PROCEDURAL GUIDELINES FOR OPERATIONS BETWEEN THE COMMERCIAL BANKS AND THE EASTERN CARIBBEAN CENTRAL BANK

Transcription

1 PROCEDURAL GUIDELINES FOR OPERATIONS BETWEEN THE COMMERCIAL BANKS AND THE EASTERN CARIBBEAN CENTRAL BANK BANKING AND MONETARY OPERATIONS DEPARTMENT EASTERN CARIBBEAN CENTRAL BANK REVISED DECEMBER 2014

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3 TABLE OF CONTENTS INTRODUCTION... 1 SECTION ONE: COMMUNICATION... 2 SECTION TWO: BANKERS RESERVE ACCOUNT... 6 SECTION THREE: RESERVE REQUIREMENT... 9 SECTION FOUR: DORMANT ACCOUNTS AND OTHER ABANDONED PROPERTY SECTION FIVE: TWENTY-FOUR HOUR CALL ACCOUNT SECTION SIX: FIXED DEPOSITS SECTION SEVEN: INTERBANK/ REPURCHASE MARKET SECTION EIGHT: PROCEDURES FOR THE ECCU REPURCHASE (REPO) FACILITY SECTION NINE: TEMPORARY ADVANCES SECTION TEN: ISSUE AND REDEMPTION OF NOTES SECTION ELEVEN: FOREIGN EXCHANGE SECTION TWELVE: ECCB RULES FOR THE AUTOMATED CLEARING HOUSE SECTION THIRTEEN: ADMINISTRATIVE CIRCULARS A P P E N D I C E S APPENDIX A... i CONTACT CHART... i APPENDIX B... iii LIST OF PUBLIC HOLIDAYS IN ST KITTS AND NEVIS... iii APPENDIX C... iv INTRA DAY CUT OFF TIMES... iv APPENDIX D... vi MEMORANDUM OF DEPOSIT... vi APPENDIX E... vii BULLETIN BOARD SERVICE USER MANUAL... vii APPENDIX F... xii 22 i

4 ELIGIBILITY CRITERIA FOR PARTICIPATION IN THE ECCU REPURCHASE (REPO) FACILITY... xii APPENDIX G... xiv FORM OF CONFIRMATION... xiv APPENDIX G1... xv FORM OF CONFIRMATION... xv APPENDIX H... xvi PRIVATE TRANSFER FORM... xvi APPENDIX I... xviii COMPUTATION OF THE RESERVE REQUIREMENT... xviii APPENDIX J... xxiv HARMONISED MESSAGE STANDARDS... xxiv APPENDIX K... xxxvii FACSIMILE TEMPLATE... xxxvii APPENDIX L... xliii #R17- CHARGING FORM... xliii APPENDIX M... xliv CRITERIA FOR MUTILATED NOTES... xliv ii

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6 INTRODUCTION The Eastern Caribbean Central Bank, hereafter referred to as the ECCB or the Bank, in accordance with the ECCB Agreement Act 1983 serves as banker to financial institutions in the Eastern Caribbean region, but unlike its regional counterparts, its responsibilities extend to more than one territory. All policy and operational decisions affect eight territories over which the Bank has jurisdiction - Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, Saint Lucia, and St Vincent and the Grenadines. Within the ECCB, the Banking and Monetary Operations Department (BMOD) is responsible for all banking activities. The Department maintains Deposit and Operating accounts for the commercial banks and provides these institutions with a safe and convenient means of making payments, buying and selling foreign exchange, and investing assets. This document discusses in detail the various services available to commercial banks, and explains the procedures and time schedules that should be followed to utilize these services effectively. General questions on information contained herein should be addressed to the Director, BMOD. Appendix A provides a list of the main responsibilities for the BMOD and Currency Management Department (CMD). 1

7 SECTION ONE: COMMUNICATION 1.0 INTRODUCTION To facilitate smooth and efficient communication between commercial banks and the ECCB, the following procedures should be followed. 1.1 CATEGORIES OF MESSAGES There are two types of messages that your institution may send to the BMOD - transaction messages and service messages. These messages should be transmitted by Society for Worldwide Interbank Financial Telecommunication (SWIFT). The ECCB will accept financial messages via facsimile only on account of a disruption to the SWIFT service that is beyond the commercial bank s control. i. Transaction messages are those which involve instructions authorizing the ECCB to debit or credit one or more of your accounts. ii. Service messages are those of a general nature (dealing with matters other than transactions). 1.2 AUTHENTICATION Testing All transaction messages not dispatched via SWIFT must pass an authentication test. Commercial banks holding accounts with the ECCB are given a copy of the ECCB s test keys, which include a fixed number unique to each bank, and accompanying instructions for the calculation of the test number. The fixed number remains unchanged unless: a) the ECCB changes the number as a security measure, or b) there is some breach of the test arrangement at your institution, in which case a specific request for change must be immediately communicated to the ECCB. 2

8 The testing procedure is very important, as it allows the ECCB to verify the authenticity of messages sent by your institution. Authorized individuals within your institution must therefore keep the keys and accompanying instructions under strict security. Messages must be tested on the date they are dispatched. The test number will be verified by the ECCB before any attempt to execute the instructions is made. If the ECCB is unable to verify the test number, the instruction will not be executed until the correct test is received. If a message fails the authentication check, your institution will be advised. Any corrections must be made by resubmitting the message with the correct test number. In such circumstances, the message must be clearly marked REPEAT OF MESSAGE DATED.... The instruction will be considered received on the date and at the time when the repeated message is received and authenticated by the ECCB. Authorised Signatories Messages sent by facsimile instructing the Bank to debit or credit one of your accounts must be signed in accordance with the most recent list of authorized signatories, submitted to the ECCB. The persons whose signatures appear on the list are permitted to make payments against the designated accounts on behalf of your institution, and/or endorse for deposit or collection, any cheque or item payable or belonging to these accounts. The ECCB is authorized to recognize as bona fide any signature that appears in a transaction with respect to the designated accounts as long as the signature is consistent with the corresponding specimen on the list. Change of Signatories The Manager of the bank must immediately communicate any change of authorized signatories to the ECCB. In the case of additions, a specimen signature must be provided. The ECCB must be provided with an updated list of authorized signatories at the beginning of each calendar year. 3

9 1.3 MESSAGE DETAILS SWIFT To avoid rejection of payment instructions dispatched via SWIFT, the ECCB advises its clients to ensure that all messages conform to the Harmonized Message Standards (HMS) as provided in Appendix J. Facsimile To avoid delay in the execution of payment instructions sent via facsimile, the ECCB advises all commercial banks to ensure that messages are presented on the ECCB s prescribed fax templates which are shown in Appendix K. All messages dispatched by facsimile must be accompanied by the institution s cover page, which should indicate the number of pages dispatched, and must bear a message number. Payment instructions which are forwarded to the ECCB via mail after being previously sent via facsimile should be clearly marked SENT BY FACSIMILE - AVOID DUPLICATION. Invalid (Non-Executable) Messages The following will be considered invalid and non-executable by the ECCB: i. SWIFT a) Messages that do not conform to ECCB s Harmonised Messaging Standards. b) Messages that do not have critical details that is necessary for proper execution e.g. value date, account numbers, Bank Identifier Code (BIC) address, amount and currency. c) Messages for value on a public holiday in the Federation of St Kitts and Nevis and in the country of ECCB s correspondent account. ii. Facsimile a) Messages that are not presented on the prescribed template. b) Messages that do not have critical details that are necessary for proper execution 4

10 e.g. value date, account numbers, BIC address, amount and currency. c) Messages that have been incorrectly tested. d) Messages that bear invalid signatures or bear no signatures where signatures are required. e) Handwritten messages. f) Messages for value on a public holiday in the Federation of St Kitts and Nevis and in the country of ECCB s correspondent account. 1.4 DEADLINES FOR MESSAGES To ensure execution of payment instructions, adherence to the cut off times (outlined in Appendix C) is mandatory. Regular Business Days ECCB s regular business days are Monday to Friday, inclusive. Half Holidays On half-holidays in St Kitts and Nevis, the ECCB will advise the commercial banks of the deadline for receipt of messages. A schedule of public holidays in St Kitts and Nevis is provided in Appendix B ACCOUNT MONITORING Commercial Banks have online viewing access to their accounts. They are therefore required to utilize this facility to actively monitor the activity on their accounts. Account Queries All entries and balances on commercial banks statements will be assumed correct unless the ECCB is notified of any discrepancy within 7 business days of the statement date. When making queries, the transaction reference number, amount, date and narrative MUST be quoted. Such queries should be submitted in writing to the BMOD. All queries must be sent in the SWIFT query message (N95) format. 5

11 SECTION TWO: BANKERS RESERVE ACCOUNT 2.0. INTRODUCTION Each commercial bank participating in the daily clearings is expected to maintain a reserve/ operating account with the ECCB. The account may be used to: i. withdraw or deposit XCD currency; ii. effect third party payments through the ECCB; iii. make XCD currency settlements with other banks which hold deposits with the ECCB; iv. buy or sell any foreign currency in which the Central Bank may be prepared to deal; v. assist in the maintenance of the 6.0 per cent statutory reserve requirement; and vi. execute any other transaction as may be approved by the ECCB ESTABLISHMENT OF THE ACCOUNT Your Reserve account will be legitimate once the following pre-requisites are met: i. Account Opening Form (completed application form); ii. completed corporate resolution form authorizing the opening of an account with the ECCB and outlining the powers of your officers relative to the operation of the account, including the powers to borrow and invest on behalf of the bank; iii. completed specimen signature form with the names, designations and specimen signatures of the officers currently authorized to act on behalf of the bank; iv. articulation of the number and level of signatures required to effect various instructions; v. bank license certificate issued by the Ministry of Finance or appropriate agency in the country of operation; vi. certificate of registration from the Registrar of Companies in the country of operation; 6

12 vii. signed Participant Collateral and Settlement Agreement 1 ; viii. copy of the bank s opening balance sheet; and ix. signed Terms and Conditions Agreement For Banking Services. Any changes in the signatories or instructions as they apply to the account must be immediately communicated to the ECCB COMMUNICATION POLICY Account holders are expected to observe the relevant provisions of the Terms and Conditions Agreement and section one of these guidelines TRANSACTIONS ON THE ACCOUNT The ECCB will execute payments on behalf of the commercial banks only if funds are available in the account. It is therefore advisable to ensure that the account is always sufficiently funded INTEREST The reserve/operating account is a non-interest bearing account CHARGES Charges may be amended from time to time as determined necessary. a) SWIFT Transactions All transactions involving the issue of a SWIFT or Facsimile to advise a beneficiary will be charged a nominal fee of EC$5 per destination. This amount will be deducted separately from your account. b) Foreign Exchange Commission A commission is applied to all purchases and sales of foreign currency with the exception of foreign currency used to establish fixed deposit accounts. The commission is deducted from your account on processing date. 1 In 2014, the Participant Collateral and Settlement Agreement for Participating and Settlement of Transactions in the ECACH between the bank and the ECACHSI and the ECCB replaced the Clearing House Agreement. 7

13 c) Temporary Loans Temporary loans are charged interest at the rate of 6.5 per cent. d) Reserve Shortfalls A penal rate is applied to any shortfall on reserve balances (Please see Section Three, sub-section 3.7). 8

14 SECTION THREE: RESERVE REQUIREMENT 3.0. INTRODUCTION As detailed in Article 33 of the ECCB Agreement 1983, the Bank may prescribe the maintenance of required reserves against deposit and other similar liabilities of each financial institution in the ECCU. Such reserves may be maintained either by EC$ cash holdings or by deposits held on the reserve account with the ECCB THE PRESCRIBED AMOUNT OF RESERVES The total amount of reserves that financial institutions are required to hold is a percentage of the total liabilities to which reserve ratios have been made applicable. Presently, the required amount is six percent of total deposit liabilities. This figure excludes deposits held for other commercial banks. Any prescriptions of or increases in the required reserve ratios will be effective only after the ECCB has given at least 15 days notice to the financial institutions RESERVE REPORTING All commercial banks will be required on a daily basis to update the Reserve Programme with the figures for their vault cash and balances held at ECCB COMPUTATION OF THE MINIMUM RESERVE REQUIREMENT In computing the required reserve, all offices of the same bank operating in a single territory will be treated as one unit. Instructions for the computation of the requirement are provided in Appendix I. a) The reserve requirement is computed on a weekly basis, a week being reckoned from Thursday to the following Wednesday. The reserve is based on the average deposit liabilities at the close of business on the previous four Wednesdays. Therefore, banks are encouraged to calculate their reserves on a daily basis. b) Total deposit liabilities comprise of all deposits except inter-bank deposits. For the purpose of the reserve statement, the term inter-bank deposits means deposits held for the account of local commercial banks, other offices including head offices of the 9

15 reporting banks, and foreign correspondent banks. The deposits held for account of other banking institutions such as Savings Banks and Development Banks are not to be treated as inter-bank deposits. c) Only credit balances on accounts are to be included in the calculation. d) The average deposit liabilities for each of the previous four weeks is computed by: i. determining the balance at the close of business on each of the previous four Wednesdays; ii. finding the sum of these four balances and dividing by four to determine the average balance. All amounts should be expressed in multiples of one thousand and rounded to the nearest thousand. e) The minimum reserve requirement is 6 per cent of the average balance computed above COMPUTATION OF AVERAGE DAILY BALANCE During the reporting week, commercial banks are required to maintain reserves of an average daily balance that is at least equal to 6 per cent of the average deposit liabilities discussed above. Banks are required to carefully monitor their accounts to ensure that adequate reserve levels are maintained. The average daily balance is computed as follows: i. The balances of XCD dollar vault cash at the close of business on each of the five days of the reporting week, i.e. Thursday to Wednesday, inclusive, are obtained. ii. The closing balance on the commercial bank s Reserve/Operating account at the ECCB at the close of business on each of the five days of the same reporting week is obtained. These figures can be retrieved on a daily basis from SAP. iii. The vault cash and the reserve account balance are then totalled, and the sum is divided by five to determine the average daily balance (see computation as outlined in Appendix I) RESERVE SHORTFALLS A reserve shortfall is any amount less than the minimum reserve requirement. In other words, it is the deficiency between the daily average balance and the minimum reserve balance (i.e. 6.0 per cent of total deposit liabilities). 10

16 3.6. SUBMISSION OF THE RESERVE STATEMENT The submission of the reserve statement is automated. The Automated Reserve Program is accessible to banks from 9:00 a.m. on Wednesdays to 9:00 a.m. on Fridays. Statements of reserve position must be updated no later than 3:00p.m. on the Thursday immediately following the end of the reporting week. Any amendments after 3:00p.m. on Thursday must be made by 9:00a.m. on Friday. Thereafter, signed hardcopies of amended statements must be submitted to the ECCB before 3:00p.m. on Friday. When a bank is unable to access the Automated Reserve Program, it is required to submit a hard signed copy of its statement within the established timeframe. Late statements are a serious violation of the ECCB Agreement 1983 (Part VIII, Article 35) 3.7. PENALTIES In accordance with Article 33 of the ECCB Agreement 1983, a financial institution which fails to maintain the required reserves is liable to a charge at an annual rate not exceeding five (5) percentage points above the ECCB s discount rate, for the amount of the deficiency. At present, commercial banks posting a reserve shortfall at the end of the reporting week are charged 11.5 per cent on the deficiency, i.e. 5 per cent above the ECCB s existing discount rate of 6.5 per cent. This rate is subject to change as the ECCB sees fit. The penalty is payable from the bankers reserve account held with the ECCB. A charge is deducted from the account on the Monday following the week of the infraction. 11

17 SECTION FOUR: DORMANT ACCOUNTS AND OTHER ABANDONED PROPERTY 4.0 PROCEDURES FOR PROCESSING DORMANT ACCOUNTS AND OTHER ABANDONED PROPERTY 4.1. Commercial banks shall notify customers by letter at least once every three (3) years, where no activity has been evidenced in respect of their deposits or other property of any kind, held or owing by the commercial banks in the course of business during the preceding three (3) years. The letter should also remind customers that if no activity is evidenced for a period of 15 years, the property shall be deemed abandoned and shall be transferred to the Central Bank Within thirty (30) days of the end of each financial year, the commercial banks shall publish for two consecutive weeks, the particulars of the abandoned property, excluding value, in at least two newspapers of general circulation. The commercial banks shall mail to the beneficial owner at his/her last known address, particulars of the deposit or other property which was classified as abandoned during the financial year and shall notify him/her that the abandoned property will be transferred to the ECCB if no claim is made within 30 days of the date of the notice. The commercial banks may deduct all reasonable expenses incurred in respect of : (a) The publication and mailing of notices of abandoned property required by sub-section (3) of section 61 of the Banking Act; or (b) The sale of any abandoned property under section 62 of the Banking Act, and apportion the expenses equally among the holdings described in section 60 of the Act. Where the amount of a holding is insufficient to cover the expenses referred to in paragraphs (a) and (b) above, the licensed financial institution shall deplete the holding and apportion the remaining expenses equally among the other holdings. 12

18 4.3. Within 90 days of the end of the financial year and in accordance with the regulations, commercial banks shall forward the list of owners and the particulars of all abandoned property via the abandoned property programme, and shall 60 days thereafter deposit with ECCB all holdings of abandoned property. The instructions to transfer the abandoned property funds must be submitted to the ECCB using the SWIFT MT Commercial banks may sell at public sale any abandoned property other than money. The commercial banks shall at least one week prior to the public sale of any abandoned property under section 62, give notice of the sale to the Central Bank. The commercial banks shall advertise for two consecutive weeks, the particulars of the public sale of any abandoned property, in the Gazette and in at least two newspapers of general circulation in [territory], prior to sale Commercial banks shall deposit with the ECCB the proceeds of the public sale as required by section 62 of the Banking Act within thirty (30) days of the date of the public sale Any subsequent claims made by a beneficial owner of abandoned property shall be verified and honoured by the licensed financial institution as agent for the Central Bank following which the commercial bank would make a claim on the ECCB for the return of the funds via SWIFT once it has confirmed the identity of the claimant. The request must specify the customer s name and account number and the amount being claimed. The details should match the records submitted to ECCB by the commercial bank. Additional information such as the date when the funds were submitted to ECCB and the customer s last known address should also be included All claims for the return of abandoned property must be submitted in the SWIFT MT101 or MT199 formats Within two working days of receipt of the funds, the commercial bank must provide confirmation to ECCB that the funds have been delivered to their rightful owner. 13

