Notice No. 16/GBM/2017, of September 22 – Concerning Market Discipline – Disclosure Requirements and Revoking Notice No. 19/GBM/2013, of December 31

REPUBLIC GAZETTE OFFICIAL PUBLICATION OF THE REPUBLIC OF MOZAMBIQUE SUMMARY N O T I C E The matter to be published in the «Republika Gazette» must be submitted in duly authenticated copy, one per subject, containing, in addition to the necessary indications for this purpose, the following endorsement, signed and authenticated: For publication in the «Republika Gazette». NATIONAL PRESS OF MOZAMBIQUE, E.P. Bank of Mozambique: Notice No. 16/GBM/2017: Concerning Market Discipline - Disclosure Requirements and Revoking Notice No. 19/GBM/2013, of December 31. Friday, September 22, 2017 I SERIES — Number 149 BANK OF MOZAMBIQUE Notice No. 16/GBM/2017 of September 22 Becoming necessary to promote and confer greater scope to the disclosure of information on the solvency and liquidity levels of credit institutions, and taking into account the criteria defined by Pillar 3 of Basel II, relating to market discipline, the Bank of Mozambique, in the exercise of the competence conferred upon it by Article 71 of Law No. 15/99, of November 1 – Law on Credit Institutions and Financial Companies, updated by Law No. 9/2004, of July 21, determines:

ARTICLE 1 (Scope) The present Notice applies to all credit institutions subject to the supervision of the Bank of Mozambique.

ARTICLE 2 (Definitions) For the purposes of this Notice, the following shall be understood: a) Management body: the highest structure in the management hierarchy of a credit institution, aggregating the supervision and management functions of the institution; b) Senior management: the top level of management of the corporate organization, responsible for implementing the strategy defined by the management body, with authority and responsibility for the planning, direction, and direct or indirect control of the daily activities of credit institutions.

ARTICLE 3 (Principles)

1. Public disclosure must include the information provided for in the annexes to this Notice, where applicable, without prejudice to the provisions of Articles 5 and 6 below.
2. When relevant, credit institutions must disclose additional information beyond that established in the annexes to this Notice, as well as present the information in question with a higher degree of detail.
3. Information that could prejudice credit institutions under Article 5 does not require disclosure; however, the existence of unpublished elements and their respective reasons must be declared, and more general information on the matter must be made available.
4. The definition of the level of detail and the degree of confidentiality and ownership of the information to be disclosed is the sole responsibility of the management body of the credit institutions.

ARTICLE 4 (Materiality)

1. Credit institutions must decide which information is relevant for disclosure purposes.
2. Information is considered relevant if its omission or incorrect presentation could alter or influence the assessment or decision of an economic agent who relies on it for decision-making.
3. The degree of detail of the information to be disclosed must reflect the relative importance of the activities, results, or risks within the overall activity of the credit institution.
4. The provisions of this Notice do not apply to elements that do not possess significant importance, which must be assessed considering the amounts involved and their nature, whether considered individually or in aggregate.
5. In the sections concerning quantitative information, defined in the annexes to this Notice, the elements to be disclosed must cover the reference period and the preceding one.

ARTICLE 5 (Ownership and Confidentiality)

1. The information required under the annexes to this Notice may only be omitted if it is considered the property of the credit institution or confidential, and these situations must be duly justified.

1152 I SERIES — NUMBER 149 2. Information is considered the property of a credit institution if its public disclosure has implications for its competitive position. This situation includes, in particular, information relating to products or systems that, if shared with competitors, would lead to a reduction in the value of the credit institution's investments in the relevant areas. 3. Information is considered confidential when obligations towards clients exist or when, within the framework of relationships with other counterparties, it binds a credit institution to a confidentiality obligation.

ARTICLE 6 (Periodicity)

1. The disclosures established in Annex I of this Notice must be made semi-annually, with reference to June 30 and December 31 of each year.
2. Qualitative information that provides a general summary of the objectives and risk management policies of a credit institution, as well as definitions, may be published annually.
3. If information on risk exposure or other elements is prone to rapid change, its disclosure must be made quarterly.
4. The disclosures established in Annex II of this Notice must be made quarterly, with reference to March 31, June 30, September 30, and December 31 of each year.

