a draft Technical Assistance Roadmap (TARM) to improve financial system stability by strengthening BRB capacity.
- Close-out meeting presented main comments and recommendations on February 12, 2024, chaired by Governor Edouard Bigendako.

### Executive summary — key findings and vulnerabilities
- Resilience and metrics:
  - Banking system showed resilience to shocks since 2015 (international sanctions after 2015; Covid-19 pandemic in 2020–2021; double-digit inflation in 2022 and 2023).
  - At end-2022, all banks except for two met total solvency requirements set at 14.5 percent (including a capital conservation buffer of +2.5 percent).
  - Banking system profitability: return on equity 29 percent; very low NPLs at 2.7 percent (end-2022).
  - No bank placed in resolution or liquidation over the past 10 years.
- Main macro-financial vulnerabilities:
  - Difficulty assessing credit quality after lending boom in 2021–2022; non-adherence to IFRS9 and BCBS credit risk rules.
  - Exchange rate depreciation risk.
  - Sovereign-banks nexus.
  - Asset and liability concentration (large exposures and deposit concentration).
- Institutional constraints:
  - High turnover of BRB staff, notably banking supervisors: 80 percent turnover in two years.
  - Extreme turnover cited as main reason for limited implementation of previous TA recommendations.
- Recommended TA sequencing (to account for staffing constraints):
  - Stage (i): initial training in fundamentals (in progress in 2023–2024).
  - Stage (ii): rebuilding banking supervision expertise.
  - Stage (iii): returning to key regulatory reforms.
- Supervision and regulatory priorities:
  - Fully embed the SEPREC rating system into supervision to confirm risk-based supervision.
  - Improve early warning indicators and early intervention processes.
  - Accurately estimate NPLs via assessment actions supported by specialized TA and continue heightened on-site inspections.
  - Adopt IFRS9 regulation and appoint specialized IFRS9 teams at BRB and in banks; limit authorized credit restructurings; align loan classification, provisioning, and restructuring with BCBS rules.
  - Strengthen prudential supervision of Payment Institutions (PIs) and modernize prudential regulation for PIs.
- Financial Safety Net (FSN) and crisis management:
  - Review banking law to assess scope for establishing a statutory special resolution regime (SRR) aligned with international standards and tailored to Burundi.
  - BRB acts de facto as resolution authority but lacks capacity and legal/operational framework for bank resolution.
  - DGRF regulation adopted December 2023; DGRF framework lacks operational independence and operating principles should be clarified.
- Stress testing:
  - Since 2017, BRB carries out annual top-down liquidity and credit risk stress tests and quarterly reverse credit risk stress tests using IMF simulation tool.
  - Current methodology should be updated to capture new vulnerabilities; formalize governance, integrate into systemic risk assessment and supervision, and embed a communication strategy.

### Selected priorities and recommended sequencing (summary)
- Immediate and high-priority actions (Priority and Timeframe preserved from source):
  - Identify causes of extreme turnover among banking expert staff and propose measures to reduce it. (Priority: H; Timeframe: ST)
  - Use on-site inspections to ensure reliability of NPL data (sampling approach, review of credit files, impact of credit restructurings). (Priority: H; Timeframe: IM)
  - Appoint specialized IFRS9 teams at BRB and in banks and adopt IFRS9 regulation without waiting for general chart of accounts amendment; limit credit restructurings and align prudential requirements with BCBS rules. (Priority: H; Timeframe: ST)
  - Operationalize risk-based supervision: incorporate rating in supervisory review process; strengthen qualitative reporting; draw up off-site supervision manual; update on-site inspection manuals; establish early warning and early intervention indicators; strengthen on-site inspection staffing. (Priority: H; Timeframe: ST/MT/LT)
  - Strengthen prudential supervision of PIs and modernize prudential regulation for PIs. (Priorities: H and M; Timeframes: ST and MT)
  - Adopt statutory SRR including missing elements for effective bank resolution and a resolution funding mechanism. (Priority: H; Timeframe: ST)
  - Require banks to prepare recovery plans. (Priority: H; Timeframe: MT)
  - Align ELA framework with international best practices. (Priority: H; Timeframe: MT)
  - Strengthen systemic risk analysis methodologies and primary data reliability; set up credit register; start National Financial Stability Coordination Committee. (Priorities: H; Timeframes: ST/MT)
  - Review and modernize stress testing methodology to address FX, sovereign, and concentration risks; strengthen BRB staff capacity and governance of stress testing. (Priorities: H; Timeframes: ST/MT)

### Macroeconomic background and financial infrastructure
- Major shocks over last 10 years: international sanctions after 2015; Covid-19 in 2020–2021; double-digit inflation in 2022 and 2023.
- Underdeveloped infrastructures:
  - No credit register in place.
  - No private bond market; stock exchange project just initiated.
  - Law on credit bureaus adopted but never promulgated.
  - Borrower identification complicated; digital banking identifier project underway.
- World Bank support on:
  - modern credit register;
  - support to establishment of a private-sector credit bureau;
  - register of movable collateral;
  - national payments strategy;
  - national AML/CFT risk assessment.

### Key macroeconomic indicators (selected, values preserved exactly)
- Nominal GDP (In millions USD) 1/: 3,086.4 (2020); 3,350.8 (2021); 3,917.4 (2022); 4,216.0 (2023, Proj.)
- Real GDP 1/: 0.3 (2020); 3.1 (2021); 1.8 (2022); 2.7 (2023, Proj.)
- CPI (period average): 7.3 (2020); 8.3 (2021); 18.9 (2022); 27.0 (2023, Proj.)
- Broad Money (M2): 25.4 (2020); 22.4 (2021); 36.1 (2022); 35.9 (2023, Proj.)
- Primary balance: -3.1 (2020); -4.7 (2021); -4.2 (2022); -7.0 (2023, Proj.)
- Overall balance: -6.0 (2020); -7.6 (2021); -7.0 (2022); -9.1 (2023, Proj.)
- Current account balance (incl. budget support): -9.7 (2020); -11.6 (2021); -16.2 (2022); -13.3 (2023, Proj.)

### Banking system structure and key metrics (end-2022 figures preserved)
- Total financial sector assets: 7,447,506 (in millions of Burundi francs - BIF).
- Deposit-taking institutions assets: 7,034,442; 49 organizations; 100.0% of deposit-taking institutions; 94.45% of the financial system.
- Banks: assets 6,132,206; 14 organizations; 87.2% of deposit-taking institutions; 82.3% of the financial system.
  - Banks under local control: 3,644,669; 9 organizations; 51.8% of deposit-taking institutions; 48.9% of the financial system.
  - Public sector: 549,676; 3 organizations; 7.8% of deposit-taking institutions; 7.4% of the financial system.
  - Banks under private control: 3,094,993; 6 organizations; 44.0% of deposit-taking institutions; 41.6% of the financial system.
  - Banks under foreign control: 2,487,537; 5 organizations; 35.4% of deposit-taking institutions; 33.4% of the financial system.
  - Islamic banks: 0; 0 organizations; 0.0% of deposit-taking institutions; 0.0% of the financial system.
- Microfinance institutions: assets 902,236; 35 organizations; 12.8% of deposit-taking institutions; 12.1% of the financial system.
- Non deposit-taking institutions: assets 413,065; 64 organizations; 5.5% of the financial system.
- Insurance companies: assets 267,339; 17 organizations; 3.6% of the financial system.
  - Life insurance: 35,712; 6 organizations; 0.5% of the financial system.
  - Non-life insurance: 74,396; 10 organizations; 1.0% of the financial system.
  - Mixed insurance companies: 157,231; 1 organization; 2.1% of the financial system.
- Other financial intermediaries (BNDE): 145,725; 1 organization; 2.0% of the financial system.
- Payment institutions: 0; 14 organizations; 0.0% of the financial system (14 licensed PIs, including 4 electronic money institutions).
- Market concentration:
  - Banks hold 82 percent of total financial assets; microfinance institutions hold 12.1 percent; insurance companies hold 3.6 percent.
  - Largest bank holds 25 percent of bank deposits; next four banks hold almost 50 percent.

### Banking system capitalization, credit boom, and credit quality
- Average banking system capital level: 19 percent (down from 23 percent at end-2021).
- Total capital requirement ratio: 14.5 percent (including capital conservation buffer of +2.5 percent).
- Increase in risk-weighted assets: 44 percent between end-2021 and end-2022.
- Lending level: 35.3 percent of GDP at end-2022, compared with 20.7 percent at end-2020.
- Credible mission findings:
  - deterioration in underwriting standards;
  - worsening of average credit quality, possibly not yet visible;
  - relaxation in banks’ assessment of credits refinanced by the BRB;
  - rise in disputes after BRB refusal to renew a large part of subsidized credits;
  - repeated restructuring (evergreening) allowed up to three restructurings without BRB validation.
- Extreme turnover among supervisory staff reduced on-site inspections and limited BRB capacity to check reliability of banks’ NPL practices and reports.

### Profitability, taxes, provisioning, and market environment
- Banking system return on equity: 29 percent.
- Profitability boosted by relatively low and falling provisioning of loans.
- New drains on profitability:
  - specific tax of 8 percent on banks since 2023 (in addition to corporate income tax of 30 percent);
  - deposit guarantee contributions from 2025 onward.
- BRB requires allocation of 65 percent of earnings to reserves before any dividend payments.
- Bank penetration: 17 percent.

### Liquidity, FX exposure, and regulatory metrics (preserve exact figures)
- LCR introduced in 2018; LCR in local currency met by all banks at end-2022; average ratio 170 percent.
- Average LCR in foreign currency 161 percent at end-2022; one systemic bank failed to meet the target.
- Interbank foreign exchange market started operations on May 4, 2023.
- Premium on the BIF/US$ parallel market: 61.6 percent at end-October 2023, compared with 42 percent on May 4, 2023.
- Nominal devaluation of 38 percent (timing tied to 2023 developments).
- Official reserves: 0.5 month of imports at end-September 2023.
- Banks reported significant losses in 2023 following the devaluation in the range of BIF 38 billion (compared to total profits of BIF 150 billion in 2022), concentrated on a few banks with short FX positions.

### Macrofinancial vulnerabilities (three main risks)
- (i) increased credit risk following rapid boom in lending in 2021–2022 with inadequate recognition of NPLs and lax underwriting and provisioning standards;
- (ii) FX risks;
- (iii) the sovereign-banks nexus.
- Amplifying factors: high concentrations of assets (large exposures) and liabilities (deposits); provisioning relatively low and falling; credit risk likely underestimated.

### Credit portfolio quality, NPL recording, and related recommendations
- NPL ratio: 2.7 percent at end-2022.
- NPL ratio fell from 2020 to 2022 while total credits rose by 117 percent.
- Regulatory loan restructuring facilities (three restructurings allowed; loan may return to “performing” after 90 days of meeting new obligations) likely explain low NPL ratio.
- Solvency and capital buffers:
  - Minimum solvency ratio: 12 percent.
  - Minimum CET1: 8.5 percent.
  - Capital conservation buffer: +2.5 percent; total capital requirement ratio: 14.5 percent.
  - Leverage ratio set at 5 percent; all credit institutions complying at end-2022.
  - At end-December 2023, two banks failed to meet the minimum total capital requirement.
- Minimum capital increases (Circular end-2023):
  - Minimum capital for banks increased from BIF 10 billion to BIF 50 billion (financial institutions from BIF 6 to BIF 30 billion).
  - Phased implementation for existing banks: BIF 30 billion at end-2025, BIF 40 billion at end-2027, and BIF 50 billion at end-2029.
  - As at end-2022: four banks had CET1 capital greater than BIF 50 billion; seven had less than BIF 30 billion; the single financial institution’s CET1 was below BIF 30 billion.
- Large exposures and depositor concentration:
  - At end-2022, seven banks had 17 exposures greater than 25 percent of their capital.
  - As of September 30, 2023, BRB had granted exemptions to six banks for 15 exposures (for one bank, a single exposure represents over 500 percent of CET1 capital).
  - The ten largest depositors supply nearly half or more of bank funding on average.
- Key recommendations on credit quality and supervision:
  - Produce an accurate estimate of NPLs, supported by specialized TA.
    - Swift on-site inspections in all banks to review credit portfolios, verify use of restructuring facilities and classification compliance.
    - Provide TA to DSS for mission preparation and monitoring (loan selection, guidance, feedback).
    - Consider external asset quality review by an independent third party.
  - Adopt IFRS9 circular once specialized IFRS9 teams are set up at BRB and banks; include prudential requirements aligned with BCBS rules.
  - Progress decisively toward risk-based supervision: fully integrate SEPREC, establish early intervention mechanism and recovery plans, strengthen on-site inspection capacity, update manuals and IT/operational risk guide, monitor liquidity beyond LCR, and resume key prudential regulatory reforms after rebuilding expertise.
  - Enforce large exposures regulation: make exemptions exceptional and time-limited; apply sanctions if normalization does not occur.

### Supervision, stress testing, systemic risk, and data quality
- Supervision:
  - SEPREC (Système d’Evaluation du Profil de Risque des Etablissements de Crédit) developed with AFC; first rating exercise covering all banks being finalized (end-January 2024: first completion of 15 SEPREC ratings). Status: ONG-Ongoing.
  - Of 26 officers allocated to Credit Institutions Division as at January 1, 2024, 16 have been in post for less than 2 years; only six of 26 in charge of on-site inspections.
  - IFRS9 not yet applied for classification and provisioning; current loan classification uses five categories with flat-rate provisioning.
- Stress testing diagnostics:
  - Since 2017: annual top-down credit and liquidity stress tests; quarterly reverse credit risk stress tests.
  - Stress tests do not cover market risk, interest rate risk, contagion, or operational risks; published stress tests do not cover FX risk.
  - Governance weak: FSS team of two experts owns exercises; limited documented procedures for sharing results; limited supervisory follow-up; dissemination limited.
  - Methodology relies entirely on IMF Stress Tester Tool; scenarios not sufficiently tailored; calibration not challenged; liquidity scenarios use IMF default run-off rates over a five-day horizon.
  - Withdrawal rates calibration referenced: demand deposits withdrawal rates 15 percent for domestic currency and 10 percent for foreign currency; term deposits 3 percent for domestic currency and 1 percent for foreign currency.
- Stress testing recommendations:
  - Upgrade top-down stress testing framework: establish governance with clear roles, integrate into systemic risk assessment and supervision, and embed communication strategy.
  - Methodology improvements: include exchange rate, sovereign, and concentration risks; adapt IMF Stress Tester Tool to Burundi specifics; consider multi-year scenarios.
  - Use and dissemination: ensure results inform supervisory dialogue, improve internal dissemination and involve supervisory teams and banks.

### Crisis management, SRR, ELA, and DGRF diagnostics and recommendations
- Crisis management and FSN diagnostics:
  - BRB de facto resolution authority but lacks capacity and supportive legal/operational framework; resolution tools in 2017 law lack enforceable statutory regime and activation processes.
  - Five banks under liquidation, some for more than 30 years.
  - DGRF regulation adopted December 2023:
    - Mandatory membership for all banks and deposit-taking MFIs.
    - Coverage for insured deposits up to BIF 3 million (US$ 1,000), covering about 76 percent of banking sector deposits per BRB.
    - DGRF fee 0.2 percent of eligible deposits, with 0.025 percent surcharge for institutions with high NPLs.
    - No impact studies conducted; fees considered manageable by banking sector.
- DGRF diagnostics:
  - No target size set for the DGRF; operating principles require clarification.
  - Regulation provides option of providing liquidity support before resolution is triggered; such use outside of resolution or liquidation is discouraged.
  - DGRF expected to become operational as a unit within the BRB in 2025; governance concerns due to committee composition including active bankers and BRB staff with no independent members.
  - Operational expenses covered by BRB until DGRF self-sustains.
- Crisis management and resolution recommendations (selected):
  - Review banking law to assess scope for establishing a statutory SRR aligned with FSB Key Attributes.
  - For failing or likely-to-fail banks, prioritize Purchase and Assumption (P&A) or liquidation; bridge bank as temporary option.
  - Operationalize P&A, bridge bank powers, and liquidation procedures; adopt bylaws for asset recoverability and write-offs.
  - Address conflicts of interest when BRB performs supervision, resolution, and ELA: keep functions operationally separate and adopt governance safeguards.
  - Require banks to draft recovery plans and progressively implement recovery planning within SRR.
  - Establish resolution funding mechanism to mobilize financial resources without defaulting to budgetary funds; rule out use of BRB funds in resolution except limited temporary liquidity in well-defined cases.
  - Establish inter-institutional crisis coordination committee chaired by BRB Governor.
  - Develop ELA guidance covering preconditions, indicative terms, collateral requirements, parent bank asset pledges, and disclosure of ELA.
  - Note: Providing ELA in FX will be a significant challenge given very low official FX reserves and signaling effects.

### Systemic risk identification, assessment, mitigation, and data improvements
- Institutional arrangements:
  - Two dedicated committees (Technical Financial Stability committee and Internal Financial Stability Committee) meet quarterly.
  - National Financial Stability Coordination Committee project remains on hold.
- Gaps and challenges:
  - Key risks (FX risk, sovereign risk) not sufficiently covered; links between risk identification, indicators, and stress tests lack consistent formal framework.
  - Missing coverage of maturity mismatch, interbank contagion, and concentration risks.
  - Data quality issues: delayed insurance data, partial microfinance coverage, lack of pension fund data; central bank accounting issues due to new accounting software in 2022.
- Recommendations:
  - Increase staff allocation to systemic risk analysis and deepen expertise.
  - Strengthen systemic risk analysis framework: link each risk to relevant indicators with thresholds; improve consistency between risks and stress tests.
  - Produce a “Financial Stability Dashboard” for internal dissemination and top management discussion.
  - Strengthen verification of accounting, financial, and risk-related information via on-site inspections.
  - Resume FSIs compilation with STA and automate calculation using primary bank data.

### Financial Soundness Indicators (FSIs) and Monetary and Financial Statistics (MFS)
- FSIs:
  - Burundi stopped disseminating FSIs in 2019.
  - With STA assistance, BRB developed 12 core FSIs and nine additional ones for the banking sector using 2006 Guide methodology; upgrading to 2019 FSI Guide underway.
  - STA conducted missions in January and November 2023 to initiate upgrade.
  - Key data quality recommendations: reassess fixed assets revaluation; strengthen review of cross holdings and Tier 1 deductions; update list of instruments eligible for liquidity indicators.
  - New bridge tables and automated compilation system in development.
  - Expected completion and dissemination timelines: compilation work expected to be completed by mid-2025; BRB plans to resume regular dissemination of FSIs by end-December 2025.
- MFS:
  - BRB reports monthly using SRF forms (SRF 1SR, SRF 2SR, SRF 4SR) broadly consistent with MFSMCG 2016.
  - Institutional coverage: 14 commercial banks and 29 deposit taking MFIs in SRF 2SR; banks hold about 87 percent of ODCs’ assets; deposit taking MFIs 13 percent.
  - Electronic money constitutes approximately 3 percent of broad money.
  - Major shortcoming: incomplete central bank account information due to new accounting software; manual reconstruction increased risk of human errors.
  - With STA assistance, BRB developing new bridge tables and automating MFS compilation.

### Technical Assistance Roadmap (TARM), capacity building, and Appendix 1 priorities
- Purpose: Link diagnostic assessment with strategic reforms over a specified time horizon (three years).
- IMF to work with authorities and other TA providers to implement TARM and monitor reforms.
- Appendix 1 selected actionable items (priorities and time horizons preserved):
  - A. Supervision and Regulation:
    - No.1: Improve accounting and provisioning procedures; TA to support on-site inspection missions. Priority: H. Time Horizon: IM.
    - No.2: Training of BRB IFRS9 team; review draft IFRS9 regulation; strengthen prudential requirements aligned with BCBS. Priority: H. Time Horizon: ST.
    - No.3: Establish risk-based supervision; finalize qualitative reporting; integrate bank rating; implement early warning indicators. Priority: H. Time Horizon: ST.
    - No.4–9: Off-site supervision procedures, IT/cybersecurity regulation, update on-site manuals, related parties regulation, supervision of problem banks, update prudential regulations. Priorities: H/MH; Time Horizons: MT/LT.
  - A. Nonbank Sector - payment services:
    - No.10: Strengthen prudential supervision of PIs; training and dashboard. Priority: H. Time Horizon: ST.
    - No.11: Assist with preparation of prudential regulation on PIs. Priority: MH. Time Horizon: MT.
  - B. Crisis Management and FSN:
    - No.1: Develop/strengthen SRR; review Banking Law with IMF LEG. Priority: H. Time Horizon: ST.
    - No.2: Align ELA framework with international best practices. Priority: H. Time Horizon: ST.
    - No.3–4: Draft preventive recovery plans and operationalize resolution planning and funding options. Priority: H. Time Horizon: MT.
  - C. Systemic Risk:
    - No.1: Develop systemic risk monitoring systems and tools; training. Priority: H. Time Horizon: ST.
    - No.2: Roadmap linking systemic risks with indicators and macrofinancial connections. Priority: H. Time Horizon: ST.
    - No.3–4: Financial stability dashboard; strengthen communication of FSR content. Priority: MH/M. Time Horizon: MT.
  - D. Bank Stress Tests:
    - No.1: Review methodology to include exchange rate, sovereign, and concentration risks. Priority: H. Time Horizon: ST.
    - No.2: Build BRB staff capacities to operate and extend stress test framework. Priority: H. Time Horizon: ST.
    - No.3: Modernize top-down stress test governance and integration with supervision. Priority: H. Time Horizon: MT.
- Time Horizon definitions preserved:
  - IM: < 6 months; ST: < 12 months; MT: 12 to 24 months; LT: 24 to 48 months.
- Priority legend preserved as shown in source.

### On-site inspection methodology, IRRBB, and IFRS9 implementation highlights
- On-site credit risk inspection:
  - Need to complete credit portfolio sampling with TA; use analytical tables and structured reporting plans; formalize assessments where weaknesses observed.
- IRRBB regulation adoption and implementation (recommendations preserved):
  - Multiple operational steps recommended: pilot tests with two or three banks, adapt draft circular, publish text, introduce reporting into BRB system, train teams, establish quality control. Timeframe: MT. Implementation status: ONG-Ongoing.
- IFRS9 monitoring and implementation:
  - Actions include sharing drafts of Circulars and chart of accounts, setting up Joint Technical Committee, establishing IFRS9 team with Project Manager, formalizing strategic IFRS9 plan, verifying dedicated teams in banks, organizing seminars, requiring action plans from banks, training BRB supervisors, and conducting IFRS9 impact study. Timeframes: ST/MT/LT. Implementation statuses: ONG-Ongoing.

*IMF Technical Assistance Report | Preface*

### Preface ................................................................................................................

### tarea2025029-print-pdf - Preface

### Preface
- IMF Monetary and Capital Markets Department (MCM) conducted a Financial Sector Stability Review (FSSR) mission from January 31 through February 13, 2024, at the request of the Bank of the Republic of Burundi (BRB).
- Mission leadership and participants:
  - Led by David Blache (MCM).
  - Included Sébastien Clanet (MCM), François Gomez, Peter Lohmus, and Martìn Saldìas (external experts).
  - Jocelyn Koussere (IMF African Department - AFR) participated as an observer.
  - Ivan Guerra (MCM) provided research on financial sector quantitative data.
- IMF Statistics Department (STA) provided technical assistance on monetary statistics and financial soundness indicators (FSI) from January 11 through 24, 2023 and supplied Appendix 3 on the FSIs.
- Mission objectives:
  - Performed a diagnostic assessment of the financial system oversight framework.
  - Reviewed progress in implementing technical assistance (TA) recommendations of 2019–2024.
  - Developed a draft Technical Assistance Roadmap (TARM) to improve financial system stability by strengthening BRB capacity.
- Mission presented main comments and recommendations at a close-out meeting on February 12, 2024, chaired by Governor Edouard Bigendako.
- Acknowledgements to BRB staff, notably the Directorate of Supervision and Financial Stability (DSS) and the Directorate of Economic Research, Statistics, and Cooperation (DES); and to IMF representative office team members Belyse Kwizera, Dieudonné Nyunguka, Eliane Nkengurutse, and Sydney Munezero.

### Executive Summary — Key findings and vulnerabilities
- Resilience and metrics:
  - Banking system showed resilience to shocks since 2015: international sanctions after 2015, Covid-19 pandemic in 2020–2021, and double-digit inflation in 2022 and 2023.
  - At end-2022, all banks except for two met total solvency requirements set at 14.5 percent (including a capital conservation buffer of +2.5 percent).
  - Banking system is very profitable and shows a very low level of nonperforming loans (NPLs) of 2.7 percent.
  - No bank placed in resolution or liquidation over the past 10 years.
- Main macro-financial vulnerabilities identified:
  - Difficulty of assessing credit quality following the boom in lending in 2021–2022, worsened by non-adherence to IFRS9 and BCBS credit risk rules.
  - Risk related to exchange rate depreciation.
  - Sovereign-banks nexus.
  - Asset and liability concentration (large exposures and deposit concentration) requiring stricter prudential application and consideration in supervision and stress tests.
- Recommended TA sequencing (to account for BRB staffing constraints):
  - Stage (i): initial training in fundamentals (in progress in 2023–2024).
  - Stage (ii): rebuilding banking supervision expertise.
  - Stage (iii): returning to key regulatory reforms.
- Key institutional challenge:
  - High turnover of BRB staff, notably banking supervisors: 80 percent turnover in two years.
  - Extreme turnover at all levels cited as main reason for limited implementation of previous TA recommendations.
- Supervision and regulatory priorities:
  - DSS has progressed on regulatory and supervisory tools since 2009 FSAP; next step is fully embedding the rating system into supervision to confirm risk-based supervision.
  - Improve early warning indicators and early intervention processes.
  - Accurately estimate NPLs via assessment actions supported by specialized TA and continue heightened on-site inspections.
  - Adopt IFRS9 regulation and appoint specialized IFRS9 teams at BRB and in banks; limit authorized credit restructurings; align loan classification, provisioning, and restructuring with BCBS rules.
  - After strengthening expertise, update prudential regulations and prepare regulation/circular for related parties; longer-term actions on operational risk and cyber/IT risk control.
- Digital financial services and payment institutions (PIs):
  - DSP (Directorate of Payment Systems) set up in 2023 and supervises PIs, competing with telecoms authority.
  - PIs, including electronic money institutions (EMI), need appropriate prudential regulation and strengthened supervision.
- Financial Safety Net (FSN) and crisis management:
  - Review banking law to assess scope for establishing a statutory special resolution regime (SRR) aligned with international standards and tailored to Burundi.
  - BRB acts de facto as resolution authority but lacks capacity and legal/operational framework for bank resolution.
  - Introduce recovery planning into SRR and implement stepwise across banks.
  - BRB has legislative powers for emergency liquidity assistance (ELA) but would benefit from a more comprehensive framework.
  - DGRF regulation adopted December 2023; DGRF framework lacks operational independence—operational principles should be clarified and establishment of deposit guarantee system should accompany supervisory improvements.
- Systemic risk analysis:
  - BRB has progressed but should: strengthen systemic risk analysis team; improve coverage via comprehensive risk mapping; focus on major risks; collect semiannual analysis results in a financial stability dashboard.
  - STA provided an Assessment of Financial Sector Statistics in Appendix 3.
- Stress testing:
  - Since 2017, BRB carries out annual top-down liquidity and credit risk stress tests and quarterly reverse credit risk stress tests using IMF simulation tool.
  - Current methodology should be updated to capture new vulnerabilities.
  - BRB should formalize a framework prioritizing: (i) governance with clear roles for top management, DSS, and stakeholders; (ii) effective integration of stress tests into systemic risk assessment and supervision; (iii) a communication strategy embedded in financial stability communication policy.

### Recommendations — Selected priorities (summary drawn from Table 1)
- Immediate and high-priority actions:
  - Identify causes of extreme turnover among banking expert staff and propose measures to reduce it. (Priority: H; Timeframe: ST)
  - Use on-site inspections to ensure reliability of NPL data (sampling approach, review of credit files, impact of credit restructurings). (Priority: H; Timeframe: IM)
  - Appoint specialized IFRS9 teams at BRB and in banks and adopt IFRS9 regulation without waiting for general chart of accounts amendment; limit credit restructurings and align prudential requirements with BCBS rules. (Priority: H; Timeframe: ST)
  - Operationalize risk-based supervision: incorporate rating in supervisory review process; strengthen qualitative reporting; draw up off-site supervision manual; update on-site inspection manuals; establish early warning and early intervention indicators; strengthen on-site inspection staffing. (Priority: H; Timeframe: ST/MT/LT)
  - Strengthen prudential supervision of PIs and modernize prudential regulation for PIs. (Priorities: H and M; Timeframes: ST and MT)
  - Adopt statutory SRR including missing elements for effective bank resolution and a resolution funding mechanism. (Priority: H; Timeframe: ST)
  - Require banks to prepare recovery plans. (Priority: H; Timeframe: MT)
  - Align ELA framework with international best practices. (Priority: H; Timeframe: MT)
  - Strengthen systemic risk analysis methodologies and primary data reliability; set up credit register; start National Financial Stability Coordination Committee. (Priorities: H; Timeframes: ST/MT)
  - Review and modernize stress testing methodology to address FX, sovereign, and concentration risks; strengthen BRB staff capacity and governance of stress testing. (Priorities: H; Timeframes: ST/MT)

### Introduction — Scope and financial system structure (selected facts and figures)
- FSSR scope:
  - Mission dates: January 31 through February 13, 2024.
  - Areas covered: (i) financial sector regulation and supervision; (ii) crisis management and the financial safety net; (iii) systemic risk; (iv) bank stress tests.
  - Diagnostic guided by international standards and best practice; relied on BRB official documents (Annual report on supervision of financial institutions 2021 and 2022; Annual financial stability report 2021 and 2022; Regulations/circulars on BRB website).
- Structure of the financial system (at end-2022):
  - Total financial sector assets: 7,447,506 (in millions of Burundi francs - BIF).
  - Deposit-taking institutions assets: 7,034,442; 49 organizations; 100.0% of deposit-taking institutions; 94.45% of the financial system.
  - Banks: assets 6,132,206; 14 organizations; 87.2% of deposit-taking institutions; 82.3% of the financial system.
    - Banks under local control: 3,644,669; 9 organizations; 51.8% of deposit-taking institutions; 48.9% of the financial system.
    - Public sector: 549,676; 3 organizations; 7.8% of deposit-taking institutions; 7.4% of the financial system.
    - Banks under private control: 3,094,993; 6 organizations; 44.0% of deposit-taking institutions; 41.6% of the financial system.
    - Banks under foreign control: 2,487,537; 5 organizations; 35.4% of deposit-taking institutions; 33.4% of the financial system.
    - Islamic banks: 0; 0 organizations; 0.0% of deposit-taking institutions; 0.0% of the financial system.
  - Microfinance institutions: assets 902,236; 35 organizations; 12.8% of deposit-taking institutions; 12.1% of the financial system. (Only some MFIs submit data to the BRB (35 in Table 2).)
  - Non deposit-taking institutions: assets 413,065; 64 organizations; 5.5% of the financial system.
  - Insurance companies: assets 267,339; 17 organizations; 3.6% of the financial system.
    - Life insurance: 35,712; 6 organizations; 0.5% of the financial system.
    - Non-life insurance: 74,396; 10 organizations; 1.0% of the financial system.
    - Mixed insurance companies: 157,231; 1 organization; 2.1% of the financial system.
  - Other financial intermediaries (BNDE): 145,725; 1 organization; 2.0% of the financial system.
  - Payment institutions: 0; 14 organizations; 0.0% of the financial system (PIs are growing, with 14 licensed PIs, including 4 electronic money institutions).
  - Banks hold 82 percent of total financial assets, microfinance institutions hold 12.1 percent, insurance companies hold 3.6 percent.
  - Largest bank holds 25 percent of bank deposits; next four banks hold almost 50 percent.
  - Banque Nationale de Développement Economique (BNDE) only receives deposits with a maturity of over 1 year, which must be used to finance development.
  - Banking law authorizes Régie Nationale des Postes to carry out banking intermediation (total deposits US$9 million) subject to forthcoming regulation; Régie Nationale des Postes not included in BRB datasets.
- Methodological notes:
  - Evaluation of banking supervision guided by “Basel Core Principles for Effective Banking Supervision” (BCBS, 2012).
  - Stress testing assessed using IMF standard analytical framework and tools.
  - Crisis management and FSN evaluated against “Key Attributes of Effective Resolution Regimes for Financial Institutions” (FSB, 2011) and “Core Principles of Effective Deposit Insurance Systems” (IADI, 2014).
  - Financial stability surveillance assessment informed by IMF staff guidance note on macroprudential policy in low-income countries (IMF, 2014).
- Ancillary note:
  - FSAP recommendations of 2009 are described as obsolete.

*IMF Technical Assistance Report | Preface*

### 6. The Burundi banking system operates in a difficult macroeconomic background with

### 6. The Burundi banking system operates in a difficult macroeconomic background with underdeveloped banking and financial infrastructures

### Macroeconomic background and financial infrastructure
- Economy subject to major shocks over the last 10 years: international sanctions after 2015; Covid-19 pandemic in 2020–2021; double-digit inflation in 2022 and 2023.
- Financial infrastructures underdeveloped:
  - No credit register in place.
  - No private bond market.
  - Stock exchange project just initiated.
  - A law on credit bureaus was adopted but has never been promulgated.
  - Identification of borrowers is complicated (a digital banking identifier project is underway).
- World Bank support currently on:
  - modern credit register;
  - support to establishment of a private-sector credit bureau;
  - implementation of a register of movable collateral;
  - developing a national payments strategy;
  - assistance for a national risk assessment with regard to international AML/CFT standards.

### Key macroeconomic indicators (selected)
- Nominal GDP (In millions USD) 1/: 3,086.4 (2020); 3,350.8 (2021); 3,917.4 (2022); 4,216.0 (2023, Proj.)
- Real GDP 1/: 0.3 (2020); 3.1 (2021); 1.8 (2022); 2.7 (2023, Proj.)
- CPI (period average): 7.3 (2020); 8.3 (2021); 18.9 (2022); 27.0 (2023, Proj.)
- Broad Money (M2): 25.4 (2020); 22.4 (2021); 36.1 (2022); 35.9 (2023, Proj.)
- Primary balance: -3.1 (2020); -4.7 (2021); -4.2 (2022); -7.0 (2023, Proj.)
- Overall balance: -6.0 (2020); -7.6 (2021); -7.0 (2022); -9.1 (2023, Proj.)
- Current account balance (incl. budget support): -9.7 (2020); -11.6 (2021); -16.2 (2022); -13.3 (2023, Proj.)

### Banking system capitalization, credit boom, and credit quality
- Average banking system capital level: 19 percent (down from 23 percent at end-2021).
- Total capital requirement ratio: 14.5 percent (including capital conservation buffer of +2.5 percent).
- Increase in risk-weighted assets: 44 percent between end-2021 and end-2022.
- Lending level: 35.3 percent of GDP at end-2022, compared with 20.7 percent at end-2020.
- Contributing policy: BRB special refinancing of bank credits to the “priority sectors.”
- Credible information obtained by the mission indicates:
  - deterioration in underwriting standards;
  - worsening of average credit quality, possibly not yet visible;
  - relaxation in banks’ assessment of credits refinanced by the BRB;
  - rise in disputes between borrowers and banks after BRB refusal to renew a large part of subsidized credits;
  - repeated restructuring (evergreening) encouraged by regulations allowing banks to restructure a credit up to three times without validation by the BRB.
- Extreme turnover among supervisory staff reduced on-site inspections and limited BRB capacity to check reliability of banks’ NPL practices and reports.

### Profitability, taxes, and provisioning
- Banking system return on equity: 29 percent.
- Profitability boosted by relatively low and falling provisioning of loans.
- New drains on profitability:
  - specific tax of 8 percent on banks since 2023 (in addition to corporate income tax of 30 percent);
  - deposit guarantee contributions from 2025 onward.
- BRB requires allocation of 65 percent of earnings to reserves before any dividend payments.

### Business environment and market structure
- Difficult business environment with uncertain application of the rule of law for enforcement of contracts and sale of collateral increases operating costs and cost of risk.
- Lack of economic diversification limits risk diversification.
- Very low rate of bank penetration: 17 percent, limiting potential demand and economies of scale for banks.

### Liquidity, FX exposure, and regulatory metrics
- Aggregate liquidity ratio masks large differences among banks; one systemic bank breached FX liquidity requirements.
- Foreign currency loans restricted due to capital controls (about 10 percent of total bank loans).
- BRB adopted the liquidity coverage ratio (LCR) in 2018; LCR easily met in local currency due to very high exposure of banks to sovereign debt.
- Interbank foreign exchange market started operations on May 4, 2023, but transactions remain small.
- Premium on the BIF/US$ parallel market: 61.6 percent at end-October 2023, compared with 42 percent on May 4, 2023.
- Nominal devaluation of 38 percent (timing tied to 2023 developments).
- Official reserves: 0.5 month of imports at end-September 2023.
- Banks reported significant losses in 2023 following the devaluation in the range of BIF 38 billion (compared to total profits of BIF 150 billion in 2022), concentrated on a few banks with short FX positions.
- Full impact of the devaluation pending assessment once 2023 audited accounts are issued.

### Macrofinancial vulnerabilities identified
- Three main vulnerabilities:
  - (i) increased credit risk following rapid boom in lending in 2021–2022 with inadequate recognition of NPLs and lax underwriting and provisioning standards;
  - (ii) FX risks;
  - (iii) the sovereign-banks nexus.
- These risks are amplified by high concentrations of assets (large exposures) and liabilities (deposits), not properly monitored and controlled.
- Rapid credit expansion raises financial stability concerns; provisioning of NPLs is relatively low and falling and credit risk likely underestimated.

