BANKY FOIBEN'I MADAGASIKARA

MONETARY OPERATIONS DEPARTMENT

INSTRUCTION NO. 008-DOM/19 on the General Framework Governing Mandatory Reserves

The Governor of Banky Foiben'i Madagasikara,

Having regard to Law No. 2016-004 of July 29, 2016, supplemented by Law No. 2016-057 of February 2, 2017, establishing the Statutes of the Central Bank of Madagascar,

Having regard to Decree No. 2014-1684 of October 29, 2014, appointing the Governor of the Central Bank of Madagascar,

HEREBY DECIDES

Article 1: This Instruction establishes the general framework for mandatory reserves, which are among the monetary policy instruments available to Banky Foiben'i Madagasikara, hereinafter referred to as BFM.

Article 2: Mandatory reserves represent the minimum amount that credit institutions must maintain in the form of non-interest-bearing deposits with BFM for a period defined by the latter.

Article 3: Credit institutions authorized to receive public deposits and holding Ariary-denominated accounts in the books of BFM are required to establish mandatory reserves in the form of readily available deposits in their current accounts with BFM.

Article 4: The minimum amount of mandatory reserves is determined based on the asset and/or liability items of credit institutions, in Ariary and foreign currencies, for both residents and non-residents, as they appear in the monthly statement and/or the cumulative balance of their holdings with BFM, according to the details set forth in Article 5 below.

Article 5: The bases for calculating mandatory reserves are as follows:

5.1. Demand deposits and similar items (in Ariary and foreign currencies)

• Ordinary accounts
• Guarantee deposits
• Payables
• Matured treasury bills
• Payables on treasury bills

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5.2. Time and savings deposits (in Ariary and foreign currencies)

• Time deposits
• Special regime savings accounts
• Outstanding treasury bills

Article 6: Credit institutions subject to the establishment of mandatory reserves shall submit a declaration to BFM in accordance with the model attached as an annex.

Article 7: An Instruction regarding the mandatory reserves system specifies the calculation, declaration, and establishment procedures, as well as the mandatory reserve coefficient.

Article 8: In accordance with the procedures stipulated in Article 7,

• the entire mandatory reserve is established based on the average amount of the operational date balance of the credit institution's current account opened in the books of BFM;
• mandatory reserve surpluses identified at the end of an establishment period are not carry-forwardable.

Article 9: A credit institution that fails to comply with the minimum reserve requirements is subject to a penalty calculated based on the amount of the identified shortfall, the number of days in the relevant period, and the number of infractions committed. Where applicable, the sanctions provided for in the banking law shall apply according to the following steps:

• for a first shortfall, a monetary sanction at the marginal lending facility rate plus 5 percentage points shall be imposed on the credit institution;
• in case of infractions over successive establishment periods, a progressive increase of 5 percentage points per period shall be applied, without exceeding three successive shortfalls and three shortfalls within a fiscal year;
• in case of non-compliance with this latter measure, the penalty rate applied to a third shortfall shall be doubled until the situation is regularized. Furthermore, the credit institution's file shall be transferred to the Banking and Financial Supervision Commission (CSBF), which may impose one or more of the sanctions provided for by the banking law.

The calculated penalty interest shall be automatically debited to the credit institution's current account opened in the books of BFM. The posting date of the entry shall be communicated to the concerned credit institution.

Delays in transmitting information, as well as the submission of inaccurate documents or information, are subject to the sanctions or penalties provided for by the banking law.

Article 10: Annex

The annex forms an integral part of this Instruction.

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Article 11: Entry into Force

This Instruction shall enter into force as of November 1, 2019.

Article 12: Final Provisions

All provisions prior to this Instruction are hereby repealed.

Antananarivo, October 25, 2019

THE GOVERNOR ALAIN H. RASOLOFONDRAIBE

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ANNEX

MANDATORY RESERVES

DECLARANT:

STATUS AS OF:

| MANDATORY RESERVES BASE | RESIDENTS | NON-RESIDENTS | EXTRACT OF MONTHLY STATEMENT | | :--- | :--- | :--- | :--- | :--- | :--- | | | Ar | FOREIGN CURRENCY | Ar | FOREIGN CURRENCY | | | Ordinary accounts | | | | | 210 | | Guarantee deposits | | | | | 213 | | Payables | | | | | 2186 | | Matured treasury bills | | | | | 220 | | Payables on treasury bills | | | | | 2286 | | | | | | | | | Subtotal (1) | | | | | | | | | | | | | | Time deposits | | | | | 211 | | Special regime savings accounts | | | | | 212 | | Outstanding treasury bills | | | | | 220 | | | | | | | | | Subtotal (2) | | | | | |

TOTAL = (1) + (2)
Mandatory Reserves to be Established TOTAL x X%

At ____________________, on ____________________

(Bank signatures and seal)