19 SECTION FIVE: TWENTY-FOUR HOUR CALL ACCOUNT 5.0. INTRODUCTION The ECCB offers a 24-hour call account facility to all commercial banks. This account allows banks to reserve funds for use when there is an unexpected need for immediate finances ESTABLISHMENT OF THE ACCOUNT Unless there is a difference in the details, the call account may become operable with the same documents required for the operating account. (See Section 2.1) 5.2. FUNDING AND OPERATING THE ACCOUNT The account must be funded with only foreign currency balances (i.e. U.S. dollars, Pound sterling or Canadian dollars), which are then converted into EC dollars at the buying rate existing at the time of the transaction. Proceeds from the sale of foreign currency notes cannot be used. Funds may be transferred from the call account to the operating account, but not vice-versa INTEREST The interest on the call account is tied to the ECCB s call rate, which is computed daily and is competitive with interest rates offered on the international financial markets. Interest on this account is calculated from the first to last day of the month and is credited to the bankers reserve/operating account on the first day immediately following the end of the month. Interest earned on this account cannot be reinvested in the call account. 14

20 SECTION SIX: FIXED DEPOSITS 6.0. INTRODUCTION Commercial banks are also encouraged to establish fixed deposits with the Bank. A fixed deposit may be established with foreign currency for periods of one, two, or three months. Requests to set up such an account should be made to the Director, BMOD ESTABLISHMENT OF THE FIXED DEPOSIT Unless there is a difference in the details, the fixed deposit may become operable with the same documents as those required for the bankers reserve account, and may be established simultaneously (see Section Two for details) FUNDING TO ESTABLISH FIXED DEPOSITS The fixed deposit must be established with foreign currency, i.e. U.S. dollars, Pounds Sterling or Canadian dollars Rate Used to Establish Fixed Deposits All foreign currency sold to the Central Bank to establish fixed deposits will be converted to EC dollars at the mid-rate existing at the time of the transaction. For example, transfers of US dollars will be converted at EC$2.70 (the USD mid-rate), and transfers of Sterling and Canadian will be converted at the existing mid-rate. All deposits will be denominated in EC dollars Rate Used to Re-convert Fixed Deposits If there is a need to re-convert a maturing fixed deposit to the foreign currency in which it was first established, the re-conversion will be effected at the existing mid-rate (i.e. without commission). For example, deposits established with Pound Sterling that are being repatriated will be re-converted at the existing mid-rate. (This will also apply in situations where only part of a fixed deposit is being reconverted). 15

21 Movement of Funds between Accounts A commercial bank may liquidate its fixed deposit to fund its banker s reserve account, its call account or cash collateral account. However, a bank is not permitted to transfer funds from the call account to a fixed deposit account Commission Applied to Transfers from Fixed Deposit Accounts to Other Accounts Funds transferred from a fixed deposit account to the reserve or call account, either before or at maturity, will be subject to a commission. The commission is calculated as the difference between the mid-rate and the buying rate of the particular currency used to establish the deposit. Accordingly, US dollar deposits being transferred to the bankers reserve or call account will be subject to a commission of EC$0.0051, which is the difference between the mid-rate of EC$2.70 and the buying rate of EC$ Therefore, an amount of EC$5,100 will be deducted from a US$1M deposit being so transferred. The commission on Sterling and Canadian dollar deposits will be the difference between the mid and buying rates existing at the time that the fixed deposit was established Conversion to a Different Foreign Currency Conversion to a foreign currency other than that in which the deposit was initially established will be subject to a commission. For example, if a deposit was established in U.S. dollars and is being converted to Sterling or Canadian dollars, a commission would apply. The EC dollar equivalent of the deposit must first be lodged in the commercial bank s reserve account, at which time the commission referred to in clause above, will apply. The sale of the desired foreign currency will be effected at the existing selling rate for that currency Interest Rates on Fixed Deposits Interest paid on fixed deposits is tied to prevailing market rates, which reflect existing market conditions. Deposits of less than EC$500,000 will earn interest at a rate equivalent to the market rate minus one-eighth of one percent ( ). Therefore, upon maturity, a deposit being rolled over for a similar period may earn interest at a rate higher or lower than the 16

22 interest rate which prevailed at the time of establishment. Interest will be credited to the bankers reserve/operating account. All commercial banks are required to notify the Eastern Caribbean Central Bank of their intention to liquidate fixed deposits two days in advance of the maturity date. Upon maturity, fixed deposits will be automatically paid away unless the ECCB is instructed otherwise Interest Penalty on Fixed Deposits Redeemed Before Maturity In addition to any applicable commission, if a fixed deposit is broken, a penalty of twenty-five basis points or one quarter of one percent (0.0025) will be deducted from the existing interest rate. The penal interest rate will be applied to the entire period for which the deposit existed. 17

23 SECTION SEVEN: INTERBANK/ REPURCHASE MARKET 7.0. INTRODUCTION The Bank, in an effort to optimize the existence of a strong banking network in the ECCU and to facilitate the provision of investment opportunities for the commercial banks, formulated a framework for the operation of an inter-bank/repurchase market in the ECCU. This arrangement caters for the market determination of interest rates as it places participants in a position to negotiate directly with each other the terms and conditions of each loan. Under the new arrangement, the commercial banks are required to provide the ECCB with information on a daily basis for purposes of analysis PARTICIPATION All commercial banks operating in the ECCU, which are members of the clearing house, can participate in the market. The banks have also signed a Repurchase Agreement among themselves to govern repurchase transactions TRADING OPTIONS The banks have three different alternatives for lending and borrowing funds: These are outlined below: i. Unsecured Agreement - This arrangement involves lending without any security in the event of default. ii. Secured Agreement by way of collateral - Under this arrangement the borrower deposits the collateral with the lender. iii. Repurchase Agreement This involves the sale of securities by the borrower to the lender in exchange for cash. This transaction is governed by the Repurchase Agreement to which the commercial banks would have to be party. 18

24 7.3. PROCEDURES FOR THE OPERATION OF THE MARKET The Bulletin Board Service facilitated by the ECCB can be used by the commercial banks on a daily basis to advertise funds available for lending and funds required for borrowing. The commercial banks can access this service by dialing into the ECCB s server (the same way they dial to access SAP). See Appendix E for the Bulletin Board Service User Manual. i. On a daily basis, commercial banks wishing to lend funds are expected to advertise on the Bulletin Board. ii. Banks wishing to borrow are expected to check the Bulletin Board for available funds. iii. They are also expected to contact the potential lenders directly and negotiate the terms of the loan using one of the three options outlined above. iv. Under the Unsecured Agreement and the Secured Agreement by Way of Collateral, the lender will be required to send an MT202 to the Central Bank requesting the transfer of funds to the borrowing bank. The lending bank will also indicate in Field 72 of the SWIFT message, the interest rate and the maturity date of the loan. v. Under the Repurchase Agreement, the respective parties will be required to complete a Form of Confirmation and the Buyer (lender) will submit to the ECCB an MT202 requesting the transfer of funds to the Seller. The Buyer will also indicate in Field 72 of the SWIFT message, the applicable interest rate and maturity date of the transaction. vi. At the end of each day the commercial banks can access the Bulletin Board for the weighted average interest rate of the current day s transactions. This rate can be used by the commercial banks as a benchmark rate for the following day s transactions. The Bulletin Board will be updated by 4.00 pm daily PROCEDURES FOR DEPOSITORY SERVICES Securities pledged for borrowing can either be physical or dematerialised. The ECCB offers a depository for physical securities while dematerialised securities are held at the Eastern Caribbean Central Securities Depository Limited (ECCSD). 19

25 Physical Securities i. A commercial bank wishing to use ECCB s depository service must deposit securities with the ECCB s Head Office or Agency Office. The securities, must be delivered with the memorandum of deposit (See Appendix D). The following information must be included in the memorandum: (a) the description of the securities; (b) the nominal value of the securities; (c) Authorised Signatory; (d) Date. ii. A commercial bank wishing to borrow from another bank using securities deposited with the ECCB will be required to instruct the ECCB to assign these securities for a set period for the benefit of the lending institution. Additionally, the following information must be provided: (a) The loan amount; (b) The maturity date of the loan; (c) The interest rate; (d) A description of the securities that the ECCB is required to hold on behalf of the lending bank. Upon receipt of required instructions from the borrowing bank, the ECCB will confirm with the lending bank that the securities are being held on its behalf. It is the responsibility of the lending bank to ensure that the security is in place before the funds are transferred to the borrower. Upon maturity, the lender will be required to send instructions to the ECCB requesting that the lien be cancelled. iii. In instances where the loan is extended for an additional period of time, both parties (lender and borrower) will be required to inform the Central Bank of the terms and conditions of the new arrangement. Additionally, the lending bank will be required to instruct the Central Bank to continue to hold the securities on behalf of the lender up to a specified time. 20

26 iv. On maturity date of the loan, the borrowing bank will be required to send a Swift message (MT202) to the Central Bank requesting the transfer of funds to the lending bank Dematerialised Securities For Securities listed on the Eastern Caribbean Securities Exchange (ECSE), a commercial bank must complete the Charging Form (available at by providing its contact details, terms of loan and description of the instruments being pledged (See Appendix L for a copy of the Charging Form). 21

27 SECTION EIGHT: PROCEDURES FOR THE ECCU REPURCHASE (REPO) FACILITY 8.0. INTRODUCTION On 26 November 2010, the Eastern Caribbean Central Bank (ECCB) Board of Directors approved the implementation of a Repo Facility for the Eastern Caribbean Currency Union. The ECCU Repo Market Facility features the ECCB as the central counterparty which provides funds to the sellers (borrowing banks) in exchange for securities, and obtains funds from buyers (lending banks) in exchange for the same securities. The Bank will undertake repo and reverse repo transactions by transferring the legal ownership of the securities through purchase and sale. The initial owner (repo seller or cash taker) will retain the right to any coupon payment. The ECCB will only facilitate the repo transaction when the funds can be obtained from another bank via a reverse repo transaction PARTICIPATION The eligibility criteria outline the standards by which the commercial banks will be accepted as an eligible participant in the Repo Market. These standards are based on the ECCB s framework for assessing commercial banks (see Appendix F) TRADING The Repo Market is a market where the holder of securities (borrowing bank) sells securities to an investor (lending bank) with an agreement to repurchase the securities at a fixed price on a fixed date. The activity on this market is governed by a repurchase agreement that must be signed by all banks. The ECCB as Central Counterparty would only enter into a repo agreement with a borrowing bank, if there are banks that are willing to invest their excess reserves with the ECCB, an equal amount for the same duration. The ECCB would lend these funds to the borrowing bank in exchange for securities, and would enter into a reverse repo agreement with the lending banks by selling the securities for cash. The legal ownership of the security will be changed from the borrowing bank to the lending bank. Once the borrowing 22

28 bank repays the ECCB, the ECCB will repay the lending bank and the legal ownership of the security will revert to the borrowing bank PROCEDURES FOR THE OPERATION OF THE MARKET i PERMITTED SECURITIES Repo and reverse repo transactions will be facilitated using Government securities which are issued on the RGSM and held in the ECSE s registry. The securities sold cannot be substituted for another security for the duration of the contract. Securities offered for sale must have a maturity date of at least 14 days (2 weeks) beyond the maturity date of the contract. In addition, given the variability in the value of securities, a haircut of 10 per cent will be applied. ii. CUSTODY OF SECURITIES All eligible participating banks will be required to transfer securities that may be used for trading to the Central Bank s account at the ECCSD. These securities will subsequently be transferred from the depository into the portfolio of the commercial bank where it will be held until a Repo transaction is executed. The reverse would apply when the ECCB returns the securities to the commercial banks PROCEDURES FOR ACCEPTING REQUESTS FOR FUNDS Participating commercial banks 2 will submit their requests for funds to the ECCB (Banking and Monetary Operations Department) via by 2:30 p.m. and cancellation of requests must be submitted via by 2:45p.m. 2 Banks eligible to participate will be notified via letter based on the most recent eligibility assessment. The assessment will be based on the Bank s eligibility criteria which will be reviewed every six months. 23

29 8.5. PROCEDURES FOR ANNOUNCING AUCTIONS The ECCB will submit to the commercial banks via the bid template (announcement) specifying the terms and conditions of the auction by 3:00p.m. (See Sample of Bid Table). ECCU REPO FACILITY BID TEMPLATE 1. A reference number of the Auction: for example ECCB 10/ Date of the Auction: for example December 21, 2010; 3. Tenor: Overnight; 4. Securities available for sale: for example $23,000,000: a) 10,000,000 of Government of St Vincent and the Grenadines 91-day T-bill b) 5,000,000 of Government of Saint Lucia 365-day T-bill c) 8,000,000 of Government of Grenada 2-year Treasury note 5. Funds Required: for example $20,000,000; 6. Minimum Bid: for example $1,000,000; 7. Auction Type: Competitive 8. Reserve Yield: 3.50 per cent; 9. Auction Window Start Time: 3:15 p.m.; 10. Auction Window Closing Time: 3:45 p.m PARTICIPATING IN THE REPO AUCTION IN SITREL TM i. At 3:15 p.m., the ECCB logs into SITREL TM and posts a sell order. ii. Between 3:15 p.m. and 3:45 p.m. the commercial banks place their bids. 24

30 Order Screen 8.7. CONDUCTING THE REPO AUCTION IN SITREL TM Pricing Mechanism Repo The rate on repo transactions (sale of securities) will not exceed the ECCB discount rate of 6.5 per cent. This will be dispatched daily by 8:30 a.m. Reverse Repo The rate (yield) on the reverse repo transactions (buyer of securities) will be determined by a competitive pricing auction. The rate (yield) will be determined as the strike price 3 at which the cumulative bids are equal to the total funds required. The reserve yield for these auctions will be the minimum savings rate plus 50 basis points Auction Process The auction will open at 3:15 p.m. to facilitate the bids from the lending banks and will close at 3:45 p.m. At 3:45 p.m. when the auction closes, the ECCB ascertains the successful parties. 3 The Strike Price/Allotment Price for the auction is defined as the average of the Market Clearing Price (price at which the sell order amount is filled) and the Reserve Price/Ceiling Price. 25

31 a. If the ECCB was unsuccessful in obtaining any reverse repo bids, the ECCB will notify the commercial banks seeking to sell securities by 3:50 p.m. via e- mail. b. The ECCB will dispatch s to the sellers confirming the success of requests by 4:00 p.m. via (or facsimile). If the total demand is not met (undersubscribed), the ECCB will fill the requests on a first-come, first-serve basis. c. The ECCB will notify the successful commercial banks by 4:00 p.m. via (facsimile as a backup) of the amount, the applicable interest rate, the commencement and maturity dates. d. The ECCB will deliver confirmations (MT515) of each transaction in authenticated form to the successful commercial banks. This will confirm the execution of the purchase or sale, describe the security, identify the buyer and seller, indicate the purchase date and price, the repurchase date and price and any other terms of the transaction (see appendices G and G1). 8.8 REPO AND REVERSE REPO TRANSACTIONS When a participant enters into a repo transaction, the participant also enters into a simultaneous arrangement to buy back the underlying security at a specified date. On the trade date, two entries are processed to reflect the transactions for the repo and reverse repo Repo Price The sale price is contracted at 90 per cent 4 of the value of the security offered. The price for the repo is determined by the sale value of the security plus the repo interest rate divided by the par value of the security. 4 Based on ECCB's policy to apply a 10 per cent haircut. 26

32 Example: Commercial Bank A offers the ECCB $5.00m in Government of Saint Lucia 6.0 per cent bonds for sale to cover a 3-day contract for $4.50m with a published rate of 6.45 per cent. The price is determined as follows: 4.500,000 + ((4,500,000 x 6.45%/365) x 3) = ,000, Reverse Repo Price For the bank that is purchasing the security from the ECCB on the contract date, the ECCB sells the security at per cent of the par value of the security while the buyback is done at a rate determined as the sale value of the security plus the reverse repo 5 interest rate divided by the par value of the security. Example: ECCB buys back the security from Commercial Bank B. The price is determined as follows: 4.500,000 + ((4,500,000 x 3.25%/365) x 3) = ,000,000 5 As determined by the auction. 27

33 SECTION NINE: TEMPORARY ADVANCES 9.0. INTRODUCTION The Bank appreciates that commercial banks may occasionally need assistance to meet temporary shortages of funds. All requests must be made at least two days in advance of the required value date and all requests must be addressed to the Governor of the ECCB. All requests for an advance must be accompanied by the following: a) The reason(s) for the request and sources of repayment; b) A balance sheet, a detailed listing of liquid assets with an indication of amounts hypothecated and details of undrawn commitments as at the date of request; c) Details of the securities being pledged to secure the facility; d) Projected cash flow statements for a four-week period TERMS AND CONDITIONS Temporary advances granted by the Bank are subject to the terms and conditions outlined below Limits A drawing limit will be agreed with each bank. The limit arranged will not exceed 90 per cent of the amount of fixed deposits or 90 per cent of the nominal value of the Treasury bills and other government securities held by the bank Security As specified in Article 31 (2) of the ECCB Agreement 1983, all temporary advances must be fully secured. Security may be in the form of fixed deposits, treasury bills or governmentguaranteed securities. For expediency, it is advisable that commercial banks lodge collateral with the ECCB, prior to any specific request being made for advances. 28

34 Securing the Advance (a) Physical Securities A commercial bank wishing to use ECCB s depository must deposit securities with the ECCB s Head Office or Agency Office. Physical securities must be delivered to ECCB Headquarters or the Agency Office with the memorandum of deposit (See Appendix D). The following information must be included in the memorandum: (a) the description of the securities; (b) the nominal value of the securities; (c) Authorised signatories; (d) Date. (b) Dematerialised Securities i. For Securities listed on the Eastern Caribbean Securities Exchange (ECSE) the Commercial bank must complete the Charging Form (available at by providing its contact details, terms of loan and description of the instruments being pledged (see Appendix L). ii. The commercial bank must make the relevant payment to ECSE and provide proof of payment to ECCB for the depository service, within 30 minutes of being contacted by the ECCB. iii. The completed Charging Form must be sent to ECCB. iv. ECCB would complete the relevant section of the form and submit the completed form and proof of payment to ECSE. v. The commercial bank must submit the original form via mail to ECCB 29

35 Interest Interest, which may vary from time to time, is charged at the ECCB s nominal discount rate. Presently, the ECCB s discount rate is 6.5 per cent. Any change in the interest rate will be communicated to the commercial banks by the ECCB Repayment Advances are to be repaid in full within the time agreed between the ECCB and the commercial bank. 30

