Law on creation of non-public banks in Syria

This is a non official translation
Law no. ( 28/2002 )

President of the Republic

By virtue of the rules of Constitution & as per the approval of People’s Assembly at the session held on 29/3/2001

Issues the following:

Article 1

- It is permissible that banks be set up in the form of private Syrian joint companies or in the form of Syrian joint stock companies to which the banking public sector or the Syrian General Insurance Establsihment contribute 25% of their capital; and they carry out their activities under the supervision and inspection of the Central Bank of Syria as per the rules of basic monetary law No./87/ of 1953 & its amendments as well as the effective regulations of currency in all rules that do not run counter to this law. These companies shall be hereafter called “the Bank”.

Article 2

- The banks mentioned above in Article 1 of this law shall be set up according to the following conditions:

That all their stocks shall be accessible for circulation except the stocks of public sector.

That all their stocks shall be possessed by the citizens of the Syrian Arab Republic whether they were real persons or legal entities.

Article 3

- It is permissible, by virtue of a decision of the Prime Minister’s office, according to the specific regulations of this law, and contrary to the rules of item 2 of the previous Article, that subjects of Arab & foreign states, whether they were real persons or legal entities, take part or contribute to the establishment of the bank or to purchase its stocks provided that their shares shall not exceed the ratio defined in Article 9 of this law, and that the value of their contributions shall be paid in foreign currency with the real current exchange rate in the market.

Article 4

A- The party applying for a permission shall submit the application to the Central Bank of Syria which will study it in the light of the rules of this law and the laws and regulations in effect, taking into consideration the qualifications, the efficiency and the reputation of the party applicant as well as the conditions and the needs of the banking sector.

Then, it (the Central Bank) will refer the application with the study and proposal to the Minister of Economy & Foreign Trade for putting down his opinion and thereby referring it to the Prime Minister for issuing his decision on the permission.

B- The decision on permission shall be issued in three months as of the date of registering the application at the Central Bank of Syria. If such a decision was not issued in the mentioned date the application shall be considered as disapproved.

In both cases of implicit or explicit disapproval the party applying for the permission shall have the right to re-apply, once again, to the Central Bank of Syria three months after the end of the period defined in item B above.

C- Following the promulgation of the decision of permission in the official gazette, the Central Bank of Syria shall register the bank at the banks register of the government commission. The bank shall have no right to begin its business before such registration.

D- The permission for establishing a bank shall be considered null unless the bank begins its business in one year as of the date of its registration at the register of banks.

E- It is not permissible for the party that obtained a permission to establish a bank as per the rules of this law to waive it to others, wholly or partially, or under any pretext.

F- The Minister of Economy & Foreign Trade shall issue, by virtue of a proposal given by the Monetary & Credit Board, a decision defining the bases according to which the registration applications shall be submitted or investigated and how to organize the new bank register as per the rules of this law, as well as, the expenses of investigation and registration which the banks must pay.

Article 5

- The bank head-office shall be in one of the governorate`s city center chosen by the applicant. And it is permissible, by virtue of an application submitted by its Board of Directors and as per the approval of the Central Bank of Syria, that branches of this bank shall be set up in the Syrian Arab Republic and abroad.

Article 6

- In the document of bank permission there shall be defined the following:

  1. The capital of the bank, which must not be less than 1500 million Syrian pounds.
  2. The ratio of the public sector’s contribution to the capital of bank if it was in the form of a joint stock company.
  3. The number of stocks to which the capital is distributed and the value of each stock which must not be less than 500 Syrian pounds.
  4. The shares of founders shall not be less than 25% of the Bank capital on the condition that the share of a real person shall not exceed 5% of the bank capital, and the share of a legal entity shall not exceed 49% except the share of state which remain, in all cases, according to the ratio defined in Article 1 of this law, if the bank was a joint stock company.
  5. When studying the applications of legal entities for having shares in the bank capital, their banking experiences, international reputation and financial cover (Capability) shall be taken into consideration according to the prevailing international rules and standards.

Article 7

- The stock surplus than the shares of founders shall be offered for public subscription. Some 50% of the nominal value of each share shall be paid, and the remaining value of share shall be paid in a six months period as of the date of permission for establishing the bank.

Article 8

A- The value of the Syrian resident citizens’ shares shall be paid in Syrian currency.

B- The value of foreign shares shall be pain in foreign currency.

Article 9

A- The founders have no right to waive the ownership of their stocks or shares at the bank to others except after the issuance of three profitable budgets.

B- It is not permissible that the waiver of the stocks or shares of the bank capital shall be to any party but to Syrian persons or non-Syrian party on whom the Central Bank of Syria shall agree in advance, and by the approval of the prime ministry.

In all cases, the ratio of ownership for non-Syrians shall be 49% of the bank capital.

Article 10

- It is permissible that the bank capital be increased as per the terms defined in its statute on the condition that preference for the subscription to the new increase in capital shall be given to the original shareholders, in the same ratio of their contribution. In this case, the public sector’s share must not be less than the ratio defined in Article 1 of this law in the case the bank was a joint stock company.

