The Rwandan financial system is currently governed by the law No. 1/017 of 23 October 2003 on the regulation of banks and financial institutions.

This law came to improve the regulation of the Rwandan financial system, given the significant role of regulation in the reliability of a banking system.

Indeed, the banking law provides further common legal framework for all stakeholders, regulation and supervision of banks and financial institutions and the strengthening of a system of protection of depositors and third parties

So to make the most efficient banking system, the law allows the central bank to issue managements rules and standards applicable to banks and financial institutions. (Article 34)

This regulation by the central bank mainly:

1. The minimum capital of banks and financial institutions as well as the conditions under which holdings may be taken or extended in these institutions;
2. The implantation conditions of agencies and counters;
3. The conditions under which banks and financial institutions can take stakes;
4. Management standards that banks and financial institutions must comply in particular to ensure their liquidity, solvency and balance of their financial structure;
5. The accounting, accounts consolidation rules and the disclosure of accounting documents and information for both the authorities and the public;
6. Instruments, rules and conditions of the general credit policy, without prejudice to legal provisions in the statutes of the Central Bank.

The Central Bank may also set conditions that can perform operations banks or financial institutions in their relations with customers and the conditions of competition.

In terms of the protection of depositors and third parties, prudential standards were established requiring banks and financial institutions to comply with the management standards to ensure the liquidity, solvency and the balance of their financial structure. They must adopt and apply coverage ratios and risk division. (Article 50).

Note also that in case of financial difficulties, the Governor of the Central Bank may order the shareholders to provide the institution in trouble all the necessary support. It can also organize, always in the logic of protection of depositors and the proper functioning and reliability of the banking system, a combination of all banks and financial institutions. (Article 55)

The same law requires banks and financial institutions to develop an internal control system and a thorough external audit following a pattern set by the Central Bank. (Article 68).

Regarding the monitoring of compliance by banks and financial institutions of legislation and regulations applicable to them, the 2003 law entrusts this mission to the Central Bank and also plans to sanction the failures. (Article 38)

The central bank also examines their operating conditions and ensures the quality of their financial situations.

It ensures compliance with the rules of conduct of the profession.

As for the nature of penalties, they are either financial or disciplinary.

And Circular No. 19/2008 on the array of sanctions under the Banking Act of 2003, distinguishes the categories of breaches that could lead to sanctions by the Central Bank, and the procedure followed by it in application of sanctions.