36 SECTION TEN: ISSUE AND REDEMPTION OF NOTES ISSUE OF EASTERN CARIBBEAN CURRENCY NOTES TO COMMERCIAL BANKS i. Currency notes may be issued to those commercial banks which have arranged to do business with the ECCB. The minimum issue will be $25,000. ii. The latest issue of upgraded currency notes does not have a suffix to identify the territory but a double alpha prefix. All genuine ECCB notes irrespective of the suffix (as with the previous issue) can be issued in any territory. iii. When a commercial bank requires currency notes, the entry must be inputted into ECM ISA Wed Application System by 3.00 p.m. the day prior to the transaction day with the Central Bank. iv. The ECM ISA Wed Application System would NOT accept orders after the cut off time of 3.00 p.m. v. Entering Request in the system: A single order must be done for the notes being ordered. Multiple entries are allowed to facilitate the input for each denomination in a single record. The delivery date must be selected. (This would be the normal transaction day). Only one record is required for the total order. An Order ID (unique identifier) is assigned to the order when the entry is completed. 31

37 The redemption record which will be printed by the ECCB will be generated when the entry is completed ISSUE OF EASTERN CARIBBEAN CURRENCY COINS i. When a commercial bank requires coins, the entry must be inputted into ECM ISA Wed Application System by 3.00 p.m. the day prior to the transaction day with the Central Bank. ii. The ECM ISA Wed Application System would NOT accept orders after the cut off time of 3.00 p.m. Entering the Request in the system: The coin order can be included with the currency notes order. 1 must be inserted in the packet size field. This will allow for the correct calculation of the value. The coins are ordered by boxes and therefore the number of packets would be the number of boxes that are required for a specific denomination REDEMPTION OF EASTERN CARIBBEAN CURRENCY NOTES When a commercial bank has currency notes for redemption, the entry must be inputted into ECM ISA Wed Application System by 3.00 p.m. the day prior to the transaction day with the Central Bank. The ECM ISA Wed Application System would NOT accept orders after the cut off time of 3.00 p.m. Following is a guideline on the types of notes that will be accepted by the ECCB, the bundling procedure and other matters in relation to the redemption of notes. A bank wishing to redeem notes to the ECCB or its Resident Representatives must accept the following conditions: Fit notes are those notes that are fit for re-issue. 32

38 Unfit notes are those that are not fit for re-issue on account of the wear and tear experienced while in the hands of the public Mutilated notes are those that are partial or missing features. They are assessed by the Currency Management Department (CMD) based on established criteria. All notes must be redeemed through the Resident Representative at the Agent Bank (all territories except St Kitts and Nevis) or at ECCB (in the case of St Kitts and Nevis where transactions are conducted at headquarters). Information must be inputted into ECM ISA Web Application system. The following should be noted: A separate redemption must be done for each denomination being redeemed. (That is, a separate record created for each denomination). A separate redemption/deposit ID has to be assigned for each redemption record. That is, a separate reference number for each denomination. If the bundles being redeemed for a specific denomination are from different tellers, the bundle(s) for each teller must be entered separately. For example, if a bank is redeeming 10 (ten) bundles of $5 notes and six (6) bundles are from Teller A and four (4) bundles are from Teller B, there would be two (2) entries, one for each teller. A label which includes the bank name/stamp, teller ID and redemption date must be included with each bundle Redemption of Fit, Unfit and Mutilated Notes a) Arrangement of Notes in Bundles Fit and Unfit notes should be arranged according to denomination in bundles of one thousand (1,000) notes. For fit notes, each bundle is made up of ten (10) mini-bundles of one hundred (100) notes each. The bundle of one thousand (1,000) notes should be sealed in a transparent plastic bag with a stamped dated label that clearly identifies the bank, denomination, and a barcode. These will be reissued from the recipient agent bank on demand. Unfit one hundred dollar ($100) notes may be redeemed in bundles of not less than five hundred (500) notes. 33

39 Mutilated notes are sent to Headquarters under separate cover. They are assessed by the CMD based on established criteria. Criteria for assessing mutilated notes are provided in Appendix M SHORTS, OVERS AND OTHER REJECTIONS The commercial banks Reserve Account will be adjusted for all shorts and overs and any rejections found during processing of notes. An advice with the details and relevant straps is ed to the affected bank(s) within one week following processing. The originals are mailed subsequently REDEMPTION OF NOTES OF NON-ECCB TERRITORIES i. The ECCB does not accept notes issued by Guyana, Jamaica or Trinidad and Tobago since the Central Banks of these territories do not redeem their notes from other territories. ii. Currency notes of Barbados are, however, accepted and these are received from all ECCB member territories COMMISSION CHARGES A commission is chargeable on an issue of currency notes and coins and the redemption of unfit currency notes. No commission is chargeable for the redemption of fit notes. The structure of commissions is as follows: i. If only an issue of currency notes is made the commission payable would be.1875 per cent of the total value of the issue. ii. If only redemption of unfit notes is made, the commission chargeable would be.1875 per cent of the total value of the redemption. iii. If both an issue and redemption are done simultaneously and the value of the issue exceeds that of the redemption of unfit or fit notes, the 34

40 commission chargeable would be.1875 per cent of the excess of the issue over the redemption. iv. Similarly, if the value of the redemption of fit or unfit notes exceeds that of the issue, then the commission chargeable would be.1875 per cent on the amount of the excess of the unfit notes over the issue. v. If there is an issue and a redemption of similar value (usually referred to as an exchange) no commission would be chargeable. vi. If there is a simultaneous issue of fit notes, and redemption of fit or unfit notes, where the net redemption is less than the amount of fit notes redeemed, the excess is considered as fit notes, and therefore no commission is charged on that excess. 35

41 SECTION ELEVEN: FOREIGN EXCHANGE RATES The ECCB provides daily foreign exchange rates via . ECCB transacts (buys and sells) with commercial banks in USD and BBD currencies at competitive rates while GBP, EURO and CAD transactions are executed at market rates. The ECCB also provides daily indicative rates for the above listed currencies as well as for several other international currencies. The ECCB will dispatch the rates via facsimile only on account of a disruption to its internet service FORWARD CONTRACTS The ECCB purchases foreign currency notes i.e. GBP, CAD, EURO and CHF from the commercial banks. To facilitate the purchase of these notes, forward contracts are established with commercial banks daily for the delivery of the said currencies. This service was initiated to i. help reduce the foreign exchange risk that commercial banks may encounter when purchasing foreign notes from customers in the ECCB area. ii. attempt to harmonize the rates offered on foreign currency notes to customers in the ECCB area, while reflecting current market rates. In all of the ECCB territories, the forward contracts mature within five working days from the time the contract is established, at which time the notes will be due for delivery. The rate used for each contract is the spot rate prevailing on the transaction date Procedure for Establishment of Forward Contracts To facilitate smooth operations between your bank and the ECCB, a detailed outline of the procedure for the establishment of forward contracts is presented below. i. The commercial bank will telephone the ECCB s Rates Information Desk to ascertain the rate at which ECCB will accept notes for Forward contracts. 36

42 ii. Following acceptance of the rate by the commercial bank, the Banking Officer will record and confirm the details of the trade including name of bank, rate, amount, value date and time, thereby establishing a contract. iii. The commercial bank will send a SWIFT MT300-Foreign Exchange Confirmation to settle the trade within one hour of the trade subject to the 3:00pm deadline. iv. On the contracted delivery date (value date), the currency notes should be delivered to the ECCB Resident Representative at the Agent Bank in the respective island. v. If the commercial bank is unable to deliver the notes contracted, the ECCB s Rates Information Desk should be contacted prior to the value date, so that arrangements can be made for that bank to repurchase these notes from the ECCB, at the prevailing market rate. If on the delivery date, the bank holds notes in excess of the amount contracted for delivery, it can sell these notes to the ECCB at the day s prevailing rate PURCHASE OF FOREIGN CURRENCY NOTES BY ECCB Introduction Any bank presenting foreign currency notes for purchase by the Bank or its Resident Representatives will be assumed to have accepted the conditions outlined below NOTES NOT ACCEPTED BY ECCB i. notes which have ceased to be legal tender or are no longer issued; ii. notes which are mutilated and do not constitute a full note in each case; iii. notes in poor condition, i.e. dyed, burned, or water-damaged to the extent that their genuineness or value is questionable; iv. notes suspected to be forgeries ARRANGEMENT, BUNDLING AND SECURING OF NOTES Notes should be arranged face and top up, and packaged in units of 100 each, without the use of pins, clips or tape. Each package of 100 notes should be bound with a paper strap showing 37

43 the name and address of the bank concerned and the dated initials of the person(s) who prepared the package. ECCB supplies commercial banks with special straps for use on packages of non-caribbean currencies. These straps should not be used on packages of ECCB notes. Wherever possible the packages of 100 notes should be placed into full bundles of one thousand (1000) notes, secured with heavy duty rubber bands and sealed in a plastic bag bearing the name and address of the bank concerned. Any excess over full bundles of 1000 notes should be similarly secured with heavy duty rubber bands, and each package of 100 notes should be sealed in a plastic bag, bearing the name and address of the bank concerned. Except for US currency, where notes cannot be accumulated during the normal transaction period (i.e. weekly) to reach the standard 100 notes per bundle, notes will be accepted in smaller bundles of 20 notes. These smaller bundles must be identified and labelled as indicated above. However, once the bundles of 20 notes can be accumulated to 100 notes, every effort should be made to redeem as such, not 5 bundles of 20 in a sealed plastic but 100 notes with one paper strap in a transparent plastic bag PRESENTATION OF NOTES Notes will be accepted at the headquarters from the commercial banks in St Kitts and Nevis and by the Resident Representatives at the Agent Bank. The entries for the foreign notes to be sold to the ECCB must be inputted into ECM ISA Wed Application System by 3.00 pm the day prior to the transaction day with the Central Bank. A printed receipt will be returned to the presenting bank. Value for the notes received will be credited to the account of the bank concerned on the same day. 38

44 11.6. SHORTS, OVERS AND OTHER REJECTIONS All shorts and overs and any rejections advised by our correspondent bank will be adjusted to the account of the bank concerned and supported by relevant straps REDEMPTION OF CURRENCY NOTES i. ECCB will provide daily rates for the redemption of foreign currency notes. ii. These rates will only be applicable for the same day. iii. These rates will expire daily at noon. iv. The usual procedures for presentation and settlement will apply SALE OF USD, GBP, EURO AND CAD BALANCES TO ECCB i. The commercial bank will telephone the ECCB s Rates Information Desk to ascertain the rate at which ECCB will buy the balances. ii. Following acceptance of the rate by the commercial bank, the Banking Officer will record and confirm the details of the trade including name of bank, rate, amount, value date and time, thereby establishing a contract. iii. The commercial bank must send a SWIFT MT300 -Foreign Exchange Confirmation to settle the trade and an MT210 Notice to receive within one (1) hour of establishing the trade subject to ECCB s 3:00p.m. deadline. The time received will be determined by the reception time indicated on the SWIFT message. iv. The commercial bank must contact its correspondent bank in order to ensure timely delivery to ECCB s correspondent bank. v. On the value date the commercial bank s account will be credited with the XCD equivalent. vi. If the commercial bank fails to deliver these funds on the specified date, a penalty will be charged at a rate of 2 per cent above the overnight lending or base rate of the relevant currency on the principal amount of the transaction. 39

45 11.9. PURCHASE OF USD, GBP, EURO AND CAD BALANCES FROM ECCB i. The commercial bank will telephone the ECCB s Rates Information Desk to ascertain the rate at which ECCB will sell the balances. ii. Following acceptance of the rate by the commercial bank, the Banking Officer will record and confirm the details of the trade including name of bank, rate, amount, value date and time, thereby establishing a contract. iii. The commercial bank must send a SWIFT MT300 - Foreign Exchange Confirmation to settle the trade and a MT200/202 Financial Institution Transfer within one (1) hour of establishing the trade subject to ECCB s 3:00p.m. deadline. The time received will be determined by the reception time indicated on the SWIFT message. iv. On value date the commercial bank s account will be debited with the XCD equivalent. Therefore the commercial bank must ensure that sufficient funds are available on its reserve account to settle the transaction on value date. 40

46 SECTION TWELVE: ECCB RULES FOR THE AUTOMATED CLEARING HOUSE 12.0 INTRODUCTION The Eastern Caribbean Automated Clearing House Services Incorporated (ECACHSI) is a company incorporated under the laws of Saint Christopher and Nevis with its registered office at Bird Rock, Basseterre, St Kitts. The ECACHSI operates the Eastern Caribbean Automated Clearing House (ECACH) which supports the clearings of retail transactions initiated by commercial banks under the authority of the ECCB. One of the critical elements of the operations of the clearing house is to ensure that settlement takes place in an efficient manner. The ECCB will act as the settlement agent COLLATERALISATION The ECACH shall only accept payment instructions that are fully collateralised from the commercial bank in order to prevent settlement failure. (1) The commercial bank shall execute a Participant Collateral and Settlement Agreement with the Central Bank and the ECACHSI. (2) The commercial bank shall maintain sufficient aggregate collateral as set out in the Participant Collateral and Settlement Agreement, to cover three (3) days or a period as the Central Bank may determine from time to time, to ensure prompt settlement of ECACH transactions. (3) The Participant Collateral and Settlement Agreement shall delineate the relationship and responsibilities of the Central Bank, the commercial bank who is allowed to settle directly in the system and the ECACH as it relates to: 41

47 (a) settlement including the Central Bank s authority to debit and credit a commercial bank s account; (b) collateral management; and (c) the granting of intraday or extended credit Collateral Requirement i. The commercial bank is required to place collateral with the Central Bank. The collateral can be in the form of cash balances and/or member government securities issued on the Regional Governments Securities Market. The collateral amount required by a commercial bank shall be based on three (3) times the average daily gross clearings activity of the commercial bank over the preceding four (4) calendar years (1 January to 31 December). ii. The collateral requirement will be calculated annually and the commercial bank will be advised of the revised collateral amount by 31 January. iii. The commercial bank must ensure that the collateral is deposited with the ECCB by the first working/business day in April. iv. Collateral in the form of cash should be deposited to the commercial bank s cash collateral account. Cash collateral accounts will be opened upon request to the ECCB. v. Collateral in the form of securities issued on the RGSM must be transferred to ECCB s registry account at the ECSE by completing a Private Transfer Form (See Appendix H). The form is available on the ECSE website Collateral Management i. The ECCB will monitor the securities held and notify the commercial bank at least 42

48 two (2) weeks before any security deposited as collateral matures. ii. The commercial bank will be required to inform the ECCB of the replacement security. Securities will only be exchanged on receipt of a replacement. If not replaced the principal and income from a matured security will be credited to the cash collateral account. iii. Income on securities held as collateral received by the ECCB will be credited to the commercial bank s Reserve Account SETTLEMENT On any given business day two cheque clearing settlement sessions will be effected at 9:00 a.m. and 2:30 p.m. The sessions will be allotted 30 minutes each for settlement to be completed. The 2 nd session cannot be effected until the 1 st session is completely settled. The commercial banks reserve account at the ECCB will be the account used to settle the clearings Intraday and extended credit In the event that the commercial bank s reserve account balance falls short of the clearing amount to be settled, the following will obtain: i. The commercial bank will automatically be granted a credit facility for seven (7) business days (based on business days in St Kitts and Nevis). ii. The approved credit limit shall be ninety (90) per cent of the collateral amount. iii. The ECCB will debit the bank s clearings loan account and credit the reserve account with the shortage amount. iv. The ECCB will within the day of granting the credit facility notify the commercial bank formally that the facility was granted. v. The notification will include the loan account number, the loan amount, the duration and the interest rate applied (ECCB Discount Rate). vi. Interest for one day will be charged for credit facilities repaid intraday. vii. The ECCB will automatically debit the commercial bank s reserve account for 43

49 principal and interest on the start of the maturity date. viii. If the commercial bank wishes to repay the facility before the maturity date the bank is required to: a. Submit a SWIFT MT202 message crediting its clearings loan account with the repayment amount BI-LATERAL EXCHANGE Communication of bilateral exchanges (1) Subsequent to the full implementation of the ECACH and the nine-month period of facilitation by the ECCB of the exchange of cheques that are not in compliance with the Canadian Payments Association Code 006 standards adopted by the ECACH, banks are allowed to bilaterally exchange compliant cheques for which a proper image cannot be captured to facilitate the electronic exchange via the ECACH. Where an item is to be exchanged bilaterally between commercial banks, the originating commercial bank shall notify the receiving commercial bank of any eligible item and the reason for bilateral exchange, within the same clearing session in which the item would have been presented electronically to the ECACH. (2) On a daily basis by 10:30 a.m. all commercial banks are to provide the Central Bank and the ECACH the following details of all cheques exchanged bilaterally: (a) the number of cheques delivered to and received from each commercial bank, (b) the value of cheques delivered to and received from each commercial bank, and (c) the number and value of returns received from and delivered to each commercial bank Delivery of physical cheques in bilateral exchanges (a) Where both the originating commercial bank and the receiving commercial bank are within the same territory, the physical cheque shall be delivered over 44

50 the counter by the clearing session following notification as required in ECACH Rule 92 (1). (b) Where both the originating commercial bank and the receiving commercial bank are not within the same territory, the originating commercial bank shall send or dispatch the physical cheque to the receiving commercial bank by the end of the following business day Endorsement of Cheques i. Any single cheque of $5,000 or over and all other instruments should be endorsed. ii. The crossing stamp of the collecting bank on instruments shall be understood to guarantee the genuineness of the depositor s endorsement, or absence of endorsement subject to (i) above Revenue Stamps Where revenue stamps are omitted by the originating bank, these will be attached by the receiving bank which will absorb the cost. Notwithstanding this, it is the right of the paying bank to return an item with the note Revenue Stamp Required Returned Items i. Instruments may be returned for any of the reasons stated in Section 12.4 (Authorized Reasons For Returned Instruments). The reason for the return should be clearly written in recognized form either on the instrument itself or upon a slip of paper securely attached thereto. ii. To minimize the incidence of returned items, every commercial bank exchanging instruments bi-laterally shall exercise due care to ensure that they are prima facie in order. iii. Instruments which the receiving bank has not accepted shall be returned and delivered to the originating bank not later than 9:30 a.m. on the following working 45

