Selected Decisions Annex (14th Ed)
Chapter

Policy on Enlarged Access: Borrowing Agreement with the Bank for International Settlements (BIS), Japan and the National Bank of Belgium

Author(s):
International Monetary Fund
Published Date:
April 1989
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1. Pursuant to Article VII, Section 1 of the Articles, the Executive Board approves the following agreements* and authorizes the Managing Director to take such action as is necessary to conclude and implement them:

(a) an agreement for borrowing from the Bank for International Settlements, in terms of the offer from the Bank set out in the Attachment [below];

(b) an agreement for borrowing from the Government of Japan, in terms of the draft set out in Attachment [below];

(c) an agreement for borrowing from the National Bank of Belgium, in terms of the draft set out in Attachment [below].

Decision No. 7677-(84/64), April 24, 1984

Attachment

Bank for International Settlements: Stand-By Facility in Favor of the IMF

1. The Bank for International Settlements (“the BIS”) offers, with effect from the date of acceptance referred to in clause 13, to open a stand-by facility in favor of the International Monetary Fund (“the Fund”) for an amount equivalent to SDR 2,505 million on the terms and conditions set forth below (“the facility”).

2. A stand-by commission of one quarter of one percent shall be payable to the BIS, at the commencement of the draw-down period referred to in clause 3, with respect to the full amount of the facility. Commission so paid shall be refunded pro rata temporis, at the rate of one quarter of one percent per annum, in respect of amounts drawn and outstanding during the one-year draw-down period. Amounts to be so refunded will be applied in reducing amounts of interest due on drawings, calculated in accordance with clause 10 below.

3. During the one-year period commencing on 30th April 1984, the Fund will have the right, on giving three business days’ notice (Basle and New York) by tested telex, to make drawings up to the total amount remaining undrawn under the facility. The Fund will endeavor not to make drawings in excess of SDR 500 million for the same value date or SDR 1.000 million during any week.

4. Drawings shall be for periods of three months or for such other periods as may De mutually agreed and may be similarly renewed by the Fund on giving notice as provided in clause 3.

5. No drawing, after allowing for subsequent renewals thereof, may mature later than two years and six months after its initial value date. Repayment of a drawing shall not have the effect of restoring the amount that can be drawn under the facility.

6. All amounts due under the facility shall be denominated in SDRs but the corresponding payments will be effected by transfer, of U.S. dollars (Federal Funds) to the respective accounts of the Fund and of the BIS (“F” account) with the Federal Reserve Bank of New York, New York.

7. All payments under the facility will be made using the exchange rate between the SDR and the U.S. dollar established and published by the Fund for the second business day (New York) before the value date of the payment.

8. The parties may mutually agree that any payment under the facility be made either, at an agreed exchange rate, in a currency other than the U.S. dollar, or in SDRs.

9. If at any time the method of valuing the SDR is changed by the Fund, all payments due under the facility two business days or more after the effective date of the change will be made on the basis of the new valuation.

10. Each drawing shall bear interest, at an annual rate determined by the BIS from the product of

(a) the offered rate in the Eurocurrency markets—at 11:00 a.m. London time—for the appropriate period, for each currency included in the SDR basket as notified to the BIS and the Fund by the Bank of England (or, if the London market is closed, at 11:00 a.m. Paris time as so notified by the Banque de France) on the business day referred to in clause 7, and

(b) the percentage weight of that currency in the valuation of the SDR on that business day, calculated by using the same amounts and exchange rates for currencies as are employed by the Fund for calculating the value of the SDR in terms of the U.S. dollar.

The interest rate applicable shall be the sum of the products so calculated, rounded to the nearest one eighth of one percent above. The amount of interest due in respect of each drawing shall be calculated on the basis of the actual number of days and 360 days a year, and shall be payable when the drawing matures.

11. The Fund agrees that, in the event that any drawing is neither renewed nor repaid by the Fund on maturity, any central bank which is either the central bank of a member country of the Fund or a prescribed holder of SDRs may, at any time thereafter, be substituted for the BIS in respect of all or part of its claims against the Fund under the facility in respect of that drawing. The said substitution shall become effective with respect to the Fund upon receipt by it of confirmation by the transferee, such confirmation to be transmitted by the BIS, that the transferee accepts such substitution.

12. Any question arising with respect to the facility shall be settled by mutual agreement and no municipal law shall be treated as governing the issue.

