Central Bank of Seychelles Operational Guidelines for Policy Tools: Minimum Reserve Requirement

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Amos Long
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1 Central Bank of Seychelles Operational Guidelines for Policy Tools: June 2017

2 1.0 Introduction The (MRR) provides a simple and effective mechanism to alter the supply of total liquidity in the system. These guidelines sets out the Central Bank s (thereafter referred to as the Bank) operational guidelines with regards to the MRR, to ensure effective implementation of this policy tool. The Bank reserves the rights to amend any of the provisions in the document on the basis of its monetary policy stance and/or to reflect market conditions with participants notified of any change in advance. These guidelines supersedes and replaces all previous guidelines on the MRR published by the Bank. 2.0 Operational Guidelines 2.1 Definition of the MRR (iii) (iv) In accordance with section 31 of the Central Bank of Seychelles Act, 2004 as amended, Other Depository Corporations 1 (ODCs) are required to maintain minimum reserves by way of deposit with the Bank. This shall be maintained in Seychelles Rupees, US Dollar and Euro only. The MRR to be maintained by each ODC shall be a percentage of deposit liabilities of ODCs as determined by the Bank. The applicable rupee deposits for the MRR are: a. the demand, savings and time deposits held by both residents and nonresidents; b. excluding inter-bank deposits; c. excluding custodian accounts for payment services; and d. calculated gross without offsetting overdrafts. 1 Commercial banks and credit union. 2

3 (v) The liable foreign currency (FX) deposits for the MRR are: a. the demand, savings and time deposits held by residents only; b. excluding FX deposits held by non-residents; c. excluding inter-bank deposits; and d. calculated gross without offsetting overdrafts; (v) (vi) Deposits held by the Development Bank of Seychelles shall not be treated as part of the interbank deposits and should be included as part of deposit liabilities. The MRR by way of the ODCs FX deposit liabilities shall be maintained in: a. Euros for the Euro deposit liabilities b. US dollars for the US dollar deposit liabilities; and the equivalent in US dollars for all other FX deposits (vii) The MRR to be maintained shall be based on the daily average of the closing balance of deposit liabilities held over four (4) weeks, including non-business day 2 but excluding weekends; starting on a Wednesday and ending on a Tuesday. (viii) All branches of the ODCs in Seychelles shall be treated as one (1) unit. 2.2 Reporting ODCs reporting to the Bank: a. Reporting of deposit liabilities shall be in the format prescribed by the Bank. b. The reporting date shall be the Friday prior to the start of the next maintenance or the next business day should this day be a non-business day. c. The report which details the deposit liabilities held for the previous four (4) weeks excluding weekends only, shall be submitted to the Financial Markets Division (FMD) not later than 1000hours on the reporting date for the 2 For the purpose of this document, non-business day refers to public holidays. 3

4 calculation of the minimum reserves to be held in the following four (4) weeks, excluding weekends only 3. d. For non-business days, the closing balance of deposit liabilities held on the previous business day shall apply. The Bank reporting to ODCs: a. The Bank shall communicate to the ODCs a report of their closing balance with the Bank at the end of each day 4. b. For non-business days, the closing balance of reserves held on the previous business day shall apply. c. The Bank shall verify and confirm the MRR to be maintained over the next maintenance period through an before the start of the period. 2.3 Transfers (iii) ODCs may transfer funds in respect to MRR both in SCR and FX at any time. For all FX transfers, the ODCs shall inform FMD through an advice or instruction of transfers to be done not less than two days (t+2) before the value date. Credit of the MRR account: a. The ODC shall transfer funds into the Banks nostro account and send the advice specifying the details of the transfer transaction that has been done to credit their MRR account. b. Upon receipt of confirmation of the above transfer, the transfer shall be executed to the ODC s MRR account. c. Transfer value date shall be as per the specified value date of the incoming funds in the Banks nostro account. (iv) Debit of the MRR account: 3 Not excluding public holidays. 4 Except for the last working day at the end of the year when this is done on the next working day given that CBS closes its system on the next working day. 4

5 a. The ODC shall send an instruction to debit its MRR account specifying all the relevant details of the transfer that has to be done. b. The Bank shall execute, following receipt of the instruction to effect a debit transaction irrespective of the resulted impact on the ODC s MRR. c. Transfer value date shall be as per the specified value date on the instruction. (v) (vi) In the case the value date is a past date, the transaction reference shall specify the value date on the day the transaction is executed. The ODC shall be notified of transaction following the execution of transfer. 2.4 Monitoring The Bank shall monitor the ODCs MRR being maintained as well as the risks and compliance issues. In the event that FX transfer is not as per the specified value date, no adjustment will be done for the purpose of the MRR. 2.5 Deficiency Charge (iii) As per Section 31 (5) of the Central Bank of Seychelles Act, 2004 as amended, the Bank may impose on any bank or other financial institution which fails to maintain required reserves in the appropriate ratio, a charge of interest on the amount of deficiency of reserve at a rate determined by the Bank not exceeding twice the highest effective rate of interest charged by that bank or other financial institution as the case may be from any of its customers during the period of such failure. The charge of interest mentioned in above shall be imposed for each day 5 on which the deficiency occurs. The ODC shall have fourteen (14) business days, from receipt of notification of the deficiency charge, to appeal to any interest charges in written notification. 5 Excluding weekends only 5

6 (iv) Subject to clause (iii) above, the ODC shall be subject to five (5) business days following the outcome of appeal to settle any interest charges. 6

Central Bank of Seychelles Operational Guidelines for Policy Tools: Standing Facilities

Central Bank of Seychelles Operational Guidelines for Policy Tools: Standing Facilities Operational Guidelines for Policy Tools: July 2017 1.0 Introduction These guidelines sets out the Central Bank 1 s (thereafter referred to as the Bank) principles on the in line with the policy direction