51 day in the case of town banks/branches, and not later than 9:30 a.m., four (4) working days following presentation, in the case of out-of-town banks/branches. A Clearing debit note showing the full particulars of the items returned will be processed by the bank immediately following. iv. When instruments are presented to the wrong bank they are to be returned to the bank making the presentation not later than 12:00 noon on the day of the presentation AUTHORIZED REASONS FOR RETURNED INSTRUMENTS 1. A NSF Not Sufficient Funds Not Sufficient Funds or OD facilities unavailable to pay cheque. 2. B UCF Uncollected Funds Hold Hold on Account and funds not available. 3. C Stop Payment Stop Payment on this cheque. 4. D Closed Account Closed Account. 5. E UTLA Unable to Locate Account Unable to locate account. 6. F Frozen/Blocked Account Account has Restrictions placed on it by either customer or bank Frozen / Blocked / Deceased Account. 7. G Stale Dated Stale Dated item is dated more than 6 months ago. 8. H Post Dated Post Dated items is future dated. 9. I Endorsement Missing/Irregular Endorsement Missing (Teller stamp missing/illegible) Endorsement Irregular (illegible teller stamp). 10. K Signature(s) Missing Signature Missing no client signature on face of the cheque. 11. L Signature(s) Irregular, Suspected Forgery Signature Irregular does not match signature card. 12. M Non Cash Item (Non Negotiable) Non Negotiable / Non-Compliant item not eligible for clearing through ACH. 13. N Altered/Fictitious Item/Suspected Counterfeit/Counterfeit - Altered/Fictitious Item/Suspected Counterfeit/Counterfeit. 14. Q Not Authorized (Includes Drafts) Unauthorized item such as a draft. 46

52 15. R Branch/Account Sold (Wrong Bank) Divested Account, Not Our Item. 16. S Refer to Maker generic return. 17. W Cannot Determine Amount Amount cannot be verified Incorrect Amount. 18. Z Forgery An affidavit shall be available upon request Fraudulent Item CLEARING HOUSE CONTINGENCY ARRANGEMENT The ECACHSI will respond to business disruptions by taking the necessary remedial actions to safeguard property, make financial and operational assessments, protect transactions and records, and quickly recover and resume the ACH operations. In the event a business disruption precludes the continuation of normal operations, all stakeholders will be guided by the ECACH Business Continuity Plan (BCP). The BCP anticipates that a significant business disruption (SBD), such as a prolonged widescale disruption of utilities (electricity and communication lines) due to natural disasters such as hurricanes, earthquakes, and floods would prevent the operation of the central ACH. Localised business disruptions could prevent one commercial bank or all commercial banks in a country from accessing the ACH. The response to a business disruption will depend on other organizations and systems, especially in regard to the supply of utilities to the backup location. The ultimate business continuity option would be the physical exchange of local cheques in the short term and bilateral exchange files over the medium to long term. The following will guide the operations for the ultimate business continuity option: CONTINGENCY CLEARING ARRANGEMENTS i. The Bank shall make arrangements for such facilities as are required for the purpose of the clearing. ii. The clearing shall take place each working day by 9:30 a.m. or at such time that the ECCB may determine. 47

53 iii. By the end of each day, each commercial bank must communicate to the respective banks in its territory, the total value of instruments which it intends to present at the next meeting of the Clearing House. iv. Member banks of the Clearing House shall submit to the ECCB the names and specimen signatures of representatives authorized to attend the clearing. All persons authorized to attend the clearings must also have a photo ID to be allowed to enter the compound. Any changes as it relates to the bank representatives who will be attending clearings must be communicated to the ECCB at least the day before that representative is due to attend. v. Each member bank shall authorize its representative to deliver and receive instruments on its behalf and direct him to observe strictly any instructions given by the Superintendent. vi. A bank representative who is not present at the clearing at the appointed time may be permitted to attend the clearing provided that the delay is for not more than ten (10) minutes. Any representative arriving later than ten (10) minutes may not be allowed to present instruments drawn on other member banks, but such representative shall be obliged to take delivery of all instruments presented by other banks. The value of such instruments shall be included in the balance due from the defaulting bank on that day. vii. If a representative arrives up to ten (10) minutes late, the member bank concerned shall be liable to a fine to be determined from time to time. Where late arrival exceeds ten (10) minutes an additional fine per minute to be determined from time to time shall be payable. viii. Each member bank shall be required to prepare and submit a Clearing Presentation Form in duplicate, consolidating the instruments to be presented for clearing and listing them in the Due From column of the Form. This column will be totalled to arrive at the amount due from other banks to the bank presenting the Form. 48

54 ix. The instruments to be presented shall be listed separately for each bank. Each list should also state the total number of instruments drawn on each bank. x. The accuracy of the lists is the responsibility of the presenting bank and errors which remain undetected when the lists are scrutinized at the Clearing House shall be settled between the two banks concerned under advice to the Central Bank. xi. At the clearing there shall be an exchange of instruments, that is, the instruments and listings shall be handed to the representatives of each paying bank. After all instruments due for presentation have been exchanged, the representative of each paying bank will enter and total the number and value of instruments received in the Due To column of the Form. xii. The difference between the value of instruments received (Due To) and the value of instruments presented (Due From) will be entered as a debit or credit. This net debit or credit (balancing figure) will be entered on the Clearing Presentation Form and constitutes a voucher from which accounts of the clearing banks with the Central Bank will be debited/credited. xiii. The Superintendent of the Clearing House will complete a Daily Settlement Form which summarizes the net debits and credits of the clearing banks as indicated on the Clearing Presentation Forms and the total number of instruments delivered by each bank. xiv. When completed, this Form should be in balance and when the Superintendent of the Clearing House is satisfied that the clearing is balanced, he/she will sign the duplicate of each bank s Presentation Form. It shall not normally be permissible for any representative to leave the Clearing-House until the clearing has been balanced. 49

55 SETTLEMENT Each commercial bank shall maintain with the ECCB an account through which settlement of net clearing balances may be made. This account should be maintained at a level sufficient to ensure the absorption of all net clearing amounts INTRADAY AND EXTENDED CREDIT The credit facility designed for the ACH will obtain if the contingency arrangement is effected RETURNED ITEMS i. Instruments may be returned for any of the reasons stated in Section and any other reason acceptable to the Superintendent of the Clearing-House. The reason for the return should be clearly written in recognized form either on the instrument itself or upon a slip of paper securely attached thereto. ii. To minimize the incidence of returned items, every member sending instruments to the Clearing-House shall exercise due care to ensure that they are prima facie in order. iii. Instruments which the receiving bank has not accepted shall be returned and delivered to the originating bank not later than 9:30 a.m. on the following working day in the case of town banks/branches, and not later than 9:30 a.m., four (4) working days following presentation, in the case of out-of-town banks/branches. A Clearing-House debit note showing the full particulars of the items returned will be passed through the clearing immediately following. iv. On a daily basis by 9:30 a.m. all commercial banks are to provide the Central Bank and the ECACH the number and value of returns received from and delivered to each commercial bank. 50

56 v. When instruments are presented to the wrong bank they are to be returned to the bank making the presentation not later than 12:00 noon on the day of the presentation MISSING INSTRUMENTS Where an instrument is observed to be missing after confirmation of a clearing settlement the presenting bank should be notified immediately of the error. The presenting bank should then use its best efforts to rectify the error by locating the missing instrument or by providing details of the instrument if it cannot be located CLEARING HOUSE CODE OF CONDUCT This Code of Conduct is designed to govern behaviour at the Eastern Caribbean Central Bank Clearinghouse in each member state of the Eastern Caribbean Currency Union. Each commercial bank must: i. be at the Clearinghouse and ready to engage in the clearings process at such time that the ECCB may determine. ii. recognise and respect the authority of the clearinghouse Supervisor at all times. iii. willingly provide to the clearinghouse Supervisor all information critical to the effective conduct of the clearings. iv. communicate fully and clearly with each other to avoid misunderstandings. v. govern himself/herself in a professional manner. vi. direct all requests to leave the clearings room to the clearinghouse Supervisor. vii. not engage in conversations which have no relevance to the clearings process. viii. keep all cellular phones in his possession on vibrate or silent mode. ix. refrain from the use of devices for personal entertainment, during the clearings 51

57 process. The clearinghouse Supervisor will report any transgressions to the Manager of the relevant financial institution within twenty-four (24) hours. The financial institution is expected to take all reasonable steps, including disciplinary action, to prevent a repeat of any misconduct. 52

58 SECTION THIRTEEN: ADMINISTRATIVE CIRCULARS The ECCB provides circulars to the Commercial Banks on policy decisions. This section includes circulars communicated to the banks. 53

59 09 March 1984 NOTICE NO 1/1984 To All Commercial Banks MINIMUM RESERVE REQUIREMENTS In exercise of the powers conferred by Article 33 of the Agreement establishing the Eastern Caribbean Central Bank (hereinafter referred to as the Central Bank), the Central Bank with the approval of the Monetary Council hereby gives notice that on and after the 15th day of March 1984, and until further notice, all commercial banks authorised to do banking business in the ECCB area shall, except as otherwise advised, maintain minimum reserves at the level of six (6%) per cent of their total deposit liabilities (excluding interbank deposits). 54

60 14 December 1984 NOTICE NO 2/1984 To All Commercial Banks MINIMUM RATE OF INTEREST ON SAVINGS DEPOSITS In exercise of the powers conferred by Article 34 of the Agreement establishing the Eastern Caribbean Central Bank (hereinafter referred to as the Central Bank), the Central Bank with the approval of the Monetary Council hereby gives notice that on and after the 14th day of January, 1985 and until further notice, the minimum rate of interest payable on savings deposits by all commercial banks authorised to do banking business in the ECCB area shall be four per cent per annum. 55

61 19 April 1985 NOTICE NO 3/1985 To All Commercial Banks EEFECTIVE INTEREST RATES The Central Bank in accordance with Article 34 (i) (iii) of the Eastern Caribbean Central Bank Agreement 1983, wishes to keep under continuous review effective annual interest rates which commercial banks pay to depositors and charge to borrowers. a. Interest Rates on Savings Deposits Since the effective annual interest rate paid to depositors in respect of savings deposits is affected by the frequency with which minimum or average deposit balances are calculated for determination of interest, and since practices among commercial banks vary, the Central Bank hereby requests all commercial banks to indicate by 31 May 1985, by response direct to the Governor, the following information related to the calculation of interest on savings deposits: i. whether the deposit base is calculated by reference to the minimum balance or to an average of deposit levels; ii. whether the period which is used for determining either the minimum balance or the average balance is a month, a quarter, a half-year or year. The response, for example, could simply state that interest amounts on savings deposits are calculated on a minimum half-yearly balance. Alternatively, the response could indicate that interest amounts are determined each quarter, on the average of the daily savings deposit balances held during a standardized ninety (90) day quarter. b. Interest Rates on Credit The effective annual interest rate on what are called add-on loans varies according to the length of the loan period and the frequency of repayment periods. Add-on loans in this context are those in which interest is added-on to the principal at the beginning of the loan period and the resulting total amount is divided into equal installments. As is illustrated in Attachment 1, the longer the add-on loan, the lower will be the annual effective interest 56

62 rate. Similarly when the repayment periods are less frequent, annual effective interest rates of add-on loans are lower. The attached table illustrates differences between a short range of discrete annual nominal interest rates and the corresponding annual effective interest rates of add-on loans and demonstrates the direction in which variability occurs. Where loan repayment plans accord with charging interest on the reducing balance or where some average of outstanding credit balance is used as the basis for calculating interest amounts, the annual effective interest rate and the annual nominal interest rate are, for most practical purposes, the same. The almost complete correspondence between the annual nominal and effective interest rates, on these latter loan plans as compared with the divergence between the two rates on the addon loans, are factors about which the public needs to be aware and about which the Central Bank wishes to be better informed. Accordingly, this notice, in so far as it relates to interest rates on credit, requests all commercial banks to undertake the following: i. To indicate with effect from 1June 1985 to ALL borrowers the annual effective interest rate on ALL loans made to them and to indicate such difference, if any, between annual nominal interest rates and annual effective interest rates. ii. iii. iv. To include, with effect from 1 June 1985, the annual effective interest rate on the promissory note or on the bill of sale or on any other loan document which the borrower is required to sign and which includes the annual rate of interest as a constituent element. To regard, for the purpose of Supplement E of the month B.S.1 return, the prime rate as the minimum lending rate and correspondingly, to treat all inhouse annual interest rates which are lower than the prime rate as if they have no significance in relation to the data required in Supplement E. To include with effect from June 1985 the following additional information on the B.S.1 and B.S.2 forms. 57

63 B.S.1 - Supplement E Lending Rates i. Prime rate % per annum ii. Other rates, range:. to % per annum iii. Add-on Loans Nominal Interest Rate.. to % per annum Effective Interest Rate. to.. % per annum Length of Loan Period. to years B.S.2 - Supplement A To add, as from 30 June 1985, on each quarterly return of Form B.S.2, as part of Supplement A (B.S.2), the following information: a) Proportion of Add-on Loans to Total Loan and Advances.. % b) Proportion of Add-on Loans which is repaid monthly. % quarterly % Other. % For the purposes of this notice, add-on loans are those defined in paragraph four (4) above. Any queries in relation to this notice may be directed to the Manager, Research, of the Eastern Caribbean Central Bank who is located in the Palms Building, Basseterre, St Kitts and who can be contacted by telephone at Ext

64 Attachment I Effective Interest Rates Table showing comparisons of Annual Nominal Interest Rates and Annual Effective Interest Rates for loan plans in which interest is added-on at the beginning of the loan and repayments of the resulting total are divided into equal installments. Table 1 LOAN NO. OF PERIODICITY ANNUAL NOMINAL INTEREST RATES PERIOD INSTALL- OF REPYMT (YRS) MENTS 8% 9% 10% 12% 14% 16% CORRESPONDING ANNUAL EFFECTIVE INTEREST RATES 1 12 Mthly Mthly Mthly Mthly Mthly Mthly Qtrly Half-Yrly Yrly Once at end of loan period

65 1 October 1985 NOTICE NO 4/1985 To All Commercial Banks METHOD OF COMPUTATION OF INTEREST ON SAVINGS DEPOSITS In exercise of the powers conferred by Article 34 of the Agreement establishing the Eastern Caribbean Central Bank (hereinafter called the Central Bank), the Central Bank with the approval of the Monetary Council hereby gives notice that on and after the first day of December, 1985, and until further notice, all commercial banks licensed to do business in the ECCB area shall compute interest on savings deposits on the basis of the minimum balance held in the account of a depositor at the end of each month. All interest so computed must be credited to the account on a quarterly basis. 60

66 20 October 1987 NOTICE NO 5/1987 To All Commercial Banks BUYING AND SELLING RATES OF FOREIGN CURRENCIES FOR BANKS To introduce a measure of uniformity in the application of exchange rates within the Eastern Caribbean Currency Area in respect of transactions with the public in certain key currencies, the following buying and selling rates are prescribed for banks which are Authorised Dealers in Foreign Exchange: Buying (min) Selling (max) US Dollars EC$ EC$ - Telegraphic transfers, cheques and credit cards Notes UK Pounds - Telegraphic transfers, cheques and credit cards As advised daily by the ECCB - Notes CAD Dollars - Telegraphic transfers, cheques and credit cards As advised daily by the ECCB - Notes Barbados Dollars - Telegraphic transfers, cheques and credit cards Notes 1.35 Guyanese Dollars - Telegraphic transfers only As advised daily by the ECCB 61

67 As requested by the Central Banks concerned, the acceptance of notes from Jamaica, Guyana and Trinidad and Tobago remains prohibited. The above rates do not take into account any government tax or levy. This circular shall come into effect in November 1987 and shall remain valid until further notice. AMENDMENT TO NOTICE NO 5/1987 (Effective 21 April 1993) Trinidad and Tobago (TT) Dollars The requirement to pay for imports from Trinidad and Tobago in TT dollars only has been suspended. Trades may settle in EC or US dollars. The ECCB will not be quoting a daily rate for trading in TT dollars, and will not therefore be a source from which TT dollars can be acquired. Commercial banks will make their own arrangements with correspondent banks in Trinidad and Tobago if TT dollar balances are required. All commercial banks are required to submit monthly returns which record the value of total payments to and total receipts from Trinidad and Tobago. 62

68 10 August 1992 NOTICE NO 6/1992 To All Commercial Banks COMMERCIAL BANKS - PURCHASE OF FOREIGN CURRENCY NOTES AMENDED EFFECTIVE 3 OCTOBER 1994 Commercial banks that deal in the following foreign currency notes are required to do so at prices as stipulated by the ECCB: i) U.S. Dollar ii) Pound Sterling iii) Canadian Dollar iv) Deutsche Marks v) French Francs vi) Italian Liras vii) Swiss Francs viii) Netherland Guilders ix) Barbados Dollars x) Belize Dollars Commercial banks will be advised daily of the prices at which the Central Bank will purchase these currencies from the commercial banks, and the prices at which the commercial banks will buy from their customers. The ECCB has made arrangements to provide the rates before 8:00 a.m. and these should be posted by 8:00 a.m. on a daily basis. 63

69 28 April 1993 NOTICE NO 7/1993 To All Commercial Banks ADMINISTRATIVE CIRCULAR NO. 2 OF 28 APRIL 1993: COMMERCIAL BANK FIXED DEPOSIT Effective 4 May 1993, the following policy in relation to commercial banks fixed deposits will apply. i. All foreign currency sold to the Central Bank for the purpose of establishing fixed deposits will be converted at the mid-rate existing at the time of the transaction. However, deposits will continue to be denominated in EC dollars. ii. Should there be any need to re-convert a maturing fixed deposit to foreign currency such re-conversion will be effected at the mid-rate existing at the time of reconversion. iii. Transfers from fixed deposit accounts to a commercial banks current or call account will be subject to commission at the current rate applicable to the currency initially transferred to establish the deposit. iv. Banks which currently hold call deposits may transfer such call deposit to fixed deposit. However, this right of transfer will cease after 14 May 1993 and the provisions of Item 5 will apply. v. A commercial bank may not transfer funds from its current account to its call account, neither from its call account to its fixed deposit account. However, funds may be transferred freely in the opposite direction, that is, from fixed to current or call, or from call to current account. 64

70 vi. Banks which currently hold fixed deposit may at maturity re-convert such deposits to foreign currency at the mid-rate. No further commission will be chargeable if such deposits are transferred to the call or current account. vii. Purchases of foreign currency dollars by a commercial bank from its current account will be subject to commission by applying the current selling rate as advised by ECCB daily. viii. Under the new arrangements the call account will be regarded as a current account except that it will be interest bearing. ix. Interest on call and fixed deposit accounts will continue to be credited to the current account. x. The rates offered on deposits will continue to reflect the Euro market conditions and will be adjusted daily. xi. Under the new arrangements the call account will be regarded as a current account except that it will be interest bearing. xii. Interest on call and fixed deposit accounts will continue to be credited to the current account. xiii. The rates offered on deposits will continue to reflect the Euro market conditions and will be adjusted daily. 65

