BANK OF CENTRAL AFRICAN STATES

The Governor

CIRCULAR LETTER NO. 004/GR/2021

Mandating CEMAC Treasury Securities Specialists (SVT) to Apply the New Governing Code of Specifications.

The Treasury Securities market is governed, within the Economic and Monetary Community of Central Africa (CEMAC), by a legal and regulatory framework adopted by the competent Community authorities, which notably includes a Code of Specifications for Treasury Securities Specialists (SVT).

The revised version of this Code of Specifications has been in force since its adoption by the Ministerial Committee of the Monetary Union of Central Africa (UMAC) on December 20, 2019, following validation by the Monetary Policy Committee (MPC) and the Board of Directors of the Bank of Central African States (BEAC); and approval by the Supervisory Council of the Settlement and Securities Depository Cell (CRCT).

Certain authorized SVT operating in CEMAC are slow to implement this Code of Specifications, which is mandatory in all its elements and immediately applicable since its adoption.

Consequently, by virtue of this Circular Letter, authorized CEMAC SVT failing to do so are required to comply, without further delay, with the current Code of Specifications. Failure to apply said Code of Specifications exposes the concerned entity to the withdrawal of its authorization as a Treasury Securities Specialist.

This Circular Letter takes effect from the date of its signature. /-

N°: SEQ 076/2021

ABBAS MAHAMAT TOLLI

PJ: - Resolution of the Ministerial Committee of UMAC No. 08 of December 20, 2019

• Copy of the revised and adopted CEMAC SVT Code of Specifications

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MONETARY UNION OF CENTRAL AFRICA

MINISTERIAL COMMITTEE

Ordinary Session of Dec 20, 2019

RESOLUTION NO. 08

The Ministerial Committee of the Monetary Union of Central Africa (UMAC), meeting in ordinary session on December 20, 2019, in Douala, Republic of Cameroon, examining the new regulatory framework regarding the public securities market in CEMAC :

1. Upon proposal of the BEAC Board of Directors meeting in ordinary session on December 19, 2019, in Douala, approves the regulatory texts governing the operation of the Treasury securities market. These are :

   • the Code of Specifications for Treasury Securities Specialists ;
   • the Convention on the organization of Treasury securities issuances ;
   • the Convention on participation in Treasury securities issuances ;
   • the General Regulations of the Settlement and Securities Depository Cell ;
   • the Adhesion Convention to the Settlement and Securities Depository Cell.

2. After a conforming opinion from the BEAC Board of Directors issued during its ordinary session on December 19, 2019, in Douala and upon the proposal of the BEAC Governor, adopts unanimously the Regulation on Treasury securities issued by CEMAC member States.

Acting Chairman of the Ministerial Committee,

Baltasar ENGONGA EDJO'O

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CODE OF SPECIFICATIONS FOR TREASURY SECURITIES SPECIALISTS

This Code of Specifications is established in application of the provisions of Article of Regulation No. //CEMAC/UMAC/CM regarding Treasury securities issued by CEMAC member States.

The Code of Specifications defines the main missions assigned to Treasury Securities Specialists (SVT), notably :

• participate in Treasury securities issuances ;
• contribute to the smooth running and success of Treasury securities issuances ;
• promote liquidity in the secondary market for Treasury securities ;
• provide the Treasury with quality advice and relevant information on debt issuance policy ;
• promote Treasury securities.

In this regard, the purpose of this Code of Specifications is to clarify the framework for SVT activities. To this end, it notably defines :

• the conditions and procedures for SVT selection ;
• the rights and obligations of SVT ;
• the framework for SVT association and consultation between SVT and the Treasury ;
• the criteria and procedures for SVT evaluation ;
• SVT oversight.

Under penalty of being excluded from Treasury securities issuances, SVT formalize their commitment to comply with this Code of Specifications by submitting a signed copy to the Minister in charge of Finance, bearing the signature of a duly authorized representative of the credit institution or stock exchange company vis-à-vis third parties. A signed copy is also sent to the National Directorate of the BEAC.

In the absence of the SVT signing the Code of Specifications within three months from the notification of authorization, the Minister in charge of Finance shall revoke the SVT status.

I - SELECTION OF TREASURY SECURITIES SPECIALISTS

1 – Conditions for Acquiring SVT Status

a- Nature and Location of the SVT

In application of Regulation No. //CEMAC/UMAC/CM regarding Treasury securities issued by CEMAC member States, only credit institutions (banks and financial establishments), as defined in Article 4 of the Annex to the Convention of January 17, 1992 on the harmonization of banking regulation in Central African States, and stock exchange companies authorized by the Central African Financial Market Regulator, are eligible to acquire SVT status.

Furthermore, credit institutions and stock exchange companies must be established in CEMAC and enjoy a sound financial situation, corresponding for the former to a minimum rating of 2 under the Central African Banking Commission (COBAC) rating system (SYSCO), and for the latter, attested by an opinion from the Central African Financial Market Regulator.

b- Holding an Account at the BEAC

The credit institution must hold a current account at the BEAC.

Stock exchange companies must designate a credit institution, settlement agent, for the settlement of their Treasury securities operations with the central depository.

c- Material and Human Resources

SVT must have adequate and sufficient material, human, and financial resources to operate in the Treasury securities market. They must have a structured and efficient organization in terms of administrative, accounting, technical, and risk control services.

SVT must establish structures corresponding to their front office (trading), middle office (risk control), and back office (post-market operations) activities. Furthermore, they must designate dedicated personnel for SVT activity management and ensure its stability.

d- Organization of SVT Activity

SVT must organize their activities to cover all functionalities necessary for trading and promoting State debt, including front office, middle office, and back office activities as well as economic research.

SVT must clearly separate the portfolio of government securities from other portfolios they manage and/or hold. To this end, they must maintain separate accounting for their Treasury securities intervention activities.

2 – SVT Selection Procedures

SVT are selected by the BEAC Board of Directors.

Credit institutions and stock exchange companies submit an authorization application file, deposited in duplicate against a receipt at the National Directorate of the BEAC in their country of establishment. This file must notably specify the chosen internal organization, activity forecasts, dedicated personnel, planned technical, material, and financial resources, as well as the country/countries where the entities wish to operate as SVT.

The BEAC, on behalf of the Treasuries, with the support of COBAC and the Central African Financial Market Regulator, processes authorization applications. It verifies whether the applicant meets the conditions defined in point I-1 of this Code of Specifications. Within this procedure, the BEAC is authorized to collect any information deemed useful for processing the application.

Files deemed eligible after processing by BEAC services are transmitted for examination to its Board of Directors. Following the Board meeting, the list of credit institutions and stock exchange companies eligible for authorization is published.

Authorization is granted by decree of each Minister in charge of Finance and individually notified to each applicant entity.

Refusal of authorization is also notified by the Minister in charge of Finance to the credit institution or stock exchange company.

3 – Duration of Authorization Validity

SVT are selected for an indefinite period, subject to compliance with the requirements of this Code of Specifications.

II – RIGHTS AND OBLIGATIONS

1 – Rights and Privileges of SVT

a- Access to Treasury Securities Issuances

SVT have the monopoly :

• to participate in Treasury securities issuance auction sessions ;
• to be members of the syndicate formed within the framework of domestic syndication ;
• to submit non-competitive bids.

b- Market Activities

Regarding market activities, SVT benefit from the exclusive right :

• to use the title of SVT of the concerned State ;
• to participate in buyback and exchange operations of Treasury securities.

c- Privileged Partner and Treasury Advisor

SVT are the Treasury's privileged partners for debt management operations related to Treasury securities. As such, they have the right to privileged information on Treasury securities and may be consulted by the Treasury regarding related operations.

SVT are informed by the Minister in charge of Finance, at the beginning of each year, of the forecast program for Treasury securities issuances. The BEAC communicates to SVT, at least three days before each auction, the characteristics of the issuance in question, notably the nature of securities to be issued, their maturity, the amount, the deadline for bid submission, and the issuance conditions.

The Treasury communicates to SVT semi-annually all information regarding the country's economic situation, public debt, and public finances.

Aggregated statistical information compiled by the Treasury is communicated to SVT in a format mutually agreed upon. The Treasury reserves the right to use this data for debt promotion purposes.

The Treasury communicates quarterly to each SVT its market share in primary and secondary market issuances by product type and/or maturity.

SVT may be consulted by the Treasury on any potential changes to Treasury securities issuance policy. The BEAC also informs them of any significant changes that may occur in the organization of issuances.

2 – Obligations of SVT

a) - Participation in Treasury Securities Issuances

SVT are obligated to ensure the success of Treasury securities issuances. To this end, they commit to :

• participate annually in at least 60% of Treasury securities issuance sessions ;
• submit prices or rates for each auctioned line ;
• ensure a minimum effective annual participation of 5% of the total auctioned amount in each category of Treasury securities.

In the event of domestic syndication, SVT ensure the smooth execution of the transaction within the tasks assigned to each by the Treasury. The Lead Manager(s) are designated taking into account their expertise on the relevant market segment and their contribution to preparatory work for the operation.

Furthermore, Lead Managers have a particular responsibility for stimulating the secondary market for the issued security.

