REGULATION OF JULY 1 st, 2017 RELATING TO THE INTERBANK FOREIGN EXCHANGE MARKET AND TO HEDGING INSTRUMENTS FOR FOREIGN EXCHANGE RISK

Transcription

1 REGULATION OF JULY 1 st, 2017 RELATING TO THE INTERBANK FOREIGN EXCHANGE MARKET AND TO HEDGING INSTRUMENTS FOR FOREIGN EXCHANGE RISK The Governor of the Bank of Algeria, - Whereas Order of Safar 23 rd, 1417 corresponding to July 09 th, 1996 relating to repression for infringement of the law and regulations relating to foreign exchange inflows and outflows movements, as amended and complemented ; - Whereas Order of Joumada El Oula 19 th, 1424, corresponding to July 19 th, 2003 relating to the general rules applicable import and export transactions of goods ; - Whereas Order of Joumada Ethania 27 th, 1424 corresponding to August 26 th, 2003 relating to Money and Credit as amended and completed ; - Whereas Law of Dhou El Hidja 27 th, 1425 corresponding to February 06 th, 2005 relating to the prevention and fight against money laundering and financing of terrorism ; - Whereas the Presidential Decree of Dhu'l-Qi'dah 24 th, 1424 corresponding to January 14 th, 2004 relating to appointment of Members of the Council of Money and Credit of the Bank of Algeria ; - Whereas the Presidential Decree of Jumaada al-awal 5 th, 1427 corresponding to June 1 st, 2006 relating to appointment of a Vice-governor of the Bank of Algeria ; - Whereas the Presidential Decree of Safa 5 th, 1437 corresponding to November 17 th, 2015 relating to appointment of the Members of the Executive Board of the Bank of Algeria ; - Whereas the Presidential Decree of Chaaban 24 th, 1437 corresponding to May 31 st, 2016 relating to appointment of the Governor of the Bank of Algeria ; - Whereas the Presidential Decree of Safa 17 th, 1438 corresponding to November 17 th, 2016 relating to appointment of the Vice-Governors of the Bank of Algeria ; - Whereas Regulation of August 14 th, 1991 on foreign exchange rules and conditions ; - Whereas Regulation of Rajab 30 th, 1416 corresponding to December 23 rd, 1995 relating to foreign exchange market ; - Whereas Regulation of Muharam 1428 corresponding to February 03 rd, 2007 relating to the rules applicable to external current transactions and foreign currency accounts ; - Whereas Regulation of Muharram 3 rd, 1433 corresponding to November 28 th, 2011 relating to internal audit of banks and financial institutions ;

2 - Whereas Regulation of Muharam 14 th, 1434 corresponding to November 28 th, 2012 relating to the prevention and fight against money laundering and the financing of terrorism ; - Whereas Regulation13-01 of April 8 th, 2013 setting general rules defining bank conditions applicable to bank transactions ; - Whereas Regulation Rabie Ethani 16 th, 1435 corresponding to February 16 th, 2014 on solvency ratios applicable to banks and financial institutions ; - Further to the Resolutions of the Council of Money and Credit of July 10 th, 2017 ; Promulgates the Regulation the content of which follows : TITLE I : INTERBANK FOREIGN EXCHANGE MARKET GENERAL PROVISIONS Article 1 st : The Bank of Algeria has set up an Interbank Foreign Exchange Market. Banks and financial institutions shall inter into this Market under a decentralized system which shall have its operating rules determined by an instruction from the Bank of Algeria. Article 2 : Banks and financial institutions, authorized intermediaries are authorized to enter together and with their client, into transactions relating to the purchase and sell of foreign currencies versus the dinar. Article 3 : Authorized intermediaries are authorized to take deposits in foreign currencies from clients and grant loans in foreign currencies, in accordance with the provisions of Articles 6 and 8 below. Article 4 : Authorized intermediaries may inter together on the interbank foreign exchange market, on their own behalf or on behalf of their clients, into spot and forward transactions, and foreign currency treasury transactions as well. They may also carry out spot foreign exchange transactions with non- resident banks. Article 5 : The Bank of Algeria may enter into the interbank foreign exchange market to carry out spot foreign exchange transactions and foreign currency treasury transactions. Article 6 : The Bank of Algeria shall put at the disposal of authorized intermediaries, foreign currencies resources provided for in Article 7 hereinafter.

