Regulation (NAP) – Foreign Currency Bidding System

Banco Central of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE
		EA04
PROPOSER
D.E.E.E.	EFFECTIVE DATE
07/12/2006	ISSUANCE DATE
07/12/2006	DOC NO.
17/2006	PAGE
1/8

Subject: Foreign Currency Bidding System – SLD

Whereas it is necessary to continuously improve the instruments and effectiveness of the Central Bank's intervention in stabilizing and consolidating the financial system through market mechanisms;

Whereas monetary policy success positively conditions exchange rate policy and vice versa;

Whereas there is a need to introduce active intervention instruments in the foreign exchange market by the Exchange Authority, allowing economic operators to transparently fix market exchange rates on one hand, and

Whereas considering the availability of foreign currency resources to meet economic agents' needs while simultaneously guaranteeing the Central Bank an additional instrument for controlling the monetary system's liquidity level and the balance of payments and international reserves equilibrium;

The Central Bank of São Tomé and Príncipe, under Articles 32 and 33 of Law No. 8/92 of July 28, 1992, and supported by Article 9 of Decree-Law No. 32/99 of August 3, 1999, determines:

ARTICLE I
(Definition of the Foreign Currency Bidding System – SLD)

1. The Foreign Currency Bidding System, hereinafter referred to as SLD, is created with the objective of regulating, on one hand, the demand and supply of foreign currency in the market, and on the other hand, strengthening the monetary authority's policy instruments.

2. The SLD's action consists in the sale and purchase of foreign currency, exclusively through a bidding process among proposals submitted by participating members at the Central Bank of São Tomé and Príncipe, hereinafter referred to as BCSTP.

Reviewed by		Revocation Data:

Banco Central of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE
		EA04
PROPOSER
D.E.E.E.	EFFECTIVE DATE
07/12/2006	ISSUANCE DATE
07/12/2006	DOC NO.
17/2006	PAGE
2/8

3. Foreign currency bidding in the SLD will be conducted on dates established by the Central Bank, in the modality of amounts offered for purchase or sale.

ARTICLE II
(Participants in the SLD)

1. All banks are participants in the SLD.
2. Exchange houses, other entities, companies, or individuals may only participate in the SLD through their respective financial institutions referred to in paragraph 1 above.
3. Financial institutions are obliged to accept proposals from their clients, requested individually or in groups.
4. Financial institutions may submit multiple proposals per bidding session.
5. Institutions may submit proposals in their own name or on behalf of their clients.

ARTICLE III
(Bidding Publicity)

1. The bidding announcement will be published at least two business days prior to the bidding date.
2. The announcement, made via an informative circular from the Central Bank, will be published in major media outlets and sent directly to participants.
3. The informative circular will indicate the date, time, and amount offered for purchase or sale according to each bidding session.

Reviewed by		Revocation Data:

Banco Central of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE
		EA04
PROPOSER
D.E.E.E.	EFFECTIVE DATE
07/12/2006	ISSUANCE DATE
07/12/2006	DOC NO.
17/2006	PAGE
3/8

ARTICLE IV
(Submission of Proposals)

1. Proposals must be submitted to the BCSTP in sealed envelopes marked "FOREIGN CURRENCY BIDDING" no later than 9:00 AM on the bidding day, accompanied by a receipt protocol according to the attached model (Annex 1) to this NAP.
2. Proposals must be submitted on a completed form according to the attached model (Annex 2) to this NAP, without corrections, signed, and sequentially numbered when more than one proposal is submitted per envelope.
3. Upon delivery of each envelope, the bidder will receive a receipt with its corresponding order number.
4. Proposals submitted after the fixed time will not be considered.
5. Individual proposals from clients to financial institutions that do not meet the minimum value set in Article V of this NAP must be aggregated with others to reach the fixed minimum value.
6. Proposals may be submitted as a total amount desired by the financial institution or separately, both their own and those of clients.
7. Each bank will only accept forms containing a single exchange rate proposal.

ARTICLE V
(Minimum Participation Value)

1. The minimum value of each proposal submitted to the bidding sessions shall be USD 100,000.00 (One hundred thousand United States Dollars) or its equivalent in another foreign currency, and multiples of one thousand are admitted from this value.

Reviewed by		Revocation Data:

Banco Central of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE
		EA04
PROPOSER
D.E.E.E.	EFFECTIVE DATE
07/12/2006	ISSUANCE DATE
07/12/2006	DOC NO.
17/2006	PAGE
4/8

ARTICLE VI
(Opening of Proposals)

1. The envelopes will be opened at 9:15 AM at the Central Bank, in the presence of participants.
2. The envelope opening session will be presided over by a BCSTP employee designated for this purpose.
3. Once opened, the accuracy of the proposals will be verified and the confirmatory protocol delivered to representatives of the institutions present.
4. Proposals with corrections, form filling errors, missing authorized signatures, or signatures from unauthorized persons at the BCSTP will be disqualified upon opening.
5. Only proposals from financial institutions with sufficient balances in their BCSTP accounts to cover the submitted amounts will be accepted.
6. The confirmatory protocol is not a guarantee that the submitted proposals will be accepted in the bidding session.

