Directive No. 02/2025 on Financial System Stability – Guiding Principles for Improving Resolvability

GOVERNOR
DIRECTIVE NO. 02/2025
ORIGIN: DEPARTMENT OF FINANCIAL STABILITY (DFS) DATE 20/01/2025 SUBJECT: FINANCIAL SYSTEM STABILITY

• Guiding Principles on Improving Resolvability

Given the need to define criteria and procedures that Banking Financial Institutions must observe when reporting information to the National Bank of Angola, during the preparation of resolution plans, aiming to ensure plan compliance and all procedures adopted within Resolution Planning and Resolvability Assessment, with the objective of being prepared to apply resolution measures in the event of a crisis scenario. In accordance with the combined provisions of Articles 259 to 262 of Law No. 14/21, dated May 19, 2021 (General Regime of Financial Institutions Law), and Article 32 of Law No. 24/21, dated October 18, 2021 (National Bank of Angola Law); This Directive serves to establish the following:

1. The National Bank of Angola publishes the Guide with the Guiding Principles on Improving Resolvability, hereinafter referred to as the Guide, according to Annex I, which forms an integral part of this Directive, with the following objectives:
   a) Clarify the concept of resolvability of Institutions; b) Establish procedures to be observed by Institutions, with a view to improving their resolvability status, as well as that of their respective groups; c) Clarify the importance of integration between Institutions and the National Bank of Angola, within the Resolution Planning and Resolvability Assessment Cycle; d) Provide essential guidance to Institutions for the information reporting process, for the purpose of preparing resolution plans; e) Promote the strengthening of Institutions' response capacity during resolution planning, by providing necessary information in a timely and effective manner; f) Ensure that the Institution is resolved in an effective and orderly manner in case of crisis, minimizing the impact on the financial system and the economy; and g) Assist in preparing Institutions for resolution, which includes creating resolution plans, defining recovery measures, and protecting taxpayers.

CONTINUAÇÃO DA DIRECTIVA N.º 02/2025 Página 2 de 21
2. This Directive applies to Banking Financial Institutions supervised by the National Bank of Angola, as provided for in letters a), b) and d) of paragraph 2 of Article 7 of Law No. 14/21, dated May 19, 2021 (General Regime of Financial Institutions Law), hereinafter referred to as Institutions.
3. For the purposes of this Directive, it is understood that:
a) Single Point of Entry (SPE) - a banking resolution strategy that centralizes the resolution process in a single entity, usually the holding company or main entity of a banking group. Instead of resolving each subsidiary individually, resolution is conducted from this central point; and b) Multiple Points of Entry (MPE) - several entities in the group can be resolved locally by their respective resolution authorities, applying different resolution options. This may result in the separation of the group based on geographic criteria or business lines.
4. Doubts and omissions resulting from the interpretation and application of this Directive are clarified by the National Bank of Angola.
5. This Directive enters into force on the day following its publication.
Luanda, January 20, 2025.
DEPARTMENT OF FINANCIAL STABILITY

---

Helga Luciana Salvaterra Peres
-Director-

CONTINUAÇÃO DA DIRECTIVA N.º 02/2025 Página 3 de 21
ANNEX I
Index
Introduction ...............................................................................................................4
1. Criteria for Resolvability Assessment...................................................................5
2. Corporate Governance and Internal Control.........................................................5
3. Self-Assessment Report.......................................................................................7
4. Loss Absorption and Recapitalization Capacity.................................................7
5. Liquidity and Financing in Resolution............................................................. 11
6. Operational Continuity in a Resolution Context and Access to Financial Market Infrastructure (FMI) Services ................................................................................... 14
7. Information Management Systems and Databases ........................................ 16
8. Communication...................................................................................................... 17
9. Spin-off and Restructuring .................................................................................. 17
10. Structure, Complexity and Interdependencies................................................. 18
11. Spin-off Analysis in Case of Application of Partial Transfer Resolution Measure ............................................................................................. 18
14. Loss Transfer and Recapitalization Mechanism ................................ 21

CONTINUAÇÃO DA DIRECTIVA N.º 02/2025 Página 4 de 21 Introduction This Guide directs how Institutions should proceed with reporting information to the National Bank of Angola during the preparation of resolution plans, as stipulated in Article 257 of Law No. 14/2021, dated May 19, 2021 (General Regime of Financial Institutions Law), and constitutes a fundamental instrument to ensure plan compliance, as well as all procedures adopted within the Resolution Planning Cycle and Resolvability Assessment, so as to keep them prepared in the event they are subject to resolution measures, taking into account the principle of proportionality.

CONTINUAÇÃO DA DIRECTIVA N.º 02/2025 Página 5 de 21

1. Criteria for Resolvability Assessment
   For resolvability assessment, Institutions must take into account the following criteria:
   a) Corporate governance and internal control; b) Loss absorption and recapitalization capacity; c) Liquidity and financing in resolution; d) Operational continuity and access to Financial Market Infrastructure (FMI) services; e) Information systems and databases; f) Communication; and g) Spin-off and restructuring.

2. Corporate Governance and Internal Control
   a) Institutions must have an adequate governance structure that facilitates the preparation and implementation of the resolution strategy; and b) For the purposes of the preceding paragraph, Institutions must ensure the following:
   i. Complete, reliable, timely, consistent and objective information reporting for the purpose of preparing the resolution plan;
   ii. Efficient control mechanisms for the resolution planning and crisis management phase; and,
   iii. An efficient decision-making process whenever one or more resolution measures are applied.
   c) The Institution may alter existing committees or create committees to support activities inherent to the resolution planning process, if necessary; d) The Institution must approve key deliverables and ensure adequate delegation mechanisms for this purpose; e) Members of the governing and supervisory bodies of Institutions must be promptly and regularly informed about the status of resolution planning activities and resolvability assessment of the Institution, with this update documented via minutes; f) The governing bodies and other holders of relevant management functions in each Institution must provide all necessary assistance to pursue the objectives of resolution planning and operationalize activities that contribute to defining the preferred resolution strategy; and g) Institutions must ensure that governing bodies actively participate in resolution planning, indicating for this purpose a member of the Administration to coordinate respective activities, who must be responsible:
   i. For the quality of information reporting for preparing the resolution plan;
   ii. For discriminating critical functions and main business lines;
   iii. For compliance with resolution planning requirements;
   iv. To ensure that resolution planning is integrated into the Institution's governance structure and internal procedures;
   v. For regular communication with other members of governing bodies and group entities, regarding the status of activities related to resolution planning and the Institution's resolvability;
   vi. To guarantee an adequate budget and human resources to respond to activities inherent to resolution planning;
   vii. To coordinate the work program established to address recommendations issued by the National Bank of Angola, within resolution planning and resolvability assessment; and,
   viii. To guarantee an efficient information flow on matters inherent to the resolution process between the Board of Directors, the Executive Committee and other holders of relevant management functions, enabling them to perform their functions before, during and after resolution planning.
   h) Institutions must implement internal procedures that guarantee the quality, integrity and reliability of information on resolution planning reported to the National Bank of Angola, with such information regularly reviewed by Internal Audit;

CONTINUAÇÃO DA DIRECTIVA N.º 02/2025 Página 6 de 21
3. Self-Assessment Report
Upon completion of the resolution planning period, Institutions must prepare and submit to the National Bank of Angola a self-assessment report, which must include:
a) The degree of capacity to respond to resolvability requirements; b) Difficulties in fulfilling reporting obligations; c) Understanding of the resolution strategy identified by the National Bank of Angola, as well as its role in executing that strategy; d) The testing and verification structure that enables them to ensure their capacity to support the execution of the resolution strategy continuously; and e) A summary of their self-assessment by key resolvability areas, in the following sequence:
i. Internal governance;
ii. Operational continuity in resolution;
iii. Loss absorption and recapitalization capacity; and
iv. Liquidity and financing in resolution.

