Instruction No. 001-DSP/09 of September 22, 2009 on the Operation of the Automated Clearing and Settlement System

Instruction No. 001-DSP/09 of September 22, 2009 on the Operation of the Automated Clearing and Settlement System

The Governor of the Central Bank of Madagascar, Having regard to the amended Law No. 94-004 of June 10, 1994 establishing the Statutes of the Central Bank of Madagascar; Having regard to Decree No. 2007-027 of January 29, 2007 appointing the Governor of the Central Bank; DECIDES:

GENERAL PROVISIONS Article 1: Object This instruction sets forth the operating conditions of the automated clearing and settlement system established and managed by the Central Bank. Any interbank operation aimed at moving at least one current account held on the books of the Central Bank must pass through this system.

Article 2: Components of the Automated Clearing and Settlement System The automated clearing and settlement system comprises two sub-systems:

• the automated payment order clearing sub-system,
• the automated Real-Time Gross Settlement (RTGS) sub-system. Operations within 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, the source documents, stamped "cleared" or "executed", must be made available to requesting institutions as proof.

Article 4: System Participants Participants are credit institutions holding a current account on the books of the Central Bank. Participation in the automated payment order clearing sub-system automatically entails participation in the automated Real-Time Gross Settlement (RTGS) sub-system. The Public Treasury and any other institution approved by the Central Bank may also be admitted as participants.

Article 5: Participation Statuses Participants in the sub-systems referred to in Article 2 may operate under different statuses: • A direct participant acts either for its own account or on behalf of others. Consequently, it assumes technical and financial responsibility, vis-à-vis all participants, for operations transiting through its intermediary. • An indirect participant is known to a sub-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. • A sub-participant is unknown to the sub-systems. It acts as a "client" of a direct or indirect participant, which acts in its name and on its behalf following an agreement to that effect. For each of the sub-systems referred to in Article 2, the participant must choose a participation status and communicate it to the Central Bank. The participant must comply with the functional and technical specifications imposed by the Central Bank and undergo prior admission tests.

Article 6: Modification of Participation Status Participants may change their participation status in a sub-system by notifying the Central Bank, subject to a one (01) month advance notice from the return of the acknowledgment of receipt. This notice is necessary to allow the Central Bank to update reference databases and adjust parameters. A direct participant wishing to become an indirect participant must propose a solution ensuring service continuity for the indirect participants it intermediates. An indirect participant wishing to become a direct participant must additionally undergo probationary tests conducted by the Central Bank. For each sub-system, the participant designates at least two (1 holder and 1 alternate) authorized persons who will be the exclusive interlocutors of the Central Bank.

Article 7: Suspension and Exclusion Participation is unlimited in time. However, a participant may be suspended or excluded from one or both of the sub-systems referred to in Article 2 under the following circumstances:

• Suspension Cases: A participant may be suspended by the Central Bank if: • a high number of technical errors is found in its submissions or messages, and the Central Bank's warnings addressed to it have not been followed by appropriate corrections within the fixed deadline, • it is unable to settle its daily balance in the automated payment order clearing sub-system, • it fails to comply with all or part of the provisions set out in the documents annexed to this instruction.
• Exclusion Cases: Automatic exclusion cases by the Central Bank result from: • failure to comply with all or part of the provisions of this instruction, • or the opening of judicial reorganization or liquidation proceedings against it, • repeated failures by the participant to meet its obligations described in this instruction and its annexed documents.

Article 8: Effects of Suspension and Exclusion Suspension in a sub-system implies, for the participant, temporary inability to issue and receive operations. Nevertheless, in the automated payment order clearing sub-system, a suspended participant will continue to receive bank returns resulting from exchanged flows in the days preceding suspension. Being excluded from a sub-system implies: • the end of authorization for the concerned participant to conduct operations in the sub-system, • the end of the capacity to receive operations in the sub-system, • in case of exclusion from the automated Real-Time Gross Settlement (RTGS) sub-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 its settlement account balance is sufficient to cover all remaining amounts due. The operations chargeable to the settlement account of the concerned participant at that time are: • debits related to the last day of participation in the sub-system, • any applicable fees and compensation. Compensation payable by a participant excluded from a sub-system may be demanded by the Central Bank. However, a suspended or excluded participant is entitled to no compensation for any prejudice suffered due to this suspension or exclusion.

