Convention on the Organization and Operation of the Foreign Exchange Market in the Democratic Republic of Congo

175 CONVENTION ON THE ORGANIZATION AND OPERATION OF THE FOREIGN EXCHANGE MARKET IN THE DEMOCRATIC REPUBLIC OF CONGO

In the context of the liberalization of foreign exchange operations, as stipulated in the Foreign Exchange Regulation, and with a view to ensuring the proper functioning and development of the foreign exchange market in the Democratic Republic of Congo, the following has been agreed upon between the Central Bank of Congo and the authorized banks in the Democratic Republic of Congo as well as the authorized financial intermediaries:

CHAPTER I: ORGANIZATION AND OPERATION OF THE MARKET

Section 1: Organization

Article 1: A spot and forward foreign exchange market is established between the Central Bank of Congo and the authorized intermediaries, on which the following are traded:

• Purchase and sale operations between the national currency and foreign currencies;
• Purchase and sale operations of foreign currencies against other freely convertible foreign currencies.

Article 2: Paragraph 1: Participation in the foreign exchange market consists of the authorized banks mentioned above, the Central Bank of Congo, and any other intermediary authorized by the Issuing Institute that adheres to this convention. Within the framework of this convention, they accept each other as strictly conventional partners and commit to respecting the terms of this convention.

Paragraph 2: Each participant shall inform the others in writing of the name of its chief trader and the list of its other authorized agents empowered to bind it irrevocably on the market. Any change of the chief trader and any modification of the list of other authorized agents must be reported to the other participants.

Article 3: The foreign exchange market is an unlocated market. Operations are conducted by telephone, telex, or any other means of communication.

Article 4: Participants may execute transactions on all working days. Foreign exchange transactions are conducted on an over-the-counter basis at rates determined by the free play of supply and demand.

Section 2: Operation of the Market

Article 5: For each transaction, each party must indicate (verbally, in writing, or electronically) the date of the transaction, the currency sold, the amount bought, the amount sold, the exchange rate, the date of conclusion, and the maturity date (for forward foreign exchange operations), the value date, the correspondent, and the place of payment for the currency bought and the currency sold. In the event that an operation has been concluded verbally, it must be confirmed on the same day by both parties.

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Article 6: Paragraph 1: "Confirmation" consists of the exchange of a written document, letter, telex, fax, or any other electronic means accepted by the participants, with each party bearing the responsibility.

Paragraph 2: The confirmation must contain the same elements as those listed in Article 5.

Paragraph 3: The failure of one party to confirm a transaction does not render it null and void, nor does it release that party from its obligations regarding this operation.

Article 7: The statistical data to be communicated to the Central Bank of Congo concerns operations concluded between 9:00 AM, and the information related thereto will be integrated into the data of the following day.

Article 8: Participants are required to put in place the necessary internal control procedures to ensure compliance with the rules governing foreign exchange operations. To this end, they are notably required to ensure a strict separation between the functions of negotiating foreign exchange contracts (Front-Office) and those of control, settlement, and accounting treatment of foreign exchange contracts (Back-Office).

Article 9: Paragraph 1: Participants are required to communicate to each request from a member a buying rate and a selling rate for each currency requested. Exceptionally, when a participant does not wish to commit, it must explicitly state this in advance by saying "rates for indicative purposes only."

Paragraph 2: The Congolese franc equivalent of the indicated rates is rounded to 4 decimal places.

CHAPTER II: OPERATIONS

Article 10: Participants in the foreign exchange market may carry out spot and/or forward operations. Spot operations are settled within 2 working days at the latest, and forward operations at the contractual maturity.

Article 11: The Congolese franc equivalents of foreign exchange operations are calculated at the rate agreed upon between the contracting parties. They are paid on the agreed date and according to the choices of the contracting parties by:

• the clearing house;
• credit to account;
• cash payment. In the event that the agreed date is a holiday, either in the Democratic Republic of Congo or abroad, settlement will take place on the next working day in the relevant place. For forward operations, • the contractual maturity must take into account holidays in the Democratic Republic of Congo and abroad.

Article 12: Foreign exchange market operations are quoted in the uncertain manner.

Article 13: Transaction Currencies The foreign currencies admitted to the foreign exchange market as transaction currencies are those for which exchange rates are published by the Central Bank of Congo.

Article 14: Transaction Amounts Paragraph 1: Under this convention, the amounts of transactions are not limited.

