Instruction No. 11/2023 of 9 August on Regulatory Capital Requirements for Credit and Counterparty Credit Risk and Periodic Reporting

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 1 of 78 INSTRUCTION NO. 11/2023 of 09 August SUBJECT: FINANCIAL SYSTEM

• Calculation and Regulatory Capital Requirement for Credit Risk and Counterparty Credit Risk and respective Periodic Reporting Given the need to regulate the technical specifics regarding the regulatory capital requirement for credit risk and counterparty credit risk as provided in Notice No. 08/21 of 05 July on Prudential Requirements; In accordance with the combined provisions of points (d) and (f) of paragraph 1 of Article 31, and point (c) of paragraph 1 of Article 54, both of Law No. 24/21 of 18 October, Law of the National Bank of Angola, and Article 198 of Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions. I HEREBY DETERMINE:

1. Subject Matter This Instruction establishes the requirements that Banking Financial Institutions must consider in calculating capital requirements for credit risk and counterparty credit risk, as well as periodic reporting, in accordance with the provisions of Notice No. 08/21 of 05 July on Prudential Requirements.
2. Scope This Instruction applies to Banking Financial Institutions under the supervision of the National Bank of Angola, as provided in Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions.

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 2 of 78 May, Law on the General Regime of Financial Institutions. 3. Definitions Without prejudice to the definitions established in Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions, for the purposes of this Instruction, the following shall be understood as: 3.1. Netting Agreements: any written bilateral agreement between an Institution and a counterparty that creates a single legal obligation covering all bilateral agreements and transactions included therein. 3.2. External Rating Agency: entity that conducts external credit risk assessments, at the request of the denoted party or on its own initiative. 3.3. Credit Risk Assessment: prospective opinion on credit quality in general or of a specific issuance by a borrower, focusing on the analysis of the borrower's capacity and willingness to honor its financial commitments at maturity dates. 3.4. Novation Contract: bilateral contract between an Institution and a counterparty, under which reciprocal rights and obligations are automatically offset, such that in each novation a single net amount is fixed, giving rise to a new single, legally binding contract that extinguishes the previous contracts. 3.5. Minimum Lease Payments: payments during the lease term that are or may be required to be made by the lessee, excluding contingent rent, costs related to services and taxes paid by the lessor and subsequently reimbursed to it, together with: a) For the lessee, any amounts guaranteed by the lessee or by a party related to the lessee; or, b) For the lessor, any residual value guaranteed to the lessor by: i. The lessee; ii. A party related to the lessee; or, iii. An unrelated third party that is financially capable of fulfilling the obligations under the guarantee. 3.6. Items in Collection: cash in the form of checks or other instruments in the process of clearing.

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 3 of 78 under the guarantee. 4. Regulatory Capital Requirement for Credit Risk and Counterparty Risk 4.1. Institutions must calculate the regulatory capital requirement for credit risk and counterparty risk, as provided in Article 30 of Notice No. 08/21 of 05 July on Prudential Requirements, in accordance with the annexes to this Instruction. 4.2. For the purposes of calculating off-balance sheet positions, the instruments described in Annex II must be considered, and particularly for financial derivative instruments, counterparty credit risk must be considered, in accordance with Annex III, both of this Instruction. 4.3. Without prejudice to the preceding sub-point, the calculation of risk positions and the amount of risk-weighted positions must consider credit risk mitigation, in accordance with Annex IV, as well as the use of credit assessments, in accordance with Annex V, both of this Instruction. 5. Reporting 5.1. Institutions must report the information required in Article 30 of Notice No. 08/21 of 05 July on Prudential Requirements, on an individual and consolidated basis, quarterly, using the forms and filling notes attached to this Instruction. 5.2. For the purposes of the preceding sub-point, in the case of a financial group, the parent company must report the information, in accordance with the consolidation perimeter provided in Article 5 of Notice No. 08/21 of 05 July on Prudential Requirements.

