Regulatory Alerts2011-03-18
Instruction No. 001/03/2011 on the Operational Modalities of the Central Bank of West African States (BCEAO) in the Framework of Monetary Policy Conduct
The Central Bank of West African States (BCEAO) issued Instruction No. 001/03/2011 to standardize the operational procedures for its monetary policy interventions, including open market tenders, marginal lending window refinancing, intraday advances, and interbank market transactions. The directive establishes precise rules for tender notices, bid submissions, collateral requirements, and the evaluation of marginal and weighted average interest rates across all WAEMU member states. It further mandates daily reporting of interbank operations, defines penalty mechanisms for payment defaults, and sets clear formulas for calculating monthly, semi-annual, and legal interest rates to ensure transparent liquidity management.
BCEAO CENTRAL BANK OF WEST AFRICAN STATES
INSTRUCTION NO. 001/03/2011 ON THE OPERATIONAL MODALITIES OF THE CENTRAL BANK OF WEST AFRICAN STATES (BCEAO) IN THE FRAMEWORK OF MONETARY POLICY CONDUCT
The Governor of the Central Bank of West African States (BCEAO),
Having regard to the Treaty establishing the West African Monetary Union (WAMU) dated 20 January 2007, particularly Article 34 thereof,
Having regard to the Statutes of the Central Bank of West African States (BCEAO), annexed to the Treaty establishing the WAMU dated 20 January 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 2 December 2010 by the Monetary Policy Committee setting out rules, instruments and procedures for implementing the BCEAO's monetary and credit policy, particularly Title I thereof,
DECIDES:
TITLE I: GENERAL PROVISIONS
Article 1: Purpose This instruction aims to specify the practical modalities of BCEAO interventions in the framework of monetary policy conduct, carried out through open market tenders, marginal lending window refinancing, intraday advances, and interbank market transactions.
TITLE II: OPEN MARKET TENDERS
Article 2: Tender Notice The BCEAO announces the organization of each auction via a tender notice, the template of which is attached to Annex 1.1, disseminated to participants by any rapid communication channel, no later than three (3) hours before the submission deadline. The tender notice includes the characteristics of the operation, namely:
- the reference number of the tender;
- the nature of the auction (liquidity injection or withdrawal);
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- the type of auction (fixed or variable rate);
- the maximum amount put up for auction, where applicable;
- the minimum submission interest rate for liquidity injections;
- the maximum submission interest rate for liquidity withdrawals;
- the maximum submission amount per participant, where applicable;
- the value date of the auction;
- the duration of the operation;
- the maturity date;
- the deadline for submission.
Article 3: Submissions Bids are submitted, on the date indicated in the tender notice and no later than the specified deadline, using forms whose templates are reproduced in Annexes 1.2 and 1.3 of this instruction. The submission amount covers an integer number of millions of CFA francs. It may be split, without limitation, into several bids with different interest rates expressed to four (04) decimal places, each covering an integer number of millions of CFA francs. For liquidity injection operations, bids at rates below the minimum submission rate are rejected. For liquidity withdrawal operations, bids above the maximum rate are rejected. In fixed-rate auctions, participants indicate only the amount of their bid. Submitters for liquidity injection operations indicate the amount and nature of eligible assets deposited as collateral. Submissions are transmitted, via agreed rapid and secure communication means between the Central Bank and each participant, to the Principal Agency of the BCEAO in the participant's country of establishment, on the date indicated in the tender notice and no later than the fixed deadline. Eligible participants holding a current account or settlement account in the books of the BCEAO Headquarters transmit their submissions within the same timeframes via any agreed rapid and secure communication channel. Submissions to BCEAO tenders on the money market are firm and irrevocable.
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Article 4: Bills and Securities Taken in Repo Borrowers on the money market must, by the submission date, have deposited at the Central Bank or with an authorized custodian, a volume of eligible bills or securities valued at least 10% higher than the request. These instruments must be available on the auction's value date. Participants authorize the Central Bank to take in repo, where applicable, the bills and securities deposited as collateral for a value covering the amount of the advance granted to them. During the repo period, interest accrued on securities taken in repo is fully passed through to the transferor.
