Guideline No. 16/2021 of 27 October

GUIDELINE NO. 16/2021 of 27 October SUBJECT: FINANCIAL SYSTEM

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

Whereas it is necessary to regulate the technical specifics regarding the regulatory capital requirement for market risk provided for in Notice No. 08/21 of 05 July on Prudential Requirements; Pursuant to the combined provisions of points d) and f) of paragraph 1 of Article 31 and point c) of paragraph 1 of Article 54, both of Law No. 24/21 of 18 October, Law of the Banco Nacional de Angola, and Article 202 of Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions. I DETERMINE:

1. Subject Matter The present Guideline establishes the requirements that Banking Financial Institutions must consider in the calculation of capital requirements for market risk, as well as periodic reporting, in accordance with the provisions of Notice No. 08/21 of 05 July on Prudential Requirements.

2. Scope The present Guideline applies to Banking Financial Institutions under the supervision of the Banco Nacional de Angola, hereinafter referred to as Institutions, as provided for in Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions.

CONTINUATION OF GUIDELINE NO. 16/2021 Page 2 of 58 3. Definitions Without prejudice to the definitions established in Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions, for the purposes of this Guideline, the following shall be understood as: a) Forward Rate Agreements (FRA): a financial derivative instrument consisting of a forward interest rate contract in which the buyer agrees to receive a value in the form of a loan in the future remunerated at the forward (contract) rate, and the seller guarantees the contracted interest rate. However, only the difference between the interest rates (forward and market) is traded, not the underlying. b) Delta: the variation in the option's value resulting from a marginal variation in the value of its underlying asset. c) Credit Derivative: a financial derivative instrument that results in the transfer of credit risk between the contracting parties. d) Risk Factor: an aspect or characteristic that influences risk. In risk assessment, the characteristics of financial products and markets, borrowers, and processes in force at Institutions are relevant, among others. e) Futures and Forwards: financial derivative instruments consisting of forward purchase and sale contracts, by which two parties agree on a price relative to a future transaction of a specific financial instrument or commodity. The two instruments differ in that futures are standardized contracts traded on an organized market, whereas forwards are customizable contracts by the involved parties, traded on an over-the-counter (OTC) market. f) Gamma: the variation in the option's Delta resulting from a marginal variation in the value of its underlying asset.

CONTINUATION OF GUIDELINE NO. 16/2021 Page 3 of 58 g) Option: a financial derivative instrument consisting of a contract that grants the right, but not the obligation, to buy or sell a specific asset (underlying), at a specific price and on a specific date, in the case of a European option, or until a future date, in the case of an American option. h) Risk Position: exposure to an asset, an off-balance sheet item, or a financial derivative instrument, plus income of any nature not yet received, which are reflected in accounting as receivables, regardless of whether they are due or not, in accordance with the criteria established in the Chart of Accounts for Banking Financial Institutions. i) Gross Position: the sum of long and short positions in a specific type of instrument. j) Net Foreign Exchange Position: the position between active/long exposure and passive/short exposure, in foreign currency or indexed to exchange rate variation. k) Short (Passive) Position: a contractual position assumed by an investor that will record a gain with a price decrease and a loss with a price increase. l) Net Position: the excess of the long (short) position over the short (long) position in the same equity security, bond, currency, commodity, convertible instruments, or identical financial instruments. m) Long (Active) Position: a contractual position assumed by an investor that will record a gain with a price increase and a loss with a price decrease. n) Firm Underwriting of Position: the process by which an entity commits to assuming part of the Institution's risk that undertakes the firm position, based on a formal and irrevocable agreement. o) Coupon Rate: the interest rate paid by a debt instrument as a percentage of its nominal value.

CONTINUATION OF GUIDELINE NO. 16/2021 Page 4 of 58 p) Convertible Security: a security with a defined maturity where the issuing company has the possibility of delivering to the investor, on a specific date, a certain quantity of shares or bonds. q) Total Return Swap: a derivative under which all cash flows from interest payments arising from the underlying asset are remitted to another entity in exchange for a fixed payment or a variable rate payment, and any increase or decrease in the fair value of the underlying asset is absorbed by this entity. r) Vega: the variation in the option's value resulting from a variation in volatility. s) Warrant: an option issued by the issuing company of the underlying security. t) Covered Warrant: which may have a greater variety of underlying instruments, but can only be issued by Financial Institutions and grants the right, but not the obligation, not only to buy but also to sell a specific underlying instrument.