71 16 February 1994 NOTICE NO 8/1994 To All Commercial Banks MINIMUM RESERVES TO BE MAINTAINED BY COMMERCIAL BANKS AMENDED EFFECTIVE 28 JUNE 1995 In exercise of the powers conferred by Article 33 of the Agreement establishing the Eastern Caribbean Central Bank (hereinafter referred to as the Central Bank), the Central Bank with the approval of the Monetary Council hereby gives notice that all commercial banks authorised to do banking business in... shall, except as otherwise advised, maintain minimum reserves at the level of six percent of their total deposit liabilities (excluding interbank deposits). The required minimum reserve shall, with effect from March 31, 1994, consist of demand deposits, with the Central Bank, and the Eastern Caribbean dollar notes and coins held by the commercial banks. Required reserves shall be computed on a weekly basis, a week being reckoned from Thursday to Wednesday. The required reserve for the current week shall be based on the average deposit liabilities at the close of business of the previous four Wednesdays. Commercial banks are required to report to the Central Bank their reserve data as at the end of business on each Wednesday. The report should reach the Central Bank not later than Friday of the same week. 66

72 Commercial banks may use their reserve account to temporarily meet clearing obligations, but on average must maintain the required reserve over the week. This means that a reserve shortfall on any day can be made up by a reserve surplus on other days during the same week. In computing the required reserve, all offices of the same bank operating in a territory shall be treated as one unit. Should a commercial bank s reserve account fall below the minimum required level for a given reporting week, this should be promptly reported to the Director, Banking and Monetary Operations Department (ECCB) in the form of a written explanation detailing the reasons for the shortfall. These reports will not be viewed as justification for a shortfall, but would allow the ECCB to determine if further appropriate action should be taken against the defaulting bank. 67

73 25 July 1996 NOTICE NO 9/1996 To All Commercial Banks PENALTY ON RESERVE REQUIREMENT SHORTFALLS EFFECTIVE 1 AUGUST 1996 In accordance with Article 33 (4) of the Eastern Caribbean Central Bank (ECCB) Agreement of 1983, any bank which fails to maintain the required reserve would be liable to a charge on the deficiency up to five percent above the highest discount rate of the Central Bank. Consequently, effective 1 August 1996, the penalty on reserve shortfalls will be prescribed as follows: Banks which report shortfalls at the end of a reporting week will be charged a penalty at a maximum of 5 per cent above the Bank s discount rate, in accordance with section 33(4) of the Central Bank s Agreement. 68

74 19 June 2000 NOTICE NO 10/2000 To All Commercial Banks INTRADAY LIQUIDITY SUPPORT TO COMMERCIAL BANKS USING THE GLOBUS REAL TIME PLATFORM The Globus Real Time Platform has introduced continuous posting to commercial banks accounts as transactions are processed by the Central Bank throughout the day. Commercial banks will be able to ascertain their updated positions on an intraday basis. This real time platform requires commercial banks to exercise even closer monitoring of their treasury operations, so that they can determine their cash position at all times. This will enable the Central Bank to more actively and effectively facilitate commercial banks by providing intraday liquidity to satisfy their obligations. The urgency of responding to a real time system has prompted the Central Bank to establish an Intraday Liquidity Desk within the Banking and Monetary Operations Department. This desk will focus on responding to the intraday liquidity requirements of commercial banks throughout the day. The Central Bank s Intraday Liquidity Desk will make available continuous intraday liquidity support using the following instruments: 1. Interbank Market Facility: Facilitate access to the interbank market. In this case, adequate collateral will be pledged by the commercial banks, as is usually the case. At the beginning of the day, after determining their cash positions, commercial banks that wish to participate in the market would indicate to the Central Bank by 11:30 am: i) The amount of cash surplus to be placed on the market; or ii) The amount of cash to be sourced from the market 69

75 2. Rediscount Secondary Market Treasury Bills: Sellback treasury bills purchased from the Central Bank in the secondary treasury bill market; 3. Intraday Collateralized Lending: Provide intraday collateralized lending as a last resort. This must be settled by the close of the business day. In the event that a message is received from a commercial bank to make a transfer or a payment and funds are not available to effect the transaction, the Central Bank will immediately contact the commercial bank to ascertain the arrangements that the bank intends to make to satisfy the obligation. The Central Bank would not effect payments/transfers on behalf of commercial banks without the available balances in the commercial banks accounts. The transaction would be placed on hold until the necessary arrangements are made to settle the obligation. The Central Bank will act on a foreign currency notice to receive (MT21O) only after confirmation is received from its correspondent bank, confirming that the finds stated in the notice were credited to the Central Bank s account. To receive good value, commercial banks must ensure that funds are delivered to the Central Bank s correspondent bank by the following stipulated times on the value date, as indicated below: Correspondent Bank Account# Cut off time Bank of England :00am Bank of Canada :00 am Federal Reserve Bank, New York :00am The aforementioned intraday liquidity arrangements established by the Central Bank do not preclude commercial banks from making their own arrangements to meet intraday liquidity needs. In the event that you need to access the Bank s intraday facility, please contact telephone No Extension 604 or

76 26 September 2001 NOTICE NO 11/2001 To All Commercial Banks DECISION TO DISCONTINUE ECCB BROKERED IBM SERVICES At the last Meeting of the Banking Committee held on 30 July 2001, it was agreed that the official Inter-Bank Market (IBM) arrangements, whereby the ECCB provides brokerage services and guarantees lending on the market, would terminate on 30 September However, we have decided to extend the date for the termination of the existing market to 15 October 2001 to allow additional time for the completion of the arrangements for the new market. In this regard, the new arrangements will take effect on 16 October The features for the new arrangements would be communicated to you shortly. We apologise for any inconvenience caused by this delay 71

77 5 October 2001 NOTICE NO 12/2001 To All Commercial Banks NEW INTERBANK MARKET ARRANGEMENTS We advised you by letter dated 26 September 2001 that the official Inter-Bank Market (IBM) arrangements, whereby the ECCB provides brokerage services and guarantees for lending on the market would terminate on 15 October 2001, and that the new arrangements which will cater for the market determination of the inter-bank funds rate, will come into effect on 16 October The old rules will, however, continue to apply to all IBM transactions conducted on or before 15 October 2001 until such time as the transactions mature. Trading Arrangements Commercial banks under the new IBM trading arrangements: 1. Can have either an informal unsecured agreement, or can choose to enter secured arrangements whether by the offer of collateral or by a repurchase agreement. 2. Under the unsecured agreement option, the parties negotiate the transaction amount and interest rate and submit details of the required funds transfer including the rate of interest and maturity to the ECCB via SWIFT form MT Under the repurchase agreement option, the respective parties will complete the attached Form of Confirmation and the buyer will submit to the ECCB via SWIFT form MT202 the details of the funds transfer, (amount, interest rate, and maturity). 4. In order to facilitate inter-island secured trading in inter-bank market funds, banks could use their correspondent banks or branches in the different islands as depositories for the transfer of securities. However, with the coming into being of the Regional 72

78 Government Securities Market, with its dematerialised environment, the Securities Registry will be used to keep track of the securities transfers. Form of Confirmation The Form of Confirmation to be used for individual repurchase transactions sets out the particulars of the transaction including, the amount, interest rate and maturity dates. The Form of Confirmation is attached. Bulletin Board Service A Bulletin Board Service (BBS) will replace ECCB s brokerage services. Banks will now negotiate directly with each other facilitated by the Bulletin Board Service. 1. Banks will dial into the ECCB server the same way they now dial in to access GLOBUS. Once connected, there will be an icon on their desktop for the IBM Bulletin Board Service. We recommend that you use the same computer to access the Bulletin Board that you use to access GLOBUS. However it would require that Microsoft Access 2000 be installed on the computer. (Detailed instructions for the operation of the BBS are attached). 2. Banks wishing to lend funds on the market will be able to post the information on the bulletin board and those wishing to borrow will be able to view this information. 3. Those banks wishing to borrow can contact the lenders and negotiate the terms. 4. Daily summary data on completed trades/transactions sent to the ECCB would be posted on the BBS at the start of the following day. The information on the average interest rate for transactions could be used to provide a benchmark rate for the day s transactions. 73

79 To: From: Date: Subject: Sale and Repurchase Agreement (Reference Number: ) Dear Sir/Madam Form of Confirmation This serves to confirm with effect on the date specified at Item 3 of the schedule as the Value Date, our agreement to sell and your agreement to buy an interest in the Security as described at Item 1 of the Schedule to the extent of and for the amount specified as the Interest Noted at Item 2 of the schedule, subject to your agreement to sell back and our agreement to buy back the said interest in the Security on the Buy Back Date specified at Item 4 of the schedule calculated at the Yield Rate specified at Item 5 of the Schedule, for the Buy Back Price specified at Item 6 of the schedule. THE SCHEDULE Item 1 THE SECURITY Security/Securities Face/total Value : (Securities listing on reverse) Item 2 Interest Noted : Item 3 Value Date : Item 4 Buy Back Date : Item 5 Yield Rate : Item 6 Buy Back Price : In confirmation of your agreement to all the above and in acknowledgement of receipt of this Letter/Agreement, kindly execute both enclosed copies hereof which serve as Duplicate Originals, retain one copy for your records and return the other to us. Authoriscd Signature Authorised Signature 74

80 05 November 2001 NOTICE 13/2001 To All Commercial Banks DISCOUNT RATE REDUCED TO SEVEN PERCENT (7%) This letter serves to confirm the decision of the Monetary Council at its 43 rd meeting held on Friday, 26 October 2001 in St Lucia to lower the discount rate by 100 basis points, from eight per cent to seven per cent effective 29 October

81 17 January 2002 NOTICE NO 14/2002 To All Commercial Banks DEPOSITORY SERVICES FOR THE INTERBANK MARKET On 16 October 2001, the new arrangements for the interbank market were introduced. This was another effort by the Central Bank to remove the rigidity of interest rates in the Currency Union and develop and deepen the financial market of the Eastern Caribbean Currency Union. Since the introduction of the new arrangements, the commercial banks have indicated that the absence of a central depository is a major impediment to participation on the market. In an effort to encourage increased participation on the market, the ECCB is pleased to announce that effective immediately, it will be providing depository services to the commercial banks. Under this arrangement the ECCB will act as a depository for commercial banks securities for the purpose of facilitating the use of these instruments as collateral for an IBM loan and/or borrowings from the Central Bank through its LOMBARD facility. To benefit from this service, commercial banks will be required to follow the following procedures: 1. A commercial bank wishing to use the depository service must deposit securities with the ECCB s Head Office or Agency Office. 2. A commercial bank wishing to borrow from another bank using securities deposited with the ECCB will be required to instruct the ECCB to assign these securities for a set period for the benefit of the lending institution. Additionally, the following information must be provided: 76

82 (a) The loan amount; (b) The maturity date of the loan; (c) The interest rate; and (d) A description of the securities that the ECCB is required to hold on behalf of the lending bank. On receipt of instructions from the borrowing bank, the ECCB will confirm with the lending bank that the securities are being held on its behalf. The lending bank should ensure that the security is in place before the funds are transferred to the borrower. 3. In instances where the loan is extended for an additional period of time, the borrowing bank will be required to inform the Central Bank that it should continue to hold the securities on behalf of the lender up to a specified time. 4. The lending bank will be required to send a SWIFT message (MT202) to the Central Bank requesting the transfer of funds to the borrowing bank. In Field 72 of the message, the lending bank will be required to include the duration of the loan and the interest rate. We trust that this new service will help to alleviate any problems presently being encountered with the use of collateral for security for loans and will lead to increased participation on the market. For further clarification on the use of this service please contact Mrs Jacqueline Lawrence, Banking and Monetary Operations Department, at fax numbers (869) or

83 06 February 2002 NOTICE NO 15/2002 To All Commercial Banks DEPOSITORY SERVICES FOR THE INTERBANK MARKET (AMENDMENT) On 16 October 2001, the new arrangements for the interbank market were introduced. This was another effort by the Central Bank to remove the rigidity of interest rates in the Currency Union and develop and deepen the financial market of the Eastern Caribbean Currency Union. Since the introduction of the new arrangements, the commercial banks have indicated that the absence of a central depository is a major impediment to participation on the market. In an effort to encourage increased participation on the market, the ECCB is pleased to announce that effective immediately, it will be providing depository services to the commercial banks. Under this arrangement the ECCB will act as a depository for commercial banks securities for the purpose of facilitating the use of these instruments as collateral for an IBM loan and/or borrowings from the Central Bank through its LOMBARD facility. To benefit from this service commercial banks will be required to adopt the following procedures: (1) A commercial bank wishing to use the depository service must deposit securities with the ECCB s Head Office or Agency Office. (2) A commercial bank wishing to borrow from another bank using securities deposited with the ECCB will be required to instruct the ECCB to assign these securities for a set period for the benefit of the lending institution. Additionally, the following information must be provided: (a) The loan amount (b) The maturity date of the loan (c) The interest rate and 78

84 (d) A description of the securities that the ECCB is required to hold on behalf of the lending bank. On receipt of instructions from the borrowing bank, the ECCB will confirm with the lending bank that the securities are being held on its behalf. The lending bank should ensure that the security is in place before the funds are transferred to the borrower. On maturity, both parties (lender and borrower) must send instructions to the ECCB requesting that the lien be cancelled. (3) In instances where the loan is extended for an additional period of time, both parties (lender and borrower) most inform the Central Bank of the terms and conditions of the new arrangement. (4) The lending bank will be required to send a SWIFT message (MT202) to the Central Bank requesting the transfer of funds to the borrowing bank. In Field 72 of the message, the lending bank will be required to include the duration of the loan and the interest rate. We trust that this new service will help to alleviate any problems presently being encountered with the use of collateral as security for loans and will lead to increased participation on the market. For further clarification on the use of this service please contact the Banking and Monetary Operations Department, at fax numbers (869) or

85 13 August 2002 NOTICE NO 16/2002 To All Commercial Banks PURCHASE OF FOREIGN CURRENCY BALANCES The Central Bank, as banker to the commercial banks operating in the Eastern Caribbean Currency Union, allows commercial banks to purchase foreign currency balances for the purpose of funding their accounts with correspondent banks abroad. In an effort to ensure that the provision of this service remains cost-effective we advise as follows: 1) Effective 19 August 2002, the minimum amounts of foreign currency balances that commercial banks can purchase from the Central Bank are as follows: United States Dollar 5,000 Pound Sterling 5,000 Canadian Dollar 5,000 Barbados Dollar 25,000 Guyana Dollar 50,000 Kindly direct any inquiries you may have to the Director, Banking and Monetary Operations Department. We look forward to your cooperation. 80

86 31 July 2002 NOTICE NO 17/2002 To All Commercial Banks MINIMUM RATE OF INTEREST ON SAVINGS DEPOSITS In exercise of the powers confirmed by Article 34 of the Agreement establishing the Eastern Caribbean Central Bank, the Bank with the approval of the Monetary Council hereby gives notice that on and after the 1st day of September, 2002 and until further notice, the minimum rate of interest payable on savings deposits by all commercial banks authorised to do banking business in the territories of the Participating Governments shall be three per cent per annum. The decision to reduce the minimum rate from four per cent to three per cent was taken with the objective of obtaining a comparable or greater reduction in lending rates, in order to stimulate credit demand and economic activity in the currency union. 81

87 19 February 2003 NOTICE NO 18/2003 To All Commercial Banks SECONDARY TREASURY BILL MARKET FACILITY In November 2002, Member Governments of the Eastern Caribbean Currency Union officially launched the Regional Governments Securities Market (RGSM) to facilitate the trading of their securities. The Government of St Kitts and Nevis made history as the first to issue and list its securities with a $75.0M bond issue, which was oversubscribed. Presently, other Governments are making preparations for the issuance and listing of securities on the market. As a result of the RGSM, there is now the prospect of a secondary market for the active trading of securities. This market will provide investors with a liquid investment alternative, and, together with the Interbank Market, provide options to commercial banks to facilitate short-term liquidity management. Since January 1988, following the decision by the Eastern Caribbean Central Bank (ECCB) to make available for discount the stock of Government Treasury Bills purchased in the primary market, commercial banks have been provided with a liquid Investment option. In light of the establishment of the RGSM, which provides opportunities for the secondary trading of bills purchased in the primary market, the discount facility currently offered to commercial banks by the ECCB will be phased out. The phasing out process will commence as Member Governments issue and list their securities on the RGSM. The dates on which this occurs will be communicated to all commercial banks on receipt of confirmation from Member Governments. 82

88 21 July 2003 NOTICE 19/2003 To All Commercial Banks DISCOUNT RATE In accordance with Article 32 of the Agreement establishing the Eastern Caribbean Central Bank, the Central Bank announces a reduction in the discount rate from 7.0 percent to 6.5 percent effective 21 July The discount rate is the rate at which the Central Bank grants secured advances to financial institutions for periods not exceeding ninety-one days. 83

89 1 October 2003 NOTICE NO 20/2003 To All Commercial Banks CHANGE IN DEADLINE FOR SUBMISSION OF WEEKLY RESERVE REPORT The ECCB s authority to prescribe the maintenance of required reserves is obtained from the ECCB agreement of 1983, which states that: the Bank may, from time to time prescribe the maintenance of required reserves, including marginal required reserves, against deposits and similar liabilities specified for this purpose. In accordance with this policy, member banks have been instructed to prepare and submit to the ECCB weekly reserve reports by Friday of the same week. Over the last three years, the process has been improved with the implementation of GLOBUS accounting system, which allows commercial banks access to balances on a daily basis. To further facilitate the process of calculating the reserve requirement and regular reporting, an automated spreadsheet solution was provided in February These changes have made it possible for the reporting process to be completed in a shorter period. It has been observed that most banks have been submitting their reports on Thursdays and thus would be in a position to facilitate this arrangement. It is therefore proposed that the deadline for submission of weekly reserve reports be changed from Fridays at 3:00pm to Thursdays at 3:00pm. 84

90 The proposed change would assist ECCB by permitting earlier follow up on reserve related matters such as ensuring that banks comply with the reserve requirement. This will assist in reducing the risk that non-compliance poses to the financial system. This change would also benefit your institution by allowing for improved management of your bank s reserves and providing earlier indication of your bank s reserve requirement for the following week. As we wish to implement this change soonest, your comments would be greatly appreciated by 15 October

