Capital Adequacy Regulations, 2001

This document lists the regulation governing capital adequacy of licensed banks and financial institutions in Tanzania. It states that the principal objective of these regulations is to provide the depositors with reasonable protection by enhancing the bank/ institutions' capability to absorb unexpected losses and minimize the incidence of bank failure.

Defining the required minimum capital of banks, the directive defines:

• Initial capital norms;
• Requirements to operate above the minimum capital required;
• Conditions leading to suspension of lending operations and other services, and the steps to resume the same;
• Conditions for establishment of regional unit bank;
• Minimum capital requirement for the establishment of:
  • Bank and a regional unit bank with trust functions;
  • Bank with expanded powers;
  • Bank with a branch abroad;
• Minimum capital ratios;
• Risk weighted assets and off balance sheet exposures;
• Deductions from available capital;
• Capital deficiency.

For financial institutions, the directive defines:

•  Initial capital norms;
• Subordinated debt as a qualifying condition.

Further, the regulation provides directions for all banks and financial institutions for:

• Computation of capital position;
• Responsibility of external auditors;
• Submission of reports.

Finally, the document lists the administrative penalties that banks and financial institutions shall be subjected to in case of violation of any of the provisions of the regulation.