Paragraph 2: Each participant may require the partner to provide guarantees in the form of, among others, bank guarantees, government securities, or deposits in national currency.

Article 15: Paragraph 1: The parties undertake towards each other to reciprocally execute the payments incumbent upon them in accordance with the terms of the transaction.

Paragraph 2: Each party may designate a bank or a correspondent to ensure that payments will be made reciprocally; the ordering party must bear the associated costs.

Article 16: Paragraph 1: In the event of delay in settlement in foreign currency, the contracting party may demand compensation from the other party for each day of delay, at a rate fixed at five percent, at the maximum, above the LOBOR rate of the US dollar equivalent of the amount whose payment has been delayed.

Paragraph 2: Regarding the Congolese franc equivalents, the penalty rate is fixed at five percent, at the maximum, above the highest advance rate applied by the Central Bank of Congo. This provision does not exclude any recourse to other legal avenues for the compensation of the actual prejudice suffered.

CHAPTER III: METHODS FOR CALCULATING EXCHANGE RATES PUBLISHED BY THE CENTRAL BANK OF CONGO

Article 17: Paragraph 1: The reference rates published by the Central Bank of Congo are determined as follows: At the end of each working day, participants will record the total value of their purchases and sales of currencies in USD, EURO (BEF and FRF), as well as the equivalent in CDF. This will allow these latter to calculate the effective buying and selling rates of the currencies in question. Outside of transactions concluded in the aforementioned currencies, other amounts are converted into USD. Participants will also record: a) the lowest and highest buying rates; b) the lowest and highest selling rates.

Paragraph 2: The data obtained in paragraph 1 must be transmitted to the Central Bank of Congo/Directorate of Foreign Services by the end of the day at 5:00 PM at the latest, according to the attached model table.

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Paragraph 3: In the event that the participant has not made a purchase and a sale, it will enter the mention "NONE" in boxes 1, 2, 4, and 5 while filling in boxes 3, 6, and 7 using the exchange rates it would have quoted to its clients if it had to conduct an operation.

Paragraph 4: From the data obtained in application of the provisions of paragraph 2 above, the Central Bank of Congo will thus derive the weighted average rates of the USD against the CDF.

Paragraph 5: To derive the rates for SDR and other foreign currencies admitted against the CDF, the Central Bank of Congo will use the cross rates of these currencies.

CHAPTER IV: OTHER PROVISIONS

Article 18: Information Session With the aim of reviewing the evolution of the foreign exchange market, an information session will be organized on the last working day of each week, under the presidency of the Central Bank of Congo and in its facilities, to which participants and any other external observer will take part. Participants will review the market conditions abroad and in the Democratic Republic of Congo, notably the conditions of supply and demand for currencies, those of the money market, the cash flow of banks and companies, the regulatory provisions in this matter, as well as any other information that would have an impact on the evolution of exchange rates.

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Article 19: Collection of Fees Operations conducted on the foreign exchange market are exempt from the exchange control fee, all exchange commissions, as well as all other bank fees.

Article 20: Usages of International Banking Participants in the foreign exchange market undertake to respect the usages of International Banking as defined by the International Association of Bankers (ACI/FOREX), insofar as they are consistent with the laws and the foreign exchange regulation in force in the Democratic Republic of Congo.

Article 21: Amendment Upon proposal by the Central Bank of Congo or by the absolute majority of participants in the foreign exchange market, this convention may be amended with a two-thirds majority of votes, each participant having one vote. The Central Bank of Congo, as the Monetary Authority, reserves the right of veto.

Article 22: Final Provisions This Convention enters into force on the date of its signature by at least a simple majority of the participants and abrogates all prior provisions contrary to it.

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Annex 1 On Terminology Under this convention:

• Foreign exchange operations are all purchase and sale transactions between parties of agreed amounts of foreign currencies against CDF or foreign currencies against each other.

• The spot foreign exchange operation or "Spot" is a transaction by which two parties agree to exchange one currency for another at a price called the "spot rate". Delivery of these currencies generally takes place on the second working day following the date of conclusion of the transaction. However, the parties may agree on delivery of the currencies to be exchanged on the same day or the next working day following the date of conclusion of this transaction.

• The forward foreign exchange operation or "forward" is a transaction by which two parties agree to exchange one currency for another at a price called the "forward rate". Delivery of the exchanged currencies takes place on a future maturity date which may fall within a period ranging from three (03) days to one (01) year.