PART 1: THE AUTOMATED CLEARING SUB-SYSTEM Chapter 1: General Rules Article 9: The Automated Clearing Sub-System The Central Bank has established an automated payment order clearing sub-system named Télécompensation, operating via transfer of payment orders in the form of images or digital data.

Article 10: Specific Responsibilities of the Central Bank The Central Bank is the manager of Télécompensation. At any time, it may delegate this role to another existing or newly created entity. In this capacity, its responsibilities are as follows: • secure all components of the sub-system, • ensure continuous operation of the sub-system, • 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 admission, • guarantee the smooth execution and settlement of clearing operations, • anticipate non-settlement risks for compensation balances by adopting preventive measures.

Article 11: Responsibilities of Participants

• Participants in Télécompensation ensure that operations they transmit directly, or through other participants, are: o free from material errors, o compliant with settlement and return deadlines defined in this instruction, o compliant with financial obligations related to the operation of their settlement accounts.
• Participants handle disputes from their order-giving clients.
• Direct participants maintain the continuous operation of the technical connection platform to Télécompensation. They transmit submissions from indirect participants using their services in accordance with the technical documentation of Télécompensation and perform operations for their sub-participants with the diligence required to process their own operations.
• Participants receive submissions from other participants even if they are unable to issue their own submissions for technical reasons.

Article 12: Transaction Protection To secure the posting of operations to client accounts, exchange standards for operations in the clearing sub-system must provide, as applicable: • the direct participant's bank reference (bank code), • those of the indirect participant (bank code), • those of the sub-participant (financial institution code), • those of the end client (RIB).

Chapter 2: Admitted Values, Settlement Deadlines, and Return Deadlines Article 13: Admitted Values The following written payment instruments are accepted in the clearing sub-system: o transfer, o check, o bill of exchange, o promissory note, o interbank direct debit, o any other payment instrument defined subsequently by the Central Bank.

Article 14: Definitions Value Date of an Operation: The value date applied to the client (debit or credit) is calculated based on the customer order date communicated to the branch. This date must account for interbank settlement delays and internal processing delays to route the operation to the clearing sub-system. However, each participant is free to apply its desired conditions.

Settlement Date: This is the date on which operations transiting through the clearing sub-system will be settled between participants by debit or credit to the settlement account (cf. Chapter 4, Article 32) held at the Central Bank. The settlement dates and return deadlines applied in Télécompensation are as follows:

Settlement Date of Initial Operation	Return Deadline
Ordinary Check	J+2 days
Banker's Check	J+2 days
Customer Transfer	J+1 day
Bank-to-Bank Transfer	J+1 day
Transfer from Abroad	J+1 day
Direct Debit (Prélèvement)	J+2 days
Commercial Paper/Effect of Commerce	J+2 days

J corresponds to the date of registration of the operation in Télécompensation.

Article 15: Settlement of Net Balances The multilateral net balances of participants are calculated by the clearing sub-system after the cutoff time for the Télécompensation day and communicated to participants. They are transmitted by the clearing sub-system to the Real-Time Gross Settlement (RTGS) sub-system no later than the cutoff time for posting in the latter. Participants give an irrevocable mandate to the Central Bank to automatically debit or credit their settlement accounts in the RTGS sub-system for the amounts of net balances generated by daily operations. A posting attempt is made by the Central Bank during the settlement period. The compensation balances can only be settled if all participants have sufficient provision. Otherwise, if at least one balance cannot be settled immediately, all balances are held pending settlement or the implementation by the Central Bank of the compensation sub-system's self-protection measures.

Article 16: Self-Protection of the Clearing Sub-System Télécompensation must be a sub-system self-protected against financial risk. To this end, to ensure the settlement of clearing, a minimum reserve amount is left on participants' current accounts to guarantee the settlement of their compensation balance.

