Guideline No. 15/2021, of October 27

GUIDELINE NO. 15/2021, Of October 27 SUBJECT: FINANCIAL SYSTEM

• Calculation and Requirement of Regulatory Capital for Credit Risk and Counterparty Credit Risk and Corresponding Periodic Reporting

Given the need to regulate the technical specifics regarding the regulatory capital requirement for credit risk and counterparty credit risk as provided in Notice No. 08/21, of July 05, on Prudential Requirements; Under the combined provisions of letters d) and f) of paragraph 1 of Article 31.º and letter c) of paragraph 1 of Article 54.º, both of Law No. 24/21, of October 18, Law of the National Bank of Angola, and Article 198.º of Law No. 14/21, of May 19, Law of the General Regime of Financial Institutions. I DETERMINE:

1. Object This Guideline establishes the requirements that Banking Financial Institutions must consider in the calculation of capital requirements for credit risk and counterparty credit risk, as well as periodic reporting, in accordance with the provisions of Notice No. 08/21, of July 05, on Prudential Requirements.

2. Scope This Guideline applies to Banking Financial Institutions under the supervision of the National Bank of Angola, hereinafter abbreviated as Institutions, as provided in Law No. 14/21, of May 19, Law of the General Regime of Financial Institutions.

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3. Definitions Without prejudice to the definitions established in Law No. 14/21, of May 19, Law of the General Regime of Financial Institutions, for the purposes of this Guideline, the following shall be understood: 3.1. Netting Agreements: any written bilateral agreement between an Institution and a counterparty that creates a single legal obligation covering all bilateral agreements and transactions included therein. 3.2. External Rating Agency: entity that conducts external credit risk assessments, at the request of the rated entity or on its own initiative. 3.3. Credit Risk Assessment: a forward-looking opinion on the overall credit quality or of a specific issuance by a borrower, focusing on the analysis of the borrower's capacity and willingness to honor its financial commitments on maturity dates. 3.4. Novation Agreement: a bilateral contract between an Institution and a counterparty, under which reciprocal rights and obligations are automatically offset, such that in each novation a single net amount is fixed, giving rise to a new single, legally binding contract that extinguishes the previous contracts. 3.5. Minimum Lease Payments: payments during the lease term that are or may be required to be made by the lessee, excluding contingent rent, costs related to services and taxes paid by the lessor and subsequently reimbursed to it, together with: a) For the lessee, any amounts guaranteed by the lessee or by a party related to the lessee; or b) For the lessor, any residual value guaranteed to the lessor by: i. The lessee; ii. A party related to the lessee; or,

CONTINUATION OF GUIDELINE NO. 15/2021 Page 3 of 69 iii. An unrelated third party to the lessor that is financially capable of fulfilling the obligations under the guarantee. 3.6. Items in Collection: funds in the form of checks or other instruments in the process of clearing.

4. Regulatory Capital Requirement for Credit Risk and Counterparty Risk 4.1. Institutions must calculate the regulatory capital requirement for credit risk and counterparty risk, as provided in Article 30.º of Notice No. 08/21, of July 05, on Prudential Requirements, in accordance with the annexes to this Guideline. 4.2. For the purposes of calculating off-balance sheet positions, the instruments described in Annex II must be considered, and particularly, for financial derivative instruments, counterparty credit risk must be considered, in accordance with Annex III, both of this Guideline. 4.3. Without prejudice to the provisions of the preceding paragraph, the calculation of risk positions and the amount of risk-weighted positions must consider credit risk reduction, in accordance with Annex IV, as well as the use of credit ratings, in accordance with Annex V, both of this Guideline.

5. Reporting 5.1. Institutions must report the information required in Article 30.º of Notice No. 08/21, of July 05, on Prudential Requirements, on an individual and consolidated basis, quarterly, using the forms and filling notes attached to this Guideline. 5.2. For the purposes of the preceding paragraph, in the case of a financial group, the parent company must report the information, according to the consolidation perimeter, provided in Article 5.º of Notice No. 08/21, of July 05, on Prudential Requirements.

CONTINUATION OF GUIDELINE NO. 15/2021 Page 4 of 69 5.3. Institutions that, due to the nature of their activity, do not have information to report to the National Bank of Angola, must declare this fact using the forms attached to this Guideline. 5.4. Institutions must ensure that the data reported in the tables attached to this Guideline are properly documented.

