Appendix No. 3: Selection of Counterparties for Access to Open Market Operations Executed by Means of Quick Tender Procedures

Appendix No 3 to Article 3, paragraph 3 Selection of Counterparties for Access to Open Market Operations Executed by Means of Quick Tender Procedures

1. For open market operations executed by means of quick tender procedures, counterparties shall be selected in accordance with points 2 and 3.
2. For structural operations conducted by means of outright transactions that are executed by means of quick tender procedures, the eligibility criteria laid down in point 3.2 shall apply.
3. For fine-tuning operations that are executed by means of quick tender procedures, counterparties shall be selected as follows: 3.1. For fine-tuning operations that are conducted by means of foreign exchange swaps for monetary policy purposes and executed by means of quick tender procedures, the range of counterparties shall be identical to the range of entities that are selected for Eurosystem foreign exchange intervention operations and are established in the Member States whose currency is the euro. Counterparties for foreign exchange swaps for monetary policy purposes by means of quick tender procedures do not need to fulfil the criteria laid down in Article 3, paragraph 2 of the Ordinance. The BNB may apply limit-based systems in order to control credit exposures vis-à-vis individual counterparties participating in foreign exchange swaps for monetary policy purposes. The selection criteria for counterparties participating in Eurosystem foreign exchange intervention operations are based on the principles of prudence and efficiency. The criteria relating to efficiency are only applied once the criteria relating to the principle of prudence have been applied: (a) The criteria relating to the principle of prudence comprise the following: creditworthiness of the counterparty, which is assessed using a combination of different methods, e.g. using credit ratings available from commercial agencies and the in-house analysis of capital and other business ratios; a counterparty is supervised by a recognised supervisor; a counterparty has a good reputation and observes high ethical standards; (b) The criteria relating to the principle of efficiency comprise, inter alia , the following: a counterparty's competitive pricing behaviour and its ability to conduct large-volume foreign exchange operations efficiently under all market conditions; and the quality and coverage of information provided by the counterparty. 3.2 For fine-tuning operations conducted by means of reverse transactions or through the collection of fixed-term deposits and executed by means of quick tender procedures, the BNB shall select, for a specific transaction, a set of counterparties from among the institutions that fulfil the eligibility criteria laid down in Article 3, paragraph 2 of the Ordinance and are established in the Republic of Bulgaria whose currency is the euro. The selection shall be primarily based on the relevant institution's activity in the money market. Additional selection criteria may be applied by the BNB, such as the efficiency of the trading desk and the bidding potential.
4. Open market operations conducted through quick tender procedures may also be executed with a wider range of counterparties than those specified in points 2 and 3 if the Governing Council of the ECB so decides.
5. For the purposes of selecting counterparties under this Appendix: 5.1. ‘quick tender’ means a tender procedure, which is normally executed within a time frame of 105 minutes from the announcement of the tender to the certification of the allotment result, and which can be restricted to a limited set of counterparties, as further specified in the BNB General Terms and Conditions; 5.2. ‘foreign exchange swap for monetary policy purposes’ is an instrument used in conducting open market operations whereby the Eurosystem buys or sells euro spot against a foreign currency and, at the same time, sells or buys it back in a forward transaction on a specified repurchase date; 5.3. ‘credit rating’ has the same meaning as in Article 3(1) of Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies.