Regulation No. 002/05 Relating to Foreign Currency Purchase Operations via Tender Offers

REGULATION NO. 002/05 RELATING TO FOREIGN CURRENCY PURCHASE OPERATIONS VIA TENDER OFFERS

I. Introduction
In addition to Regulation No. 001/05 of February 14, 2005, relating to foreign currency sales operations via tender offers, the Central Bank of Congo establishes a variable-rate tender system and applies the single-rate competitive auction method for its foreign currency purchases. The functioning of the tender system for purchases is described in the technical annex, attached to this regulation.

II. Operational Conduct
II.1. Eligible Participants in Auctions
Only authorized banks are eligible for foreign currency purchases by the Central Bank via tender offers.

II.2. Announcement of Tender Operations by the BCC The Central Bank invites all eligible counterparties to participate in the auction the day before the auction. The tender announcement message is published on the BCC website and contains the following information:

• the location and time of the auction;
• the type of variable-rate tender and the single-rate competitive auction method;
• the deadline for submitting offers and the value date of the operation;
• the currency(ies) concerned;
• the correspondent through which the Central Bank will receive the currency;
• the maximum number of offers (bids) per participant.
  The Central Bank of Congo reserves the right to announce or not the volume of the auction in advance.

II.3. Presentation and Submission of Offers by Counterparties Offers are presented in the format imposed by the Central Bank. If a secure transmission system is set up, submission will be made electronically. Authorized banks may submit up to 4 offers. Each offer must indicate the proposed amounts, the corresponding exchange rates, as well as all useful information for the settlement of the operation. Offers are revocable until the deadline for submission provided in the Central Bank's announcement message. The bank whose headquarters is located in a province submits its offer via internet, fax, or if necessary, through its Kinshasa agency. The Central Bank may impose a maximum limit on the amounts of submissions to exclude disproportionate offers (speculative offers). Banks are subject to the sanctions provided for in point III in the event of non-delivery on the agreed value date of the foreign currency amounts sold.

II.4. Auction
Banks transmit to the Central Bank under sealed envelopes the offers indicating the foreign currency amounts offered and the exchange rates at which they are willing to deliver these currencies. The Central Bank opens the envelopes in the presence of bank representatives, examines them, and takes its auction decision in closed session based on the method as explained in the technical vade-mecum in the annex. Participants are invited not to submit offers at unrealistic rates, i.e., manifestly outside the fluctuation range of prevailing market rates at the time of the auction. A correction coefficient may be applied to prevent a single participant from offering more than 40% of the total amount to be purchased by the Central Bank (Market cornering).

II.5. Announcement of Results
The overall result of the auction is published on the website of the Central Bank of Congo and possibly in the press, while the individual result is notified to each bidder separately.

II.6. Settlement by the Central Bank of the Counter-Values of Purchased Currencies The counter-values of foreign currencies purchased by the Central Bank are settled by the latter via book entry.

III. Sanctions Applicable in Case of Failure to Fulfill Counterparty Obligations
In the event of failure to fulfill counterparty obligations, banks are subject to the following sanctions:

III.1. Monetary Sanctions
The provisions of Article 16 of the convention on the organization and functioning of the foreign exchange market in the DRC (application of a penalty of 5 percentage points above the LIBOR rate) for each day of delay and this until the total clearance of the amount due.

III.2. Non-Monetary Sanctions
In the event of recidivism (late delivery, speculative offers in volume and price), the bank is temporarily suspended from any new auction operation.

This Regulation enters into force on the date of its signature.
Made in Kinshasa, on JUNE 12, 2005
Nestor DIAMBWANA Vice-Governor