Guideline No. 06/2023 of July 14

---

GUIDELINE NO. 06/2023 of July 14 SUBJECT: FINANCIAL SYSTEM

• Prudential Limits on Large Exposures
• Holding of Participations in Non-Financial Companies

Given the need to establish prudential limits on large exposures, as well as the holding of participations in Non-Financial Companies by Banking Financial Institutions, as established in Advisory No. 08/21 of July 5 on Prudential Requirements; In accordance with the combined provisions of Article 166 of Law No. 14/21 of May 19, the General Regime for Banking Financial Institutions, Articles 31(1)(d) and (f) and Article 98(1), both of Law No. 24/21 of October 18, the National Bank of Angola Act. I DETERMINE:

1. Object This Guideline establishes the limits on large exposures, as well as the participation of Banking Financial Institutions in the capital of Non-Financial Companies, in accordance with Advisory No. 08/21 of July 5 on Prudential Requirements.

2. Scope This Guideline applies to Banking Financial Institutions under the supervision of the National Bank of Angola, as provided for in Law No. 14/21 of May 19, the General Regime for Banking Financial Institutions.

3. Definitions Without prejudice to the definitions established in Law No. 14/21 of May 19, for the purposes of this Guideline: 3.1. Indirect Holding of Shares or Stock: A person, natural or legal, is considered to indirectly hold shares or stock in a company when these are attributable to them according to the criteria set out in paragraph 2 of Article 8 of Advisory No. 01/22 of January 28 on the Corporate Governance Code for Banking Financial Institutions. 3.2. Exposures: The assets and off-balance sheet items listed in Annex III to this Guideline and forming an integral part thereof.

4. General Requirements 4.1. Banking Financial Institutions must calculate the limits on large exposures and their participation in the capital of Non-Financial Companies, as provided for in Annexes I and II to this Guideline. 4.2. The limits set out in this Guideline do not apply to exposures or components of exposures arising from assets directly deducted from own funds or other own fund reductions related to the asset item. 4.3. Excesses beyond the limits set out in this Guideline are subject to own fund requirements, as provided for in Annexes I and II.

5. Policies and Processes 5.1. Banking Financial Institutions must adopt operational procedures associated with solid, effective, and complete internal control policies and processes for identifying all risk concentration situations, as well as for controlling the limits referred to in this Guideline. 5.2. For the purposes of large exposure calculations, Banking Financial Institutions may consider direct risk or guarantor risk, provided they apply consistent and uniform methodologies throughout the operation's duration. 5.3. For the purposes of the preceding sub-point, credit derivative protection sellers are treated as guarantors. 5.4. For exposures to collective investment schemes and securitization operations, Banking Financial Institutions must consider directly and substantively the direct and underlying risks of the exposure and their economic reality.

CONTINUATION OF GUIDELINE NO. 06/2023 Page 2 of 26 6. Concentration Risk Control 6.1. Without prejudice to the limits set out in this Guideline, Banking Financial Institutions must identify, assess, monitor, control, and report on concentration risk, particularly in stress situations that may occur in financial markets, impacting the following elements: a) Activity sectors of borrowers and guarantors; b) Guarantors, if opting not to consider direct risk; c) Counterparties in financial derivative operations, notably over-the-counter traded instruments; d) Countries of allocation for operations; e) Suppliers of goods and services; and, f) Technology dependence inherent to information systems. 6.2. The National Bank of Angola may determine adjustments to exposures on the matters referred to in the preceding paragraph whenever deemed necessary for good concentration risk management.

7. Information Reporting 7.1. Banking Financial Institutions must report to the National Bank of Angola information on large exposures and holdings in non-financial companies, as provided for in Article 35 of Advisory No. 08/21 of July 5 on Prudential Requirements, on an individual and consolidated basis, quarterly, using the forms and completion notes provided in Annexes IV and V. 7.2. For the purposes of the preceding paragraph, if part of a financial group, the parent company must report information according to the consolidation perimeter provided for in Article 5 of Advisory No. 08/21 of July 5 on Prudential Requirements. 7.3. Banking Financial Institutions must ensure that data reported in the tables attached to this Guideline are properly documented.

8. Transitional Provisions 8.1. Exposures to the Angolan State denominated in foreign currency are exempt until December 2023, transitioning to a 75% weighting by December 2024, and must comply with this Guideline from January 1, 2025. 8.2. For the purposes of Annex I, exposures on or linked to guarantees from Banking Financial Institutions may be deducted at 80% until December 2023, and 50% by December 2024, with full compliance required from January 1, 2025. 8.3. Banking Financial Institutions must report to the National Bank of Angola the information required by Article 35 of Advisory No. 08/21 of July 5 on Prudential Requirements, individually on a monthly basis and consolidated on a quarterly basis, until October 2022. 8.4. Banking Financial Institutions must report the information required by Article 35 of Advisory No. 08/21 of July 5 on Prudential Requirements, individually and consolidated, quarterly, from November 2022 onwards.

9. Sanctions Non-compliance with the provisions of this Guideline constitutes an offense punishable under Law No. 14/21 of May 19, the General Regime for Banking Financial Institutions.

10. Doubts and Omissions Doubts and omissions arising from the interpretation and application of this Guideline are resolved by the National Bank of Angola.

11. Revocation Guideline No. 12/22 of October 19 on Prudential Limits on Large Exposures is hereby revoked.

12. Entry into Force This Guideline enters into force on the date of its publication. PUBLISHED. Luanda, July 14, 2023. THE GOVERNOR MANUEL ANTÓNIO TIAGO DIAS

CONTINUATION OF GUIDELINE NO. 06/2023 Page 6 of 26 ANNEX I Prudential Limits on Large Exposures

1. Banking Financial Institutions must not assume large exposures to a counterparty or a group of interconnected counterparties exceeding 25% of their Tier 1 own funds.
2. Whenever large exposures relate to holders of qualifying participations or the interconnected counterparties share the same shareholders, the limit is reduced to 10% of Tier 1 own funds, unless the large exposure relates to a single entity.
3. The sum of the 20 largest large exposure positions must not exceed 300% of Tier 1 own funds.
4. For calculating large exposures, Banking Financial Institutions must consider the exemptions and deductions provided for in paragraphs 13 to 17 of this Annex.
5. The limits set out in paragraphs 1 to 3 apply equally on a consolidated basis.
6. Whenever Banking Financial Institutions exceed or are likely to exceed the limits set out in paragraphs 1 to 3, they must immediately communicate the exposure values to the National Bank of Angola.
7. For the purposes of the preceding paragraph, Banking Financial Institutions must submit an action plan within one (1) month, providing for regularization within six (6) months.
8. Where excess exposures are identified, this excess must be factored into the Own Funds Ratios calculation, being included in Risk-Weighted Assets (RWAs) and weighted at 1250%.
9. For the purposes of the preceding paragraph, the corresponding own fund requirement value is obtained by multiplying RWAs by 8%.

Categorization of Exposure Types 10. Exposures must be considered according to the following criteria: a) Assets at their accounting book value, in accordance with IAS/IFRS, except for trading portfolio exposures; b) Trading portfolio at the excess of long positions over short positions; c) High, medium, medium/low, and low off-balance sheet items listed in Table 2 of Annex III, at their nominal value; and d) Off-balance sheet items related to financial derivatives referred to in Annex III, at the value resulting from multiplying their notional values by the percentages in Table 1.

Table 1

Residual Maturity	Interest Rate Contracts	FX and Gold Contracts	Equity Securities Contracts	Precious Metals (Excl. Gold) Contracts	Commodities (Non-Precious Metals) Contracts
≤ 1 year	0.0%	1.0%	6.0%	7.0%	10.0%
> 1 to ≤ 5 years	0.5%	5.0%	8.0%	7.0%	12.0%
> 5 years	1.5%	7.5%	10.0%	8.0%	15.0%

11. The following exposures are not considered for large exposure limit calculations: a) Foreign exchange operations during the normal settlement period according to commercial practices for each currency; b) Securities purchase or sale operations during the normal settlement period according to commercial practices, up to 5 (five) business days from payment or delivery date; c) Fund transfers, including payment, clearing, and settlement services, in any currency, as well as clearing, settlement, and custody services for financial instruments on behalf of counterparties; and d) Take-underwriting operations, up to 5 (five) business days from the date the Institution received previously underwritten assets.

Associated Guarantees 12. Real and personal guarantees received by Banking Financial Institutions that meet the criteria set out in Annex IV of Guideline No. 15/21 of October 27 on the Calculation and Requirement of Regulatory Own Funds for Credit Risk and Counterparty Credit Risk are eligible as mitigants for large exposures. 13. The guarantees referred to in the preceding paragraph may be considered within the exemptions provided for in paragraph 14 or deductions according to paragraphs 15 to 17 of this Annex.

Exemptions 14. The following exposures are exempt from the large exposure limits set out in paragraphs 1 to 3: a) To central administration, namely the Angolan State and the National Bank of Angola, denominated and financed in national currency; b) To the National Bank of Angola denominated and financed in foreign currency; c) Fully linked to an eligible guarantee, as per Annex IV of Guideline No. 15/21 of October 27, granted by the National Bank of Angola; d) To central state administrations, Central Banks, international organizations, or Multilateral Development Banks to which a 0% risk weight is applied, according to Annex I of Guideline No. 15/21; e) Fully linked to an eligible guarantee, as per Annex IV of Guideline No. 15/21, granted by central state administrations, Central Banks, international organizations, or Multilateral Development Banks to which a 0% weight would be applied; f) Assumed by a Banking Financial Institution to societies in a dominance or group relationship, provided they are included in the consolidation perimeter for prudential purposes per Article 5 of Advisory No. 08/21 or equivalent foreign regulations; g) Guaranteed by cash deposits, constituted in the lending Institution or a group/dominance-related Institution; h) Fully linked to obligations subject to netting agreements; i) Secured by deposit certificates, issued by the lending Institution or a group/dominance-related Institution, provided they are deposited in these entities; j) Arising from unused revocable credit lines, provided the contract stipulates that lines can only be used without exceeding the limits in paragraphs 1 to 3; and k) Arising from contributions to deposit guarantee schemes, where Banking Financial Institutions integrated therein have a legal or contractual obligation to finance them; l) Without prejudice to the preceding sub-points, exposures to central administration (namely the State) denominated and financed in foreign currency without international quotation must observe the limits set out in paragraphs 1 and 3.

Partial Deductions from Exposures 15. A deduction of 80% must be applied to the value of exposures on or linked to guarantees from local or regional administrations, to which a 20% risk weight would be applied per Annex I of Guideline No. 15/21. 16. A deduction of 50% must be applied to the value of exposures classified as low and medium/low risk in Table 2 of Annex III. 17. Up to 50% (fifty percent) of the market value of residential real estate may be deducted from the exposure value or any part thereof fully guaranteed by residential real estate, provided the following cumulative conditions are met: a) The National Bank of Angola has not assigned a risk weight exceeding 35% to the risky positions or parts thereof guaranteed by residential real estate; b) The exposure or part thereof is fully guaranteed by: i. Mortgages on residential real estate; and, 18. A deduction of 75% (seventy-five percent) may be applied to the exposure value guaranteed by residential real estate, where the lessor retains full ownership and the lessee has not yet exercised their purchase option. 19. Up to 50% (fifty percent) of the market value of commercial real estate may be deducted from the exposure value or any part thereof fully guaranteed by commercial real estate, provided the following cumulative conditions are met: a) The National Bank of Angola has not assigned a risk weight exceeding 50% to the risky positions or parts thereof guaranteed by commercial real estate; b) The risky position is fully guaranteed by: i. Mortgages on offices or other commercial facilities; and, ii. Offices or other commercial facilities and risky positions related to real estate leasing operations; c) The value of the commercial real estate does not significantly depend on the borrower's credit quality; and, d) Commercial real estate is fully constructed.

CONTINUATION OF GUIDELINE NO. 06/2023 Page 12 of 26 ANNEX II Limits on Holding Participations in Non-Financial Companies

1. Banking Financial Institutions may not directly or indirectly hold shares or stock in a non-financial company or group of interconnected non-financial companies exceeding 15% of the participating Institution's regulatory own funds.
2. The total amount of shares or stock held, directly and indirectly, in non-financial companies must not exceed 40% of the participating Institution's regulatory own funds.
3. Banking Financial Institutions may not hold for more than 3 (three) years, consecutively or intermittently, shares or stock exceeding 25% of the capital of a non-financial company.
4. The following are not considered for calculating the limits defined in this Annex: a) Non-financial companies exercising activities that the National Bank of Angola considers, upon prior request by Banking Financial Institutions, to be any of the following: i. A direct extension of banking activity; ii. Ancillary services to banking activity; and iii. Leasing, factoring, investment fund management, IT services management, or any similar activity. b) Shareholdings resulting from take-underwriting operations, up to 5 (five) business days from the date the Banking Financial Institution received previously underwritten assets.
5. The limits defined in this Guideline do not apply to Investment Holding Companies subject to the supervision of the National Bank of Angola.
6. The limits set out in paragraphs 1 to 3 apply equally on a consolidated basis.
7. Whenever holdings of shares or stock in non-financial companies exceed or are likely to exceed the limits set out in paragraphs 1 to 3, Banking Financial Institutions must immediately communicate the holding values to the National Bank of Angola.
8. For the purposes of the preceding paragraph, Banking Financial Institutions must submit an action plan within one (1) month, providing for regularization within six (6) months.
9. Where excess holdings are identified, this excess must be factored into the Own Funds Ratios calculation, being included in Risk-Weighted Assets (RWAs) and weighted at 1250%.
10. For the purposes of the preceding paragraph, the corresponding own fund requirement value is obtained by multiplying RWAs by 8%.

CONTINUATION OF GUIDELINE NO. 06/2023 Page 14 of 26 ANNEX III Assets and Off-Balance Sheet Items to Consider for "Prudential Limits on Large Exposures" The assets listed in Table 1 and the off-balance sheet items present in Table 2 of this Annex must be considered.

Table 1 – Assets

Account PCIFB	Asset Class
1.10 CASH AND BALANCES
1.20 APPLICATIONS IN CENTRAL BANKS AND OTHER CREDIT INSTITUTIONS
1.30 SECURITIES AND MARKETABLE INSTRUMENTS
1.40 HEDGING DERIVATIVES WITH POSITIVE FAIR VALUE
1.50 CREDITS IN THE PAYMENT SYSTEM
1.60 FOREIGN EXCHANGE OPERATIONS
1.70 CREDITS TO CUSTOMERS
1.80 OTHER ASSETS
1.90.10 INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

Table 2 – Off-Balance Sheet Items

Risk Level	Instrument Type	PCIFB Account	Off-Balance Class
High	• Guarantees with credit substitute nature<br>• Acceptances<br>• Endorsements of instruments without another Institution's signature<br>• Irrevocable stand-by letters of credit with credit substitute nature<br>• Sale of assets with repurchase agreement<br>• Receivable portion of shares and other partially paid securities<br>• Forward deposits<br>• Purchase of assets on credit/term<br>• Transactions with recourse	9.10.20	Liability to Third Parties
Medium	• Indemnities and guarantees not having credit substitute nature<br>• Unused credit lines with initial maturity > 1 year<br>• Irrevocable stand-by letters of credit not having credit substitute nature<br>• Documentary credits, issued and confirmed, except medium/low risk	9.10.20	Liability to Third Parties
Medium / Low	• Unused credit lines with initial maturity ≤ 1 year and irrevocable<br>• Documentary credits where shipping documents serve as guarantee and other potential automatic settlement transactions	9.10.20	Liability to Third Parties
Low	• Unused credit lines that can be unconditionally cancelled at any time without prior notice or provide for automatic cancellation due to deterioration of the borrower's credit situation	9.10.20	Liability to Third Parties
Medium	• Note Issuance Facilities (NIF), revolving underwriting facilities (RUF) and other similar instruments	9.10.30.20	Securities subscribed for primary placement
High	• Credit derivatives	9.10.40	Reference value of financial instruments

---