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 4 of 78 5.3. Institutions that, due to the nature of their activity, do not have information to report to the National Bank of Angola, must declare this fact using the forms attached to this Instruction. 5.4. Institutions must ensure that the data reported in the tables attached to this Instruction are properly documented. 6. Sanctions Non-compliance with the provisions established in this Instruction constitutes a regulatory offense punishable under Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions. 7. Transitional Provisions 7.1. For the purposes of Calculation and Regulatory Capital Requirement for Credit Risk and Counterparty Credit Risk, banking financial institutions must weight 100%, starting from 01 January 2027, gradually, risk positions on central government, notably the Angolan State and the National Bank of Angola, that are not denominated and financed in national currency, as follows: a) 35% (thirty-five percent) until 31 December 2023; b) 50% (fifty percent) until 31 December 2024; c) 75% (seventy-five percent) until 31 December 2025; and, d) 85% (eighty-five percent) until 31 December 2026. 7.2. Institutions must report the information required in Article 30 of Notice No. 08/21 of 05 July on Prudential Requirements, on an individual and consolidated basis, quarterly. 8. Repeal All regulation contrary to the provisions of this Instruction is hereby repealed, notably Instruction No. 07/2023 of 14 July on Calculation and Regulatory Capital Requirement for Credit Risk and Counterparty Credit Risk and respective Periodic Reporting.

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 5 of 78 Credit Risk and Counterparty Credit Risk and respective Periodic Reporting. 9. Doubts and Omissions Doubts and omissions resulting from the interpretation and application of this Instruction are resolved by the National Bank of Angola. 10. Entry into Force This Instruction enters into force on the date of its publication. PUBLISH Luanda, 09 August 2023 THE GOVERNOR MANUEL ANTÓNIO TIAGO DIAS

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 6 of 78 ANNEX I Calculation of Risk-Weighted Amounts

1. The regulatory capital requirement to cover credit risk must be 8% (eight percent) of the risk-weighted amount.
2. The risk-weighted amount must be calculated based on the weighting factors established in paragraph 7 of this Annex, multiplied by the value of risk positions, as defined in paragraph 5 of this Annex.
3. For the purposes of the preceding paragraph, the application of weighting factors is based on the risk class to which the risk position belongs, in accordance with paragraph 6 of this Annex, and its credit quality, determined by reference to credit assessments by external rating agencies in accordance with Annex V of this Instruction.
4. Whenever a risk position is subject to credit protection, the applicable risk weight for that element may be adjusted in accordance with Annex IV of this Instruction.
5. The value of risk positions must be determined as follows: a) For asset risk positions, the value of the risk position corresponds to its book value in the balance sheet according to the Chart of Accounts for Banking Financial Institutions (PCIFB); b) Without prejudice to the provision in point c) of this paragraph, for off-balance sheet exposures, the risk position consists of the value resulting from multiplying its notional value by the following factors, according to the list in Table 1 of Annex II of this Instruction: i. 100% (one hundred percent) for high-risk elements; ii. 50% (fifty percent) for medium-risk; iii. 20% (twenty percent) for medium/low-risk; and, iv. 0% (zero percent) for low-risk. c) The value of the risk position of a derivative instrument included in the list of Table 2 of Annex II of this Instruction must be determined in accordance with the method described in paragraphs 5 to 7 of Annex III of this Instruction, with the effect of novation contracts and other netting agreements taken into account in the application of those methods, in accordance with paragraphs 8 to 10 of Annex III of this Instruction; d) For the purposes of the preceding points, assets directly deducted from capital, impairments, and other capital reductions related to the risk position element are excluded. e) Whenever a risk position is subject to credit risk mitigation, the value of the risk position may be adjusted in accordance with Annex IV of this Instruction. Identification of Risk Classes
6. Institutions must use the following risk classes to classify their risk positions: a) Public Entities This class is composed of the following subcategories: i. Central Governments: include Governments and Central Banks when recognized by their respective Government; ii. Other Administrations:
7. Regional administrations or local authorities of a sovereign State;
8. Churches and religious communities, which take the form of public law legal entities and have the right to levy taxes, are treated as other administrations. iii. Public Sector Entities:

