Notice No. 004/GGBM/96 of July 16 - Creation of the Interbank Foreign Exchange Market

1 BANCO DE MOÇAMBIQUE NOTICE No. 004/GGBM/96 SUBJECT: CREATION OF THE INTERBANK FOREIGN EXCHANGE MARKET Within the framework of the financial system reform, the Interbank Foreign Exchange Market plays an important role in transactions for the purchase and sale of foreign currency. In these terms, the Bank of Mozambique, using the powers conferred upon it by Article 46 of Law No. 01/92 of January 3, the Organic Law, determines:

Article 1 (Object) The Interbank Foreign Exchange Market is created, hereinafter designated as MCI.

Article 2 (Purposes) The MCI aims to regulate the internal foreign exchange market by clarifying an institutional framework that allows authorized operators to carry out purchase and sale transactions of foreign currency among themselves.

Article 3 (Participating Institutions)

1. Participants in the MCI are the Bank of Mozambique and the Commercial Banks operating in Mozambique.
2. Other institutions invited by the Bank of Mozambique may also participate.

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Article 4 (Place of Operation) The MCI sessions take place at the headquarters of the Bank of Mozambique in Maputo, and may be extended to its branches.

Article 5 (Position Limits)

1. To ensure greater liquidity in the MCI, the Bank of Mozambique will establish foreign exchange position limits expressed in US dollars, subject to periodic revisions.
2. If excesses against the established limits are verified, participating institutions must sell the corresponding amounts in the MCI.

Article 6 (Exchange Rates) The exchange rate applied to the operations referred to in the previous paragraph should not exceed by 2% the selling exchange rate for that day published by the institution holding such excesses.

Article 7 (Donated Funds)

1. Donated funds intended to support the country's imports, which are subject to transaction in the MCI, will be sold by the Bank of Mozambique only to Commercial Banks in the MCI.
2. Commercial Banks must regularly provide detailed information, on a weekly basis, regarding the use of the funds referred to in paragraph 1 of this article, adhering to the schedule set out in item d) of paragraph 1 of Article 8.

Article 8 (Information to be Submitted to the Bank of Mozambique)

1. Participants in the MCI must submit the following information to the Bank of Mozambique:

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a) Daily table of indicative buying and selling exchange rates, by 09:00 hours each day (Annex 1). b) Daily foreign exchange position report by 11:30 hours each business day of the week (Annex 2). c) Weekly foreign exchange position report by 10:00 hours each Friday (Annex 3). d) Weekly report on the use of import support funds acquired in the MCI by 10:00 hours each Friday (Annex 4). 2. For the purposes of items c) and d), the week is understood as the period between 07:30 on Friday and 17:30 on Thursday.

Article 9 (Fixing Session)

1. Participants in the MCI meet weekly on Fridays at 15:00 hours at the headquarters of the Bank of Mozambique.
2. The sessions will be chaired by the Bank of Mozambique, which will provide information on the weekly behavior of exchange rates in the foreign exchange market.
3. At the end of each MCI session, the Fixing exchange rate will be determined.
4. In the event that any currency was not traded during that week, the exchange rate will be calculated using the cross-rate from the international market, reported to the day of the session.

Article 10 (Technical Instructions) The Foreign Exchange Operations Department of the Bank of Mozambique will issue technical instructions deemed necessary for the functioning of the MCI.

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Article 11 (Clarity) Doubts arising from the interpretation and application of this regulation will be clarified by the Foreign Exchange Operations Department.

Maputo, July 16, 1996 Governor of the Bank of Mozambique ADRIANO AFONSO MALEIANE

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