Instruction No. 002/03/2011 on the Procedures for Establishing Mandatory Reserves with the Central Bank of West African States (BCEAO)

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BCEAO BANQUE CENTRALE DES ETATS DE L'AFRIQUE DE L'OUEST

INSTRUCTION NO. 002/03/2011 ON THE PROCEDURES FOR ESTABLISHING MANDATORY RESERVES WITH THE CENTRAL BANK OF WEST AFRICAN STATES (BCEAO)

The Governor of the Central Bank of West African States (BCEAO),

Having regard to the Treaty of the West African Monetary Union (WAMU) dated January 20, 2007, particularly Article 34 thereof,

Having regard to the Statutes of the Central Bank of West African States (BCEAO), annexed to the Treaty of the West African Monetary Union dated January 20, 2007, particularly Article 62 thereof,

Having regard to the Uniform Act on Banking Regulation, particularly Article 56 thereof,

Having regard to Decision No. 397/12/2010 of December 2, 2010 by the Monetary Policy Committee on rules, instruments and procedures for implementing BCEAO monetary and credit policy, particularly Title IV thereof,

DECIDES

Article 1: Purpose

This instruction specifies the procedures for establishing mandatory reserves by credit institutions operating in the member states of the West African Monetary Union (WAMU).

Article 2: Basis for Determining the Mandatory Reserves Base

The mandatory reserves base is determined based on periodic accounting statements submitted to the Central Bank of West African States (BCEAO or Central Bank), according to the declaration system of the WAMU Banking Accounting Plan:

• for banks, from data extracted from supplementary statements to their monthly accounting statement of the third-to-last¹ month relative to that of the last day of the mandatory reserves establishment period;

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¹ Preceding the second-to-last Avenue Abdoulaye FADIGA | Tel. (221) 33 839 05 00 / Fax. (221) 33 823 93 35 | BP 3108 – Dakar – Senegal | www.bceao.int

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• for financial institutions with a banking character, from data derived from supplementary statements to their accounting statement of the second-to-last² quarter relative to that of the effective mandatory reserves establishment period.

Article 3: Calculation of Mandatory Reserves

The minimum amount of mandatory reserves that each liable institution must establish, over a given establishment period, is calculated by applying the prevailing mandatory reserve coefficients to the corresponding elements of the base.

Article 4: Mandatory Reserves Establishment Period

Banks establish mandatory reserves on a monthly basis, from the 16th of each month to the 15th of the following month.

For liable financial institutions with a banking character, reserves must be established on a quarterly basis.

Article 5: Establishment of Mandatory Reserves

Mandatory reserves are established in a current or clearing account.

Liable credit institutions that are direct or indirect participants in the Automated Transfer and Clearing System of WAMU (STAR UEMOA) establish their mandatory reserves in their clearing accounts within said system.

Liable credit institutions that are sub-participants, as well as institutions not having participant status in STAR UEMOA, establish their mandatory reserves in their current accounts at the BCEAO.

Liable credit institutions are required to establish, on an average basis, the minimum amount of mandatory reserves required. They are not obliged to maintain said amount in account each day.

For the assessment of established mandatory reserves, account balances are retained by units of one million and without decimals.

Article 6: Declaration of Mandatory Reserves to the Central Bank

Liable credit institutions submit to the BCEAO, within thirty (30) days following the date of finalization of their periodic accounting statements, and in any case before the start of the relevant establishment period, duly completed reserve evaluation forms as set out in the annex to this instruction. Amounts are finalized by units of one million.

All accounting or statistical documents necessary for calculating mandatory reserves, transmitted to the BCEAO by a liable institution, must present all guarantees of reliability and be mandatorily signed by persons authorized to commit said institution.

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² Second-to-last

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When the BCEAO cannot precisely determine the amount of mandatory reserves to be established by a liable credit institution, due to unavailability of required data or unreliable communicated information, it retains as the level of reserves to be established by said institution for the relevant establishment period, the highest amount to which the institution was previously liable over the six (06) last establishment periods, until the production of required documents.

Article 7: Delay in Transmission of Reserve Declarations

Credit institutions liable for establishing mandatory reserves that have not transmitted to the BCEAO, within required deadlines, the documents referred to in Article 6 of this instruction or that have knowingly communicated inaccurate statistics, are subject to sanctions provided by the banking regulation law.

Article 8: Method of Controlling Mandatory Reserves

The Central Bank calculates, no later than two (02) working days following the end of the relevant establishment period, on required periods, the arithmetic average balance of the current or clearing account of each liable institution, according to the following formula:

$$Sm_t = \frac{\sum_{i=1}^{N_t} Sc_i}{N_t}$$

where: $Sm_t$ = average balance of holdings in current or clearing account for period $t$ of mandatory reserves establishment, in units of millions; $Sc$ = daily balance of the current or clearing account; $i$ = $i^{th}$ calendar day of period $t$ of mandatory reserves establishment; $N_t$ = number of calendar days during period $t$ of mandatory reserves establishment.