3 In return, authorized intermediaries shall be compelled to use such resources to ensure the liquidity of the interbank foreign exchange market and to cover external commitment made on a regular basis by themselves or by they clients, namely under the transactions specified in Article 8 below. Article 7 : Foreign currencies resources put at the disposal of authorized intermediaries are the following : - receipts collected from exports of goods and services, excluding hydrocarbons and mining products ; - amounts generated from any financial credit or loan in foreign currencies contracted by authorized intermediaries for their own needs or for their clients ; - amounts generated from purchases carried out in the interbank foreign exchange market ; - the balances of foreign currency accounts of all customers ; - any other resource that shall be specified, as required, by the Bank of Algeria. Article 8 : External commitments specified in Article 6 hereinbefore are the following : - advances on receipts generated by non-hydrocarbon and mining products export ; - advance payments relating to import contracts ; - imports of goods and services ; - external debt service ; - any other payment obligations compliant with the Legislation and Regulation in force. Article 9 : Authorized intermediaries shall be authorized to establish a foreign exchange position in accordance with the conditions set by an instruction from the Bank of Algeria. Article 10 : Authorized intermediaries shall be compelled to monitor and manage with great caution the risks involved in the holding of foreign exchange positions, in strict compliance with prudential rules. In particular, when calculating net foreign exchange positions by currency, authorized intermediaries should take into account the net delta equivalent of the foreign exchange currency option portfolio on each currency. The net delta equivalent of a portfolio of options on a given currency is equal to the sum of proceeds of deltas of the individual option and the amounts secured by such options.

4 Article 11 : The exchange rate and interest rate applicable respectively to the foreign exchange transaction and to the foreign currency treasury transaction shall be freely negotiated by the parties in the interbank foreign exchange market. Article 12 : Authorized intermediaries acting in the interbank foreign exchange market shall be required to display, on a continuous basis, the buying and selling spot exchange rates and the interest rate applicable to the currencies processed, versus dinar. Article 13 : The provisions of this Regulation shall not apply to physical foreign exchange transactions. Definitions Article 14 : The interbank foreign exchange market is a market in which the participants may carry out spot and forward foreign exchange transactions as well as foreign currency treasury transactions. Article 15 : Exchange transaction means all transactions between parties involving the purchase by one party of an agreed amount denominated in one currency versus the sale to another party of another agreed amount denominated in another currency. The two amounts are delivered on the same value date. Upon the conclusion of any foreign exchange transaction, each party shall specify (whether verbally, in writing or electronically) the currency purchased, currency sold, amount purchased, amount sold, market price, transaction date, value date, maturity date (for forward exchange transactions) and the place of delivery of the currency to be received. Article 16 : Spot exchange transaction is a transaction whereby two parties agree to exchange one currency for another at a price called "spot rate" or spot ; the delivery of these two currencies generally takes place on the second business day following the closing date of the transaction. However, the parties may agree to a delivery on the same day or the day following the date of conclusion of the transaction. Article 17 : Foreign currency treasury transaction is a transaction whereby a party "the lender" lends to another party "the borrower" an amount denominated in a given currency, for an agreed period, and at an agreed interest rate at the time of the conclusion of the transaction. On the maturity date, the borrower shall reimburse the lender for the principal amount plus interest.

5 TITLE II : CURRENCY HEDGING GENERAL PROVISIONS Article 18 : Authorized intermediaries are allowed to carry out, for their own account or for the account of their clients, currency hedging operations against Dinar. Article 19 : In the context of currency hedging, authorized intermediaries may carry out the following transactions : - Forward exchange transactions ; - Vanilla options of European type ; - SWAP contracts of foreign currencies against the Dinar ; - Spot purchases of forward deliverable foreign currencies. Article 20 : Conditions governing foreign exchange and currency transactions as well as SWAP contracts and currency options are subject to free negotiation between the parties. However, these conditions shall comply with a bilateral framework agreement based on that established by the International Swaps and Derivatives Association (ISDA Master Agreement). Article 21 : Spot purchases of forward deliverable foreign currencies, provided for in Article 15 above, shall give rise to a delivery of the dinars on value date and of the currencies at maturity of the contract. These purchases are intended exclusively for customers holding positive balance in their bank accounts in dinars. This category of transactions can be concluded with the Bank of Algeria on currencies held in its portfolio as official foreign exchange reserves. Definitions Article 22 : The forward exchange transaction is a transaction in which two parties agree to exchange one currency for another at a price called forward price or forward or outright. The delivery of the currencies being traded occurs on a future maturity date. Article 23: A currency option of European-type is a right but not an obligation to purchase or sell against dinar a specified amount denominated in a given currency at a price called "strike price" and at a maturity fixed in advance. An option entitling the holder to purchase forward foreign currencies against Dinar is called OPTION CALL. An option entitling the holder to sell forward foreign currencies against Dinar is called OPTION PUT.