Reviewed by		Revocation Data:

Banco Central of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE
		EA04
PROPOSER
D.E.E.E.	EFFECTIVE DATE
07/12/2006	ISSUANCE DATE
07/12/2006	DOC NO.
17/2006	PAGE
5/8

ARTICLE VII
(Selection of Proposals)

1. Proposals will be ranked considering the best price. In foreign currency purchase bidding, proposals are ranked in ascending order of prices. In foreign currency sale bidding, proposals are ranked in descending order of prices.
2. The cutoff exchange rate will be chosen from the rates in the submitted proposals.
3. The selection of the cutoff exchange rate will follow guidelines issued by the BCSTP Board of Directors.
4. The cutoff exchange rate will be used for settling accepted proposals.
5. In sale bidding, proposals with rates below the cutoff rate will be eliminated; in purchase bidding, proposals with rates above the cutoff rate will be eliminated.
6. If the bid amount is lower than demand, proposals will be fulfilled proportionally to their share of the total accepted demand.
7. The BCSTP may, at its discretion, reject all proposals for a given bidding session.
8. The BCSTP will archive relevant documentation for each bidding session, namely the proposals, for audit purposes.

Reviewed by		Revocation Data:

Banco Central of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE
		EA04
PROPOSER
D.E.E.E.	EFFECTIVE DATE
07/12/2006	ISSUANCE DATE
07/12/2006	DOC NO.
17/2006	PAGE
6/8

ARTICLE VIII
(Publication of Bidding Results)

1. The BCSTP will publish the bidding results via a circular sent to participants by 11:00 AM on the bidding day.
2. The circular will contain the following information: the bidding session number, the highest and lowest offered exchange rates, the cutoff rate, the amount of submitted proposals, the accepted amount, and its percentage ratio to the total proposals.
3. The circular will be published in major media outlets.

ARTICLE IX
(Settlement of Proposals)

1. The settlement of winning proposals will be carried out by posting to the accounts maintained by financial institutions at the BCSTP, by 11:00 AM on the bidding day.
2. Partial settlement of winning proposals will not be allowed.
3. The transfer of bid foreign currency abroad is made via a letter request to the Central Bank and will be carried out after the settlement of proposals at the BCSTP.

Reviewed by		Revocation Data:

Banco Central of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE
		EA04
PROPOSER
D.E.E.E.	EFFECTIVE DATE
07/12/2006	ISSUANCE DATE
07/12/2006	DOC NO.
17/2006	PAGE
7/8

ARTICLE X
(Penalties)

1. A financial institution that refuses to accept a client's submitted proposal incurs the following penalties:
   a) In the first occurrence, a warning; b) In the second occurrence, verified within six months from the first, payment of a fine to the BCSTP in the amount of USD 1,000.00 (One thousand United States Dollars) or its equivalent in dobras. c) In the third occurrence, verified within one year from the first, the financial institution will be subject to a fine of USD 5,000.00 (Five thousand United States Dollars) or its equivalent in dobras and barred from participating in two subsequent bidding sessions.
2. A bank that does not have sufficient funds in its deposit accounts at the BCSTP to settle its proposal will have its proposal rejected and incurs the following penalties:
   a) Warning in the first occurrence. b) In case of a second occurrence, within 6 months, in addition to the rejection, it must pay a fine to the BCSTP equivalent to 2% of the nominal amount of the proposal. c) In case of a third occurrence, within 1 year, in addition to the rejection, it must pay a fine to the BCSTP equivalent to 5% of the nominal amount of the proposal.
3. The fine amounts are automatically debited from the commercial bank's deposit accounts at the Central Bank of São Tomé and Príncipe.

Reviewed by		Revocation Data:

Banco Central of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE
		EA04
PROPOSER
D.E.E.E.	EFFECTIVE DATE
07/12/2006	ISSUANCE DATE
07/12/2006	DOC NO.
17/2006	PAGE
8/8

ARTICLE XI
(Transitional Provisions)

1. The Central Bank of São Tomé and Príncipe (BCSTP), in situations where available international reserves are constrained for market sale, may conduct direct operations with financial institutions, exclusively to cover foreign currency payments related to petroleum imports and government obligations.
2. For the operations referred to in the previous item, the Central Bank's reference sale exchange rate of the operation day will be used.

ARTICLE XII
(Revocation)

1. NAP No. 1/2006 of February 3, 2006 is hereby revoked.

ARTICLE XIII
(Effectiveness)

1. This NAP enters into force on December 6, 2006.

Central Bank of São Tomé and Príncipe, December 7, 2006.

Reviewed by		Revocation Data: