Notice No. 1/GBM/2024, of 15 March – Establishes Rules on Own Funds and Prudential Limits for Payment Service Providers

SUMÁRIO A V I S O The matter to be published in the «Boletim da República» must be submitted as a duly authenticated copy, one for each subject matter, containing, in addition to the necessary indications for this purpose, the following endorsement, signed and authenticated: For publication in the «Boletim da República». IMPRENSA NACIONAL DE MOÇAMBIQUE, E. P. Bank of Mozambique: Notice No. 1/GBM/2024: Establishes rules on Own Funds and Prudential Limits for Payment Service Providers. Notice No. 2/GBM/2024: Approves guidelines on Risk Management and Cyber Resilience. Friday, 15 March 2024 I SERIES — Number 54

BANK OF MOZAMBUQUE Notice No. 1/GBM/2024 of 15 March

Given the need to establish rules on own funds and prudential limits for payment service providers, the Bank of Mozambique, using the powers conferred by paragraph 1 of Article 80, paragraph 1 of Article 85, and paragraph 2 of Article 90, all of Law No. 20/2020, of 31 December, the Law on Credit Institutions and Financial Companies, determines:

CHAPTER I General Provisions ARTICLE 1 Object This Notice establishes the rules on own funds and prudential limits for payment service providers.

ARTICLE 2 Scope of Application This Notice applies to payment service providers.

CHAPTER II Prudential Rules SECTION I Own Funds ARTICLE 3 Composition of own funds The own funds of payment service providers consist of positive and negative elements, as defined in Articles 4 and 5 of this Notice.

ARTICLE 4 Positive elements of own funds The following are considered positive elements of own funds: a) paid-up capital, including the portion represented by non-convertible preference shares; b) share and other issue premiums; c) statutory, legal, and other reserves formed from undistributed profits; d) positive results carried forward from previous financial years; e) positive results of the last financial year, under the conditions referred to in Article 11; f) provisional positive results of the current financial year, under the conditions referred to in Article 11; g) portion of reserves and results corresponding to deferred tax assets; h) elements characterized in Article 12, subject to conditions approved by the Bank of Mozambique; i) elements characterized in Article 13; j) reserves arising from the revaluation of tangible fixed assets, carried out in accordance with the Legal Instrument authorizing it; k) subordinated loans, under the conditions referred to in Article 14; and l) released portion of convertible preference shares.

ARTICLE 5 Negative elements of own funds The following are considered negative elements of own funds: a) treasury shares, at their book value; b) other own elements falling under the preceding article, at their book value; c) intangible assets; d) negative results carried forward from previous financial years; e) negative results of the last financial year; Edição electrónica da Pandora Box, Lda.

678 I SERIES — NUMBER 54 f) negative results of the current financial year, at month-end; g) negative revaluation reserves; h) positive revaluation differences under the equity method; and i) value of shortfalls verified by the positive difference between own funds requirements and the value of own funds.

ARTICLE 6 Elements excluded from own funds In determining the elements listed in Articles 4 and 5 of this Notice, unrealized gains and losses from cash flow hedging of covered elements measured at amortized cost and future transactions must be excluded.

ARTICLE 7 Core and supplementary own funds

1. The amount corresponding to the sum of the elements indicated in letters a) to g) of Article 4, minus the sum of the elements indicated in letters a), c) to i) of Article 5, constitutes core own funds.
2. The amount corresponding to the sum of the elements indicated in letters h) to l) of Article 4, minus the element indicated in letter b) of Article 5, constitutes supplementary own funds.

ARTICLE 8 Calculation of own funds

1. The total (own) funds of payment service providers are determined by the sum of core own funds and supplementary own funds, minus the amounts referred to in Article 9 of this Notice.
2. The elements provided for in paragraph 1 of Article 9 must be deducted by 50% from core own funds and by 50% from supplementary own funds, after applying the limits for the eligibility of supplementary own funds in relation to core own funds.
3. For the purposes of the preceding paragraph, if supplementary own funds are less than the deduction, the remaining amount must be deducted from core own funds.

ARTICLE 9 Elements to be deducted from own funds

1. The amount corresponding to shares, other securities, and other instruments falling under Article 4, issued or contracted by credit institutions or financial companies of which the payment service provider holds participations, is deducted at their respective net book value, under the following conditions: a) in cases where the payment service provider holds a participation exceeding 25% of the share capital of one of the aforementioned institutions, by the total amount of that participation, as well as by the value represented by the other equity elements mentioned it holds in the same institution; and b) the total amount of remaining qualified participations and other equity elements referred to in this paragraph not covered by the preceding letter, only to the extent that it exceeds 25% of the own funds of the institution holding them, calculated before making the deductions provided for in the preceding letter.
2. The amount of value adjustments that safeguard risks incurred in securitization transactions must also be deducted, to the extent that these are not already safeguarded in the payment service provider's accounts, whenever the requirements established by the Bank of Mozambique for recognizing significant transfers in payment services are not met.
3. The following are also deducted: a) the amount the institution intends to allocate exclusively to cover specific risks, notably those related to electronic money issuance and payment activity, other financial assets, and tangible fixed assets; b) the portion exceeding the limits defined in paragraph 2 of Article 8 of Notice No. 6/GBM/2015, of 31 December, without prejudice to the corresponding sanctioning regime; c) the value of the shortfall between the fiduciary account balance and the circulating electronic money balance; and d) the value of other deductions resulting from measures established by the Bank of Mozambique in specific Notices.

ARTICLE 10 Exceptions in the treatment of deduction values from own funds

1. The value of asset elements to be deducted under paragraph 1 of Article 9 corresponds to their respective net book value, except for the value of participations subject to the equity method.
2. For the purposes of the preceding paragraph, under the application of the equity method, revaluation differences indicated in letter h) of Article 5 must be excluded when included in that value.

ARTICLE 11 Treatment of results in own funds Provisional positive results of the current financial year or positive results of the last financial year should only be considered as own funds if the following conditions are met: a) they have been determined after accounting for all costs attributable to the reference period and complying with all rules regarding impairment provisions and amortization allocations; b) they have been reduced by the values of foreseeable taxes and dividends, calculated proportionally to the period to which they relate; and c) they have been accepted by the Bank of Mozambique, without prejudice to the audit of accounts by an external auditor approved by the Bank of Mozambique.

ARTICLE 12 Treatment of non-securitized loan amounts The elements referred to in letter h) of Article 4 of this Notice consist of amounts from the issuance of securities with indefinite maturity and from non-securitized loans, whose contracts, in addition to the subordination clause referred to in letter b) of paragraph 1 of Article 14, provide: a) that they can only be repaid at the initiative of the issuing or borrowing institution and with prior consent of the Bank of Mozambique; b) the option for the institution to defer interest payments; and c) that outstanding capital and unpaid interest may be called upon to absorb losses, allowing the institution to continue its activity.

ARTICLE 13 Other eligible equity elements to be incorporated into own funds Equity elements meeting the following requirements may be included in supplementary own funds: a) they can be freely used to cover risks normally associated with the payment service provider's activity without losses or write-downs having been identified; b) they are reflected in the accounts of payment service providers; c) their amounts are verified by an external auditor approved by the Bank of Mozambique; and d) they have been authorized by the Bank of Mozambique.

ARTICLE 14 Treatment of subordinated loans in own funds

1. Contracts formalizing subordinated loans must respect, at least, the following conditions: a) they have been approved by the Bank of Mozambique; b) they clearly establish that in case of borrower insolvency or liquidation, the lender's repayment is subordinated to the prior repayment of all other non-subordinated creditors; c) if an initial repayment term is established, it must not be less than five years; d) they do not contain any early repayment clause regarding the maturity date, at the lender's initiative; e) the borrowing institution has the option to defer interest payments; and f) outstanding capital and unpaid interest may be called upon to absorb losses, allowing the borrowing institution to continue its activity.
2. Any early repayment of the loan, provided for in letter c) of the preceding paragraph, should only occur at the initiative of the borrowing institution and after obtaining authorization from the Bank of Mozambique.

ARTICLE 15 Restriction on preference shares in own funds

1. The amounts corresponding to convertible preference shares with a fixed redemption date are not considered own funds of payment service providers when redemption occurs before five years have elapsed since their issuance.
2. Convertible preference shares are those that can be liquidated on a previously stipulated date or when the general meeting so stipulates.

ARTICLE 16 Phase-out period for other securities, convertible preference shares, and subordinated loans in own funds The Bank of Mozambique establishes a gradual reduction program for these amounts over the five years preceding the start of their respective repayment, for payment service providers that include in their own funds amounts from the issuance of other securities and fixed-date convertible preference shares, and from contracting subordinated loans.

ARTICLE 17 Method for determining own funds on a consolidated basis

1. Without prejudice to Article 18 of this Regulation, in cases where the calculation of own funds is performed on a consolidated basis, the elements indicated in the preceding articles are considered at the amounts resulting from consolidation, carried out in accordance with Bank of Mozambique regulations, and core own funds are: a) increased by the amounts corresponding to: i. minority interests, considering Articles 6 and 18 of this Notice; ii. negative first-time consolidation differences; and iii. negative revaluation differences under the equity method. b) decreased by the amounts corresponding to the differences referred to in items ii and iii of the preceding letter, when positive.
2. For the purposes of the deduction referred to in paragraph 1 of Article 9, participations subject to the equity method are deducted at the values recorded in the participating institution's balance sheet, which exclude revaluation differences under the equity method indicated in letter b) of the preceding paragraph, when included in those values.

ARTICLE 18 Method for determining own funds on an adjusted consolidated basis

1. In cases where the calculation of own funds is performed on a consolidated basis, the following must also be observed: a) the application of letter g) of Article 4; and b) the amount corresponding to the sum of elements indicated in letters a) to g) of Article 4, minus the sum of elements indicated in letters a) and c) to i) of Article 5, constitutes core own funds.
2. The results referred to in Article 11 are those resulting from corrections inherent to the application of relevant provisions of this Notice, for determining positive and negative elements of own funds.
3. If the application of the principles stated in paragraph 1 results in a negative value, it must be considered in the calculation of letters e) and f) of Article 5, as applicable. Edição electrónica da Pandora Box, Lda.

680 I SERIES — NUMBER 54 SECTION II Ratios and Prudential Limits ARTICLE 19 Own funds of payment service providers The own funds of payment service providers must not be lower than the minimum share capital value established by the Bank of Mozambique or the amount resulting from applying Articles 20 and 22, whichever is higher.

ARTICLE 20 Own funds requirements for payment aggregators and fund transfer institutions

1. The own funds of payment aggregator companies and fund transfer institutions must, on a permanent basis, be equal to or greater than the amount resulting from applying the fixed overheads method, described in Article 21.
2. Based on the assessment of risk management procedures, loss data, and internal control mechanisms, the Bank of Mozambique may require or allow payment aggregators and fund transfer institutions to hold own funds higher or lower by up to 20% from the amount resulting from applying the method defined in paragraph 1 of this article.

ARTICLE 21 Fixed overheads method

1. Payment aggregators and fund transfer institutions must possess own funds of at least 10% of the value of their administrative costs from the previous year.
2. For the purposes of the preceding paragraph, administrative costs are understood as the sum of personnel costs and service provision costs.
3. In the first year of operation, the own funds of payment service providers must be at least equivalent to 10% of the value of fixed overheads forecast for the first year in their projected accounts.
4. The Bank of Mozambique may require adjustments to the projected accounts, notably in cases where significant divergence from forecasts is observed.

ARTICLE 22 Own funds requirements for electronic money institutions

1. The own funds requirements of electronic money institutions must correspond to at least 2% of the average value of electronic money in circulation.
2. For the purposes of the preceding paragraph, the average value of electronic money in circulation consists of the average total value of financial liabilities associated with issued electronic money at the end of each day over the last three months, calculated on the first day of each month and applied to that month.

ARTICLE 23 Participation in the capital of other companies

1. Payment service providers must not hold, directly or indirectly, participations in the capital of a company whose amount exceeds 25% of their own funds.
2. The total amount of qualified participations in companies must not exceed 75% of the payment service provider's own funds.
3. Payment service providers must not hold, directly or indirectly, in a company, a participation conferring more than 25% of the voting rights corresponding to the capital of the participated company.
4. Without prejudice to Article 9, paragraph 1, the provisions of the preceding paragraphs do not apply to participations in other institutions subject to Bank of Mozambique supervision and insurance companies headquartered in Mozambique.

