Instruction No. 05/91: Monetary Policy - Credit Operations and Rediscount

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INSTRUCTION NO. 05/91 Subject: MONETARY POLICY

• Credit Operations/Rediscount .Regulation CONSIDERING that, in accordance with Article 16(f) of the Organic Law of the National Bank of Angola, approved by Law No. 4/91 of April 20, 1991, it is incumbent upon this Bank, as the monetary authority, to safeguard the stability of the national financial system, ensuring, for this purpose, the function of lender of last instance. CONSIDERING that, in accordance with Article 22 of the same Law, the Bank, under terms and conditions defined by its Board of Directors, may purchase, sell, discount, and rediscount securities to financial institutions that maintain the deposit accounts referred to in Articles 21(c) and 25 of that Law; CONSIDERING that, in conformity with Article 23 of the aforementioned Law, the Bank may grant loans to financial institutions for a term not exceeding three months, in the modalities that the Board of Directors deems advisable. In exercise of the authority conferred upon me by Article 60 of the Organic Law of the National Bank of Angola, I determine: Article 1 The Bank Operations Regulation, attached hereto, is hereby approved, and its provisions shall be observed by the National Bank of Angola in its transactions with financial institutions. Article 2 Open market operations subject to repurchase or resale agreements for securities are not permitted. Article 3 Applications for secured credit operations that do not comply with the established guarantees shall be reviewed by the Board of Directors, following an opinion from the competent Directorates, whenever there are liquidity requirements of the borrowing Financial Institution and public interest considerations.

Article 4

1. Treasury Credit Operations of Band A are authorized by the Director of Emission and Credit.
2. Treasury Credit Operations of Band B, as well as Secured Credit operations covered by the guarantees enumerated in point 2 of letters a), b), c), and d) of Article 23 of the Organic Law, are authorized by the Governor.
3. The remaining operations are authorized by the Board of Directors, based on the proposal of the competent area. Article 5 The Directorate of Emission and Credit shall draft the complementary rules necessary for the implementation of the attached Regulation, including the preparation of rediscount proposal templates and the necessary contractual instruments. Article 6 This Instruction enters into force immediately. Luanda, October 16, 1991

(Annex to Instruction No. 05/91, of October 16) BANK OPERATIONS REGULATION

1. The bank operations of the National Bank of Angola shall be conducted exclusively with financial institutions operating in the Country.
2. Such operations are classified as follows: I - TREASURY CREDIT OPERATION, intended to advance the liquidity of short-term assets, to meet potential cash needs of those institutions; II - SECURED CREDIT OPERATION, intended to allow the correction of short-term liquidity imbalances, under the guarantee of securities and other assets of the financial institution.
3. THE TREASURY CREDIT OPERATION is subject to the following rules and conditions: Beneficiaries: Financial institutions authorized to maintain reserve deposit accounts with the BNA. Term: Up to 6 months. Limits: Band A: 5% of the institution's demand and time deposits, evidenced in the last "map" for calculating the base for mandatory reserves. Band B: 10% of the same value. Band C: At the discretion of the Board of Directors. Formalization: Through a rediscount, discount, or sale proposal, in which the assets to be transacted will be specified (nature, quantity, issuance and maturity dates, name and address of debtors and obligors, redemption and discount value, interest and commissions applicable to the original operation). Such proposals shall be signed by two directors of the financial institution, with specific powers for this purpose, and delivered to the National Bank of Angola accompanied by securities endorsed in blank and a copy of the updated registration form for each debtor and obligor, constituting proposals for: a) rediscount of commercial drafts and bills drawn or issued for commercial purposes, with two or more signatures, one of which must be that of a bank, and (with maturity within six months following the date of the rediscount; b) discount or acquisition (including for subsequent resale) of treasury bonds or other securities issued or guaranteed by the State, which are part of a public offering, with maturity within one year from the date of their acquisition by the Bank, with the commitment of repurchase or resale by either party strictly prohibited; c) acquisition or early redemption of securities issued by the Bank, with future reissuance permitted, with the commitment of repurchase or resale by either party, however, strictly prohibited. Costs: Shall be defined in a Notice by the Governor of the National Bank of Angola. Settlement: The Operations shall be settled by debit to the financial institution's deposit account with the central bank, on the maturity date of each security or, if a holiday, on the next business day. The settled securities will be returned to the Institution, accompanied by a receipt and the respective debit "bordereau", from the day following settlement. Accounting, Custody, and Inventory: The Directorates of Emission and Credit and of Accounting shall establish the necessary procedures to ensure the accounting of securities in balance sheet accounts on the same day of the operation. The Directorate of Emission and Credit shall keep such securities under its custody. In a safe, performing daily control over them, for reconciliation with accounting balances. On the last business day of each month, an analytical inventory of the securities shall be prepared and signed by two employees designated by the Director of Emission and Credit, who shall also initial it, keeping it available for the Bank's Audit Board.
4. THE SECURED CREDIT OPERATION obeys the following rules and conditions: Beneficiaries: Financial institutions of any nature, authorized to operate in the Country. Parabanking institutions and others not authorized to maintain deposit accounts at the National Bank of Angola shall indicate the name of the institution whose account, with its prior authorization, will be used for crediting the loaned amounts and for settling the operation. Term: Up to three months. Limits: For institutions authorized to maintain the mandatory reserve deposit account, the limit is the value equivalent to 10% of the institution's demand and time deposits, evidenced in the last statement for calculating the base for those reserves, without affecting the limits for Treasury Credit Operations. For the remaining institutions, the limit is equivalent to 20% of the net accounting equity to be determined by the Banking Supervision Directorate, based on the latest balance sheet. Formalization: "Revolving" Credit Opening Contract, signed by directors with statutory authority to encumber the financial institution's equity. The loan amount may be drawn in a single lump sum or in installments, allowing for alternating withdrawals and amortizations as well as the renewal, expansion, or substitution of guarantees. The institution offering its reserve deposit account to cover the movement of withdrawals, amortizations, and loan settlement shall sign as an intervening party. Guarantees: The total value of the guarantees, principal and subsidiary, shall not be less than 130% of the outstanding balance. The principal guarantee shall consist of the pledge of any of the assets provided for in item 1 of Article 23 of the Organic Law of the National Bank of Angola. The subsidiary guarantee shall comprise, as a mandatory requirement, the pledge of the portion of mandatory reserves equivalent to the contract value and a bill of exchange issued by the institution, with the endorsement of its general and financial directors. At the discretion of the Board of Directors, the pledge of machinery and "stock" goods and the mortgage of real estate of the financial institution or its shareholders may be accepted, as principal or subsidiary guarantee. In the case of real estate not dedicated to the institution's main activity, the contract shall establish the obligation of its alienation and the application of the sale proceeds to the amortization of the loan. Costs: Shall be defined in a Notice by the Governor of the National Bank of Angola. Withdrawals, Amortizations, and Settlement: All movements related to the Secured Credit Operation shall be conducted between the loan's debtor account and the reserve deposit account. Accounting, custody, and inventory: The Directorates of Emission and Credit and of Accounting shall adopt the necessary procedures to ensure the daily accounting of movements resulting from the operations, as well as the accounting record in their respective memorandum accounts, of the values received as guarantee, even in the case that the goods remain in the possession of the benefiting institution itself, in the capacity of a custodian. In any event, a monthly inventory of the pledged goods shall be carried out, signed by two employees designated by the Director of Emission and Credit, initialed by him, and kept available for the Audit Board.