Selected Decisions Annex (14th Ed)
Chapter

Policy on Enlarged Access: Borrowing from Central Banks and Other Official Institutions on Terms Similar to Those of the Agreement with the Bank for International Settlements (BIS)

Author(s):
International Monetary Fund
Published Date:
April 1989
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The Fund shall stand ready to enter into an agreement with any member, the central bank or other agency of any member, or any official entity that has been prescribed as a holder of Special Drawing Rights pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement, under which such member, central bank or other entity will accord a credit line in favor of the Fund on terms and conditions that are substantially the same as those of the Agreement with the BIS (Executive Board Decision No. 6863-(81/81)), except as those terms and conditions may be adjusted and supplemented by the following provisions.

1. The commitment of the lender under the credit line shall be for a period of not less than two years, provided that it can be for a shorter period if the lender represents that, for legal or other compelling reasons, it cannot accept a commitment period of at least two years and, in the Managing Director’s judgment, the shorter period is consistent with the prudent management of the Fund’s liquidity.

2. At the request of the lender, its commitment may be terminated before the end of the commitment period if (i) the lender is a member, the central bank, or another agency of a member; (ii) it represents that its balance of payments and reserve position, or that of the member if the lender is the central bank or other agency of that member, does not justify further drawings under the commitment; and (iii) the Fund, having given the representation the overwhelming benefit of any doubt, determines that no further drawing should be made.

3. The maturity of the drawings under the commitment may be six months, one year, or two years, provided that, if the maturity of such drawings is for six months or one year, the lender will normally be expected to undertake to extend the maturity of the drawings so that resources borrowed shall be available to the Fund for at least two years. Nevertheless, if, in the Managing Director’s judgment, shorter periods would be consistent with the prudent management of the Fund’s liquidity, the agreement may provide for shorter maturities that would be renewed automatically unless the lender or the Fund gave notice, at least 30 days before maturity, that renewal should not take place.

4. (a) The interest rate applicable to drawings with a maturity of one year shall be determined in accordance with the same rules and procedures as the interest rate for drawings under the Agreement with the BIS, except that the instruments to be used for the calculation of that interest rate shall be, insofar as possible, government instruments of one-year maturity and that interest shall be payable at six months and at maturity.

(b) The interest rate applicable to drawings with a maturity of two years shall be determined in accordance with the same rules and procedures as the interest rate for drawings under the Agreement with the BIS, except that, (i) the instruments to be used for the calculation of that interest rate shall be those used by the Fund for calculating the interest rate on the Special Drawing Right, with the interest calculated at three-month intervals and payable semiannually; or (ii) if the Managing Director judges it appropriate in prevailing circumstances, the instruments shall be, insofar as possible, government instruments of two years’ maturity, with interest being calculated and payable semiannually.

5. The commitment of the lender shall be transferable only with the consent of the Fund.

6. Loans may be made in any currency, provided that (i) the concurrence of the issuer of that currency has been given, and (ii) arrangements are agreed under which balances of that currency borrowed by the Fund will be converted at equal value exchange rates into U.S. dollars to the extent required for investment pending use of the borrowed resources in transactions of the Fund. By agreement with the lender, the Fund may make repayment of principal or pay interest in any currency or in SDRs.

7. (a) The lender may obtain repayment of a claim on the Fund before maturity if: (i) the lender is a member, the central bank, or another agency of a member; (ii) the lender represents that its balance of payments and reserve position, or that of the member’s if the lender is a central bank or another agency of a member, justifies early repayment; and (iii) the Fund, having given the lender’s representation the overwhelming benefit of any doubt, determines that there is such a need for early repayment.

(b) At any other time the Fund may agree with the lender on repayment prior to maturity subject to an adjustment in the interest rate applicable for the period during which the drawing remained outstanding.

8. The lender shall have the right to transfer at any time all or part of its claim on the Fund, which results from drawings outstanding under its commitment that have not less than three months to maturity from the requested transfer, to any member, the central bank or another agency of any member, or any official entity that has been prescribed as a holder of Special Drawing Rights pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement. A claim transferred shall be subject to the renewal undertakings of the transferor. The transferee shall have all the rights of the lender, except that (i) the right to obtain repayment before maturity pursuant to 7(a) above shall be exercisable by the transferee only if it is a member, or the central bank, or another agency of a member, that at the time of the transfer is in a net creditor position in the Fund and, in the opinion of the Fund, the member’s currency could be used in net sales in the Fund’s operational budgets for the foreseeable future, and (ii) the right of the Fund to use the currency of the transferor in payment of principal or interest shall, if the transferee is a member, or the central bank, or another agency of a member, be replaced by the right to use the transferee’s currency; or, if the transferee is not a member, or the central bank, or another agency of a member, this right shall no longer apply.