The balance $Sc$ for non-working days equals the daily balance of the preceding last working day.

A liable credit institution has fulfilled its mandatory reserves establishment obligations when the average balance of holdings in current or clearing accounts is at least equal to the minimum required reserves of said institution, determined in accordance with the provisions of the relevant Monetary Policy Committee Decision.

The Central Bank issues to each liable credit institution a statement of reserves established by that institution, compared with required mandatory reserves.

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Article 9: Procedures for Calculating Penalties for Insufficient Mandatory Reserves

The penalty for insufficient established mandatory reserves is calculated on the unestablished portion of mandatory reserves, at the prevailing penalty rate at the beginning of the relevant establishment period, according to the following formula:

$$P_t = \frac{(Ro_t - Sm_t) \times T \times N_t}{360 \times 100}$$

where: $P_t$ = penalty amount for period $t$ of mandatory reserves establishment; $Ro_t$ = minimum required reserves amount during period $t$; $Sm_t$ = average balance of reserve holdings for period $t$; $T$ = prevailing penalty rate at the beginning of period $t$; $N_t$ = number of calendar days during period $t$.

Article 10: Notification and Collection of Penalties

Credit institutions that have failed in their mandatory reserves establishment obligations receive from the Central Bank, within forty-eight (48) hours following the identification of the shortfall, a notification specifying the penalty amounts to which they are subject, without prejudice to sanctions that may be taken elsewhere for non-compliance with banking regulations.

The penalty amount is debited to their current or clearing accounts in the books of the BCEAO. Penalties thus applied are acquired by the Central Bank.

Article 11: Entry into Force

This instruction repeals and replaces all prior provisions dealing with the same subject.

It enters into force as of its signature date and is published wherever necessary.

Done in Dakar, on MARCH 18, 2011

The Acting Governor [Signature] Jean-Baptiste COMPAORE

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ANNEX

CENTRAL BANK OF WEST AFRICAN STATES

Main Branch of ...........................

FORM FOR EVALUATION OF RESERVES TO BE ESTABLISHED WITH THE BCEAO

DECLARATION OF BANKS AND FINANCIAL INSTITUTIONS WITH A BANKING CHARACTER CREDIT DISTRIBUTORS AUTHORIZED TO RECEIVE PUBLIC DEPOSITS

Finalization Date (1):

Name of Institution: Registration Number:

RO300-B

(in millions of CFA francs without decimals)

BALANCE SHEET ITEMS FORMING THE MANDATORY RESERVES BASE	Concordance Table	Amounts Registered on the DEC	Reserve Coefficients	Mandatory Reserves to be Established
Description	DEC Situation	Code	Column (a)	(b)
DEPOSITS AT SIGHT
- Ordinary credit accounts of financial institutions	2012	F1 A	5+6
- Ordinary credit accounts of the public	2000	G10	4
- Other sums due to the public	2000	G70	4
SHORT-TERM CREDITS
Registered financial institutions
- ordinary debit accounts	2012	A12	5+6
- loan accounts – State	2013	A4 L	1+2+3
- loan accounts – WAMU	2013	A4 M	1+2+3
International or foreign financial institutions
- ordinary debit accounts	2012	A12	10+11
- loan accounts – WAMU	2013	A4 P	1+2+3
- loan accounts – Rest of World	2013	A4 Q	1+2+3
Government and non-financial international institutions
Public Treasury
- ordinary debit accounts	2012	A12	3
- loan accounts	2013	A4 D	1+2+3
Postal Checking Accounts (CCP)
- ordinary debit accounts	2012	A12	4
- loan accounts	2013	A4 E	1+2+3
State and similar bodies
- commercial paper portfolio: ordinary credits	2016	B12	4+5+6
- other short-term credits: ordinary credits	2016	B2 D	4+5+6
- ordinary debit accounts	2016	B2 N	4+5+6
Other economic agents
- commercial paper portfolio: campaign credits	2016	B11	1+2+3
- other short-term credits: campaign credits	2016	B2 C	1+2+3
- commercial paper portfolio: ordinary credits	2016	B12	1+2+3
- other short-term credits: ordinary credits	2016	B2 D	1+2+3
- ordinary debit accounts	2016	B2 N	1+2+3
Values for collection with immediate credit	2016	C56	1+2+3+4+5+6
GROSS CLAIMS ON THE EXTERIOR
Banknotes and coins	2000	A11	4
Ordinary debit accounts	2012	A12	2+9+11
Other debit deposit accounts	2012	A2A	2+9+11
Loan accounts	2012	A3A	2+9+11

