Notice No. 17/2012 of April 3, 2012 on Prudential Norms for Financial Leasing Companies

Published in the Official Gazette, First Series, No. 64, of April 3

NOTICE NO. 17/2012 of April 3

Given the need to regulate and establish appropriate accounting policies and disclosure practices applicable to financial leasing (leasing) operations carried out by financial leasing companies authorized to operate by the National Bank of Angola.

In accordance with the combined provisions of paragraph f) of number 1 of Article 21 and paragraph d) of number 1 of Article 51, both of Law No. 16/10 of July 15, the National Bank of Angola Law, combined with the provisions of Articles 106 and 77 of Law No. 13/05 of September 30, the Financial Institutions Law, it is incumbent upon the National Bank of Angola to safeguard the solvency and liquidity of non-bank financial institutions, as well as to establish prudential limits on the operations that financial leasing companies are authorized to conduct;

IT IS HEREBY DETERMINED:

Article 1. (Object) The present notice establishes the specific prudential norms applicable to financial leasing (leasing) companies.

Article 2. (Minimum Capital and Own Funds) Financial leasing companies must have fully paid-up share capital in national currency and maintain the minimum values of share capital and Regulatory Own Funds (ROF) established in Notice No. 04/07 of September 12.

Article 3. (Minimum Regulatory Solvency Ratio)

1. Financial leasing (leasing) companies authorized to operate by the National Bank of Angola must maintain a level of own funds compatible with the nature and scale of their operations, as well as with the inherent risks, maintaining the Regulatory Solvency Ratio (RSR), in accordance with Notice No. 05/07 of September 12.
2. For the purposes of determining the minimum regulatory solvency ratio referred to in the preceding paragraph, the following shall be observed: a) for the calculation of exchange rate risk, the provisions of Notice No. 05/10 of November 10 and Instruction No. 06/07 of September 12; and b) for the calculation of credit risk exposure in the form of financial leasing, the provisions of Instruction No. 03/11 of June 8.

Article 4. (Limits on Investments) In addition to the limits provided in Notice No. 08/07 of September 12, financial leasing companies must observe a limit of 15% of Regulatory Own Funds in investments in securities and financial instruments issued by the same company, affiliated companies, and their subsidiaries.

Article 5. (Prohibitions) Financial leasing companies are prohibited from carrying out the following acts: a) Providing guarantees to third parties; b) Conducting financial leasing operations with related parties; c) Taking financial participations in the capital of other companies, except in their branches, agencies, or other forms of representation. d) Providing services complementary to the operational leasing activity, namely, maintenance and technical assistance of leased assets, while nevertheless being able to enter into service contracts with third parties.

Article 6. (Classification of Operations and Credit Provisions) Financial leasing companies must classify credits related to financial leasing operations, creating respective provisions based on the level of risk assumed, as established in Notice No. 04/2011 of June 8.

Article 7. (Guarantees) Any guarantees, personal or real, may be constituted in favor of the financial leasing company with respect to financial leasing operations.

Article 8. (Fixed Asset Limit) Financial leasing companies, in calculating the fixed asset limit, must observe the provisions of Notice No. 06/2011 of July 13.

Article 9. (Return or Recovery of Leased Assets)

1. Financial leasing companies are permitted to alienate or lease to third parties the assets subject to financial leasing that have been returned or recovered.
2. Financial leasing companies are permitted to retain assets subject to financial leasing that have been returned or recovered, in their fixed assets, for a maximum period of 2 (two) years.
3. During the period referred to in the preceding paragraph, returned or recovered assets must be excluded from the calculation of the fixed asset limit.
4. The provisions in the preceding paragraphs also apply to financial leasing operations carried out by banking financial institutions.

Article 10. (Ancillary Activities)

1. Financial leasing companies may, ancillary to their main activity, lease movable assets outside the cases provided in Article 9 of this Notice, subject to a maximum limit of 20% of the total balance of financial leasing operations.
2. The assets subject to the leasing mentioned in the preceding paragraph must be maintained in fixed assets and excluded from the calculation of the limit provided in Article 3 of Notice No. 06/2011 of July 13.
3. In addition to the rules in the preceding paragraphs, the provisions of the Commercial Code, Companies Law and complementary legislation shall apply subsidiarily, as well as Articles 1022 et seq. of the Civil Code.