6. Sanctions Non-compliance with the mandatory rules established in this Guideline constitutes an offense punishable under Law No. 14/21, of May 19, Law of the General Regime of Financial Institutions.

7. Transitional Provisions 7.1. Institutions must comply with the provisions of this Guideline as of December 31, 2021. 7.2. For the purposes of Annex I of this Guideline, risk positions on central administration, notably the Angolan State and the National Bank of Angola, that are not denominated and financed in national currency, may be weighted at 20% (twenty percent) until December 2021 and at 50% (fifty percent) until December 2022, and must be in compliance with the provisions of this Guideline as of December 2023. 7.3. For the purposes of subpoint 5.1 of this Guideline, Institutions must provide the information required in Article 30.º of Notice No. 08/21, of July 05, on Prudential Requirements, on an individual basis, monthly, and on a consolidated basis, quarterly, until August 2022. 7.4. Institutions must provide the information required in Article 30.º of Notice No. 08/21, of July 05, on Prudential Requirements, on an individual and consolidated basis, quarterly, as of September 2022.

8. Doubts and Omissions Doubts and omissions resulting from the interpretation and application of this Guideline are resolved by the National Bank of Angola.

CONTINUATION OF GUIDELINE NO. 15/2021 Page 5 of 69 9. Revocation All regulations that contradict the provisions of this Guideline are hereby revoked, notably Guideline No. 12/16, of August 08, on Calculation and Requirement of Regulatory Capital for Credit Risk and Counterparty Credit Risk, and Guideline No. 13/16, of August 08, on Reporting of Regulatory Capital Requirement for Credit Risk and Counterparty Credit Risk.

10. Entry into Force This Guideline enters into force on the date of its publication. PUBLISH Luanda, October 27, 2021 THE GOVERNOR JOSÉ DE LIMA MASSANO

CONTINUATION OF GUIDELINE NO. 15/2021 Page 6 of 69 ANNEX I Calculation of the Amount of Risk-Weighted Positions

1. The regulatory capital requirement to cover credit risk must be 8% (eight percent) of the amount of risk-weighted positions.
2. The amount of risk-weighted positions must be calculated based on the weighting coefficients established in paragraph 7 of this Annex, multiplied by the value of risk positions, as defined in paragraph 5 of this Annex.
3. For the purposes of the preceding paragraph, the application of weighting coefficients is based on the risk class to which the risk position belongs, in accordance with paragraph 6 of this Annex, and its credit quality, determined by reference to credit ratings from external rating agencies in accordance with Annex V of this Guideline.
4. Whenever a risk position is subject to credit protection, the applicable risk weight for that element may be modified in accordance with Annex IV of this Guideline.
5. The value of risk positions must be determined as follows: a) For asset risk positions, the value of the risk position corresponds to its book value on the balance sheet according to the Chart of Accounts for Banking Financial Institutions (PCIFB); b) Without prejudice to the provisions of letter c) of this paragraph, for off-balance sheet exposures, the risk position consists of the value resulting from multiplying its notional value by the following factors, according to the list in Table 1 of Annex II of this Guideline: i. 100% (one hundred percent) for high-risk elements; ii. 50% (fifty percent) for medium-risk; iii. 20% (twenty percent) for medium/low-risk; and

CONTINUATION OF GUIDELINE NO. 15/2021 Page 7 of 69 iv. 0% (zero percent) for low-risk; c) The value of the risk position of a derivative instrument included in the list of Table 2 of Annex II of this Guideline must be determined in accordance with the method described in paragraphs 5 to 7 of Annex III of this Guideline, with the effect of novation agreements and other netting agreements taken into account in the application of those methods, in accordance with paragraphs 8 to 10 of Annex III of this Guideline; d) For the purposes of the preceding letters, assets directly deducted from capital, impairments, and other capital reductions related to the risk position element are excluded. e) Whenever a risk position is subject to a credit risk reduction, the value of the risk position may be modified in accordance with Annex IV of this Guideline.