Article 5: Bid Evaluation Submissions from participants of all WAEMU member states are centralized at the BCEAO Headquarters and evaluated on the submission date. Submissions are accepted starting, for liquidity injections, with those offering the highest interest rate, and for liquidity withdrawals, with those expressing the lowest interest rate. The interest rate of the last accepted bid is the marginal rate, corresponding to the minimum accepted rate for liquidity injections and the maximum accepted rate for liquidity withdrawals. A weighted average rate (WAR) of accepted submissions is determined for each auction. It is calculated as follows:
WAR = Σ (Ti * Oi) / O where:
- Ti is the interest rate of accepted bid Oi;
- O is the sum of accepted bids and;
- n is the number of accepted bids.
Article 6: Communication of Results Results of periodic auctions are communicated to participants no later than twenty-four (24) hours after the submission date. For spot auctions, results are communicated no later than twelve (12) hours after the submission deadline. They include overall results for all WAEMU member states, the marginal rate, and the weighted average auction rate, recorded in a summary table, the individual result of each participant, as well as any other information the Central Bank deems necessary to communicate. The summary table of auction results and a press release are
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published. Participants' accounts are debited or credited on the value date indicated in the tender notice.
Article 7: Interest Calculation Interest is calculated pro rata for the number of days between the value date and the actual settlement date of the auction. Each accepted bid is serviced at the rate actually proposed by the participant, in accordance with the variable interest rate auction technique or, where applicable, at the pre-announced fixed rate. Interest is charged, unless otherwise withheld in advance, on the first business day following the maturity date, by debiting the current or settlement account of advance beneficiaries in the case of liquidity injections, or by crediting the current or settlement account of resource providers in the case of liquidity withdrawals. Interest is calculated based on the "exact number of days / 360" convention. The Central Bank notifies each concerned participant of the calculated interest amount, using forms whose templates are attached to Annexes 1.4 and 1.5.
Article 8: Payment Default Any subscriber lacking sufficient provision to cover accepted bids on the settlement date or to repay advances at maturity is suspended until the situation is regularized and for at least one (01) session, without prejudice to any other applicable sanction in case of payment incidents. In case of recurrence within twelve (12) months, suspension is for at least two (02) sessions after regularization. The Central Bank publishes an announcement for participants indicating, for a given auction, payment incidents and sanctions imposed on their authors.
Article 9: Monthly Average Money Market Rate No later than the first business day following month-end, the Central Bank calculates and communicates to credit institutions the Monthly Average Money Market Rate. It equals the duration-weighted average of the weekly tender rates for the month. Its calculation formula is as follows:
TMM = Σ (Ti * ni) / n
Ti = marginal rate of weekly liquidity injection operations (i) for the month ni = corresponding duration of Ti n = actual number of days in the concerned month.
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Article 10: Semi-Annual Average Money Market Rate No later than the first business day following semester-end, the Central Bank calculates and communicates to credit institutions the Semi-Annual Average Money Market Rate. Its calculation formula is as follows:
TMS = Σ (Ti * ni) / n
Ti = marginal rate of weekly liquidity injection operations (i) for the semester ni = corresponding duration of Ti n = actual number of days in the semester.
TITLE III: OPERATIONS INITIATED ON THE INTERBANK MARKET
Article 11: Communication of Interbank Operations to the Central Bank Credit institutions participating in the interbank market must communicate to the BCEAO, via the fastest channels, each day by 16:30 UTC (deadline), using the form whose template is attached to Annex 1.9 of this instruction, details of operations conducted on said market during the day. The BCEAO may also collect from Principal Market Operators, via the fastest channels, the amounts of anticipated liquidity offers and requests likely to be presented on the interbank market during the day. The BCEAO calculates and publishes daily indicative reference interest rates resulting from transactions conducted on the following main compartments of the interbank market across the WAEMU: one (01) day, one (01) week, one (01) month, three (03) months, six (06) months, nine (09) months and twelve (12) months.
Article 12: Securities Pledge with the Central Bank Interbank market participants may pledge their securities deposited at or held by the Central Bank as custodian, to serve as collateral for interbank loans. To establish the pledge, the pledgor communicates to the concerned BCEAO Principal Agency a duly completed and signed pledge declaration form (template attached to Annex 1.10). This form indicates, among other things, the identity of the pledgor and pledge beneficiary, references to the concerned securities, and the guaranteed obligation. The pledgor receives a copy of the "pledge declaration" and a "certificate of pledge establishment" (cf. Annex 1.11); this certificate is also transmitted to the pledge beneficiary.
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During the pledge period, the pledgor cannot perform any operation on pledged securities that could change their ownership or restrict attached property rights. Accrued interest on the concerned securities is credited to the pledgor's current or settlement account in the BCEAO books. In case of amortization of pledged securities, the pledgor must replace them before maturity with other securities of the same nature and nominal value. In this case, repayment is made to the pledgor by crediting their current or settlement account at the BCEAO. Otherwise, repaid amounts are paid into a non-interest-bearing blocked account opened in the pledgor's name in the BCEAO books, until pledge settlement. Pledge settlement occurs either upon production to the BCEAO of a release certificate issued by the creditor beneficiary using a form (template attached to Annex 1.12), or by court decision. It restores the holder's full property rights over the concerned securities.
Article 13: Repo Operations on Securities Held by the Central Bank Interbank market participants may put bills and securities deposited at the Central Bank into repo, to serve as collateral for interbank loans. During the repo period, accrued interest on the concerned securities is credited to the transferor's current or settlement account in the BCEAO books. In case of amortization of securities put into repo, the transferor must replace them before maturity with other securities of the same nature and nominal value. In this case, repayment is made to the transferor by crediting their current or settlement account at the BCEAO. Otherwise, repaid amounts are paid into a non-interest-bearing blocked account, allocated to repo settlement at maturity.
TITLE IV: MARGINAL LENDING WINDOW AND INTRADAY ADVANCES
Article 14: Marginal Lending Window Taking in repo bills or securities on the marginal lending window is supported by a statement (template attached to Annex 2.1). Dematerialized securities admitted to the marginal lending window must be transferred to the Central Bank, in its books or with an authorized custodian. Other admitted values are delivered endorsed in blank to the Central Bank, which verifies their physical existence. No reference mentioning their passage through the Central Bank must appear on the securities.
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Repurchase occurs within a maximum of seven (07) days. It may be initiated by the transferring counterparty at any time, twenty-four (24) hours after BCEAO's acceptance. For this purpose, the Central Bank issues a repayment request using a form (template attached to Annex 2.2). In case of amortization of a security taken in repo by the BCEAO, the repo is settled up to the repaid amount.
Article 15: Legal Interest Rate No later than the first business day of the year, the Central Bank calculates and communicates to the Ministry responsible for Finance the rate representative of the legal interest rate. The legal interest rate for a year (n) equals the duration-weighted average of marginal lending window rates from year (n-1).
LIR = Σ (Ti * ni) / n
Ti = Marginal lending window rate for a period i of the year; ni = corresponding duration of Ti; n = actual number of days in the year.
Article 16: Intraday Advances Intraday advances are collateralized loans provided to participants in the Automated Transfer and Settlement System of WAEMU (STAR WAEMU), repayable on the same day, to enable them to meet punctual treasury needs during the trading day. The intraday advance window operates exclusively on business days, based on the STAR WAEMU calendar. Advances must be settled by end of day. They do not accrue interest. However, in case of non-settlement, the intraday advance is subject to a penalty calculated based on the prevailing BCEAO marginal lending rate, increased by five (5) percentage points, as defined by Article 18 of Decision No. 397/12/2010 by the Monetary Policy Committee setting out rules, instruments and procedures for implementing monetary and credit policy.
TITLE V: CALCULATION OF MAXIMUM REFINANCING QUOTA
Article 17: Maximum Refinancing Quota Banking assets of credit institutions and other beneficiaries of Central Bank advances, serving as reference for calculating the maximum refinancing quota
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fixed at 35% by Article 52 of Decision No. 397/12/2010 by the Monetary Policy Committee setting out rules, instruments and procedures for implementing monetary and credit policy, include:
- advances to financial institutions and international or foreign financial institutions;
- claims on customers, including decentralized financial systems;
- other banking assets, notably investment and placement securities, credit leasing, and collected values with immediate crediting.
The calculation form for the maximum refinancing quota is attached to Annex 3 of this instruction.
TITLE VI: FINAL PROVISIONS
Article 18: Entry into Force This instruction, including its annexes which form an integral part thereof, repeals and replaces all prior provisions dealing with the same subject matter. It enters into force as of its signature date and is published wherever necessary.
Done in Dakar, on 18 MARCH 2011
Acting Governor (Signature) Jean-Baptiste COMPAORE
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ANNEXES
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ANNEX 1 FORMS USED FOR LIQUIDITY INJECTION OR WITHDRAWAL TENDERS
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Annex 1.1 CENTRAL BANK OF WEST AFRICAN STATES Principal Agency of: ....................
WAEMU MONEY MARKET TENDER NOTICE
MM 812 - IBC
Auction No. .................... of .................... 20...
THE CENTRAL BANK OF WEST AFRICAN STATES HEREBY NOTIFIES INTERVENTIORS IN THE WAEMU MONEY MARKET THAT IT IS ORGANIZING A TENDER WITH THE FOLLOWING CHARACTERISTICS:
Nature of auction¹ : ........................................................ Type of auction : ........................................................ Maximum amount: .................... millions of CFA francs Limit rate (minimum or maximum): ........................................................ Maximum submission amount per intervenor (where applicable): .................... millions of CFA francs Value date: ........................................................ Maturity date: ........................................................ Duration: ........................................................ Deadline for submission of bids: ........................................................
At ...................., on .................... 20..
BCEAO Signature
1: Indicate liquidity injection or withdrawal
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Annex 1.2 CENTRAL BANK OF WEST AFRICAN STATES Principal Agency of: ....................
WAEMU MONEY MARKET SUBMISSIONS FOR REPO OPERATIONS
Intervenor: ........................................................ Registration number: ........................................................ Auction No.: .................... of .................... 20..
MM 813 - IBC
Total amount (in figures): .................... millions of CFA francs (in words): ........................................................ detailed as follows:
| Amounts (in millions of CFA francs) | Interest rate (*) |
|---|---|
| ............................... | ................... % |
| ............................... | ................... % |
| ............................... | ................... % |
| ............................... | ................... % |
Within the framework of this auction, and subject to compliance with the interest rate conditions and maximum amounts indicated above, the BCEAO is authorized to debit our ordinary current account or settlement account in its books, up to the amount retained for our submissions.
At ...................., on .................... 20..
Authorized signature of the submitter
N.B.: Interest rates are expressed with a maximum of four decimal places.
- In the case of an auction where the interest rate is fixed by the Central Bank, indicate this rate
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Annex 1.3 CENTRAL BANK OF WEST AFRICAN STATES Principal Agency of: ....................
WAEMU MONEY MARKET SUBMISSIONS FOR TAKING IN REPO
Intervenor: ........................................................ Registration number: ........................................................ Auction No.: .................... of .................... 20..
MM 814 - IBC
Total amount (in figures): .................... millions of CFA francs (in words): ........................................................ detailed as follows:
| Amounts (in millions of CFA francs) | Interest rate (*) |
|---|---|
| ............................... | ................... % |
| ............................... | ................... % |
| ............................... | ................... % |
| ............................... | ................... % |
Amount of bills and securities deposited as collateral (in figures): .................... millions of CFA francs
Within the framework of this auction, and subject to compliance with the interest rate conditions and maximum amounts indicated above, the BCEAO is authorized to credit our ordinary current account or settlement account in its books, up to the amount retained for our submissions.
At ...................., on .................... 20..
Authorized signature of the submitter
N.B.: Interest rates are expressed with a maximum of four decimal places.
- In the case of an auction where the interest rate is fixed by the Central Bank, indicate this rate
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Annex 1.4 CENTRAL BANK OF WEST AFRICAN STATES Principal Agency of: ....................
WAEMU MONEY MARKET INTEREST ON REPO OPERATIONS
Intervenor: ........................................................ Registration number: ........................................................ Auction No.: .................... of .................... 20.. Value date: .................... Maturity: ....................
MM 821 - IBC
| Accepted bids | Amount (in millions of CFA francs) | Rate (in %) | Number of days calculated | Interest (in CFA francs) |
|---|---|---|---|---|
| 1 | .................... | ............ | ........................ | .................... |
| 2 | .................... | ............ | ........................ | .................... |
| 3 | .................... | ............ | ........................ | .................... |
| 4 | .................... | ............ | ........................ | .................... |
| 5 | .................... | ............ | ........................ | .................... |
| Total | .................... | //////// | //////////////////////// | .................... |
The interest amount calculated above has been credited today to your ordinary current account or settlement account in our books, following the placement made under the aforementioned auction.
At ...................., on .................... 20..
BCEAO Signature
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Annex 1.5 CENTRAL BANK OF WEST AFRICAN STATES