Article 11. (Accounting) Financial Leasing Companies must record their operations in accounting terms, in accordance with the current Chart of Accounts for Financial Institutions, adopting headings that address these operations.

Article 12. (Information System) The information system of Financial Leasing Companies must be sufficiently robust to ensure that the accounting application is compatible with the chart of accounts for financial institutions and allows their operations to have direct reflection in their accounting.

Article 13. (Accounting Treatment of Financial Leasing)

1. At the beginning of the financial leasing operation term, the lessor must derecognize the asset subject to the contract and recognize receivables at the value of net investment in leasing.
2. Net investment in leasing is equivalent to the sum of the fair value of the asset subject to leasing and any initial direct costs, which must equal the sum of the following installments, discounted at the interest rate implicit in leasing: a) minimum payments to be made by the lessee during the lease term, up to the expected date of exercise of the purchase option; b) payment necessary to exercise the purchase option; c) if applicable, the unguaranteed residual value attributed to the lessor.
3. During the financial leasing term, the lessor must recognize financial revenues earned based on the implicit interest rate of the operation, so as to produce a constant return rate on net investment in leasing.
4. Assets recorded by the lessor are subject to impairment testing for reduction to recoverable value (impairment), when not allocated in financial leasing operations.

Article 14. (Accounting Treatment of Financial Leasing – Real Estate) Land and buildings must be considered as separate elements for the purposes of classifying financial leasing.

Article 15. (Information Provision)

1. Financial leasing companies must submit, quarterly, within 8 days after the end of each quarter, a trial balance reporting the global position of the institution;
2. The document referred to in the preceding paragraph of this article must be sent to the National Bank of Angola, in XML format, through the Financial Institutions Supervision System - SSIF.
3. While conditions for submission in the system (SSIF) are not created, information must be submitted via other electronic devices (Excel file) to the email of the Financial Institutions Supervision Department (dsi@lda.bna.ao).
4. For the purposes of paragraph 1, reference dates are March 31, June 30, September 30, and December 31.
5. Financial leasing companies must publish by April 30 of the following year the financial statements for each fiscal year, as well as the External Audit Report and, if applicable, the Fiscal Council Report, in a medium of easy public access, as well as send them to the National Bank of Angola by that date;
6. Complementarily, they must observe the following disclosure requirements in Notes to Accounts: a. reconciliation between the gross investment value at the end of each period and the present value of minimum financial leasing payments to be received on those same dates; b. gross investment value and present value of minimum payments, at the end of each period, segmented according to the terms in which they become due, namely up to one year, more than one year, up to five years, and more than five years; c. revenues to be appropriated; d. unguaranteed residual values that result in benefit to the lessor; e. provision for minimum receivables (uncollectible minimum payments); f. general description of relevant financial leasing agreements.
7. Financial leasing companies must appoint a qualified interlocutor to respond to any questions regarding information reported to the National Bank of Angola;
8. Financial leasing companies must ensure permanent availability of the designated interlocutor, obligatorily appointing a substitute, definitive or temporary, in case of impediment of the designated interlocutor.

Article 16. (Penalties) Failure to comply with the deadlines for sending periodic information, established by the National Bank of Angola, is punishable per day of delay, with each document subject to a fine corresponding to 1% (one percent) of the minimum share capital defined for financial leasing companies, divided by 360 (three hundred and sixty) days.

Article 17. (Information and Credit Risk Center) Financial leasing (leasing) companies must submit to the Information and Credit Risk Center (CIRC) information on customer financial leasing operations, in accordance with Instruction No. 05/10 of October 4.

Article 18. (External Audit)

1. Financial leasing companies must submit their financial statements annually to external audit, conducted by an independent auditor.
2. The independent auditor must report to the Financial Institutions Supervision, the work developed and respective results, infractions and facts that may affect the continuity of the financial leasing company's activity.
3. For the purposes of this article, the independent auditor may be a duly authorized audit firm or chartered accountant duly registered with the Order of Chartered Accountants and Financial Auditors.

Article 19. (Term) The present Notice enters into force 30 days after the date of its publication.

PUBLISHED: Luanda, December 19, 2011

THE GOVERNOR JOSÉ DE LIMA MASSANO