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(in millions of CFA francs without decimals)

BALANCE SHEET ITEMS FORMING THE MANDATORY RESERVES BASE	Concordance Table	Amounts Registered on the DEC	Reserve Coefficients	Mandatory Reserves to be Established
Description	DEC Situation	Code	Column (a)	(b)
MEDIUM- AND LONG-TERM CREDITS
- Financial institutions – State	2013	A4 L	4+5+6
- Financial institutions – WAMU	2013	A4 M	4+5+6
- International financial institutions – WAMU	2013	A4 P	4+5+6
- International financial institutions – Rest of World	2013	A4 Q	4+5+6
- Government and non-financial international institutions
- Loan accounts: Public Treasury	2013	A4 D	4+5+6
- Loan accounts: Postal Checking Accounts	2013	A4 E	4+5+6
- Medium-term credits: State and similar bodies	2016	B 30	4+5+6
- Long-term credits: State and similar bodies	2016	B 40	4+5+6
Other economic agents
- Individuals – Enterprises – State Companies and EPICs	2016	B30	1+2+3
- Individuals – Enterprises – State Companies and EPICs	2016	B40	1+2+3
MANDATORY RESERVES TO BE ESTABLISHED WITH THE BCEAO: (Total C1+C2+C3+C4)
DURING THE PERIOD FROM ................... TO ...................

(1) Data are finalized at the end of the third-to-last month relative to that of the last day of the effective mandatory reserves establishment period; for example, for the period from January 16 to February 15, consider data contained in the accounting statement finalized at the end of November, i.e., one month and two weeks exactly before the start of the effective mandatory reserves establishment period. (1) For Financial Institutions with a banking character authorized to receive sight and/or term deposits, required to use this form, data are finalized at the end of the second-to-last quarter relative to that of the effective mandatory reserves establishment period; for example, for the period from January 1 to March 31, consider the accounting statement finalized at end September of the previous year. (1) For finalization dates, refer to the calendar communicated by the BCEAO for monthly accounting statements of banks and quarterly statements of financial institutions. (b) mandatory reserve coefficients as set by the BCEAO. NB: This form must be completed by the declarant and submitted to the BCEAO within 30 days following the finalization date.

Name, First Names, Telephone (of the contact person regarding questions related to this declaration).

Authorized Signature(s)

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CENTRAL BANK OF WEST AFRICAN STATES

Main Branch of ...........................

FORM FOR EVALUATION OF MANDATORY RESERVES TO BE ESTABLISHED WITH THE BCEAO

DECLARATION OF FINANCIAL INSTITUTIONS WITH A BANKING CHARACTER, CREDIT DISTRIBUTORS, NOT AUTHORIZED TO RECEIVE PUBLIC DEPOSITS

Finalization Date (1):

Name of Institution: Registration Number:

RO 300-EF

(in millions of CFA francs without decimals)

BALANCE SHEET ITEMS FORMING THE BASE	Concordance Table	Amounts Recorded in the Statement Transmitted to BCEAO
OF MANDATORY RESERVES	DEC Situation	Code
I – CREDITS TO THE ECONOMY	2 000	B2 D
- Ordinary credits	2 000	B 30
- Medium-term credits	2 000	B 40
II - TO BE DEDUCTED (Loans obtained from banks)	2 011	F1D
- Ordinary credit accounts	2 013	F4 G
- Loan accounts	2 013	F4 H
- Banks and correspondents – State	2 013	F4 J
- Banks and correspondents – WAMU	2 013	F4 J
- Banks and correspondents – Rest of World	2 013	F4 J
III – NET AMOUNT OF THE MANDATORY RESERVES BASE
TO BE ESTABLISHED (I-II)
IV – MANDATORY RESERVE COEFFICIENT (in %)
MANDATORY RESERVES TO BE ESTABLISHED WITH THE BCEAO:
DURING THE PERIOD FROM ................... TO ...................
(Mandatory Reserves = III * IV)

(1) Data are finalized at the end of the second-to-last quarter relative to that of the effective mandatory reserves establishment period; for example, for the period from January 1 to March 31, consider the accounting statement finalized at end September of the previous year. (1) The finalization date is that appearing in the calendar communicated by the BCEAO for quarterly statements. The mandatory reserve coefficient is that notified by the BCEAO.

NB: This form must be completed by the declarant and submitted to the BCEAO within 30 days following the finalization date.

Name, First Names, Telephone (of the contact person regarding questions related to this declaration)

Authorized Signature(s)