Instruction No. 04/91: Exchange Rate Policy - Exchange Position and Limits

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INSTRUCTION NO. 04/91 Subject: EXCHANGE RATE POLICY

• Exchange Position/Limits .Regulation This Instruction defines the concept and establishes the operational rules for exchange position limits, in order to regulate the relationship of the Central Bank, in its capacity as manager of external reserves, with financial institutions authorized to conduct foreign exchange trading, in accordance with the provisions of Notice No. 03/91, dated October 16, issued by the Governor of the National Bank of Angola. 1st. INTERNAL EXCHANGE FUNCTIONS OF RESERVE MANAGEMENT As manager of the country's exchange reserves, the National Bank of Angola,
• sells to authorized institutions the external funds necessary to execute the operations that these, under licensing or delegation, contract with their clients;
• purchases the funds that these hold in excess relative to their respective business volume in the primary exchange market. 2nd. EXCHANGE POSITION OF FINANCIAL INSTITUTIONS

1. Active spot and forward exchange positions, for each currency, are defined as the difference between purchases and sales, in that currency, respectively spot and forward. The value of forward contracts must be transferred to the spot position five business days prior to their respective maturity.

2. Optionally, receipts or payments of interest, commissions, and other charges in foreign currency, as well as operations involving the purchase and sale of foreign banknotes and coins, may be included in spot and forward exchange positions.

3. Purchases or sales of foreign currency related to results (repatriation), own funds, or institutional provisions shall not be considered in the active position.

4. The active spot and forward exchange positions of entities authorized to conduct foreign exchange trading are defined as the sum, in absolute value, of the short and long positions held in the various currencies, respectively spot and forward.

5. The total active position, for each currency, is defined as the algebraic sum of the spot position and the forward position in that currency.

6. The total active position of entities authorized to conduct foreign exchange trading is defined as the sum, in absolute value, of the total short and long positions held in the various currencies.

7. For the purpose of determining the entry and exit dates of foreign exchange in the exchange positions of entities authorized to conduct foreign exchange trading, the general rules for any and all operations shall be observed, namely registration:

• in the spot position, when the operation's maturity occurs within a period of less than five business days;
• in the forward position, when the operation's maturity occurs within a period of more than five business days;

8. The conversion of foreign banknotes and coins into foreign exchange through the credit or debit of the accounts of entities authorized to conduct foreign exchange trading with their correspondents requires that these operations be considered for the determination of positions.

3rd. LIMITS FOR POSITIONS At the close of each day, the total position may not exceed the limit established by the National Bank of Angola for each entity authorized to conduct foreign exchange trading. 4th. INFORMATION ELEMENTS

1. The daily total exchange position table (a copy of which is attached) must be sent or transmitted via telefax daily to the National Bank of Angola (Reserve Management Directorate), by the end of business on the first subsequent business day. Its completion shall observe the aforementioned criteria.
2. When converting positions into United States dollars, the following rules shall be respected:

• Spot Operations: conversion at the spot exchange rate of the currency considered against the United States dollar;
• Forward Operations: Conversion at the forward exchange rate of the currency considered against the United States dollar corresponding to the residual term of the operation;
• "Swap" Operations: Conversion at the spot and forward exchange rates of the currency considered against the United States dollar in effect on the date of contracting the operation.

3. For control purposes, entities authorized to conduct foreign exchange trading must maintain in a dedicated file documentation substantiating daily exchange positions. Luanda, October 16, 1991. THE GOVERNOR Fernando Alberto da Graça Teixeira