FAQs regarding the Bank of Israel Order (Information regarding Transactions in Foreign Currency Derivatives and Short-Term Debt Instruments), 5771 2011 (hereinafter: the Reporting Order) * Financial intermediary What is a financial intermediary? A financial intermediary is a banking corporation, a member of the Tel Aviv Stock Exchange and any party that engages in the purchase and sale of foreign currency against local currency or a debt instrument for others, and manages for this purpose an account at a banking corporation or with a stock exchange member. If the latter is a nonresident then a company affiliated with it is a financial intermediary. Is an institution that engages in securities custody (custodian) alone a financial intermediary? An institution that engages in the custody of securities only is not a financial intermediary under the Reporting Order and does not have an obligation to report. Is a clearing house a financial intermediary? In itself, a clearing house is not a financial intermediary under the Reporting Order. However, an institution that holds a clearing house and also manages financial intermediation activity as defined under the Order has an obligation to report on its transactions and on the transactions of its client which are conducted with it or by means of its intermediation within the framework of its activity as a financial intermediary. Does a subsidiary/branch of a banking corporation abroad or of a stock exchange member abroad need to report? A subsidiary/branch of a banking corporation abroad or of a stock exchange member abroad need to file a separate report if they answer to one of the definitions of a "financial intermediary". To facilitate the procedure, the appropriate files can be sent via the banking corporation or the stock exchange member. (See the following question.) * NOTE: In any case of any inconsistency between this document and Reporting Order, the Reporting Order will be binding. 1
Does a foreign bank that is a subsidiary/branch of a corporation abroad need to report? A foreign bank that is a subsidiary/branch of a corporation abroad need file a report if they answer to one of the definitions of a "financial intermediary". Reporting should be done separate than that of the corporation abroad. Can a banking corporation that is a financial intermediary with worldwide branches send batch reports? Reports for branches abroad can be sent by the banking corporation or by each overseas branch itself, but this must be done while observing the directives in the third appendix to the Reporting Order, according to which a separate file must be sent for each branch abroad. Does a financial intermediary conducting a transaction of an amount exceeding the reporting threshold with another financial intermediary have an obligation to report as a client as well? Yes. Do financial intermediaries conducting transactions in debt instruments have to report on their balances (Order 4(b))? Yes, only if they are a nonresident financial intermediary and on the same day they report transactions and balances for one or more clients. Does the Order also apply to transactions that are not concluded via the Israeli banking system offshore transactions that is. Yes. The reporting requirement applies to all transactions in foreign-currency derivatives and in short-term debt instruments defined in the Reporting Order conducted with a financial intermediary as defined in the Order. This includes transactions between a nonresident financial intermediary and its nonresident clients. Manner of reporting How are reports submitted to the Bank of Israel? The precise regulations governing reporting by a financial intermediary and of a resident or nonresident that are not financial intermediaries can be found in the third appendix to the order. What is the balance of debt instruments of a financial intermediary or its client? The balance of a financial intermediary (nostro) is the balance held on the reporting date (at any custodian). 2
A client s balance of debt instruments at a financial intermediary is the accrual of the client s purchases and sales (each of these separately) with the financial intermediary of those debt instruments bought/sold after 30.6.2011 and that their period to maturity at the reporting date does not exceed a year. Balances of debt instruments (of both the financial intermediary and its clients) are to be reported in thousands of NIS (face value) and should include only securities that have not reached their redemption date. What is the balance of FX derivatives? This is the client's balance, vis-a-vis the financial intermediary, of open positions on the reporting date. Purchases and sales are to be recorded separately in thousands of foreign currency units. Days mentioned in the Order Day means business day. Date regarding transaction: date in country where transaction is effected. Date regarding balance: date in country of residency of the reporter. How should corrections and cancellations be reported? A corrected file must be re-sent (in the same format and in the same name). The last file to be sent will be the one that will be taken into account. How should digital options be reported? Digital options should be reported like other options. The transaction amount (the gross amount in NIS and the gross amount in units of foreign currency exchanged for NIS) to be reported (in the appropriate field) will be the predetermined amount payable if the option s terms are fulfilled. Types of transactions Does the Reporting Order also apply to repo transactions in securities? Yes, repo transactions and sell&buyback or buy&sellback transactions must be reported. These transactions have separate reporting fields in the Order. Does the Reporting Order also apply to securities lending transactions? The Reporting Order does not apply to securities lending transactions (except for repo transactions as these are defined in the Reporting Order). 3
Does the Reporting Order also apply to transactions in debt instruments that are sent to Euroclear? If this concerns only the transferring of the custodianship of the securities, then reporting is unnecessary. However, if this concerns the execution of another transaction this would involve a financial intermediary. Does the Reporting Order also apply to futures transactions and options that are traded on the stock exchange? Does the Reporting Order also apply to spot transactions (including Sameday transactions and TOM transactions)? What is a swap transaction? A swap transaction is a transaction known as an FX swap or Cross-Currency swap as well as any swap transaction in NIS against a foreign currency that are of a similar nature to these transactions, whatever they may be called. How is a swap transaction reported? Notwithstanding that such a transaction is comprised of two elements, it is reported as one transaction having two dates. The date of the short leg is the date of the execution of the first part, whereas the date of completion/redemption is the date of the execution of the long leg. Should reporting be based on transaction value or on nominal value? Reporting should be in terms of the nominal value (the face value) of the transaction in the case of all types of transactions and instruments. What is the number of the security on the stock exchange? The number that was determined for the security on the stock exchange. According to what conversion rate should reports be submitted? When details of the contract/transaction do not include the amount in NIS and the gross amount of units of foreign currency exchanged for NIS, the conversion must be made as follows: With currencies whose representative rates are published by the Bank of Israel, the representative rate will the rate used for the purpose of the conversion. On days when the Bank of Israel does not publish a representative rate, the last rate that was published must be 4
used. With currencies whose representative rate against the NIS is not published by the Bank of Israel, a quotation from other sources which properly expresses the price at the end of the day on which the transaction was made must be selected. Is the expiration and/or repayment of a debt instrument or foreign-currency derivative regarded as a transaction? How can a client be identified in the case of a joint account? In a joint account of a resident and nonresident, all the identifying variables will be of the nonresident. In an account where all the account holders are residents and in an account where all the account holders are nonresidents, all the identifying variables will be of the partner appearing first among the names of the account holders. How is it possible to identify a client on whose behalf a trust account is managed? The client s details and the criteria for reporting will be those of the trustee. How should debt instrument transactions vis-a-vis the stock exchange and MTS be reported? If the bank executed a nostro transaction and the counterparty is not required to report, then the "client" is the bank itself. What is the economic sector of the client? The UN publishes a list of sectors in the framework of the System of National Accounts (SNA). An explanation of the methodology and a description of the sectors can be seen at: http://www.imf.org/external/pubs/ft/bop/2007/bopman6.htm 5