BANQUE DE LA REPUBLIQUE DU BURUNDI

REGULATION No. 004 /2024 ON OPERATIONS ON SECURITIES ISSUED BY THE BANQUE DE LA REPUBLIQUE DU BURUNDI

OCTOBER 2024

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REGULATION No. 004/2024 ON OPERATIONS ON SECURITIES ISSUED BY THE BANQUE DE LA REPUBLIQUE DU BURUNDI

The Banque de la République du Burundi,

Having regard to Law No. 1/02 of February 4, 2008, on the fight against money laundering and the financing of terrorism;

Having regard to Law No. 1/34 of December 2, 2008, establishing the statutes of the Banque de la République du Burundi, particularly Article 10;

Having regard to Law No. 1/17 of August 22, 2017, governing banking activities;

Having regard to Law No. 1/07 of May 11, 2018, establishing the national payment system;

Having regard to Regulation No. 002/2019 governing the interventions of the Banque de la République du Burundi on the money market;

Having regard to Regulation No. 1/2022 of April 14, 2022, governing participation in the Burundi Integrated Payment and Settlement System (SIPREBU);

Having regard to Regulation No. 2/2022 of April 14, 2022, relating to participation in the Central Securities Depository;

The Banque de la République du Burundi, hereinafter referred to as "the BRB", enacts this regulation.

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Article 1. Purpose

This regulation aims to determine the provisions relating to operations on BRB securities to manage liquidity within the framework of conducting monetary and exchange rate policy.

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Article 2. Scope of Application

This regulation applies to operations on BRB securities.

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Article 3. Definitions

For the purposes of this regulation, the following terms are defined as:

1. BRB Bills: Borrowing instruments issued by the BRB with a maturity (due date) of one year or less. Interest is deducted at source and paid at issuance, and the principal is repaid at maturity;

2. Coupons: Interest generated by BRB Bonds. They are paid periodically on an annual, semi-annual, quarterly, monthly, or weekly basis, in accordance with the characteristics mentioned in the issuance announcement;

3. Central Securities Depository (CSD): an automated platform or system that ensures the custody, conservation, and management of the purchase-sale process of securities operations;

4. DvP: "Delivery versus payment": a delivery against payment system where the exchange of securities for cash payment occurs simultaneously;

5. BRB Bonds: Borrowing instruments issued by the BRB with a maturity (due date) of two years or more;

6. Real Time Gross Settlement (RTGS): a payment and gross settlement system in real time for high-value or urgent amounts, in which the settlement of payment operations between financial institutions occurs individually (transaction by transaction) and continuously;

7. BRB Securities: Financial instruments issued by the BRB to manage liquidity within the framework of conducting monetary and exchange rate policy. BRB securities consist of Bills and Bonds.

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Article 4. Participants

Access to the BRB securities market is free and open to any natural or legal person, resident or non-resident, meeting the necessary technical and financial conditions to conduct transactions on this market.

However, if it deems necessary, the BRB may reserve access to the primary market exclusively for commercial banks or exclusively for non-bank participants.

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Article 5. Access Conditions

Any natural or legal person wishing to invest in BRB securities must hold a securities account or sub-account in the CSD and a current account in the RTGS (Real Time Gross Settlement) payment and settlement system. An investor who does not have an account in the RTGS must go through their intermediary bank/settlement agent for the cash payment portion.

Similarly, any intermediary must have a securities account in the CSD and open a securities sub-account for each of its clients.

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Article 6. Issuance Procedures

BRB securities are dematerialized upon creation and managed electronically throughout their lifecycle in the Central Securities Depository (CSD).

The issuance of BRB securities is also carried out in the CSD, via tender calls.

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Article 7. Issuance Calendar

The issuance of securities is decided by the Bank's Management upon proposal by the Banking Liquidity Forecast Committee.

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Issuance takes place on a date determined by the Banque de la République du Burundi. However, adjudication cannot take place before or on the same day as the adjudication of Treasury securities.

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Article 8. Nature of Securities

BRB securities consist of bills and bonds. They may be issued in local currency or foreign currency and are negotiable on the secondary market.

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Article 9. Maturities and Nominal Value of Securities

BRB bills are short-term securities with maturities of 7, 14, 28, 91, 182, 271, and 364 days.

