Download Regulation on Repo Operations of Treasury Bills Issued by The

Regulation on Repo Operations of Treasury Bills Issued by The Ministry of
Finance
Approved under Decree No.97
of President of the National Bank of Georgia
October 22, 1998
The document includes amendments approved under:
Decree No. 346 of December 27, 2000
Decree No. 131 of June 25, 2004
of President of the National Bank of Georgia
Article1. General Provisions
1. This Regulation is developed according to Article 73 of Law on NBG to execute Article 29
of the same law.
2. REPO is an agreement on selling securities at fixed price on condition of further
repurchase whereas the party possessing excess cash delivers it to the other party.
3. REPO transactions are carried out by NBG with commercial banks based on General
Agreement with them (Annex 1) to regulate liquidity. Pursuant to the agreement Seller
is obligated to repurchase the sold securities at an agreed price.
4. Registration of General Agreement between commercial banks and between a
commercial bank and a non-bank entity on conducting a Mof T-bills repo operations
shall be made at NBG (in a special file of the Monetary Operations Department).
5. Buyer of securities has ownership rights and is entitled to use them at his own discretion
with mandatory preliminary consent of Seller provided that he returns the collateral
securities to Seller upon repo expiration. When performing repo operations among
themselves commercial banks and non-banking institutions are obligated to submit a
notification to NBG in the form of appendix 3.
6. While carrying out monetary and credit policy NBG conducts repo operations with
commercial banks through auctions using only MoF T-bills under repurchase term of
between 1 and 14 days. Information is announced to commercial banks in advance.
7. Auction is based on multiple price principle.
8. Credit Auction Committee appointed by NBG Governor shall lead auction.
9. Auctions shall be held in the administrative building of NBG every Monday at 11 AM.
10. One banking day before repo auction NBG informs commercial banks about purchase
(sale) of T-bills (Annex 2).
11. (Removed)
12. The NBG Monetary and Foreign Exchange Commission shall set the limits on purchase
and/or sale of MoF T-bills repo operations similar to interest rates.
13. (Removed)
14. On the basis of the agreement with primary dealer commercial banks NBG holds
guaranteed repo operations, the limit of which is determined by the Monetary and
Foreign Exchange Commission.
15. Commercial banks may enter into repo transaction among themselves and non-banking
institutions for any period of time subject to their agreement depending on the maturity
of T-bills.
16. The Vice-president of the NBG determines the volume of T-bills to be purchased (sold) at
the concrete repo auction on the basis of the parameters established by the Monetary
Policy
Committee and the Macroeconomic Research and Monetary policy and Monetary
Operations
Departments. This is announced to the Auction Committee till 10 AM
Article 2. Bidding Rule
In order to participate in an auction, banks are required to submit a transaction bid to the
NBG (Monetary Operations Department) in the form of annex (also electronically) to the
general agreement not late than one hour before commencement of an auction. Besides, it is
allowed that a bank offers several percentages and some amount in the transaction bid
simultaneously.
Article 3. Auction Committee Working Rules
1. (Removed)
2. The amount of recourses to be paid shall be calculated on basis of the following formula:
NxE
F= ------------------------------------i +5
d
1 + (----- x -------)
100
365
F= total amount of T-bills paid for sale
N= face value of T-bills for sale
E= number of T-bills
i = interest rate fixed at the securities market
Before establishment of the secondary market of securities the National Bank of Georgia in
accordance with annex 4 of this provision shall determine the interest rate
d= number of days before maturity
3. Auction committee shall calculate the yield to be received from repo operations by the
following formula:
Fxpxd
I = --------------100. 365
Where I= shows yield from repo operations
F= total amount of T-bills for sale
p= interest rate of repo operations
d= duration of repo agreement in days
4. (Removed)
5. Auction committee checks accuracy of T-bill data of a seller's bid against the securities
register.
6. Commercial bank bids are entered into software for processing. Committee members are
responsible for accurate data entry. Then they compare propriety of bids and bidder
requisites with the information entered.
7. When NBG buys T-bills, the bids are sorted in descending yield order of interest rate
successively indicating respective amounts.
Auction ends when total amount in decreasing interest rates equals with the T-bill
purchase amount.
Should several bids exist at the same interest rate, in case of settled
limit of auction, award shall be on pro rata basis.
8. Auction committee is obligated to make relevant records in the register upon completion
of a transaction and makes same day transfer instructions for the value of sold T-bills to
the correspondent account of seller in amount defined according to point 2 of the article
3.
9. When NBG sells T-bills, bids are sorted in an ascending yield order.
Auction ends when total amount of bids sorted in ascending yield order of interest rate
equals with the value of specified T-bills sale amount.
Should several bids exist at the same interest rate, in case of the settled limit of auction,
award shall be on pro rata basis.
10. In case of request of guaranteed repo by primary dealer banks, they will be satisfied at
the minimal
interest rate fixed on the last repo auction. within the limits determined by the Monetary
Foreign
Exchange Commission.
11. If the seller fails to fulfill his obligations at the repurchase day, the buyer takes
possession of T-bills
in the amount as determined by market price (The calculation method is the one given
in item 2,
article 3, value i minus 5 percentage points). If the value of T-bills is insufficient to repay
the complete
repurchase value, the buyer satisfies his claims at the expense of other resources and
submits a claim in
Court for repayment of the difference.
12. Committee has the right to sell on the secondary market T-bills taken into possession of
NBG.
13. As a rule MoF T-bills shall be priced at market every day or at least at the end of
accounting period with
results reflected on respective accounts.