Instruction No. 10/2018 of July 19 – Monetary Policy: Mandatory Reserves

CONTINUATION OF INSTRUCTION NO. 10/2018 Page 1 of 11 INSTRUCTION NO. 10/2018 19 de Julho SUBJECT: MONETARY POLICY

• Mandatory Reserves
  With a view to updating the existing rules for calculating and complying with mandatory reserves to the current macroeconomic stability framework, aiming for greater efficiency of monetary policy instruments; In the exercise of the powers conferred upon me by Article 51 of Law No. 16/10 of July 15, the Law of the National Bank of Angola. I HEREBY DETERMINE:

1. Banking Financial Institutions established in the country must maintain mandatory reserves in accordance with this Instruction.
2. The assessment base for mandatory reserves, in national currency, shall consist of the amounts recorded according to auxiliary tables (1, 2, 4, 6, 7, 8 and 9) in the following accounts of the Chart of Accounts of Financial Institutions (ADJUSTED CONTIF):

• 2.10.10. Demand Deposits;
• 2.10.20. Time Deposits;
• 2.10.80. Other Deposits;
• 2.10.90. Other Loans;
• 2.20.20. Sale of Own Securities with Repurchase Agreement;

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• 2.20.30. Sale of Third-Party Securities with Repurchase Agreement;
• 2.30.10. Issued or Endorsed Securities and Financial Instruments;
• 2.50.20.10. Obligations from Pending Settlement Operations; and,
• 2.50.20.30. Obligations from Tax Collection Services.

3. The assessment base for mandatory reserves, in foreign currency, shall consist of the amounts recorded according to auxiliary tables (1, 2, 4, 6, 7, 8 and 9) in the following accounts of the Chart of Accounts of Financial Institutions (ADJUSTED CONTIF):

• 2.10.10. Demand Deposits;
• 2.10.20. Time Deposits;
• 2.10.80. Other Deposits;
• 2.10.90. Other Loans;
• 2.20.20. Sale of Own Securities with Repurchase Agreement;
• 2.20.30. Sale of Third-Party Securities with Repurchase Agreement;
• 2.30.10. Issued or Endorsed Securities and Financial Instruments;
• 2.50.20.10. Obligations from Pending Settlement Operations;
• 2.50.20.20. Correspondent Relations; and,
• 2.50.20.30. Obligations from Tax Collection Services.

4. For the purposes of this Instruction, balances of Bankita accounts, demand and time deposits in national and foreign currency, and all monthly interest from the assessment base defined in paragraphs 2 and 3 of this Instruction, are not eligible for the calculation of mandatory reserves.

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5. Assets defined in specific regulations are eligible for fulfilling mandatory reserves in national currency (NC) and foreign currency (FC).
6. The calculation of mandatory reserves and their compliance shall be carried out periodically on the first business day and from the first to the last business day of the period following the formation of the balances referred to in paragraphs 2 and 3 of this Instruction.
7. The assessment base defined in paragraphs 2 and 3 of this Instruction is subject to mandatory reserve coefficients, as established in specific regulations.
8. The requirement for the assessment base in national currency, subject to the mandatory reserve coefficient as established in specific regulations, is calculated periodically on the arithmetic mean of the balances determined in the respective accounts on business days of the period, in accordance with the following formula:

• ETn = crn {∑ [Dtn (T –1)]/N}
  Where:
• ETn = requirement for period T in NC, corresponding to the percentage established in specific regulations on the assessment base, excluding accounts of the Central Government, Local Governments, and Municipal Administrations;
• crn = mandatory reserve coefficient as established in specific regulations;
• T = T-th calendar period in which mandatory reserves are complied with, (T=1, 2, 3,...,n);
• T-1 = T-th calendar period in which final daily credit balances are formed, recorded in the assessment base accounts referred to in paragraph 2 of this Instruction, excluding accounts of the Central Government, Local Governments, and Municipal Administrations, (T-1=-n, 1, 2,..., n-1);
• t = business day of the formation period T-1;
• Dtn (T – 1) = final daily credit balances recorded in the assessment base accounts referred to in paragraph 2 of this Instruction, excluding accounts of the Central Government, Local Governments, and Municipal Administrations, reported on the first business day of the compliance period; and,
• N = number of business days in period T-1.

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9. The requirement for the assessment base in foreign currency (FC), subject to the coefficient as established in specific regulations, is calculated periodically on the arithmetic mean of the balances determined in the respective accounts on business days of the period, in accordance with the following formula:

• ETe = cre {∑ [Dte (T –1)]/N}
  Where:
• ETe = requirement for period T in FC on the assessment base, as established in specific regulations, excluding accounts of the Central Government, Local Governments, and Municipal Administrations;
• cre = mandatory reserve coefficient as established in specific regulations;
• T = T-th calendar period in which mandatory reserves are calculated, (T=1, 2, 3,..., n);
• T-1 = T-th calendar period in which final daily credit balances are formed, recorded in the assessment base accounts referred to in paragraph 3 of this Instruction, (T-1= -n, 1, 2, ..., n-1);

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• t = business day of the formation period (T-1);
• Dte (T – 1) = final daily credit balances recorded in the assessment base accounts referred to in paragraph 3 of this Instruction, reported on the first business day of the compliance period; and,
• N = number of business days in period T-1.

10. For the purposes of this Instruction, business days are considered to be the days of the period, excluding Saturdays, Sundays, and national holidays.
11. The amount defined in specific regulations, corresponding to the arithmetic mean of the period of final daily balances determined in account 1.10.10 National Currency Cash of the Chart of Accounts of Financial Institutions (ADJUSTED CONTIF), during the formation period, may be deducted from the NC requirement calculated under paragraph 2 of this Instruction, excluding accounts of the Central Government, Local Governments, and Municipal Administrations. For this purpose, the value of checks returned by the clearing service must not be included.
12. Credit rights, as per specific regulations, may also be deducted from the NC requirement calculated under paragraph 2 of this Instruction.
13. The amount for the purpose of deducting the mandatory reserve, referred to in the previous paragraph, is determined based on the position on the last day of the formation period of the credit portfolio granted by the Banking Financial Institution and recorded in the Supervision System of Financial Institutions of the National Bank of Angola (SSIF).
14. The effective reserve value to be considered for fulfilling the NC requirement shall equal the sum of the daily balances of the Central Government, Local Governments, and Municipal Administrations accounts and the amount referred to in paragraph 2 of this Instruction, weighted according to coefficients established in specific regulations, minus the amounts established in paragraphs 11 and 12 of this Instruction, in accordance with the following formula:

• ROdn = ∑[GCdn+ (GLdn) + ETn – DCTn(T-1) - NMn(T-1)]
  Where:
• ROdn = effective mandatory reserves in NC to be considered for fulfilling the requirement on day d;
• GCdn = daily balances of Central Government accounts in NC on day d, weighted according to specific regulations;
• GLdn = daily balances of Local Government and Municipal Administration accounts in NC on day d, weighted according to specific regulations;
• ETn = requirement in period T in NC, corresponding to the coefficient established in specific regulations on the assessment base, as referred to in paragraph 8 of this Instruction;
• DCTn = value corresponding to credit rights, as per specific regulations;
• NMn (T-1) = amount corresponding to the arithmetic mean of final daily balances of account 1.10.10 National Currency Cash during the formation period (T-1), weighted according to specific regulations; and,
• d = business day of the compliance period (T).

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15. The effective reserve value to be considered for fulfilling the FC requirement shall equal the sum of the balances of the Central Government, Local Governments, and Municipal Administrations accounts and the amount referred to in paragraph 3 of this Instruction, weighted according to coefficients established in specific regulations, in accordance with the following formula:
ROde = ∑[GCde+ GLde+ ETe]

CONTINUATION OF INSTRUCTION NO. 10/2018 Page 7 of 11 Where:

• ROde = effective mandatory reserves in FC to be considered for fulfilling the requirement on day d;
• GCde = daily balances of Central Government accounts in FC on day d, weighted according to specific regulations;
• GLde = daily balances of Local Government and Municipal Administration accounts in FC on day d, weighted according to specific regulations;
• ETe = requirement in period T in FC, corresponding to the coefficient established in specific regulations on the assessment base, as referred to in paragraph 9 of this Instruction; and,
• d = business day of the compliance period (T).

16. The submission of data and information related to the calculation of the requirement, as well as the assets for its fulfillment in FC, must be in NC, at the average exchange rate published by the National Bank of Angola, in accordance with the ADJUSTED CONTIF provisions for this purpose. Meanwhile, for fulfilling mandatory reserves in FC, the daily average exchange rate published by the BNA must be considered.
17. Without prejudice to other measures that may be adopted, the National Bank of Angola shall apply a sanction equivalent to 1% (one percent) per month, above the highest prevailing interest rate for active operations in national currency practiced by financial institutions during the relevant period, as provided for in paragraph 4 of Article 25 of Law No. 16/10 of July 15, the Law of the National Bank of Angola, on the daily shortfall of mandatory reserves, both in national and foreign currency. The National Bank of Angola shall also apply the same penalty retroactively for situations in which Banking Financial Institutions provide inconsistent data and information that would imply non-compliance with mandatory reserves in the respective period.

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18. The collection of charges resulting from the penalties provided for in paragraph 17 of this Instruction shall be carried out until the last business day of the week following the occurrence, by debit from demand deposit accounts in national currency held at the National Bank of Angola, for both NC and FC non-compliances.
19. For FC non-compliances, the equivalence shall be made using the exchange rate referred to in paragraph 16 of this Instruction.
20. If the amount of said penalties is not settled by the end of the stipulated period, the National Bank of Angola shall proceed with a compulsory debit in the reserve account of the respective bank.
21. Banking Financial Institutions shall be notified by the BNA whenever sanctions provided for in paragraph 17 of this Instruction apply.
22. The daily balances of the items comprising the assessment base defined in paragraphs 2 and 3 of this Instruction and the Central Government and Local Government and Municipal Administration accounts in NC and FC must be transmitted daily to the Payments System Department (DSP) of the National Bank of Angola through the SSIF.
23. Contingency Procedures: in case of SSIF unavailability, Banking Financial Institutions are obliged to alternatively send data via email.
24. The data referred to in the previous paragraph must comply with ADJUSTED CONTIF guidelines and be accurate, complete, reliable, and verifiable.

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25. Banking Financial Institutions are obliged to retain and present to representatives of the Banking Supervision Department (DSB) of the National Bank of Angola, whenever requested, the documents that allow proving the information provided for the calculation of the requirement.
26. Instruction No. 05/2018 of May 25 is hereby repealed, along with all regulations that contradict the provisions of this Instruction.
27. This Instruction enters into force on 07/23/2018, for the purpose of forming the assessment base, with effective compliance of the requirement to occur on 07/30/2018.
28. Doubts regarding the interpretation and application of this Instruction shall be resolved by the National Bank of Angola.
PUBLISH.
Luanda, July 19, 2018.
THE GOVERNOR
JOSÉ DE LIMA MASSANO

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ANNEX I
ANNEX NO. 01 - INSTRUCTION NO. 10/2018, of JULY 19

• CALCULATION OF WEEKLY REQUIREMENT IN NATIONAL CURRENCY AND