CENTRAL BANK OF MADAGASCAR

DIRECTION

MONETARY OPERATIONS

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INSTRUCTION NO. 004-DOM/23

amending certain provisions of Instruction No. 005/2021 of 3 December 2021 implementing Law No. 2019-009 of 22 January 2020 governing repurchase operations

The Governor of the Central Bank of Madagascar,

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

Having regard to Law No. 2019-009 of 22 January 2020 governing repurchase operations on the financial market;

Having regard to Decree No. 2019-2069 of 6 November 2019 repealing the provisions of Decree No. 2014-1684 of 29 October 2014 on the appointment of the Governor of the Central Bank of Madagascar and on the appointment of the Governor of the Central Bank of Madagascar;

Having regard to Instruction No. 005/2021 of 3 December 2021 implementing Law No. 2019-009 of 22 January 2020 governing repurchase operations;

DECIDES

Article 1:

This Instruction aims to amend the provisions of Article 3 and the Annex of Instruction No. 005-DOM/2021 of 3 December 2021 implementing Law No. 2019-009 of 22 January 2020 governing repurchase operations, and to introduce a new article therein.

Article 2:

The provisions of Article 3 of Instruction No. 005-DOM/2021 of 3 December 2021 implementing Law No. 2019-009 of 22 January 2020 governing repurchase operations are amended as follows:

Article 3 (new): Haircuts and Late Interest

3.1. Within the framework of BFM's monetary policy operations, the haircuts applied to securities placed in repurchase are determined based on their remaining maturity.

The haircuts to be applied for each eligible security are described in the table below:

Securities	Maturity < 6 months	6 months < Maturity ≤ 12 months	Maturity > 1 year	Maturity > 2 years	Maturity > 3 years
BTA	2.5%	5.0%
BTF	2.5%	5.0%	10.0%	12.5%	15.0%
TCN	2.5%	5.0%
CDP	2.5%	5.0%	10.0%

On the date of transfer of a repurchase operation, the value of a security placed in repurchase is determined according to the calculation method presented in the Annex.

3.2. In the event of an agreement between the Parties to extend the repurchase date, following a request initiated by the transferor before the maturity date and accepted by the transferee, late interest shall apply. This interest will be calculated on the final repurchase price, from the initial repurchase date until the date of its actual payment. The late interest rate is set at the marginal lending facility rate plus 5 percentage points.

Article 3:

The Annex to Instruction No. 005/2021 of 3 December 2021 implementing Law No. 2019-009 of 22 January 2020 governing repurchase operations:

Annex (new)

The provisions of the Annex to Instruction No. 005-DOM/2021 of 3 December 2021 implementing Law No. 2019-009 of 22 January 2020 governing repurchase operations are amended as follows:

Calculation of the value of a security placed in repurchase

The value of a security (V) to be placed in a repurchase is obtained under the following assumption:

V * (1 - d) ≥ N * (1 + (p / 360) * i) with V_E = V * (1 - d)

Hence, the nominal loan amount is determined from the following formula:

Σ (from i=1 to n) [V * (1 - d) / (1 + (p / 360) * i)] ≥ N

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V_E : Value at maturity of the security placed in repurchase
V : Nominal value of the security placed in repurchase
N : Nominal amount of the loan
p : Loan duration (in days)
i : Loan interest
d : Haircut

Article 4:

This Instruction shall enter into force as of 24 MAY 2023

Antananarivo, on 23 MAY 2023

Signature
THE GOVERNOR
AIVO HANDRIATIANA ANDRIANARIVELO