Central Bank of Tunisia Circular No. 2018-12 dated November 28, 2018

Tunis, November 28, 2018 Circular to Banks No. 2018-12 Subject: Interbank Market in Dinars.

Pursuant to Law No. 2016-35 of April 25, 2016 establishing the status of the Central Bank of Tunisia, Pursuant to Law No. 2016-48 of July 11, 2016 on banks and financial institutions, Pursuant to Law No. 2012-24 of December 24, 2012 on the stock lending and borrowing agreement (repo), Pursuant to Circular to Credit Institutions No. 2005-09 of July 14, 2005 on the organization of the money market, as amended and supplemented by subsequent texts, Pursuant to Circular to Credit Institutions and Approved Intermediaries No. 2008-07 of March 13, 2008 on the use of the "SED" data exchange system, Pursuant to Central Bank of Tunisia Circular No. 2013-05 of April 30, 2013 establishing the standard framework agreement for stock lending and borrowing operations, Pursuant to Circular to Banks No. 2017-02 of March 10, 2017 on the implementation of monetary policy by the Central Bank of Tunisia, Pursuant to the Decision of the Board of Directors of the Central Bank of Tunisia dated June 13, 2018, Pursuant to Opinion No. 10-2018 of the Control and Compliance Committee dated November 16, 2018, as provided for in Article 42 of Law No. 2016-35 of April 25, 2016 establishing the status of the Central Bank of Tunisia,

Decides:

TITLE I: OBJECT, SCOPE AND DEFINITIONS Article 1: Object and Scope This circular aims to define the conditions, procedures, and methods for liquidity exchange within the interbank market in dinars. It applies to banks as defined by Law No. 2016-48 of July 11, 2016 on banks and financial institutions.

Article 2: Definitions "Contributing Bank", a bank that is part of the panel contributing to TUNIBOR. "TUNIBOR Underlying Contributions", interest rate quotes provided by the panel of contributors to TUNIBOR. "Rate Quote", an offer of interest rate regarding a liquidity exchange in dinars for a specified duration. "Interbank Market", an over-the-counter market where banks mutually exchange dinar liquidity for short maturities up to one year. "Stock Lending and Borrowing Operation (Repo)", a temporary transfer of an asset at an agreed price on the trade date, which includes the irrevocable and simultaneous commitment of the transferor to repurchase the asset and the transferee to return it at an agreed date and price on the trade date. "Panel of Contributors to TUNIBOR", the list of contributing banks selected by the Central Bank of Tunisia based on pre-established criteria. "SED", the data exchange system between the Central Bank of Tunisia and banks. "SGMT", Tunisia's Large Value Payment System enabling real-time gross settlement of dinar payments. "Trading System", a secure and reliable system enabling electronic trading of interbank transactions. "Reference Interest Rates", interest rates calculated and published daily by the Central Bank of Tunisia applying a formula to underlying data from interbank transactions or contributions made by the panel of contributors to TUNIBOR. "TM", the overnight interbank market average interest rate. "Unsecured Interbank Transaction", an uncollateralized interbank transaction. "Interbank Transaction", a liquidity exchange concluded between two banks in the form of an unsecured transaction or a stock lending and borrowing operation. "TUNIBOR", abbreviation for 'Tunisian Interbank Offered Rate', representing the average interest rate at which contributing banks are willing to lend unsecured funds to each other for maturities ranging from one week to twelve months: one week, two weeks, one month, two months, three months, six months, nine months, and twelve months.

TITLE II: QUOTING, TRADING AND REPORTING OF INTERBANK TRANSACTIONS Article 3: Obligation to Display Quotes Banks are required to continuously display their indicative offer and demand conditions for dinar liquidity for maturities ranging from overnight to one year. This obligation also applies to banks engaged in operations compliant with Islamic finance principles as provided by current regulations, notably Articles 11 to 16 of Law No. 2016-48 of July 11, 2016 on banks and financial institutions. Rate quotes must be displayed using contribution pages disseminated via secure information networks such as Reuters or Bloomberg, in accordance with the model attached as Annex No. 1 to this circular. In the absence of access to the aforementioned information networks, banks may use any other communication method meeting standard security and reliability norms.

