Guideline No. 21-2021 of October 27

GUIDELINE NO. 21/2021 of October 27
ASSUNTO: FINANCIAL SYSTEM

• Prudential Limits on Large Exposures
• Participation of Banking Financial Institutions in the Capital of Non-Financial Companies

Whereas it is necessary 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 Notice No. 08/21 of July 05 on Prudential Requirements. In these terms, under the combined provisions of letters d) and f) of paragraph 1 of Article 31.º and letter c) of paragraph 1 of Article 54.º, both of Law No. 16/10 of July 15, Law of the National Bank of Angola, and Article 166.º of Law No. 14/21 of May 19, Law of the General Regime of Financial Institutions. I DETERMINE:

1. Subject Matter
   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 the provisions of Notice No. 08/21 of July 05 on Prudential Requirements.
2. Scope
   This Guideline applies to Banking Financial Institutions under the supervision of the National Bank of Angola, hereinafter referred to as Institutions, as provided for in Law No. 14/21 of May 19, Law of the General Regime of Financial Institutions.
3. Definitions
   Without prejudice to the definitions established in Law No. 14/21 of May 19, Law of the General Regime of Financial Institutions, for the purposes of this Guideline, the following shall be understood:
   3.1. Indirect Holding of Shares or Stocks: A person, natural or legal, shall be considered to indirectly hold shares or stocks in a company when these are attributable to them according to the criteria set out in paragraph 2 of Article 8.º of Notice No. 10/21 of July 14 on the Corporate Governance Code for Financial Institutions.
   3.2. Exposures: The assets and off-balance sheet items listed in Annex III to this Guideline.
4. General Requirements
   4.1. Institutions must calculate the limits on large exposures and the participation of Banking Financial Institutions in the capital of non-financial companies, as provided for in Annexes I and II of this Guideline, respectively.
   4.2. The limits set forth 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 component.
   4.3. Excesses over the limits provided for in this Guideline are subject to own fund requirements, as provided for in Annexes I and II of this Guideline.
5. Limits on Large Exposures
   5.1. Institutions must not assume large exposures towards a counterparty or a group of interconnected counterparties, the value of which exceeds 25% (twenty-five percent) of their Level 1 own funds.
   5.2. Whenever large exposures relate to holders of qualifying holdings or the group of interconnected counterparties includes the same shareholders, the limit is reduced to 10% (ten percent) of Level 1 own funds, unless the large exposure is towards an institution.
   5.3. The sum of the 20 (twenty) largest large exposure positions must not exceed 300% (three hundred percent) of Level 1 own funds.
   5.4. For the purpose of calculating large exposures, Institutions must consider the exemptions and deductions provided for in paragraphs 5 to 6 of Annex I of this Guideline.
   5.5. The limits established in paragraphs 5.1 to 5.3 of this section also apply on a consolidated basis.
   5.6. Whenever Institutions exceed the assumed exposures or there is a probability of exceeding the limits established in paragraphs 5.1 to 5.3, they must immediately communicate the value of the exposures to the National Bank of Angola.
   5.7. For the purposes of the preceding sub-paragraph, Institutions must submit an action plan within 1 (one) month, providing for their regularization within 6 (six) months.
   5.8. Where an excess of assumed exposures is found, they shall be subject to an adjustment of additional own fund requirements, calculated according to the excess values, weighted by 1250% (one thousand two hundred and fifty percent), and multiplied by 8% (eight percent).
6. Policies and Processes
   6.1 Institutions must adopt operational procedures associated with solid, effective, and complete internal control policies and processes for identifying all concentration risk situations, as well as for controlling the limits referred to in this Guideline.
   6.2 For the purposes of large exposure positions, Institutions may consider direct risk or the risk of the guarantors of the operations, provided they apply consistent and uniform methodologies throughout the duration of the operation.
   6.3 For the purposes of the preceding sub-paragraph, sellers of protection in credit derivative contracts are treated as guarantors.
   6.4 In exposures assumed towards collective investment schemes and in securitization transactions, Institutions must consider, in an integrated manner, the direct and underlying risks of the exposure and its economic reality.
7. Concentration Risk Control
   7.1. Without prejudice to the limits referred to in this Guideline, Institutions must identify, assess, monitor, control, and report on concentration risk, particularly in situations of stress that may occur in financial markets, namely:
   a) Activity sectors of borrowers and guarantors; b) Guarantors of operations, in case they opt not to consider direct risk; c) Counterparties in financial derivative operations, notably those traded in over-the-counter markets; d) Countries where operations are allocated; e) Suppliers of goods and services; and, f) Dependence on technology used, inherent to information systems.

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7.2. The National Bank of Angola may determine adjustments to exposures on the matters referred to in the preceding paragraph whenever it deems them necessary for the proper management of concentration risk.
8. Information Reporting
8.1. Institutions must report to the National Bank of Angola information on large exposures and the holding of participations in non-financial companies, in accordance with Article 35.º of Notice No. 08/21 of July 05 on Prudential Requirements, quarterly, on an individual and consolidated basis, through the forms and filling notes provided for in Annexes IV and V of this Guideline.
8.2. For the purposes of the preceding paragraph, in the case of a financial group, the parent company must report the information according to the consolidation perimeter provided for in Article 5.º of Notice No. 08/21 of July 05 on Prudential Requirements.
8.3. Institutions must ensure that the data reported in the tables annexed to this Guideline are properly documented.
9. Transitional Provisions
9.1. Institutions must comply with the provisions of this Guideline as of December 31, 2021.
9.2. For the purposes of Annex I of this Guideline, the value of exposures towards or secured by guarantees of Banking Financial Institutions may be deducted at 80% (eighty percent) in December 2021 and at 50% (fifty percent) in December 2022, and must be in compliance with this Guideline by December 2023.
9.3. Institutions must report to the National Bank of Angola the information required in Article 35.º of Notice No. 08/21 of July 05 on Prudential Requirements, on an individual basis monthly, and on a consolidated basis quarterly, until August 2022.

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9.4. Without prejudice to the preceding paragraph, Institutions must report the information required in Article 35.º of Notice No.