Identification of Risk Classes 6. Institutions must use the following risk classes to classify their risk positions: a) Public Entities This class is composed of the following subcategories: i. Central administrations: include Governments and Central Banks when recognized by their respective Government; ii. Other administrations:

1. Regional administrations or local authorities of a sovereign State;
2. Churches and religious communities, which take the form of a public law legal entity and have the right to levy fees, are treated as other administrations. iii. Public sector entities:

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1. Administrative bodies that are owned by central administrations or other administrations, or entities that, in the opinion of the National Bank of Angola, exercise the same responsibilities as other administrations;
2. Non-commercial enterprises owned by central administrations that have specific guarantee agreements, which may include bodies with administrative authority under public supervision;
3. Non-profit legal entities of public or private law, whether resident or non-resident, are treated as public sector entities;
4. Enterprises majority-owned by the Angolan State. b) Organizations This class is composed of the following subcategories: i. International Organizations: include supranational bodies established by two or more sovereign States whose purpose is to mobilize financial assistance for the benefit of their members; ii. Multilateral Development Banks: include organizations, composed exclusively or mainly of sovereign States, that provide financial assistance and professional advice with the objective of promoting economic or social development activities in recipient countries. c) Institutions This class is composed of public or private law entities, resident or non-resident, with the nature of Financial Institutions as described in the terms and conditions provided in the Law of the General Regime of Financial Activity and Financial Institutions, with the exception of Financial Institutions linked to insurance activity. d) Corporates

CONTINUATION OF GUIDELINE NO. 15/2021 Page 9 of 69 This class is composed of private law entities, resident and non-resident, that carry out non-financial or non-insurance activity. e) Retail Portfolio i. The retail portfolio includes risk positions on individuals, or on small or medium-sized enterprises, which must cumulatively meet the following conditions:

1. The risk position must arise from credits and revocable credit lines (including credit cards and bank overdrafts), or individual credits (including auto credit and consumer credit), or credit lines and commitments with small or medium-sized enterprises.
2. The risk position must be one of a significant number of other risk positions, all with similar characteristics, such that when considering the risk associated with that position, it is significantly diversified.
3. The total amount due to the institution, considering its current and past-due values, towards the counterparty or group of interconnected counterparties, does not exceed the value of 700,000,000.00 AKZ (seven hundred million Kwanzas). ii. Lease transactions, excluding their respective residual value, contracted with individuals or with small or medium-sized enterprises, may be included in the retail portfolio. iii. Exchange-traded securities are specifically excluded from this category. Mortgage credit is excluded as it is treated in a specific risk class. f) Risk Positions Secured by Real Estate This class is composed of risk positions secured, wholly or partially, by real estate intended for the borrower's residence or leased by them, or by multi-purpose real estate intended for offices or commerce.

g) Past-Due Elements i. Unsecured portion of any risk position that the institution considers there is a reduced probability of the debtor fully fulfilling its obligations or whose maturity date occurred more than 90 (ninety) days ago and whose past-due value is above a limit of 15,000.00 AKZ (fifteen thousand Kwanzas), net of impairments and any values deducted from the book value; ii. The limit defined in the preceding point may be adjusted to the institution's reality whenever it can demonstrate to the National Bank of Angola that another value is more appropriate; iii. For the purposes of defining the secured portion of the risk position, risk reduction techniques eligible under Annex IV of this Guideline are permitted. h) Mortgage Bonds or Public Sector Bonds i. Mortgage bonds consist of bonds secured by mortgages, with the guarantee respecting the conditions set out in Annex IV of this Guideline; ii. Public sector bonds consist of bonds secured by central administrations and other administrations, with the guarantee respecting the conditions set out in Annex IV of this Guideline. i) Other Elements The remaining balance sheet and off-balance sheet exposures must be incorporated into this risk class.

ii) Risk Weights 7. Institutions must apply the following risk weights to their risk positions according to the classes to which they are associated, as provided in the preceding paragraph:

CONTINUATION OF GUIDELINE NO. 15/2021 Page 11 of 69 a) Public Entities i. Central Administrations