Article 4: Requirements Regarding Quotes Banks must implement appropriate internal procedures to ensure the accuracy, integrity, and reliability of their interbank market interest rate quotes in dinars. Each bank must also designate two officers responsible respectively for establishing and approving the rate quotes prior to their dissemination. The identity and contact details of these two officers must be transmitted to the Central Bank of Tunisia.

Article 5: Hours Liquidity exchange on the interbank market in dinars takes place on business days from opening time until the provisional closing time of Tunisia's Large Value Payment System (SGMT).

Article 6: Categories of Interbank Transactions Interbank transactions are conducted either unsecured or in the form of stock lending and borrowing operations. The interest rates applied to these transactions are expressed as percentages with two decimal places according to the monetary convention (actual/360). Interbank transactions conducted in compliance with Islamic finance principles notably take the form of Moudharaba, Wakala, or Mourabaha operations.

Article 7: Trading of Interbank Transactions Regardless of the form taken by dinar liquidity exchange on the interbank market, banks are required to use a trading system that ensures transaction traceability and security, such as Reuters or Bloomberg. The Central Bank of Tunisia may access data on interbank transactions executed via the said trading system remotely and in real time without prior authorization from banks.

Article 8: Declaration of Interbank Transactions by Banks Banks are required to declare to the Central Bank of Tunisia, for each category indicated in Article 6 of this circular, interbank transactions executed per session, in accordance with the computerized recording structure published on the data exchange system (SED). During the double-session period, two declaration sessions are set at 10:30 and 14:00 respectively. For the single-session period, a single session is set at 10:30 at the latest. In case of SED system malfunction, banks may use fax or, where applicable, any other communication system leaving a written record. Banks must also communicate to the Central Bank of Tunisia, at the latest 15 minutes after the provisional closing of the Large Value Payment System (SGMT), a summary of all interbank transactions for the day, specifying amounts, rates, and durations for each category.

Article 9: Information Communicated by the Central Bank of Tunisia At the end of each session provided for in Article 8, the Central Bank of Tunisia communicates to banks a file, for each category of operations, summarizing all declared transactions broken down by amount, rate, and duration. At the end of the day, it communicates to banks a summary statement of all interbank transactions for the day for each category of operations. The Central Bank of Tunisia also publishes, every Tuesday, liquidity forecasts for the following week detailed by autonomous liquidity factors. It publishes daily from the opening of the Large Value Payment System (SGMT), banks' status regarding mandatory reserve building as well as main expected cash flows for the day.

TITLE III: REFERENCE INTEREST RATES OF THE INTERBANK MARKET Article 10: Typology of Reference Interest Rates Interbank market reference interest rates are indices calculated daily by the Central Bank of Tunisia either from rates applied to actual interbank transactions for the overnight average interest rate (TM), or from rate quotes provided by the panel of contributors for TUNIBOR. The combination of the two aforementioned data sources provides reference rates covering the entire spectrum of maturities from overnight to one year. The daily preparation and publication of reference interest rates by the Central Bank of Tunisia aim to improve the depth and liquidity of the interbank market, which constitutes an important link in monetary policy transmission.

Article 11: Methodology for Calculating the Overnight Average Interest Rate (TM) The overnight average interest rate (TM) is calculated as the weighted average of overnight lending rates for all unsecured interbank transactions, transmitted at the end of the day to the Central Bank of Tunisia under the conditions provided in Article 8. This rate is rounded to the nearest basis point. The Central Bank of Tunisia reserves the right to eliminate outlying rates that do not reflect market conditions.

Article 12: Publication of TM The overnight average interest rate (TM) is published at the end of the day by the Central Bank of Tunisia on the data exchange system (SED), and at the latest the following day on its website and on Reuters and Bloomberg platforms.

Article 13: Panel of Contributors to TUNIBOR The panel of contributors to TUNIBOR consists of the most active banks on the dinar money market that meet the counterparty eligibility conditions for monetary policy operations as provided in Article 2 of Circular No. 2017-02 of March 10, 2017 on the implementation of monetary policy by the Central Bank of Tunisia. To this end, the Central Bank of Tunisia ranks banks at least once a year based on the volume of activity achieved across different segments of the dinar money market (interbank market, negotiable debt securities market, and refinancing with the Central Bank of Tunisia). The Central Bank of Tunisia regularly publishes and updates on its website and on Reuters and Bloomberg platforms the list of contributing banks to TUNIBOR.

