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17.07.2017

Regulation on open market operations of the National Bank of Moldova, approved by the DCA of the NBM no.188 of September 25, 2014

Published in the Official Monitor of the Republic of Moldova, 2014, no.293-296, Art. 1386

Registered
at the Ministry of Justice
of the Republic of Moldova
No. 1133 of 05 October 2016

COUNCIL OF ADMINISTRATION
OF THE NATIONAL BANK OF MOLDOVA

 

DECISION no.188
of “25” September 2014

on the approval of the Regulation on open market operations
of the National Bank of Moldova

Pursuant to Article 5 paragraph (1) letter a) and letter e), Article 11 paragraph (1), Article 15, Article 18 paragraphs (1), (2), (4) and (5), Article 26 letter a) and letter c), Article 42 and Article 45 of the Law no.548-XIII of 21 July 1995 on the National Bank of Moldova (Official Monitor of the Republic of Moldova, 1995, no.56-57, Article 624), with further amendments and completions, the Council of Administration of the National Bank of Moldova

DECIDED:

1. To approve the Regulation on open market operations of the National Bank of Moldova, according to Annex no.1.

2. To repeal some normative acts of the National Bank of Moldova, according to Annex no.2.

3. This Decision shall enter into force on 31 October 2014.

 

Chairman
of the Council of Administration

Dorin DRĂGUŢANU

Annex no.1
to the Decision of the Council of Administration
of the National Bank of Moldova
no.188 of 25 September 2014

REGULATION
on open market operations of the National Bank of Moldova

Amended by:

DEB of the NBM no.165 of 28.06.2017, Official Monitor of the Republic of Moldova no.244-251 of 14.07.2017, Art.1284
DEB of the NBMno.249 of 22.09.2016, Official Monitor of the Republic of Moldova no.355-359 of 14.10.2016, Art.1714

Chapter I
General provisions

1. This Regulation establishes the general principles, instruments, conditions, criteria and procedures for conducting open market operations of the National Bank of Moldova, duties and responsibilities of participants in these operations, eligible assets for trading and for collateralisation of liquidity provision operations, operations settlement procedures and sanctions to be applied in case of participants' failure to honour their obligations.

2. Open market operations of the National Bank shall be carried out at its initiative with the eligible participants in order to manage the liquidity in the market, steer the interest rates and to signal the stance of monetary policy. National Bank shall establish the instrument to be used, terms and conditions to carry out such operations.

3. For the purpose of this Regulation, the following terms shall be used:
a) granting of collateralised loans - liquidity-providing operation whereby the National Bank grants loans to eligible participants that maintain the ownership of the eligible assets pledged as collateral;
b) eligible assets for trading and collateralisation - state securities (hereinafter SS), Certificates of the National Bank of Moldova, and other eligible financial assets established by the National Bank;
c) equivalent assets (SS) - SS equivalent to those sold/purchased within a repo/reverse repo operation. Equivalent SS are assets of the same issuer, forming part of the same issue and being of identical type, nominal value, description and amount;
d) margin call - procedure applied in liquidity-providing operations by which National Bank calls for eligible participants to supply additional assets where the value of the underlying assets, measured on a regular basis, falls below a certain level. In order to reduce the frequency of margin calls, National Bank applies a trigger point;
e) collection of term deposits - liquidity-absorbing operation with a pre-specified maturity whereby the National Bank attracts deposits from eligible participants;
e1) enforcement event of financial collateral –  an event of default mentioned in item 118 sub-item 1)-4), 6) and 8)-11), upon the occurrence of which the National Bank has the right either to enforce a collateral in accordance with item 122, sub-item 7), either to enforce the assets for collateralisation in accordance with item 123 or to benefit from the close-out netting provision in accordance with item 127;
(Letter e1) introduced by the DEB of the NBM no.165 of 28.06.2017, in force on 14.07.2017.)
f) certificates of the National Bank of Moldova (hereinafter NBM Certificates) - debt securities issued by the National Bank as open market instruments. NBM Certificates are issued on a discount basis and are redeemed upon maturity at nominal value, with the circulation term of up to one year;
g) settlement date - date on which the open market operations are settled. The settlement date may be only a working day;
h) maturity date - date of actual redemption of state securities, NBM Certificates by the issuer; expiry date of an open market operation of the National Bank;
i) issuance of NBM Certificates - liquidity-absorbing operation whereby the National Bank sells NBM Certificates to banks and to Deposit Guarantee Fund in the Banking System through banks;
j) tender - a procedure by which the National Bank provides liquidity to the market or withdraws liquidity from the market on the basis of bids submitted by participants in competition;
k) quick tender - tender procedure used by the National Bank for fine-tuning operations when it is deemed desirable to have a rapid impact on the liquidity situation in the market. Quick tenders are normally executed within 90 minutes of the announcement of the tender;
l) standard tender - a tender procedure used by the National Bank in its regular open market operations. National Bank shall announce participants about standard tender conditions on the working day preceding the day of the tender. All eligible participants are entitled to submit their bids in the standard tender;
m) valuation haircut - a risk control measure applied to underlying assets used in repo transactions and when granting collateralised loans, implying that the National Bank calculates the value of underlying assets as the market value of the assets reduced by a certain percentage (haircut);
n) multiple price/rate auction procedure - an auction at which winning bids are satisfied at the level of the price/rate offered by the participants;
o) trigger point - a pre-specified level of the value of the liquidity provided at which a margin call is executed;
p) bilateral procedure - a procedure whereby the National Bank deals directly with only one or a few participants, without making use of tender procedures;
q) repo (reverse purchases) - liquidity-providing operations whereby the National Bank purchases eligible assets from eligible participants upon their commitment to repurchase the respective assets or other equivalent assets at the date and the price agreed on the date the transaction was concluded;
r) repo (reverse sales) - liquidity-absorbing operations whereby the National Bank sells eligible assets to eligible participants, thereby committing itself to repurchase the respective assets or other equivalent assets at the date and the price agreed on the date the transaction was concluded;
s) outright transaction - a liquidity-absorbing/providing transaction whereby the National Bank sells/buys SS outright from/to the own portfolio whose ownership is transferred from seller to buyer.

4. This Regulation shall also apply the terms defined in:
1) the Regulation on the placement and redemption of state securities in book-entry form, approved by the Decision of the Council of Administration of the National Bank of Moldova no.96 of 17 May 2013 and by the Ministry of Finance of the Republic of Moldova no.13/2-1/133 of 17 May 2013 (Official Monitor of the Republic of Moldova, 2013, no.125-129, Article 887);
2) the Regulation on Book Entry System of Securities, approved by the Decision of the Council of Administration of the National Bank of Moldova no.250 of 25 October 2012 (Official Monitor of the Republic of Moldova, 2012, no.252-253, Art.1547), including further amendments and completions.
3) the Law no.184 of 22 July 2016 on financial collateral arrangements (Official Monitor of the Republic of Moldova, 2016, no. 293-305, Art. 622).
(Item 4 completed by the DEB of the NBM no. 165 of 28.06.2017, in force on 14.07.2017)

 

Chapter II
Eligible participants

5. Eligible participants with which the National Bank carries out open market operations are the banks licensed by the National Bank.
Deposit Guarantee Fund in the Banking System (hereinafter Deposit Guarantee Fund) shall be entitled to participate only in NBM Certificates issuance through banks.

6. In order to participate in the open market operations, the eligible participants shall possess the quality of participant in the Automated Interbank Payment System (AIPS), and to participate in open market operations, involving transactions with SS and/or NBM Certificates, the eligible participants and Deposit Guarantee Fund shall also possess the quality of participant in the Book Entry System of Securities (BES).
Eligible participants shall have qualified staff and adequate technical facilities (Bloomberg Professional Service, specific communications equipment - telephone, fax, etc.).
(Item 6 amended by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

7. To participate in open market operations of the NBM, each eligible participant shall enter into an agreement with the National Bank with regard to the participation in open market operations of the National Bank of Moldova (Annex no.1).

 

Chapter III
Open market operations and relating procedures

Section 1.
General provisions

8. Depending on the objectives, regularity and procedures, open market operations of the National Bank of Moldova are divided into the following categories:
1) main operations - regular refinancing operations or, where appropriate, liquidity-absorbing operations, which play a pivotal role in achieving open market operations objectives of the National Bank, conducted weekly, based on standard tenders and with a maturity usually of one or two weeks. All eligible participants may submit bids to tender for the main operations. In order to send monetary policy signals to the market, National Bank apply the base rate to these operations;
2) fine-tuning operations - executed on an ad-hoc basis with the aim of managing the liquidity situation in the market and steering interest rates, in particular in order to smooth the effects on interest rates caused by unexpected liquidity fluctuations in the market. Fine-tuning operations may be conducted on the last days of a required reserve maintenance period to counter liquidity imbalances, accumulated since the liquidity-provision/absorption of the last main operation.
Fine-tuning operations may take the form of liquidity-providing or liquidity-absorbing operations, their frequency and maturity is not standardized. Fine-tuning operations are normally executed through quick tenders or bilateral procedures;
3) structural operations - operations conducted with all eligible participants through standard tenders and bilateral procedures, when it is necessary to adjust the structural position of the National Bank vis-à-vis the financial sector (regularly or occasionally). The frequency of these operations may be regular or irregular, and their maturity standardized or non-standardized.
In structural operations, the National Bank may carry out longer-term refinancing operations. Generally, the National Bank does not use these operations to transmit signals to market and therefore accepts the rates proposed.
Longer-term refinancing operations are usually executed in the form of variable rate tender. Periodically, the National Bank may indicate the refinancing volume to be allotted in the forthcoming tenders. In exceptional circumstances, the National Bank may also execute longer-term refinancing operations through fixed rate tenders.

9. National Bank carries out operations on open market using the following instruments:
1) repo/reverse repo operations with eligible assets;
2) outright transactions (outright sales and purchases of SS);
3) granting of loans collateralised with eligible assets;
4) issuance of NBM Certificates;
5) collection of term deposit;
6) foreign exchange swap transactions.

91. In order to participate in the liquidity-providing operations of the National Bank (repo transactions and granting of loans collateralised with eligible assets), the eligible participants create financial collateral by remittance, transfer, possession, registration or by any other modality by which the National Bank, as the collateral taker, obtains possession or control over the collateral in the manner established by the normative acts of the National Bank.
The financial collateral shall be considered to be available for the National Bank even if the participant has the right to replace the financial collateral, the right to withdraw in his favour the exceeding financial collaterals, until otherwise provisioned by the National Bank.
For the purpose of identifying the object of the financial collateral, it is sufficient to prove that securities in the book-entry form, which constitutes the object of the financial collateral, are recorded in the SIC and that the financial resources constituting the object of the collateral – in the accounts of the banks opened at the National Bank or at other financial institutions accepted by the National Bank.
(Item 91 introduced by the DEB of the NBM no.165 of 28.06.2017, in force on 14.07.2017)

10. Assets eligible as collateral are SS, NBM Certificates, and other categories of eligible financial assets, established by the National Bank.

11. Assets eligible as collateral shall meet the following conditions, cumulatively, as appropriate:
1) be the property of the eligible participant;
2) shall not be pledged or seized;
3) have a later maturity than the maturity of the operation performed, except assets accepted as collateral for loans through bilateral procedures;
4) shall not be issued by the eligible participant.

12. State securities (SS) are eligible assets in repo / reverse repo and outright transactions.

 

Section 2.
Repo / reverse repo transactions with eligible assets

13. Repo / reverse repo operations may be used in the main operations, fine-tuning operations and structural operations.

14. In case of repo transactions, the SS publicly issued and registered in the account no.I of participants in BES at the National Bank are deemed eligible.

15. National Bank may be both the original buyer (repo) and the original seller of SS (reverse repo).

16. During the repo / reverse repo transaction with eligible assets, the ownership of the assets is transferred to the creditor.

17. At the maturity date of a repo / reverse repo transaction, the original buyer is obliged to sell the same SS or equivalent SS, and the original seller is obliged to repurchase them. The maturity date of a repo / reverse repo transaction may be changed with the agreement of both parties.

18. When performing a repo transaction, the term from its maturity date until the maturity date of the SS delivered in the transaction shall not be less than three working days.

19. Only government bonds that have the interest (coupon) payment date later than the maturity date of the repo transaction are accepted.

20. The repurchase price of eligible assets subject to trading, which are the object of repo / reverse repo transactions, consists of selling price and interest due at maturity relating to the amount of assets sold. The interest rate applied is the nominal interest rate based on the day-count convention “actual/365”.

21. When performing a repo / reverse repo transaction, the National Bank shall set the buying/ selling price of SS.
When setting the buying/selling price, the National Bank shall determine the market price of SS, which is decreased upon repo transactions with a valuation haircut set by the National Bank. In the absence of a market price for government bonds, the National Bank may use the present value of their future cash flows.
(Item 21 amended by the DEB of the NBM no.165 of 28.06.2017, in force on 14.07.2017)

22. In order to maintain the initial percentage of the transaction guarantee, established by the National Bank, if the market price of SS purchased by the National Bank as the original buyer under repo transactions falls essentially, the National Bank has the right to require additional collateral in the form of SS or additional funds (margin call).
If the adjusted value of SS, following their revaluation, exceeds a certain level, the amount of liquidity provided plus accrued interest up to the date of the revaluation, the National Bank may return to the eligible participant the excess of collateral additionally provided at request.

 

Section 3.
Outright transactions

23. Outright transactions refer to operations whereby the National Bank buys or sells SS outright in the market. Such operations are executed only for structural purposes.

24. An outright transaction implies a full transfer of ownership from the seller to the buyer with no connected reverse transfer of ownership. The transactions are executed in accordance with the market conventions for the instrument used in the transaction.

25. The operational features of the transactions are as follows:
1) they can take the form of liquidity-providing (outright purchase) or liquidity-absorbing (outright sale) operations;
2) their frequency is not standardised;
3) they are executed through bilateral procedures and tenders.

26. Only SS available for sale, publicly issued and registered in account no.I of the participant in BES at the National Bank are used.

 

Section 4.
Granting of loans collateralised with eligible assets

27. National Bank may grant collateralised loans within main operations, structural operations and fine-tuning operation.

28. National Bank grants loans to banks in national currency under the terms regularly established by itself and collateralised with the eligible assets specified in Article 18 paragraph (1) of the Law no. 548-XIII of 21 July 1995 on the National Bank of Moldova (republished in the Official Monitor of the Republic of Moldova, 2015, no.297-300, Article 544), with further amendments and completions.
(Item 28 amended by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

29. National Bank shall proceed to granting the loan after the collateral is provided by the participant.

30. The value of eligible assets provided as collateral shall fully cover the loan granted, interest and other related payments.

31. National Bank determines the value of assets accepted as collateral both at the time the loans are granted and during their use in accordance with the Norms on the way of determining the value of assets accepted by the National Bank as guarantees while extending credits to banks, approved by the Decision of the Council of Administration of the National Bank of Moldova no.263 of 3 December 2009, in force as of 11 December 2009. The excerpt from the Norms on the way of determining the value of assets accepted by the National Bank as guarantees while extending credits to banks is published on the official website of the National Bank.

32. In case of loans collateralised with SS, the provisions of item 22 of this Regulation shall apply accordingly.

(Item 33 repealed by the DEB of the NBM no.165 of 28.06.2017, in force on 14.07.2017)

34. The interest rate applied to collateralised loans shall be the nominal interest rate based on the day-count convention "actual/365".

 

Section 5.
Issuance of NBM Certificates

35. NBM Certificates constitute debt securities, which represent obligation of the National Bank vis-à-vis the holder of the certificate and may be issued within the main operations, fine-tuning operations and structural operations to absorb liquidity.

36. National Bank issues certificates for a period of up to one year in national currency and in dematerialised form through standard and quick tenders.

37. Registration and confirmation of ownership over NBM Certificates shall be made by entering the appropriate records in BES accounts at the National Bank.

38. The nominal value of a certificate is MDL 1000. The difference between the sale price and the nominal value is the interest paid to the holder upon maturity. The interest rate applied shall be the nominal interest rate, based on the day-count convention “actual/365”.

39. National Bank assigns each issuance of certificates a state registration number (ISIN unique identification code), determined according to the Method of calculating the state registration number (ISIN code), (Annex no.2). The detailed conditions for each NBM Certificates issuance are set out in the Global Certificate of issuance of certificates of the National Bank of Moldova.

40. NBM Certificates are traded on the secondary market, which includes all selling operations, buying operations and other operations with NBM Certificates outstanding and unencumbered.

41. Secondary market operations with NBM Certificates shall be made by eligible participants and Deposit Guarantee Fund during the period of circulation, from the date of issuance of certificates and up to the trading deadline - two working days prior to maturity.

42. Deposit Guarantee Fund shall conclude with the National Bank an agreement to participate in operations of NBM Certificates issuance (Annex no.3).

43. Banks' activity in providing intermediary services for the Deposit Guarantee Fund participation in tenders for issuing NBM Certificates, includes the followings:
1) concluding a contract of providing services related to transactions with NBM Certificates;
2) receiving, verifying and transmitting he purchase orders of NBM Certificates through the unique trading platform within a tender bid;
3) notification of the execution or non-execution of purchase orders of the NBM Certificates.

44. National Bank shall be informed by the Deposit Guarantee Fund on the name of the bank with which it has concluded the services provision agreement in the process of issuing NBM Certificates.

45. The bank shall not request from the Deposit Guarantee Fund to reserve funds in order to execute the purchase orders of NBM Certificates. The Deposit Guarantee Fund shall ensure the availability of necessary funds in its current account with the National Bank, according to the agreement to participate in issuance operations of NBM Certificates.

46. NBM Certificates sale and redemption payments shall be made strictly between the National Bank and the Deposit Guarantee Fund in accordance with the agreement referred to in item 42 of this Regulation.

 

Section 6.
Collection of term deposit

47. Term deposits shall be collected in national currency only for fine-tuning purposes in order to absorb liquidity from the market.

48. Deposits attracted from eligible participants are on term (maximum maturity up to one year) and have a fixed rate of interest.

49. If the National Bank attracts deposits from eligible participants, the interest rate applied to the deposit shall be the nominal interest rate, based on the day-count convention “actual/365”. The interest shall be calculated from the date of registration of the amount in the deposit account of the eligible participant at the National Bank until its repayment date. The day on which the National Bank reimburses the deposit amount to the eligible participant shall be excluded from the calculation of the interest. The interest on deposits with the National Bank shall be paid simultaneously with the reimbursement of the deposit amount to the eligible participant.

50. Term deposits are collected through bilateral procedures or quick tenders.

51. The frequency with which deposits are collected is irregular and their maturity is non-standardised.

52. Funds of eligible participants placed in deposit accounts at the National Bank are not required reserves.

53. Assignment of any rights relating to the deposits of eligible participants placed with the National Bank to a third party is not allowed, and the term of deposits with the National Bank may not be extended.

 

Section 7.
Foreign exchange swap transactions

54. Foreign exchange swap transactions are carried out within fine-tuning operations.

55. The conditions under which the National Bank performs foreign exchange swap transactions on the interbank foreign exchange market are set out in the Regulation on the performance of transactions on the interbank foreign exchange market of the Republic of Moldova, approved by the Decision of the Council of Administration of the National Bank of Moldova no. 8 of 24 January 2013 (Official Monitor of the Republic of Moldova, 2013, no.36-40, Article 234), as amended and supplemented.

 

Chapter IV
Technical means used to conduct
open market operations

56. Open market operations are carried out through the unique trading platform, unless this Regulation provides otherwise. The NBM Certificates issuing operations, repo/reverse repo transactions and outright transactions are carried out through BAS (Bloomberg Auction System), the granting operations of loans collateralised with eligible assets/collection of term deposits - through FXGO (Bloomberg Professional Service FX, Precious Metals&Money Market trading platform).
(Item 56 amended by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

57. Only National Bank and eligible participants have access to the unique trading platform through authorized representatives.

58. Eligible participants as users of the unique trading platform are required to:
1) respect the rules of use of the system;
2) designate at least two persons and register them in the system as users with the right to transact and present the list of such persons to the National Bank (Annex no. 4), as well as information on changes thereof in the shortest time;
3) ensure that designated persons are trained to use the platform and use it accordingly;
4) announce the National Bank in due time about the difficulties arising in the use of the unique trading platform.

59. In exceptional cases, taking into account the nature of the problems, when those occur and the number of bidders that have experienced difficulties in using the platform, the National Bank may apply one of the following alternatives:
1) option A - to extend the time for receipt of bids;
2) option B - to postpone the tender for the next day.

60. Option A shall apply where errors were detected in the processing of operations or one or more participants in the tender inform at least 15 minutes before the time limit for the receipt of bids about the impossibility of accessing the platform. National Bank may extend the time for receiving the bids at most until 4:00 pm local time.

61. Option B may be applied where the National Bank decided that the issues arisen in the use of the platform cannot be solved by applying Option A.