1. A weight of 0% (zero percent) must be applied to risk positions, denominated and financed in national currency, on the central administration of Angola and the National Bank of Angola.
2. To risk positions on other central administrations for which a credit risk assessment has been established by an external rating agency, a risk weight must be applied in accordance with Table 01 of this Annex. Table 01 | Credit Quality Grade | 1 | 2 | 3 | 4 | 5 | 6 | |---|---|---|---|---|---|---| | Risk Weight | 0% | 20% | 50% | 100% | 100% | 150% |
3. If the provisions of paragraphs 1 to 2 do not apply, a weight of 100% (one hundred percent) must be applied to risk positions on central administrations.
4. When the competent authorities of a third country, with regulation and supervision equivalent to those applied by the National Bank of Angola, assign a risk weight lower than indicated in paragraphs 2 to 3 to risk positions on their central administration or central bank, denominated and financed in their national currency, institutions may apply the same weight to those risk positions, except when the National Bank of Angola determines a more restrictive risk weight. ii. Other Administrations
5. Risk positions on regional administrations or local authorities may be treated as positions on central administrations when there is no difference in their risk due to the existence of specific powers of regional administrations or local authorities regarding fee collection and/or institutional agreements that reduce their default risk.
6. For the purposes of the preceding paragraph, the National Bank of Angola maintains a publicly available database of all regional administrations or local authorities considered as risk positions on central administrations.
7. When the competent authorities of a third country, with regulation and supervision equivalent to those applied by the National Bank of Angola, treat risk positions on their regional administrations or local authorities as risk positions on their respective central administration, institutions may apply the central administration weight to risk positions on other regional administrations or local authorities.
8. To risk positions on other administrations of Angola, that are not referred to in paragraphs 1 or 3 and that are denominated and financed in national currency, a weight of 20% is applied.
9. If the provisions of paragraphs 1 to 4 do not apply, risk positions on other administrations are treated as positions on Institutions. iii. Public Sector Entities
10. To risk positions on public sector entities, for which no credit assessment has been established by a recognized external rating agency, a risk weight must be applied according to the credit quality degree assigned to risk positions on the central administration of the jurisdiction where the public sector entity is established, in accordance with Table 02.

CONTINUATION OF GUIDELINE NO. 15/2021 Page 13 of 69 Table 02

Credit Quality Degree of Central Administration	1	2	3	4	5	6
Risk Weight	20%	50%	100%	100%	100%	150%

2. For risk positions on public sector entities, for which no credit assessment has been established for the public sector entity and the central administration is not rated, a risk weight of 100% (one hundred percent) is applied.
3. Risk positions on public sector entities for which a credit assessment has been established by an external rating agency are treated as positions on institutions.
4. In exceptional cases, risk positions on public sector entities may be treated as risk positions on the central administration whenever, upon request by Institutions, the National Bank of Angola considers that there are no differences in the risk of these types of positions, as a result of the existence of an appropriate guarantee provided by the central administration.
5. When the competent authorities of a third country, with regulation and supervision equivalent to those applied by the National Bank of Angola, treat risk positions on public sector entities as risk positions on their respective central administration, Institutions may apply the central administration weight to risk positions on public sector entities. b) Organizations i. a weight of 0% (zero percent) must be applied to risk positions on international organizations and multilateral development banks mentioned in Annex VI of this Guideline. ii. if the provisions of the preceding point do not apply, risk positions on multilateral development banks are treated as positions on Institutions. iii. if the provisions of point i. of this letter do not apply, risk positions on international organizations are treated as positions on Corporates. c) Institutions i. to risk positions on institutions, for which a credit risk assessment has been established by an external rating agency, a weight must be applied in accordance with Table 03.

CONTINUATION OF GUIDELINE NO. 15/2021 Page 14 of 69 Table 03

Credit Quality Grade	1	2	3	4	5	6
Risk Weight	20%	50%	50%	100%	100%	150%
ii. if the provisions of the preceding point do not apply, to risk positions on Institutions a weight of 100% (one hundred percent) must be applied.
iii. if the risk weight assigned to risk positions on the central administration of the country where the institution is established differs from that presented in points i. or ii. of this letter, as applicable, the greater of the weights must always be assigned.
iv. to risk positions on Institutions with an initial maturity not exceeding 3 (three) months, for which a short-term credit risk assessment has been established by an external rating agency, a weight must be applied in accordance with Table 04.
Table 04
Credit Quality Grade	1	2	3	4	5	6
---	---	---	---	---	---	---
Risk Weight	20%	20%	20%	50%	50%	150%
v. whenever the assessment mentioned in the preceding point is not available, a weight of 20% (twenty percent) must be applied.
d) Corporates
i. to risk positions on corporates, for which a credit risk assessment has been established by an external rating agency, a weight must be applied in accordance with Table 05.
Table 05
Credit Quality Grade	1	2	3	4	5	6
---	---	---	---	---	---	---
Risk Weight	20%	50%	100%	100%	150%	150%
ii. if the provisions of the preceding point do not apply, to risk positions on corporates a weight of 100% (one hundred percent) must be applied.
iii. if the risk weight assigned to risk positions on the ad