ARTICLE 7 (Disclosures)

1. The information required under Annex I of this Notice must be disclosed in a single document, identified as “Market Discipline”, which credit institutions may, if they deem fit, present as an autonomous section to the financial statements. This document must include an introductory note, explicitly stating that the content is underpinned by a predominantly prudential perspective.
2. The document referred to in the preceding paragraph must be fully published on the respective institutions' websites and in a newspaper of wide national circulation or a medium considered equivalent.
3. The information contained in Annex II of this Notice must be published on the respective institutions' websites, as well as sent to the Bank of Mozambique for aggregated publication, according to terms to be defined in a Circular.
4. Credit institutions must provide proof, to the Bank of Mozambique, of compliance with the publication obligations provided for in paragraph 2 of this Article, within a maximum period of 10 days, by sending the proof of publication.
5. The “Market Discipline” document must be published by August 31 for information relating to June 30, and by May 31 for information relating to December 31.
6. The information contained in Annex II must be published by the 15th day of the month following the one to which it refers.

ARTICLE 8 (Responsibility of the Management Body)

1. For the purposes of this Notice, the document entitled “Market Discipline” must contain a declaration issued by the management body of the credit institution concerned, in which: a) It certifies that all procedures deemed necessary have been developed and that, to the best of its knowledge, all disclosed information is true and reliable; b) It ensures the quality of all disclosed information, including that relating to, or originating from, entities encompassed within the economic group in which the credit institution operates; and c) It commits to promptly disclose any significant changes that occur during the subsequent fiscal year to which the “Market Discipline” document refers.
2. The impact on the information of any relevant events occurring between the end of the fiscal year to which the “Market Discipline” document refers and the date of its publication must be explicitly stated. If no relevant event has occurred, this fact must be mentioned.

ARTICLE 9 (Clarification of Doubts) Doubts arising from the interpretation and application of this Notice must be clarified by the Prudential Supervision Department.

ARTICLE 10 (Repealing Provision) This Notice revokes Notice No. 19/GBM/2013, of December 31.

ARTICLE 11 (Entry into Force) This Notice enters into force on the date of its publication. – The Governor, Rogério Lucas Zandamela.

ANNEX I - Minimum Disclosure Requirements I. Scope of Application The scope of application of credit institutions' disclosures must include, at a minimum, the following information: 1.1 Qualitative Disclosures: a) The name of the credit institution; b) Where applicable, a list of differences in the consolidation basis for accounting and regulatory purposes, accompanied by a brief description of the companies within the group: (i) That are fully consolidated after the recording of significant subsidiaries in the consolidated accounts; (ii) That are proportionally consolidated after the recording of subsidiaries in the consolidated accounts; (iii) That are deducted for the recording of significant subsidiaries in the consolidated accounts. It may be provided as an expansion of companies only if they are significant to the consolidating institution; (iv) From which excess capital is recognized; and (v) That are neither consolidated nor deducted. c) Any restrictions or other major impediments to the transfer of funds or regulatory capital within the group. 1.2 Quantitative Disclosures:

22 DE SETEMBRO DE 2017 1153 a) The positive difference between the value of holdings in insurance subsidiaries and the amount of minimum share capital required for the same; b) The total value of capital shortfalls in all unconsolidated subsidiaries, i.e., those that are deducted, including their respective names. Capital shortfall is the amount by which the capital of the participating institution is less than the minimum share capital; c) The total values (e.g., current book value) of the institution's holdings in insurers, which are risk-weighted instead of deducted from own funds or subject to an alternative method, including the name, country of incorporation or residence, the shareholding proportion, and the voting power proportion in these companies. Furthermore, indicate the quantitative impact on own funds of using this method, compared to the deduction method or the alternative method.

II. Capital Structure In the capital structure, credit institutions must disclose, at a minimum, the following information: 2.1. Qualitative Disclosures: Summary of the terms and conditions of all capital instruments, especially in the case of innovative, complex, or hybrid capital instruments. 2.2. Quantitative Disclosures: a) The value of Core Tier 1 capital, with appropriate detail of its components, including the respective deductions; b) Total value of Additional Tier 2 capital, with appropriate detail of its components, including the respective deductions; c) Other capital deductions; d) Total qualifying capital.

III. Capital Adequacy At the capital adequacy level, credit institutions must disclose, at a minimum, the following information: 3.1. Qualitative Disclosures: A summary of the methods used by the institution to assess its capital adequacy, highlighting capital projections based on current and future activities. 3.2. Quantitative Disclosures: a) Capital requirements for credit risk by risk classes, as defined in the Notice on credit risk; b) Capital requirements for market risk; c) Capital requirements for operational risk: (i) Basic Indicator Approach; (ii) Standardized Approach. d) Total, Core Tier 1, and Tier 2 solvency ratios, individual or consolidated group, where applicable.

