Notice No. 08/2017 of 07 November: Classification of Subsystems of the Angola Payment System

NOTICE NO. 08/2017 SUBJECT: ANGOLA PAYMENT SYSTEM – Classification of Subsystems

Given the need to update the regulation of the clearing and settlement subsystems of the Angola Payment System (SPA), with a view to adopting risk control mechanisms;

Given, equally, the need to establish guidelines for the operation of the aforementioned subsystems, as well as the responsibilities related to their operationalization;

Considering the provisions established in paragraph 2 of Article 3 of Law No. 05/05 of July 29, the Angola Payment System Law;

Under the terms of the combined provisions of Article 7 of Law No. 05/05 of July 29, the Payment System Law, and Article 51 of Law No. 16/2010 of July 15, the National Bank of Angola Law.

I DETERMINE:

Article 1. (Object and Scope)

1. The purpose of this Notice is to regulate the classification of the clearing and settlement subsystems of the Angola Payment System (SPA), with a view to adopting risk control mechanisms, as well as to provide for the operation and operationalization of the aforementioned subsystems, and the responsibilities of their respective operators.

CONTINUATION OF NOTICE NO. 08/2017 page 2 of 16 2. The following entities are subject to the provisions of this Notice and the complementary norms published by the National Bank of Angola (BNA): a) The operators of the clearing and settlement subsystems of the SPA; b) Payment service providers; c) Direct and indirect participants of the clearing and settlement subsystems.

Article 2. (Definitions) For the purposes of this Notice, the following are understood:

a) Payment subsystem: a set of rules, procedures, and instruments that allows the transfer of funds between participating institutions. It includes the participants and the entity that operates the central mechanism.

b) Systemically important subsystem: a subsystem that, due to the nature or amounts of transactions processed therein, may shake public confidence in the Payment System and the national currency, or generate risk to the solidity and regular functioning of the national Financial System as a result of its non-functioning or functioning in disagreement with its respective manuals of norms and procedures.

c) Subsystem of relevant importance: a subsystem that may jeopardize the credibility of the Financial System, causing a decrease in public confidence in banks, the Payment System, or the national currency, or negatively interfere with the achievement of the SPA's objective to replace the use of paper and cash payment instruments with electronic payment instruments, as a result of its non-functioning or functioning in disagreement with its respective manuals of norms and procedures.

CONTINUATION OF NOTICE NO. 08/2017 page 3 of 16 d) Operator of a clearing and/or settlement subsystem: any entity that operates a subsystem whose functioning may result in interbank fund transfers.

e) Credit risk: the risk that the counterparty does not settle its obligation in full, whether at maturity or subsequently.

f) Liquidity risk: the risk that the counterparty does not settle an obligation in full at maturity.

Article 3. (Classification of subsystems in the SPA)

1. The following are classified as Systemically Important Subsystems: a) Real-Time Payments Subsystem (SPTR), which ensures the automatic processing and real-time, transaction-by-transaction settlement of interbank electronic fund transfers in national currency; b) Market and Asset Management Subsystem (SIGMA), which ensures the registration and custody of book-entry securities issued by the Treasury or by the BNA, and the gross settlement of transactions in national and foreign currency of the aforementioned securities; c) Securities and other financial instruments clearing and settlement system created under the terms of the Securities Law.

2. The following are classified as Subsystems of Relevant Importance: a) Multicaixa Subsystem (MCX), which ensures the processing of operations carried out with valid bank cards at service points of the Multicaixa network, with deferred settlement of the multilateral clearing balance of these operations;

CONTINUATION OF NOTICE NO. 08/2017 page 4 of 16 b) Credit Transfers Subsystem (STC), which ensures the processing of fund transfers, ordered by payers, with deferred settlement of the multilateral clearing balance of transfers sent and received by participants; c) Check Clearing Subsystem (SCC), which ensures the interbank clearing of standardized checks deposited in an institution different from the drawee, with deferred settlement of the multilateral clearing balance of checks sent and received by participants; d) Direct Debits Subsystem (SDD), which ensures the processing of fund transfers initiated by payment beneficiaries, with deferred settlement of the multilateral clearing balance of debit instructions sent and received by participants; e) Angola Mobile Payments Subsystem (SPMA), a subsystem of the Angola Payment System that ensures the processing of fund transfers carried out using a mobile device associated with the payment account, with real-time settlement of the multilateral clearing balance of debit and/or credit instructions sent and received by participants.

Article 4. (Settlement of rights and obligations)

1. The financial settlement of rights and obligations is final, irrevocable, and unconditional at the moment when the respective debits and credits occur in the settlement accounts maintained at the BNA and managed in the SPTR.

2. Financial settlement is executed exclusively through sufficient available funds in the settlement account to be debited in the operation or in the reserve accounts associated with it.