4. Regulatory Capital Requirement for Market Risk 4.1. Institutions must calculate the regulatory capital requirement for market risk, as provided for in Article 32 of Notice No. 08/21 of 05 July on Prudential Requirements, the result of which must be reported to the Banco Nacional de Angola through the maps and completion notes attached to this Guideline. 4.2. Institutions have the option to calculate the regulatory capital requirement for their trading book, in accordance with the provisions of specific regulations on capital requirements for credit risk and counterparty credit risk, provided they communicate this in advance to the Banco Nacional de Angola, and the volume of on-balance sheet and off-balance sheet activities of their trading book does not exceed 5% (five percent) of total assets and the amount of KZ 1,000 (one billion kwanzas). 4.3. Credit derivatives must be previously communicated to the Banco Nacional de Angola.

CONTINUATION OF GUIDELINE NO. 16/2021 Page 5 of 58 5. Reporting 5.1. Institutions must report the information required in paragraph 1 of Article 32 of Notice No. 08/21 of 05 July on Prudential Requirements, on an individual and consolidated basis, quarterly, through the maps and completion notes attached to and forming an integral part of this Guideline. 5.2. For the purposes of the preceding sub-point, if it is a financial group, the parent company must report the information, in accordance with the consolidation perimeter provided for in Article 5 of Notice No. 08/21 of 05 July on Prudential Requirements. 5.3. Institutions that, due to the nature of their activity, do not have information to report to the Banco Nacional de Angola, must declare this fact through the maps attached to and forming an integral part of 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 provisions established in this Guideline constitutes an offense punishable under Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions.

7. Transitional Provisions 7.1. Institutions must comply with the provisions of this Guideline from 31 December 2021. 7.2. For the purposes of sub-point 5.1 of this Guideline, Institutions must report the information required in paragraph 1 of Article 32 of Notice No. 08/21 of 05 July on Prudential Requirements, on an individual basis monthly and on a consolidated basis quarterly, until August 2022.

CONTINUATION OF GUIDELINE NO. 16/2021 Page 6 of 58 7.3. Without prejudice to the preceding sub-point, Institutions must report the information required in paragraph 1 of Article 32 of Notice No. 08/21 of 05 July on Prudential Requirements, on an individual and consolidated basis quarterly from September 2022.

8. Doubts and Omissions Doubts and omissions resulting from the interpretation and application of this Guideline shall be resolved by the Banco Nacional de Angola.

9. Repeal All regulations contrary to the provisions of this Guideline are hereby repealed, notably Guideline No. 14/16 of 08 August on Calculation and Requirement of Regulatory Capital for Market Risk and Counterparty Credit Risk in the Trading Book and Guideline No. 15/16 of 08 August on Reporting of Capital Requirements for Market Risk and Counterparty Credit Risk in the Trading Book.

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

CONTINUATION OF GUIDELINE NO. 16/2021 Page 7 of 58 ANNEX I Calculation of Net Positions

1. The net position of an Institution in each of the different instruments is the difference between its long and short positions in equity securities, debt instruments, or convertible securities, in the same currency or commodity, and in identical contracts relating to futures, options, warrants, and covered warrants.
2. All net positions in foreign currency, regardless of their sign, must be converted into national currency at the reference exchange rate of the Banco Nacional de Angola on the date of reporting, before their aggregation.
3. The calculation of the net position between a convertible security and a hedging position of its underlying instrument is not permitted.
4. Interest rate futures contracts, Forward Rate Agreements (FRA), and forward commitments to purchase or sell debt instruments must be treated as combinations of long and short positions. In this case, a "long position" is considered the position in which the Institution has fixed the interest rate it will receive in the future, and a "short position" is the position in which it has fixed the interest rate it will pay in the future, according to the following: a) Long position in interest rate futures contracts - must be treated as the combination between: i. A loan taken out, maturing on the delivery date of the futures contract; and ii. A holding of an asset with a maturity date equal to that of the instrument or notional position underlying the futures contract in question; b) Sold FRA – must be treated as a combination between: i. A long position with a maturity date equal to the settlement date, plus the contractual period; and

