Operational Notice - South African Reserve Bank

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SA RESERVE BANKIn the above example, the Reserve Bank requires margin securities or cashwith a total market value of at least R5 381 431.The Reserve Bank will advise participants before 09:30 of the exact amountof any margin transfers to be made, based on the official BESA closingrates for value the previous day.If the Reserve Bank exercises a margin call, detail of the securities/cash tobe delivered to the Bank should be confirmed by fax before 10:30 on theday of the call. Securities should be delivered before 11:00. Cash marginsshould also be paid before 11:00 via SAMOS to the Bank’s SettlementDivision in Johannesburg (see Appendix V). The Reserve Bank reserves theright to reject the composition of any proposed margin transfer.Interest on cash margins will be calculated at the SAONIA rate on a daily basisand paid to the counterparty on the first business day of the next month. Thesame principle will apply when the Reserve Bank is called for margin.6.1.3 Repayment of excess marginIf the total value of securities exceeds the total repurchase price for allrepurchase transactions outstanding with a participant by an amount equalto or greater than R5 million, the Reserve Bank will, at the request of theparticipant, transfer the excess margin. Participants should request theBank before 09:30 for such transfers.6.1.4 Margin transfersWhere securities are provided as margin, the maturity dates of suchsecurities must exceed the maturity date of the longest outstandingrepurchase transaction with that participant.6.2 Longer-term reverse repurchase transactions6.2.1 Calculation of margin deficitLonger-term reverse repurchase transactions are not subject to haircutvaluations. However, such transactions are marked to market daily usingBESA closing rates. The Reserve Bank will call for margin if the market valueof the securities sold to the counterparty exceeds the cash plus total interestfor the period of the transaction (repurchase price) by an amount equal to orgreater than R5 million. Outstanding repurchase and reverse repurchasetransactions are netted.Interest at the SAONIA rate will be calculated daily on cash margins and paidto the counterparty on the first business day of the next month. The sameprinciple applies when the Reserve Bank honours a margin call in cash.6.2.2 Margin transfersCounterparties subject to a margin call should be informed of such a callbefore 09:30. Securities to be delivered should be confirmed via fax by10:30 and settled before 11:00. The maturity date of any security providedas margin must exceed the maturity date of the longest reverse repooutstanding with that participant.OPERATIONAL NOTICE11
SA RESERVE BANK7. Legal and accounting framework7.1 A repurchase agreement entered into between the Reserve Bank and acounterparty is an irrevocable undertaking by the counterparty (seller) torepurchase the securities sold to the Reserve Bank under this agreementand by the Reserve Bank to sell them back at an agreed price and on astated date. For the purpose of this legal and accounting framework, the“borrower” means the seller of the securities or the cash taker, and the“lender” refers to the buyer of the securities under the repurchaseagreement, or the cash provider.7.2 In the repurchase agreements conducted between the Reserve Bank anda counterparty there is full transfer of ownership of the securities from theborrower to the lender for the period of the transaction. This transfer ofownership is accompanied by an irrevocable undertaking by the borrowerto repurchase the underlying securities and by the lender to sell them backat an agreed price and on a stated date. In case of default by the borrowerto repurchase the securities, as agreed, the ownership of the securitiesremains with the lender. The lender has no further claim on the defaultingborrower.7.3 This document should be read in conjunction with the Master RepurchaseAgreement (Master Agreement) which is based on the ISMA Agreement bywhich all transactions referred to in this Operational Notice are governedand which must be signed by all participants in the Reserve Bank’s repooperations. In the event of any conflict between this notice and the MasterAgreement, the latter prevails.7.4 For accounting purposes, the borrower shall continue to reflect theunderlying securities as assets on its balance sheet, as prescribed byRegulation 16(12) of the Regulations Relating to Banks, issued by theMinister of Finance in terms of section 90 of the Banks Act (No. 94 of 1990)and published in Government Gazette No. 21726 of 8 November 2000.According to this regulation, the borrower shall continue to reflect an assetof which it had been the outright owner but which it had sold in terms of arepurchase agreement as such an asset in its monthly balance sheet (formDI 100) opposite the relevant asset category, at the value at which thatasset appeared in its accounting records prior to the sale thereof. Theborrower will, however, indicate that the said security is subject to arepurchase agreement so as not to mislead potential investors. Thisaccounting procedures is designed for practical and risk-weightingpurposes and does not impair the legal claim of the lender on theunderlying securities in the case of default.7.5 The legal and accounting principles described above for repurchaseagreements will apply mutatis mutandis to reverse repurchase agreements.12 OPERATIONAL NOTICE
Page 1 and 2: Operational NoticePertaining to ope
Page 3 and 4: SA RESERVE BANK1. Background1.1 Thi
Page 5 and 6: SA RESERVE BANK2.3 The marginal len
Page 7 and 8: SA RESERVE BANKAfrica. The issuing
Page 9 and 10: SA RESERVE BANKrepurchase auction,
Page 11: SA RESERVE BANKThe delivered securi
Page 15 and 16: EXAMPLES OF ANNOUNCEMENTS ON WIRE S
Page 17 and 18: Appendix IIIREPURCHASE TRANSACTION
Page 19 and 20: Appendix VContact Name: ___________
Page 21 and 22: Appendix VIISOUTH AFRICAN RESERVE B

Operational Notice - South African Reserve Bank

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