Notice No. 1/GBM/2023, of April 26 - Regulation on the Calculation and Establishment of Mandatory Reserves

SUMMARY NOTICE The material to be published in the 'Boletim da República' must be submitted as a duly authenticated copy, one per subject, which must include, in addition to the necessary indications for this purpose, the following endorsement, signed and authenticated: For publication in the 'Boletim da República'. NATIONAL PRESS OF MOZAMBIQUE, P.E. Bank of Mozambique: Notice No. 1/GBM/2023: Approves the Regulation on the Calculation and Establishment of Mandatory Reserves and revokes Notice No. 11/GBM/2021, of December 31. Wednesday, April 26, 2023 I SERIES — Number 80

BANK OF MOZAMBIQUE Notice No. 1/GBM/2023 of April 26

Given the need to adjust the period for the establishment of mandatory reserves, as well as the mechanism for submitting related information, the Bank of Mozambique, pursuant to paragraphs 1 and 2 of Article 27 of Law No. 1/92, of January 3, the Organic Law of the Bank of Mozambique, determines:

1. The Regulation on the calculation and establishment of mandatory reserves is hereby approved, forming an integral part of this Notice.
2. Notice No. 11/GBM/2021, of December 31, which approves the Regulation on the Calculation and Establishment of Mandatory Reserves, is hereby revoked.
3. This Notice enters into force on the date of its publication.

Questions regarding the interpretation and application of this Notice must be submitted to the Markets and Reserve Management Department of the Bank of Mozambique.

Maputo, March 22, 2023. — The Governor, Rogério Lucas Zandamela.

Regulation on the Calculation and Establishment of Mandatory Reserves

CHAPTER I Object and Scope

ARTICLE 1 Object This Regulation establishes the rules for the calculation and establishment of mandatory reserves.

ARTICLE 2 Scope

1. This Regulation applies to all credit institutions holding liabilities referred to in Article 4 of this Regulation and monetary assets with the Bank of Mozambique.
2. The preceding paragraph does not cover credit institutions not authorized to collect deposits.

CHAPTER II Calculation and Establishment

ARTICLE 3 Currencies for Establishment Mandatory reserves shall be established: a) in meticais, for deposits denominated in national currency; and b) in United States dollars, for deposits denominated in foreign currency.

ARTICLE 4 Liabilities Subject to Levy

1. The following liabilities constitute the levy base for mandatory reserves, as detailed in the mandatory reserve calculation schedules: a) Resident Deposits; b) Non-Resident Deposits; and c) State Deposits.
2. The liabilities referred to in the preceding paragraph must be segregated into national currency and foreign currency.

ARTICLE 5 Calculation of the Levy Base

1. The levy base for mandatory reserves is calculated from the simple arithmetic mean of the balances of the liabilities referred to in the preceding article, observed over the calculation period. Electronic Edition by Pandora Box, Lda.

822 I SERIES — NUMBER 80 2. The calculation period for the levy base begins on the first day (day one) and ends on the last day of each month. 3. For the purpose of calculating the levy base, deposits denominated in other foreign currencies are converted daily into their United States dollar equivalent, using the prevailing reference exchange rate. 4. The value, in United States dollars, of the deposits referred to in the preceding paragraph is calculated by applying the following conversion factor:

FUSD = Taxa ME / Taxa USD

5. In the formula provided in the preceding paragraph: a) FUSD - is the conversion factor for the United States Dollar; b) Taxa ME - is the reference (daily) exchange rate of the foreign currency to be converted; and c) Taxa USD - is the reference (daily) exchange rate of the United States Dollar.

ARTICLE 6 Levy Rate The Bank of Mozambique establishes, by circular, the mandatory reserve coefficient applicable to the levy base referred to in the preceding article.

ARTICLE 7 Establishment Period

1. The period for establishing mandatory reserves begins on the last Wednesday of each month and ends on the Tuesday preceding the last Wednesday of the following month.
2. The mandatory reserves for each establishment period correspond to the immediately preceding calculation period.

ARTICLE 8 Methods of Establishment

1. Mandatory reserves in national currency must be established in one of the following forms: a) Cash; b) Checks drawn by the institution itself on other national credit institutions; c) Account-to-account transfer; and d) Other financial assets eligible to be included in the clearing system, excluding demand deposits in foreign currency held by credit institutions with the Bank of Mozambique.
2. Mandatory reserves in foreign currency must be established in one of the following forms: a) Funding the United States dollar demand deposit account held with the Bank of Mozambique, via account-to-account transfer from banks within the country; and b) Funding the United States dollar demand deposit account, via transfer from the institution's nostro account to the Bank of Mozambique's nostro account.
3. In cases where the provisions of the preceding paragraph cannot be operationalized, the Bank of Mozambique may, upon a duly justified request from the institution, authorize other methods for establishing mandatory reserves.

ARTICLE 9 Establishment Methodology

1. Mandatory reserves in national currency and United States dollars are established on a daily average basis.
2. To comply with mandatory reserves on a daily average basis, the following formula is applied:

Saldo Médio = ∑SD / N

3. In the formula referred to in the preceding paragraph: a) ∑SD - is the sum of the daily accounting balances of demand deposits, in national or foreign currency, held by credit institutions with the Bank of Mozambique, calculated for the mandatory reserve establishment period, based on statements issued by the Bank of Mozambique branches; b) N - is the number of days comprising the mandatory reserve establishment period.
4. The average of daily values obtained in accordance with the provisions of paragraph 2 of this article must not be less than the amount of mandatory reserves resulting from multiplying the rate referred to in Article 6 by the levy base calculated in accordance with Article 5, both of this Regulation.