13. Please confirm by tested telex your acceptance of the offer made above. This telex and your confirmation will constitute a binding agreement between our two institutions, which will become effective on the date of your acceptance.

Borrowing Agreement Between the Fund and the Government of Japan

1. The Government of Japan (“Japan”) agrees to open a facility, free of commission, fee, or charge, in favor of the International Monetary Fund (“the Fund”) for an amount equivalent to SDR 375 million, on the terms and conditions set out below.

2. The Fund may draw on the facility at any time during the period of twelve months commencing April 30, 1984, on giving Japan at least three business days’ notice (Tokyo) by tested telex. The Fund will endeavor not to draw more than SDR 80 million on any one value date or more than SDR 160 million during any week.

3. The amount of each drawing shall be denominated in SDRs. Unless otherwise agreed between the Fund and Japan, the amount shall be paid by Japan, on the value date specified in the Fund’s notice, by transfer of the equivalent amount of Japanese yen to the account of the Fund at the Bank of Japan, Tokyo. Japan agrees that, on request, it shall exchange yen provided hereunder for U.S. dollars, to the extent required by the Fund for investment pending use of the borrowed funds in transactions of the Fund.

4. (a) Drawings shall be for periods of six months or such other periods as may be mutually agreed, and may be similarly renewed by the Fund on giving notice as provided in paragraph 2 prior to each maturity date, provided that the total period that any drawing remains outstanding shall not exceed two years and six months.

(b) If a maturity period does not end on a business day in the place where payment of interest or principal is to be made, the maturity date shall be fixed to fall on the next succeeding business day in that place.

(c) A renewal may be recorded in the books of Japan by entries showing that the outstanding drawing has been repaid and an identical amount has been drawn by the Fund on the same value date.

5. At the request of Japan, its commitment to meet drawings or to renew drawings may be terminated if Japan represents that its balance of payments and reserve position does not justify further drawings or renewals, and the Fund, having given this representation the overwhelming benefit of any doubt, determines that no further drawing or renewal should be made.

6. (a) Each drawing shall bear interest at an annual rate determined by the Fund at the commencement of each maturity period, from the product of

  • (i) the offered rate in the Eurocurrency markets, at 11:00 a.m. London time, for the appropriate period for each currency included in the SDR basket, as notified to the Fund by the Bank of England (or, if the London market is closed, at 11:00 a.m. Paris time as so notified by the Banque de France) on the business day referred to in paragraph 10, and

  • (ii) the percentage weight of that currency in the valuation of the SDR on that business day, calculated by using the same amounts and exchange rates for currencies as are employed by the Fund for calculating the value of the SDR in terms of the U.S. dollar on that day.

The applicable interest rate shall be the sum of the products so calculated, rounded up to the nearest one eighth of one percent.

(b) The amount of interest payable in respect of the maturity period shall be calculated on the basis of the actual number of days that interest has accrued and a 360-day year and shall be paid by the Fund on the last day of the period or on the date the principal amount is repaid, whichever is earlier.

7. At the request of Japan, the Fund shall issue to Japan a nonnegotiable certificate evidencing its claim on the Fund resulting from a drawing outstanding under this agreement.

8. The Fund shall repay the principal amount of each drawing on the final maturity date applicable to the drawing or on such earlier repayment date as may be established pursuant to paragraph 11 or 12 of this agreement. Repayment shall not have the effect of restoring the amount that can be drawn under the facility.

9. (a) Payments by the Fund of principal and interest shall normally be made in Japanese yen, provided that the Fund, by agreement with Japan, may use SDRs, U.S. dollars, or any other currency.

(b) Payments in Japanese yen shall be made by crediting the amount due to the account of the Government of Japan at the Bank of Japan, Tokyo. Payments in SDRs shall be made by crediting Japan’s holdings account in the Special Drawing Rights Department, payments in U.S. dollars shall be made by crediting the account of the Government of Japan, Minister of Finance, at the Federal Reserve Bank of New York, New York, and payments in any other currency shall be made as may be agreed between the Fund and Japan.

10. Unless otherwise agreed between Japan and the Fund, all transfers and exchanges under paragraph 3, and all payments of principal and interest, shall be made at the exchange rates for the relevant currencies in terms of the SDR established by the Fund for the third business day of the Fund before the value date of the transfer, exchange, or payment.

11. If the Fund changes the method of valuing the SDR, all transfers, exchanges, and payments of principal and interest made three or more business days of the Fund after the effective date of the change shall be made on the basis of the new method of valuation. Nevertheless, if Japan so requests within 30 days after the adoption of the relevant decision of the Fund but not later than 14 days after the date the change becomes effective, the former method of determining the value of the SDR shall continue to apply to all outstanding amounts and their repayment, and in the calculation and payment of interest on such outstanding amounts. If Japan exercises this option, the Fund shall have the right, on giving 14 days’ notice, to repay in advance of maturity all the amounts to which the option has been applied.

12. (a) Japan may obtain repayment of a claim on the Fund under this agreement before maturity, at face value, if Japan represents that its balance of payments and reserve position justifies early repayment, and the Fund, having given this representation the overwhelming benefit of any doubt, determines that there is a need for such early repayment.

(b) Japan and the Fund may agree that a claim on the Fund will be repaid at the end of any maturity period.

13. (a) Except as provided in (b) and (c) below, the commitment of Japan to meet and renew drawings under this agreement and its claims on the Fund resulting from outstanding drawings shall be transferable only with the consent of the Fund.

(b) Japan shall have the right to transfer at any time all or part of any claim to any member of the Fund, to the central bank or other agency of any member, or to any official entity that has been prescribed as a holder of SDRs pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement.

(c) The transferee shall, as a condition of the transfer, assume the liability of Japan to accept a renewal of the transferred claim, and shall acquire all the rights of Japan under this agreement with respect to such claim, except that (i) for purposes of notice of renewals, references to business days (Tokyo) shall be deemed to refer to business days in the place where the transferee is situated, (ii) the transferee shall acquire the right to request termination of renewals under paragraph 5 and early repayment under paragraph 12 only if it is a member, or the central bank or other agency of a member, and at the time of transfer the member’s balance of payments and reserve position is considered sufficiently strong for its currency to be usable in net sales in the Fund’s operational budget, and (iii) if the transferee is a member or the central bank or other agency of a member, the reference to Japanese yen in paragraph 9(a) shall be deemed to refer to the transferee’s currency, and in other cases it shall be deemed to refer to U.S. dollars.

14. Any question arising hereunder shall be settled by mutual agreement between Japan and the Fund.

15. If the foregoing proposal is acceptable to Japan, this communication and your duly authenticated reply accepting the proposal shall constitute an agreement between Japan and the Fund, which shall enter into effect on the date the Fund acknowledges receipt of your reply.

Borrowing Agreement Between the Fund and the National Bank of Belgium

1. The National Bank of Belgium (“the Bank”) agrees to open a facility, free of commission, fee, or charge, in favor of the International Monetary Fund (“the Fund”) for an amount equivalent to SDR 120 million, on the terms and conditions set out below.

2. The Fund may draw on the facility at any time during the period of twelve months commencing on June 30, 1984, on giving the Bank at least three business days’ notice (Brussels) by tested telex. The Fund will endeavor not to draw more than SDR 25 million on any one value date or more than SDR 50 million during any week.

3. The amount of each drawing shall be denominated in SDRs. Unless otherwise agreed between the Fund and the Bank, the amount shall be paid by the Bank, on the value date specified in the Fund’s notice, by transfer “of the equivalent amount of U.S. dollars (Federal funds) to the account of the Fund at the Federal Reserve Bank of New York, New York.

4. (a) Each drawing shall have an initial maturity of three months, and shall be renewable by the Fund for further successive periods of three months by giving notice as provided in paragraph 2 prior to each maturity date, provided that the total period that any drawing remains outstanding shall not exceed two years and six months.

(b) If a maturity period does not end on a business day in the place where payment of interest or principal is to be made, the maturity date shall be fixed to fall on the next succeeding business day in that place.

3. At the request of the Bank, its commitment to meet drawings or to renew drawings may be terminated if the Bank represents that the balance of payments and reserve position of Belgium does not justify further drawings or renewals, and the Fund, having given this representation the overwhelming benefit of any doubt, determines that no further drawing or renewal should be made.

