Regulatory Alerts2021-07-07
Circular Letter No. 04/DCF-2021
The National Bank of Angola’s Department of Financial Conduct requires Commercial Banks to adjust time deposit interest rates, particularly for terms of one year or longer, and develop savings products to stimulate household savings and curb inflation. To align with the recent 20% increase in the Basic Interest Rate, banks must ensure deposit rates reflect inflation trends and publish equivalent TANB figures for multi-period deposits. These measures aim to reverse negative real interest rates, encourage longer-term resource maturity on bank balance sheets, and enhance market transparency.
CIRCULAR LETTER NO. 04/DCF-2021 SUBJECT: FINANCIAL SYSTEM
- Dynamic Savings Products and Interest Rate Adjustment. Within the framework of the Monetary Policy Committee (MPC) of the National Bank of Angola (BNA), held on July 2, measures were adopted to reverse the current inflation trend by reducing consumption propensity during a period of reduced availability of goods and services due to health safety measures adopted by most countries. In this regard, it was announced that the recent inflation trajectory has required additional control measures, including, notably, the increase of the Basic Interest Rate (BNA Rate) from 15.5% (fifteen point five percent) to 20% (twenty percent), and the increase of the Interest Rates for Permanent Lending and Liquidity Absorption Facilities from 19.88% (nineteen point eighty-eight percent) to 25% (twenty-five percent), and from 12% (twelve percent) to 15% (fifteen percent), respectively. It should also be noted that the ongoing increase in the Inflation Rate, without a corresponding increase in Interest Rates paid on deposits, has caused a progressively negative Real Interest Rate, acting as a strong disincentive to savings. In this context, it is essential that Commercial Banks set Interest Rates for time deposits in a manner that aligns with the objectives of stimulating savings and reducing inflation. To this end, Commercial Banks are recommended to adopt the following measures: • Adjust Interest Rates on time deposits, particularly rates for terms equal to or greater than 1 (one) year, considering, at a minimum, the proportion of the BNA Rate increase, combined with their liquidity needs;
CONTINUATION OF CIRCULAR LETTER NO. 04/DCF-2021 page 2 of 2 • Develop products that contribute to stimulating savings, thereby extending the maturity period of resources on their balance sheets; • Promote transparency and objectivity in communicating time deposit conditions to clients and the market. In cases where multiple Interest Rates are applied during the validity period of a deposit, Banks are required to publish, in addition to the rates applicable in each period, the equivalent TANB for the total validity period of the time deposit. This Circular Letter enters into force on the date of its publication. Luanda, July 7, 2021. DEPARTMENT OF FINANCIAL CONDUCT
Osvaldo Manuel Pedro dos Santos -Director-