Regulatory Alerts2015-09-14
02 Management of Exchange Rate Risk and Mandatory Reserves
The Bank of the Republic of Haiti issued Circular #02 to mandate that commercial and savings banks limit their structural exchange rate position to a maximum of 1% of accounting equity. Banks holding long positions exceeding this threshold must unwind them by day-end, or face forced sales to the central bank at the reference rate on the third following business day. The circular also confirms the continued validity of mandatory reserve requirements on foreign currency liabilities established by Circular #01.
Bank of the Republic of Haiti
CIRCULAR # 02
LETTER-CIRCULAR TO COMMERCIAL BANKS AND SAVINGS AND HOUSING BANKS
Pursuant to paragraph 5 of Article 43 of the Decree of November 14, 1980, regulating the operation of banks and banking activities on the territory of the Republic of Haiti, banking establishments must comply with the provisions of this letter-circular regarding the management of exchange rate risk and mandatory reserves.
1.- Exchange Position
Effective March 1, 2008, the structural exchange position as defined in Circular # 81-4 on exchange rate risk is set at a maximum of 1% relative to accounting equity.
At the end of each day, any banking establishment reporting a long position exceeding 1% of accounting equity is required to unwind this position. If this excess position is not closed out, it will be sold to the BRH (Bank of the Republic of Haiti) on the third business day following, at the bank reference rate. The bank reference rate is the weighted average of the acquisition rates for dollars by banks on the day preceding the day on which this excess was reported.
2.- Establishment of Mandatory Reserves on Liabilities Denominated in Foreign Currencies
The measures regarding the establishment of mandatory reserves on liabilities denominated in foreign currencies, adopted on January 25, 2008, according to Circular # 01, remain and continue to be in force.
Port-au-Prince, February 26, 2008
(Signature) Charles Castel
P.O. Box 1570, Port-au-Prince, Haiti. Telephone: (509) 299-1243 / Fax: (509) 299-1095