6. (a) Each drawing shall bear interest at an annual rate determined by the Fund at the commencement of each maturity period, from the product of

  • (i) the three-month offered rate in the Eurocurrency markets, at 11:00 a.m. London time, for each currency included in the SDR basket, as notified to the Fund by the Bank of England (or, if the London market is closed, at 11:00 a.m. Paris time as so notified by the Banque de France) on the business day referred to in paragraph 9, and

  • (ii) the percentage weight of that currency in the valuation of the SDR on that business day, calculated by using the same amounts and exchange rates for currencies as are employed by the Fund for calculating the value of the SDR in terms of the U.S. dollar on that day.

The applicable interest rate shall be the sum of the products so calculated, rounded up to the nearest one eighth of one percent.

(b) The amount of interest payable in respect of the maturity period shall be calculated on the basis of the actual number of days that interest has accrued and a 360-day year and shall be paid by the Fund on the last day of the period or on the date the principal amount is repaid, whichever is earlier.

7. The Fund shall repay the principal amount of each drawing on the final maturity date applicable to the drawing or on such earlier repayment date as may be established pursuant to paragraph 10 or 11 of this agreement. Repayment shall not have the effect of restoring the amount that can be drawn under the facility.

8. (a) Payments by the Fund of principal and interest shall normally be made in U.S. dollars. The Fund and the Bank may agree on other means of payment, provided that, if agreement is not reached, the Fund shall have the option to pay in Belgian francs, any freely usable currency, or SDRs.

(b) Payments in U.S. dollars shall be made by crediting the amount due to an account designated by the Bank at the Federal Reserve Bank of New York. Payments in currencies other than U.S. dollars shall be made as may be agreed between the Fund and the Bank. Payments in SDRs shall be made by crediting the account of Belgium in the Special Drawing Rights Department, and shall be deemed to meet the Fund’s obligations to the Bank under this agreement to the extent of the payment.

9. Unless otherwise agreed between the Bank and the Fund, all transfers under paragraph 3, and all payments of principal and interest, shall be made at the exchange rates for the relevant currencies in terms of the SDR established by the Fund for the third business day of the Fund before the value date of the transfer or payment.

10. If the Fund changes the method of valuing the SDR, all transfers, exchanges, and payments of principal and interest made three or more business days of the Fund after the effective date of the change shall be made on the basis of the new method of valuation. Nevertheless, if the Bank so requests within 30 days after the adoption of the relevant decision of the Fund but not later than 14 days after the date the change becomes effective, the former method of determining the value of the SDR shall continue to apply to the amounts of outstanding drawings and their repayment, and in the calculation and payment of interest on such outstanding amounts. If the Bank exercises this option, the Fund shall have the right, on giving 14 days’ notice, to repay in advance of maturity all the amounts to which the option has been applied.

11. The Bank may obtain repayment of a claim on the Fund under this agreement before maturity if the Bank represents that the balance of payments and reserve position of Belgium justifies early repayment, and the Fund, having given this representation the overwhelming benefit of any doubt, determines that there is a need for such early repayment.

12. (a) Except as provided in (b) and (c) below, the commitment of the Bank to meet and renew drawings under this agreement and its claims on the Fund resulting from outstanding drawings shall be transferable only with the consent of the Fund.

(b) The Bank shall have the right to transfer at any time all or part of any claim to any member of the Fund, to the central bank or other agency of any member, or to any official entity that has been prescribed as a holder of SDRs pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement.

(c) The transferee shall, as a condition of the transfer, assume the liability of the Bank to accept a renewal of the transferred claim, and shall acquire all the rights of the Bank under this agreement with respect to such claim, except that (i) for purposes of notice of renewals, references to business days (Brussels) shall be deemed to refer to business days in the place where the transferee is situated, and (ii) the transferee shall acquire the right to request termination of renewals under paragraph 5 and early repayment under paragraph 11 only if it is a member, or the central bank or other agency of a member, and at the time of transfer the member’s balance of payments and reserve position is considered sufficiently strong for its currency to be usable in net sales in the Fund’s operational budget, and (iii) if the transferee is a member or the central bank or other agency of a member, the reference to Belgian francs in paragraph 8(a) shall be deemed to refer to the transferee’s currency, and in other cases the reference shall not apply.

13. Any question arising hereunder shall be settled by mutual agreement between the Bank and the Fund.

14. If the foregoing proposal is acceptable to the Bank, this communication and your duly authenticated reply accepting the proposal shall constitute an agreement between the Bank and the Fund, which shall enter into effect on the date the Fund acknowledges receipt of your reply.

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