9. At the request of the lender, the Fund shall issue to such lender an instrument evidencing its claim on the Fund resulting from drawings outstanding under the lender’s commitment. Such an instrument shall not be issued if the lender has requested or has received bearer notes pursuant to 10 below.

10. At the request of the lender made within ten days from the date of a drawing under the commitment, the Fund shall issue and deliver to such lender, without charge, promissory notes of the Fund in bearer form in exchange for all or part of the lender’s claim on the Fund resulting from that drawing, whereupon the claim shall be cancelled pro tanto. The renewal of a drawing shall be deemed to be a new drawing. By agreement between the lender and the Fund, bearer notes may also be issued on an interest payment date in exchange for a claim for the balance of the period of the claim. The issuance of the bearer notes shall be governed by the provisions set forth in Annex A and, unless otherwise agreed between the lender and the Fund, shall be substantially in the form, and subject to the terms and conditions set forth in Annex B or C.

11. An agreement negotiated pursuant to this Decision shall not become effective before it has been approved by the Executive Board.

Decision No. 6864-(81/81) May 13, 1981

Annex A: Provisions Governing Issuance of Bearer Notes

1. The Notes shall be in denominations of SDR 1 million, 5 million or any integral multiple of 5 million as specified by the lender in its request.

2. Notes issued in exchange for all or part of a claim resulting from a drawing with a maturity of six months or one year shall be substantially in the form and subject to the terms and conditions set forth in Annex B. Notes issued in exchange for all or part of a claim resulting from a drawing with a maturity of two years shall be substantially in the form and subject to the terms and conditions set forth in Annex C. Each Note shall have as its issue date the date of the drawing that gave rise to the claim in exchange for which the Note is issued, and shall carry the same interest rate as that claim. The renewal of a drawing shall be deemed to be a new drawing.

3. Each Note shall have as its maturity date the same maturity date as the claim in exchange for which it is issued, except that, if such date would not fall on a banking day in New York, the banking day in New York immediately preceding that date shall be the maturity date.

4. Each Note shall be executed in the name of the Fund by the manual or facsimile signatures of the Managing Director and the Treasurer and, if facsimile signatures are used, shall be countersigned manually by an officer or other authorized representative of the Fund designated by the Managing Director. Each such Note, when duly executed and delivered, shall constitute a valid and enforceable obligation of the Fund in accordance with its terms.

5. Notes shall be delivered to the lender at the principal office of the Fund, or at such other place as may be agreed between the Fund and the lender.

6. Delivery shall be made on a date specified by the Fund, which, unless otherwise agreed with a lender, shall be not more than 30 days after the date the request for Notes is received by the Fund.

7. For purposes of the Notes, the Fund shall appoint paying agents in Frankfurt, London, New York, Paris, and Tokyo, and shall maintain a paying agent in each such city as long as any such Notes remain outstanding.

8. The Fund, by agreement with the holder of any Note, may redeem such Note prior to its maturity date at a mutually agreed price, against surrender of the Note.

Annex B Forms of A Six-Month or One-Year Bearer Note1

INTERNATIONAL MONETARY FUND

700 19th Street, N.W., Washington, D.C. 20431

No. _________________Issue Date: ________________
SDR _________________Maturity Date: ______________

The International Monetary Fund (“the Fund”), for value received, hereby promises to pay to bearer in United States dollars a principal amount equivalent to ___________ ___________Special Drawing Rights on the maturity date of this Note, together with interest on such principal amount at the rate of _____________ per annum from the issue date hereof until the maturity date. [Interest shall be paid in two installments; the first installment on (date), and the second on (the maturity date).] For purposes of payment hereunder the value of the United States dollar in terms of the special drawing right shall be that determined by the Fund in accordance with the Rules and Regulations of the Fund adopted pursuant to its Articles of Agreement for a date three business days of the Fund before the date payment falls due.

Payment of principal and interest shall be made, subject to applicable laws and regulations, on presentation and surrender [on presentation and, at maturity, surrender] of this Note at any of the paying agents specified below by check drawn on a bank in New York City or, in the case of paying agents outside the United States, by transfer to a United States dollar account maintained by the payee with a bank in New York City:

[List paying agents]

[A record of an interest payment endorsed below and initialled by an authorized officer of one of the above paying agents shall be conclusive evidence of the discharge of the obligations of the Fund in respect of the interest payment in question.]

This Note is governed by the laws of the State of New York, U.S.A. An action against the Fund for failure to pay any amount due hereunder may be brought in the Federal Courts (or if such courts lack competence, in State Courts) in the State of New York, with right of recourse to competent higher Courts. The Fund hereby irrevocably waives its immunity from judicial process and submits to the jurisdiction of such Courts with respect to such action and to the execution, in any member country of the Fund, of a final judgment of such Courts, and appoints the Federal Reserve Bank of New York at its principal office in the Borough of Manhattan as agent of the Fund to receive on behalf of the Fund service of copies of the summons and complaint and any other process that may be served in any such action. Such waiver and submission shall not extend to any question relating to the interpretation of the provisions of the Articles of Agreement of the Fund, nor shall it extend to any action or proceedings other than as specified in this paragraph.

