Regulatory Alerts2008-04-29
Banking Circular No 3 of 2008 - Term Auction Deposit
The Central Bank of Kenya announced in Banking Circular No. 3 of 2008 their intention to introduce a new deposit product called Term Auction Deposit (TAD) on April 25, 2008. This product will have competitive auction bidding systems and flexible tenures ranging from 3 to 90 days. Late TAD bids will be priced at 100 basis points below the day's weighted average rate. The deposit amount threshold is initially set at KES 20m, which will be adjusted to KES 10m for late TAD deposits. Current OMO dealing times apply and TAD deposits will be held until maturity, qualifying as part of the liquidity ratio. Late TAD bids won't be eligible as collateral for CBK borrowing or ILF creation. The Central Bank will acknowledge deposits through issuance of account statements on the Reuters OMO page. Testing will run for two days from April 28-29, 2008, and the product will be fully launched on April 30, 2008.
Banking Circular No. 3 Of 2008 To: Chief Executives Of Commercial Banks Re: Term Auction Deposit
The Central Bank of Kenya briefed Treasury Officers of Commercial banks on its intention to introduce a deposit product to be known as Term Auction Deposit on April 25, 2008. The briefing covered a description of the features of the product and technical aspects of bidding for the same. In summary, the Term Auction Deposit, will have the following features:- a) Competitive auction bidding system; b) Flexibility in tenures: 3 to 90 days; c) Threshold at KES 20m but will be adjusted to KES 10m for late Term Auction Deposit bids; d) Current OMO dealing times will apply; e) Deposits will be held to maturity and will qualify for liquidity ratio purposes; f) Deposits will not be eligible as collateral for CBK borrowing or ILF creation; g) Late deposit bids will be priced at 100 basis points below the day's weighted average Term Auction Deposit rate; h) The CBK will acknowledge deposits through issuance of account statement; i) Whenever this product is on offer, posting will be on Reuters OMO page. As agreed during the briefing, testing will run for two days i.e. April 28-29, 2008 and thereafter the product will be rolled out on April 30, 2008.