## Borrowing Agreement Between Banca d’Italia and the International Monetary Fund — March 10, 2011

## Source details

**Canonical URL:** [Borrowing Agreement Between Banca d’Italia and the International Monetary Fund — March 10, 2011](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2011/_031011.pdf)

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### Purposes and Maximum Amount
- Lender: Banca d’Italia; Borrower: the International Monetary Fund (the “Fund”).
- Purpose: to support the Fund’s ability to provide timely and effective balance of payments assistance and to ensure adequacy of the Fund’s financial resources.
- Maximum principal available to the Fund: SDR-denominated amount up to the equivalent of EUR 8.11 billion.

### Legal Basis and Policy Context
- Agreement based on Article VII, Section 1(i) of the Articles of Agreement of the IMF.
- Agreement to be considered in light of the Fund’s Guidelines on Borrowing, which state that quota subscriptions are and should remain the basic source of Fund financing and borrowing serves as a temporary supplement.

### Term and Drawing Period
- Initial drawing period: two years commencing on the date of the first drawing or one month after the agreement enters into force according to paragraph 15(b), whichever is earlier.
- Notice procedures: Fund to give Banca d’Italia at least five business days’ (Rome) notice before a drawing and provide payment instructions at least two business days (Rome) prior to the value date by SWIFT, unless otherwise agreed.
- Extension: With Banca d’Italia’s agreement, Fund may extend the term for successive one-year periods for a total drawing period of up to four years, effective upon at least one month’s prior notice.
- Termination option for Banca d’Italia: Banca d’Italia may terminate the term if Italy, Banca d’Italia or another official Italian institution becomes a participant in an enlarged and amended New Arrangements to Borrow (“NAB”) effective after this agreement’s date.

### Uses, Drawings Estimates and Limits
- Permitted uses:
  - (i) any use of Fund resources in the General Resources Account; or
  - (ii) payment of the Fund’s outstanding indebtedness under other official sector borrowing effected pursuant to Article VII, Section 1(i) where terms permit such use.
- Quantitative drawing limits:
  - Not more than the equivalent of EUR 1 billion during any calendar week.
  - Not more than the equivalent of EUR 4 billion during any calendar month.
  - Total outstanding drawings shall not exceed EUR 8.11 billion at any time.
- Estimation requirement: Prior to each quarter of the Fund’s financial year, the Fund shall provide Banca d’Italia with its best estimates of expected drawings for the forthcoming quarter and provide revised estimates during each quarter where warranted.

### Evidence of Indebtedness
- At Banca d’Italia’s request, Fund shall issue non-negotiable instruments evidencing indebtedness in a mutually agreed form.
- On repayment of an instrument and accrued interest, the instrument shall be returned for cancellation; partial repayments lead to substitution with a new instrument for the remainder with the same maturity date.

### Maturity and Repayment
- Standard maturity: each drawing shall have a maturity date of three months from the drawing date.
- Extension option: Fund may extend maturity in additional three-month periods at its sole discretion, automatically deemed elected for all outstanding drawings unless Fund notifies Banca d’Italia at least five business days (Rome) before a maturity date that it does not elect to extend a particular drawing or portion thereof.
- Extension limit: No maturity may be extended to a date later than the fifth anniversary of the drawing date.
- Repayments:
  - Principal payable on the applicable maturity date.
  - Fund may make early repayments after consultation and with at least five business days (Rome) written notice.
  - Repayments restore pro tanto the amount available to be drawn.
  - If a maturity date is not a business day at payment place, payment is on the next business day with interest accruing up to that payment date.

### Interest Rate and Payment Timing
- Interest rate: each drawing bears interest at the SDR interest rate established by the Fund pursuant to Article XX, Section 3; provided that if the Fund pays a higher rate on comparable Article VII, Section 1(i) borrowing, the rate on drawings under this agreement shall be equivalent to that higher rate for as long as it remains in effect.
- Interest calculation: based on outstanding amount, accrues daily.
- Interest payment schedule: paid promptly by the Fund after each July 31, October 31, January 31 and April 30.

### Denomination, Media and Modalities of Drawings and Payments
- Denomination: drawings and corresponding repayments denominated in SDRs.
- Payment of drawings: Banca d’Italia to pay by transfer of the SDR equivalent amount of euros to the Fund’s account at the designated depository of Italy on the value date specified.
- Repayments of principal: except as provided in paragraph 9 and unless otherwise agreed, repayments to be made in euros.
- Interest payments: normally in SDRs; with Banca d’Italia’s consent, may be made in euros or any other freely usable currency.
- Payment mechanics: euro payments credited to an account specified by Banca d’Italia; SDR payments credited to Italy’s account in the Special Drawing Rights Department; other currencies to an account specified by Banca d’Italia.

