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2001-10-03 | 79/2001

Guideline 79/2001 on Certificates of Deposits

The Bank of Albania’s Supervisory Council issued this guideline to standardize the issuance, pricing, and accounting treatment of certificates of deposits (CDs) by licensed domestic and foreign banks. It establishes minimum denomination thresholds of 50,000 Lek and 1,000 USD or EUR, defines maturity periods from one to sixty months, and permits fixed, adjustable, or mixed interest rates paid either at maturity or in advance. The regulation further mandates specific chart of accounts classifications, dictates that CDs cannot be liquidated early without bank facilitation, and grants the Supervisory Council authority to set corresponding reserve requirements.

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121 GUIDELINE GUIDELINE ON CERTIFICATE OF DEPOSITS TE OF DEPOSITS Approved by the Supervisory Council Decision of the Bank of Albania No.79, Approved by the Supervisory Council Decision of the Bank of Albania No.79, dated 03.10.2001 CHAPTER 1 GENERAL PROVISIONS GENERAL PROVISIONS

  1. DEFINITION Certificates of deposits (CD) Certificates of deposits (CD) Certificates of deposits (CD) represent a special form of time deposits. They can be issued either as nominal CDs or bearer CDs.
  2. ISSUERS CDs are issued by banks and branches of foreign banks licensed by the Bank of Albania to conduct banking activity, and hereinafter will be referred to as “banks”.
  3. MINIMUM AMOUNT CDs are issued in Lek, US dollar and Euro. The minimum amount for a CD issued in Lek is 50,000 Lek. The minimum amount for a CD issued in USD is 1,000 USD. The minimum amount for a CD issued in Euro is 1,000 EUR. Banks can issue CDs over the minimum amount, but these must be in multiples of 10,000 for CDs issued in Lek and multiples of 500 for CDs issued in USD and EUR.
  4. TERM TO MATURITY Term to maturity of a CD ranges from one month up to sixty months. All CDs with a term to maturity of 1 to 12 months are considered short-term. All CDs with a term to maturity of 12 to 36 months are considered mid-term. All CDs with a term to maturity of 36 to 60 months are considered long-term.
  5. INTEREST RATE The interest rate can be: • fixed (unchangeable) throughout the maturity term; • adjustable according to some acknowledged ratings in the international interbank market; • mixed, which is a combination of the adjustable and fixed rates.
  6. INTEREST The interest can be calculated at time of maturity and paid out at the end of the maturity term or it can be calculated in advance and paid out when the CD is issued.
  7. RESERVE REQUIREMENTS

122 The Supervisory Council of the Bank of Albania decides the reserve requirements for a CD. 8. CIRCULATION REGIME 8.1. On the CD of bearer • All claims on the interest and settlement of principal at the end of the maturity shall rest upon the CD bearer. • Issuing banks formulate the internal procedures in order to establish the forms, features, denomination, type, size, the size of multiples, settlement of CDs and in particular, the internal procedures on the circulation regime and client information on the CD of the bearer. 9. RESTRICTIONS Under no circumstances will the issuing bank liquidate the CD prior to its maturity date. The issuing bank assists its client or the owner of the CD in liquidating the CD before maturity by: • finding a new client who is ready and willing to purchase the CD at hand; • finding a bank with which it has a mutual understanding about the early liquidation of a CD, issued respectively by the banks. In every case CDs are entered into books the issuing bank, which should settle the principal and interest duly. CHAPTER 2 ACCOUNTING IN RELA CCOUNTING IN RELATION TO CERTIFIC O CERTIFICATES OF DEPOSIT TES OF DEPOSIT

  1. CHART OF ACCOUNTS CDs are classified in Class “Operations with clients”, section 27 “Obligations to clients on current accounts and deposits”, and group 274 “Certificates of Deposits” in the chart of accounts. The Structure of group 274 is presented as follows:
  2. Nominal Certificate of Deposits.
  3. Households.
  4. Private commercial and industrial units.
  5. Public commercial and industrial units.
  6. Bank employees.
  7. Other clients.
  8. Accrued interest.
  9. Bearer’s Certificate of Deposit.
  10. Principal.
  11. Accrued interest.
  12. ACCOUNT RECORDING ASSESSMENT All nominal CDs are recorded in the account 2741, whereas the CDs of the bearer are registered in the account 2742. CDs calculated at time of maturity are assessed with the nominal value of the principal and are

123 CHAIRMAN OF THE SUPERVISORY COUNCIL Shkëlqim CANI registered in the respective sub-accounts (27411, 27412, 27413, 27414, 27415, 27421). The calculated interest is assessed as “prorata temporis” and registered in the respective accounts (27419, 27429). CDs calculated in advance are assessed with the price (the spread between the nominal value the pre-paid interest) and are recorded in the respective accounts (27411, 27412, 27413, 27414, 27415, 27421). The accrued interest is assessed “prorata temporis” and recorded in the respective sub-accounts (27419, 27429).

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