Notice No. 01-2018 of January 17: Exchange Rate Policy - Foreign Exchange Position Limit

NOTICE NO. 01/2018 January 17 SUBJECT: EXCHANGE RATE POLICY

• Foreign Exchange Position Limit

Given the need to update the regulation on the foreign exchange position limit of Commercial Banks; Considering the relevance of establishing the operating rules for the foreign exchange position limit, in order to regulate the relationship between the Bank of Angola, in the exercise of its functions as manager of external reserves, with the Commercial Banks authorized to conduct foreign exchange trading.

In these terms, and under the combined provisions of letters d) and f) of paragraph 1 of Article 21st and letter d) of paragraph 1 of Article 51st, both of Law No. 16/10, of July 15 – Law of the Bank of Angola, of letter l) of paragraph 1 of Article 90th of Law No. 12/15, of June 17, Law of the Bases of Financial Institutions, and of Article 12th of Law No. 5/97 of June 27 - Foreign Exchange Law.

I DETERMINE:

Article 1. (Object) This Notice establishes the limit of the global foreign exchange position of Commercial Banks and its calculation basis.

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ARTICLE 2. (Scope) This Notice applies to Commercial Banks, hereinafter abbreviated as Banks.

ARTICLE 3. (Definitions)

1. For the purposes of this Notice, the following are understood by: 1.1 Net foreign exchange position: in each currency, it results from the algebraic sum of the following elements, positive or negative: a) Net spot position: the difference between all asset elements and all liability elements, including accrued interest, in each currency; b) Net forward position: the difference between all amounts receivable and all amounts payable regarding forward foreign exchange operations; c) Irrevocable guarantees and other similar instruments for which there is certainty that they will likely be exercised, but which will probably not be recovered in foreign currency; 1.2 Global foreign exchange position: the algebraic sum of the net foreign exchange positions held in various foreign currencies, converted into Euros (EUR), which may be long when the asset position exceeds the liability position, or short in the inverse situation.
2. For the purposes of the provisions of this article, the elements contained in the daily foreign exchange position map must be considered, as established in specific regulation.

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Article 4. (Limit for the foreign exchange position)

1. Banks must observe, daily, a global foreign exchange position that does not exceed 10% (ten percent) of their Regulatory Own Funds (ROF), regardless of whether the position is long or short.
2. For compliance with the provisions of the previous paragraph, the ROF calculated at the close of the previous month are considered.
3. Banks must sell the excess foreign exchange position to the Bank of Angola immediately after sending the report, at the reference buying rate in force on that day.

Article 5. (Calculation basis)

1. The asset and liability elements in foreign currency must be considered at their accounting value, net of impairments, provided that these have been constituted in foreign currency.
2. Operations with derivatives must be considered at market value.

Article 6. (Conversion)

1. The foreign exchange position must be determined in EUR.
2. For the purposes of the previous number, in the conversion to EUR of foreign exchange positions in different currencies, the average reference exchange rate in force on the day to which they refer must be applied.
3. The rate referred to in number 2 must also be applied in the conversion of ROF from Kwanzas to EUR.

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ARTICLE 7. (Information elements)

1. The statistical map of foreign exchange operations at the close of each day must be sent to the Bank of Angola, in accordance with the provisions of specific regulation.
2. Banks must keep in their own archive the supporting documentation for their respective daily foreign exchange positions, in accordance with current legislation.
3. The Bank of Angola may establish complementary guidelines to this Notice, as well as request additional information it deems necessary for the fulfillment of its mission.

ARTICLE 8. (Transitional regime) Banks must adapt to the global foreign exchange position limit observing the following schedule: a) Until March 31, 2018, the global foreign exchange position limit must be, at most, 20% (twenty percent) of the ROF, regardless of whether the position is long or short. b) Until June 30, 2018, the foreign exchange position must be, at most, 10% (ten percent) of the ROF, regardless of whether the position is long or short.

Article 9. (Penalties) Non-compliance with the provisions of this Notice constitutes an offense provided for and punishable under the terms of Law No. 12/15, of June 17, Law of the Bases of Financial Institutions.

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Article 10. (Doubts and omissions) Doubts and omissions resulting from the interpretation and application of this Notice are resolved by the Bank of Angola.

Article 11. (Repealing clause) All legislation contrary to the provisions of this Notice is hereby repealed.

Article 12. (Entry into force) This Notice enters into force on the date of its publication.

PUBLISH. Luanda, January 17, 2018. THE GOVERNOR JOSÉ DE LIMA MASSANO