Instruction No. 01-2018 of January 19: Foreign Currency Exchange Policy - Purchase and Sale Auctions and Participation Procedures

INSTRUCTION NO. 01/2018 of January 19
SUBJECT: EXCHANGE RATE POLICY

• Foreign Currency Purchase and Sale Auctions
• Participation Procedures

Where it is necessary to adjust the processes and procedures for the purchase and sale of foreign currency to better fulfill the objectives of exchange rate policy;

Under the combined provisions of Article 3 of Law No. 16/10, of July 15, the Law of the National Bank of Angola, and Article 70 of Law No. 12/15, of June 17, the Law of the Bases of Banking Financial Institutions, and in the exercise of the competence conferred upon me by Article 51 of Law No. 16/10, of July 15, the Law of the National Bank of Angola.

I DETERMINE:

1. Method of Realization of the Sale or Purchase of Foreign Currency
   1.1. The sale or purchase of foreign currency by the National Bank of Angola (BNA) is carried out through auctions conducted electronically, in the Foreign Exchange Market Management System – SGMC, in accordance with the conditions and procedures referred to in this Instruction.
   1.2. The BNA also proceeds with direct sales to cover the needs of sovereign bodies and, exceptionally, whenever the supply of goods and services critical to the Country is at stake.

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1.3. For private operations, the BNA may, additionally, carry out direct sales to Commercial Banks based on the demand declared in the Needs Maps of each Bank in this segment.
1.4. The frequency of the auctions is determined by the BNA.

2. Participating Institutions
   The BNA and the Commercial Banks authorized by it participate in the auctions.

3. Access Requirements for the Foreign Currency Sale Sessions of the National Bank of Angola
   3.1. Commercial Banks wishing to participate in the auctions must send to the BNA on the first business day of each year, an application for admission to them, in accordance with the model of the contract letter annexed, forming an integral part of this Instruction.
   3.2. The participation of Commercial Banks in each auction will be conditioned upon compliance with the following conditions:
   3.2.1. Compliance with the legislation and regulation applicable to banking activity, in particular, with regard to:
   a) The level of mandatory reserve required in national currency; b) The limit of Exchange Position; c) Compliance with the minimum limit of the regulatory solvency ratio; d) The submission of accounting, statistical, and management information within the deadlines defined by the Departments of Supervision of Banking Financial Institutions, Asset Markets, and Exchange Control; e) The existence of internal control systems and procedures that ensure compliance with legal and regulatory provisions on the marketing of foreign currency.

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3.2.2. Sending via the SSIF, and in its absence, via email, to the DMA - BNA Market Room, by 17:00 hours on the last business day of each week, the forecast information of foreign exchange resource needs for the following week that are in conditions to be effectively executed;
3.2.3. Sending information to the BNA, 10 (ten) business days after each session, regarding the degree of execution of the sale of foreign currency acquired in previous auctions, or through direct sale, and the remaining value that must be returned to the BNA, as per point 7.2.
3.2.4. Commercial Banks that present non-compliance with the above requirements or relevant deficiencies in their internal control systems will be excluded from the auctions until their regularization.

4. Procedures for the Realization of Auctions
   4.1 Sale Auctions
   4.1.1 The amount available for each auction and the denomination of the foreign currency are communicated by the BNA through the SGMC or another available and adequate means of communication for this purpose.
   4.1.2 Commercial Banks must submit their proposals in the SGMC within a maximum period of 30 (thirty) minutes after the announcement of the opening of the auction, indicating the amounts and their respective exchange rates.
   4.1.3 Each Commercial Bank may submit up to 4 (four) proposals with different exchange rates, the minimum and maximum limit being up to 2% (two percent) on the reference exchange rate on the date of the auction. The value of each proposal should not be less than EUR 500,000.00 (five hundred thousand) or equivalent in another foreign currency, in accordance with the currency announced in the session.

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4.1.4 The amount of proposals entered by each participating Commercial Bank in the sale auction will be limited to the equivalent of 15% (fifteen percent) of their regulatory own funds.
4.1.5 In sectoral auctions, only Commercial Banks that have demand in these sectors, registered in their needs maps, should participate.

4.2 Auctions for the Coverage of Letters of Credit
4.2.1 The BNA may organize specific auctions for the exchange rate coverage of letters of credit, committing to sell (i) on the date of the auction, a value up to 10% (ten percent) of the auction value at the spot exchange rate, which may be used for the settlement of advances or the constitution of collateral; (ii) up to 5 (five) days before the payment dates of each shipment, at the spot or forward exchange rate, the remaining value upon presentation of proof of negotiation of the documents.
4.2.2 The BNA must communicate to participating Banks the characteristics of each auction session, namely, (i) the exchange rate option (spot or forward) and the eligible purposes, if applicable.
4.2.3 In auctions with a forward exchange rate, a single exchange rate applicable to all shipments under the same letter of credit is defined by the BNA, calculated considering its validity period and the reference interest rates of the currencies contemplated for the same period (Libor in the case of the Kwanza).
4.2.4 Only letters of credit that contemplate deferred payments, with maturity dates not less than 60 (sixty) days counted from the date of presentation of the documents relating to each shipment, are permitted.
The shipment dates and presentation of documents must allow payment within the validity date of the letter of credit.
4.2.5 Letters of credit should only be opened by Commercial Banks after acceptance in the auction.