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 7 of 78

1. Administrative bodies that are owned by central governments or other administrations, or entities that, in the opinion of the National Bank of Angola, exercise the same responsibilities as other administrations;
2. Non-commercial enterprises owned by central governments that have specific guarantee agreements, which may include bodies with administrative authority under public supervision;
3. Non-profit legal entities of public or private law, whether resident or non-resident, are treated as public sector entities;
4. Enterprises majority-owned by the Angolan State. b) Organizations This class is composed of the following subcategories: i. International Organizations: include supranational bodies established by two or more sovereign States whose purpose is to mobilize financial assistance for the benefit of their members; ii. Multilateral Development Banks: include organizations composed exclusively or primarily of sovereign States that provide financial assistance and professional advice with the aim of promoting economic or social development activities in recipient countries. c) Institutions This class is composed of public or private law entities, resident or non-resident, with the nature of Financial Institutions as described in the terms and conditions provided in the Law on the General Regime of Financial Activity and Institutions, with the exception of Financial Institutions linked to insurance activity.

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 8 of 78 d) Corporates This class is composed of private law entities, resident and non-resident, that carry out non-financial or non-insurance activity. e) Retail Portfolio i. The retail portfolio includes risk positions on individuals, or on small and medium-sized enterprises, which must cumulatively meet the following conditions:

1. The risk position must arise from loans and revocable credit lines (including credit cards and bank overdrafts), or individual loans (including auto loans and consumer credit), or credit lines and commitments with small and medium-sized enterprises.
2. The risk position must be one of a significant number of other risk positions, all with similar characteristics, such that when considering the risk associated with that position, it is significantly diversified.
3. The total amount due to the institution, considering its current and past-due values, towards the counterparty or group of interconnected counterparties, must not exceed 700,000,000.00 AKZ (seven hundred million Kwanzas). ii. Leasing transactions, excluding their respective residual value, contracted with individuals or small and medium-sized enterprises, may be included in the retail portfolio. iii. Exchange-traded securities are specifically excluded from this category. Mortgage credit is excluded as it is treated in a specific risk class. f) Risk Positions Secured by Real Estate This class is composed of risk positions secured, fully or partially, by real estate intended for the borrower's residence or leased by them, or by multi-purpose real estate intended for offices or commerce.

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 9 of 78 g) Past-Due Items i. Unsecured portion of any risk position that the institution considers that there is a reduced probability of the debtor fully fulfilling its obligations or whose maturity date occurred more than 90 (ninety) days ago and whose past-due value is above a limit of 15,000.00 AKZ (fifteen thousand Kwanzas), net of impairments and any values deducted from the book value; ii. The limit defined in the preceding point may be adjusted to the institution's reality whenever it can demonstrate to the National Bank of Angola that another value is more appropriate; iii. For the purposes of defining the secured portion of the risk position, eligible risk mitigation techniques in accordance with Annex IV of this Instruction are permitted. h) Mortgage Bonds or Public Sector Bonds i. Mortgage bonds consist of bonds secured by mortgages, where the guarantee meets the conditions set out in Annex IV of this Instruction; ii. Public sector bonds consist of bonds secured by central governments and other administrations, where the guarantee meets the conditions set out in Annex IV of this Instruction. i) Other Elements The remaining balance sheet and off-balance sheet exposures must be incorporated into this risk class. j) Risk Weights 7. Institutions must apply the following risk weights to their risk positions according to the classes to which they belong, as provided in the preceding paragraph:

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 10 of 78 a) Public Entities i. Central Governments

1. A weight of 0% (zero percent) must be applied to risk positions, denominated and financed in national currency, on the central government of Angola and the National Bank of Angola.
2. For risk positions on other central governments for which a credit risk assessment has been established by an external rating agency, a risk weight must be applied in accordance with Table 01 of this Annex. Table 01 Credit Quality Grade 1 2 3 4 5 6 Risk Weight 0% 20% 50% 100% 100% 150%
3. If the provisions in paragraphs 1 to 2 do not apply, a weight of 100% (one hundred percent) must be applied to risk positions on central governments.
4. When the competent authorities of a third country, with regulation and supervision equivalent to those applied by the National Bank of Angola, assign a risk weight lower than indicated in paragraphs 2 to 3 to risk positions on their central government or central bank, denominated and financed in their national currency, institutions may apply the same weight to those risk positions, except when
5. The National Bank of Angola determines a more restrictive risk weight.

