Guideline No. 4/94: Exchange Rate Policy – Floating Exchange Rate Regime. Spot Operations

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GUIDELINE NO. 4/94 SUBJECT: EXCHANGE RATE POLICY – Floating Exchange Rate Regime . Spot Operations

The Economic and Social Programme for 1994 established, as one of the fundamental premises of economic policy, the adoption of a floating exchange rate regime, to be operated through a two-tier banking system; Given the need to clarify the methodology for foreign exchange operations under this new regime, particularly regarding the role of the National Bank of Angola as a Central Bank, and of the authorized Financial Institutions as operators. In exercise of the competence established in Article 42 of the Organic Law of the National Bank of Angola, I HEREBY DETERMINE:

Article 1 (DEFINITION) Spot foreign exchange transactions against new kwanzas shall have a value date corresponding to the second business day following the execution of the transactions. Article 2 (AUTHORIZED OPERATIONS) Without prejudice to more restrictive conditions established in specific regulations, the Financial Institutions authorized to conduct foreign exchange trading may carry out the following operations:

1. Purchase of foreign currency against new kwanzas from: a) Residents – excluding foreign currency originating from the export of petroleum products as well as that arising from tax obligations of the petroleum sector; b) National Bank of Angola; c) Other entities authorized to conduct foreign exchange trading; d) Non-Residents.

2. Sale of foreign currency against new kwanzas to: a) Residents – when the foreign currency is intended for the settlement of operations for goods, current invisibles, or capital, duly and demonstrably authorized under the prevailing regulations; b) National Bank of Angola; c) Other entities authorized to conduct foreign exchange trading; d) Non-residents – under terms to be defined by the National Bank of Angola.

3. Purchase and sale of foreign currency to: a) Residents – provided they are legally authorized to hold the foreign currency used in the transaction ; b) National Bank of Angola c) Other entities authorized to conduct foreign exchange trading; d) Non-residents.

4. The operations with the National Bank of Angola mentioned in points 1-b, 2-b and 3-b shall only be carried out with Financial Institutions authorized to conduct foreign exchange trading specifically summoned by the National Bank of Angola for this purpose. Article 3 (TRANSACTIONAL CURRENCIES) The foreign currencies eligible for trading with resident clients or with the National Bank of Angola are those officially quoted, and other currencies may be traded in special cases duly authorized by the National Bank of Angola. In the aforementioned cases, currencies accepted by the entity authorized to conduct foreign exchange trading may be traded. Article 4 (EXCHANGE RATES TO BE APPLIED)

5. In purchase and sale operations of foreign currency against new kwanzas or against another foreign currency for entities conducting foreign exchange trading, the National Bank of Angola shall apply the exchange rates agreed upon by the parties.

6. In purchase and sale operations of foreign currency against foreign currency carried out by financial institutions authorized to conduct foreign exchange trading among themselves, with their clients, and with non-residents, the contracting parties shall determine the rates.

7. In purchase and sale operations of foreign currency against new kwanzas with their clients, if other rates are not agreed upon by the parties, the entities authorized to conduct foreign exchange trading may apply the following exchange rates: a) for operations presented to them by 11:00 AM, the official client purchase and sale exchange rates, which will be determined at that day's consultation session; b) for operations presented in the afternoon, the official client purchase and sale exchange rates, which will be determined at the consultation session of the following day. Article 5 (REGULATIONS FOR THE EXCHANGE RATE CONSULTATION SESSION)

8. Location – The session will take place at the premises of the National Bank of Angola, Av. 4 de Fevereiro, 151 - in Luanda.

9. Participants – The consultation session may be attended by Financial Institutions authorized to conduct foreign exchange trading by the National Bank of Angola, which chairs the session. Only representatives who have been previously indicated to the Reserve Management Directorate of the National Bank of Angola and who present themselves duly accredited may participate.

10. Schedule – The consultation session will be held on all business days, unless otherwise previously indicated by the National Bank of Angola, and will begin at 11:30 AM. Participants must arrive at the start of operations, and representatives who are not present when the National Bank of Angola opens the session will not be permitted to participate. After intervening in the currencies in which a participant is interested, they may, if they so wish, leave the session, but must do so without disrupting its normal progress.

11. Exchange Rates – During the session, the following exchange rates will be determined: a) Base Exchange Rate – The base exchange rates for the intervention currency (United States dollar) will be obtained by calculating the weighted arithmetic mean of the operations carried out during the session, taking into account the quantities and prices at which the operations are executed. The execution of the operations will be at prices freely agreed upon by the participants. b) Official Exchange Rates – the official client purchase and sale exchange rates for each currency are those resulting from the application, to the base exchange rates referred to in the previous point, of a 3% margin.

12. Quoted Currencies and Minimum Amounts – During the session, participants may freely trade any currency amounts. Only operations with amounts equal to or greater than the equivalent of US$50,000.00 (fifty thousand United States dollars) will count towards the calculation of the base exchange rates.

13. Session Operation – The session is chaired by the National Bank of Angola and organized as follows: a) quotations will be made against the new kwanza. The National Bank of Angola will indicate the opening quotation. This opening rate is merely indicative, reflecting the objectives of the National Bank of Angola, and does not necessarily correspond to any intention to buy or sell by the National Bank of Angola, unless expressly declared by its representative. b) Operations contracted for amounts below the minimums will not, as already mentioned, be considered in the determination of the base exchange rates; c) proposals from any participant must be made in such a way that the desk and other interested parties clearly perceive the entity, amounts, and nature of the transaction involved; d) any disputes will, at the end of the session, be definitively resolved by the National Bank of Angola.

Article 6 (INTERVENTIONS BY THE NATIONAL BANK OF ANGOLA)

1. The interventions of the National Bank of Angola in the foreign exchange market, through purchase and sale operations of foreign currency against new kwanzas, will take into account its exchange rate policy objectives, for which the Bank is not obliged to provide firm quotations to operating Institutions, if this is not in its interest, given the management of those objectives. Article 7 (OPERATIONAL PROVISIONS)

2. Confirmations of operations agreed with the National Bank of Angola must be processed within a maximum period of 24 hours, and for this purpose, TELEX or FAX lines may be used.

3. The new kwanza counterparties for the foreign currency traded between the Financial Institutions participating in the interbank foreign exchange market may be recorded as debits and credits in accounts opened in the books of the National Bank of Angola in the name of the buying and selling banking Institutions of the foreign currency in question.

4. For this purpose, notification to the National Bank of Angola of the operations referred to in the previous point must be made on the day of execution by 5:00 PM, with explicit indication of the value date of these movements.

5. The notification to the National Bank of Angola referred to in the preceding number must be authenticated in the case of using TELEX or signed by officials whose signatures are recognized, for this purpose, by the National Bank of Angola. Article 8 (FINAL PROVISIONS)

6. Any doubts must be submitted to the Reserve Management Directorate of the National Bank of Angola.

7. Guidelines No. 03/93 of May 27, and No. 04/93 of June 17 are hereby repealed.

8. This Guideline enters into force immediately. Luanda, on April 1994 THE GOVERNOR GENEROSO HERMENELGIDO GASPAR DE ALMEIDA '"' o o :i!; ~ i.c: g .c :;, : "'

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