62. Application of alternative options may also include, where appropriate, the receipt of bids/SS lists on paper with the stamp and signature of the participant's manager and the parallel use of other means of communication - e-mail or fax.
(Item 62 supplemented by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

63. National Bank shall immediately inform by e-mail and telephone the users of the unique trading platform about triggering of alternative options and actions to be taken by them.
(Item 63 supplemented by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

(Item 64 repealed by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

65. If the participant has submitted the bids/lists of SS to tender on paper based document, it shall submit a written explanation to the National Bank, indicating the reason thereof.
(Item 65 amended by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

 

Chapter V
Tender procedures

Section 1.
General provisions

66. Open market operations of the National Bank of Moldova are carried out generally through tenders.

67. There are two types of tenders: standard tenders and quick tenders. The procedures for standard and quick tenders are identical except for the time between the tender announcement and the start of receiving bids and the number of participants.

68. In the case of a standard tender, National Bank announces the participants about the tender conditions on the working day preceding the day of the tender.

69. The main operations and structural operations are carried out through standard tenders. All eligible participants may participate in standard tenders.

70. Quick tenders are only used for fine-tuning operations and take place within a time span of 90 minutes from the tender announcement.

71. Tender procedure is executed in the following operational steps:
1) announcement of the tender;
2) submission of bids by the participants eligible to tender and, where appropriate, the list of eligible assets available;
3) tender allotment;
4) announcement of individual allotment results;
5) settlement of transactions.

72. In order to determine the amounts allotted in the tender, the National Bank may set up a tender committee.

73. The National Bank has the option of conducting either fixed rate (volume adjudication) or variable rate (interest adjudication) tenders.
In case of a fixed rate tender, the National Bank shall indicate in advance the interest and the bids of participants shall include only one option for the amount to be traded.
In case of a variable rate tender, the National Bank may indicate in advance the minimum / maximum accepted interest rate (price) and the tenders of participants shall contain, for each interest rate / price, the amount to be traded. Participants may submit bids unlimitedly. Only one bid shall be accepted in case of tenders organised to collect deposits and those organised to grant loans collateralised with eligible assets.
(Item 73 amended by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

74. The main operations shall be performed in accordance with a pre-agreed indicative schedule published on the official website of the National Bank. The schedule shall be published before the beginning of the year for which it is valid.

 

Section 2.
Announcement of tender

75. National Bank shall inform about the operation of the tender and conditions thereof by sending participants an announcement with the following elements, which list is not exhaustive:
1) date of the tender operation;
2) type of instrument to be used;
3) start date of the operation (settlement date);
4) maturity date of the operation/SS or NBM Certificates;
5) type of tender (fixed rate or variable rate tender);
6) method of allotment (multiple prices or single price);
7) intended operation volume (if applicable);
8) interest rate ( in the case of fixed rate tenders);
9) minimum / maximum accepted interest rate / price (if applicable);
10) minimum / maximum bid limit of the participant (if applicable);
11) nominal value of a NBM Certificate;
12) time limit for the receipt of SS list proposed by the participant (in the case of repo transactions);
13) ISIN code of the issue of SS and NBM Certificates (if applicable);
14) start time of receipt of bids;
15) time limit for the receipt of bids;
16) assets eligible as collateral and asset valuation haircut (in the case of granting of loans);
17) time limit for the tender results announcement.
(Item 75 amended by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

751. On the day of repo/reverse repo tender, before the start of the receipt of bids, National Bank shall make available to the participants, through the Bloomberg Professional Service (NBMC), the list of SS eligible for these transactions and their purchase/sale prices.
(Item 751 inserted by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

 

Section 3.
Submission of bids by eligible participants

76. Participants shall submit their bids on the day on which the tender is conducted, within the time limits specified in the announcement.

77. Participants are responsible for the submission of bids and are entitled to modify or withdraw the submitted bids during the term provided for the submission of bids announced within the tender.
No modification or withdrawal of submitted bids is allowed after the time limit provided for the receipt of bids, these being considered as firm commitments of participants.

78. The bids submitted after the time limit provided for in the tender announcement shall not be validated.
Bids containing amounts below the minimum or above the maximum amount announced by the National Bank or interest rates below the minimum or above the maximum rate announced will not be validated if these elements are specified in the tender announcement. In case of loan granting, the bids containing other eligible assets proposed as collateral than those indicated in the tender announcement will not be validated.

79. The aggregate amount of the interest rate/price options of an eligible participant may not exceed the amount announced by the National Bank. Otherwise, the bids will not be validated.

80. Bids submitted by participants for the respective operation shall include:
1) tendered volume;
2) interest rate/price.
In the NBM Certificates issuing operations, the bids submitted by the participants on behalf of the Deposit Guarantee Fund shall contain the number “2” in the respective box and, separated by a comma, the BES identification number assigned to the Deposit Guarantee Fund.

81. The bids submitted by the participants shall contain options for interest rates, expressed in percentage, with two digits after comma or prices, expressed as a percentage of the nominal value with two digits after comma for SS and four digits after comma for NBM Certificates.

82. Participants shall submit to the National Bank, until the time limit indicated in the tender announcement, a list of SS proposed for the repo transaction through BAS, which shall contain the following elements:
1) ISIN code of SS;
2) volume of SS at the nominal value;
3) repo rate;
4) sale and repurchase price of a SS;
5) volume of SS at the sale and repurchase price.
(Item 82 in the wording of the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

83. Upon granting loans collateralised with eligible assets, participants shall submit, along with the bids, a confirmation to the National Bank containing the date of the tender, the list of eligible assets available as collateral, their features and value, and other elements as appropriate.

 

Section 4.
Tender allotment procedure

84. In the allotment of a fixed rate tender, if the aggregate amount of bids exceeds the amount to be allotted by the National Bank, the submitted bids will be satisfied pro rata, according to the ratio of the amount to be allotted to the aggregate amount of bids.

85. In the allotment of a variable rate tender, bids are listed in ascending or descending order of offered interest rates, until it reaches the level where supply meets demand or the level at which monetary policy objectives of the National Bank are achieved, as follows:
1) in the case of liquidity-provision (SS outright purchases, SS repo operations, and granting of loans collateralised with eligible assets): in descending order of interest rates / in ascending order of prices, starting with the highest interest rate / lowest price ;
2) in the case of liquidity-absorbing (SS outright sales, SS reverse repo operations, issuance of NBM Certificates, collection of deposit): ascending order of interest rates / in descending order of prices, starting with the lowest interest rate / highest price.

86. If the volume of bids submitted by the eligible participants exceeds the volume intended for the operation and if several bids have been submitted at the marginal interest rate / price accepted level (lowest/ highest), these bids shall be executed pro rata, according to the ratio of the remaining amount to be allotted and total bid amount at the marginal interest rate / price.

87. For SS trading and NBM Certificates issuance, the amount allotted to each participant is rounded upwardly to the nearest value divisible by the nominal value of a SS or NBM Certificate.

88. The multiple rate / price allotment method is applied in the variable rate tenders, which means that bids are satisfied at the rate / price levels offered by the participants. For variable rate tenders, it may be applied the single rate auction procedure, according to which all bids of participants are satisfied at the marginal interest rate.

89. On the tender day, after receiving the bids of participants/the lists of SS and/or of other assets proposed by them for trading and/or for collateralisation of liquidity-providing operations, National Bank shall check the availability of assets, including the SS used in repo transactions with the National Bank, due on the settlement date of the new transaction and, where appropriate, shall block them in the volume determined by the National Bank.
If the participant at the repo transaction fails to ensure the availability of SS in own portfolio on the tender date, before the time limit indicated in the tender announcement, and/or the SS that are subject of repo transaction due on the date of this repo transaction, before 12:00 noon, National Bank shall completely cancel the transaction for which the available SS are not sufficient and apply sanctions provided for in the agreement on the participation in the NBM open market operations.
(Item 89 in the wording of the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

 

Section 5.
Announcement of tender results

90. After the tender is closed, on the same day and before the time limit for the tender results announcement, the results of each allotment in the tender shall be available to participants via the unique trading platform. Participants have also access to information about the total results of the tender which, depending on the type of operation, shall include:
1) date of tender;
2) type of operation;
3) total amount of bids submitted by participants;
4) number of bidders/bids submitted;
5) total amount announced and allotted;
6) marginal interest rate/price accepted and the percentage of allotment at the marginal interest rate/price (in the case of variable rate tenders);
7) minimum bid rate, maximum bid rate and weighted average allotment rate/ weighted average allotment price (in the case of multiple rate auctions);
8) start date of the operation (settlement date) and the maturity date of the operation.
(Item 90 amended by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

91. In case of a repo / reverse repo transaction, the information about the results of each allotment in the tender, indicating the SS accepted by the National Bank shall include:
1) ISIN code;
2) purchase (sale) price;
3) repurchase price;
4) repo rate;
5) the volume of transaction:
a) at the purchase-sale price;
b) at the repurchase price;
c) at the nominal value.
(Item 91 amended by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

92. Upon granting of loans collateralised with eligible assets / accepting deposits, after determining the tender results, the National bank shall send to participants, on the same day, a confirmation that includes the following elements:
1) name of participant;
2) date of transaction;
3) type of transaction;
4) amount of credit/deposit;
5) currency of credit/deposit;
6) date of settlement;
7) maturity of credit/deposit;
8) nominal interest rate;
9) interest payment date;
10) calculation convention.
Simultaneously, when granting loans collateralised with eligible assets, the National Bank shall send to participants a confirmation with regard to the assets eligible accepted as collateral (Annex no.5).

 

Section 6.
Settlement of open market operations

93. Settlement of open market operations is conducted on the settlement date, after providing the underlying assets related to the liquidity-providing operations or when the provision of underlying assets takes place under the principle of delivery versus payment.

94. Open market operations based on standard tenders are normally settled on the first working day following the tender date, and the operations based on quick tenders on the day of the tender. In some cases, for operational reasons, the National Bank may establish other settlement dates for standard tenders and quick tenders.

95. Participants are obliged to ensure on their current accounts with the National Bank availability of sufficient funds to conduct settlement of liquidity-absorbing operations, on the settlement date, according to the results of the tender, at the beginning of the stage “Payments and clearing” of the AIPS operational day.

96. If the date of settlement of the main liquidity-absorbing operations coincides with the due date of the operation performed previously, participants shall ensure on their current accounts with the National Bank the difference between the amount to be paid to the National Bank and the amount to be paid by the National Bank on the same operational day.

97. NBM Certificates buying operations of the Deposit Guarantee Fund shall be settled in the Fund's current account with the National Bank.

98. On the date of settlement of reverse repo transactions, NBM Certificates issuance, outright sale of SS, collection of deposits, the National Bank shall issue, on the basis of power of attorney granted by participants and, where appropriate, by the Deposit Guarantee Fund, payment orders on their behalf in order to debit their current accounts opened with the National Bank with the amounts related to the operation performed.

99. On settlement day, after charging the respective funds, the National Bank shall register in BES the ownership of NBM Certificates issued and SS traded outright or within repo / reverse repo transactions.
In case of granting of loans, National Bank shall open analytical accounts, inform the participants about the account number to which they must repay the loan and transfer the related interest.

 

Section 7.
Calculation formulas used for
open market operations

101. In variable rate tenders, the pro rata allotment and the amount allotted to the minimum accepted price / maximum accepted rate is determined as follows:

where:

all%- percentage of pro rata allotment;
Va- total allotted volume;
Vs- aggregate volume of bids executed at a higher price/lower interest rate/higher interest rate than the marginal accepted price/marginal accepted interest rate;
Vm- aggregate volume of bids submitted at the marginal accepted price/marginal accepted interest rate;
Sm- amount allotted to the individual bid submitted at the marginal accepted price/marginal accepted interest rate;
Cm- value of the individual bid submitted at the marginal accepted price/marginal accepted interest rate.

102. Nominal interest rate of NBM Certificates shall be determined as follows:

where:

r- nominal value of interest rate (%);
N- nominal value of NBM Certificates (MDL);
Pc- purchase price of NBM Certificates (MDL);
t- number of days to maturity.

103. Weighted average price/weighted average interest rate is calculated as follows:

where:

Pmp- weighted average price/weighted average interest rate (MDL);
Pi- price/interest rate indicated in the bidi(MDL);
Vi- volume indicated in the bidi(MDL);
n- total number of allotted bids in the tender.

104. Interest on deposits attracted/loans granted is calculated as follows:

where:

D – amount of interest on the deposit attracted/loan granted;
S – amount of the deposit attracted/loan granted;
Rd – interest rate in percent;
n - term of operation (days).

105. The interest rate on repos / reverse repos (repo rate) is the annual interest rate used to determine the repurchase price and is determined using the following formula:

where:

R - interest rate (repo rate) (%);
Pr – repurchase price (MDL);
Pc - purchase (selling) price set by the National Bank, reduced by the valuation haircut established by the National Bank in case of repo operations (MDL);
t - term of operation (days).

106. Repurchase price of SS upon repo/reverse repo transaction maturity is calculated as follows:

 

Pr = Pc*(1+R*t/365/100)

where:

Pr - repurchase price;
Pc - purchase (selling) price set and reduced by the valuation haircut established by the National Bank;
R - interest rate (repo);
t - term of operation (days).

 

Chapter VI
Bilateral procedures

107. Open market operations may be performed through bilateral procedures initiated by the National Bank within fine-tuning operations and structural operations, depending on the situation in the money market. In this procedure, the National Bank directly contacts one or more participants.

108. The frequency and maturity of operations performed through bilateral procedures are not standardized.

109. In order to conduct open market operations through bilateral procedures, the National Bank shall negotiate in advance by telephone with the participant, where appropriate, the transaction parameters:
1) type of transaction;
2) term of transaction;
3) purchase/selling price;
4) interest rate;
5) volume of transaction;
6) date of settlement;
7) maturity date;
8) list of eligible assets accepted as collateral (in case of loan granting).

110. Open market operations performed through bilateral procedures shall be confirmed similar to those carried out through tenders and settled on the settlement date negotiated with the participant.

111. Upon granting loans through bilateral procedures, the National Bank shall conclude with the participant a separate financial collateral arrangement without transfer of ownership.
(Item 111 amended by the DEB of the NBM no.165 of 28.06.2017, in force on 14.07.2017)

 

Chapter VII
Discharge from obligations linked to open market operations

112. NBM Certificates shall be redeemed on the maturity date, announced upon the issuance thereof.

113. On the maturity date of NBM Certificates, National Bank shall transfer to the current accounts of eligible participants / current account of the Deposit Guarantee Fund with the National Bank the nominal value of the certificates subject to redemption.

114. On the maturity date of reverse repo transaction (SS repurchased by the National Bank), the National Bank shall transfer to the current accounts of eligible participants with the National Bank the repurchase value (price) of SS. In the case of a repo transaction (SS repurchase by participants), upon its maturity, the National Bank shall issue payment orders on behalf of eligible participants in order to debit their current accounts with the National Bank with the repurchase value (price) of SS.

115. The payment of the loans collateralised with eligible assets and related interest shall be made by the eligible participant by transferring those amounts to the account of the National Bank, under the terms and conditions set upon loan granting.

116. On the maturity date of deposits, the National Bank shall transfer to the current accounts of eligible participants with the National Bank the deposit amounts and related interest.

117. If the maturity date of an open market operation is a non-working day, SS repurchase within repo / reverse repo transactions, NBM Certificates and the repayment of loans / deposits shall take place on the next working day, without paying any additional interest.

 

Chapter VIII
Procedures and measures to be applied upon the occurrence of an event of default
in relation to participants / the Deposit Guarantee Fund

Section 1.  Events of default

118. For the purposes of this Regulation, events of default shall be considered:
1) withdrawal by the National Bank of the bank’s license for performing financial activities;
2) adoption of reorganization measures or of other similar procedures intended to safeguard or restore the financial situation of the participant as well as to avoid the approval of the decision indicated in sub-item 1);
3) submission to the National Bank of a written declaration by the participant regarding its inability to fulfil its obligations pertaining to open market operations;
4) suspension or loss of the status of participant to AIPS;
5) failure by the participant to provide sufficient volume of eligible assets for collateralisation of the liquidity-providing operations;
6) failure by the participant to fulfil the obligations to deliver additional collateral in accordance with the provisions of item 22 of the Regulation;
7) failure by the participant to honour payment obligations in liquidity-absorbing operations;
8) failure by the participant to honour payment obligations of the repurchase price at the repo transaction maturity date;
9) failure by the participant to honour the delivery obligations of the SS at the due date of the reverse repo transaction;
10)  failure by the participant to reimburse within the set deadlines the credit granted by the National Bank;
11) any other imminent or existing event, the occurrence of which may threaten the fulfilment by a participant of his obligations under the agreement of participation in the open market operations of the National Bank.

119.  Upon the occurrence of the event indicated in item 118 sub-item 1), the National Bank shall terminate and suspend all outstanding open market operations with the respective participant without any prior notice. The National Bank can, also, terminate and suspend all outstanding open market operations at the occurrence of the events indicated in item 118 sub-items 2) to 3) without notifying the participant. In the events indicated in item 118 sub-items 5) and 7), the National Bank may cancel the respective transaction without notifying the participant, subject to financial penalties provided for in the agreement on the participation in the open market operations.
In the events indicated in item 118 sub-items 4), 6) and 8) to 11), the National Bank may terminate and suspend all outstanding operations by sending a written notification to the respective participant. The National Bank may, at its discretion, grant the participant a maximum period of 3 business days to meet his obligations.

120.  The participant is obliged to notify the National Bank of any occurrence of an event of default referred to in the item 118 sub-items 8) to 11) during the day, when the fact became aware to him.      

121.  With exception of the case that this Regulation specifies otherwise, all notifications required or provided for under this Regulation shall be forwarded to the participant in writing.
default

 

Section 2 Measures applied by the National Bank
in events of default

122. If an event of default as defined in item 118 occurs in relation to the participant, the National Bank may:
1) suspend or limit his participation in open market operations for a period of up to 30 calendar days as of the date when the event has been defined;
2) terminate unilaterally the agreement on the participation in the open market operations of the National Bank of Moldova;
3) terminate all outstanding transactions;
4) demand accelerated performance of its claims that have not yet matured or are contingent;
5) use the participant’s deposits at the National Bank to set off claims against the respective participant;
6) suspend the fulfilment of its obligations towards the participant until he fulfils its obligations towards the National Bank;
7) exercise its preferential and unconditional right to satisfy each of its claims that reaches maturity in accordance with the provisions of Article 70, paragraph (2) of the Law no. 548-XIII of 21 July 1995 on the National Bank of Moldova (republished in the Official Monitor of the Republic of Moldova, 2015, no. 297-300, art. 544), with the subsequent modifications and amendments;
8) enforce the financial collateral in accordance with the provisions of item 123;
9) apply, as appropriate, pecuniary sanctions in the manner provided for in agreements concluded with eligible participants / the Deposit Guarantee Fund.                              

123.  The National Bank is entitled to enforce the financial collateral in one of the following ways:
1)  in case of cash, by setting off the amount against or applying it in discharge of the relevant financial obligations;
2) in the case of SS and of NBM certificates, by sale or appropriation and by setting off their value against, or applying their value in discharge of, the relevant financial obligations.  Enforcement of financial collateral by appropriation shall be performed in compliance with the provisions of Art. 9 paragraph (1) of the Law no.184 of July 22, 2016 on financial collateral arrangements (Official Monitor of the Republic of Moldova, 2016, no. 293-305, art.622).       

124.   Enforcement by selling of collateral in the form of SS within repo transactions and of credit granting operations shall be carried out through auctions conducted in accordance with the provisions of this Regulation, in integral or partial volume, by notifying the debtor bank. 

125.   All banks shall be accepted at the auctions for sale of underlying assets, except banks with overdue credits and those that have not repurchased SS under repo transactions.

126.   The National Bank utilises the proceeds from the sale of the underlying assets in the account of payment of penalties, then of the debt to interests and after that of its own claims.             

127.  National Bank may benefit from the close-out netting provision within repo / reverse repo transactions at the occurrence of an event of default specified in item 118.

128.  The National Bank may not admit the Deposit Guarantee Fund to one or more subsequent auctions, in case of not honouring payment obligations for purchased NBM certificates.

 

Section 3.  Close-out netting provision in repo / reverse repo transactions

129. Upon the occurrence of an event of default set out in item 118, the National Bank shall have the right to suspend and terminate all outstanding repo / reverse repo transactions.

130. In order to achieve the set off, upon the occurrence of an event of default, the National Bank shall apply the following provisions:
1) the repurchase date for each repo / reverse repo transaction shall be deemed to occur immediately and any SS or additional financial resources for making the margin call shall be delivered immediately, so that the performance of the respective obligations of the parties on the delivery of SS and the payment of the repurchase price for repurchased SS shall be made only in accordance with sub-items 2) - 3);
2) the repurchased SS value and of those to be transferred for margin and the repurchase price to be paid by each party shall be set by the National Bank for all transactions on the repurchase date;
3) on the basis of the amounts set in accordance with sub-item 2), the National Bank shall calculate what is due from each party to the other at the repurchase date. The sums due from one party must be set off against the sums due from the other and only the net balance is payable on the next business day by the party having the claim thereby valued at the lower amount.

(Chapter VIII in the wording of the DEB of the NBM no.165 of 28.06.2017, in force on 14.07.2017)
(Chapter VIII amended by the DEB of the NBM no.249 of 22.09.2016, in force on 25.10.2016)

 

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