4. Loss Absorption and Recapitalization Capacity
   a) Institutions must have sufficient capital for loss absorption and, where applicable, recapitalization capacity at the point of entry, to absorb losses inherent to the resolution measure; b) Institutions must also comply with requirements for maintaining authorization to exercise their activity, to recover market confidence in the post-resolution period and allow continuity of critical functions during and after resolution application; c) Institutions must ensure loss absorption and recapitalization capacity of subsidiaries;

CONTINUAÇÃO DA DIRECTIVA N.º 02/2025 Página 7 de 21 d) Institutions must implement internal Corporate Governance, Internal Controls and Information Management System procedures to:
i. Identify liabilities, with greater focus on those not eligible for internal recapitalization;
ii. Support the National Bank of Angola's assessment for adopting discretionary exclusions; and
iii. Support the application of resolution measures.
e) Institutions must comply with the Minimum Requirement for Own Funds and Eligible Liabilities (MREL), defined by the National Bank of Angola, so as to ensure they maintain a minimum amount of own funds and eligible liabilities at all times, to enable implementation of the preferred resolution strategy; f) The Minimum Requirement for Own Funds and Eligible Liabilities must be defined at the consolidated resolution group level; g) The creditor hierarchy defined by the National Bank of Angola facilitates resolvability by reducing default risk, under which no creditor of the Institution may bear a greater loss than it would if that institution had entered liquidation; h) Institutions must submit to the National Bank of Angola the information necessary for MREL calculation; i) Institutions must have a sufficient level of loss absorption and recapitalization capacity, allowing allocation of losses to a set of liabilities, as well as guaranteeing application of the preferred resolution strategy; j) For the purposes of the preceding paragraph, Institutions must identify and quantify:
i. The amount of liabilities capable of contributing to loss absorption or recapitalization, for applying the preferred resolution strategy;
ii. The value of liabilities that are mandatorily excluded from write-down and conversion; and

CONTINUAÇÃO DA DIRECTIVA N.º 02/2025 Página 8 de 21
iii. The amount of liabilities not capable of contributing to loss absorption or recapitalization, where applicable, considering at minimum the following factors:
a. Maturity; b. Subordination degree classification;
c. Types of instrument holders or transferability of the instrument;
d. Legal constraints on loss absorption; e. Other factors creating risk that the liability may be exempt from absorbing losses in resolution; and, f. The amount and legal entities issuing eligible liabilities. k) Institutions must disaggregate eligible liabilities for internal recapitalization by creditor classes, according to the creditor hierarchy. l) Institutions must provide all necessary information for assessing each class of shareholders and creditors in a liquidation scenario under normal insolvency proceedings, ensuring that assets, securities, creditors or obligations are treated fairly and without preference, in accordance with the pari passu principle; m) Institutions must have adequate internal mechanisms to support execution of liability write-down and conversion, regularly evaluating and testing their effectiveness; n) Institutions must have processes and infrastructures to submit to the National Bank of Angola a set of information on short-term loss absorption capacity of liabilities; o) Institutions must prepare an internal recapitalization manual, which must include:
i. All Corporate Governance and Internal Control requirements, actions and processes to be carried out by the Banking Financial Institution for effective write-down and conversion;
ii. The sequence of events based on the expected timeline for preparing and activating the resolution plan, legal, operational, accounting and tax considerations relevant to each type of instrument eligible for internal recapitalization and Corporate Governance and Internal Control requirements;
iii. Procedures for executing write-down and conversion, whereby:
a. Institutions must have systems and resources to generate, within hours, updated information on Securities and Financial Instruments (SFIs) within an internal recapitalization; b. Institutions must be able to identify agents that would need to be involved in executing write-down and conversion; and
c. Institutions must ensure that information delivered to the National Bank of Angola for operationalizing internal recapitalization is complete, reliable, timely and consistent, in an accessible format and has been subjected to quality control.
iv. Procedures regarding the readiness level of information systems at group level for reporting information for application and operationalizing internal recapitalization.
p) The process of preparing and approving the internal recapitalization manual must be the responsibility of the governing body of the Banking Financial Institution; q) Institutions must maintain a sufficient quantity of eligible instruments for MREL, defined by the National Bank of Angola, aligned with their preferred resolution strategy, business model, financing model, risk profile and resolvability assessment; r) For the purposes of the preceding paragraph, Institutions must:
i. Report at all times all necessary information enabling the National Bank of Angola to determine MREL; and
ii. Comply with the MREL requirement communicated by the National Bank of Angola.

