Since January 1998, the Central Bank has implemented monetary policy by issuing its own Securities using market based techniques - commonly known as Open Market Operations (OMO). CBS Securities are the predominant monetary policy instrument, which is issued to influence the amount of liquidity in the financial system. There are six different terms to maturity available to investors – 14-days, 28-days, 56-days, 91-days, 182-days and 365-days maturities. On a weekly basis, the Central Bank of Sāmoa conducts its Open Market Operations to influence the level of free liquidity available and ultimately the level of interest rates in the Samoan financial market.
The immediate target for open market operations is reserve money, particularly the commercial banks’ free liquidity component that is measured by the overall balance of the commercial banks’ exchange settlement accounts (ESA) or demand deposits with the Central Bank of Sāmoa.
A Central Bank of Samoa security is a short-term financial instrument, in much the same way that a bank deposit is a financial instrument. As with other financial instruments, there are two parties involved - the issuer, who is raising funds, and the investor. In this case, the Central Bank of Samoa is the issuer and raises funds by issuing the security, and the investors are those who purchase the security.
When the Central Bank receives the funds, it issues the investor with a certificate of title which acts as a receipt and evidence of ownership. This certificate is the actual security. It states how much has been invested, when the investment matures and how much the Central Bank will pay back when the investment matures. Repayment is guaranteed by the Central Bank of Samoa.
The securities are issued in accordance with the Prospectus for Central Bank of Samoa securities. The Prospectus is a legal document which stipulates the features of the securities and how the securities must be issued. This type of document protects the integrity of the tender, thereby protecting the interests of the investors.