Instruction No. 001-22-DSP of June 16, 2022 on the Operation of the Automated Clearing and Settlement System

INSTRUCTION No. 001/22-DSP on the Operation of the Automated Clearing and Settlement System

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 Law No. 2019-009 of January 22, 2020 governing repurchase operations on the financial market; Having regard to Decree No. 2019-2069 of November 6, 2019 repealing the provisions of Decree No. 2014-1684 of October 29, 2014 on the appointment of the Governor of the Central Bank of Madagascar and on the appointment of the Governor of Banky Foiben’i Madagasikara; Having regard to Instruction No. 001-DSP/09 of September 22, 2009 on the operation of the Automated Clearing and Settlement System; Having regard to Instruction No. 001-DSP/2017 of December 22, 2017 amending certain provisions of Instruction No. 001-DSP/09 on the operation of the Automated Clearing and Settlement System; Having regard to Instruction No. 01/2019-DSP of February 6, 2019 on the administration and upgrading of the network support infrastructure for the Automated Clearing and Settlement System.

DECIDES

GENERAL PROVISIONS

Article 1: Subject Matter This instruction aims to set the operating conditions for the Automated Clearing and Settlement System established and managed by Banky Foiben’i Madagasikara.

Article 2: Components of the Automated Clearing and Settlement System The Automated Clearing and Settlement System comprises two systems:

• the automated clearing system or "Teleclearing",
• the Real Time Gross Settlement automated system or "RTGS". Any interbank operation intended to move at least one current account held on the books of Banky Foiben’i Madagasikara must pass through this system. Operations in the Automated Clearing and Settlement System are exclusively denominated in Ariary.

Article 3: Transmission of Payment Orders Payment orders are transmitted, within the scope of the Automated Clearing and Settlement System, by electronic means. In case of dispute over data or digital images, source documents, stamped "cleared" or "executed" for transfers or "presented" or "represented" for cheques, must be made available to the requesting system participants to serve as evidence.

Article 4: Participants in the Automated Clearing and Settlement System Participants in the system are:

1. credit institutions holding a current account opened on the books of Banky Foiben’i Madagasikara,
2. the Public Treasury,
3. any other institution authorized by Banky Foiben’i Madagasikara. Participation in Teleclearing automatically entails participation in RTGS.

Article 5: Participation Statuses Participants in the systems referred to in Article 4 may participate under different statuses:

• the direct participant acts either for its own account or for the account of others. Consequently, it assumes technical and financial responsibility, vis-à-vis all participants, for operations transiting through its intermediary.
• the indirect participant is known to a system. It holds a settlement account but uses the technical infrastructure of a direct participant for its exchanges. It bears full financial responsibility for its exchanges and their settlement.
• the sub-participant is unknown to the systems. It is the "client" of a direct or indirect participant who acts in its name and on its behalf following an agreement to that effect. For each system referred to in Article 2, each participant must choose a participation status and communicate it to Banky Foiben’i Madagasikara. Each participant must comply with the functional and technical specifications imposed by Banky Foiben’i Madagasikara and undergo preliminary tests prior to admission.

Article 6: Modification of Participation Status Participants may change their participation status in a system by notifying Banky Foiben’i Madagasikara, subject to a one (1) month notice period starting from the return of the acknowledgment of receipt. This notice is necessary to allow Banky Foiben’i Madagasikara to update reference files and modify settings. A direct participant wishing to become an indirect participant must propose a solution ensuring service continuity for the indirect participants for whom it acts as a technical intermediary. An indirect participant wishing to become a direct participant must additionally undergo probationary tests conducted by Banky Foiben’i Madagasikara. For each system, each participant designates at least two (1 principal and 1 alternate) authorized persons who will be the exclusive points of contact for Banky Foiben’i Madagasikara.

Article 7: Fees for Participation in the Automated Clearing and Settlement System Banky Foiben’i Madagasikara charges fees for participation in the systems referred to in Article 2. The pricing (monthly, quarterly, or annual) of participation fees for each system consists of a fixed amount and a variable amount as detailed below:

• For Teleclearing: • a fixed amount established based on Banky Foiben’i Madagasikara's hardware and software investments. This fixed amount is uniform for each participant; • a variable amount established based on Banky Foiben’i Madagasikara's operating costs allocated to a unit cost per operation exchanged by each participant, i.e., a cost per transaction. The amount may differ by payment instrument (cheque, bill, transfer, …); cheques and bills may be more expensive due to image transport. The amount may differ by nature of the operation (initial, cancellation, bank rejection). Surcharges may be applied depending on the exchange time (approaching end of day). Reductions may also be applied depending on volumes.
• For RTGS: • a fixed amount established based on Banky Foiben’i Madagasikara's hardware and software investments. This fixed amount is uniform for each participant; • a variable amount based on the number of messages sent or received by the participant, established based on Banky Foiben’i Madagasikara's operating costs allocated to a unit cost per message exchanged by each participant; Banky Foiben’i Madagasikara may decide to apply different rates depending on message transmission time slots, the nature of messages sent, and the infrastructure used. Furthermore, Banky Foiben’i Madagasikara may charge for:
• the use of its office service,
• technical training provided to participants. Applicable rates, pricing methods, and payment terms are set by Banky Foiben’i Madagasikara. Banky Foiben’i Madagasikara reserves the right to modify these rates and is required to inform participants by any means leaving a written trace three (3) months before the effective date.

Article 8: Suspension and Exclusion Participation in the system is unlimited in time. However, a participant may be suspended or excluded from one or both of the systems referred to in Article 2 in the following cases:

• Suspension cases: A participant may be suspended by Banky Foiben’i Madagasikara if: • a high number of technical errors is found in its submissions or messages, and warnings issued by Banky Foiben’i Madagasikara have not been followed by appropriate corrections within the set deadline; • it is unable to settle its daily balance in the automated clearing system; • it fails to comply with all or part of the provisions set forth in the documents annexed to this instruction; • deficiencies are found in the implementation of its duties regarding the operation of network support equipment as provided in PART 4 of this instruction.
• Exclusion cases: Cases of automatic exclusion by Banky Foiben’i Madagasikara result from: • failure to comply with all or part of the provisions of this instruction, • or the opening of a banking resolution procedure or collective debt clearance procedure, • or repeated failures by the participant to meet its obligations described in this instruction and its annexes.

Article 9: Effects of Suspension and Exclusion Suspension in a system implies, for the participant, the temporary inability to send and receive operations in it. Nevertheless, in Teleclearing, the suspended participant will continue to receive bank rejections resulting from flows exchanged in the days preceding the suspension. Being excluded from a system implies:

• the termination of authorization, for the concerned participant, to carry out operations in the system,
• the termination of the capacity to receive operations in the system,
• in case of exclusion from the Real Time Gross Settlement system, the closure of the settlement account, after debiting all operations related to this exclusion. In case of exclusion, the concerned participant must ensure that the balance of its settlement account is sufficient to cover all remaining amounts due. Operations chargeable to the settlement account of the concerned participant at that time are:
• debits related to the last day of participation in the system,
• any fees and compensation including in particular all fees owed by the defaulting participant resulting from its participation in the Automated Clearing and Settlement System prior to its exclusion. Compensation payable by a participant excluded from a system may be demanded by Banky Foiben’i Madagasikara. However, a suspended or excluded participant is not entitled to any compensation for any damage suffered as a result of this suspension or exclusion.

PART 1: THE AUTOMATED CLEARING SYSTEM

Chapter 1: General Rules

Article 10: Automated Clearing System Teleclearing operates by transferring payment orders in the form of images or digital data.

Article 11: Responsibilities of Banky Foiben’i Madagasikara Banky Foiben’i Madagasikara is the manager of Teleclearing. At any time, it may delegate this role to another existing or to-be-created entity. In this capacity, its responsibilities are as follows:

• secure all system components,
• ensure continuous system operation,
• establish "backup" procedures defined in the contingency plan,
• establish applicable standards and monitor compliance by each participant,
• assess the technical adequacy of any entity requesting direct participation admission,
• guarantee the proper execution and settlement of clearing operations,
• anticipate non-settlement risks for clearing balances by adopting preventive measures.

Article 12: Responsibilities of Participants Teleclearing participants must ensure that operations they transmit directly, or through other participants, are:

• free of material errors,
• compliant with settlement and rejection deadlines defined in this instruction,
• compliant with financial obligations related to the operation of their settlement accounts. Participants handle disputes from their ordering clients. Direct participants maintain the continuous operation of the technical platform connecting to Teleclearing. They transmit submissions from indirect participants using their services in accordance with Teleclearing technical documentation and process their sub-participants' operations with the diligence required for their own operations. Participants receive submissions addressed by other participants even if they are unable to send their own submissions for technical reasons.

Article 13: Transaction Protection To secure the posting of operations to client accounts, Teleclearing operation exchange standards provide, as applicable:

• the direct participant's bank references (bank code),
• the indirect participant's references (bank code),
• the sub-participant's references (financial institution code),
• the final client's references (RIB).

Chapter 2: Admitted Values, Settlement Dates, Rejection Deadlines, and Credit Deadlines for the Final Beneficiary's Account

Article 14: Admitted Values The following scribal payment instruments are accepted in Teleclearing:

• transfer,
• cheque,
• bill of exchange,
• promissory note,
• interbank direct debit,
• any other payment instrument defined subsequently by Banky Foiben’i Madagasikara.

Article 15: Settlement Dates, Rejection Deadlines, and Credit Deadlines for the Final Beneficiary's Account Settlement Date: This is the date on which operations transiting through Teleclearing will be settled between participants by debit or credit to the settlement account (cf. Chapter 4, Article 32) held with Banky Foiben’i Madagasikara. The settlement dates and rejection deadlines applied in Teleclearing are as follows:

| Settlement Date of Initial Operation | Rejection Deadline | | Cheque | J+2 days | | Transfer | J+1 day | | Commercial Bill | J+2 days |

J corresponds to the date of operation registration in Teleclearing. The rejection deadline is expressed in business days.

Credit Deadline for the Final Beneficiary's Account: This is the period between the receipt of funds in the final beneficiary's participant's settlement account at Banky Foiben’i Madagasikara and the day these funds are credited to the final beneficiary's account. This deadline is expressed in business days. The account of the final beneficiary client of an operation processed via the automated clearing system named Teleclearing during an exchange day J must be credited no later than the deadline defined below, depending on the scribal payment instrument (or value) concerned:

• for cheques, bills of exchange, and promissory notes: by J+2,
• for transfers: by J+1,
• for any other payment instrument defined subsequently by Banky Foiben’i Madagasikara, this deadline will be determined subsequently. Failure to comply with the credit deadlines for the final beneficiary's account exposes the defaulting participant to administrative sanctions provided for by applicable legal provisions and pronounced by the competent authority.

Article 16: Settlement of Net Balances Multilateral net balances of participants are calculated by Teleclearing after the Teleclearing day cutoff time and communicated to participants. They are transmitted by Teleclearing to RTGS no later than the cutoff time for transfer into the latter. Participants give irrevocable mandate to Banky Foiben’i Madagasikara to automatically debit or credit their RTGS settlement accounts with the amount of debit or credit balances generated by the day's operations. Banky Foiben’i Madagasikara will attempt to post during the settlement period. Clearing balances can only be settled if all participants have sufficient provision. Otherwise, if at least one balance cannot be settled immediately, all balances are put on hold until settlement or until Banky Foiben’i Madagasikara implements Teleclearing self-protection measures.

Article 17: Teleclearing Self-Protection Teleclearing is a self-protected system against financial risk. To this end, in order to ensure the resolution of clearing, a minimum reserve amount is left on participants' current accounts to guarantee the settlement of their clearing balance.

Article 18: Authorized Operations Authorized operations in Teleclearing are:

• initial transactions,
• cancellations of initial transactions and rejections within the time frame separating the submission of this operation into the system and the exchange cutoff time,
• bank rejections. The related processes, as well as the standards and technical procedures used in the system, are described in the following documents:
• Participant Guide (Annex I.1),
• Functional specifications for agency modules and pre-clearing modules (Annex I.2),
• Functional specifications for the participant platform and central platform (Annex I.3),
• System user manuals (Annex I.4),
• Interbank procedures of the system. The maximum amount of an operation processed in Teleclearing and taken into account in the calculation of the system's multilateral balances at the end of the exchange day is set at one hundred million Ariary (100,000,000 Ariary). However, cheques and bills of exchange exceeding this threshold are processed at the Teleclearing level but are not taken into account in the calculation of multilateral balances as they are subject to unit settlement in the dedicated high-value RTGS system. Operations processed in Teleclearing as well as the threshold for each operation may be modified by Banky Foiben’i Madagasikara by instruction.

Article 19: Organization of the Exchange Day The opening days of the automated clearing system and the different time slots of the exchange day are communicated to participants by Banky Foiben’i Madagasikara and are available on its website. Banky Foiben’i Madagasikara reserves the right to modify the Teleclearing day profile and is required to inform participants three (3) months before the effective date of the new organization by any means leaving a written trace. Nevertheless, in case of force majeure or exceptional situation, Banky Foiben’i Madagasikara may modify the exchange day profile after informing participants by any means leaving a written trace one day before the effective date of the new day profile. The Teleclearing day comprises an exchange period spanning two (2) consecutive business days. The clearing day schedule is defined as follows:

| Time | Description | | J-1 18H | Start of J clearing day: Beginning of electronic submission transmission. | | J 7H30 | Beginning of electronic submission reception. | | J From 15H | Teleclearing day cutoff time: End of electronic submission transmission and reception for the clearing day. Calculation of definitive net balances. Communication of balances to the Real Time Gross Settlement system. | | J 15H30 to 16H | Clearing balance settlement period | | J 16 to 18H | Backup period | | J 18H | Start of J+1 exchange day |

PART 2: THE REAL TIME GROSS SETTLEMENT AUTOMATED SYSTEM

Chapter 1: General Rules

Article 20: Real Time Gross Settlement Automated System RTGS concerns the settlement of high-value payments and urgent payments. RTGS operates by real-time posting of Transfer Orders to the settlement account of each participant opened on the books of Banky Foiben’i Madagasikara. High-value payments are those exceeding the maximum amount admissible in Teleclearing mentioned in Article 18. This threshold may be modified at any time by Banky Foiben'i Madagasikara by instruction three (3) months before its effective date.

Article 21: System Ownership RTGS is a service provided by Banky Foiben’i Madagasikara to the participants defined in Article 4. In this capacity, the system and its infrastructure belong to Banky Foiben’i Madagasikara, which ensures their regular operation.

Article 22: Responsibilities of Banky Foiben’i Madagasikara Banky Foiben’i Madagasikara is the manager of RTGS. In this capacity, its responsibilities are as follows:

• exchange operation messages,
• manage queues,
• manage settlement accounts,
• manage the liquidity provision mechanism,
• communicate information related to RTGS operation. However, Banky Foiben’i Madagasikara does not guarantee the successful completion of participants' operations.

Article 23: Responsibilities of Participants The RTGS participant receives, upon admission, confidential identifiers that will allow it to carry out operations. Furthermore, it processes its operations in accordance with the provisions of technical and functional specification documents, particularly regarding the messages it addresses to the system and their content.

Article 24: Authorized Operations Authorized operations in RTGS are as follows:

• transfer order issued by a participant,
• operations carried out by Banky Foiben’i Madagasikara in the context of monetary policy implementation,
• settlement of multilateral clearing balances operated by Teleclearing or by another exogenous system,
• cash component of settlement/delivery operations for securities of which Banky Foiben’i Madagasikara is the depository,
• any other operation that Banky Foiben’i Madagasikara declares eligible for exchange via the system. Operations carried out in the system are exclusively interbank in nature. Payments between participants or with Banky Foiben’i Madagasikara carried out in the system take exclusively the form of a transfer order:
• between two settlement accounts of an ordering participant and a beneficiary participant,
• or between a Banky Foiben’i Madagasikara account and a participant's settlement account. The opening days of RTGS and the different time slots of the exchange day are communicated by Banky Foiben’i Madagasikara and are available on its website. Banky Foiben’i Madagasikara reserves the right to modify the exchange day profile and is required to inform participants three (3) months before the effective date of the new organization by any means leaving a written trace. Nevertheless, in case of force majeure or exceptional situation, Banky Foiben’i Madagasikara may modify the exchange day profile after informing participants by any means leaving a written trace one day before the effective date of the new day profile.

Chapter 2: Order Processing

Article 25: Transfer Order The procedures for processing transfer orders, from their sending to their receipt, as well as the standards and technical procedures used are determined by the documents below