### Supervision, stress testing, and governance recommendations
- Supervision of credit risk must be reinforced; ongoing on-site credit risk inspection campaign should be accompanied by:
  - stricter recognition of credit risk in line with IFRS9 and BCBS standards;
  - adequate provisioning;
  - other measures to mitigate risks to institutions and financial stability.
- BRB’s tools and internal governance for assessing FX exposure impacts should be improved:
  - BRB currently uses LCR in FX and market risk measures;
  - work started on FX stress tests but published stress tests do not cover FX risk;
  - pre-May 2023 BRB estimates did not expect major effects from a devaluation; departments produced FX assessments without sufficient communication.
- Mission proposes measures (in Part II) to improve consistency between systemic risks identified and associated stress tests.

### Sovereign-bank nexus, public debt exposure, and market development
- Commercial banks hold one third of total public debt, representing 22.8 percent of GDP (end-2022).
- BRB holds another third (22.3 percent of GDP); nonresidents hold 19.9 percent of GDP.
- Public debt estimated at 67.9 percent of GDP at end-2022.
- BRB created a secondary market for public debt in 2018 and a central securities depository (maturities of 13 weeks to 10 years); total of 270 investors in debt securities.
- Banks may pledge public debt instruments to receive liquidity from the BRB via standing facilities.
- Recommendations and considerations:
  - Improve data quality on banks’ holdings of government debt; consider obligation for banks to publish sovereign exposures.
  - Expand bank stress tests to include risks linked to significant sovereign exposures and various channels of impact.
  - Consider measures to reduce incentives to excessive holdings of public debt when macroeconomic stability is restored, including capital surcharges on bank holdings of domestic sovereign bonds above thresholds.
  - Use risk-based supervision (“Pillar 2”) to impose individual requirements if a bank’s business model is overly dependent on sovereign exposures.
  - Broaden investor base to strengthen market resilience: diversify to nonbanks and institutional investors to improve risk spread and extend the yield curve, reducing the sovereign-bank nexus.

### Public sector banks and governance
- Effective governance, regulation, and supervision necessary to ensure public banks are safe while achieving public policy objectives.
- Avoid regulatory differences between public sector banks and private shareholder banks; mission found no regulatory discrimination among Burundi banks.
- A Governance Diagnostic assessment to be carried out by Fund staff in 2024 covering state ownership and governance aspects in the financial system.

### Technical assistance (TA) progress, constraints, and sequencing
- Progress in implementing TA recommendations on financial stability has been low.
- Causes:
  - Very high turnover of BRB staff: 80 percent turnover of bank supervisors in two years.
  - Frequent changes in top management: three different governors between 2022 and 2024.
  - All managers of the DSS changed in 2022 after appointment of the governor.
- Consequences:
  - Weak implementation of TA recommendations from 2019 onward.
  - Example: individual rating of banks only put in place in January 2024—and only partially—despite TA since 2019.
  - Significant portion of TA activities consisted of training BRB staff.
- Suggested TA sequencing (three stages):
  - (i) initial training in fundamentals (in progress with AFC in 2023–2024);
  - (ii) rebuilding banking supervision expertise;
  - (iii) returning to key regulatory reforms.
- AFC-supported 2018 package: 14 regulations adopted following the 2017 banking law; subsequent turnover undermined implementation.

### Diagnostics of supervision and regulation
- 2017 banking law upgraded the regulatory framework; main BRB circulars updated in 2018, bringing framework closer to Basel III.
- Gaps persist in areas of capital, credit categories, and bank governance despite prior AFC TA recommendations.
- Implementation of risk-based supervision delayed by staff turnover:
  - Of 26 officers allocated to the Credit Institutions Division as at January 1, 2024, 16 have been in post for less than 2 years.
  - Only six officers out of 26 are in charge of on-site inspections.
- BRB has basic tools for risk-based supervision:
  - SEPREC (Système d’Evaluation du Profil de Risque des Etablissements de Crédit) developed with AFC; first rating exercise covering all banks being finalized.
  - Shortcomings: annual internal control report template does not include Circular 23/2018 risk management developments; AFC 2019 suggestions not considered; reports lack information for SEPREC questionnaires leading to many “Do not know the answer” responses.
  - SEPREC not automatically fed with data from Bank Supervision Application (BSA) and does not incorporate AML/CFT requirements (regulation of March 2023).
- IFRS9 not yet applied for classification and provisioning of loans:
  - Current loan classification: five categories with minimum flat-rate provisioning (from 1 percent for performing loans after deduction of collateral to 100 percent for impaired loans overdue more than one year).
  - AFC TA missions in 2020–2022 prepared an update of Circular 12 to align with IFRS9 and BCBS rules on loan classification, provisioning, and restructuring; not yet implemented.

*IMF Technical Assistance Report — selected excerpts from Chapter 6*

### 27. The assessment of credit portfolio quality is undermined by weaknesses in the

### tarea2025029-print-pdf - 27. The assessment of credit portfolio quality is undermined by weaknesses in the

### Credit portfolio quality and NPL recording
- The NPL ratio is extremely low: 2.7 percent at end-2022.
- The NPL ratio fell from 2020 to 2022 while total credits rose by 117 percent.
- The improvement may be temporary: credits granted in 2021 and 2022 are likely to generate significant past due amounts once they mature.
- Regulatory loan restructuring facilities likely explain the low NPL ratio: three restructurings are allowed for each loan and the loan may be returned to “performing” status after only 90 days of meeting the new obligations.

### Solvency, capital buffers, and leverage
- Minimum solvency ratio: 12 percent.
- Minimum “Common Equity Tier 1 ratio” (CET1): 8.5 percent.
- Banks are not authorized to use internal models; credit risk-weighted assets calculation largely follows Basel I standards.
- Market risk (FX) and operational risk (Basic Indicator Approach) are multiplied by 8.33 for inclusion in the denominator, not by 12.5.
- Capital conservation buffer activated: +2.5 percent, bringing total capital requirement ratio to 14.5 percent.
- At end-December 2023, two banks failed to meet this minimum.
- Leverage ratio set at 5 percent; all credit institutions were complying at end-2022.
- BRB applied BCBS methodology to classify systemic importance: five banks major systemic importance and five medium, but did not communicate classification or impose additional capital requirements.

### Minimum capital increases and transition timelines
- Circular end-2023 increased banks’ minimum capital from BIF 10 billion to BIF 50 billion (financial institutions from BIF 6 to BIF 30 billion).
- Phased implementation for existing banks: BIF 30 billion at end-2025, BIF 40 billion at end-2027, and BIF 50 billion at end-2029.
- As at end-2022: four banks had CET1 capital greater than BIF 50 billion; seven had less than BIF 30 billion; the single financial institution’s CET1 was below BIF 30 billion.
- Considerations when increasing minimum capital: staggered phase for small profitable banks (three to five years); same amounts for larger banks; need for credible bank resolution framework; minimum capital is not a substitute for effective supervision and solvency requirements.
- Undercapitalized institutions should submit credible capital restoration plans; DSS should monitor execution periodically.

### Large exposures and depositor concentration
- Large exposure regime follows BCBS quantitative requirements but not exemptions; BRB grants wide exemptions regularly.
- At end-2022, seven banks had 17 exposures greater than 25 percent of their capital.
- As of September 30, 2023, BRB had granted exemptions to six banks for 15 exposures (for one bank, a single exposure represents over 500 percent of CET1 capital).
- Of the 15 cases exceeding the limit, nine already existed at end-2022; six of these increased over the first nine months of 2023.
- Concentration risk: on average the ten largest depositors supply nearly half or more of bank funding.

### Liquidity metrics and IT/operational risk
- LCR introduced in 2018; due to weight of government securities as HQLA:
  - LCR in local currency met by all banks at end-2022; average ratio 170 percent.
  - Average ratio in foreign currency 161 percent at end-2022; one systemic bank failed to meet the target.
- NSFR will replace the current ratio of stable funding; expected to be adopted in the first quarter of 2024.
- Prudential requirements for IT risk are covered under operational risk in the circular on risk management: good practice and business continuity plan requirements set forth.
- Credit institutions are not required to declare to the BRB any operational incident that may undermine prudential position, business continuity, or banking system functioning.
- A methodological guide covering IT risk for on-site inspection was drawn up with AFC in 2018.

### Key recommendations on credit quality and supervision (from paragraphs 33–37)
- Priority: produce an accurate estimate of NPLs, supported by specialized TA.
  - Conduct swift on-site inspections in all banks to review credit portfolios, verify (i) use of loan restructuring facilities and (ii) classification criteria compliance.
  - Provide TA to the DSS for mission preparation and monitoring (loan selection, guidance, feedback formalization).
  - Consider an external asset quality review by an independent third party.
- BRB should adopt the circular on IFRS9 once specialized IFRS9 teams are set up at BRB and banks; include prudential requirements for loan classification, provisioning, and restructuring aligned with BCBS rules.
- DSS should progress decisively towards risk-based supervision:
  - Fully integrate SEPREC into ongoing supervision; use ratings to determine supervisory actions and integrate into SRP as part of “Pillar 2”.
  - Establish an early intervention mechanism and incorporate recovery plans in early intervention framework; integrate elements into an off-site supervision manual.
  - Strengthen on-site inspection: increase staff, update manuals, update IT/operational risk guide and publish detailed expectations for banks.
  - Monitor liquidity tools beyond LCR (maturity gaps, cash flow analysis); conduct sensitivity analyses and stress tests, including FX liquidity and deposit concentration impacts.
  - After rebuilding supervision expertise, resume adoption of key prudential regulatory reforms (update 2018 prudential regulations on governance, risk management, composition of capital, large exposures, licensing, and prudential regime for the Post Office).
- BRB should enforce large exposures regulation forcefully:
  - Require risk-sharing among banks for large exposures per regulation.
  - Make exemptions exceptional, time-limited, based on clear criteria, and subject to reporting and monitoring.
  - If normalization does not occur within allotted periods, take supervisory actions including fines, sanctions, and corrective measures.
- Consolidate all rules on transactions with related parties into a single circular to incorporate Point 20 of the BCPs and remove fragmentation/inconsistencies.

### Nonbank sector — Payment Institutions (PIs)
- Directorate of Payment Systems (DSP) established in 2023; tasked with prudential and consumer-related supervision of PIs and supervision of banks’ digital financial services and consumer-related aspects.
- Prudential supervision of payment service providers should be strengthened by reinforcing on-site inspection expertise and establishing indicators/dashboard of activity.
- Prudential regulation should be modernized to implement the 2018 law on payments.
- A 2023 tax dispute led to seizure of accounts of one major EMI (two main EMIs represent 99 percent of the market), affecting trust accounts and causing a run; EMI resumed activities with group support but dispute ongoing.
- World Bank helped draft 2018 law on payments and supports BRB on national payments strategy but has no projects on prudential supervision/regulation of PIs.

### Crisis Management and Financial Safety Net — diagnostics and prioritized reforms
- Establishing a comprehensive FSN should be proportionate to Burundi’s banking system size, structure, complexity, and authorities’ capacity; start with legal framework review for prevention and resolution.
- BRB is de facto resolution authority but lacks sufficient capacity and supportive legal/operational framework; resolution tools referenced in 2017 banking law lack enforceable statutory regime and activation processes.
- Five banks under liquidation, some for more than 30 years; no bank placed in resolution or liquidation over past 10 years.
- DGRF regulation adopted December 2023:
  - Mandatory membership for all banks and deposit-taking MFIs.
  - Coverage for insured deposits up to BIF 3 million (US$ 1,000), covering about 76 percent of banking sector deposits per BRB.
  - DGRF fee 0.2 percent of eligible deposits, with 0.025 percent surcharge for institutions with high NPLs.
  - No impact studies conducted; banking sector considered fees manageable.

### Crisis management and resolution recommendations (selected)
- Review the banking law to assess scope for establishing a statutory SRR aligned with FSB Key Attributes, adjusted to Burundi’s needs; SRR features should include defining bank non-viability, asset quality and viability assessment framework, adequate resolution powers, and safeguards for creditors and shareholders.
- For failing or likely-to-fail banks, prioritize Purchase and Assumption (P&A) or liquidation:
  - BRB needs broad powers to transfer select assets and liabilities for P&A.
  - Bridge bank should be a temporary option only when no acquirer exists.
  - Operationalize P&A, bridge bank powers, and liquidation procedures; adopt bylaws for assessing asset recoverability and write-offs to streamline liquidation.
- Address conflicts of interest when BRB performs supervision, resolution, and ELA: keep functions operationally separate, adopt governance safeguards, consider separating units with separate reporting lines while balancing resource costs.
- Require banks to draft recovery plans and progressively implement recovery planning within SRR.
- Over longer term, introduce resolvability assessments and resolution plans for large banks once SRR aligned with international standards is adopted.
- Establish a resolution funding mechanism to mobilize financial resources without defaulting to budgetary funds; rule out use of BRB funds in resolution except limited temporary liquidity in well-defined cases.
- Review cooperation with home authorities; SRR should address cross-border resolution for foreign subsidiaries.
- Establish inter-institutional crisis coordination committee chaired by BRB Governor, including BRB, Ministry of Finance, and other relevant institutions.
- Develop ELA guidance covering: (i) preconditions for eligibility; (ii) indicative terms and conditions; (iii) collateral requirements and valuations; (iv) parent bank asset pledges; and (v) disclosure of ELA.
- Note: Providing ELA in FX will be a significant challenge given very low official FX reserves and signaling effects must be considered.

*Source: IMF Technical Assistance Report — excerpts on credit portfolio quality, prudential regulation, supervision, and crisis management.*

### 51. The DGRF operating principles should be clarified. There is no target size set for the

### tarea2025029-print-pdf - 51. The DGRF operating principles should be clarified. There is no target size set for the

### DGRF (Deposit Guarantee and Resolution Fund) — Diagnostics
- No target size is set for the DGRF; operating principles require clarification.
- Unclear mandate: regulation provides the option of providing liquidity support to banks in difficulties before resolution is triggered; such use outside of resolution or liquidation is discouraged.
- No reference to a last resort back-up funding to provide additional resources for deposit payouts by the government if the DGRF is short of funds.
- Compensation of depositors after setting off their liabilities should be reconsidered.
- Creditor hierarchy: depositor preference is mentioned in the banking law and BRB regulation, but a clear and comprehensive creditor hierarchy should be laid down in the SRR to derogate to corporate insolvency laws.
- Governance and independence concerns:
  - DGRF expected to become operational as a unit within the BRB in 2025.
  - DGRF overseen by the BRB board, which will appoint an entity within the BRB to manage it.
  - Governing structure includes five committees, some composed of active bankers (Advisory Committee, which has the power to “issue guidelines on the management of the DGRF”) or a large number of BRB staff, with no independent members.
  - Operational expenses will be covered by the BRB until the DGRF can generate sufficient income to sustain itself.
- Need to avoid using DGRF resources for pre-resolution liquidity support given difficulty of ensuring successful rehabilitation and long-term viability of troubled banks.

### DGRF — Policy Recommendations
- Avoid use of DGRF resources outside of resolution or liquidation (i.e., avoid pre-resolution liquidity support).
- Reconsider compensation mechanics for depositors after set-off of liabilities.
- Establish a clear and comprehensive creditor hierarchy in the SRR to derogate to corporate insolvency laws.
- Define a target size for the DGRF and clarify operating principles and mandate.
- Ensure explicit arrangements for last-resort government back-up funding for deposit payouts if DGRF funds are insufficient.
- Strengthen DGRF operational independence and governance, including reducing conflicts from committee composition and ensuring independent membership.

### Systemic Risks: Identification, Assessment, and Mitigation — Diagnostics
- Institutional arrangements:
  - Two dedicated committees (the Technical Financial Stability committee and the Internal Financial Stability Committee, chaired by the Governor) meet quarterly.
  - A National Financial Stability Coordination Committee project involving BRB, ARCA, Ministry of Finance, etc., remains on hold.
- Progress and challenges:
  - BRB has made progress but more work is needed; DSS and DES draft summaries for the Financial Stability Report (FSR) published since 2017 (first report based on end-2015 data).
  - High staff turnover has hampered accumulation of expertise.
  - DSS faces challenges upgrading methods, extending data coverage, strengthening automatic consistency checks at reception of data, and integrating stress tests with macro-financial analyses.
- Risk coverage gaps:
  - Key risks (FX risk, sovereign risk) not sufficiently covered; connections between risk identification, indicators, and stress tests lack a consistent formal framework.
  - Missing coverage of risks such as maturity mismatch, interbank contagion, and asset/liability concentration risk.
- Timeliness and coordination issues:
  - Systemic risk work based on outdated information and insufficiently coordinated across departments.
  - 2022 FSR identified sovereign debt and depreciation risks but lacked quantification.
  - Recent FX risk stress test work started, but published stress tests do not cover FX risk; several departments performed FX assessments without coordination.
- Data quality and inspections:
  - Scope and quality of source data need improvement; transmission of bank data through BSA appears satisfactory but issues remain for insurance (delays), microfinance (partial coverage), and pension funds (lack of data).
  - On-site inspection missions planned to review accounting function and quality of prudential reporting were postponed in favor of credit and operational risk missions, undermining reliability of primary data.
- Credit information infrastructure:
  - Effective credit register and credit bureau project due to start in 2024 and take 18 to 20 months.
  - Credit bureaus in comparator countries (Uganda 2011, Tanzania 2012) cited as examples.

### Systemic Risks — Recommendations
- Increase staff allocation to systemic risk analysis and deepen expertise in micro-prudential supervision.
- Strengthen systemic risk analysis framework:
  - Increase coverage of vulnerabilities; link each risk to nationally relevant indicators compiled regularly and linked to specific thresholds based on statistical review of historic data.
  - Improve consistency between identified systemic risks and associated stress tests (credit risk, liquidity risk, FX risk, and sovereign risk) to use stress test results as early indicators and guide supervisory actions.
  - Produce a “Financial Stability Dashboard” for wide internal dissemination and top management discussion/validation at Technical and Internal Financial Stability Committee meetings; base preparation on more intense and formalized exchanges among directorates (DSS, DES, etc.).
- Strengthen verification of accounting, financial, and risk-related information via on-site inspections.
- DSS should strengthen consistency checks and data quality tests within the BSA with IT Directorate support.
- BRB to resume FSIs compilation with STA and automate their calculation using primary bank data in accordance with current accounting and prudential provisions and EAC best practices.

### Bank Stress Tests — Diagnostics
- Assessment framework: BCBS stress testing principles (objectives, governance, use, methodology, communication) used as guidance.
- Frequency and scope:
  - Since 2017 BRB has conducted top-down credit and liquidity stress tests at a yearly frequency and a credit risk reverse stress test at a quarterly frequency.
  - Exercises cover all 15 credit institutions and produce aggregate system-level results.
  - Stress tests do not cover market risk, interest risk, contagion, or operational risks.
  - BRB plans to evaluate FX risk and build a satellite model following EAC guidelines; no macro stress tests or top-down stress tests on other sectors.
- Governance and use:
  - FSS within DSS: a team of two experts has full ownership of exercises; limited exchange with internal stakeholders; procedures governing sharing of results not documented.
  - Results are reviewed and approved by DSS management and discussed in FSR validation annually; no follow-up by DSS after publication and not used to engage in supervisory dialogue with banks.
  - Dissemination limited: banks cannot benchmark internal stress tests; BRB top management participation limited to review/approval and results not followed up by direct supervision.
- Methodology:
  - Reliance entirely on IMF Stress Tester Tool; DSS does not sufficiently tailor toolkit to Burundi data.
  - Credit stress tests approaches include: proportional and aggregate NPL shock to all banks; correction for underprovisioning of NPLs; sectoral shock by exposure size/vulnerability; shock to large debtors (concentration risk).
  - Shock calibration not challenged; NPL ratios appear very low, so observed yearly averages over recursive samples may not be conservative.
  - Reverse credit risk stress tests used only for internal discussion; methodology suited to weak data environments; neither supervisory teams nor banks are aware of the exercise.
  - Liquidity stress tests follow IMF Stress Tester Tool default run-off rates over a five-day horizon; scenarios not calibrated to Burundi specifics (e.g., large depositors’ concentration).
- Published results:
  - Yearly stress tests are published in the FSR; methodology and scenarios discussed for credit risk and liquidity risk.
  - Credit risk results reported as number of institutions resisting shocks and those breaching regulatory capital requirements.
  - Liquidity results summarize number of banks needing external liquidity after given days.
  - Quarterly reverse stress test results are not published.
- Stress test findings:
  - FSRs for 2021 and 2022 note increasing number of banks with potential capital adequacy problems due to strains in key sectors and rising default risk from large debtors.
  - BRB has detailed information on large exposures enabling potential extension to contagion analysis and linking credit to liquidity risks.
- Calibration specifics referenced in source:
  - Withdrawal rates to demand deposits are 15 percent for domestic currency deposits and 10 percent for foreign currency deposits. For term deposits, they are 3 percent for domestic currency deposits and 1 percent for foreign currency deposits.

### Bank Stress Tests — Recommendations
- Upgrade the top-down stress testing framework with formalized components:
  - Establish governance structure with clear and documented roles/responsibilities for top management, DSS, and other stakeholders.
  - Integrate stress testing into broader systemic risk assessment and supervisory activities.
  - Develop a communication strategy embedded in financial stability communication policy to enable internal buy-in, coordination, and effective supervisory use; external communication should be regular, consistent, and embedded in direct supervision.
- Methodology improvements:
  - Challenge and adapt credit and liquidity stress tests to capture current vulnerabilities: FX risk (strong depreciation), sovereign risks (interest rate risk, haircut scenarios), and concentration risks (credits and deposits).
  - Adapt the IMF Stress Tester Tool to provide realistic scenarios, improved risk coverage, and decision-making relevance; longer term consider multi-year scenario-based stress testing.
  - Calibrate liquidity scenarios to reflect Burundi-specific features such as large depositor concentration.
- Use and dissemination:
  - Ensure stress test results inform supervisory dialogue and risk-based supervision actions.
  - Improve internal dissemination and involve supervisory teams and banks to foster benchmarking and strengthen market discipline.

*IMF Technical Assistance Report — extracted content*

### 78. The BRB staff needs to build capacity to operate, revise and extend the stress testing

### The BRB staff needs to build capacity to operate, revise and extend the stress testing framework

### Capacity building for stress testing (paragraph 78, D.2)
- Finding: "The BRB staff needs to build capacity to operate, revise, and extend the stress testing framework."
- Suggested training and capacity enhancements:
  - Training in data management and analysis.
  - Training in econometric modeling applied to stress testing.
  - Training in fundamentals of financial stability communications.
- Intended outcome: Strengthen staff capacity to operate, revise, and extend the stress testing framework while expanding risk coverage and calibrating shocks of the stress tests.

### Technical Assistance Roadmap (paragraphs 79–80; Appendix 1 overview)
- Purpose: Link the diagnostic assessment with strategic reforms over a "specified time horizon (three years)" through a Technical Assistance Roadmap (TARM).
- Implementation: "The IMF, with other TA providers, if possible, will work with the authorities to implement the TARM and monitor the development of reforms in relation to expected results."
- Organization: TA projects in the draft TARM are numbered under each area reviewed (from A.1 through D.3).

### Appendix 1 — Key TA items related to supervision, systemic risk, and stress testing
- Structure: Areas A–D covering Supervision and Regulation of the Financial Sector; Crisis Management and Financial Safety Net; Systemic Risk; Bank Stress Tests.
- Selected actionable items and priorities (preserve original priority and time-horizon labels):
  - A — Supervision and Regulation of the Financial Sector (Banking Sector)
    - No.1: Incorrect identification of impaired/doubtful loans and expected losses.
      - Strategic objective: "Improve accounting and provisioning procedures."
      - Technical assistance: Support organization by the DSS of on-site inspection missions (planning, loan tape creation, guide to analysis, plan of reports, restructured loans).
      - Authority in charge: BRB. Priority: H. Time Horizon: IM.
    - No.2: Same vulnerability; actions include "Training of the new BRB IFRS9 team. Review of the final version of the draft IFRS9 regulation. Prudential requirements for loan classification, provisioning, and restructuring should be strengthened to be in alignment with BCBS rules."
      - Condition: "BRB has validated a draft IFRS9 regulation and set up an IFRS9 team."
      - Authority in charge: BRB. Priority: H. Time Horizon: ST.
    - No.3: "Insufficient knowledge of the risks assumed by banks and poor allocation of DSS resources."
      - Strategic objective: "Establish risk-based supervision and strengthen the supervision process."
      - Technical assistance: Finalization of qualitative reporting to assess banks’ risk management systems; incorporation of bank rating in prudential supervision; implementation of early warning indicators; design an action plan for establishing the supervisory review process (SRP); training on incorporating bank rating in prudential supervision.
      - Authority in charge: BRB. Priority: H. Time Horizon: ST.
    - No.4–9: Additional items include formalization of off-site supervision procedures (No.4, H, MT), strengthening IT/cybersecurity regulation and on-site IT inspection guides (No.5, MH, LT), updating on-site inspectors’ procedures manuals (No.6, MH, LT), preparing a single text on related parties aligned with Point 20 of the Basel Core Principles (No.7, MH, LT), supervision of problem banks and early intervention procedures (No.8, H, LT), and updating prudential regulations for risk-based supervision (No.9, MH, LT).
  - A — Nonbank Sector - payment services
    - No.10: "Failure to apply the prudential rules for PIs."
      - Actions: Training workshop for supervisors; establish prudential reporting indicators and a prudential indicator dashboard.
      - Priority: H. Time Horizon: ST.
    - No.11: "Insufficient prudential framework for the activity of PIs."
      - Actions: Assist with preparation of prudential regulation on PIs.
      - Condition: "the DSP shares a draft prudential regulation."
      - Priority: MH. Time Horizon: MT.
  - B — Crisis Management and Financial Safety Net
    - No.1: "Lack of a special resolution framework hinders the resolution of problem banks..."
      - Objective: "Develop/strengthen the special resolution regime and crisis preparedness framework."
      - Assistance: Review existing Banking Law; suggest revisions to align the special resolution regime with international standards.
      - Condition: "carried out jointly with IMF LEG, may require six weeks of desk review and one-week in-person to explain drafting suggestions."
      - Authority in charge: BRB. Priority: H. Time Horizon: ST.
    - No.2: "Use of liquidity mechanism in resolution puts the central bank at risk."
      - Objective: "Introduce/strengthen the ELA framework."
      - Assistance: Align the ELA framework with international best practices.
      - Condition: "BRB shares a first version of text."
      - Authority in charge: BRB. Priority: H. Time Horizon: ST.
    - No.3–4: Drafting regulations on preventive recovery plans (No.3, H, MT) and operationalizing resolution planning and funding options while addressing conflict-of-interest issues (No.4, H, MT). Conditions note sequencing relative to adoption of a statutory special resolution regime.
  - C — Systemic Risk
    - No.1: "Development of the systemic risk analysis framework in further depth."
      - Objective: "Develop/ improve the systemic risk monitoring systems and tools."
      - Assistance: Strengthen officers’ capacity via focused training on technical systemic risk analysis tools.
      - Authority in charge: BRB. Priority: H. Time Horizon: ST.
    - No.2: Draw up a comprehensive roadmap linking potential sources of systemic risk with indicators and macrofinancial connections; define robust indicators and thresholds for an early warning system.
      - Conditions: presence of a formal process for summary and dissemination to BRB committees; regular collection of data.
      - Authority in charge: BRB. Priority: H. Time Horizon: ST.
    - No.3: "Strengthen the systemic risk oversight structure."
      - Actions: Create a financial stability dashboard; discuss risk analysis results within decision-making committees; share results among directorates/institutions.
      - Condition: "validation of the Systemic Risk Roadmap and associated indicators by the BRB Board."
      - Authority in charge: BRB. Priority: MH. Time Horizon: MT.
    - No.4: "Develop and strengthen communication relating to financial stability."
      - Action: "Improve the analytical content of the Financial Stability Report, in particular the consistency of inclusion of stress test results."
      - Authority in charge: BRB. Priority: M. Time Horizon: MT.
  - D — Bank Stress Tests (items relevant to paragraph 78)
    - No.1: "The present methodology needs to be reviewed and updated..."
      - Objective: "Strengthen the toolbox for the identification of threats to financial stability and remedial policies."
      - Action: Review methodology to include exchange rate, sovereign, and concentration risks, and scenarios for each.
      - Authority in charge: BRB. Priority: H. Time Horizon: ST.
    - No.2: "Need to build BRB staff capacities to operate, review, and extend the existing stress test methodology."
      - Objective: "Strengthen the systemic risk oversight structure."
      - Action: "Build BRB staff capacities to operate, review, and extend the stress test framework."
      - Authority in charge: BRB. Priority: H. Time Horizon: ST.
    - No.3: "The stress test framework lacks formal governance, effective integration in the risk analysis system, ability to support supervision, and a clear communication strategy."
      - Objective: "Strengthen the systemic risk oversight structure."
      - Action: "Modernize the top-down stress test framework, including its governance, its effective integration with supervision, and a consistent communication strategy to guide prudential and oversight policies."
      - Authority in charge: BRB. Priority: H. Time Horizon: MT.

### Time horizons and priority key (as presented)
- Time Horizon definitions: IM: < 6 months; ST: < 12 months; MT: 12 to 24 months; LT: 24 to 48 months.
- Priority legend (Key shown in source):
  - High = Immediate (IM)
  - Medium High = Short term (ST)
  - Medium = Medium term (MT)
  - (Long term (LT) labeled accordingly)

### Appendix 2 — Stocktaking and review highlights (selected items)
- Ongoing implementation items and status labels used in the source: FA-Fully Achieved; PA-Partially Achieved; ONG-Ongoing; NA-Not Achieved.
- Examples of implementation observations:
  - SEPREC rating methodology: "End-January 2024: first completion of 15 SEPREC ratings (all banks and financial institutions)." Status: ONG-Ongoing.
  - Incorporation of IFRS9 in draft Circular 12: "The BRB has committed at the EAC level to implementation by end-2024." Status: ONG-Ongoing.
  - NSFR-related work: multiple steps listed as ST/MT and ONG-Ongoing, including publishing the new circular on the NSFR, conducting a quantitative impact study, adapting reporting systems, and training inspection teams.
  - IRRBB (interest rate risk in the banking book): DSS needs training; planned AFC in FY 2024; FSSR mission suggests postponing until after strengthening expertise (but integrating it in the sovereign risk stress tests). Status: ST ONG-Ongoing for validation and testing steps.

*Source: IMF Technical Assistance Report — Appendix 1 and Appendix 2 excerpts as provided.*

### introduction  of  the  regulation  on  interest  rate  risk  in

### introduction of the regulation on interest rate risk in the banking book

### IRRBB regulation adoption and implementation (recommendations 4–11)
- Context: Low level of expertise and lack of a formalized framework for interest rate risk management in many institutions.
- Key recommended actions:
  - 4a: Ensure thorough understanding among the banking system of the challenges relating to the IRRBB draft circular. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 4a (operational): Carry out a test on the implementation of the standard method with two or three pilot banks. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 4b: Verify the banks’ capacity to deliver the regulatory report attached to the draft circular in a reliable manner. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 5a: Amend the draft circular to reflect the results of the discussions with the banking system. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 5b: Present the new text and the new template report for publication. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 6: Publish the new text. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 7a: Introduce the new IRRBB regulatory risk report in the BRB reporting system. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 7b: Adapt the BRB information system to enable it to process the new report. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 8a: Formalize the processing and application procedures of the new IRRBB report. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 8b: Incorporate IRRBB risk in the supervisory review and evaluation process (SREP) in connection with the draft ICAAP/ILAAP regulation currently in development (internal capital adequacy assessment process (ICAAP) and internal liquidity adequacy assessment process (ILAAP)). Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 8c: Prepare a procedure on the use and treatment of the “Supervisory Outlier Test” (SOT) indicators. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 8d: Draw up a policy setting forth remedial measures to be put in place for banks particularly exposed to interest rate risk in the banking book. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 9: Support the banking profession throughout the process of reform to ensure ownership of it and effective execution of the adjustments necessary to comply with future prudential requirements. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 10: Train the on-and off-site supervisory teams in IRRBB risk. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 11: Establish a quality control system for the new regulatory reports on IRRBB risk. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
- Operational notes: Share draft circular and draft regulatory reporting statement with the banking sector for comment. Authority responsible: BRB.

### Monitoring the implementation of IFRS9 (selected recommendations)
- Key recommended actions:
  - 1: Share with the banking sector the drafts of Circular 12/2018 on the classification and provisioning of loans, Circular 16/2018 on External Auditors (CAC), and the chart of accounts for credit institutions (= Volume 3 of the chart of accounts), updated and aligned with IFRS9, to obtain their comments. Authority in charge: BRB. Timeframe: ST. Implementation status: ONG-Ongoing.
  - 2: Set up a Joint Technical Committee of the BRB and the banking profession, led by the BRB’s IFRS9 team, and organize regular meetings with the Committee during the stages of dissemination of and transition toward IFRS9 to ensure the support and active involvement of the banking profession to apply IFRS9. Authority in charge: BRB. Timeframe: ST. Implementation status: ONG-Ongoing.
  - 3: Set up an IFRS9 team within the BRB directed by a Project Manager, allocating the appropriate means and resources to it for the whole duration of the IFRS9 project. Formalize an internal procedure covering its tasks and objectives. Authority in charge: BRB. Timeframe: ST. Implementation status: ONG-Ongoing. MCM comment: Unit formed, but departures of experts (in particular hired by banks).
  - 4: Formalize a strategic IFRS9 plan for the banking sector approved by the Governor of the BRB and published after consultation with the profession, providing a deadline after which credit institutions will have to comply fully with the BRB’s requirements concerning submission of financial statements according to IFRS9 following a transition phase to be determined. Authority in charge: BRB. Timeframe: ST. Implementation status: ONG-Ongoing.
  - 5: Verify the actual existence of a dedicated IFRS9 project team in each supervised institution to manage the migration to IFRS9. Authority in charge: BRB. Timeframe: ST. Implementation status: ONG-Ongoing.
  - 6: Organize communication with high-level representatives of the banking profession to explain the expectations of the BRB relating to the application of IFRS9 and to raise awareness among senior management on the expected quality of financial statements according to IFRS9. Authority in charge: BRB. Timeframe: ST. Implementation status: ONG-Ongoing.
  - 7: Ask each supervised institution to set forth a practical action plan with well-defined steps and a clear timetable for the appropriate application of IFRS9, the elements of which must be communicated to the BRB. Authority in charge: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 8: Organize regular bilateral meetings with the general management and the technical teams of each credit institution in order to monitor the state of progress of the IFRS9 project compared with the action plan of the credit institution concerned. Authority in charge: BRB. Timeframe: MT/LT. Implementation status: ONG-Ongoing.
  - 9: Ask each bank to ensure that its financial and accounting officials have proven experience with IFRS9 (and the IFRS in general). Require that each institution establish a capacity building policy to this end as soon as possible. Authority in charge: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 10: Ask credit institutions to plan and carry out a training program for staff and managers to ensure their ownership of IFRS9 and their involvement in the IFRS9 project to strengthen the integrity of the accounts preparation process. Authority in charge: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 11: Require statutory auditors (CACs) to train the teams assigned to the certification of credit institutions’ accounts in IFRS9. CACs should provide the BRB with evidence of their capabilities. Authority in charge: BRB. Timeframe: ST. Implementation status: ONG-Ongoing.
  - 12: Train the BRB's bank supervisors in IFRS9 to build their capacities (i) to lead the reform (for the members of the IFRS9 team), (ii) to review the institutions’ action plans relating to the application of IFRS9, and then (iii) to check and analyze the financial statements provided according to IFRS9 (and IFRS7). Authority in charge: BRB. Timeframe: ST/MT. Implementation status: ONG-Ongoing.
  - 13: Carry out an IFRS9 impact study, in particular on the financial position, profitability, solvency, and liquidity at each institution according to a framework established by the BRB. Authority in charge: BRB. Timeframe: ST. Implementation status: ONG-Ongoing.

### Analysis of gaps between the regulatory framework and the Basel framework and roadmap
- Key recommended actions:
  - 1: Set up a market watch system to monitor developments and, if necessary, to adapt the priorities assigned to the projects identified in the roadmap. Authority responsible: BRB. Timeframe: ST. Implementation status: ONG-Ongoing. MCM comment: Team members have left the BRB, not replaced as priority was given to resuming on-site inspections.
  - 2: Update the specifications for the outsourced accounting work by incorporating the constraints relating to the implementation of supervision on a consolidated basis, identification and limits to the banking and trading books, review of the Basel III asset classes (in accordance with market developments as well as ensuring the availability of a flexible accounting system and framework that enable the major foreseeable changes to be integrated as necessary and as quickly as possible). Authority responsible: BRB. Timeframe: ST. Implementation status: ONG-Ongoing.
  - 3: Carry out a review of the regulatory texts proposed by the two missions (circulars on risk management and on ICAAP) and submit the final versions to the BRB board for promulgation with an indication of the envisaged dates of entry into effect. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing.
  - 4: Roadmap approved by the BRB board. Draw up an action plan setting forth the procedures for its implementation and the deadlines (short, medium, or long term, accordingly). Adjust the roadmap priorities according to the developments seen under the market watch system recommended in point 1 and any new risks identified that could lead to a reconsideration of work priorities. Also consider the priorities in connection with the absorption capacity of the supervisory teams (ownership of the new regulations and corresponding methodologies) and the acceptability of the reforms by the Burundi banks. Authority responsible: BRB. Timeframe: MT. Implementation status: ONG-Ongoing. MCM comment: The FSSR mission suggests three-year priorities to the BRB (FY2025-2028) and after these three years the BRB will be able to pursue the other projects set out in the roadmap from the 2022 TA report, which provided a five- to seven-year program.
- Contextual observation from source text: The revision of Law 1/17 of August 22, 2017 governing banking activities, supplemented by the general revision of the BRB’s prudential circulars, published in August 2018, or the overhaul of the bank rating model (known as SEPREC) to establish risk profiles according to international best practice and standards, in the first half of 2019, represent essential progress. Nevertheless, these processes and regulations are only partially in phase with Basel III. Convergence toward Basel III will involve the adoption of new circulars (covering the internal capital adequacy assessment process -ICAAP-, the internal liquidity adequacy assessment process -ILAAP-, the net stable funding ratio -NSFR-, Pillar 2, the trading book, Pillar 3, etc.) identified in the roadmap but will necessarily have to be enforced progressively and proportionately. This dual requirement derives not only from the absorption capacity of the Burundi supervision teams, but also from the acceptability of reforms of such magnitude by the banking system operating in the country.