CHAPTER III Sanctions

ARTICLE 10 Penalties for Irregularities

1. Without prejudice to the provisions of applicable legislation, the following irregularities are subject to monetary penalties: a) Shortfall in mandatory reserves; and b) Delay in submitting information regarding the levy base to the Bank of Mozambique.
2. The penalty for the shortfall in mandatory reserves calculated at the end of each establishment period takes a monetary form and is determined based on the following formula:

Penalização = 10.000,00 MT x N + ((SM - r x BI) x T x N) / 36500

3. In the formula provided in the preceding paragraph: a) N - is the number of days of the establishment period to which the mandatory reserves relate; b) SM - is the average of the accounting balances of national currency demand deposit accounts of credit institutions with the Bank of Mozambique, calculated for the respective establishment period, in accordance with paragraph 2 of Article 9 of this Regulation, based on statements issued by the Bank of Mozambique branches; c) r - is the mandatory reserve rate; d) BI - is the levy base for the mandatory reserve; and e) T - is the penalty rate for the shortfall in mandatory reserves.
4. The penalty rate for the shortfall in mandatory reserves, referred to in paragraph (e) of the preceding paragraph, corresponds to: a) The prevailing prime interest rate at the end of the establishment period, plus two percentage points, in the case of a shortfall in national currency; and

APRIL 26, 2023 823 b) The highest and most recent interest rate on active United States dollar operations, charged by the infringing credit institution, plus two percentage points, in the case of a shortfall in foreign currency. 5. The penalty for delaying the submission of mandatory reserve calculation schedules in national and foreign currency is fixed at 10,000.00 MT (ten thousand meticais) per schedule and per business day of delay. 6. In cases where information on the interest rates for active operations charged by the infringing institution is unavailable, the most recent average interest rate on active operations charged by the banking system, plus two percentage points, shall apply for the purposes of the penalty referred to in this article. 7. The penalty amounts due for shortfalls in mandatory reserves in foreign currency are converted into meticais using the reference rate in effect on the last day of the establishment period to which the shortfall relates.

ARTICLE 11 Payment of Penalty The Bank of Mozambique debits the national currency demand deposit account of the infringing credit institution for the amount of the penalties calculated in accordance with the preceding article.

ARTICLE 12 Escalation of Penalty If a credit institution incurs a shortfall in two out of three mandatory reserve establishment periods, whether consecutive or not, the rate T (penalty rate) under Article 10 is increased by ten percentage points.

ARTICLE 13 Account Blockage

1. If a credit institution incurs a shortfall in two consecutive mandatory reserve establishment periods, the Bank of Mozambique automatically blocks the balance of the free movement account.
2. Only credit movements are permitted in the blocked account, without prejudice to any additional measures provided for in the Regulation on the Interbank Clearing and Settlement Subsystem.
3. The institution is notified of the account blockage at least four days in advance of its effective date.
4. The institution with the blocked account is required, upon receipt of the notification, to: a) Immediately instruct the opening of a new account for clearing and other types of operations with the Bank of Mozambique; and b) Fund the blocked account for the purpose of meeting mandatory reserve requirements.
5. The Bank of Mozambique reserves the right to transfer, from the new account to the blocked account, the balances necessary for the institution to meet its mandatory reserve obligations.
6. As long as shortfalls persist in the blocked account, a penalty on periodic shortfalls is applied based on the rate provided for in Article 12 of this Regulation.
7. The Bank of Mozambique may instruct the lifting of the blockage within a period of no less than two mandatory reserve establishment periods, calculated from the date of the account blockage.

CHAPTER IV Final Provisions

ARTICLE 14 Submission of Information

1. Credit institutions covered by this Regulation must submit information regarding mandatory reserves to the Bank of Mozambique through the calculation schedules available on the BSA (Banking Supervision Application) platform, referencing the levy base calculation period indicated in paragraph 2 of Article 5.
2. The mandatory reserve calculation schedules referred to in the preceding paragraph must be received by the Bank of Mozambique by the 15th day of the month following the calculation period, and may be corrected until the last business day preceding the start of the respective establishment period.
3. For the purposes of the preceding paragraph, whenever the 15th day of a given month falls on a non-business day, the deadline for receiving the schedules is extended to the next business day.
4. Support requests regarding anomalies related to the submission of mandatory reserve calculation schedules must be submitted by 4:00 PM on the dates indicated in paragraphs 2 and 3 of this article.
5. The submission of overdue schedules is an indispensable condition for the acceptance of schedules relating to subsequent periods.
6. Any correction made to the levy base information that results in a reduction of the shortfall calculated at the end of the establishment period shall not be considered for the purpose of reducing the calculated penalty amount; in such cases, the prior information shall prevail.
7. Credit institutions must retain, for a period of five years, all documents supporting the information contained in the schedules referred to in paragraph 1 of this article.

ARTICLE 15 Exemption Period

1. Credit institutions are exempt from establishing mandatory reserves for a maximum period of three months, calculated from the date of the commencement of deposit collection, which must be notified in writing to the Markets and Reserve Management Department of the Bank of Mozambique.
2. A credit institution wishing to join the Interbank Money Market before the expiration of the period referred to in the preceding paragraph must waive the remaining exemption period in order to comply with the Regulation on the Market Operations System.
3. The exemption referred to in paragraph 1 of this article is automatic, and its terms are formally communicated by the Regulation and Licensing Department of the Bank of Mozambique.

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Price — 20.00 MT NATIONAL PRESS OF MOZAMBIQUE, P.E. Electronic Edition by Pandora Box, Lda.