BRB bonds are medium and long-term securities issued in foreign currency for a duration of two years or more.

BRB bills and bonds are issued with a nominal value of one hundred thousand Burundian Francs (100,000 BIF) and one hundred US Dollars (USD 100), respectively, or the equivalent per security. Said nominal value may be modified by the BRB Management Committee upon proposal by the Adjudication Committee.

The minimum number of securities to be subscribed is determined by the Adjudication Committee, which also has the prerogative to adjust upwards or downwards the number of securities issued by category, based on the offered rates/prices.

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Article 10. Interest Rates and Prices

Bids are conducted at competitive or non-competitive interest rates/prices, or both simultaneously. The maximum/minimum interest rate/price for submissions to BRB security issuances may be fixed by the BRB in the case of competitive interest rates/prices.

In the case of adjudications at competitive interest rates/prices, participants propose only the amount of their bid.

The BRB may issue zero-coupon bonds.

The maximum subscription amount is announced in the tender notice.

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Article 11. Submission Procedures

All offers must be submitted electronically via the CSD or another platform dedicated to this purpose, at the indicated time.

Participants who do not have direct access to the CSD or the platform present their offers through their bank.

Bidders must indicate in their offers the nominal value and the rate/price as a percentage in accordance with the tender conditions. Received offers are ranked in ascending/descending order of the proposed rate/price.

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Article 12. Issuance Announcement

For each announcement, the Banque de la République du Burundi launches a tender call for the sale of securities at least two calendar days before the adjudication date, in the Central Securities Depository (CSD) and/or on its website as well as any other means of wide dissemination.

The related auctions are created and opened in the CSD through which participants send their offers from their web interfaces or any other application. Offers are submitted via the CSD, and in the event of CSD unavailability, market participants may use email, telephone, or any other appropriate channel.

Each tender call must include at least the following information:

1. The category of securities and their series;
2. The reference number of the tender call;
3. The number of securities put up for auction;
4. The unit value of the securities;
5. The deadline date and time for submitting offers;
6. The adjudication date;
7. The value date of the securities;
8. The repayment date of the securities;
9. The minimum number of securities per offer;
10. The maximum number of offers per category of securities.

The Adjudication Committee reserves the right to add any other information likely to improve the conditions for the conduct of the adjudication.

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Article 13. The Adjudication Committee

The modalities relating to the composition and functioning of the Adjudication Committee are determined by an Order signed by the BRB Management.

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Article 14. Processing of Offers

The processing of offers is carried out by the Adjudication Committee in collaboration with the agents of the Service responsible for managing the CSD platform within its purview.

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Article 15. Adjudication Procedures

For tender calls at competitive rates/prices, subscribers are served automatically by the CSD and by priority in the allocation following the ascending/descending order of the proposed rates/prices up to the amount announced in the tender call or that determined by the Adjudication Committee.

If offers presented under the same competitive conditions cannot be fully accepted, the residual amount corresponding to this tranche is distributed proportionally among them at the last retained rate/price (marginal rate/price).

The Adjudication Committee has the latitude to reject any offer accompanied by a rate/price deemed very high/low.

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For tender calls at non-competitive rates/prices, subscribers are served at the same rate/price, namely the weighted average rate/price derived from the adjudication of competitive offers of the same issuance. Each bidder is served for the full amount they offered provided that the sum of offers is less than or equal to the issuance amount or that determined by the Adjudication Committee.

If the total of offers exceeds the issuance amount, bidders are served pro rata of their respective requests based on a percentage equal to the ratio between the amount to be added and the total amount of submissions, while respecting the conditions of the tender call.

The Adjudication Committee reserves the right to reject or accept offers in whole or in part.

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Article 16. Calculation Method for the Amount to be Settled

For BRB bills, the net amount to be paid by the subscriber on the value date is calculated as follows:

C’ = C / {1 + [(I . n)/364]}

Where C’ : Amount to be settled; C : Nominal amount of securities; I : Interest rate as a percentage per year; n : The number of days between the settlement date and the maturity date, excluding the latter.

The amount to be settled is equal to the nominal amount of securities minus the interest.

At maturity, the subscriber is credited with the nominal amount.

For BRB bonds, the net amount to be paid by the subscriber on the value date is calculated as follows:

Amount to be paid = Nominal value of adjudicated bonds * price (in %).

