Regulation (NAP) - Foreign Exchange Market

Central Bank of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE <br> EA04
PROPOSER(S)	EFFECTIVE DATE	ISSUANCE DATE	DOC NO.	PAGE
PPMC	01/01/2010	29/12/2009	14/2009	1/4

Subject: FOREIGN EXCHANGE MARKET

Considering the need to provide greater transparency to the national foreign exchange market and to allow for better assessment and management of banks' foreign exchange risk;

Taking into account that the information published by the Central Bank must be based on the rules established by the current foreign exchange legislation;

In these terms and in accordance with the competence established by paragraph g) of Article 38 of the Organic Law of the Central Bank and the provisions of Articles 6(1), 8, and 9 of the Foreign Exchange Law, the Board of Directors of the Central Bank, in its session on 29/12/2009, approved the following:

Article 1.
Daily Foreign Exchange Rate Bulletin

1. The daily foreign exchange rate bulletin published by the Central Bank of São Tomé and Príncipe takes into account the exchange rate of the dobra against the euro fixed by BCSTP under the Economic Cooperation Agreement.

2. The rates published for the other currencies are calculated taking into account their respective cross rates collected in the international market (cross rate), of the reference currency against the Euro.

Article 2.
Foreign Exchange Position

1. For the purposes of this regulation, a Foreign Exchange Position in a foreign currency is defined as the algebraic sum of total assets minus liabilities in that foreign currency, recorded in banks' balance sheets, excluding the value of own funds.

2. For the calculation of the Foreign Exchange Position, contracted and unsettled active and passive operations must also be taken into account, regardless of the reason.

Reviewed/Approved: [Signature] | Revocation Data:

Central Bank of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE <br> EA04
PROPOSER(S)	EFFECTIVE DATE	ISSUANCE DATE	DOC NO.	PAGE
PPMC	01/01/2010	29/12/2009	14/2009	2/4

3. The following formula is applied for the calculation of the Foreign Exchange Position, as of the relevant date:

PC = (AME – PME) + (CCL-CVL), where:

PC = Foreign Exchange Position
AME = Total Assets in Foreign Currency
PME = Total Liabilities in Foreign Currency
CCL = Purchases of foreign currency contracted and unsettled CVL = Sales of foreign currency contracted and unsettled.

Note: The foreign exchange position is said to be long (purchased) when the result of this operation is positive, and short (sold) when the result is negative.

4. Banks must report their foreign exchange position to the Central Bank on the last day of each week, according to the attached table.

5. The foreign exchange position referred to in the previous point must be submitted to the Banking Supervision Directorate of the Central Bank on the first business day of the following week.

6. Failure to submit the foreign exchange position within the aforementioned period will suspend the bank's access to both the Central Bank's foreign currency bidding and direct foreign exchange hedging requests, until regularization, without prejudice to the fine applicable under Article 28 of the Foreign Exchange Law.

Article 3.
Limits on Foreign Exchange Position

1. A global long (purchased) position is defined as the sum of foreign exchange positions in each foreign currency (converted to Euro). A global short (sold) position is defined as the sum of foreign exchange positions in each sold foreign currency (converted to Euro): Both refer to point 6 of the foreign exchange position table.

2. Banks authorized to operate in the São Tomé financial system must not present, at the close of the relevant period, a global foreign exchange position (purchased or sold) exceeding 20% of their own funds, nor a foreign exchange position (purchased or sold) in each currency exceeding 10% of their own funds.

Reviewed/Approved: [Signature] | Revocation Data:

Central Bank of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE <br> EA04
PROPOSER(S)	EFFECTIVE DATE	ISSUANCE DATE	DOC NO.	PAGE
PPMC	01/01/2010	29/12/2009	14/2009	3/4

FOREIGN EXCHANGE POSITION TABLE

BANK: _________________________________________________

Bank's Own Funds: EURO __________________________

Reference Date: ________________ to ____________________

Foreign Exchange Position	Euro (1)	US Dollar (2)	Other Currencies (3)	Total = (1 + 2 + 3) (*)
1. Assets in FC (AME)
2. Liabilities in FC (PME)
3. Unsettled Purchases(CCL)
4. Unsettled Sales(CVL)
5. FX Position [(1-2) + (3-4)]
a. Long (Purchased)
b. Short (Sold)
Exchange Rate of this currency, relative to EURO (*)
6. FX Position-EURO [(1-2) + (3-4)]
a. Long (Purchased)
b. Short (Sold)
7. FX Positions in % of own funds ()

Date and signature ________________________________________

Reviewed/Approved: [Signature] | Revocation Data:

Central Bank of S. T. P.	N A P <br> PERMANENT APPLICATION REGULATION	CODE <br> EA04
PROPOSER(S)	EFFECTIVE DATE	ISSUANCE DATE	DOC NO.	PAGE
PPMC	01/01/2010	29/12/2009	14/2009	4/4

Notes:

From point 1 to 5 of the foreign exchange position table, the value to be presented must be in the respective currency.

(*) For the calculation of line 6, which must be presented in Euro, use the rates reported in that day's foreign exchange rate bulletin for the reported foreign exchange position.

() The foreign exchange position in each purchased or sold currency (point 7 of the foreign exchange position table) must not exceed 10% of the bank's own funds.

(*) The global foreign exchange position purchased or sold (point 7 of the foreign exchange position table) must not exceed 20% of the bank's own funds.

Article 4.
Revocation

Permanent Application Regulation (NAP) No. 8/2007, of November 19, 2007, is hereby revoked.

Article 5.
Effectiveness

This NAP enters into force as of January 01, 2010.

Central Bank of São Tomé and Príncipe, on December 29, 2009

Reviewed/Approved: [Signature] | Revocation Data: