2024 – Benin’s New Banking Law: Implementation of the WAEMU Banking Uniform Law
1. Beninese law No. 2024-14 dated 2 September 2024 regulating banking activities (the “New Banking Law”)
On 2 September 2024, the President of the Republic of Benin promulgated the New Banking Law.
The New Banking Law implements in Benin the West African Economic and Monetary Union (“WAEMU”) banking uniform law which was adopted by the Council of Ministers of the WAEMU on June 2023 (the “WAEMU Banking Uniform Law”).
We do not, however, have any information on whether the New Banking Law has been published in the Beninese official gazette, which we understand to be a condition that needs to be met for the New Banking Law to officially become applicable in Benin.
As expected, the provisions of the New Banking Law seem to be identical to the provisions of the WAEMU Banking Uniform Law, which is normal because that is the whole purpose of the WAEMU Banking Uniform Law – i.e., to have similar banking laws across WAEMU countries (including Benin).
We have previously published an article on the WAEMU Banking Uniform Law (please click here to access the article). Our input below on the New Banking Law is similar to our input on the WAEMU Banking Uniform Law (which again, is absolutely normal because the whole purpose of the WAEMU Banking Uniform Law is to have similar banking laws across WAEMU countries (including Benin), but we have added more relevant details where necessary.
On another note, we understand that Burkina Faso will also soon adopt its own local law to implement the WAEMU Banking Uniform Law. But we have no visibility into when this might happen.
For completeness, we have no information on when the other WAEMU countries (i.e., Guinea Bissau, Ivory Coast, Mali, Niger, Senegal, and Togo) will adopt their own local laws to implement the WAEMU Banking Uniform Law.
2. Main innovations of the New Banking Law
This section does not intend to be exhaustive. It sets out the main innovations brought by the New Banking Law.
- New scope of application: The New Banking Law applies to banks, credit financial establishments, payment establishments, e-money companies, banking holdings, and financial companies.
- A “bank” is defined as a legal entity that is allowed to carry out all banking activities.
- A “credit financial establishment” is defined as a legal entity (other than a bank) that carries out, as a profession, one or more banking activities in accordance with the conditions and limits set out in its agrément or licence.
- A “payment establishment” is defined as a legal entity (other than a credit establishment, an e-money company, a financial company, or a microfinance institution) that provides, as a profession, payment services.
- An “e-money company” is defined as a legal entity (other than a credit establishment, a payment establishment, a financial company, or a microfinance institution) that issues and distributes, as a profession, e-money.
- A “banking holding” is defined as a credit establishment that is not controlled by another credit establishment or a financial company, and that holds at least one subsidiary that has the status of a credit establishment within the West African Monetary Union.
- A “financial company” is defined as a company which principal activity is to take and manage financial stakes and which (either directly or via the intermediary of companies with the same corporate purpose) controls one or more companies that carry out financial transactions with at least one being a credit establishment.
- The following entities do not fall within the scope of application of the New Banking Law:
- the Banque Centrale des Etats de l’Afrique de l’Ouest - i.e., the central bank;
- the public treasury;
- entities (other than the ones listed in the first bullet point above) licenced by the financial market regulator of the West African Monetary Union;
- entities licenced by the insurance regulator;
- social securities institutions;
- the post office (but the post office – for its transactions pertaining to financial services and postal cheques – needs to provide the central bank with any information/documents/clarification that said central bank requires);
- the Caisse des dépôts et consignations du Bénin also known as CDC Bénin, which is a public financial institution in charge of finding solutions to issues pertaining to investment financing in Benin;
- microfinance institutions (as they are regulated by a separate piece of legislation); and
- international financial institutions and foreign aid/foreign cooperation public institutions, whose activities in Benin are authorised by treaties or international conventions to which Benin is a party.
- New definitions: The New Banking Law introduces new concepts. For example, it introduces the notion of “Islamic banking activity”, which it defines as an activity consisting of carrying out, as a profession, one or more Islamic banking transactions. It also introduces the notion of “FinTech” which is defined as a financial technology company that can carry out banking transactions as per the conditions and within the limits set out in its licence.
- Details on the role played by local authorities: The New Banking Law sets out in detail the role played by each relevant local authority within the banking sector (e.g., it defines the missions of the Beninese Minister of Finance, it defines the missions of the central bank, it defines the missions of the banking commission of the West African Monetary Union, etc.).
- More comprehensive definition of banking transactions: Banking transactions are defined in a more comprehensive way in the New Banking Law (e.g., funds received from the public now expressly include funds pertaining to certificates of deposit, payment services are now clearly identified and include inter alia payment initiation services).
- Express licensing requirements: FinTech companies are now subject to express licensing requirements to be able to carry out their activities.
- Entire new chapter on Islamic finance: The New Banking Law has a new chapter on Islamic finance. Banks, credit financial establishments, and payment establishments can carry out Islamic banking activities either exclusively or via a specific branch. A few examples of special features of Islamic finance are as follows: the perception of interest is forbidden, the payment of interest is forbidden, speculation is prohibited, etc.
- The New Banking Law formally introduces the notion of délit d’inité or insider trading, which is prohibited. Insider trading is defined as the use of confidential information by an individual (e.g., the director of a bank) that said individual has become aware of during the course of their activity, to carry out (whether directly or indirectly) transactions on their own account or for the benefit of other persons.
- Proper regulation of the activities of intermediaries: The New Banking Law provides further details on how the activities of intermediaries are regulated. These intermediaries are banking agents and payment services agents. They can carry out their activities only if they are registered with the central bank. This registration can be cancelled under certain circumstances (e.g., at the request of the intermediaries).
Banking agents can, for example, help a local bank enter into a banking transaction with a customer. Payment services agents can, for example, promote the payment services offered by a payment service provider.
- More detailed rules on control of banks, financial credit establishments, payment establishments, e-money companies, banking holdings, and financial companies: The control of these entities by the relevant local authorities is more stringent under the New Banking Law (e.g., banking establishments of a systemic national importance are subject to a more thorough control by the Commission Bancaire de l’UMOA – i.e., the “Banking Commission”, which is the entity in charge of overseeing the establishments that operate in the banking sector).
- More rules on protection of users of banking services: The New Banking Law provides additional protection for users of banking services in Benin (e.g., a customer that has a complaint against its bank, which they deem has not been properly addressed by said bank can lodge a complaint with the Banking Commission).