P = c/(1+r) + c/(1+r)² + c/(1+r)³ + …………+ (c+C)/(1+r)^n

Where P: Price to be paid by the subscriber and specified in their offer (as a % of the nominal value); C: Nominal value of subscribed bonds, c: Coupon amount expressed as a % of the nominal value of the bond (the coupon rate is announced in the tender call), r: Expected yield rate of the investment (determined by the subscriber); n: Number of coupon payment periods.

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For zero-coupon bonds, the amount to be settled is calculated as follows:

P = C / (1 + r)^n

Where P: Price to be paid by the subscriber and specified in their offer (as a % of the nominal value); C: Nominal value of subscribed bonds, r: Expected yield rate of the investment (determined by the subscriber); n: Number of periods the bond will last.

Similar to BRB bills, the amount to be settled is equal to the nominal amount of securities minus the interest. At maturity, the final holder of the security is credited with the nominal amount.

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Article 17. Settlement of Operations

Settlement and delivery operations of securities are carried out simultaneously in the RTGS-CSD systems in "DvP" mode.

The amounts to be settled are debited, as the case may be, from the accounts of subscribers having current accounts at the BRB and from the accounts of intermediary banks at the BRB for other subscribers.

The adjudicated securities are credited to the securities accounts of the respective subscribers held in the CSD.

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Article 18. Subscription Certificate

If necessary, the BRB, as the manager of the CSD, issues to the winning subscriber who requests it, a certificate specifying the characteristics of the securities adjudicated in their favor, including notably the maturity, category, number and value of the securities, serial number, value dates, and maturity dates.

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Article 19. Publication and Notification of Adjudication Results

Subscribers participating in the CSD can consult through their web interfaces or other applications allowing access to information, the status of their offers and those of their clients, which shows the details of individual results as soon as the adjudication is completed. Intermediaries/settlement agents then notify the adjudication results to their respective clients by reliable means of communication agreed upon between them.

The global or synthetic results of each adjudication are published on the BRB website on the same day.

For each category of securities, the publication of results mainly covers the following elements:

1. The number of securities requested;

2. The number of securities adjudicated;

3. The number of securities not adjudicated;

4. The total amount to be settled and received by the BRB;

5. The weighted average rate/price;

6. The minimum and maximum rate/price;

7. The marginal adjudication rate/price;

8. The average yield rate.

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Article 20. Payment of Interest and Coupons

Interest on BRB bills is prepaid and calculated based on the formula mentioned in Article 16 above.

Coupons on BRB bonds are calculated by multiplying the nominal value by the coupon rate, and are payable periodically on an annual, semi-annual, quarterly, monthly, or weekly basis, in accordance with the characteristics mentioned in the issuance announcement.

Interest and coupons on BRB bills and bonds are calculated based on a year of 364 days.

At maturity, the coupon amount is paid by automatic debit of the BRB's settlement account to the credit of the account of the holder of the concerned security or that of their intermediary bank. The latter must in turn credit the beneficiary's account with the same amount, on the same value date.

For zero-coupon bonds, no coupon is paid, neither during their life nor at their maturity.

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Article 21. Repayment at Maturity

At maturity, the nominal amount of each security is repaid by automatic debit of the BRB's settlement account to the credit of the final holder's cash account or that of their intermediary bank/settlement agent. In the latter case, intermediary banks must in turn credit the corresponding accounts of their respective clients with the same amount, on the same value date.

The repayment of the securities portion gives rise to simultaneous operations of debiting the corresponding securities accounts of final holders by crediting the maturity account of BRB securities.

The repayment of BRB bills and bonds is carried out in accordance with the conditions announced in the related tender calls, and may be effected in annual, semi-annual, quarterly, monthly, or weekly tranches.

When the maturity date coincides with a holiday, the repayment takes place on the next business day without however considering this additional period in the calculation of interest.

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Article 22. Buyback of Securities by the BRB

The Banque de la République du Burundi may repurchase, via adjudications, before their maturity, the bills/bonds in circulation issued for its own account.

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Article 23. Final Provisions

This regulation enters into force on the day of its publication in the Official Bulletin of Burundi (BOB) and on the BRB website.

Done in Bujumbura, on October 16, 2024

BANQUE DE LA REPUBLIQUE DU BURUNDI Edouard Normand BIGENDAKO Governor.