### Termination and Early Repayment at Banca d’Italia’s Request
- Termination of commitment to meet drawings at Banca d’Italia’s request if:
  - (i) Banca d’Italia represents that Italy’s balance of payments and reserve position does not justify further drawings, and
  - (ii) Fund determines, giving that representation the overwhelming benefit of the doubt, that no further drawing should be made.
- Early repayment at Banca d’Italia’s request:
  - Banca d’Italia may obtain early repayment at face value of all or part of outstanding drawings if:
    - (i) Banca d’Italia represents that Italy’s balance of payments and reserve position justifies such repayment, and
    - (ii) Fund determines, giving that representation the overwhelming benefit of the doubt, that early repayment is needed.
  - Repayments under this paragraph may be made in SDRs or a freely usable currency as determined by the Fund.

### Transferability of Claims
- General rule: Banca d’Italia may not transfer obligations or claims under this agreement except with prior consent of the Fund.
- Exceptions (permitted transfers without prior Fund consent):
  - To any Fund member, to the central bank or other fiscal agency designated by any member for Article V, Section 1 purposes (“other fiscal agency”), or to any official entity prescribed as a holder of SDRs pursuant to Article XVII, Section 3.
- Conditions on transferees:
  - Transferee must assume liability regarding extension of maturities per paragraph 5(a).
  - Transferred claims held on same terms and conditions, except:
    - (i) right to request early repayment under paragraph 9 only if transferee is a member or the central bank or other fiscal agency of a member and the member’s balance of payments and reserve position is considered sufficiently strong for its currency to be used in transfers under the Financial Transactions Plan;
    - (ii) if transferee is member or its fiscal agency, references to euros in paragraph 7 shall be deemed to refer to transferee’s currency; otherwise references to euros deemed to refer to a freely usable currency determined by the Fund;
    - (iii) payments related to transferred claim shall be made to an account specified by the transferee;
    - (iv) references to business days (Rome) deemed to refer to business days in the transferee’s place.
- Transfer mechanics:
  - Price of transferred claim as agreed between Banca d’Italia and transferee.
  - Banca d’Italia to notify the Fund promptly of transfer details (claim amount, transferee, price, value date).
  - The Fund shall reflect transfers in its records if in accordance with paragraph 10; transfer effective as of agreed value date.
  - If transfer occurs during a quarterly period as per paragraph 6(b), the Fund shall pay interest to the transferee on the transferred amount for the whole of that period.
  - Fund to assist in seeking to arrange transfers if requested.

### Exchange Rates and Valuation
- Exchange rate determination:
  - Unless otherwise agreed, all drawings, exchanges and payments shall be at exchange rates for relevant currencies in terms of the SDR established pursuant to Article XIX, Section 7(a) and Fund rules for the second business day of the Fund before the value date of the transfer, exchange or payment.
  - If that exchange-rate determination date is not a business day in Rome, the date shall be the last preceding business day of the Fund that is also a business day in Rome.
- Application to limits:
  - For applying limits in paragraphs 1, 3(b), and 3(c), the euro value of each SDR-denominated drawing shall be determined and permanently fixed on the drawing’s value date based on the euro/SDR exchange rate established pursuant to Article XIX, Section 7(a) for the second business day of the Fund before the value date; if that date is not a business day in Rome, it shall be the last preceding business day of the Fund that is also a business day in Rome.
- Change in SDR valuation method:
  - If the Fund changes the method of valuing the SDR, all transfers, exchanges and payments made two or more business days of the Fund after the effective date shall be on the basis of the new method.

### Non-Subordination, Settlement and Final Provisions
- Non-subordination: Fund agrees not to take any action that would have the effect of making Banca d’Italia’s claims under this agreement subordinate to claims arising from any other Article VII, Section 1(i) borrowing.
- Settlement of questions: any question arising under the agreement to be settled by mutual agreement between Banca d’Italia and the Fund.
- Execution and effectiveness:
  - Agreement may be executed in duplicate counterparts.
  - Agreement becomes effective on the date last signed or the date on which Italy provides required concurrence under Article VII, Section 1(i) for Fund borrowing of euros from Banca d’Italia, whichever is later.

*Borrowing Agreement Between Banca d’Italia and the International Monetary Fund, March 10, 2011.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2011/_031011.pdf_