3. The responsibility for managing the conclusion of the financial settlement of the net cleared results, on the value date of the clearing and at the time established for this purpose, lies with the operator of the subsystem, which must, for this purpose, establish operational procedures and risk containment measures for credit, liquidity, and operational risks, which can be executed safely and quickly, as well as allow for total transparency regarding the obligations of participants and the central counterparty, if any.

4. In the transfer of securities in custody accounts maintained in securities registration systems, resulting from transactions with these assets that require interbank financial settlement, the following must be observed: a) If the transaction is in national currency, the transfer of the traded asset must be carried out simultaneously with the confirmation of the final financial settlement sent by the SPTR and received in the relevant system, automatically; b) If the transaction is in foreign currency, the transfer of the traded asset must occur simultaneously with the electronic confirmation of the financial settlement in the respective securities registration system by the participant receiving the payment.

Article 5. (Operators of subsystems)

1. The BNA is the operator of the following subsystems: a) Angola Real-Time Payments Subsystem (SPTR); b) Market and Asset Management Subsystem (SIGMA).

2. The Management Company of the Settlement System and the Centralized Securities System is the operator of the securities and other financial instruments clearing and settlement system created under the terms of the Securities Law.

3. The Interbank Services Company (EMIS) is the operator of the Automated Clearing House of Angola (CCAA), which comprises the following payment subsystems, with specific and distinct processing and controls for each of the subsystems: a) Multicaixa Subsystem (MCX); b) Credit Transfers Subsystem (STC); c) Check Clearing Subsystem (SCC); d) Direct Debits Subsystem (SDD).

4. The operator of the mobile payments subsystem, if implemented, will be authorized to operate by the BNA, under the terms of this Notice and other applicable legislation.

5. The operators of other payment, clearing, and settlement subsystems of the SPA that may be implemented will be authorized to operate, on a case-by-case basis, by the BNA, under the terms of this Notice and other applicable legislation.

Article 6. (Regulation, authorization, control, and monitoring)

1. It is the responsibility of the National Bank of Angola, regarding the CCAA and payment subsystem operators: a) To regulate their activities, according to the provisions of the Angola Payment System Law, this Notice, and other applicable legislation; b) To approve the norms and procedures established by the operator, in a document called the Manual of Norms and Procedures (MNP), regarding each subsystem; c) To authorize the functioning of the subsystems, through proof, via tests, of the consistency between the provisions of the respective MNP and the functions executed by the supporting computer systems; d) To exercise control and monitoring (oversight) of their activities, in conformity with the provisions of the Angola Payment System Law, this Notice, and other applicable legislation.

CONTINUATION OF NOTICE NO. 08/2017 page 7 of 16 2. Regarding risk containment measures in the clearing and settlement of transactions processed in subsystems for the financial settlement of transactions with securities, and after hearing the Securities Market Supervision Body, it is also the responsibility of the National Bank of Angola: a) To regulate their activities, according to the provisions of the Angola Payment System Law, the Securities Law, and this Notice, as well as to publish or transmit technical instructions and others necessary for the proper legal execution thereof; b) To approve the “Manual of Norms and Procedures – MNP” established by the operator; c) To authorize the functioning of the subsystems, through proof, via tests, of the consistency between the provisions of the respective MNP and the functions executed by the supporting infrastructure; d) To exercise control and monitoring of their activities, in conformity with the provisions of the Angola Payment System Law, this Notice, and other applicable legislation.

Article 7. (Responsibilities of operators)

1. The operator of a Systemically Important Payment Subsystem must ensure compliance with all principles applicable to payment systems, defined in the 2012 report “Principles for Financial Market Infrastructures” by the Bank for International Settlements (BIS) and the International Organization of Securities Commissions (IOSCO), summarized in the Annex to this Notice.

2. For the purposes of the preceding paragraph, when a securities clearing and settlement subsystem is involved, compliance with all principles applicable to the type of subsystem in question, defined in the 2012 report “Principles for Financial Market Infrastructures” by the Bank for International Settlements (BIS) and the International Organization of Securities Commissions (IOSCO), and summarized in the Annex to this Notice, must be ensured.

3. The operator of a Subsystem of Relevant Importance must ensure compliance with principles numbers 1, 2, 3, 8, 9, 13, 17, 18, 21, 22, and 23, defined in the 2012 report “Principles for Financial Market Infrastructures” by the Bank for International Settlements (BIS) and the International Organization of Securities Commissions (IOSCO), summarized in the Annex which is an integral part of this Notice.

4. All operators of clearing and settlement subsystems in the SPA, including those operating subsystems that process transactions with securities, must: a) Ensure in the subsystems they operate: i) The execution of procedures and routines that contribute to achieving public interest objectives, defined in Art. 3 of the SPA Law; ii) Compliance with the provisions of this Notice and its complementary norms, to be published by BNA Instruction; b) Provide, regarding the subsystems they operate and before their entry into operation, the following minimum documentation: i) Manual of Norms and Procedures, mentioned in letter b) of paragraph 1 and letter b) of paragraph 2 of Article 6 of this Notice; ii) Model of participation contract in the subsystem, to be celebrated between the operator and each participant; iii) Internal Procedures Manual, with the responsibilities of employees, the operator, and the routines to be executed in the operation of the subsystem.