INTERNATIONAL MONETARY FUND

By ___________ ___________

Managing Director

___________ _____________

Treasurer

Countersigned: ___________ _____________

Authorized Representative

This Note is not valid unless manually countersigned by an Authorized Representative of the Fund.

No action has been taken by or on behalf of the Fund to register this Note or any prospectus relating thereto or otherwise to qualify it for offering or sale under the laws of any jurisdiction.

RECORD OF INTEREST PAYMENT

OF SDR (___________) due

(date) ______________

SDR/US$ rate ______________

US$ amount ______________

Paid ______________(date) ______________

Signature ______________

(Authorized Officer)

Annex C

[Face]

FORM OF TWO-YEAR BEARER NOTE

INTERNATIONAL MONETARY FUND

700 19th Street, N.W., Washington, D.C. 20431

No. _________________Issue Date: ________________
SDR _________________Maturity Date: ______________

The International Monetary Fund (“the Fund”), for value received, hereby promises to pay to bearer in United States dollars a principal amount equivalent to _________________Special Drawing Rights on the maturity date of this Note, and to pay interest on such principal amount in United States dollars at the rate and on the dates specified on the reverse side hereof from the issue date of this Note until the maturity date. For purposes of each payment hereunder the value of the United States dollar in terms of the Special Drawing Right shall be that determined by the Fund for a date three business days of the Fund before the date payment falls due in accordance with the Rules and Regulations of the Fund adopted pursuant to its Articles of Agreement.

Payments of the principal amount and of interest shall be made, subject to applicable Jaws and regulations, on presentation (and, at maturity, surrender) of this Note at any of the paying agents specified below by check drawn on a bank in New York City, or, in the case of paying agents outside the United States, by transfer to a United States dollar account maintained by the payee with a bank in New York City:

[List paying agents]

A record of an interest payment endorsed on the reverse hereof and initialled by an authorized officer of one of the above paying agents shall be conclusive evidence of the discharge of the obligations of the Fund in respect of the interest payment in question.

This Note is governed by the laws of the State of New York, U.S.A. An action against the Fund for failure to pay any amount due hereunder may be brought in the Federal Courts (or if such courts lack competence, in State Courts) in the State of New York, with right of recourse to competent higher Courts. The Fund hereby irrevocably waives its immunity from judicial process and submits to the jurisdiction of such Courts with respect to such action and to the execution, in any member country of the Fund, of a final judgment of such Courts, and appoints the Federal Reserve Bank of New York at its principal office in the Borough of Manhattan, New York City, as agent of the Fund to receive on behalf of the Fund service of copies of the summons and complaint and any other process that may be served in any such action. Such waiver and submission shall not extend to any question relating to the interpretation of the provisions of the Articles of Agreement of the Fund, nor shall it extend to any action or proceedings other than as specified in this paragraph.

INTERNATIONAL MONETARY FUND

By _____________________

Managing Director

__________________

Treasurer

Countersigned: ____________________

Authorized Representative

This Note is not valid unless manually countersigned by an Authorized Representative of the Fund.

For three months [six months] from the Issue Date of this Note interest shall accrue at__________percent per annum. Thereafter, for each successive three-month [six-month] period until the maturity date, interest shall accrue at the rate of interest determined as follows:

1. The central banks of the members whose currencies are used for the valuation of the special drawing right shall notify to the Fund the market interest rate or yield in their respective market for a date three business days of the Fund prior to the last day of the three-month period, or if that day is not a business day, for the preceding business day, on the instrument chosen by the Fund, in consultation with the central bank, as representative for a three-month maturity in that market for the purpose of determining the interest rate on the special drawing right.

[Alternative formulation using governmental instruments with two years to maturity]

2. Using these rates and yields as notified by these central banks the Fund will calculate the rate of interest for the next three-month period as follows:

The yield or rate for each instrument on that date will be multiplied by the number of units of that currency, used by the Fund in its valuation of the special drawing right, and by then multiplying the product by the value of such currency unit in terms of the special drawing right on that date. The resulting product for each such currency, rounded to the nearest four decimal places, shall be added together, and the total, rounded up to the nearest one sixteenth of one percent, shall be the interest rate to be applied during the ensuing interest period.

Such interest shall be paid on interest payment dates falling at successive intervals of six months from the issue date of Note, as shown in the interest Payment Schedule set forth below, with the last interest payment date being the maturity date of this Note. If an interest payment date should fall on a day that is not a banking day in New York City, the interest due on such interest payment date shall be paid on the banking day in New York City immediately preceding such interest payment date.

INTEREST PAYMENT SCHEDULE (To be added)

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