6 Article 24 : In return for the right to hold the option, purchasers are required to pay the sellers a premium called the option price. Article 25 : The currency swap transaction is a combination of two opposite currency transactions, one on spot and the other forward. TITLE III : RULES OF ETHICS AND GOOD CONDUCT Article 26 : The rules of ethics and good conduct apply to all authorized intermediaries acting on the interbank foreign exchange market as well as to all their staff involved, directly or indirectly, in transactions in this market. They aim to promote the professionalism and reputation of the financial center. They are also intended to serve as an appropriate framework for the resolution of any disputes that may arise between intermediaries acting on the interbank foreign exchange market. Article 27 : Heads of authorized intermediaries and staff acting under their responsibility or on their behalf are expected to act with honesty, moral integrity and loyalty at all times. In particular, they shall observe the following rules of ethics : - refrain from participating in or contributing by any action to any transaction likely to alter or distort market mechanisms for profit purposes or interest therefrom ; - to avoid spreading or maintaining rumors on the market that could undermine the reputation of other participants in this market or distort prices or rate formation mechanisms ; - inform customers of all potential risks they may incur for proposed transactions ; - respect the principle of reciprocity in the quotation between authorized intermediaries, in compliance with rules of good management of counterparty risk ; - avoid taking advantage of a manifest error in quotation by counterparty. Article 28 : Intermediaries shall observe the following rules of good conduct : - provided that it is clearly specified that the quotation is given as an indication, quoted prices or rates shall constitute firm commitment from the participant who provided them ; - any counterparty that delays in making a decision after having been granted a quotation at its request, is exposing itself to the risk of modification or cancellation of such quotation ; - under penalty of refusal, where the proposed transaction involves amounts that are too small or too large compared to the standards set by the Bank of

7 Algeria, the counterparty requesting the quotation must indicate the amount and the type (purchaser / seller) of this transaction ; - the prices charged to customers shall in no case exceed by more than one percent (1%) the weighted average price paid by the authorized intermediary at the time of purchase of each currency for the value date concerned ; - customers should be fairly treated by authorized intermediaries when concluding interbank foreign exchange transactions ; - all transactions concluded between authorized intermediaries shall be confirmed in writing within a period not exceeding the working day following the date of the transaction. In the event of an objection to any information mentioned on the confirmation, the issuing party shall be informed of it, not later than the working day following the date of receipt of this confirmation. Article 29 : Authorized intermediaries are required to have sufficient human and material resources and to set up an information system, organization and procedures to control the risks generated by the market operations they carry out. In this context, they shall ensure a strict separation between the front office functions and the control, payment and back office functions of these operations. Article 30 : Authorized intermediaries are required to set up procedures to enable their branches to be accurately and continuously informed about overall exposure by currency and to monitor the risks involved. Article 31 : Staff of authorized intermediaries shall refrain, on pain of administrative penalties and / or legal proceedings, from concluding, for their own account, market transactions from the trading rooms of their institutions or those of other authorized intermediaries. The liability of authorized intermediaries remains fully committed to any negotiated transaction by their staff in the trading room. Article 32 : The trading rooms shall be sufficiently secure and their access regulated. These trading rooms can be equipped with recording equipment for telephone conversations. Authorized intermediaries having such equipment are required to inform their counterparties. Article 33 : The phone records referred to in Article 32 above may serve as a basis for the settlement of any dispute over a given transaction. They must be retained, as the case may be, for a minimum period of three (3) months or until settlement of the dispute relating to the transaction concerned. Access to these records shall be restricted exclusively to persons duly authorized by the top management of the authorized intermediary.

8 TITLE IV : COMMON PROVISIONS Article 34: By entering into any transaction provided for in this Regulation, each party is deemed to have declared that : - it is regularly constituted and that it carries on its activities in accordance with the laws and regulations applicable to it ; - it has all the powers and the capacity to enter into market transactions and that the conclusion of such transactions has been validly authorized by its corporate bodies ; - all obligations arising out of all the transactions concluded are enforceable against it ; - no event of default or threat of default shall affect its ability to enter into market transactions and to execute payments thereunder ; - there are no legal actions, outstanding claims or, to the best of its knowledge, threats of legal action that could result in a significant deterioration in its solvency or which could affect the proper execution of its market transactions. Article 35 : All transactions provided for in this Regulation are negotiated over-thecounter, between authorized intermediaries and between them and their customers, in strict compliance with universal rules. Article 36 : The authorized intermediaries undertake, in the event of a dispute arising out of a transaction concluded between them, to take all the necessary actions to settle it amicably. In the event that conciliation proves impossible, the parties may resort to arbitration by the Bank of Algeria, subject to the waiving of all other remedies. Article 37 : All foreign exchange and currency hedging transactions between authorized intermediaries and their customers shall be supported by payments between residents and non-residents in accordance with the laws and regulations governing foreign trade and exchange. Article 38 : The procedures for implementing the provisions of this Regulation shall be specified by instructions. Article 39 : Any prior provisions contrary to the provisions of this Regulation shall be repealed. Article 40 : This Regulation shall be published in the Journal Officiel of the Democratic and Popular Republic of Algeria. The Governor Mohamed Loukal