CONTINUAÇÃO DA DIRECTIVA N.º 02/2025 Página 9 de 21 s) Institutions must maintain eligible instruments that can be used for loss absorption and recapitalization, including a minimum amount of instruments to be defined by the National Bank of Angola, according to resolution strategy, business model, financing model, risk profile and resolvability assessment; t) For the purposes of the preceding paragraph, Institutions must:
i. Submit to BNA legal opinions supporting eligibility of own funds and other liabilities, whenever necessary;
ii. Provide all necessary information enabling the National Bank of Angola to identify potential constraints on resolvability; and
iii. Report information supporting that the financing structure model of the Banking Financial Institution is viable for executing the preferred resolution strategy.
u) The parent company must mitigate contagion risk so that group entities subject to the Multiple Points of Entry strategy are resolved without causing MREL shortfalls; v) Institutions must have the capacity for internal loss absorption transfer and recapitalization mechanism within groups subject to resolution, whereby:
i. Reporting all necessary information enabling the National Bank of Angola to determine MREL for non-resolvable entities, where applicable; and
ii. Ensuring that, in addition to meeting this requirement, an effective internal transfer of losses and recapitalization mechanism is implemented for subsidiaries of the Banking Financial Institution in resolution; and

5. Liquidity and Financing in Resolution
   a) Institutions must develop robust methodologies that estimate the amount of financing and liquidity required for implementing the preferred resolution strategy and identify possible sources of liquidity supporting ex ante resolution; b) Whenever application of resolution measures is necessary, Institutions must identify their main sources of liquidity, including those of each relevant group entity;

CONTINUAÇÃO DA DIRECTIVA N.º 02/2025 Página 10 de 21 c) Institutions must also consider different types of crisis scenarios, namely sudden crisis with slow development, solvency and liquidity crises, during analysis of liquidity factors in a resolution scenario, to identify main risks related to liquidity; d) Institutions must develop internal procedures and methodologies to simulate, under different resolution scenarios, cash flows arising from assets, liabilities and off-balance sheet items, as well as the evolution of loss absorption capacity; e) Institutions must simulate cash flows regarding equity and off-balance sheet items, and netting capacity under different resolution scenarios, namely:
i. Regarding the group in resolution, concerning each relevant entity and, where applicable, concerning specific branches covered by the group on an individual basis;
ii. At aggregate level in reporting currency and at each significant currency level, including all currencies relevant for Institutions' participation in Financial Market Infrastructures (FMIs); and
iii. Regarding multiple periods, from overnight to a sufficient temporal horizon after resolution.
f) Institutions must adopt a conservative methodology capable of evaluating liquidity and financing required to implement the resolution strategy, considering the following aspects:
i. Legal, regulatory and operational constraints on liquidity transferability, especially between entities in the group in resolution;
ii. Obligations related to payment, clearing and settlement activities;
iii. Eligibility requirements for collateral and counterparties;
iv. Contractual suspension, termination and netting rights that counterparties may exercise upon Institutions' deliberation;
v. Liquidity flows between the group in resolution and entities not part of the resolution process;

CONTINUAÇÃO DA DIRECTIVA N.º 02/2025 Página 11 de 21
vi. Legal and operational obstacles to pledging available collateral in the short term;
vii. Impact of lack of a market for trading securities and assets and high exchange rate risk, considering additional difficulties in converting and moving assets, as well as managing exchange exposures during implementation of the resolution strategy.
g) Institutions must present an explanatory note on key variables, namely haircuts and interest rates, supporting their estimates; h) Institutions must also take into account the result of liquidity risk analysis associated with the resolution strategy; i) Institutions must have capacity to mobilize assets and other private resources1 for:
i. Identifying all assets capable of being considered eligible for resolution financing purposes;
ii. Establishing a distinction between encumbered and unencumbered assets, determining rights and collateral created;
iii. Monitoring available and unencumbered collateral at group level and each relevant entity or branch, covered by the group, on an individual basis and concerning each significant currency.
j) Institutions must prepare manuals and internal procedures to identify and mobilize assets that can be used as collateral to obtain financing during and after application of resolution measures; k) Institutions must define the timeframe necessary for refinancing operations and anticipate steps required to make them acceptable to counterparties, whereby:
i. Identifying available collateral, as well as all potential assets that can be qualified as eligible collateral to support

1 They refer to assets and investments controlled by non-governmental entities. In the context of institutions, the capacity to mobilize such resources is crucial for sustainability and growth. This includes efficient management of shareholders' capital, reserves and undistributed profits.