Article 11

- The joint bank newly-established as per the rules of this law shall not be subject to the rules and regulations mentioned in the legislative and organizational texts related to the companies and establishments of the public sector, whatever the ratio of the state and public sector’s shares were in the bank capital.

Article 12

A- The bank shall practice financial services and banking business of all kinds as per the rules of the statute of banks and laws and regulations in effect in all matters that do not run counter to the rules of this law. These services and business include:

  1. Acceptance of deposits in Syrian and foreign currency for different terms.
  2. Discounting the commercial bills as well as bills of exchange and order, the discount of all bills of credit and other bills in general.
  3. Discounting the bills of loan accessible or non-accessible for circulation.
  4. Financing the commercial operations and granting loans and loans in advance of all kinds against assets or financial or other guarantees which are defined by the Central Bank of Syria.
  5. Issuing certificates of deposit and interest-producing circulated values as well as bills of draw, bills of exchange, letters of credit, checks, drafts of all kinds and trading in these bills.
  6. Ensuring the required facilities for the operations of keeping money, bank notes, precious things and documents safe.
  7. Opening current and saving accounts.
  8. Offering the services of payment & collecting.
  9. Issuing the instruments of payment including bank drawings, pay & credit cards and travel checks & their management as per the instructions issued by the Management Committee of Currency Office.
  10. Selling and purchasing all tools of payment in foreign currency and dealing with them at the immediate and later payment markets according to the regulations of currency in effect.
  11. Loans for different terms and acceptance of all kinds of guarantees.
  12. Purchasing and selling the stocks and bills of share-holding companies the stocks of which are offered for public subscription as well as other bank notes admissible for circulation in the Syrian Arab Republic in accordance with the rules and ratios defined by the Central Bank of Syria.
  13. In general, carrying out all financial and banking services, as well as, discount operations, credit and guarantee issuance, in the Syrian Arab Republic, for itself or for others, or in collaboration.

B- By virtue of an advanced approval of the Central Bank of Syria, the bank has the right to carry out the following:

  1. Taking share through an Arab or foreign capital within the limits and conditions defined by the Central bank of Syria.
  2. Purchasing real estates exclusively required for carrying out its activities inside the territories of the Syrian Arab Republic and abroad.


Article 13

A- The bank affairs shall be run by a Board of Directors elected by the shareholders as per the rules of its statute which defines their qualifications and the conditions required.

B- The Central Bank of Syria has the right to make sure of the qualifications and conditions mentioned above in item a, and to take all necessary procedures to form the Board of Directors in line with those qualifications and conditions.

Article 14

- The Minister of Economy and Foreign Trade shall appoint the representatives of public sector at the joint bank board of directors from among the employees who enjoy a banking experience on the basis of a proposal by the Monetary & Credit Board at the ratio of stocks that the public sector possesses. They shall have no right to interfere in the election of the remaining members or dismissing them. The term of their presence at the Board shall not be restricted to the period defined in the statute on membership at the Board of Directors.

Article 15

A- The statute shall define the number of the board and the term of their membership as well as the number of stocks that they must possess to obtain the membership of board of directors.

The Central Bank of Syria has the right to estimate this number according to the situation of the bank and in guarantee of its interest and the interest of shareholders and claimants. The Chairman of Board of Directors has to possess twice more than the stocks possessed by the member, provided that the maximum share of the real person be honoured, out of the bank capital as provided in Article 6 of this law.

B- It is not imperative that this number of stocks be possessed when election is conducted, but the quorum can be completed in one-month period as of the date of election or membership shall certainly be cancelled.

Article 16

- Decisions of the Board of Directors shall not be considered legal unless they are taken by the majority of members present at the session provided that one of the representatives of shareholders of the public sector which has a share in the joint bank capital be among them when decisions related to the main topics defined by the statute are taken.

Article 17

A- The Director-General of the bank shall be elected from among the banking experts and appointed by a decision taken by the Board of Directors.

B- The Director-General at joint banks shall not be permitted to occupy both positions as Director-General and as Chairman or member of the Board of Directors.

C- Any person who occupies the position of Director-General or Assistant Director-General or is a Director at the bank shall neither have the right to make private business for himself, nor to be member at private individuals’ companies or member at the Board of Directors of any company.

Article 18

A- The founders shall work out the draft statute of the bank in conformity with the nature of its business and the formula of its structure and in line with the statute of banks which is being prepared by the Central Bank of Syria. It is permissible that this statute define the nationality of the Chairman and members of the Board of Directors, their number, ages, premiums, compensations, the bases of their election, the ration representation from among non-Syrians at the Board of Directors, and in line with the ratio of their shares at capital as well as defining the mechanism of action at the Board and the capital and the value of the stock in local currency & its equivalent in foreign currency or vice versa without compliance with the rules of laws and regulations in effect , particularly the Law of Commerce No./149/ of the year 1949 & its amendments. This statute shall be issued by virtue of a decision taken by the Minister of Economy & Foreign Trade as per a proposal by the Monetary & Credit Board.