### On-site credit risk inspection methodology (selected recommendations)
- Key recommended actions and status:
  - 1: Reexamine the draft methodological guide on on-site credit risk inspection (Annex 1) to validate its final version. Authority in charge: BRB. Timeframe: I. Implementation status: FA-Fully achieved. MCM comment: Methodology in place (a manual) and used by on-site inspectors.
  - 2: Perform credit reviews based on the principles described in Annex 3 of the methodological guide to select the files according to risk criteria and better reflect the nature of the various activities carried out by credit institutions. Use an analytical table of the credit files based on the model provided in Annex 4 of the methodological guide. Authority in charge: BRB. Deadline: July 31, 2022. Implementation status: ONG-Ongoing. MCM comment: Need to complete credit portfolio sampling with the help of TA.
  - 3: Use a structured reporting plan covering the various credit risk topics based on the model provided in Annex 6 of the methodological guide. Authority in charge: BRB. Deadline: July 31, 2022. Implementation status: ONG-Ongoing. MCM comment: Need to complete credit portfolio sampling with the help of TA.
  - 4: If weaknesses are observed, in particular with regard to regulatory provisions, formalize assessments (references to regulations, conditions, primary causes, impact) using the model provided in the methodological guide. Authority in charge: BRB. Timeframe and status: ONG-Ongoing.

*Source: tarea2025029-print-pdf - introduction of the regulation on interest rate risk in the banking book*

### Annex 5 of the methodological guide.

### Annex 5 of the methodological guide.

### Credit portfolio sampling and credit risk review
- ONG-Ongoing: Need to complete credit portfolio sampling with the help of TA.
  - Authority in charge: BRB
  - Date noted: July 31, 2022
- Recommendation 5: During the credit risk review, seek a fair balance between the resources allocated to the review of credit files and those assigned to analysis of governance, organization and processes for analyzing applications for credit, and granting/management/monitoring of credits.
  - Authority in charge: BRB
  - Status: ONG-Ongoing

---

### ICAAP circular and guidance on stress testing (22MMQ6800, FY 2022)
- Recommendation 1: Finalize the internal ICAAP circular review and validation process, carry out a consultation of the banking sector, take into account all the relevant comments, make any adjustments, and publish the circular for implementation by the banking sector with a sufficient time horizon.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing
  - MCM comments: Given the priority assigned to the strengthening of expertise of the supervisors, the FSSR mission suggests not including this in the FSSR priorities. The mission proposes work on the recovery plans as a priority (see workstream “crisis management and financial safety net” work area) which are, moreover, EAC criteria.
- Recommendation 2: Finalize the process of internal validation and review of the guidelines on crisis simulation programs (“stress tests”), carry out a consultation with the banking sector, take into account all the relevant comments, make any adjustments, and publish them for implementation by the banking sector with a sufficient time horizon.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing
- Recommendation 3: Finalize the process of internal review and validation of Circular 23/2018 on risk management, carry out a consultation of the banking sector, take into account all the relevant comments, make any adjustments, and publish the circular for implementation by the banking sector with a sufficient time horizon.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing
- Recommendation 4: Make a first assessment of the risk profiles of the banks applying the BRB's rating methodology (“SEPREC”).
  - Authority in charge: BRB
  - Timeframe: ST
  - Implementation: ONG-Ongoing
- Recommendation 5: Develop ILAAP regulations.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing
- Recommendation 6: Consider the development of a methodology specific to the BRB for the definition of Pillar 2 quantitative requirements for credit institutions.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing
- Recommendation 7: Continue the training of supervisory teams covering the new concepts and tools introduced by the new ICAAP regulations and stress tests.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing

---

### Revision of the regulatory prudential and accounting framework; IFRS9 roadmap (20MMI0207, FY 2021)
- Recommendation 1: Update the regulations (Circular 12/2018 on classification and provisioning of loans, Circular 16/2018 on statutory auditors – CACs) and Circular 24/2019 on the publication of financial information by credit institutions, as well as the chart of accounts of credit institutions, according to IFRS9. Sections 27-44, (Part IV – Chapters B and C) Annexes 1 and 2.
  - Authority in charge: BRB (Technical assistance from AFRITAC Central)
  - Timeframe: ST
  - Implementation: ONG-Ongoing
  - MCM comments: This recommendation had been partially implemented at the end of the mission covered in this report. A draft revised circular was completed accordingly and sent to the BRB for finalization. A revised draft circular on the CACs was also prepared. The circular on the publication of the financial information had not been reviewed at this stage. The chart of accounts will be reviewed by an external consultant currently being hired by the BRB. He/she will be able to use the preliminary work carried out during this mission.
- Recommendation 2: Set up a Joint Technical Committee of the BRB with the banking profession led by the IFRS9 team and organize regular meetings with the Committee during the stages of dissemination of and transition toward IFRS9 to ensure the support and active involvement of the banking profession to apply IFRS9.
  - Authority in charge: BRB
  - Timeframe: ST
  - Implementation: ONG-Ongoing
- Recommendation 3: Set up an IFRS9 team within the BRB directed by a Project Manager, allocate the appropriate means and resources to it for the whole duration of the IFRS9 project. Formalize an internal procedure covering its tasks and objectives.
  - Timeframe: ST
  - Implementation: ONG-Ongoing
  - MCM comments: Implementation of recommendation currently underway. A project manager has been appointed accordingly.
- Recommendation 4: Formalize a strategic IFRS9 plan for the banking sector approved by the Governor of the BRB and published after consultation with the profession, providing a deadline after which credit institutions will have to comply fully with the BRB’s requirements concerning submission of financial statements according to IFRS9 following a transition phase to be determined.
  - Authority in charge: BRB
  - Timeframe: ST
  - Implementation: ONG-Ongoing
- Recommendation 5: Verify the actual existence of a dedicated IFRS9 technical team at each supervised institution to manage the migration to IFRS9.
  - Authority in charge: BRB
  - Timeframe: ST
  - Implementation: ONG-Ongoing
- Recommendation 6: Organize an information seminar with high-level representatives of the banking profession in order to explain the expectations of the BRB relating to the application of IFRS9 and to raise awareness among senior management of the expected quality of the financial statements according to IFRS9.
  - Authority in charge: BRB (Technical assistance from AFRITAC Central)
  - Timeframe: ST
  - Implementation: ONG-Ongoing
- Recommendation 7: Ask each supervised institution to set forth a practical action plan with well-defined steps and a clear timetable for the appropriate application of IFRS9, the elements of which must be communicated to the BRB.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing
- Recommendation 8: Organize regular bilateral meetings with the general management and the technical teams of each credit institution in order to monitor the state of progress of the IFRS9 project compared with the action plan of the credit institution concerned.
  - Authority in charge: BRB
  - Timeframe: MT and LT
  - Implementation: ONG-Ongoing

- Additional IFRS9 capacity and oversight recommendations:
  - Recommendation 9: Ask each bank to ensure that its financial and accounting officials have proven experience with IFRS9 (and IFRS in general). Require that each institution establish a capacity building policy to this end as soon as possible.
    - Authority in charge: BRB
    - Timeframe: MT
    - Implementation: ONG-Ongoing
  - Recommendation 10: Ask the credit institutions to plan and carry out a training program for staff and manager to ensure their ownership of IFRS9 and their involvement in the IFRS9 project to strengthen the integrity of the accounts preparation process.
    - Authority in charge: BRB
    - Timeframe: MT
    - Implementation: ONG-Ongoing
  - Recommendation 11: Require the statutory auditors (CACs) to train the teams assigned to the certification of credit institutions’ accounts in IFRS9. The CACs should provide the BRB with evidence of their capabilities.
    - Authority in charge: BRB
    - Timeframe: ST
    - Implementation: ONG-Ongoing
  - Recommendation 12: Train the BRB's bank supervisors in IFRS9 to build their capacities (i) to lead the reform (for the members of the IFRS9 unit), (ii) to review the institutions’ action plans relating to the application of IFRS9, and then (iii) to check and analyze the financial statements provided according to IFRS9 (and IFRS7).
    - Authority in charge: BRB (Technical assistance from AFRITAC Central)
    - Timeframe: ST and MT
    - Implementation: ONG-Ongoing
  - Recommendation 13: Carry out an IFRS9 impact study, in particular on the financial position, profitability, solvency, and liquidity at each institution according to a framework established by the BRB.
    - Authority in charge: BRB
    - Timeframe: ST
    - Implementation: ONG-Ongoing

---

### Payment Institutions (Draft Circular 4/EP/21 and related work)
- Recommendation 14: Resume the preparation of draft Circular 4/EP/21 on the prudential standards applicable to payment institutions (PI), and the draft guide for granting digital credits, taking into account the comments of AFRITAC Central.
  - Authority in charge: BRB
  - Date target: June 30, 2021
  - Implementation: ONG-Ongoing
  - MCM comments: Draft regulation suspended with the reorganization (establishment of the DSP in 2023) and projects with the World Bank.
- Recommendation 15: Set up regulatory template reports specific to PIs including the “classic” prudential and accounting reports and a report on the monitoring of segregation of customer funds.
  - Authority in charge: BRB
  - Date target: June 30, 2021
  - Implementation: ONG-Ongoing
- Recommendation 16: Consult with the profession on the regulatory requirements provided in the final version of the draft of Circular 4/EP/21 on prudential standards applicable to payment institutions, and the draft of the guide for granting digital credits (to be renamed).
  - Authority in charge: BRB
  - Date target: December 31, 2021
  - Implementation: ONG-Ongoing
- Recommendation 17: Prepare the regulatory framework on the guarantee fund for digital credits after having carried out an in-depth preliminary study to establish the legal and organizational formula best adapted to the aims of the relevant authorities in Burundi.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing

---

### On-site operational risk inspection methodology in credit institutions (20MMI0208, FY 2021)
- Recommendation 1: Reexamine the draft methodological note on on-site operational risk inspection (Annex 1) to validate its final version.
  - Authority in charge: BRB
  - Timeframe: I
  - Implementation: FA-Fully achieved
  - MCM comments: Methodological note and implementation during an on-site inspection (pilot mission) to finalize the methodological note.
- Recommendation 2: Finalize the review of the methodological note on on-site IT risk inspection (submitted to the BRB in October 2018) and validate it.
  - Authority in charge: BRB
  - Date target: March 31, 2021
  - Implementation: ONG-Ongoing
- Recommendation 3: Finalize the report on the pilot on-site inspection mission carried out by the BRB at a large domestic bank in November 2020.
  - Authority in charge: BRB
  - Timeframe: I
  - Implementation: FA-Fully achieved
- Recommendation 4: Program and carry out a general campaign of on-site operational risk inspection missions at the most significant credit institutions or those most exposed to this risk.
  - Authority in charge: BRB
  - Timeframe: ST
  - Implementation: ONG-Ongoing
- Recommendation 5: If necessary, according to the feedback on the experiences from this campaign of missions, appraise whether it is appropriate to develop operational risk supervision policy, for example by (i) publishing guidelines (recommendations) for the banking profession to describe the expectations of supervisors with regard to control of operational risk; (ii) fine-tuning the regulatory requirements already introduced in Circular 23/2018; or (iii) developing information exchanges with the other supervisory and oversight authorities concerned, both in Burundi and abroad.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing

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### Methodology for on-site inspection of data quality control and the accounting function (FY 2021, 20MMI0206)
- Recommendation 1: Reexamine the draft methodological guide on on-site inspection of the accounting function and the reporting process to validate its final version.
  - Authority in charge: BRB
  - Timeframe: I
  - Implementation: ONG-Ongoing
- Recommendation 2: Finalize the report on the pilot on-site inspection mission carried out by the BRB at a bank in April 2021.
  - Authority in charge: BRB
  - Timeframe: I
  - Implementation: FA-Fully achieved
- Recommendation 3: Program and carry out a campaign of on-site inspection missions reviewing the accounting function and the reporting process at the credit institutions with the highest risk profiles.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing
  - MCM comments: Need to train teams in advance in aspects of accounting (training planned by AFC in FY 2024).
- Recommendation 4: According to the feedback of this campaign of missions, fine-tune the procedures for supervision of the accounting function and the reporting process, for example by publishing guidelines (recommendations) for the banking profession to inform them of the BRB’s expectations with regard to control of the associated risks.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing

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### Implementation of IFRS9 Credit institution rating methodology and SEPREC (18MMA8523, FY 2020)
- Recommendation 1: Formally validate the SEPREC rating methodology guide at the appropriate level of the BRB.
  - Authority in charge: BRB
  - Timeframe: ST
  - Implementation: ONG-Ongoing
  - MCM comments: Validated at the DSS level and submitted to BRB senior management.
- Recommendation 2: Test the SEPREC methodology by performing the rating of one or more credit institutions (pilot phase), then finally validate the user guide after having taken into account the experience feedback as required.
  - Authority in charge: BRB
  - Timeframe: ST
  - Implementation: ONG-Ongoing
- Recommendation 3: Conduct a campaign of rating all credit institutions based on the annual accounts for FY2019.
  - Authority in charge: BRB
  - Timeframe: ST
  - Implementation: FA-Fully achieved
  - MCM comments: See SEPREC above.
- Recommendation 4: Undertake an overall feedback exercise to review all of the operational methods of internal banking supervision at the BRB (off-site inspection, on-site inspection, early interventions) in order to maximize the added value of rating.
  - Authority in charge: BRB
  - Timeframe: MT
  - Implementation: ONG-Ongoing
- Recommendation 5: Update the regulations (Circular 12/2018 on classification and provisioning of loans, Circular 16/2018 on external auditors - CACs) and Circular 24/2019 on the publication of financial information by credit institutions, as well as the chart of accounts of credit institutions, according to IFRS9.
  - Authority in charge: BRB
  - Timeframe: ST/MT
  - Implementation: ONG-Ongoing
  - MCM comments: See IFRS9 above.
- Recommendations 6–19: (See IFRS9 section above for repeated items) include setting up a Joint Technical Committee, establishing an IFRS9 team with a Project Manager, formalizing a strategic IFRS9 plan, verifying technical teams at institutions, information seminars, requiring action plans from supervised institutions, organizing bilateral monitoring meetings, capacity building requirements for banks and CACs, training BRB supervisors, carrying out an IFRS9 impact study, programming thematic on-site inspections on IFRS9 implementation, and deciding on appropriate prudential measures and sanctions for non-compliance.
  - Authorities in charge and timeframes vary across ST, MT, LT.
  - Implementation statuses: Mostly ONG-Ongoing; specific item (12 under one listing) marked NA-Not Achieved in one instance.

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### Implementation of risk-based supervision in the banking sector (18MMA8524, FY 2020)
- Recommendation 1: Review the roadmap proposed to finalize the actual implementation of risk-based supervision.
  - Authority in charge: BRB
  - Project code: 18MMA8524
  - Timeframe: FY 2020
  - (Text truncated in source; further specifics not provided in this annex.)

*Annex 5 — Authority in charge: BRB — Extracted recommendations, timeframes, implementation statuses, and MCM comments as presented in the source PDF.*

### Annex 1) to adjust the recommendations if

### Annex 1) to adjust the recommendations if

### Banking supervision — implementation status and operational steps
- Prepare a summary of the reasons for the proposed reform and have the roadmap validated by the BRB board.
  - Draw up an operational action plan including the specific indication of the work to be carried out with practical details for its implementation and the completion time lines (short, medium, or long term, accordingly).
  - Authority in charge: BRB
  - ST FA-Fully achieved — See SEPREC above.
- Publish a revised version of the template report on internal control and risk management to be submitted annually to the BRB by the credit institutions.
  - Authority in charge: BRB
  - ST ONG-Ongoing — Annual internal control report structure published but need to update SEPREC.
- Finalize the improvement of the credit institution oversight indicators using the following steps:
  - (i) establish a project team;
  - (ii) set out the list of oversight indicators considered to be relevant for ongoing off-site supervision;
  - (iii) define the procedures for calculating the indicators chosen as well as the relevant warning thresholds to place on the most sensitive ones;
  - (iv) configure the oversight and warning indicators in the BRB’s information system to automate their production.
  - Authority in charge: BRB
  - MT ONG-Ongoing

### Supervision of payment institutions — recommendations and status
- Prepare and publish the prudential circulars implementing Regulation 001/2017 on payment services and activities of payment institutions with regard to:
  - (i) the prudential ratios and
  - (ii) the qualitative prudential requirements relating to governance, internal control, and risk management should the aforementioned regulation not be sufficiently detailed in this regard to be directly applicable.
  - Prepare templates of prudential and accounting reports to be submitted by the payment institutions to the BRB.
  - Authority in charge: BRB
  - ST ONG-Ongoing
- Operationalize oversight and warning indicators for credit institutions in the BRB’s information system in accordance with the steps outlined in the report.
  - Authority in charge: BRB
  - 6/30/2020 ONG-Ongoing
- Use the oversight and warning indicators to supplement and improve off-site inspection analyses and develop discussions with the payment institutions under supervision.
  - Authority in charge: BRB
  - ST ONG-Ongoing
- Review the banking supervision scoreboard based on a selection of relevant indicators once they have been brought into operation.
  - Authority in charge: BRB
  - ST ONG-Ongoing
- Finalize the methodological note on supervision of payment institutions in accordance with the structure proposed by AFRITAC Central.
  - Authority in charge: BRB
  - MT ONG-Ongoing
- Develop regular meetings of the BRB with each payment institution to monitor activities, financial position, profitability, and control of risks, using the methodological note’s points of note and points to check.
  - Undertake targeted on-site inspections starting with those showing the most worrying factors of weakness.
  - Authority in charge: BRB
  - ST ONG-Ongoing

### Training and IT risk supervision recommendations
- Ensure supervisors trained in IT risk control and payment institution supervision pass on knowledge and documentation to relevant colleagues who remained in Burundi.
  - Section 23 — I ONG-Ongoing — Extreme staff turnover.
- Prepare a program of supervision to develop assessment and inspection of institutions’ IT risk based on the IT risk inspection guide provided by AFRITAC Central.
  - 12/31/2018 ONG-Ongoing
- Finalize the methodology for inspecting payment institutions and payment services based on the aide-mémoire provided by AFRITAC Central.
  - 3/31/2019 ONG-Ongoing
- Carry out on-site inspection in payment institutions and payment services.
  - 6/30/2019 ONG-Ongoing
- Clarify BRB policy regarding requests from telecommunications operators to obtain authorization to grant electronic credits.
  - 6/30/2019 ONG-Ongoing

### Revision of credit institution rating methodology (SEPREC)
- Review and fine-tune quantitative thresholds and questionnaires embedded in the rating tool.
  - 3/31/2019 — FA-Fully Achieved (January 2024) — See SEPREC above.
- Collect prudential and accounting reports as at December 2018 and internal control reports from FY 2018 for all institutions subject to rating.
  - 04/31/2019 — FA-Fully achieved
- Check the quality of quantitative data provided by institutions and correct as necessary; obtain additional qualitative information required for rating.
  - 5/31/2019 — FA-Fully achieved
- Perform the rating of all credit institutions based on validated information.
  - 6/30/2019 — FA-Fully achieved
- Upon completion, review the experience, identify needs for adjustment, and have the SEPREC rating tool validated after fine-tuning.
  - 8/31/2019 — ONG-Ongoing
- Ensure IT-related security of the rating tool (protection of format and calculation formulas).
  - 6/30/2019 — ONG-Ongoing
- Draw up IT specifications to enable processing in the SEPREC system to be automated.
  - 12/31/2019 — ONG-Ongoing
- Enhance the structure of the annual regulatory report on internal control and risk management.
  - 12/31/2019 — ONG-Ongoing
- Finalize the methodological guide on credit institution rating using the SEPREC system.
  - 12/31/2019 — ONG-Ongoing
- Undertake an overall review of BRB off-site supervision operational methods based on the revised rating process to implement risk-based supervision; draw up an off-site supervision manual supplementing the rating methodology guide.
  - 12/31/2020 — ONG-Ongoing
- Adjust BRB on-site inspection methodology so on-site findings enhance the revised rating process under risk-based supervision.
  - 12/31/2020 — ONG-Ongoing
- Clarify BRB role and responsibilities regarding AML/CFT supervision to assess AML/CFT risks in the revised rating process.
  - 12/31/2019 — FA-Fully achieved
- Finalize the revised draft BRB circular on prompt corrective actions.
  - 12/31/2019 — ONG-Ongoing

### Review and publication of revised BRB circulars implementing Law 1/17 (Banking Law)
- Review AFRITAC Central comments transcribed in draft revised BRB circulars and determine appropriate follow-up action.
  - ST FA-Fully achieved — MCM comments note creating deviations from international standards.
- Formally consult the banking profession on amended drafts and review comments to assess follow-up action required.
  - ST FA-Fully achieved
- Publish revised circulars on the BRB website after finalization, specifying reasonable compliance periods as necessary.
  - ST FA-Fully achieved — All the regulatory texts appear on the BRB website with updates.
- Plan a review of implementation status of revised circulars after two to three years to adjust regulatory requirements as needed.
  - LT NA-Not Achieved — Proposed in the TARM at end of cycle.

### Financial safety net and institutional framework for financial stability
- No technical assistance on these topics over the past five years.

### Financial Soundness Indicators (FSIs) — assessment and upgrade
- Burundi stopped disseminating FSIs in 2019.
- With STA assistance, BRB developed a set of twelve core FSIs and nine additional ones for the banking sector, compiled using the 2006 FSIs Compilation Guide’s methodology.
- In 2019 the central bank ceased dissemination citing the need to upgrade the compilation framework to the 2019 FSIs Compilation Guide standards.
- STA conducted two combined FSIs-MFS technical assistance missions in January and November 2023 to initiate upgrading the compilation framework to the 2019 FSI Guide’s methodology.
- Key recommendations to enhance FSI quality include:
  - (i) ascertain robustness of the revaluation of fixed assets approaches adopted by banks to minimize the risk of overestimating the value of these assets in Tier 2 capital;
  - (ii) strengthen review of bank data on cross holdings and their deduction from Tier 1 capital to enhance capital-based FSI ratios quality;
  - (iii) update the list of financial instruments eligible for inclusion in liquidity indicators.
- BRB is developing new bridge tables mapping bank call reports to FSI templates, leveraging granular source data from bank call reports adopted after parts of the Basel III regulatory framework were adopted in 2018.
- With STA’s assistance, BRB is developing a fully automated compilation system to:
  - reduce human errors from manual interventions;
  - improve timeliness of FSI dissemination;
  - enable extraction of extended time series across granular layers to facilitate data validation.
- Expected completion and dissemination timelines:
  - Compilation work expected to be completed by mid-2025.
  - BRB plans to resume regular dissemination of the FSIs by end-December 2025.

### Monetary and Financial Statistics (MFS) — coverage, issues, and remediation
- BRB reports monthly monetary data using standardized report forms (SRFs):
  - SRF 1SR for the central bank;
  - SRF 2SR for other depository corporations (ODCs);
  - SRF 4SR for other financial corporations (OFCs).
- SRFs broadly accord with the concepts and definitions of the Monetary and Financial Statistics Manual and Compilation Guide 2016 (MFSMCG 2016).
- Institutional coverage of SRF 2SR currently includes:
  - 14 commercial banks and 29 deposit taking microfinance institutions (MFIs).
  - Banks hold about 87 percent of ODCs’ total assets, while deposit taking MFIs account for the remaining 13 percent.
- BRB is exploring options for including mobile money in MFS.
  - Two types of electronic money issuers in Burundi:
    - three independent subsidiaries of telecommunications companies offering mobile money to households;
    - five banks issuing mobile money to their clients.
  - Electronic money constitutes approximately 3 percent of broad money, with transactions guaranteed by bank deposits.
  - Nonfinancial electronic money issuers are required to open a trust account or special account in a commercial bank, microfinance institution, or the post office.
- Institutional coverage of SRF 4SR includes 14 insurance corporations and one development bank.
- Major data shortcoming: incomplete central bank account information due to adoption of a new accounting software in 2022 that generates incomplete data, prompting manual data reconstruction and increasing risk of human errors.
- January and November 2023 MFS missions identified classification and sectoring issues on both SRF 1SR and SRF 2SR:
  - For 1SR, recommendation to make the central bank trial balance available to MFS compilers for compilation of 1SR.
  - For 2SR, issues stem from use of old bank call reports rather than granular source data from newly adopted Basel III-based bank reporting forms.
- With STA technical assistance, BRB is developing new bridge tables and automating the MFS compilation process.

*Annex 1) to adjust the recommendations if — IMF Technical Assistance Report content as provided.*

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_Source: https://www.imf.org/-/media/files/publications/tar/2025/english/tarea2025029-print-pdf.pdf_