91 09 June 2004 NOTICE 21/2004 To All Commercial Banks DAILY FIXED EXCHANGE RATES Commercial banks are advised that effective 01 July 2004, the Eastern Caribbean Central Bank will cease to offer fixed daily rates for commercial banks transactions denominated in Sterling (GBP) and Canadian Dollars (CAD). In light of this, the following procedural changes will apply: Publication of Rates and Redemption of currency notes 1) ECCB will provide daily rates for the redemption of foreign currency notes only. 2) These rates will only be applicable for the same day. 3) These rates will expire daily at noon. Balances 1) All purchases and sales of foreign currency balances via ECCB will be contracted at rates set at the time of trade and will be based on the prevailing market rate. 2) Commercial banks will be required to contact the ECCB s Rates Information Desk to ascertain the applicable rate for each transaction. 3) Commercial banks will be required to submit an MT300 Foreign Exchange Confirmation within one hour of establishing the rate to ensure receipt of the established rate. It should also be noted that no transaction will be effected if the confirmation is not received within the stipulated time. 4) The last trade will be established at 2:00 pm for confirmation by 3:00 pm. 5) For sales of currency balances to the ECCB, a penalty will be applied for the late delivery of funds at a rate of 2 percent plus the base rate of the currency. 86

92 6) Should ECCB default on the settlement of the trade, the commercial bank would be entitled to reimbursement of any interest (costs) incurred. Forward Contracts on Notes 1) Commercial banks will be required to contact the ECCB s Rates Information Desk to ascertain the applicable rate. 2) Commercial banks will be required to submit an MT300 Foreign Exchange Confirmation within one hour of establishing the rate to ensure receipt of the established rate. The Procedural Guidelines for Operations between Commercial Banks and the Eastern Caribbean Central Bank will be updated to reflect these changes. 87

93 20 July 2004 NOTICE NO 22/2004 To All Commercial Banks INTRODUCTION OF BANKING SCHEDULES 10 - PAYMENT SYSTEM DATA The Central Bank is currently spearheading a process of payment system modernisation across the currency union. In light of this, it has become necessary to implement Banking Schedule 10 (BS10) Monthly Statement of Payment System Activity and Capacity. This form would facilitate the systematic collection and management of payments data that is critical to both policy-making as well as the ongoing programme of reform. A copy of the form BS10, with explanatory notes and instructions for submission, is enclosed. Should you require additional information, please contact Messrs Henry Hazel Adviser, Alex Straun Banking Officer or Roger Lake - Banking Officer, Banking and Monetary Operations Department. The form BS10, complete with data for July 2004, should be submitted in electronic format to the Central Bank no later than 31 August Please be reminded that a signed hardcopy of the form must also be submitted to the ECCB Agency Office in the territories and to the ECCB Headquarters for banks in St Kitts and Nevis. 88

94 89

95 Eastern Caribbean Central Bank Monthly Statement of Payments System Activity Form BS10 - Section A Activity for Month Ending July 2004 Month Year Bank Name Country Total Cheque Transactions Cheques issued Local Currency USD Currency Cheques Requiring Settlement Abroad Local Currency USD Currency No. of Returned Cheques Card Transaction Payments by cards Debit Credit Stored-value Total Cheque and Card Transactions Paperless Transfers Customer Initiated (Wire Tranfers) Inter-bank Large value Other Transfers Direct Debits Standing Orders ( not for own account) E-money Payroll Other Total Paperless Transfers Total Activity Value ('000) Quantity $ $ $ $ $ $ $ $ $ $ Place Bank Stamp Here Signature Name in block Designation Date dd /mm /yyyy 90

96 Eastern Caribbean Central Bank Monthly Statement of Payments System Capacity Monthly Capacity as at July 2004 Month Year Form BS10 - Section B Bank Name Count ry Electronic Funds Transfer at Point-of-Sale (EFTPOS) EFTPOS: Number of Networks Debit Cards Credit Cards Number of Terminals Please Specify Network Name/Details Quantity 0 Payment Cards Cards with a Cash Function Cards with a Debit/Credit Function of which: Debit Cards Credit Cards Cards with a Cheque-Guarantee Function Retailer and Fidelity Cards Stored-value Cards Cash Dispensers and ATMs Cash Dispensers and ATMs Number of Networks National Regional International Number of Terminals Quantity of Transactions Value of Transactions Please Specify Network Name/Details Quantity Quantity 0 0 Place Bank Stamp Here Signature Name in block Designation Date dd/mm/yyyy 91

97 STANDARD METHODOLOGY AND EXPLANATORY NOTES TO BANKING SCHEDULE 10 (BS10) OVERVIEW The objective of the BS10 Schedule is to collect data relating to payment system activity and capacity within the Eastern Caribbean Currency Union (ECCU). The ECCU comprises Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St Kitts and Nevis, Saint Lucia, and St Vincent and the Grenadines. The schedule is divided into two sections. Section A is designed to capture payment system activity (and to indicate the relative importance of each payment instrument), while section B is to gather information on payments system infrastructure and its capacity. The term payment excludes any funds transferred in which the originator and the beneficiary are the same. Examples: Use of own cheque to obtain cash; Transfers between accounts in the same name at the SAME Institution (Because in practice it is usually impossible to exclude them from the data, transfers between accounts in the same name but where the accounts are held at different institutions are included unless indicated otherwise). No distinction is made between interbank items (bank A to bank B), inter-branch items (bank A branch to another bank A branch), or intra-branch items (bank A customer to another bank A customer at the same branch). All are included in the statistics. To avoid double counting payments are to be counted by the originator unless otherwise noted (i.e. the entity issuing the debit instructions). Examples: All cheques debited to a particular account. All payment instructions issued by a bank 92

98 Exceptions: Returned Items Payroll Count all items returned BY YOU. Count the individual credit items Unless otherwise noted, all figures provided are to be quoted in Eastern Caribbean Currency. Breaks in series Where there is a break in the series, please indicate by a Footnote. Definitions Foreign Currency Definitions for terms used in BS10, which are not given in this document, are based on those in the Glossary of Terms Used in (BIS) Payment and Settlement Systems (March 2003). Foreign currency transactions are not to be included in the figures unless indicated. Time Period The data is required on a monthly basis. In Section A, the data is requested for an aggregate of the activity during the reporting month. Section B requires data as at the end of the month (the specific point in time). There are two exceptions to this rule in section B namely Quantity and Value of ATM Transactions where the data requested should be an aggregate for the reporting month. n.a,., neg. and 0 Large Value Where data are not available, this is indicated by n.a.. Where data not applicable, this is indicated by.. Where data are very small (for example less than 0.01 when data is being collected in thousands), this is indicated by neg.. Where data mean absolutely zero or none, rather than being a small number rounded to zero, this is indicated by 0. For the purposes of this exercise, Large Value will refer to transactions $50,000 and over as defined by the clearinghouse rules. However, such items should only be considered where they are actually transferred bilaterally between institutions for immediate settlement. For 93

99 example, a cheque exceeding $50,000 presented immediately (over the counter/special clearings) to the drawer bank for immediate settlement would qualify as a large value. However, were the cheque to be presented through the clearinghouse process, then it would not qualify for the large value transfer category. 94

100 Electronic Funds Transfer at Point of Sale (EFTPOS). EFTPOS Number of networks Number of machines A terminal at a retail location, which is designed to capture, and in some cases transmit, debit card transactions by electronic means. An EFTPOS network is defined as a group of EFTPOS terminals managed by one or more service providers for a bank or group of banks. As a rule, each EFTPOS terminal is counted as one machine. Number of Payment Cards in Circulation A card, which has several functions, is counted in each relevant line (e.g. a local debit card which can be used to withdraw cash and to make payments is counted in each of the first two main items). Therefore, the figures should not be added. Cards with a cash function Cards with a debit/credit function Of which: Cards with a debit function Cards with a credit function Cards with a cheque guarantee function All cards enabling the holder to withdraw cash from a cash dispenser. All cards which have a debit function, credit function or both functions. Cards enabling the holder to have his purchases directly charged to funds on his account at a bank. Includes both credit cards and charge cards (charge cards are also sometimes called delayed debit cards or travel and entertainment cards). Transactions with this card are guaranteed by the issuing bank up to a specific amount. Cash Dispensers Cash dispensers and ATMs Number of Networks Cash dispensers and ATMs may be operated online (with real-time reference to an authorization database) or offline. A network of ATMs is defined as a group of ATMs managed by one or more service providers for a bank or group of banks. 95

101 Cheque Volumes/Quantities and Cheque Values Cheques Issued Required Settlement Abroad Returned Items Includes ALL paper items issued by the bank or its clients for the purpose of transferring value to another irrespective of location within the ECCU and where the account is held. Note that the USD accounts held locally are reported separately. These include cheques/drafts/payment orders drawn on an institution outside your territory of domicile and which required some form of dispatch/sending on collection for the completion of the settlement cycle. These items typically fall within two groups, XCD cheques drawn on banks in another territory within the ECCU and USD/FX cheques written locally requiring replacement drafts for settlement. (Example where an account holder issues a US dollar cheque drawn on his local US account at a bank, the receiving bank may request a draft drawn on a US bank in settlement. Cheques/drafts/payment orders refused settlement for any of a number of reasons (Count as the bank refusing settlement of the item and NOT as the bank presenting the item for settlement. Example Bank of Nova Scotia returns a cheque for insufficient funds.). Payments by debit and credit cards Other card payments Paperless credit transfers (Paper-based credit transfers) Also includes charge cards. Payments made using retailer cards or prepaid cards are shown here if the data is available. The row label or a footnote indicates the type of payments included. Credit transfers that do not involve the exchange of paper documents between banks. Other credit transfers are called paper-based. The distinction between paper-based and paperless credit transfers is based on the interbank exchange: credit transfer orders which are exchanged on a paperless basis between banks are deemed to be paperless even if the originator and/or the beneficiary submitted or received a piece of paper. Example-transfers between institutions in settlement of obligations etc. 96

102 Customer initiated transfers are to be Direct debits E-Money Stored Value Card understood as those in which the originator was not an entity which provides payment services. Pre-authorised debit on the payer s account by the payee. Value stored electronically in a device such as a chip card or a hard drive on a computer. The term encompasses electronic wallets, electronic purses and stored value cards. A prepaid card in which the record of funds can be increased as well as decreased. Also called an electronic purse. 97

103 19 August 2004 NOTICE NO 23/2004 To All Commercial banks THE REMOVAL OF FIXED DAILY EXCHANGE RATE FOR STERLING AND CANADIAN CURRENCIES Further to our circular dated 24 June 2004, please note the following: (1) Effective 01 September 2004, the ECCB will no longer provide a guaranteed exchange rate for Sterling (GBP) and Canadian Dollars (CAD). (2) Rates indicative of international market rates will be provided once daily as a basis for establishing your rates to the public. These rates will also be provided on our website and on the daily radio announcements. (3) Commercial banks are required to publish daily the rates at which they will buy and sell Sterling and Canadian currencies. (4) The ECCB will provide rates at which it will deal in foreign currencies with commercial banks. (5) The attached procedural changes will apply. 98

104 PROCEDURAL GUIDELINES TO COMMERCIAL BANKS Redemption of Currency Notes 1. ECCB will provide daily rates for the redemption of foreign currency notes. 2. These rates will only be applicable for the same day. 3. These rates will expire daily at noon. 4. The usual procedures for presentation and settlement will apply. Procedure for Selling Balances to ECCB 1. The commercial bank will telephone the ECCB s Rates Information Desk to ascertain the rate at which ECCB will buy the balances. 2. Following acceptance of the rate by the commercial bank, the Banking Officer will record and confirm the details of the trade including name of bank, rate, amount, value date and time, thereby establishing a contract. 3. The commercial bank must send a SWIFT MT300 -Foreign Exchange Confirmation to settle the trade and an MT21O - Notice to receive within one (1) hour of establishing the trade subject to ECCB s 3:00 pm deadline. The time will be determined by the reception time printed on the SWIFT message. 4. The commercial bank must contact their correspondent in order to ensure timely delivery to ECCB s correspondent (BOE or BOC). 5. On the value date the commercial bank s account will be credited with the XCD equivalent. 6. If the commercial bank fails to deliver these funds on the specified date, a penalty will be charged at a rate of 2% above the overnight lending or base rate of the relevant currency on the principal amount of the transaction. 7. If the commercial bank chooses to cancel the contract after the deal date but before the value date, the commercial bank will be penalised at the ECCB s discount rate (currently 6.5%) on the value of the transaction. 99

105 Procedure for Purchasing Balances from ECCB 1. The commercial bank will telephone the ECCB s Rates Information Desk to ascertain the rate at which ECCB will sell the balances. 2. Following acceptance of the rate by the commercial bank, the Banking Officer will record and confirm the details of the trade including name of bank, rate, amount, value date and time, thereby establishing a contract. 3. The commercial bank must send a SWIFT MT300 -Foreign Exchange Confirmation to settle the trade and an MT200/202 - Financial Institution Transfer within one (1) hour of establishing the trade subject to ECCB s 3:00pm deadline. The time will be determined by the reception time printed on the SWIFT message. 4. On value date the commercial bank s account will be debited with the XCD equivalent. Therefore the commercial bank must ensure that sufficient funds are available on its reserve account to settle the transaction on value date. 5. If the commercial bank has insufficient funds on its reserve account on value date, the commercial bank will be required to make arrangements to fund its account and the commercial bank will also be charged a penalty of 6.5% (current discount rate) of the principal amount. Procedure for Forward Contracts on Notes 1. The commercial bank will telephone the ECCB s Rates Information Desk to ascertain the rate at which ECCB will accept notes for Forward contracts. 2. Following acceptance of the rate by the commercial bank the Banking Officer will record and confirm the details of the trade including name of bank, amount, value date and time, thereby establishing a contract. 3. The commercial bank will send a SWIFT MT300-Foreign Exchange Confirmation to settle the trade within one hour of the trade subject to the 3:00pm deadline. 4. On the contract delivery date (value date) of the transaction, the currency notes should be delivered to the ECCU Resident Representative at the Agent Bank in the respective island. 5. If the commercial bank is unable to deliver the notes contracted, the Banking and Monetary Operations Department should be contacted prior to the value date, so that 100

106 arrangements can be made for that bank to repurchase these notes from the ECCB at the prevailing market rate. 101

107 1 September 2004 NOTICE NO 24/2004 To All Commercial banks REMOVAL OF RESTRICTIONS ON FOREIGN EXCHANGE TRANSACTIONS At the fifty-first meeting of the Monetary Council held in St Kitts on 23 July 2004, the Monetary Council approved 01 September 2004 as the date for the effective implementation of the decision to liberalise exchange control in all Eastern Caribbean Currency Union member territories through the removal of the limit of EC$250, (Two hundred and fifty thousand Eastern Caribbean Dollars) on the purchase of foreign exchange without the authorisation of the Ministry of Finance. The necessary legislative requirements to implement this decision are being finalised. Commercial banks will be advised when the liberalisation takes effect. 102

108 30 November 2004 NOTICE NO 25/2004 To All Commercial Banks MAGNETIC INK CHARACTER RECOGNITION (MICR) ENCODING The Eastern Caribbean Central Bank recognizes that MICR encoding is an extremely useful enabling facility in the retail payments arena. Banks normally apply this technology to increase internal operating efficiencies and positively impact bottom-line and value-added to their customers. Also, MICR encoding embodies the naming convention for the development of a proper system of bank identification numbers that are critical to the operation of an automated clearinghouse, which was agreed by the industry at the 15 th Annual Conference for Commercial Banks on 5 November Pursuant to the industry s decision of 5 th November 2004 regarding MICR-encoding standards for the Eastern Caribbean Currency Union, the Eastern Caribbean Central Bank wishes to advise all commercial banks as follows: 1. The standards for MICR encoding in the ECCU are the Canadian Payment Association (CPA) standards. A copy of this standard can be retrieved from the following source: 2. The assignment of bank numbers in keeping with the MICR document that was distributed in 1993 is reconfirmed per the attachment. 3. Banks should advise the Central Bank of any branch number assignment. All feedback and inquiries should be submitted to The Director, Banking and Monetary Operations Department for the attention of The Payment System Project Team. 103

109 EASTERN CARIBBEAN CENTRAL BANK BANK NUMBER ASSIGNMENT BANKS NUMBER National Bank of Anguilla 038 Caribbean Commercial Bank 039 Antigua Commercial Bank 069 Antigua and Barbuda Investment Bank 037 Bank of Antigua 018 National Bank of Dominica 020 National Commercial Bank, Grenada 035 Grenada Cooperative Bank 023 Bank of Montserrat 024 Bank of Nevis 031 St Kitts-Nevis-Anguilla National Bank 021 Bank of St Lucia 036 St Lucia Cooperative Bank 033 National Commercial Bank (SVG) Limited 034 Bank of Nova Scotia 002 FirstCaribbean International Bank Limited 005 RBTT Bank Limited 012 Royal Bank of Canada

110 25 January 2005 NOTICE NO 26/2005 To All Commercial Banks MEMORANDUM OF DEPOSIT INTERBANK MARKET We attach a new memorandum of deposit form to be used by banks that borrow funds on the Interbank market, and have designated the Eastern Caribbean Central Bank (ECCB) as custodian. This form supersedes the existing memorandum of deposit and is more reflective of the existing market arrangements where the ECCB is custodian only. The new deposit form does not affect exiting loans, but all new loans and loan extensions. 105

111 Memorandum of Deposit 1. For the Lender having agreed to advance to the Borrower funds in the amount of Eastern Caribbean dollars, as set out in the Letters of Confirmation, the Borrower hereby deposits with the Eastern Caribbean Central Bank, Custodian, the property as described in paragraph 2, which the Borrower hereby declares is in its beneficial ownership, for the purpose of securing payment to the Lender of all monies by way of principal and interest owing by the Borrower in respect of the advances made under the Loan Agreement. 2. Description of Property 6 Made this day of 200. Signed: Signed: Authorised Signature Name of borrower bank Authorised Signature Name of borrower bank 6 Treasury bills The bill number and issue date should be stated as well as the term (e.g. 91 days). Government Bonds The call date (if applicable) and maturity date should be specified. 106

112 18 June 2008 NOTICE 27/2008 The All Commercial Banks CODE OF CONDUCT - CLEARINGHOUSE The attached code of conduct approved at the l7 th Meeting of the Banking Committee was crafted to govern the behavior of the participants at the ECCB clearinghouse. Kindly circulate to the relevant personnel representing your institution at the daily clearings for immediate implementation. 107

