Permanent Application Standard (NAP) - Interbank Money Market (IMM)

Central Bank of S.T.P	NAP PERMANENT APPLICATION STANDARD	CODE ECM 02
PROPOSER(S) CA	ENTRY INTO FORCE 01/04/2015	DATE OF ISSUE 12/02/2015	DOC. NO. 04/ 2015	PG 1/10

SUBJECT: INTERBANK MONEY MARKET (IMM)

Considering that the interbank money market plays an indispensable role in the mechanism for transmitting monetary policy decisions to the economy;

Considering further the need to regulate the exchange of liquidity between banks through this market segment, thereby reducing reliance on refinancing;

Therefore, in the exercise of powers conferred by paragraph 1 of Article 31 and paragraph g) of Article 32, all of its Organic Law (Law No. 8/92), the Central Bank determines the following:

Article 1.
(Object)

This NAP regulates fund exchange operations between Banks within the domestic interbank money market.

Article 2.
(Concept and Objective)

1. The Interbank Money Market, abbreviated as IMM, is an organized market in which participating institutions exchange funds held in their accounts, for terms up to one year.

2. The participation of BCSTP aims to reduce settlement risk in operations, promote confidence among Commercial Banks, and stimulate the functioning of the domestic IMM, with a view to a more efficient allocation of liquidity.

Article 3.
(IMM Modality)

The Interbank Money Market is subdivided into two segments:

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Central Bank of S.T.P	NAP PERMANENT APPLICATION STANDARD	CODE ECM 02
PROPOSER(S) CA	ENTRY INTO FORCE 01/04/2015	DATE OF ISSUE 12/02/2015	DOC. NO. 04/ 2015	PG 2/10

a) Unsecured Interbank Money Market (IMM/SG); b) Secured Interbank Money Market (IMM/CG).

Article 4.
(IMM/SG)

The IMM/SG is a market in which participating institutions exchange funds held in their demand deposit accounts with BCSTP, for terms up to one year, through operations that do not require asset collateral.

Article 5.
(IMM/CG)

1. The IMM/CG is a market in which participating institutions exchange funds held in their demand deposit accounts with BCSTP, for terms up to one year, through operations that simultaneously establish collateral.

2. Fund exchange operations conducted under the IMM/CG shall always be adequately collateralized, constituted by eligible assets, in accordance with the conditions established in this NAP and the contracts executed between the parties.

3. The following are considered eligible assets to constitute credit collateral in IMM operations:
   a) Foreign Currency Deposits; b) Treasury Bills (BT); c) BCSTP Bonds; d) Central Bank Deposit Certificates; e) Other guarantees negotiated between the parties.

4. The securities referred to in the preceding paragraph are only admitted in the operations subject to this regulation when duly registered in the BCSTP's registration, settlement, and custody system, or in an asset registration and financial settlement system authorized and/or accepted by BCSTP.

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Central Bank of S.T.P	NAP PERMANENT APPLICATION STANDARD	CODE ECM 02
PROPOSER(S) CA	ENTRY INTO FORCE 01/04/2015	DATE OF ISSUE 12/02/2015	DOC. NO. 04/ 2015	PG 3/10

BCSTP, or in an asset registration and financial settlement system authorized and/or accepted by BCSTP.

Article 6.
(Access to the IMM)

1. To access the IMM, institutions must request membership by sending a letter to the Market and Liquidity Management Directorate of BCSTP.

2. Financial institutions duly authorized to operate in São Tomé and Príncipe are eligible to participate in the IMM.

3. The membership of banking institutions in the IMM is effected by completing and signing the Membership Term, according to the model constituting Annex I to this NAP.

4. Institutions participating in the IMM must inform BCSTP of the name, position, and signature of persons authorized to conduct operations, according to Annex II.

Article 7.
(Operations)

1. In the IMM, participating institutions may transfer to each other funds held in their accounts at BCSTP.

2. It is incumbent upon BCSTP to process the operations, triggering the financial settlement on the settlement value date and the maturity date, including due interest, through the movement of institutions' accounts at BCSTP.

3. Operations are negotiated bilaterally between participating institutions and executed for a fixed term, stated in days, which cannot exceed one year, with a settlement value date:
   a) of the same day; b) of the next business day; or c) of the second business day following.

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Central Bank of S.T.P	NAP PERMANENT APPLICATION STANDARD	CODE ECM 02
PROPOSER(S) CA	ENTRY INTO FORCE 01/04/2015	DATE OF ISSUE 12/02/2015	DOC. NO. 04/ 2015	PG 4/10

4. Agreed interest rates are expressed to the thousandth of a percentage point, and operations are executed for the negotiated amount.

5. After negotiation, operations must be communicated by participating institutions (lender and borrower) through BCSTP's designated computer platform.

Article 8.
(Settlement of Operations)

1. The settlement of the operation or its repayment in the IMM shall be carried out by BCSTP according to the instructions of the participating institutions.

2. Operations with a settlement value date of the same day are settled immediately at BCSTP until 12:00.

3. If the available balance in the account is insufficient to repay the credit, the borrowing bank must fund the account until 11:00 on the maturity date.

4. On the settlement value date, the creditor institution's account at BCSTP is debited by the amount corresponding to the funds agreed in the contract in favor of the counterparty.

5. On the maturity date, the liquidity borrowing participating institution's account is debited by the amount corresponding to the funds obtained plus the respective interest, in exchange for the credit in the counterparty's account at BCSTP.

6. For the purposes of this NAP, settlement is understood as the execution of the operation by the Central Bank, following communication by the parties.

Article 9.
(Interest)

1. Interest is negotiated between the parties and calculated at a simple interest rate applied according to the Actual Number of Days/360 Convention.

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Central Bank of S.T.P	NAP PERMANENT APPLICATION STANDARD	CODE ECM 02
PROPOSER(S) CA	ENTRY INTO FORCE 01/04/2015	DATE OF ISSUE 12/02/2015	DOC. NO. 04/ 2015	PG 5/10

2. The settlement of the interest amount occurs on the maturity date of the respective operations.

Article 10.
(Currency)

1. Fund exchange operations conducted within the interbank money market must be in Dobras.

2. The repayment of operations conducted within the IMM must always be made in Dobras, except in cases of collateral execution.

Article 11.
(Communications)

1. The communication of operations to be carried out in the IMM must be made via BCSTP's computer platform on business days between 08:00 and 16:00.

2. The communication must obligatorily contain the operation date, maturity, amount, and negotiated interest rate.

3. All operations that cannot be finalized by 16:00 due to lack of communication from one of the participating institutions or divergence in the elements transmitted by the parties are cancelled.

4. In cases where operations cannot be finalized by 10:00 due to insufficient liquidity in the participating institution's account to be debited, BCSTP will immediately notify the institution in default to regularize the situation.

Article 12.
(Information Disclosure)

1. The Central Bank makes available on its website, for each settlement value date, statistical information regarding operations carried out:

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Central Bank of S.T.P	NAP PERMANENT APPLICATION STANDARD	CODE ECM 02
PROPOSER(S) CA	ENTRY INTO FORCE 01/04/2015	DATE OF ISSUE 12/02/2015	DOC. NO. 04/ 2015	PG 6/10

a) Total negotiated amount; b) Number of operations; c) Minimum, maximum, and average interest rates; d) Balance of active operations.

2. Operations are grouped by term classes according to their duration, according to the following table:

Classes	Operations with:
Overnight	Maturity on the business day following the settlement value date
Up to 1 month	2-32 days
]1-3 months]	33- 96 days
]3-6 months]	97-189 days
]6-12 months]	190 - 366 days

Article 13.
(Defaults and Sanctions)

1. A default is considered any situation whose occurrence could jeopardize the participating institution's compliance with its obligations arising from this NAP, including cases where:
   a) The available balance in the participating institution's account to be debited, until 12:00 on the operation's maturity date, is insufficient to carry out the financial settlement of the contracted IMM operations; b) The value of the collateral assets of the participating institution to be credited, until the operation's closing time, is insufficient to carry out the financial settlement of the contracted operations;

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Central Bank of S.T.P	NAP PERMANENT APPLICATION STANDARD	CODE ECM 02
PROPOSER(S) CA	ENTRY INTO FORCE 01/04/2015	DATE OF ISSUE 12/02/2015	DOC. NO. 04/ 2015	PG 7/10

2. In the event of default, in addition to the interest agreed in the contract, BCSTP debits the borrower's account with default interest corresponding to an annual rate of 2%.

3. In case of recurrence, BCSTP may suspend or exclude the infringing institution from the IMM.

Article 14.
(Transitional Provision)

In the absence of the computer platform, participating institutions must send communications via a letter addressed to the Market and Liquidity Management Directorate, attaching a copy of the credit contract between the parties.

Article 15.
(Final Provisions)

Doubts and gaps arising from the application of this NAP are resolved by decision of BCSTP.

Article 16.
(Repeal)

All previous provisions that contradict the spirit of this NAP are hereby repealed.

Article 17.
(Entry into Force)

This NAP enters into force on April 1, 2015.

Central Bank of São Tomé and Príncipe, on the 12th day of February 2015.

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Central Bank of S.T.P	NAP PERMANENT APPLICATION STANDARD	CODE ECM 02
PROPOSER(S) CA	ENTRY INTO FORCE 01/04/2015	DATE OF ISSUE 12/02/2015	DOC. NO. 04/ 2015	PG 8/10

ANNEX I

MEMBERSHIP TERM FOR THE INTERBANK MONEY MARKET OF SÃO TOMÉ AND PRÍNCIPE

By this instrument, the [banking institution name], with headquarters at [social address], holder of License number [...] issued by BCSTP for the development of [commercial/investment/commercial and investment] banking activities, adheres to the Interbank Money Market of São Tomé and Príncipe (hereinafter "IMM"), consequently submitting to the provisions of NAP [....] regarding the Interbank Money Market, and the following Conditions:

I. OBLIGATIONS

1. Adhering institutions undertake to provide all information necessary for the execution of the contract's object in the IMM, as well as any other that may be requested by the counterparty or BCSTP;
2. Adhering institutions must respect and faithfully submit to all conditions expressed in NAP [....] and this contract;
3. Borrowing institutions undertake to settle the loan within the term agreed in the contract between the parties.

II. CONTRACTUAL FREEDOM

Adhering institutions enjoy total freedom in setting the content of contracts in the IMM, provided they do not violate the provisions of NAP [....].

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Central Bank of S.T.P	NAP PERMANENT APPLICATION STANDARD	CODE ECM 02
PROPOSER(S) CA	ENTRY INTO FORCE 01/04/2015	DATE OF ISSUE 12/02/2015	DOC. NO. 04/ 2015	PG 9/10

III. DEFAULT AND ACCELERATION

The default of a repayment obligation within the IMM may imply the acceleration of the others, making their immediate and full compliance due, and BCSTP must notify the parties of said acceleration.

IV. LIMITATION OF LIABILITY

Any delays or damages resulting from non-compliance with IMM rules are the sole responsibility of the adhering institutions.

V. DURATION OF IMM MEMBERSHIP

Membership in the IMM occurs upon signing this Membership Term, ceasing only in the event of the adher