SVT take all necessary measures to guarantee the settlement of their subscriptions on the settlement/delivery date of the auctioned Treasury securities. In case of payment default, the defaulting SVT is subject to penalties whose rate is determined by the Convention on their participation in Treasury securities issuances, without prejudice to other applicable sanctions.

b- Obligations Related to Market Activities

SVT are obligated to stimulate the secondary market for Treasury securities. As such, they commit to facilitating market liquidity. To this end, they undertake to :

• sell or buy, upon request from any investor, Treasury securities on the secondary market ;
• sell annually at least 30% of their Treasury securities subscriptions ;
• participate annually in at least 2% of all transactions (buys and sells) on the secondary Treasury securities market ;
• make every effort to deliver, under all circumstances, their counterparties in Treasury securities.

Furthermore, SVT guarantee market transparency and are permanently required to :

• display buy and sell prices for Treasury securities at their counters ;
• execute transactions at displayed prices ;
• provide buyers who request them with receipts indicating all characteristics of the subscribed Treasury securities and a statement that they are eligible for trading until maturity and at any SVT counter ;
• perform quotations in accordance with market rules and practices ;
• implement all measures conducive to promoting Treasury securities market liquidity, notably displaying quotations on any appropriate platform (website, etc.).

c- Obligations Towards the Treasury

In exchange for the rights and privileges they enjoy, SVT commit to promoting Treasury securities, advising the Treasury on its debt issuance policy, and communicating market information.

• Promotion of Treasury Securities

SVT undertake to promote Treasury securities to a broad and diversified investor community and develop the related market within their commercial strategy. To this end, they employ professionals, notably economists, capable of regularly informing investors of economic developments in CEMAC member States.

In this regard, they contribute to promotional actions organized by the Treasury and jointly organize promotional actions for Treasury securities with it, the modalities of which are mutually agreed. The Treasury may also, at the SVT's request, participate in their promotional actions.

SVT contribute to improving the State's debt issuance policy and the development of related new products. In this regard, they bring to the Treasury's attention information that could clarify potential investors, resident or non-resident, as well as measures to make Treasury securities attractive while guaranteeing the Treasury a better cost of borrowing for its debt strategy.

• Debt Issuance Policy Advisory

SVT advise and assist the Treasury in defining and implementing its issuance policy, as well as on any matter concerning the smooth functioning of the primary and secondary markets for Treasury securities.

SVT advise the Treasury on its issuance policy and propose, notably, any changes likely to improve market efficiency and attract interest in Treasury securities. To this end, they allocate specific resources to this activity.

The Treasury may consult SVT, notably through their professional association, where applicable in liaison with market authorities, on the organization of the Treasury securities market and on any proposal to improve its functioning.

• Reporting on the Treasury Securities Market

SVT transmit to the Central Bank and the Treasury weekly the prices and transaction volumes for each BTA and OTA line.

SVT regularly report to the Treasury and the Central Bank on the evolution of the Treasury securities market, prevailing conditions, transaction volumes, and, where applicable, their own positions. To this end, they report quarterly to the Treasury on their secondary market activities. They distinguish in this report activity by maturity, client type, and geographic location.

SVT make available to the Treasury or any person mandated by it, and to the Central Bank, all information useful for verifying the reliability of their declarations.

III - FRAMEWORK FOR THE ASSOCIATION OF TREASURY SECURITIES SPECIALISTS AND TREASURY-SVT CONSULTATION

a) – Association of Treasury Securities Specialists

SVT establish an Association of Treasury Securities Specialists (ASVT) whose purpose is to define, promote, and implement, on matters of common interest, any action likely to improve the smooth functioning of the Treasury securities market and SVT activity.

They commit to participating in its activities and jointly financing it. Furthermore, they may also form a community professional association.

SVT establish, within their association, a Code of Conduct specifying the ethical rules specific to this activity, which they commit to respecting.

b) – SVT – Treasury Consultation

The Treasury and SVT establish permanent contact between their services to ensure the smooth functioning of the Treasury securities market. To this end, both designate their respective correspondents for monitoring the Treasury securities market.

The Treasury convenes all SVT at least once per quarter to review the evolution of the Treasury securities market. To this end, it communicates to them the annual forecast calendar for consultation meetings. It informs them without delay of decisions concerning any matter of common interest.

The Ministry in charge of Finance maintains a continuous and close dialogue with the association of Treasury securities specialists, notably on any matter concerning the Treasury securities market. It takes into account, as far as possible, the association's proposals aimed at ensuring the smooth functioning of the Treasury securities market.

IV - EVALUATION OF SVT