Regulatory Alerts2021-01-05
Directive No. 01/DRO/2021, dated January 6
The Department of Regulation and Organization of the Financial System (DRO) issued Directive No. 01/DRO/2021 to mandate Banking Financial Institutions in Angola to record additional state credit impairments, arising from the country's rating downgrade and COVID-19 macroeconomic pressures, in national currency while adjusting for Kwanza exchange rate fluctuations. The directive requires that these nationally denominated impairments permanently reflect the equivalent value of foreign currency exposures, while pre-existing foreign currency impairments remain unchanged. It applies to all state credit exposures from Treasury Bonds, loans, and other liabilities, takes immediate effect, and remains valid until the National Bank of Angola issues contrary instructions.
GOVERNOR ACTING DIRECTIVE NO. 01/DRO/2021 ORIGIN: Department of Regulation and Organization of the Financial System (DRO) DATE 06/01/2021 SUBJECT: FINANCIAL SYSTEM
- Establishment of Impairments for State Exposure, Denominated in Foreign Currency
Considering the publication of Notice No. 21/2020 dated October 26, regarding the Deferral of Impairment Recognition for Public Debt Securities of the Republic of Angola, recorded in the balance sheets of Banking Financial Institutions; Following the occurrence of the COVID-19 pandemic, which has worsened Angola's macroeconomic outlook, resulting in an increase in the credit risk of state debt and other state liabilities, and consequently the need to record additional impairments on this exposure by Banking Financial Institutions; Pursuant to paragraph (e) of Article 90 of Law No. 12/15, dated June 17, the Basic Law of Financial Institutions.
This Directive serves to establish the following:
- Additional impairments resulting from Angola's credit rating downgrade, established by Banking Financial Institutions on their state credit exposure denominated in foreign currency, must be exceptionally recorded in the national currency and updated according to the variation of the Kwanza exchange rate against the denomination currency of the exposure.
CONTINUATION OF DIRECTIVE NO. 01/DRO/2021 2 of 2 2. Impairments established in the national currency must permanently represent the equivalent of the required impairment value calculated on the state credit exposure value in foreign currency. 3. Impairments established in foreign currency on state exposure in that currency, prior to the publication of this Directive, must remain recorded in the same currency. 4. This Directive applies to the entirety of Banking Financial Institutions' state credit exposure, resulting from Treasury Bonds, financing or loans as well as other liabilities assumed by the State towards them. 5. The provisions of this Directive shall be applied from its publication date and remain in force until contrary instruction by the National Bank of Angola. 6. Non-compliance with this Directive constitutes an offense provided for and punishable under Law No. 12/15, dated June 17, the Basic Law of Financial Institutions. 7. Doubts and omissions arising from the interpretation of this Directive are resolved by the National Bank of Angola. 8. This Directive enters into force immediately.
Luanda, January 6, 2021. DEPARTMENT OF REGULATION AND ORGANIZATION OF THE FINANCIAL SYSTEM Cândido Abrantes Pina -Acting Director-