IV. Credit Risk: General Disclosures for all Credit Institutions Credit institutions must disclose, at a minimum, the following information: 4.1. Qualitative Disclosures: General qualitative disclosure requirement regarding credit risk, encompassing: a) Definitions, for accounting purposes, of overdue credit and impaired credit; b) Description of the methods used to determine valuation adjustments and general and specific provisions; c) Indication of valuation adjustments and amounts recovered recorded directly in the income statement for the reference year and the preceding year; d) General description of the credit concentration risk management policy and approaches adopted in its assessment, as well as in the institution's credit risk management; e) Risk factors considered for the analysis of correlations between counterparties; and f) Names of ECAs (Export Credit Agencies) and ECAIs (External Credit Assessment Institutions) used, where applicable, including the reasons for any changes. 4.2. Quantitative Disclosures: a) Total gross credit risk exposure (i.e., before taking into account any effects of eligible risk mitigants, such as collateral) broken down by major types of credit exposure (e.g., loans, finance leases, off-balance sheet commitments, debt securities, derivatives, etc.); b) The average gross exposure during the period (between the reference period and the preceding period), broken down by major types of credit exposure (e.g., loans, finance leases, off-balance sheet commitments, debt securities, derivatives, etc.); c) In case of no change in position throughout the analysis period, the credit institution is exempt from disclosing the average gross exposure for that period; d) Geographical distribution of exposures, broken down by major credit exposure classes; e) Distribution of exposures by sector or by type of counterparties, broken down by major types of credit exposure; f) Breakdown of the asset portfolio based on remaining contractual maturities, broken down by major classes of credit exposure.

V. Credit Risk Mitigation 5.1 Qualitative Disclosures: General qualitative disclosure requirements regarding credit risk mitigation: a) Policies and processes for the management and assessment of collateral; b) A description of the main types of collateral obtained by the institution; c) The main types of guarantors and credit derivative counterparties and their financial capacity to obtain credit; and d) Information on risk concentrations (market or credit) at the level of taken mitigants.

1154 I SERIES — NUMBER 149 5.2 Quantitative Disclosures: The total exposure of each risk class covered by collateral, guarantees, and credit derivatives must be disclosed.

VI. Market Risk 6.1. Qualitative Disclosures: General qualitative disclosure requirements for market risk, encompassing: a) Risk management strategies and processes; b) The structure and organization of the risk management function; c) The scope and nature of risk reports and/or risk quantification systems; and d) Hedging and/or risk mitigation policies, as well as strategies and processes for continuous monitoring of the effectiveness of risk hedging or mitigation.

VII. Operational Risk 7.1. Qualitative Disclosures: General qualitative disclosure requirements: method of capital assessment for covering operational risk for which the institution qualifies.

VIII. Equity Investments - Disclosures Regarding the Banking Book 8.1. Qualitative Disclosures General qualitative disclosure requirements regarding equity investment risk, encompassing: a) Differentiation between holdings held with the objective of generating capital gains and those held with strategic or relationship objectives; and b) The valuation and accounting policies for equity investments in the banking book. This includes the accounting techniques and valuation methodologies used, the practices and key assumptions affecting valuation, as well as significant changes in these practices. 8.2. Quantitative Disclosures a) Value of investments recorded on the balance sheet, as well as the fair value of these investments; b) For the value of securities traded on stock exchanges, a comparison with the exchange quotes when the price of these securities is materially different from the fair value; c) The types and nature of investments, including values that may be classified as: (i) Traded on stock exchanges; and (ii) Traded over-the-counter. d) Realized and accumulated gains and losses, resulting from sales and liquidations during the reference period; e) The total of unrealized gains and losses recognized on the balance sheet, and not in the income statement; f) The total of unrealized revaluation gains and losses not recognized on the balance sheet or in the income statement; and g) Any values of the elements mentioned above included in Core Tier 1 and Additional Tier 2 own funds.

IX. Interest Rate Risk in the Banking Book 9.1. Qualitative Disclosures: General qualitative disclosure requirements, encompassing the nature of risks and key assumptions, assumptions regarding early loan repayments and the behavior of non-maturity deposits, as well as the frequency of interest rate risk assessment in the banking book. 9.2. Quantitative Disclosures: The increase or decrease in revenues or economic value (or relevant valuation used by management) for impacts of rate variations, broken down by currency, if relevant.

