Regulatory Alerts2020-04-17
Circular Letter No. 02/DCC/2020, April 18
The Central Bank of Angola issued Circular Letter No. 02/DCC/2020 to mandate that all letter of credit settlements require an immediate debit from the importer’s national currency account at the prevailing selling exchange rate, prohibiting foreign-currency-indexed credit. The directive requires banking institutions to rectify existing non-compliant records by converting credited amounts to national currency equivalents at the settlement date, ensuring imported goods transactions adhere to current foreign exchange rules. Non-compliant institutions face penalties under the Foreign Exchange Law and Financial Institutions Framework Law, while aggrieved importers may file complaints with the Bank’s Financial Conduct Department.
CIRCULAR LETTER NO. 02/DCC/2020, April 18 Subject: Settlement of Letters of Credit Considering that: Notice 11/2014, dated December 17, on specific requirements for credit operations, in Article 8(1), states that: “Institutions are expressly prohibited from carrying out credit operations, by disbursement, in foreign currency, for any term and for any credit purpose.” Notice 5/2018, dated July 17, on Rules and Procedures Applicable to Foreign Exchange Operations for the Import and Export of Goods, in Article 8(5), states: “Whenever foreign currency is sold, the settlement of the operation must be effected by debit of the importer’s national currency account, at the time of settlement of the transaction with the foreign party.” Instruction 4/2019, dated April 26, on the granting of credit, in paragraph 1.5(a), states that “The granting of credit with capital indexed to a foreign currency is not permitted.” The Central Bank of Angola clarifies the following:
- Any settlement of a letter of credit in favor of the exporter requires the debit of the importer’s national currency account on that same date, at the prevailing foreign currency selling exchange rate in force at the banking financial institution on that date. In other words, the banking financial institution is obligated to sell foreign currency to the importer on the date of settlement of the liability with the foreign party. This rule applies regardless of whether the banking financial institution has used its foreign exchange position to settle said liability or has purchased foreign currency specifically for this purpose.
- In the event that the importer does not have a sufficient account balance to cover the settlement referred to in the preceding point, the banking financial institution must grant a credit in national currency, equal to the deficit identified in the customer’s national currency account, and this amount may not be indexed to any foreign currency.
- In order to comply with the prevailing foreign exchange regulations, all situations currently recorded in the books of banking financial institutions that contradict the above must be immediately regularized, so that the value of the credit granted to the importer is the national currency equivalent on the date of settlement in foreign currency under the letter of credit, deducted from the balance in their account on that same date, available for said payment.
- The Central Bank of Angola reiterates that non-compliance with the prevailing regulations subjects banking financial institutions to the penalties and sanctions stipulated in the Foreign Exchange Law and the Framework Law of Financial Institutions.
- Importers who feel aggrieved may submit their complaints to the Financial Conduct Department of the Central Bank (reclamacoes@bna.ao). Luanda, April 18, 2020