B- The Bank’s Board of Directors shall work out the employees statute on the basis of the Labor Code in effect No. 91 of 1959 and its amendments.

C- The Bank’s Board of Directors shall work out all regulations related to the business of the Bank and its branches, and they shall be passed to the Monetary & Credit Board for approval.

General Rules

Article 19

- Any bank which is given the permission as per the rules of this law shall be obliged to:

  1. Deposit a no interest frozen account with the 10% ratio of its subscribed capital at the Central Bank of Syria. This sum is considered one of the elements of its fixed assets that shall be returned to it when its business in liquidated.
  2. Appoint at the commencement of its business an external inspection commissioner named by the General Assembly of the bank shareholders and his tasks shall be defined in the statute.
  3. Abide by the international accountability standards.
  4. Use the modern international technologies at his business, domestically and overseas.

Article 20

- Without any limitation of the rules of item 12, paragraph A of Article 12 of this law, the new banks shall be prohibited, as per the rules of this law, from dealing, directly or indirectly, with the business mentioned bellow:

  1. The commercial and industrial business and activities or any other activity, which has nothing to do with the banking business.
  2. Having shares in industrial or commercial or agricultural or service or tourist establishments.
  3. Opening credits or granting facilities to the Chairman and members of the bank Board of Directors and its General Director and the inspectors and the bank audits or employees at the state bodies who have a direct relation with the inspection or following up the activities of the bank.

Article 21

- Any bank established as per the rules of this law shall not have the right to stop practicing its activities, partially or fully, for any period of time before obtaining, in advance, the approval of the Central Bank of Syria.

Article 22

- In conformity with the special rules provided in the Basic Monetary Law issued by virtue of the legislative decree No./87/ of the year 1953 and its amendments and the basic international principles of banking inspection, the Central bank of Syria shall have the right to:

  1. Inspect the new banks according to the rules of this law with respect to all matters related to their performance and the safety of their dealing and work progress and activities as well as their abidance by their statutes and the rules of this law.
  2. Appoint a banking accounts inspector or any person whom it authorizes to carry out the work of auditing the accounts entries of the bank and its books, registers and correspondence to make sure that all its banking operations and activities are right.
  3. Take, when necessary, all suitable measures to set the conditions of the bank right and to protect the rights and funds of shareholders, depositors and all clients dealing with it.
  4. The Central Bank of Syria shall, in all its supervision and inspection measures, observe the principles of secrecy required for the banking profession.

Article 23

- The bills, letters and telegrams exchanged between the Syrian banks and different parties and establishments inside and outside the country through the developed world communications have the same strength which other instruments enjoy due to the laws and regulations in effect according to the instructions issued by the Central Bank of Syria.

Article 24

- The new banks established according the rules of this law shall be permitted to transfer the dues, stated bellow, of their accounts in foreign currency resulted from their business based on their budgets legalized duly:

  1. The profits and interests achieved annually as a result of the stocks and shares of the subjects of Arab and foreign countries whose shares were originally paid in foreign currency.
  2. The premiums and compensations of the non-Syrian resident members of the bank Board of Directors and those ones who are in the same position.
  3. 50% of net wages, salaries and premiums and 100% of the compensations for the end of service for Arab and foreign experts and technicians employed at banks.
  4. The sums due on banks, which are required to be paid and transferred abroad in foreign currency.

Article 25

- The ratio of income tax on the net profits achieved by new banks established as per the rules of this law shall be defined for all their activities with 25% including the contribution to the defence effort. This tax shall be excluded from the addition for the advantage of the Local Administration.

Article 26

- The rules of the legislative decree No./6/ issued on 22/4/2000 shall not be applied to the new banks established as per this law.

Article 27

- The bank shall be subject to the rules of the Commercial Law No. 149 of the year 1949 and its amendments and the basic monetary system issued as per the legislative decree No. 87 of the year 1953 and its amendments as well as the regulations of the currency in effect on all what does not go in contravention of the rules of this law.

Article 28

- The Minister of Economy and Foreign Trade shall issue the instructions required for the implementation of the rules of this law on the basis of a proposal given by the Central Bank of Syria.

Article 29

- This law shall be promulgated in the official gazette.

Damascus on 16/4/2001

President of the Republic
Bashar al Assad

Disclaimer:

These materials have been prepared for educational and information purposes only. They are not legal advice or legal opinions on any specific matters. Transmission of the information is not intended to create, and receipt does not constitute, a lawyer-client relationship between Damascus Bar Association, the author(s), or the publisher (Law Firm, Bar Association or other legal publisher) and you. Readers should not act upon this information without seeking professional counsel.

The opinions expressed in the articles found on our Legal Library are those of the author(s), or the publisher (Law Firm, Bar Association or other legal publisher) and not those of Damascus Bar Association.