CONTINUATION OF GUIDELINE NO. 16/2021 Page 8 of 58 ii. A short position with a maturity date equal to the settlement date; c) Forward commitment to purchase debt instruments – must be treated as a combination between: i. A loan taken out, maturing on the delivery date, and: ii. A long (spot) position in the debt instrument itself; d) Positions contrary to those described above must be treated symmetrically to those referred to in the preceding sub-points. 5. Options on interest rates, debt instruments, equity securities, stock indices, futures on financial instruments, swaps, currencies, and commodities must be considered as positions with a value equal to that of the underlying instrument of the option, multiplied by their respective delta. 6. For the purposes of the preceding number, the delta to be used must be that of the exchange where the options are tradable. In the event that the aforementioned delta is not available or for over-the-counter (OTC) options, the delta used must be calculated by the Institution, which must submit the model used for approval by the Banco Nacional de Angola. Authorization is granted if the model adequately estimates the rate of variation of the option or warrant value relative to small variations in the market price of the underlying instrument. 7. Positions in futures on financial instruments not related to interest rates and forward commitments to purchase or sell the same must be considered, at the notional amount, as positions in the underlying instruments or commodities, with a maturity date assigned based on the maturity date. 8. For the purposes of the provisions in numbers 5 and 7 of this Annex, Institutions may determine the net position between these positions and any hedging positions in identical commodities or securities to the underlying ones or in derivative instruments.

CONTINUATION OF GUIDELINE NO. 16/2021 Page 9 of 58 9. Warrants must be treated in the same manner as described for options. 10. Institutions must duly take into account other risks, considering the provisions of Annex IX of this Guideline, in addition to non-delta risk, in the capital requirements associated with options and warrants. 11. An interest rate swap, under which an Institution receives interest at a variable rate and pays interest at a fixed rate, must be considered as a combination between: a) A long position in a variable rate instrument whose maturity period is equivalent to the period until the next interest rate reset; and b) A short position in a fixed rate instrument with the same maturity period as the swap. 12. For the purposes of calculating the capital requirement for general risk coverage, Institutions may offset positions in interest rate derivative instruments that cumulatively meet the following conditions: a) The positions have the same value and are denominated in the same currency; b) Variable rate positions have the same reference rate, and fixed rate positions have a difference between rates not exceeding 0.15% (fifteen hundredths of a percent); c) The difference between the interest rate reset dates for variable rate instruments or between the maturity dates for fixed rate positions, based on the shorter of the residual maturity periods, is less than: i. 1 (one) day, for instruments to be offset whose residual maturity is less than 1 (one) month; ii. 7 (seven) days, for instruments to be offset whose residual maturity is between 1 (one) month and 1 (one) year; and iii. 30 (thirty) days, for instruments to be offset whose residual maturity is greater than 1 (one) year.

CONTINUATION OF GUIDELINE NO. 16/2021 Page 10 of 58 13. For the determination of the position, for the purposes of calculating the capital requirement, when an Institution is a seller of a credit derivative, it must use the notional value of the derivative. 14. In the situations referred to in the preceding number, positions are determined as follows: a) A total return swap originates: i. Regarding general risk, a long position in the underlying and a short position in debt securities of the Banco Nacional de Angola (Central Bank Securities) denominated in national currency with a maturity equivalent to the period until the next interest rate reset, to which a risk weighting coefficient of 0% (zero percent) is assigned; ii. Regarding specific risk, the underlying originates a long position; b) A credit default swap only gives rise to specific risk, and the Institution must record a synthetic long position in the underlying, but with the maturity of the credit default swap. If premium or interest payments are due, these cash flows must be recorded as notional positions in debt securities of the Banco Nacional de Angola (Central Bank Securities) denominated in national currency. 15. When an Institution is a buyer of a credit derivative, it must calculate its position symmetrically to that described when it is the seller of the derivative. 16. If the Institution transfers securities or commodities (or rights guaranteed relating to their ownership) that are part of the trading book, in a sale with a repurchase agreement or in a securities lending transaction, it must include the respective securities or commodities in the calculation of its net position for the purposes of this Annex.

CONTINUATION OF GUIDELINE NO. 16/2021 Page 11 of 58 17. If the Institution receives securities or commodities (or rights guaranteed relating to their ownership) that are part of the trading book, in a sale with a repurchase agreement or in a securities lending transaction, it must not include the respective securities or commodities in the calculation of its net position for the purposes of this Annex.

CONTINUATION OF GUIDELINE NO. 16/2021 Page 12 of 58 ANNEX II Debt Instruments

1. Institutions must classify their net positions in debt instruments based on the currency in which these positions are denominated and calculate the capital requirement for specific risk and general risk coverage by currency, according to the following points. Specific Risk: For the purposes of calculating the capital requirement for specific risk, the following procedure must be followed:
2. Net positions in the trading book are allocated to the categories in Table 1 of this Annex, taking into account the respective issuer/debtor, residual maturity, and external credit risk assessment, in accordance with specific regulations on external rating agencies. The maturity period is considered, in the case of fixed interest rate instruments, the residual term, and in the case of variable interest rate instruments, the period until the next interest rate reset. The Banco Nacional de Angola may determine that instruments included in the last line of Table 1 of this Annex are subject to a higher specific risk requirement and/or not recognize the offsetting effect between these instruments and any other debt securities, for the purposes of calculating the capital requirement for general risk coverage.
3. The values referred to in the preceding number are multiplied by the weighting coefficients indicated in the same table.
4. The capital requirement is the result of the sum of the weighted net positions, regardless of whether they are long or short.
5. In the event that the Institution's portfolio includes its own debt instruments, these must not be included in the calculation of the capital requirement for specific risk.

CONTINUATION OF GUIDELINE NO. 16/2021 Page 13 of 58 Table 1

Categories	Regulatory Capital Requirement for Specific Risk
Debt securities to which a risk weighting of 0% corresponds according to Annex I of Guideline No. 15/21 of 27 October on calculation and requirement of capital for credit risk and counterparty credit risk.	0%
Debt securities to which a risk weighting of 10% corresponds according to Annex I of Guideline No. 15/21 of 27 October on calculation and requirement of capital for credit risk and counterparty credit risk.	0.125% (residual maturity equal to or less than 6 months)<br>0.50% (residual maturity greater than 6 months and up to 24 months)<br>0.80% (residual maturity greater than 24 months)
Debt securities to which a risk weighting of 20% or 50% corresponds according to Annex I of Guideline No. 15/21 of 27 October on calculation and requirement of capital for credit risk and counterparty credit risk.	0.25% (residual maturity equal to or less than 6 months)<br>1.00% (residual maturity greater than 6 months and up to 24 months)<br>1.60% (residual maturity greater than 24 months)
Debt securities to which a risk weighting of 100% corresponds according to Annex I of Guideline No. 15/21 of 27 October on calculation and requirement of capital for credit risk and counterparty credit risk.	8.00%
Debt securities to which a risk weighting of 150% corresponds according to Annex I of Guideline No. 15/21 of 27 October on calculation and requirement of capital for credit risk and counterparty credit risk.	12.00%

General Risk: For the purposes of calculating the capital requirement for general risk, the following procedure must be followed:

CONTINUATION OF GUIDELINE NO. 16/2021 Page 14 of 58 6. Net positions are allocated to the appropriate maturity intervals in the second or third column of Table 2 of this Annex and classified into zones also according to the same Table. The maturity period is considered, in the case of fixed interest rate instruments, the residual term, and in the case of variable interest rate instruments, the period until the next interest rate reset. 7. The sum of weighted long positions and the sum of weighted short positions are calculated for each maturity interval. 8. The amount of weighted long positions that is offset by weighted short positions, for each maturity interval, constitutes the offset weighted position of that interval, and the residual position, long or short, constitutes the unoffset weighted position of that same interval. 9. The total of offset weighted positions in all intervals is calculated. 10. To determine the unoffset weighted long position and the unoffset weighted short position in each zone of Table 2 of this Annex, the Institution must calculate their respective totals in all intervals included in each zone. The part of the unoffset weighted long/short position in a zone that is offset by the unoffset weighted short/long position of that same zone constitutes the offset weighted position of the zone. The part of the unoffset weighted long/short position in a zone constitutes the unoffset weighted position of that zone. 11. The part of the unoffset weighted long/short position in zone one (Z-1) that is offset by the unoffset weighted short/long position of zone two (Z-2) constitutes the offset weighted position between zones one (Z-1) and two (Z-2). 12. The same calculations must be carried out regarding the remaining part of the unoffset weighted position of zone two (Z-2) and the position

CONTINUATION OF GUIDELINE NO. 16/2021 Page 15 of 58