NEGOTIABLE CERTIFICATES OF DEPOSIT: A PRIMER
By AP Faure

Definition
negotiable certificate of deposit, usually abbreviated to NCD, is a fixed deposit receipt issued by a bank that is negotiable in the secondary market for financial assets. The issuing bank undertakes to pay the amount of the deposit plus the interest on maturity date (in the case of short term NCDs), or interest six-monthly in arrears and the deposit amount on maturity (in the case of long NCDs). An NCD certificate contains the following information:

Name of issuing bank
Issue date
Maturity date
Amount of the deposit
Rate of interest per cent per annum
Maturity value (amount of the deposit plus interest) in the case of short NCDs
Interest dates (in the case of long NCDs)

Negotiable certificates of deposit (negotiable CDs) are the most important source of purchased funds to U. Banks that are practitioners of liabilities man- agement. Moreover, they have become one of the.

Case of discounting a Negotiable Certificate of Deposit (NCD) for one year or less. Bank (A) issues a certificate of deposit for $ 1,000,000.00 for 181 days at a rate of 10% per year and the certificate is.
Negotiable Certificate of Deposit. The following requirements and benefits are available with this deposit instrument: A minimum amount of N$1.

Historical background
The United States was the first country to create NCDs, and this took place in February 1961. As far as can be ascertained, South Africa was the second country to issue NCDs, and the first issue was made in July 1964. The first English issue took place on 28 October 1968. Building societies first issued NCDs in South Africa on 12 October 1983.

A joint press statement of the four large banks was released on 21 July 1964 regarding the introduction of NCDs from 22 July. The first issuers were Barclays Bank DCO (now First National Bank) and the Netherlands Bank (later Nedbank and now Nedcor Bank). The exact date of the first issue is not known, but it was within days of the press release. Barclays Bank issued their first NCD on 25 July 1964 (see accompanying image).

The discount houses played a major role in the NCD market from its inception. Banking correspondence reveals that the two discount houses in existence in 1964 were approached by the first issuers to act as brokers and market makers in NCDs.

Purpose of issue
As the name of the instrument hints, NCDs are deposits for fixed periods that are negotiable. Thus, a NCD is issued in exchange for a deposit, ie it is an evidence of a deposit. The fact that it is negotiable makes it an attractive instrument for investors, ie investors are not locked into the deposit. Casino enjoy pucon cl.

This instrument is available only in large denominations, ie R1 million and above, and this renders it a “wholesale” instrument. Thus the primary (and secondary) market is limited to the large investors.

Legal environment
NCDs are common law instruments, ie there is no specific law that provides for and regulates NCDs. However, the Regulations under the Banks Act 94 of 1990 limits the term of the instrument, and the amount which banks may issue. In summary:

NCDs may not be issued for periods of longer than 3 years, unless the Registrar grants authorisation in writing
Total NCDs issued may not exceed 30% of the total amount of liabilities to the public
NCDs with maturity of 12 months or less may not exceed 20% of liabilities to the public

NCDs do not rank as liquid assets for banks, and they are not eligible for use as repo assets with the Reserve Bank.

Negotiable Certificate Of Deposits (ncds)

Characteristics
In South Africa a standard set of conditions applies to the issue of NCDs. These are found on the reverse of the certificate.

As noted, NCDs may be issued for periods of up to three years (unless the Registrar of Banks has authorised a deviation from the Regulations). When issued for periods of less than one year, interest is usually payable at the end of the period. When issued for longer than one year, interest may be payable either at the end of the period or six-monthly in arrears, but usually the latter. Crown casino perth nightclub. NCDs are also issued at variable rates, usually with reference to some benchmark rate.

NCDs are usually issued in bearer form (ie not payable to any particular person), and only occasionally in the name of the depositor. In this case the endorsement of the investor is required for transfer.

NCDs may be issued in any amount, but are usually issued in denominations of R1 million. At times a bank may issue denominations of R500 000 and even R100 000 but only when part of a larger parcel.

Banks are willing to split larger denomination NCDs into smaller denominations.

Amount in issue
Between the first issue in 1964 and the first quarter of 1965 the total amount of NCDs issued grew slowly, ie up to R3 million, and stood at only R104 million at the end of 1967. It was after this period that NCDs issued grew rapidly, the amount of R2 billion being first breached in 1982.

Since 1969 total NCDs issued has kept pace with the growth in bank deposits and as a ratio thereof has fluctuated between 10% and 20%. The amount outstanding for banks was approximately R28 billion at the end of 1991, and approached R90 billion ten years later.

End of	End of	End of	End of
1964	1975	1986	1997
1965	1976	1987	1998
1966	1977	1988	1999
1967	1978	1989	2000
1968	1979	1990	2001
1969	1980	1991*	2002
1970	1981	1992*	2003
1971	1982	1993*	2004
1972	1983	1994
1973	1984	1995
1974	1985	1996
Source: South African Reserve Bank. * = numbers are not available for these three years due to a change to the reporting forms of the banks (he numbers shown are estimates). ** = also an estimate.

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