22 DE SETEMBRO DE 2017 1155 9 Annex II - Prudential and Economic-Financial Indicators Name of the credit institution Prudential and Economic-Financial Indicators Description Period CAPITAL Leverage Ratio Own Funds (i) / Total Assets Solvency Ratio Own Funds / Risk-Weighted Assets Tier 1 Capital Core Tier 1 Funds (ii) / Risk-Weighted Assets ASSET QUALITY Overdue Credit Ratio up to 90 days Overdue Credit up to 90 days / Total Credit Non-Performing Loan Ratio (NPL) Non-Performing Credit (Gross) (iii) / Total Credit (Gross) NPL Coverage Ratio Provisions for Non-Performing Loans / Non-Performing Loans MANAGEMENT Overhead Cost Operating Costs (iv) / Banking Product Operating Cost Administrative Costs (v) / Banking Product Efficiency Ratio Productive Assets (vi) / No. of Workers RESULTS Financial Margin Ratio Financial Margin / Average Productive Assets Return on Assets (ROA) Net Income / Average Assets Return on Equity (ROE) Net Income / Average Own Funds LIQUIDITY Liquid Assets Ratio Liquid Assets (vii) / Total Assets Transformation Ratio Total Credit / Total Deposits Short-term Liquidity Coverage Ratio Liquid Assets / Short-term Liabilities (viii) Notes: (i) Own funds = Capital + Share premium + Other capital instruments + Treasury shares + Revaluation reserves + Other reserves and carried forward results + Advanced dividends + Minority interests + Net income of the year. (ii) Core Tier 1 funds calculated in accordance with Notice No. 8/GBM/2017, of June 2. (iii) Non-performing credit determined in accordance with Notice No. 16/GBM/2013, of December 31. (iv) Operating Costs = Personnel costs + supplies and third-party services + amortizations excluding profits on financial operations. (v) Administrative Costs = Personnel costs + supplies and services. (vi) Investments in CIs + Credit + Securities. (vii) See explanatory notes in annex. (viii) See explanatory notes in annex.

1156 I SERIES — NUMBER 149 10 EXPLANATORY NOTES The determination of Liquid Assets and Short-term Liabilities considers the elements contained in the table below and observes the provisions of Notice No. 14/GBM/2017, of June 9, and other regulations approved in its execution. Liquid Assets and Short-term Liabilities A. Liquid Assets

1. Cash and balances with central banks 1.1 Cash 1.2 Balances at the Bank of Mozambique excluding mandatory reserves 1.2.1 Balances at the Bank of Mozambique 1.2.2 Mandatory reserves 1.3 Balances with central banks abroad
2. Balances with other credit institutions 2.1 In the country 2.2 Abroad
3. Investments in credit institutions 3.1 At the Bank of Mozambique 3.1.1 Interbank money market 3.1.2 Very short-term investments 3.1.3 Deposits with notice and term deposits 3.2 With other credit institutions in the country 3.2.2 Very short-term investments 3.2.3 Deposits with notice and term deposits 3.3 With central banks abroad 3.3.1 Very short-term investments 3.3.2 Deposits with notice and term deposits 3.4 With international financial organizations 3.4.1 Very short-term investments 3.4.2 Deposits 3.5 Other credit institutions abroad 3.5.1 Very short-term investments 3.5.2 Deposits with notice and term deposits 3.6 Headquarters and branches of the institution itself 3.6.1 Very short-term investments 3.6.2 Deposits with notice and term deposits
4. Assets received in repurchase and reverse repurchase agreements 4.1 In operations with the Bank of Mozambique 4.2 In operations with other credit institutions in the country 4.3 In operations with credit institutions abroad
5. Negotiable securities issued or guaranteed by governments, central banks, public sector entities, international organizations, or multilateral development banks, as established in Notice No. 14/GBM/2017
6. Debt securities issued by the Government of Mozambique and the Bank of Mozambique, provided they are denominated in national currency
7. Other liquid assets
8. Total liquid assets B. Short-term Liabilities
9. Resources from the Bank of Mozambique
10. Resources from other central banks
11. Resources from credit institutions in the country
12. Resources from credit institutions abroad
13. Customer resources
14. Loans
15. Liabilities represented by non-subordinated securities
16. Trading financial liabilities and other financial liabilities at fair value through profit or loss
17. Subordinated liabilities
18. Current tax liabilities
19. Creditors and other resources
20. Total short-term liabilities Explanatory Notes Price — 13.95 MT NATIONAL PRESS OF MOZAMBIQUE, E.P.