Notice No. 02/2015 of January 26 on Monetary and Exchange Policy - Limits of Exposure to Exchange Rate Risk

Published in the Official Gazette, 1st Series, No. 15, of January 29

NOTICE NO. 02/2015

SUBJECT: MONETARY AND EXCHANGE POLICY

• LIMITS OF EXPOSURE TO EXCHANGE RATE RISK

Whereas it is necessary to update the regulation regarding the limit of exposure to exchange rate risk and gold for financial institutions supervised by the Bank of Angola;

In accordance with the combined provisions of item f) of paragraph 1 of Article 21 and item d) of paragraph 1 of Article 51, both of Law No. 16/10 of July 15, the Law of the Bank of Angola, conjugated with Articles 70 and 77 of Law No. 13/05 of September 30 – the Law of Financial Institutions.

I DETERMINE:

Article 1. (Definitions) Without prejudice to the definitions established in the Law of Financial Institutions, for the purposes of this Notice, the following are understood as:

1. Net exchange exposure: the difference between active or long exposure and passive or short exposure, in foreign currency or indexed to exchange rate variation;

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2. Active or long exchange exposure: the sum of assets and other rights in foreign currency or indexed to foreign currency, subject to exchange rate risk;

3. Passive or short exchange exposure: the sum of liabilities and other obligations in foreign currency or indexed to foreign currency, subject to exchange rate risk.

Article 2. (Object) This Notice establishes the limit of exposure to exchange rate risk and gold for financial institutions subject to the supervision of the Bank of Angola.

Article 3. (Scope) This Notice applies to financial institutions under the supervision of the Bank of Angola, under the terms and conditions provided for in the Law of Financial Institutions, hereinafter designated as institutions.

Article 4. (Limit of Exposure to Exchange Rate Risk) Without prejudice to the regulatory own funds required for coverage of exchange rate and gold risk established in specific regulation, the exchange exposure is limited to 20% (twenty percent) of regulatory own funds for active operations (long) and for passive positions (short).

Article 5. (Calculation Base)

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1. Exposure to exchange rate and gold risk must be calculated on all active and passive positions, including off-balance sheet items that result in established liabilities or are indexed to foreign currency and gold.

2. Without prejudice to the provisions of the preceding paragraph, Treasury Bonds indexed to foreign currency are exempt from exchange exposure calculation.

3. Active and passive positions must be reported at their accounting value, net of provisions and other adjustments.

4. Derivative operations must be reported at market value, except for forward operations which must be reported at cost value.

5. Guarantees provided, irrevocable commitments, exchange operations, and services provided by third parties must be reported at accounting value.

Article 6. (Conversion) Exposure to exchange rate and gold risk must be determined in national currency, by converting the values in foreign currency and gold of the operations, using the daily reference average exchange rate.

Article 7. (Penalties)

1. Non-compliance with the provisions of Article 4 of this Notice subjects the financial institution to:

a) Payment of a monetary fine in the amount of Kz 150,000.00 (One Hundred and Fifty Thousand Kwanzas) per day of non-compliance with the aforementioned limits;

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b) Without prejudice to other measures that may be adopted, the Bank of Angola must charge a monetary fine of 0.25% (twenty-five hundredths percent daily) calculated on the excess verified;

c) Monetary fines must be calculated cumulatively and, weekly, debited directly from the reserve bank account of the non-compliant financial institution.

2. Financial institutions that exceed the established limit of exchange exposure for long positions are prohibited from participating in the foreign currency sale auctions organized by the Bank of Angola until their regularization.

Article 8. (Revocation) All regulation contrary to this Notice is revoked, notably Notice No. 05/2010 of November 10, regarding the limit of exposure to exchange rate risk.

Article 9. (Doubts and Omissions) Doubts and omissions arising in the interpretation and application of this Notice are resolved by the Bank of Angola.

Article 10. (Entry into Force) This Notice enters into force on the date of its publication.

PUBLISH.

Luanda, January 26, 2015.

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THE GOVERNOR JOSÉ PEDRO DE MORAIS JÚNIOR