Banking Circular No. 3 Of 2008 To: Chief Executives Of Commercial Banks Re: Term Auction Deposit

The Central Bank of Kenya briefed Treasury Officers of Commercial banks on its intention to introduce a deposit product to be known as Term Auction Deposit on April 25, 2008. The briefing covered a description of the features of the product and technical aspects of bidding for the same. In summary, the Term Auction Deposit, will have the following features:- a) Competitive auction bidding system; b) Flexibility in tenures: 3 to 90 days; c) Threshold at KES 20m but will be adjusted to KES 10m for late Term Auction Deposit bids; d) Current OMO dealing times will apply; e) Deposits will be held to maturity and will qualify for liquidity ratio purposes; f) Deposits will not be eligible as collateral for CBK borrowing or ILF creation; g) Late deposit bids will be priced at 100 basis points below the day's weighted average Term Auction Deposit rate; h) The CBK will acknowledge deposits through issuance of account statement; i) Whenever this product is on offer, posting will be on Reuters OMO page. As agreed during the briefing, testing will run for two days i.e. April 28-29, 2008 and thereafter the product will be rolled out on April 30, 2008.