113 CODE OF CONDUCT FOR CLEARINGHOUSE OPERATIONS This Code of Conduct has been designed to govern behaviour at the Eastern Caribbean Central Bank Clearinghouse in each member state of the Eastern Caribbean Currency Union. 1. Each participant must: a. be at the Clearinghouse and ready to engage in the clearings process by 9:30 am daily. b. recognise and respect the authority of the clearinghouse Supervisor at all times. c. willingly provide to the clearinghouse Supervisor all information critical to the effective conduct of the clearings. d. communicate fully and clearly with each other to avoid misunderstandings. e. govern himself/herself in a professional manner. f. direct all requests to leave the clearings room to the clearinghouse Supervisor. g. not engage in conversations which have no relevance to the clearings process. h. keep all cellular phones in his possession on vibrate or silent mode. i. refrain from the use of devices for personal entertainment, during the clearings process. 2. The clearinghouse Supervisor will report any transgressions to the Manager of the relevant financial institution within twenty-four (24) hours. 3. The financial institution is expected to take all reasonable steps, including disciplinary action, to prevent a repeat of any misconduct. 108

114 23 July 2008 NOTICE 28/2008 To All Commercial Banks HARMONISED SWIFT MESSAGE STANDARDS At the 16 th meeting of the Banking Committee held on 16 June 2008 at the Eastern Caribbean Central Bank Headquarters, the Banking Community agreed to comply with the harmonized SWIFT message standards effective 01 August In keeping with the decision outlined above, please note that effective 01 August 2008 failure to conform to the harmonised SWIFT message standards would result in the rejection of your messages. Should you have any questions, please contact Ms Sandra Storrod or Mrs Denise Williams-Frank, Banking and Monetary Operations Department, at telephone number extension 604 and 611, respectively. We look forward to your continued support as we work together to improve the payment system within the Eastern Caribbean Currency Union. 109

115 19 April 2010 NOTICE NO 29/2010 To All Commercial Banks CHANGES IN THE OPERATION OF THE ECCU CLEARING HOUSE In exercise of the role assigned to the Central Bank under Article 36 of the ECCB Agreement 1983, and in an effort to mitigate settlement risk in the ECCU Clearing House, the Central Bank hereby gives notice that: Effective 01 July 2010, the following will apply in relation to the operation of the ECCU Clearing House: 1. Advance Notification: By the end of each day, each commercial bank must communicate to the respective banks in its territory, the total value of instruments which it intends to present at the next meeting of the Clearing House. 2. Debit Cap: An individual instrument presented at any meeting of the Clearing House should not exceed $150,000. Individual instruments exceeding $150,000 should be presented over the counter to the drawee bank for settlement over the drawee s bank s current account at the Central Bank. 110

116 EASTERN CARIBBEAN CENTRAL BANK ADVISORY ON THE REMOVAL OF THE FIXED EXCHANGE RATE FOR STERLING AND CANADIAN CURRENCIES 21 January 2005 The Manager, Commercial banks Dear Sir/Madam The Removal of Fixed Daily Exchange Rate for Sterling and Canadian Currencies Further to our circular dated 24 June 2004, please note the following: 1. Effective 01 September 2004, the ECCB will no longer provide a guaranteed exchange rate for Sterling (GBP) and Canadian Dollars (CAD). 2. Rates indicative of international market rates will be provided once daily as a basis for establishing your rates to the public. These rates will also be provided on our website and on the daily radio announcements. 3. Commercial banks are required to publish daily the rates at which they will buy and sell Sterling and Canadian currencies. 4. The ECCB will provide rates at which it will deal in foreign currencies with commercial banks. 5. The attached procedural changes will apply. Please be guided accordingly. Yours faithfully,. Errol Allen Deputy Governor Eastern Caribbean Central Bank Att. 1 /cmg/amh 111

117 A P P E N D I C E S 112

118 APPENDIX A CONTACT CHART Banking and Monetary Operations Department Unit Processing Unit and Financial and Intelligence and Analysis Unit Main Responsibilities Payment transfers and receipts of EC$ transactions for Banker s reserve accounts Administration of all other commercial bank accounts (call, fixed deposit,) Administration of temporary advances Administration of Secondary Treasury Bill Market Vetting of Weekly Reserve Statements Processing of all foreign exchange transactions for commercial banks Publication of daily exchange rates Account queries Administration of forward contract service Bulletin Board Service Payments and Settlements Unit Managing incoming and outgoing communication Handling of queries pertaining to settlement, authenticity of messages and statements i

119 Currency Management Department Main Responsibilities Issue and redemption of EC currency notes and coins Redemption of non-ec currency notes Purchase of foreign currency notes Sale of commemorative coins ii

120 APPENDIX B LIST OF PUBLIC HOLIDAYS IN ST KITTS AND NEVIS Event New Year s Day Carnival Day Good Friday Easter Monday Labour Day Whit Monday August Monday Culturama Day National Heroes Day Independence Day Christmas Day Boxing Day Date 01 January To be announced (T.B.A.) T.B.A. T B.A. First Monday in May T.B.A. First Monday in August Tuesday following August Monday 16 September 19 September 25 December 26 December iii

121 APPENDIX C INTRA DAY CUT OFF TIMES The following are the cut-off times on transactions date for receipt of instructions according to value date required: A FINANCIAL TRANSFERS CURRENCY IF V = T IF V = T + 1 IF V = T + 2 XCD Transfers (note 1) 1:30 pm 3:00 pm 3:00 pm Settlement -i.e. Book transfers (note 2) 3:00 pm 3:00 pm 3:00 pm REGIONAL CURRENCIES GYD 9:00(subject to Bank 2:00 pm (subject to Bank) 3:00 pm of Guyana s approval) of Guyana s approval) BBD 9:00(subject to Central 2:00 pm 3:00 pm Bank of Barbados approval) INTERNATIONAL IF V = T IF V = T + 1 IF V = T + 2 CURRENCIES USD & CAD 9:00(subject to prior 1:30 pm 3:00 pm approval from ECCB) GBP :30 pm 3:00 pm iv

122 FORWARD CONTRACTS 3:00 pm Note 1: Note 2: requires ECCB to issue a payment instruction to another bank only a book entry required. No payment instructions required Value date (V) (date funds should move in/out of account) Transaction date (T) (date message received by ECCB) v

123 APPENDIX D MEMORANDUM OF DEPOSIT The Governor Eastern Caribbean Central Bank P O Box 89 BASSETERRE St Kitts, West Indies In consideration of your making advances to us from time to time but not exceeding the amount of outstanding at any time, we hereby deposit with you the following securities, which we declare, are in our beneficial ownership, for the purpose of securing payment to you of all monies, by way of principal and interest, owing by us in respect of the above advances and we also undertake that we will on request by you, execute and sign all transfers, powers of attorney and other documents which may be necessary effectively to transfer all or portion of the said securities to your name in satisfaction of any claim made by you against the above advances. Description of Securities Nominal Value for Signed... Date.. vi

124 APPENDIX E BULLETIN BOARD SERVICE USER MANUAL EASTERN CARIBBEAN CENTRAL BANK Prepared by the Banking and Monetary Operations Department EASTERN CARIBBEAN CENTRAL BANK October 2001 vii

125 PROCEDURES FOR IBM BULLETIN BOARD OPERATIONS To access the ECCB s Inter-Bank Market Bulletin Board Service: Dial into the ECCB s Remote Server Double click the Icon labelled Inter-Bank Marketing The welcome screen will then appear. Click on the command button to go to the login screen. At the Login screen, enter your six (6)-digit bank code (this is the first six digits of your reserve/current account number at the ECCB) along with as the password. This is the default password and can be changed at login by selecting the change password box and the Login button. NB. The password can be of alphanumeric characters. If change password is selected, the user will be taken to the change password form, which will require you to enter a new password. Click on the Update Password button to confirm your new password and exit the screen. viii

126 Once the password is changed, the following message will be displayed. Click OK to continue. The Status/verification screen (Present Status) will appear. This screen verifies the bank s log in name, previous balances and the last log on date. Click on the Continue button to go to the IBM Menu or Stop to exit the application. ix

127 Click the IBM Advertising button to advertise funds available for lending and funds required for borrowing. For security reasons you will be prompted to enter your Bank Code and password. The IBM Input form will appear. Click on the Save Record button to update your information. To return to the Main Menu click on the Close Form button. At the main menu you can either return to the login screen or you can view the available reports. Click the Funds Available Report button to view the actual bulletin board for funds available. x

128 Click the Funds Required Report button to view funds required. Click on the Aggregate Trade Summary Button to view the market activity and the weighted average interest rate. To quit the application, click the Return to Login Screen button on the IBM menu followed by the Exit button on the Login Screen. xi

129 APPENDIX F ELIGIBILITY CRITERIA FOR PARTICIPATION IN THE ECCU REPURCHASE (REPO) FACILITY 1.0 ELIGIBILITY CRITERIA The commercial banks will be assessed to determine eligibility. The banks will be reassessed every six months. To participate in the ECCU Repurchase (Repo) Facility, each counterparty must meet the following criteria: a) Must be a licensed commercial bank which is a member of the ECCB Clearing House and operating for at least one year prior to the submission of the application. b) Must be compliant with the Banking Act. c) Should have a satisfactory corporate governance framework as determined by its regulators. d) Must satisfy the Eastern Caribbean Central Bank (ECCB), that it has an effective system of internal controls to identify and manage liquidity risk. e) Must be a party to the Master Repurchase Agreement between the ECCB and the banks participating in the ECCB Clearing House Agreement. f) Must be in a position to satisfy the following transaction requirements: i) Execute the repo transactions with securities subject to the terms and conditions of the Repurchase/Reverse Repurchase Agreement. ii) Possess ECCU government securities for the amount or exceeding the amount being requested. These securities must be in dematerialised form and must be deposited at the Eastern Caribbean Central Securities Depository (ECCSD). iii) Execute a Direct Debit Mandate to facilitate automatic transfers of funds at initiation of the agreement and at the start of day on the maturity date. iv) Provide the names, job titles, addresses and contact numbers for persons authorised to contract repos on behalf of the bank, if different from the current list of authorised signatories previously submitted to the ECCB. xii

130 v) Execute the repo and/or reverse repo transaction with terms of up to seven (7) business days. vi) Submit minimum bids of $1.0m or greater and not to exceed the maximum amount of securities that the bank possesses. vii) Execute the repo and/or reverse repo transaction for same day settlement. g) Must comply with the following key financial indicators: Liquidity Cash reserves to deposits ratio 6 per cent. i. Net Liquid Assets/deposits plus short-term liabilities ratio not less than 20 per cent. In addition to the foregoing, the ECCB will not accept any applicant as a repo and/or reverse repo counterparty if the bank (or its investment officer and or adviser) is or has been within the prior year, subject to litigation, or investigation that the ECCB, in its sole discretion, determines material or otherwise relevant to the potential counterparty relationship. In making such determination, the ECCB will consider, among other things, the stage of any such matters and the applicant s history of regulatory compliance. xiii

131 APPENDIX G FORM OF CONFIRMATION MT515- CLIENT CONFIRMATION OF PURCHASE OR SALE M 20C Sender s Reference M 23G Function of the Message: O 98A Date/Time: M 22F Transaction Type: M 20C Related Reference M 36B Quantity of Financial Instrument: M 90A Deal Price: M 98A Trade Date and Time: M 98A Settlement Date and Time: M 19A Settlement Amount: M 22H Buy Rate M 97A Cash M 97A Account Number M 35B Identification of Financial Instrument Confirmed xiv

132 APPENDIX G1 FORM OF CONFIRMATION MT518- SECURITIES TRADE CONFIRMATION M 20C Sender s Reference M 23G Function of the Message: O 98A Date/Time: M 22F Transaction Type: M 20C Related Reference M 36B Quantity of Financial Instrument: M 90A Deal Price: M 98A Trade Date and Time: M 98A Settlement Date and Time: M 19A Settlement Amount: M 22H Buy Rate M 97A Account Number M 35B Identification of Financial Instrument Confirmed xv

133 APPENDIX H PRIVATE TRANSFER FORM xvi

134 xvii

135 APPENDIX I COMPUTATION OF THE RESERVE REQUIREMENT ECCB RESERVE REQUIREMENT 6 per cent Reserve Requirement instituted in Computation done on a weekly basis (Thursday to Wednesday) based on the average deposit liabilities at the close of business on the previous four weeks. STEPS IN THE COMPUTATION OF THE REQUIRED RESERVE Compute average Deposit Liabilities Deposit Liabilities total of all deposits held by a bank on behalf of all its customers (individuals, institutions). 1. Determine the deposit liability of the previous four Wednesdays (express amounts in multiple of thousands and round to the nearest thousand). 2. Calculate average deposit liability by summing the four deposit liabilities and dividing by four. Compute Average Daily Balance 1. Determine the balance of XCD vault cash at close of the business for the five days of the reporting week Thursday to Wednesday. 2. Add commercial bank reserve account balance at close of business on each of the five days of the reporting week. 3. Calculate the average daily balance by summing the vault cash balance and the reserve account balances and dividing by five (5). xviii

136 Determining the Reserve Position The average daily balance must at least be equal to 6 per cent of the average deposit liabilities. Three possible results: 1. Daily average reserve is equal to 6 per cent of the average deposit liabilities. 2. Daily average reserve is more than 6 per cent of the average deposit liabilities resulting in excess reserves. 3. Daily average reserve is less than 6 per cent of the average deposit liabilities resulting in a shortfall position. ACTION TO BE TAKEN WHEN A RESERVE SHORTFALL IS REPORTED Commercial Bank - Submit communication in writing to the ECCB detailing the reason for the position. - Take immediate corrective action. Central Bank - Investigate position and if necessary provide advice/assistance. - Impose penalty charge currently 11.5 per cent on the amount of the shortfall (subject to change upon the discretion of the ECCB). MANAGING YOUR RESERVES Constant monitoring of the reserve account at the ECCB. This would entail - conducting daily reconciliation of the balances on the books of the commercial bank with the reserve balances at the ECCB. xix

137 - Tracking account balances on SAP throughout the day. Maintain investments at the ECCB. The advantages of maintaining these accounts at the ECCB are: 1. Commercial bank would earn a competitive return on its investments; 2. Commercial bank would have a source of funds that is readily accessible to fund the reserve account. Investment Alternatives - Fixed deposits ( funded with foreign currency) - Call deposits (funded with foreign currency) - Secondary Treasury Bill Market Borrow funds from the Inter-bank/ Repo Market ECCB s Lender of Last Resort facility. xx

138 COMPLETING THE STATEMENT OF RESERVE POSITION Insert bank name (include island) Insert dates for close of business for previous four Wednesdays. Insert date for Wednesday of supporting week. Insert dates for current reporting week Insert vault cash balances (all EC$ notes and coin held by the bank) at close of business on each of the five days of the reporting week. Name of Bank:.. Report for week ending Wednesday: / /.. 1. Total Deposit liabilities (excluding inter-bank liabilities) Close of business Amount ($ 000 (Wednesday) Day/Month at close of business (One week ago)../ (A) (Two weeks ago)./. (B) (Three weeks ago) /.. (C) (Four weeks ago)../.. (D) AVERAGE OF A,B,C AND D 2. Reserve Balance at close of business each day of the current week Wednesday.. Days Days/Month (E) Vault cash Balance at Amount Central Total (EC$ only) Bank Amount Thursday.../ + = Friday / + = Monday / + = Tuesday / + = Wednesday / + = Daily average reserves Minimum reserves required (6per cent of E) Excess (+) / deficiency(-) DAILY AVERAGE RESERVE*..(F) *..(F-G) *...(F) *..(G) *For Central Bank use only Signature Date Insert date for Wednesday of reporting week. Insert balances of deposit liability at close of business on each of previous four Wednesdays. Insert sum of A, B, C, and D divided by four. Reserve balances at ECCB at close of business on each of the five days of the reporting week. Sum vault cash balances and reserve account balances for respective days. Sum daily totals and divide by five. Daily average reserve F, minus 6per cent of average deposit liabilities G. Average as in F above. 6per cent of average deposit liabilities i.e. 6per cent of E above. Date of completion. Sign and affix bank stamp. xxi

139 STATEMENT OF RESERVE POSITION (EXAMPLE) Name of Bank: Bank A. Report for week ending Wednesday: / 05. / Day Month Year 1. Total Deposit liabilities (excluding inter-bank liabilities) Close of business Amount ($ 000 (Wednesday) Day/Month at close of business (One week ago). 06./ ,123 (A) (Two weeks ago).29 / ,456 (B) (Three weeks ago).22 / ,289 (C) (Four weeks ago) 15 / ,010 (D) AVERAGE OF A,B,C AND D 333,220 (E) 2. Reserve Balance at close of business each day of the current week Wednesday 13 May Days Days/Month Vault cash Balance at Amount Central Total (EC$ only) Bank Amount Thursday..07./ =...20,490. Friday..08/ = 19,611. Monday..11/ = 22,244. Tuesday..12/ = 19,145. Wednesday..13/ = 18,554. DAILY AVERAGE RESERVE* (F) Daily average reserves Minimum reserves required (6per cent of E) Excess (+) / deficiency(-) *..20,009...(F) * 19,993...(G) *...16 (F-G) *For Central Bank use only Facsimile #: (869) / Signature Date xxii

140 BLANK FORM STATEMENT OF RESERVE POSITION Name of Bank.... Report for week ending Wednesday:./.. / Day Month Year 1. Total Deposit Liabilities (excluding inter-bank liabilities) Close of business Amount ($ 000) (Wednesday) Day/Month at close of business (One week ago).../.... (A) (Two weeks ago) /..... (B) (Three weeks ago).../...(c) (Four weeks ago)../..(d) AVERAGE OF A, B, C AND D (E) 2. Reserve Balances at close of business each day of the current week ending Wednesday Vault cash 7 Balances at Amount (EC$ only) Central Bank Total Days Day/Month $ 000 $ 000 $ Thursdays.. /..+...=... Fridays../ = Monday.. / =... Tuesday.. /..+...=... Wednesday.. / = DAILY AVERAGE RESERVE (F) Daily average reserves Minimum reserves required (6per cent of E).. (F)... (G) Excess (+) / deficiency (-)....(F-G) Signature To be submitted to the Eastern Caribbean Central Bank by 3:00 p.m. on Fridays Date 7 All EC notes and coins held by the Bank xxiii