Article 17: Authorized Operations At the launch of the clearing sub-system, it is recommended to introduce only operations with amounts less than or equal to five hundred million Ariary (500,000,000 Ariary). This threshold may be modified by the Central Bank. The authorized operations in Télécompensation are: • initial transactions, • cancellations of initial transactions and returns within the time frame separating the submission of this operation to the sub-system and the cutoff time for exchanges, • bank returns. The related processes, as well as the technical standards and procedures used in the sub-system, are described in the following documents: • Participant Guide (Annex I.1), • Functional specifications of the branch modules and pre-clearing modules (Annex I.2), • Functional specifications of the participant platform and central platform (Annex I.3), • Sub-system user manuals (Annex I.4) • Interbank procedures of the sub-system.

Article 18: Organization of the Exchange Day

• The Télécompensation day comprises an exchange period spanning two consecutive business calendar days. The Central Bank reserves the right to modify the profile of the Télécompensation day. It is required to inform participants three months before the new organization takes effect.
• The compensation day schedule is defined as follows at launch:

Timeframe	Description
J-1 18H00	Start of the compensation day for J: Beginning of electronic submission transmission.
J 07H30	Start of receipt of electronic submissions
J from 15H00	Cutoff time for the compensation day: End of transmission and receipt of electronic submissions for the compensation day. Calculation of final net balances. Communication of balances to the Real-Time Gross Settlement (RTGS) sub-system.
J 15H30 to 16H00	Settlement period for compensation balances
J 16H00 to 18H00	Backup/Safeguarding period
J 18H00	Start of the exchange day for J+1

Article 19: Fees for Participation in Télécompensation During the first three (3) years of operation, participants will pay no fees to the Central Bank for participation in the sub-system. After this period, participation fees will be collected by the Central Bank. The pricing (quarterly, monthly, or annual) will consist of: • a fixed amount corresponding to the Central Bank's material and software investments, distributed equally among each participant. This amount remains fully acquired by the Central Bank even in case of suspension or exclusion of the participant; • a variable amount covering the Central Bank's operating costs, calculated as a unit cost per operation exchanged by each participant (cost per transaction). The amount may differ by payment instrument (check, commercial paper, transfer, direct debit); checks and commercial paper may be more expensive due to image transport. The amount may differ by nature of the operation (initial, cancellation, bank return). Surcharges may be applied based on exchange time (approaching end of day). Reductions may also be applied based on volumes. Furthermore, from the first year of operation, the Central Bank may charge: • use of its bureau service, • technical training provided to participants.

PART 2: THE AUTOMATED REAL-TIME GROSS SETTLEMENT (RTGS) SUB-SYSTEM Chapter 1: General Rules Article 20: The Automated Real-Time Gross Settlement (RTGS) Sub-System The Central Bank has established an automated Real-Time Gross Settlement (RTGS) sub-system for the settlement of large-value payments and urgent payments. This sub-system, named Real-Time Gross Settlement (RTGS), operates by real-time posting of Transfer Orders to each participant's settlement account held on the books of the Central Bank. Large-value payments are those exceeding the maximum admissible amount for Télécompensation mentioned in Article 17. This threshold may be modified at any time.

Article 21: Ownership of the Sub-System The automated Real-Time Gross Settlement (RTGS) sub-system is a service provided by the Central Bank to the participants defined in Article 4. In this capacity, the sub-system and its infrastructure belong to the Central Bank, which ensures regular operation. However, the Central Bank may transfer dedicated equipment made available to participants to those participants.

Article 22: Responsibilities of the Central Bank The Central Bank is the manager of the automated Real-Time Gross Settlement (RTGS) sub-system. In this capacity, its responsibilities are as follows: • exchange of operation messages, • management of queues, • management of settlement accounts, • management of the liquidity provision mechanism, • communication of information related to the operation of the automated Real-Time Gross Settlement (RTGS) sub-system. However, the Central Bank does not guarantee the finality of participants' operations.

