Mutual Banks Act, 1993 (Act No. 124 of 1993)RegulationsRegulations relating to Mutual BanksChapter II : Risk-based Returns and Instructions, Directives and Interpretations relating to the completion thereof18. Cash-management schemes |
Unless otherwise prescribed in these Regulations, the reduction of balances resulting from the application of a cash-management scheme shall be taken into account in completing the prescribed forms only where all of the following circumstances apply, namely—
| (a) | a cash-management scheme shall only be conducted for those companies that are subsidiaries of the same holding company and they are included in the consolidated audited annual financial statements of such holding company, as well as for such holding company; |
| (b) | transfers of debit or credit balances from individual accounts to a central group account must be shown as actual transactions on individual accounts, as well as in the accounting records of the individual account holders, in order to ensure that the accounting system of a bank reflects the true debtor/creditor and legal relationships; |
| (c) | a mutual bank must provide its clients with statements of account evidencing the effect of transfers, whenever such transfers are made between their accounts and a central group account, to enable its clients to make the necessary entries to ensure that their accounting records reflect their true debtor/creditor and legal relationships vis-à-vis the mutual bank (except for uncleared items, balances in the books of clients should therefore correspond to balances on n client accounts in the accounting system of the mutual bank); |
| (d) | a group account, or any other account to which transfers are made, must be in the name of a legal entity in order to protect the legal position of the mutual bank; |
| (e) | transfers between client accounts and a central group account must be supported by legal authorization granted to the mutual bank by its clients, including resolutions of clients’ boards of directors, to effect such transfers; |
| (f) | agreements whereby authorization is granted as contemplated in paragraph (d) must legally limit the mutual bank’s risk to the debtor/creditor relationship that exists after transfers have been effected; |
| (g) | statutory returns must reflect the true debtor/creditor and legal relationships of the mutual bank vis-à-vis its clients; |
| (h) | a mutual bank entering into agreements relating to cash-management schemes with its clients must ensure that the clients are fully aware that after the transfer of balances on their accounts, they have no claim against or obligation to the mutual bank in respect of the amounts so transferred; |
| (i) | a mutual bank must ensure that all agreements relating to cash-management schemes entered into by it with clients are legal and binding; and |
| (j) | all cash-management schemes involving the transfer of balances among different legal entities, as well as a standardized agreement, providing for the conduct of such a scheme, entered into between a mutual bank and its clients, must be submitted to the Authority for his approval. |