ARTICLE 24 Method for covering liabilities

1. Payment service providers must permanently ensure the coverage of their liabilities towards third parties.
2. On-demand or short-term liabilities with a residual maturity of up to 30 days must be fully covered by the following values: a) cash in vault; b) postal orders and demand checks; c) current accounts at credit institutions; d) term deposits not exceeding 30 days; e) gold and other precious metals; and f) other realizable asset elements within a period not exceeding 30 days, except tangible assets, non-monetary financial assets classified as available for sale, and investments in subsidiaries, associates, and joint ventures.
3. The total amount of liabilities with a residual maturity exceeding 30 days but less than 180 days, by the excess of the values referred to in the preceding paragraph and other tangible assets, except non-monetary financial assets classified as available for sale and investments in subsidiaries, associates, and joint ventures.
4. The total amount of liabilities with a residual maturity exceeding 180 days must be fully covered by: a) Excess of the values referred to in paragraphs 1 and 2 over the liabilities mentioned therein; and b) Other asset elements, realizable within a period exceeding 180 days, except tangible assets, non-monetary financial assets classified as available for sale, and investments in subsidiaries, associates, and joint ventures.

CHAPTER III Rules on Operational Risk and Security Management ARTICLE 25 Management of operational and security risks

1. Payment service providers must establish a framework for managing operational and security risks related to the payment services they provide. Edição electrónica da Pandora Box, Lda.

15 DE MARÇO DE 2024 681 2. As part of the framework referred to in the preceding paragraph, payment service providers must establish: a) procedures for identifying, assessing, and monitoring the operational risk inherent in their significant products, services, and systems; b) the risk tolerance level; c) procedures for controlling and mitigating risk; d) effective incident management procedures, including for detecting and classifying severe operational and security incidents; and e) disaster recovery and business continuity plans. 3. Payment service providers must provide the Bank of Mozambique annually and upon request with a comprehensive and updated assessment of operational and security risks, as well as the adequacy of risk mitigation measures and control mechanisms applied in response to these risks.

ARTICLE 26 Incident reporting In the event of a severe operational or security incident, payment service providers must: a) immediately notify the Bank of Mozambique; and b) if the incident has or is likely to have repercussions on the financial interests of their payment service users, immediately inform them of the incident and all measures those users can take to mitigate its adverse effects.

CHAPTER IV Final and Supplementary Provisions ARTICLE 27 Submission of Information Payment service providers must submit to the Bank of Mozambique: a) the own funds statement, referencing the last day of each month and within 15 days thereafter; b) the ratios and prudential limits statement, quarterly; and, c) by the 15th of each month: i. the balance of fiduciary accounts and respective deposit concentration ratio; ii. the balance of interest on fiduciary accounts; and iii. the total pending balances of electronic money held by them and respective ratio to fiduciary account balances.

ARTICLE 28 Sanctioning Regime Violation of the provisions of this Notice constitutes an offense provided for and punishable under Law No. 20/2020, of 31 December.

ARTICLE 29 Clarification of Doubts Doubts regarding the interpretation and application of this Notice must be submitted to the Prudential Supervision Department of the Bank of Mozambique.

ARTICLE 30 Compliance Period Institutions must align their acts and procedures with the provisions of this Notice within 180 days, counting from the date of its entry into force.

ARTICLE 31 Entry into Force This Notice enters into force 90 days after the date of its publication. Banco de Moçambique, em Maputo, aos 25 de Janeiro 2024. — Governor, Rogério Lucas Zandamela. Aviso n.º 2/GBM/2024 de 15 de Março Havendo necessidade de estabelecer directrizes para a mitigação do risco cibernético, com o objectivo de, por um lado, promover a governação e gestão deste risco no sector financeiro, e por outro, prever os requisitos para as instituições aperfeiçoarem a sua postura no que diz respeito à resiliência cibernética, o Banco de Moçambique, no uso das competências conferidas ao abrigo da alínea d) do n.º 2 do artigo 37, da Lei n.º 1/92, de 3 de Janeiro, Lei Orgânica do Banco de Moçambique, determina:

1. São aprovadas as Directrizes de Gestão do Risco e Resiliência Cibernética, que fazem parte integrante do presente Aviso.
2. O presente Aviso entra em vigor 180 dias após