141 APPENDIX J HARMONISED MESSAGE STANDARDS Format I Financial transfer between two Accounts held at the same Institution (No Onward Payment Instruction required) MT202 Field Tag 20 32A 52a 53a 58 Field Name Content/Options Field Usage Transaction Reference Number Value Date Currency Amount Ordering Institution Sender s Correspondent Beneficiary Institution 16x - Sixteen characters permitted of upper/lower case. 6!n Date must be expressed in the format YYMMDD with 2 numeric characters for the date, 2 numeric characters for the month and 2 numeric characters for the day. 3!a 3 uppercase characters only permitted. 15d - Amount is expressed as numeric characters. Maximum number of characters is 15 and must contain at least one digit for the integer part. This must be separated by a comma. A Party Identifier BIC: Customer s 8/11 BIC Code In the absence of the BIC option D should be utilized D-Party Identifier Name and Address: 4*35x 4 lines of 35 characters accepted. B-Party Identifier location: this option specifies the account to be debited or credited, or a branch of the Sender characters allowed. A Party Identifier BIC: Customer s 8/11 BIC Code Account number is required xxiv This field specifies the sender s unambiguous identification of the message/transaction. This field specifies the value date of the transfer. This field specifies the currency code of the transfer. This field specifies the amount of the transfer. This field specifies the ordering institution (usually used only when other than the Sender) and the account or clearing code of the ordering institution. Indicate the account at the Receiving Bank that you want the receiving bank to debit. Use Option B only. This field specifies the financial institution which has been designated by the ordering institution as the ultimate recipient of the funds being transferred. The account number is required because

142 Format I Financial transfer between two Accounts held at the same Institution (No Onward Payment Instruction required) MT202 Field Field Name Content/Options Field Usage Tag Account number must begin with a slash (/) and may be 35 characters long. an institution may have multiple accounts. 72 Sender to Receiver Information 6*35x 6 lines of 35 Characters is accepted. Example I - Financial transfer between two Accounts held at the same Institution (No Onward Payment Instructions required) MT202 This field specifies additional information for the Receiver. E.g. details of the transactions as each receiver might request. Sender: Receiver: ECCBKNSO Bank A ECCBKNSK Bank B 20: Transaction Reference Number 199/ A: Value Date, Currency Code Amt Date: 11 September 2007 Currency: XCD (EASTERN CARIBBEAN DOLLAR) Amount: #80500, 37# 52A: Ordering Institution BIC ECCBKNSB 53B: Sender s Correspondent Location / A: Beneficiary Institution BIC ECCBKNSL / Bank C BASSETERRE KN 72: Sender to Receiver Information /REC/ SPECIAL CLEARINGS xxv

143 Example II - Financial transfer between Own Accounts held at the same Institution (No Onward Payment Instructions required) MT200 Sender: Receiver: ECCBKNSO Bank A ECCBKNSK Bank B 20: Transaction Reference Number 199/ A: Value Date, Currency Code Amt Date: 11 September 2007 Currency: XCD (EASTERN CARIBBEAN DOLLAR) Amount: #80500, 37# 52A: Ordering Institution BIC ECCBKNSO 53B: Sender s Correspondent Location / A: Beneficiary Institution BIC ECCBKNSO / Bank A BASSETERRE KN 72: Sender to Receiver Information /REC/ TO COVER MISC PAYMENTS. xxvi

144 Format II - Financial transfer to an account at another bank MT202 (Onward Payment Instructions Required) Field Tag Field Name Content/Options Field Usage 20 Transaction Reference 16x - Sixteen characters This field specifies the sender s unambiguous Number permitted of upper/lower case. identification of the message/transaction. 32A 52a Value Date Currency Amount Ordering Institution 6!n Date must be expressed in the format YYMMDD with 2 numeric characters for the date, 2 numeric characters for the month and 2 numeric characters for the day. 3!a 3 uppercase characters only permitted. 15d - Amount is expressed as numeric characters. Maximum number of characters is 15 and must contain at least one digit for the integer part. This must be separated by a comma. A Party Identifier BIC: Customer s 8/11 Bic Code In the absence of the BIC option D should be utilized D-Party Identifier Name and Address:4*35x 4 lines 35 characters accepted. 53a Sender s Correspondent B-Party Identifier location: this option specifies the account to be debited or a branch of the Sender characters allowed. 57 A Party Identifier BIC: Customer s 8/11 BIC Code Account with Institution 58 Beneficiary Institution 72 Sender to Receiver Information Account number is required Account number must begin with a slash (/) and may be 35 characters long. A Party Identifier BIC: Customer s 8/11 BIC Code Account number is required Account number must begin with a slash (/) and may be 35 characters long. 6*35x 6 lines of 35 Characters is accepted. xxvii This field specifies the value date of the transfer. This field specifies the currency code of the transfer. This field specifies the amount of the transfer. This field specifies the ordering institution (usually used only when other than the Sender) and the account or clearing code of the ordering institution. Indicate the account at the Receiving Bank that you want the receiving bank to debit. Use Option B only. This field identifies the financial institution, other than the Receiving Bank, which will pay or credit the beneficiary Institution. This field should contain the details and account number of the financial institution at the Receiving Bank. This field specifies the financial institution which has been designated by the ordering institution as the ultimate recipient of the funds being transferred. The account number is used because an institution may have multiple accounts. This field specifies additional information for the Receiver.

145 Example III - Financial transfer to an account at another bank MT202 Sender: Receiver: ECCBKNSO Bank A ECCBKNSK Bank B 20: Transaction Reference Number 200/ A: Value Date, Currency Code Amt Date: 12 September 2007 Currency: XCD (EASTERN CARIBBEAN DOLLAR) Amount: # , 00# 52A: Ordering Institution BIC ECCBKNSO 53B: Sender s Correspondent Location / A: Account with Institution BIC TESTBANKSL / Bank C Castries, St. Lucia 58A: Beneficiary Institution BIC ECCBKNSO / Bank A BASSETERRE KN 72: Sender to Receiver Information /REC/ TRANSFER OF FUNDS xxviii

146 Format III Financial transfers to another Bank through an Intermediary Bank MT202 (Onward Payment Instructions required) Field Tag 20 32A 52a 53a Field Name Content/Options Field Usage Transaction Reference Number Value Date Currency Amount Ordering Institution Sender s Correspondent 56 Intermediary 16x - Sixteen characters permitted of upper/lower case. 6!n Date must be expressed in the format YYMMDD with 2 numeric characters for the date, 2 numeric characters for the month and 2 numeric characters for the day. 3!a 3 uppercase characters only permitted. 15d - Amount is expressed as numeric characters. Maximum number of characters is 15 and must contain at least one digit for the integer part. This must be separated by a comma. A Party Identifier BIC: Customer s 8/11 BIC Code - Account number is required In the absence of the BIC option D should be utilized. D-Party Identifier Name and Address:4*35x 4 lines of 35 characters accepted. B-Party Identifier location: this option specifies the account to be debited or a branch of the Sender characters allowed. A Party Identifier BIC: Customer s 8/11 BIC Code - Account number is required In the absence of the BIC option D should be utilized: xxix This field specifies the sender s unambiguous identification of the message/transaction. This field specifies the value date of the transfer. This field specifies the currency code of the transfer. This field specifies the amount of the transfer. This field specifies the ordering institution (usually used only when other than the Sender) and the account or clearing code of the ordering institution. Indicate the account at the Receiving that you wish the receiving bank to debit. Use Option B only. This field specifies the party between the Receiver and the account with institution through which the transaction must pass and should be used if there are more than two parties involved. This field should contain the details and account number of the financial institution at the Receiving Bank.

147 Format III Financial transfers to another Bank through an Intermediary Bank MT202 (Onward Payment Instructions required) Field Tag Field Name Content/Options Field Usage D-Party Identifier Name and Address:4*35x 4 lines of 35 characters accepted Account with Institution Beneficiary Institution 72 Sender to Receiver Information A Party Identifier BIC: Customer s 8/11 BIC Code Account number is required Account number must begin with a slash (/) and may be 35 characters long. A Party Identifier BIC: Customer s 8/11 BIC Code Account number is required Account number must begin with a slash (/) and may be 35 characters long. 6*35x 6 lines of 35 Characters is accepted. This field identifies the financial institution, other than the Receiving Bank, which will pay or credit the beneficiary Institution. The details of this institution including its account number at the Intermediary Bank should be specified here. This field specifies the financial institution which has been designated by the ordering institution as the ultimate recipient of the funds being transferred. The account number is used because an institution may have multiple accounts. This field specifies additional information for the Receiver. xxx

148 Example: IV Financial transfers to another Bank through an Intermediary Bank MT202 Sender: Receiver: ECCBKNSO Bank A ECCBKNSK Bank B 20: Transaction Reference Number 201/ A: Value Date, Currency Code Amt Date: 13 September 2007 Currency: XCD (EASTERN CARIBBEAN DOLLAR) Amount: #50000, 00# 52A: Ordering Institution BIC 53B: Sender s Correspondent Location / A: Intermediary Bank BIC TESTBANKSL / Bank C Castries, St. Lucia 57A: Account with Institution - BIC TESTBANK2SL / BANK D View Fort, St. Lucia 58A: Beneficiary Institution BIC ECCBKNSKO / Bank A BASSETERRE, KN 72: Sender to Receiver Information /REC/ TRANSFER OF FUNDS xxxi

149 Format IV MT103 Field Tag Field Name Content/Options Field Usage 20 Transaction Reference Number 16x - Sixteen characters permitted of upper/lower case. This field specifies the sender s unambiguous identification of the message/transaction. 23B Bank Operation Code One of five codes may be selected: /CRED/ CRTS/SPAY/SSTD/SPRI/ 8 is required for ECCB. This field identifies the type of operation. Value Date 6!n Date must be expressed in the format YYMMDD with 2 numeric characters for the date, 2 numeric characters for the month and 2 numeric characters for the day. This field specifies the value date of the transfer. 32A 52a Currency Amount Ordering Institution 3!a 3 uppercase characters only permitted. 15d - Amount is expressed as numeric characters. Maximum number of characters is 15 and must contain at least one digit for the integer part. This must be separated by a comma. A Party Identifier BIC: Customer s 8/11 BIC Code - Account number is required In the absence of the BIC option D should be utilized This field specifies the currency code of the transfer. This field specifies the amount of the transfer. This field is mutually exclusive of Field 50 and is used depending on whose behalf the instructions are being sent. This field specifies the ordering financial institution. 50 Ordering Customer 53a Sender s Correspondent D-Party Identifier Name and Address:4*35x 4 lines of 35 characters accepted. K/F This field specifies the customer ordering the transaction. B Party Identifier location: This option specifies the account to be debited or a branch of the sender - 35 characters allowed. This field specifies the ordering entity when that entity is a non-financial institution. This field can only be used when Field 52 is not being used. Indicate the account at the Receiving Bank that you want to debit. Use Option B only. 8 CRED message contains a credit transfer where there is no SWIFT Service Level involved CTRS message contains a credit transfer for test purposes SPAY message contains a credit transfer to be processed according to the SWIFTPAY Service Level SSTD message contains a credit transfer to be processed according to the Standard Service Level SPRI message contains a credit transfer to be processed according to the Priority Service Level xxxii

150 Format IV MT103 Field Tag Field Name Content/Options Field Usage Intermediary Account with Institution Beneficiary Customer 70 Remittance Information A Party Identifier BIC: Customer s 8/11 BIC Code Account number is required Account field: /34x account must begin with / and may be 35 characters long. A Party Identifier BIC: Customer s 8/11 BIC Code Account number is required Account number must begin with a slash (/) and may be 35 characters long. *35x 4 lines of 35 characters permitted Account number is required Account number must begin with a slash (/) and may be 35 characters long. 4*35x 4 lines of 35 Characters is accepted and SWIFT rules for code words and slashes apply. This field specifies the party between the Receiver and the account with institution through which the transaction must pass. This Field is conditional depending on the number of parties involved. When present will normally specify the Intermediary Bank details at the Receiving Bank. This field identifies the financial institution, other than the Receiver, which will pay or credit the beneficiary Institution. When no Intermediary bank is used, this field will contain the details and account number of the financial institution at the Receiving Bank. When an Intermediary is present, this field will contain the details and account number of the financial institution at the Intermediary Bank. This field specifies the customer and account number who is the ultimate recipient of the funds. This field specifies information from the ordering party to the beneficiary customer about the reason for the payment. This field specifies details about charges affecting the transaction. Details of 71A /SHA Charges Note on Charges: /OUR Use when all charges will be borne by the Ordering Customer. In these circumstances a request for the payment of charges (MT291) may be sent by each bank to the originator of the received message, requesting settlement for charges. /SHA /BEN Use when both the Sender and the Receiving Bank may exercise discretion to apply charges to the Financial Transfer. Use when all charges will be borne by the Beneficiary. Usually will be applied in credit less charges situations whereby a portion of the funds is deducted by each handling institution. xxxiii

151 Example I - MT103 Payment at Another Bank (Onward SWIFT Message Required) Sender: Receiver: ECCBKNSA Bank A ECCBKNSK Bank B 20: Transaction Reference Number 100/ B: Type of Operations CRED 32A: Value Date, Currency Code Amt Date: 11 September 2007 Currency: XCD (EASTERN CARIBBEAN DOLLAR) Amount: #555555, 00# 50K/F: Ordering Customer Social Security Scheme Address Country X 53B: Sender s Correspondent Location / A: Account with Institution BIC TESTBANKSL / Bank C Castries, St Lucia 59: Beneficiary Customer Name & Address / Ocean Gardens CASTRIES ST LUCIA 71: Details of Charges SHA xxxiv

152 Example V - MT103 Payment at Another Through an Intermediary Bank (Onward SWIFT Message Required) Sender: Receiver: ECCBKNSA Bank A ECCBKNSK Bank B 20: Transaction Reference Number 100/ B: Type of Operations CRED 32A: Value Date, Currency Code Amt Date: 11 September 2007 Currency: XCD (EASTERN CARIBBEAN DOLLAR) Amount: #555555, 00# 50K/F: Ordering Customer Social Security Scheme Address Country X 53B: Sender s Correspondent Location / A: Intermediary Bank BIC TESTBANKSL / Bank C Castries, St Lucia 57A: Account with Institution - BIC TESTBANK2SL / BANK D View Fort, St Lucia 59: Beneficiary Customer Name & Add / Ocean Gardens CASTRIES ST LUCIA 71: Details of Charges SHA xxxv

153 Format V MT210 Notice to Receive Field Tag Field Name Content/Options Field Usage 20 Transaction Reference Number 16x - Sixteen characters permitted of upper/lower case. This field specifies the sender s unambiguous identification of the message/transaction. 25 Account Identification 35 characters. This field identifies the account to be credited with the incoming funds Value Date Related Reference Currency code Amount Ordering Customer 6!n Date must be expressed in the format YYMMDD with 2 numeric characters for the date, 2 numeric characters for the month and 2 numeric characters for the day. 16x - Sixteen characters permitted of upper/lower case. 3!a 3 uppercase characters only permitted. 15d - Amount is expressed as numeric characters. Maximum number of characters is 15 and must contain at least one digit for the integer part. This must be separated by a comma. F This field specifies the customer ordering the transaction. This field specifies the value date of the transfer. This field contains the transaction reference number. This field specifies the currency code of the transfer. This field specifies the amount of the transfer. This field specifies the ordering institution (usually used only when other than the Sender) and the account or clearing code of the ordering institution. xxxvi

154 APPENDIX K FACSIMILE TEMPLATE Example I - Financial transfer between two Accounts held at the same Institution (No Onward Payment Instructions required) MT202 Sender: 20: Message Number 32A: Value Date, Currency Code Amt 52A: Ordering Institution BIC 53B: Sender s Correspondent Location 58A: Beneficiary Institution BIC 72: Sender to Receiver Information xxxvii

155 Example II - Financial transfer between Own Accounts held at the same Institution (No Onward Payment Instructions required) MT200 Sender: 20: Message Number 32A: Value Date, Currency Code Amt Currency: XCD (EASTERN CARIBBEAN DOLLAR) 52A: Ordering Institution BIC 53B: Sender s Correspondent Location 58A: Beneficiary Institution BIC 72: Sender to Receiver Information xxxviii

156 Example III - Financial transfer to an account at another bank MT202 Sender: 20: Message Number 32A: Value Date, Currency Code Amt Currency: XCD (EASTERN CARIBBEAN DOLLAR) 52A: Ordering Institution BIC 53B: Sender s Correspondent Location 57A: Account with Institution BIC 58A: Beneficiary Institution BIC 72: Senders to Receiver Information xxxix

157 Example: IV Financial transfers to another Bank through an Intermediary Bank MT202 Sender: Receiver: 20: Message Number 32A: Value Date, Currency Code Amt 52A: Ordering Institution BIC 53B: Sender s Correspondent Location 56A: Intermediary Bank BIC 57A: Account with Institution - BIC 58A: Beneficiary Institution BIC 72: Senders to Receiver Information xl

158 Example I - MT103 Payment at Another Bank (Onward SWIFT Message Required) Sender: 20: Message Number 23B: Type of Operations CRED 32A: Value Date, Currency Code Amt 50K/F: Ordering Customer 53B: Sender s Correspondent Location 57A: Account with Institution BIC 59: Beneficiary Customer Name & Address 71: Details of Charges SHA xli

159 Example II MT103 Payment at Another Through an Intermediary Bank (Onward SWIFT Message Required) Sender: 20: Message Number 23B: Type of Operations CRED 32A: Value Date, Currency Code Amt 50K/F: 53B: Sender s Correspondent Location 56A: Intermediary Bank BIC 57A: Account with Institution - BIC 59: Beneficiary Customer Name & Address 71: Details of Charges SHA xlii

160 APPENDIX L #R17- CHARGING FORM Name of Chargor (PLEASE PRINT) Address of Chargor: Telephone: Address: Registry Account Number: Investor ID: Security Name(s) and Type: Number of Securities Charged:.. Plus... (Please state if dividend or interest payments are to be included in the charge. method of payment will be void until the charge is released.) If so your Security Amount ($): Duration of Charge: Date of Charge:... The Chargor hereby acknowledges that the entry of the charge on the register of securities shall preclude any transfer by the Chargor of the charged security; the charge may not be removed without the Chargee s consent or pursuant to court order; and if the Chargee enforces the charge, the Chargee may be entered on the register of securities as holder of the security in place of the Chargor. Signature of Chargor: Signature of Witness: Name of Witness (PLEASE PRINT) Address of Witness:..... Revised April 2008 xliii