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 11 of 78 ii. Other Administrations

1. Risk positions on regional administrations or local authorities may be treated as positions on central governments when there is no difference in their risk due to the existence of specific powers of regional administrations or local authorities regarding tax collection and/or institutional agreements that reduce their default risk.
2. For the purposes of the preceding paragraph, the National Bank of Angola maintains a publicly available database of all regional administrations or local authorities considered as risk positions on central governments.
3. When the competent authorities of a third country, with regulation and supervision equivalent to those applied by the National Bank of Angola, treat risk positions on their regional administrations or local authorities as risk positions on their respective central government, institutions may apply the central government weight to risk positions on other regional administrations or local authorities.
4. For risk positions on other administrations in Angola, other than those referred to in paragraphs 1 or 3 and that are denominated and financed in national currency, a weight of 20% is applied.
5. If the provisions in paragraphs 1 to 4 do not apply, risk positions on other administrations are treated as positions on Institutions.

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 12 of 78 iii. Public Sector Entities

1. For risk positions on public sector entities for which no credit assessment has been established by a recognized external rating agency, a risk weight must be applied according to the credit quality grade assigned to risk positions on the central government of the jurisdiction where the public sector entity is established, in accordance with Table 02. Table 02 Credit Quality Grade of Central Government 1 2 3 4 5 6 Risk Weight 20% 50% 100% 100% 100% 150%
2. For risk positions on public sector entities for which no credit assessment has been established for the public sector entity and the central government is not rated, a risk weight of 100% (one hundred percent) is applied.
3. Risk positions on public sector entities for which a credit assessment has been established by an external rating agency are treated as positions on institutions.
4. In exceptional cases, risk positions on public sector entities may be treated as risk positions on the central government whenever, upon application by Institutions, the National Bank of Angola considers that there are no differences in the risk of these types of positions, as a result of an appropriate guarantee provided by the central government.

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 13 of 78 5. When the competent authorities of a third country, with regulation and supervision equivalent to those applied by the National Bank of Angola, treat risk positions on public sector entities as risk positions on their respective central government, Institutions may apply the central government weight to risk positions on public sector entities. b) Organizations i. a weight of 0% (zero percent) must be applied to risk positions on international organizations and multilateral development banks mentioned in Annex VI of this Instruction. ii. if the provision in the preceding point does not apply, risk positions on multilateral development banks are treated as positions on Institutions. iii. if the provision in point i. of this paragraph does not apply, risk positions on international organizations are treated as positions on Corporates. c) Institutions i. for risk positions on institutions for which a credit risk assessment has been established by an external rating agency, a weight must be applied in accordance with Table 03. Table 03 Credit Quality Grade 1 2 3 4 5 6 Risk Weight 20% 50% 50% 100% 100% 150% ii. if the provision in the preceding point does not apply, a weight of 100% (one hundred percent) must be applied to risk positions on Institutions. iii. if the risk weight assigned to risk positions on the central government of the country where the institution is established differs from that presented in points i. or ii. of this paragraph, as applicable, the higher of the weights must always be assigned. iv. for short-term risk positions on Institutions with an initial maturity not exceeding 3 (three) months, for which a short-term credit risk assessment has been established by an external rating agency, a weight must be applied in accordance with Table 04. Table 04 Credit Quality Grade 1 2 3 4 5 6 Risk Weight 20% 20% 20% 50% 50% 150% v. whenever the assessment mentioned in the preceding point is not available, a weight of 20% (twenty percent) must be applied.

CONTINUATION OF INSTRUCTION NO. 11/2023 Page 14 of 78 d) Corporates i. for risk positions on corporates for which a credit risk assessment has been established by an external rating agency, a weight must be applied in accordance with Table 05. Table 05 Credit Quality Grade 1 2 3 4 5 6 Risk Weight 20% 50% 100% 100% 150% 150% ii. if the provision in the preceding point does not apply, a weight of 100% (one hundred percent) must be applied to risk positions on corporates. iii. if the risk weight assigned to risk positions on the central government of the country where the corporate is established differs from that established in points i. or ii. of this paragraph, as applicable, the higher of the weights must always be assigned. iv. for short-term risk positions on corporates, for which a credit risk assessment d

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