5. The operators of payment subsystems or subsystems that process transactions with securities in national currency must celebrate a service provision contract with the BNA, with a view to financial settlement in the SPTR and the management of limits and guarantees constituted by their respective participants.

Article 8. (Sanctioning regime) Violation of the provisions of this Notice is punishable under the terms of Law No. 05/2005 of July 29, the Angola Payment System Law.

Article 9. (Doubts and omissions) Doubts and omissions resulting from the interpretation and application of this Notice are resolved by the National Bank of Angola.

Article 10. (Repealing norm) Notice No. 11/2015 of December 24 is repealed.

Article 11. (Entry into force) This Notice enters into force immediately after the date of its publication.

PUBLISH. Luanda, on August 15, 2017

GOVERNOR VALTER FILIPE DUARTE DA SILVA

ANNEX TO NOTICE NO. 08/2017 Page 10 of 16 ANNEX Principles for Financial Market Infrastructures (FMIs)

General Organization

1. Legal basis An FMI should have a well-founded, objective, transparent, and binding legal framework for all its important activities in all relevant jurisdictions.

2. Governance An FMI should possess clear and transparent management mechanisms that promote its safety and efficiency, and reinforce not only the stability of the financial system in general, but also public interest objectives and those of relevant stakeholders.

3. Comprehensive and complete risk management structure An FMI should possess a robust risk management structure to comprehensively and completely manage legal, liquidity, credit, operational, and other risks.

Management of credit and liquidity risks 4. Credit risk An FMI should effectively measure and monitor its credit exposures to participants and those resulting from its payment, clearing, and settlement processes. It should have sufficient financial resources to fully cover its credit exposures in relation to each participant, with a high degree of confidence.

Additionally, a central counterparty (CCP) that participates in activities with a more complex risk profile or that has systemic importance in multiple jurisdictions, should maintain additional financial resources sufficient to cover a broad range of scenarios that should include, but not be limited to, the default of the two participants and their respective affiliates that may generate the largest aggregated credit exposure to the CCP under extreme but possible market conditions. Other CCPs should maintain additional financial resources that are sufficient to cover a broad range of stress scenarios that should include, but not be limited to, the default of the participant and its respective affiliates that may generate the largest aggregated credit position to the CCP under extreme but possible market conditions.

ANNEX TO NOTICE NO. 08/2017 Page 11 of 16 5. Collateral If collateral in securities is used to manage credit exposures, these must have low credit, liquidity, and market risk. Thus, an FMI should impose sufficiently prudent valuation haircuts and concentration limits.

6. Margin A CCP should cover its creditor exposures to participants through an effective risk-based margin system that is reviewed periodically.

7. Liquidity risk An FMI should effectively measure, monitor, and manage liquidity risk. In this regard, it should possess sufficient liquid resources in all relevant currencies to ensure the settlement of payment obligations on the same day and, when appropriate, intraday, with a high degree of confidence under a broad set of possible stress situations, including, but not limited to, the default of the participant and its respective affiliates, which may generate the largest aggregated liquidity obligation for the FMI, in extreme but possible market situations.

Settlement 8. Settlement finality An FMI should provide for final settlement clearly and safely, at least at the end of the value date. When necessary or preferable, the FMI should provide for final settlement intraday or in real-time.

9. Settlement currency Whenever possible (if feasible and resources exist), the FMI should effect settlement in central bank money. If central bank money is not used, the credit and liquidity risks resulting from the use of commercial bank money must be minimized and strictly controlled.

10. Physical deliveries An FMI should clearly define its obligations regarding the delivery of physical instruments or raw materials and must identify, monitor, and manage the risks associated with such deliveries.

Securities depositories and value-for-value settlement systems 11. Securities depositories (CSD) A CSD should have adequate rules and procedures that contribute to ensuring the integrity of securities issuances and minimize and manage risks associated with the custody and transfer of securities. A CSD should keep securities immobilized or dematerialized in a way that allows for book-entry transfer.

12. Value-for-value settlement systems If an FMI settles transactions involving the settlement of two related obligations (for example, securities or foreign exchange transactions), it must eliminate principal risk by conditioning the final settlement of one obligation to the final settlement of the other (DvP or PvP, respectively).

ANNEX TO NOTICE NO. 08/2017 Page 13 of 16 Default management 13. Rules and procedures regarding participant defaults An FMI should have clear and effective rules and procedures to manage the default of a participant. These rules and procedures should be designed to ensure that the FMI can trigger timely actions to contain losses and liquidity pressures, and continue to meet its obligations.

14. Segregation and portability A CCP