• The working day of an operation is a day when banks are open. In the event that the date of conclusion, the maturity date, or the payment date is not a working day, settlement will take place on the next working day in the relevant place. For forward operations, the contractual maturity must take into account holidays in the Democratic Republic of Congo and abroad.

• The date of conclusion or transaction is the date on which the parties concluded the foreign exchange transaction and on which this transaction enters into force. It is the first day taken into consideration for the determination of the roll or swap in a forward foreign exchange operation.

• The maturity date is the date agreed upon by the parties which is the last day taken into consideration for the determination of the amounts of payments of the currencies to be exchanged in a forward foreign exchange transaction.

• The payment date is any date specified as such upon the conclusion of the foreign exchange transaction.

• The value date is the date valid for accounting entries from which interest begins or ceases to accrue.

• The calculation base for the payment amount(s) of the currency/currencies in forward foreign exchange transactions is a fraction defined at the conclusion of the forward foreign exchange transaction, which may have, among others, the following meanings: exact base/360.

• The exact base/360, with regard to each application period, is a fraction whose numerator is the exact number of days elapsed during this period and whose denominator is 360.

• The roll or swap constitutes the interest rate differential on the exchanged currencies applied to the spot rate and the duration of the forward foreign exchange operation. The result is reported to the number of days in the year. The roll is the premium to be added to the spot rate to determine the forward rate. The swap is the discount to be subtracted from the spot rate to determine the forward rate.

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Annex II: Authorized Banks in the Democratic Republic of Congo

• The Commercial Bank of Congo "B.C.D.C."
• The International Credit Bank "B.I.C"
• The International Bank for Africa in Congo "B.I.A.C."
• Citibank "CITIBANK"
• Stanbic Bank Congo "STANBIC BANK"
• The Union of Congolese Banks "U.B.C."
• Fransabank Congo "FRANSABANK"
• The African Trade Bank "A.T.B."
• The Bank of Commerce and Development "B.C.D."
• The First Banking Corporation "F.B.C."
• The Congolese Bank for Foreign Trade "B.C.C.E."
• The Bank of Trust and Confidence "BANCOR"

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Signatories of the Convention

• The Central Bank of Congo "B.C.C."
• The Commercial Bank of Congo "B.C.D.C."
• The International Credit Bank "B.I.C"
• The International Bank for Africa in Congo "B.I.A.C."
• Citibank "CITIBANK"
• Stanbic Bank Congo "STANBIC BANK"
• The Union of Congolese Banks "U.B.C."
• Fransabank Congo "FRANSABANK"
• The African Trade Bank "A.T.B."
• The Bank of Commerce and Development "B.C.D."
• The First Banking Corporation "F.B.C."
• The Congolese Bank for Foreign Trade "B.C.C.E."
• The Bank of Trust and Confidence "BANCOR"

Authorized Intermediary Table to be provided daily to the B.C.C./Directorate of Foreign Services according to the convention governing the foreign exchange market Effective exchange rates practiced on .

CUMULATIVE DAILY SPOT OPERATIONS IN USD USD Purchases CIV in CDF Buyer Rate USD Sales CIV in CDF Seller Rate Effective Average Rate Effective USD/CDF Effective USD/CDF USD/CDF 1 2 3 =2/1 4 5 6=5/4 7=(3+6)/2 N.S Range of rates practiced for spot operations Buyer Rate Seller Rate Lowest: Highest:

CUMULATIVE DAILY SPOT OPERATIONS IN BEF BEF Purchases CIV in CDF Buyer Rate BEF Sales CIV in CDF Seller Rate Effective Average Rate Effective BEF/CDF Effective BEF/CDF BEF/CDF 1 2 3 =2/1 4 5 6=5/4 7=(3+6)/2 N.B Range of rates practiced for spot operations Buyer Rate Seller Rate Lowest: Highest:

CUMULATIVE DAILY SPOT OPERATIONS IN FRF FRF Purchases CIV in CDF Buyer Rate FRF Sales CIV in CDF Seller Rate Effective Average Rate Effective FRF/CDF Effective FRF/CDF FRF/CDF 1 2 3 =2/1 4 5 6=5/4 7=(3+6)/2 N.B Range of rates practiced for spot operations Buyer Rate Seller Rate Lowest: Highest:

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