Notice No. 16/2011 of December 19

BANCO NACIONAL DE ANGOLA GABINETE DO GOVERNADOR

AVISO N.º 16/2011 de 19 de Dezembro

Whereas it is necessary to regulate and establish appropriate accounting and disclosure policies applicable to financial leasing (leasing) operations carried out by authorized financial leasing companies operating under the Central Bank of Angola.

Pursuant to the combined provisions of item f) of paragraph 1 of Article 21 and item d) of paragraph 1 of Article 51, both of Law No. 16/10 of July 15 (Central Bank of Angola Law), combined with Articles 106 and 77 of Law No. 13/05 of September 30 (Financial Institutions Law), the Central Bank of Angola is responsible for ensuring the solvency and liquidity of non-bank financial institutions, as well as establishing prudential limits on operations that financial leasing companies are authorized to conduct;

IT IS ORDERED:

Article 1. (Subject Matter)

This notice establishes the specific prudential rules applicable to financial leasing companies.

Article 2. (Minimum Capital and Own Funds)

Financial leasing companies must have fully paid-up share capital in national currency and maintain the minimum values for share capital and Regulatory Own Funds (ROF) established in Notice No. 04/07 of September 12.

Article 3. (Minimum Regulatory Solvency Ratio)

1. Authorized financial leasing companies must maintain a level of own funds compatible with the nature and scale of their operations, as well as inherent risks, maintaining the Regulatory Solvency Ratio (RSR), in accordance with Notice No. 05/07 of September 12.

2. For the purpose of determining the minimum regulatory solvency ratio referred to in the preceding paragraph, the following shall be observed:

   a) for the calculation of exchange rate risk, the provisions of Notice No. 05/10 of November 10 and Instruction No. 06/07 of September 12; b) for the calculation of exposure to credit risk in the form of financial leasing, the provisions of Instruction No. 03/11 of June 8.

Article 4. (Limits on Investments)

In addition to the limits provided in Notice No. 08/07 of September 12, financial leasing companies must observe a limit of 15% of Regulatory Own Funds in investments in securities and financial instruments issued by the same company, affiliated companies, and their subsidiaries.

Article 5. (Prohibitions)

Financial leasing companies are prohibited from carrying out the following acts:

a) Providing guarantees to third parties;
b) Conducting financial leasing operations with related parties;
c) Taking financial participations in the capital of other companies, except in their branches, agencies, or other forms of representation.
d) Providing services complementary to the operational leasing activity, namely maintenance and technical assistance of leased assets, while nevertheless being able to enter into service contracts with third parties.

Article 6. (Classification of Operations and Credit Provisioning)

Financial leasing companies must classify credits related to financial leasing operations, creating respective provisions based on the assumed risk level, as established in Notice No. 04/2011 of June 8.

Article 7. (Guarantees)

Any guarantees, personal or real, may be established in favor of the financial leasing company regarding financial leasing operations.

Article 8. (Fixed Asset Limit)

Financial leasing companies, in calculating the fixed asset limit, must observe the provisions of Notice No. 06/2011 of July 13.

Article 9. (Return or Recovery of Leased Assets)

1. Financial leasing companies are permitted to sell or lease to third parties assets subject to financial leasing that have been returned or recovered.

2. Financial leasing companies are permitted to retain returned or recovered financial leasing assets in their fixed assets for a maximum period of 2 (two) years.

3. During the period referred to in the preceding paragraph, returned or recovered assets must be excluded from the calculation of the fixed asset limit.

4. The provisions of the preceding paragraphs also apply to financial leasing operations carried out by banking financial institutions.

Article 10. (Ancillary Activities)

1. Financial leasing companies may, ancillary to their main activity, lease movable property outside the cases provided for in Article 9 of this Notice, observing a maximum limit of 20% of the total balance of financial leasing operations for this purpose.

2. The leased assets mentioned in the preceding paragraph must be maintained in fixed assets and excluded from the calculation of the limit provided for in Article 3 of Notice No. 06/2011 of July 13.

3. In addition to the rules provided in the preceding paragraphs, the Commercial Code, Companies Law and complementary legislation apply subsidiarily, as well as Articles 1022 et seq. of the Civil Code.

Article 11. (Accounting)

Financial leasing companies must carry out the accounting registration of their operations, in accordance with the currently effective Chart of Accounts for Financial Institutions, adopting headings that address these operations.

Article 12. (Information System)

The information system of financial leasing companies must be sufficiently robust to ensure that the accounting application is compatible with the chart of accounts for financial institutions and allows their operations to have direct reflection in their accounting.

Article 13. (Accounting Treatment of Financial Leasing)

1. At the beginning of the financial leasing operation term, the lessor must derecognize the asset subject to the contract and recognize receivables at the value of net investment in the lease.

2. Net investment in the lease is equivalent to the sum of the fair value of the leased asset and any initial direct costs, which must equal the sum of the following components, discounted at the interest rate implicit in the lease:

   a) minimum payments to be made by the lessee during the lease term, up to the expected date of exercise of the purchase option;

   b) payment necessary to exercise the purchase option; c) if applicable, the unguaranteed residual value attributed to the lessor.

3. During the financial leasing term, the lessor must recognize financial income accrued based on the implicit interest rate of the operation, in order to produce a constant return rate on net investment in the lease.

4. Assets registered by the lessor are subject to impairment testing for reduction to recoverable value when not allocated to financial leasing operations.

Article 14. (Accounting Treatment of Financial Leasing – Real Estate)

Land and buildings must be considered as separate elements for the purpose of classifying financial leasing.

Article 15. (Information Reporting)

1. Financial leasing companies must submit quarterly, within 8 days after the end of each quarter, a trial balance reporting the institution's overall position;

2. The document referred to in the preceding paragraph of this article must be sent to the Central Bank of Angola, in XML format, through the Financial Institutions Supervision System - SSIF.

3. Until conditions are created for submission in the system (SSIF), information must be submitted via other computer devices (Excel file) to the email of the Financial Institutions Supervision Department (dsi@bna.bna.ao).

4. For the purposes of paragraph 1, reference dates are March 31, June 30, September 30, and December 31.

5. Financial leasing companies must publish by April 30 of the following year the financial statements for each fiscal year, as well as the External Audit Report and, if applicable, the Fiscal Council Opinion, in a medium of easy public access, as well as submit them to the Central Bank of Angola by that date;

6. Complementarily, they must observe the following disclosure requirements in Notes to Accounts:

   a. reconciliation between the gross investment value at the end of each period and the present value of minimum financial leasing payments receivable on those same dates; b. gross investment value and present value of minimum payments, at the end of each period, segmented according to the terms in which they become due, namely up to one year, more than one year, up to five years, and more than five years; c. income to be accrued; d. unguaranteed residual values that benefit the lessor; e. provision for minimum receivables (uncollectible minimum payments); f. general description of relevant financial leasing agreements.

7. Financial leasing companies must appoint a qualified spokesperson to respond to any questions regarding information reported to the Central Bank of Angola;

8. Financial leasing companies must ensure the permanent availability of the designated spokesperson, obligatorily appointing a substitute, definitive or temporary, in case of impediment of the designated spokesperson.

Article 16. (Sanctions)

Failure to comply with the deadlines for sending periodic information established by the Central Bank of Angola is punishable per day of delay, with a fine corresponding to 1% (one percent) of the minimum share capital defined for financial leasing companies, divided by 360 (three hundred and sixty) days applied to each document.

Article 17. (Information and Credit Risk Center)

Financial leasing companies must submit to the Information and Credit Risk Center (CIRC) information on customers' financial leasing operations, in accordance with Instruction No. 05/10 of October 4.

Article 18. (External Audit)

1. Financial leasing companies must submit their financial statements annually to external audit, conducted by an independent auditor.

2. The independent auditor must report to the Financial Institutions Supervision Department, the work carried out and respective results, infractions, and facts that may affect the continuity of the financial leasing company's activity.

3. For the purposes of this article, the independent auditor may be a duly authorized audit firm or a certified accountant registered with the Order of Certified Accountants and Auditors.

Article 19. (Entry into Force)

This Notice enters into force 30 days after the date of its publication.

PUBLISH

Luanda, December 19, 2011

THE GOVERNOR

JOSÉ DE LIMA MASSANO