Circular Note No. 2026/BCC/DESM of the Central Bank of the Comoros on the Interbank Market

Subject: Animation of the Interbank Market and Operational Framework

The Central Bank of the Comoros (BCC) announces the official launch of the interbank market, an essential mechanism for managing liquidity between credit institutions (banks and decentralized financial institutions (DFIs)). This market will allow credit institutions to place short-term deposits, thereby strengthening their capacity to respond to liquidity fluctuations.

Definition and Operation

The interbank liquidity market is the market on which credit institutions make short-term loans to each other with a fixed maturity for a determined duration and interest rate. Interbank transactions for a fixed amount, duration, and rate must be differentiated from the current account balances that a bank may hold with another. The amounts of the latter can vary daily, and the rate can be modified unilaterally by the account holder.

By convention, the interbank liquidity market can be considered for transactions with a duration of up to one year, but the ideal is that most transactions have a shorter maturity, for example, from 24 hours to one week. Longer-term transactions can be considered as structural financing and investments.

Transactions can be unsecured or secured by collateral. This operational framework aims to optimize liquidity management, strengthen the financial resilience of banks, and improve the transmission of monetary policy.

Advantages of the Interbank Market

The interbank market plays a fundamental role in the efficient management of liquidity by credit institutions.

1. Liquidity Optimization: It allows credit institutions with excess liquidity (temporary or permanent) to place funds with credit institutions having liquidity needs, to the mutual benefit of both parties. Otherwise, the lender might be forced to place its excess funds at the BCC deposit facility rate (currently set at 0%), and the borrower might have to borrow from the BCC marginal lending facility (currently at 5.5%) subject to collateral. If a credit institution knows it can borrow short-term on the interbank market in case of financing needs, it can hold smaller liquidity reserves, allowing it to optimize its asset composition.
2. Risk Management: Strengthens the defense lines available to credit institutions to meet liquidity needs. If a credit institution faces short-term liquidity needs, it can use its existing reserves, attract customer deposits, and resort to the interbank market before turning to the central bank's marginal lending facilities.
3. Monetary Policy Transmission: Improves the efficiency of transmitting monetary decisions within the banking system.

BCC Operational Framework

The BCC operates in a context of structural liquidity surplus. On an aggregated basis, for the banking system as a whole. The BCC drains part of this liquidity surplus through its regular liquidity absorption operations.

In the current situation, liquidity absorption operations are calibrated so that there is a residual liquidity surplus after the operations.

This does not exclude, however, that due to the specific composition of their balance sheets, individual credit institutions may have liquidity needs, particularly those with a large loan portfolio. These needs can be met by the interbank market.

BCC Expectations

Given the advantages of the interbank liquidity market, the BCC welcomes and encourages interbank transactions by credit institutions.

• Transactions are carried out at the initiative and risk of the credit institutions;
• Credit institutions must operate within a solid risk management framework reflecting the credit and liquidity risk of these transactions. Consequently, limits must be established on amounts, duration, and counterparties;
• Credit institutions are encouraged to establish bilateral credit lines between themselves. Within the framework of a credit line, a credit institution assesses the solvency of a counterparty and, subject to a positive solvency assessment, sets the maximum amount it can lend. The advantage for a credit institution of establishing a credit line is also reciprocity: it provides a credit line in exchange for the benefit of receiving one. However, it is equally possible to establish unilateral credit lines;
• Once the credit line is established, it is the responsibility of the credit institution's treasurer or another designated official to approve interbank transactions within the limits of the established credit line;
• There are no regulatory obstacles to the execution of these transactions;
• Although, over time, the BCC may expect a repurchase agreement market to develop, the interbank liquidity market can begin with non-collateralized transactions or secured transactions, as indicated in the attached draft agreements.

Obligations of the Parties:

Once the transaction is agreed upon:

• The borrower may prepare a transaction confirmation which will be signed by the borrower and countersigned by the lender;
• The borrower and the lender may agree on the confirmation model once a bilateral credit line has been established. The BCC proposes the attached drafts, provided that the role of the BCC is not modified;
• Confirmations can be exchanged by email, with the signed confirmation attached to the BCC;
• Once a transaction is agreed upon and confirmed, the parties are obligated to execute the obligations provided therein, in particular:
  • The lender is obligated to transfer the agreed amount via the BCC's RTGS+ or KOMORPAY systems on the settlement date,
  • The borrower is obligated to transfer the borrowed amount plus due interest on the maturity date via the BCC's RTGS+ system;
• Confirmations must include a penalty interest rate to be paid in case either party does not transfer the funds on the agreed date. The BCC suggests setting the penalty interest rate at the BCC marginal lending facility rate plus 1% per day (for example, if the lender must transfer to the borrower 10 million KMF (which constitute the principal and due interest) on January 15 but does so only on the 17th, it must transfer to the borrower, in addition to the 10 million KMF, 3,611 KMF as penalty interest: (10,000,000 KMF * 6.5% * 2) / 360;
• If the lender does not transfer the funds to the borrower on the agreed date, the borrower has the option to denounce the transaction. The lender will then owe a penalty to the borrower equal to the marginal lending facility interest rate plus 1% on the amount not delivered, for the number of days of delay or for the number of days between the expected loan date or the loan maturity date, if the latter occurs before the delivery of funds;
• The borrower has no option for early repayment, and the lender has no right to demand early repayment.
• To facilitate the launch of the market, and for an initial test period, the BCC, upon receipt of a copy of the confirmation signed by both parties, will automatically debit the borrower's account and credit the lender's account at the maturity of the transaction for the amount due (principal plus interest) within the limits of the funds available in the borrower's account the day after the maturity date before the closure of the RTGS+ system, within the limits of the borrower's available funds at the BCC.
• This operational commitment by the BCC must in no way be interpreted as a guarantee of repayment. The risks remain borne by the parties, and the BCC's commitment is to facilitate settlement at maturity within the limits of the funds available in the borrower's account.

Reporting and Dispute Resolution

• All credit institutions declare the interbank liquidity operations they have carried out on a monthly basis, via the attached Excel file, to the BCC Liquidity Committee (comite.liquidite@banque-comores.km).

• Disputes between the parties may be submitted to the BCC for amicable and fair resolution.

Done in Moroni, on 22-02-2026

[Signature]

The Governor,