Article 23: Responsibilities of Participants A participant in the automated Real-Time Gross Settlement (RTGS) sub-system receives, upon admission, confidential identifiers allowing it to conduct operations. Furthermore, it processes its operations in accordance with the provisions of the technical and functional specification documents, particularly regarding the messages it addresses to the sub-system and their content.

Article 24: Authorized Operations The authorized operations for participants in the automated Real-Time Gross Settlement (RTGS) sub-system are as follows: • transfer order issued by a participant, • operations conducted by the Central Bank as part of monetary policy implementation, • settlement of multilateral compensation balances operated by Télécompensation, • cash component of settlement/delivery operations for securities of which the Central Bank is custodian, • any other operation declared eligible by the Central Bank for exchange via the sub-system. Operations conducted within the sub-system are exclusively interbank in nature. Payments between participants or with the Central Bank performed in the sub-system take exclusively the form of a transfer order: • between two settlement accounts of an ordering participant and a beneficiary participant, • or between a Central Bank account and the settlement account of a participant. The opening days of the automated Real-Time Gross Settlement (RTGS) sub-system and the different time slots for the exchange day are communicated by the Central Bank and available on its website.

Chapter 2: Processing of Orders Article 25: Transfer Orders The procedures for processing transfer orders, from sending to receipt, as well as the technical standards and procedures used, are determined by the following documents: • Description of Business Processes and Management Rules (Annex II.1), • Message Flows (Annexes II.2 and II.3), • Message Formats (Annex II.4), • Technical Interface Specifications (Annex II.5), • Technical and Security Environment Specifications (Annex II.6), • Sub-system User Guides (Annex II.7), • Interbank procedures of the sub-system. Regarding queue management, it is recalled that transfer orders are executed in the following order within the automated Real-Time Gross Settlement (RTGS) sub-system: • operations debiting a settlement account in favor of the Central Bank, • the balance resulting from multilateral compensation of the mass operations sub-system to which the considered participant adheres, • transfer orders destined for another participant.

Processing of a Transfer Order: • A transfer order is considered irrevocable once the Central Bank has transmitted an execution notification to the ordering participant in the forms and according to the modalities defined in the technical and functional specification documents. The Central Bank undertakes to post the corresponding operation to the current accounts of the concerned participants, held on its books. • a transfer order may be rejected by the sub-system. This rejection can be technical and initiated by the Central Bank, or banking-related and initiated by the Central Bank or the beneficiary participant. • A technical rejection is due to the ordering participant's failure to comply with specifications related to the considered transfer order. • A transfer order may be cancelled by the ordering participant under conditions provided in the technical and functional specification documents. • A transfer order is considered final within the automated Real-Time Gross Settlement (RTGS) sub-system and the settlement of the related legal obligation is considered fulfilled once the settlement account of the destination participant is credited in accordance with the rules defined in the technical and functional specification documents. • The final beneficiary client's account must be credited on the same day that said operation is posted to the credit of its affiliated participant's settlement account.

Article 26: Restitution Orders Restitution orders are payment orders aimed at returning funds to the issuer of an initial order that has already been settled, but which contains an error in amount, recipient participant, or final beneficiary. The issuing participant of the erroneous order submits the restitution request outside the system. Both parties (issuer and recipient) must agree on the restitution modalities. The receiving participant must promptly process identified errors. Restitution may also occur at the initiative of the receiving participant, particularly if the order is poorly filled or unprocessable.

Article 27: Unpaid Operations Operations whose settlement could not be effected are declared unpaid when they remain in the queue at the end of the exchange day. It is recalled that these operations remain due but outside the system. Balances from an unprotected exogenous system rejected after the settlement period for lack of provision are considered unpaid. In the case of a protected exogenous system, the nature of the unpaid status is only confirmed after an unsuccessful implementation of self-protection mechanisms.

Article 28: Fees for Participation in the Real-Time Gross Settlement (RTGS) Sub-System During the first three (03) years...