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4.2.6 The opening and payment of letters of credit, partial or total, must be registered in the SINOC and reported in the SSIF.

4.3 Purchase Auctions
4.3.1 The amount and denomination of the foreign currency that the BNA intends to purchase through an auction are communicated via the SGMC or another available and adequate means of communication for this purpose.
4.3.2 Commercial Banks must enter their proposals for the sale of foreign currency in the SGMC, indicating the amount and exchange rate.

5. Criteria for the Selection of Proposals
   5.1 The proposals of Commercial Banks for the purchase of foreign currency from the BNA will be selected in descending order of exchange rate, starting from the proposal offering the highest exchange rate until the total amount made available is exhausted.
   5.2 The proposals for the purchase of foreign currency by the BNA will be selected in ascending order, starting from the one offering the lowest exchange rate until the smallest of the total amount made available by the Commercial Banks or sought by the BNA is exhausted.
   5.3 If proposals with equal rates are presented, and it is not possible to satisfy the total requests, the available amount will be prorated in proportion to what was reported in the Needs Maps.
   5.4 The maximum purchase amount per participating Commercial Bank will be limited to 25% of the offer placed by the BNA.
   5.5 The BNA reserves the right to exclude proposals understood as speculative or outside the context of the equilibrium, stability, and dynamism of the foreign exchange market.
   5.6 After the closure of the proposal insertion period, the BNA communicates the result of the auction through the SGMC and/or another available and adequate means of communication for this purpose.

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6. Procedures for the Settlement of Operations and Restrictions
   6.1 Except as established in point 4.2, for the settlement of purchase and sale operations of foreign currency negotiated in the auctions, the following criteria must be observed:
   a) The settlement of values in national currency will be effected on D+2, by debit or credit of the reserve accounts of Commercial Banks, through the Real-Time Payments System – SPTR; b) It is the responsibility of the BNA to proceed with the debit, or credit, as the case may be, of the reserve bank accounts for the settlement of the contracted operations; c) The settlement of values in foreign currency will also be effected by the seller on D+2.
   6.2 Access to rediscount operations or any permanent liquidity facility of the National Bank of Angola is not permitted for the purpose of settling foreign currency acquired in the auction sessions organized by the BNA.
   6.3 In the event of the absence or insufficiency of resources for the settlement of the operations provided for in this Instruction, the following sanctions will be applied, jointly, to the non-compliant Commercial Bank:
   a) Cancellation of uncovered contracted operations; b) Prohibition of participation in the next 3 (three) auction sessions.

7. Deadline for the Marketing of Foreign Currency Acquired from the BNA
   7.1 The foreign currency acquired under the terms of this Instruction must, obligatorily, be used to carry out operations in accordance with the current exchange legislation.
   7.2 The currency acquired from the BNA and not marketed within a period of 5 (five) business days, after the settlement of the auction, must be returned to the BNA, which will acquire it at the lowest exchange rate between the selling rate and the buying rate in force on the date of return.

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8. Exchange Rate Correction Auctions
   8.1 The BNA may carry out extraordinary sessions for the purchase and sale of foreign currency with an intervention character, adopting specific participation criteria, including the dimension of activity in the financial market, operational efficiency, financial solidity, and bidding capacity of participants.
   8.2 The BNA may also carry out auctions without financial settlement, for the purpose of assessing the sensitivity of the market exchange rate.

9. Doubts and Omissions
   Doubts and omissions resulting from the interpretation and application of this Instruction are resolved by the Asset Markets Department.

10. Revocation
    Instruction No. 10/2015, of June 04, and all regulation that contradicts the provisions of this Instruction are revoked.

11. Entry into Force
    This Instruction enters into force from January 22, 2018.

PUBLISH.
Luanda, January 19, 2018.
THE GOVERNOR
JOSÉ DE LIMA MASSANO

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ANNEX
Application for Admission to the Purchase and Sale Sessions of Foreign Currency of the National Bank of Angola

THE BANK (name of the bank), duly represented by the signatories:

1. REQUESTS from the National Bank of Angola its admission to the sessions for the purchase and sale of foreign currency, under the terms and conditions defined in Instruction No. 01/2018, of January 19, 2018;

2. DECLARES to be aware of the exchange regulation and the rules that govern the sessions for the purchase and sale of foreign currency, as well as to possess internal control procedures that ensure strict compliance with the current exchange norms in the Country;

3. ALSO COMPROMISES to communicate to the National Bank of Angola / Department of Asset Markets and Department of Exchange Control, any facts of its knowledge that may constitute a risk for the implementation and development of the interbank foreign exchange market in Angola;

4. AUTHORIZES the National Bank of Angola to debit its reserve bank account, for the countervalue of the contracted operations according to what is established for the operations of purchase of foreign currency from the National Bank of Angola;

5. AUTHORIZES the National Bank of Angola to credit its Reserve Bank Account, for the countervalue of its operations of sale of foreign currency to the BNA, contracted according to what is established for the operations of sale of foreign currency to the National Bank of Angola;

6. INDICATES, for the purpose of settling the foreign currency, the banking coordinates below;

i. Name of the Bank:

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ii. Correspondent:
iii. Account No.:
iv. Intermediary:
v. Signature:
vi. Full Name:

COPY: DCC, DSI, DOB