9 REGULATION OF SEPTEMBER 25 th, 2017 AMENDING AND SUPPLEMENTING REGULATION OF FEBRUARY 3 rd, 2007 RELATING TO THE RULES APPLICABLE TO EXTERNAL CURRENT TRANSACTIONS AND FOREIGN CURRENCY ACCOUNTS The Governor of the Bank of Algeria, - Whereas Order of September 26 th, 1975 relating to the Commercial Code, as amended and complemented ; - Whereas Law of July 21 st, 1979, relating to Customs Code, as amended and supplemented ; - Whereas Order of Chaabane 1416 corresponding to January 10 th, 1996 relating to leasing ; - Whereas Order of Safar 23 rd, 1417 corresponding to July 09 th, 1996 relating to repression for infringement of law and regulations relating to foreign exchange and movement of money from abroad and towards foreign countries, as amended and complemented ; - Whereas Order of Jumada El Oula 19 th, 1424, corresponding to July 19 th, 2003 relating to the general rules applicable import and export transactions OF goods ; - Whereas Order of Jumada Al thania 27 th, 1424 corresponding to August 26 th, 2003 relating to Money and Credit as amended and completed ; - Whereas Law of Dhu El Hidja 27 th, 1425 corresponding to February 06 th, 2005 relating to the prevention and fight against money laundering and financing of terrorism ; - Whereas Order of Jumada Al thania18 th, 1426 corresponding to July 25th, 2005 relating to the 2005 complementary budget law ; - Whereas Law OF Rabia Al Awel 10 th, 1426 corresponding to April 28 th, 2005 relating to hydrocarbons as amended and complemented ; - Whereas Law of Chawal 29 th, 1437 correspending to August 3 rd, 2016 relating to the promotion of investments; - Whereas the Presidential Decree of Dhu'l-Qi'dah 24 th, 1424 corresponding to January 14 th, 2004 relating to the appointment of Members of the Council of Money and Credit of the Bank of Algeria ; - Whereas the Presidential Decree of Jumaada al-awal 5 th, 1427 corresponding to June 1 st, 2006 relating to the appointment of a Vicegovernor of the Bank of Algeria ; - Whereas the Presidential Decree of Safa 5 th, 1437 corresponding to November 17 th, 2015 relating to the appointment of Members of the Executive Board of the Bank of Algeria ;

10 - Whereas the Presidential Decree of Chaabane 24 th, 1437 corresponding to May 31 st, 2016 relating to the appointment of Governor of the Bank of Algeria ; - Whereas the Presidential Decree of Safa 17 th, 1438 corresponding to November 17 th, 2016 relating to the appointment of Vice-Governors of the Bank of Algeria ; - Whereas Regulation of Muharam 1428 corresponding to February 03 rd, 2007 relating to the rules applicable to external current transactions and foreign currency accounts ; - Whereas Regulation of Muharam 14 th, 1434 corresponding to November 28 th, 2012 relating to the prevention and fight against money laundering and the financing of terrorism ; - Further to the Resolutions of the Council of Money and Credit of 25 September 2017 ; Promulgates the Regulation the content of which follows: Article 1 st : This Regulation is to amend and supplement Regulation of 15 Muharam 1428 corresponding to 03 February 2007 relating to the rules applicable to external current transactions and foreign currency accounts. Article 2 : Article 29 of Regulation of to 03 February 2007, hereinbefore, shall be amended and completed as follows : Article 29: except for transactions relating to transit operations and other transactions mentioned in Article 33 below, any transaction relating to import or export of goods and services shall be subject to the obligation of domiciliation with an authorized intermediary. Domiciliation shall be prior to any fund transfer or repatriation, commitment and/or customs clearance. The Bank of Algeria may enact any condition deemed relevant. Article 3 : This Regulation shall be published in the Journal Officiel of the Peoples Democratic Republic of Algeria. The Governor Mohammed Loukal

11 REGULATION OF DECEMBER 6 th, 2017 AMENDING AND SUPPLEMENTING REGULATION OF MAY 26TH, RELATING TO OPERATIONS, INSTRUMENTS, AND PROCEDURES WITH RESPECT TO MONETARY POLICY The Governor of the Bank of Algeria, - Whereas Order of September 26 th, 1975 relating to the Commercial Code, as amended and complemented ; - Whereas Order of Joumada Ethania 27th, 1424 corresponding to August - 26th, 2003 relating to Money and Credit, namely its articles 41 through 45 and - 62, paragraphs b and c ; - Whereas the Presidential Decree of Chaaban 24 th, 1437 corresponding to May 31 st, 2016 relating to appointment of Governor of the Bank of Algeria ; - Whereas the Presidential Decree of Jumaada al-awal 5 th, 1427 corresponding to June 1 st, 2006 relating to the appointment of a Vicegovernor of the Bank of Algeria ; - Whereas the Presidential Decree of Safa 17 th, 1438 corresponding to November 17 th, 2016 relating to the appointment of Vice-Governors of the Bank of Algeria ; - Whereas the Presidential Decree of Dhu'l-Qi'dah 24 th, 1424 corresponding to 14 January 2004 relating to the appointment of Members of the Money and Credit Council of the Bank of Algeria ; - Whereas the Presidential Decree of Safa 5 th, 1437 corresponding to November 17 th, 2015 relating to the appointment of Members of the Executive Board of the Bank of Algeria ; - Whereas Regulation of Ramadhan 10th, 1426 corresponding to October - 13th, 2005 relating to the Real Time Gross Settlement System of large value and urgent payments ; - Whereas Regulation of Dhu'l-Qi'dah 26th, 1426, corresponding to - December 28th, 2005 relating to the security of payment systems ; - Whereas Regulation of May 26th, relating to operations, instruments and procedures with respect to monetary policy ; - Whereas Regulation of Rabia Al Thania corresponding to February 19th, 2015 relating to operations of discount of government securities, rediscount of private bills, advances and credits to banks and financial institutions ; - Further to the Resolutions of the Council of Money and Credit of 6 December 2017 ; Promulgates the Regulation the content of which follows :

12 Article 1 st : This Regulation is to amend and supplement Regulation of Awal of Joumada Ethania 1430 corresponding to May 26 th, 2009 relating to operations, instruments and procedures with respect to monetary policy. Article 2 : Article 6 of Regulation of May 26 th, 2009, mentioned hereinbefore, shall be amended and supplemented as follows: Article 6: Government paper issued or guaranteed by the State, tradable on any market, and eligible for the monetary policy operations shall be : - Short-term Treasury bills, - Assimilated Treasury bills, - Treasury assimilated obligations, - Government papers guaranteed by the State, - Dematerialized securities, representative of national loans, issued or guaranteed by the State, - Treasury securities representative of repurchase of banks' claims on customers. The outstanding amount of Government paper shall be set according to monetary policy objectives. Article 3 : Article 7 of Regulation 09-02, mentioned hereinbefore shall be amended and supplemented as follows: Article 7 : Marketable private commercial papers denominated in Dinar shall be short-term papers tradable on the market and obligations which have an unconditional fixed principal amount and a fixed rate coupon. They must have a high quality credit rate (company s creditworthiness, guarantees submitted payable at first demand, etc..). Non marketable private papers, admissible for temporary purchase and sale in monetary policy operations with a maturity date exceeding that of the temporary purchase and sale are as follows : - Papers representing commercial transactions with Algeria or abroad, bearing the signature of at least three solvent natural or legal entities including the assignor s signature. One of the signatures may be replaced by collaterals such as warrants, goods receipts or original bills of lading of goods exported from Algeria with the usual relevant documents. - Financing papers representing current account credit line or seasonal credits bearing the signature of at least two solvent natural or legal entities.

13 - Medium and long-term credit financing papers ( including syndicated loans), granted to non-financial companies favorably rated by the Bank of Algeria and bearing the signature of at least three solvent natural or legal entities one of which may be replaced by the State guarantee. Medium term credits concerning the financing of investment for the development of means of production (creation, extension or renewal of equipment), the export of goods (pre-financing of export orders), the construction of housing under real estate development projects and leasing operations of capital goods with call options. Long-term credits for the financing of investments related to construction and equipment of production units of goods and services. Article 4 : This Regulation shall be published in the Journal Officiel of the Peoples Democratic Republic of Algeria. The Governor Mohammed Loukal