Article 14: Obligations of Contributing Banks Each contributing bank is required to update daily its displayed rate quotes on its contribution pages disseminated via Reuters or Bloomberg platforms before 10:45. In case of interruption of services offered by these platforms, contributing banks must communicate their rate quotes to the Central Bank of Tunisia via the data exchange system (SED) or by fax according to the model attached as Annex No. 2 to this circular. It must ensure that the underlying contributions provided to the Central Bank of Tunisia reflect its assessment of the evolution of liquidity lending conditions between banks belonging to the panel of contributors to TUNIBOR. To this end, it must take into account, in order of priority, the following factors:

• Rates related to recent transactions observed on the interbank market for similar maturities;
• Rates related to recent transactions on other types of markets (monetary policy operations, stock lending and borrowing operations, foreign exchange swaps, negotiable debt securities…);
• Rate quotes observed on the interbank market;
• Statistical or analytical methods sufficiently documented;
• Expert judgment based on objective, reasonable, and consistent criteria. Contributions provided for the TUNIBOR fixing do not constitute an obligation for contributing banks to trade or commit to trading interbank transactions.

Article 15: Methodology for Calculating TUNIBOR After controlling and validating the underlying contributions, the Central Bank of Tunisia calculates TUNIBOR daily at 11:00 by maturity as a simple arithmetic mean, rounded to the nearest basis point, of lending rates transmitted by contributing banks after eliminating 15% of the extreme quotes (i.e., the highest and lowest). The Central Bank of Tunisia ensures that at least half of the banks in the panel of contributors have communicated their lending rates on the 8 maturities before 10:45. If this quorum is not met, the Central Bank of Tunisia may postpone the TUNIBOR fixing time and inform the market. The TUNIBOR calculation methodology may be modified by the Central Bank of Tunisia, after consulting banks, to better reflect market reality.

Article 16: Publication of TUNIBOR TUNIBOR is published every business day at 11:00 AM on the website of the Central Bank of Tunisia and on Reuters and Bloomberg platforms.

TITLE IV: FINAL PROVISIONS Article 17: Measures Taken in Case of Non-Compliance The obligations provided by this circular and incumbent upon banks constitute conditions for the implementation of monetary policy within the meaning of Circular No. 2017-02 of March 10, 2017 on the implementation of monetary policy by the Central Bank of Tunisia. Non-compliance with any of these obligations is subject to measures provided for in said circular against counterparties.

Article 18: Repeal Title I as well as the provisions of the first indent of Article 3, Article 18, and the first paragraph of Article 20 of Circular No. 2005-09 of July 14, 2005 on the organization of the money market are repealed.

Article 19: Entry into Force This circular enters into force as of January 2, 2019.

THE GOVERNOR Marouane EL ABASSI

ANNEX NO. 1 TO CIRCULAR NO. 2018-12 DATED 28/11/2018 LIQUIDITY OFFER AND DEMAND CONDITIONS UNSECURED 1 ON THE INTERBANK MARKET IN DINARS (Continuous Display) DATE AND TIME: BANK: (In % with two decimal places) Duration Offered Rate Requested Rate 1 Day 1 Week 2 Weeks 1 Month 2 Months 3 Months 6 Months 9 Months 12 Months Officers 1st Officer 2nd Officer Name and Surname Contact Details

1 The same model is to be used for rate quotes on stock lending and borrowing operations or operations compliant with Islamic finance principles such as Moudharaba, Wakala, and Mourabaha.

ANNEX NO. 2 TO CIRCULAR NO. 2018-12 DATED 28/11/2018 TUNIBOR UNDERLYING CONTRIBUTIONS (Deadline: 10H45) DATE AND TIME: CONTRIBUTING BANK: (In % with two decimal places) Duration Requested Rate 1 Week 2 Weeks 1 Month 2 Months 3 Months 6 Months 9 Months 12 Months Officers 1st Officer 2nd Officer Name and Surname Contact Details