Instruction No. 11/2021, dated July 7

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• Internal Liquidity Adequacy Assessment Process (ILAAP)

Whereas it is necessary to implement the Supervisory Review and Evaluation Process (SREP) in accordance with recommendations issued by international standard-setting bodies, aiming to identify, measure, manage and monitor the liquidity of Banking Financial Institutions; Whereas, equally, it is necessary for Banking Financial Institutions to have solid, effective and complete strategies and processes to assess and maintain, on an ongoing basis, the amount of internal liquidity they consider adequate to cover risk levels, according to their nature; In the exercise of the competence conferred upon me under the combined provisions of paragraphs d) and f) of paragraph 1 of Article 21, and paragraph d) of paragraph 1 of Article 51, both of Law No. 16/10, dated July 15 - Law of the National Bank of Angola, and Articles 205 and 215 of Law No. 14/21, dated May 19 - Law on the General Regime of Financial Institutions. I DETERMINE:

1. Object
   The present Instruction establishes the minimum terms and conditions to be observed in the Internal Liquidity Adequacy Assessment Process, hereinafter abbreviated as “ILAAP”.

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2. Scope
The present Instruction applies to Banking Financial Institutions under the supervision of the National Bank of Angola, hereinafter abbreviated as Institutions.

3. Definitions
   Without prejudice to the definitions established in Law No. 14/21, dated May 19, Law on the General Regime of Financial Institutions, for the purposes of this Instruction, it is understood that:
   3.1. Risk Factor: aspect or characteristic, notably of financial products and markets, participants in the business relationship, and processes in force within institutions, with influence on risk;
   3.2. ILAAP (Internal Liquidity Adequacy Assessment Process): regular assessment of the amounts, types and distribution of internal liquidity that an Institution considers sufficient to meet its commitments towards third parties.

4. ILAAP Process
   4.1. Institutions must have an internal process that allows them to identify, measure, manage and monitor their liquidity, as provided in this Instruction.
   4.2. Institutions must ensure that their exposures to liquidity and funding risks are adequate to their respective business model risk profiles.
   4.3. ILAAP must integrate the institution's management process and culture, be reviewed regularly, taking into account the economic environment in which the Institution operates, so as to guarantee a credible and understandable assessment and result.
   4.4. For the design and implementation of ILAAP, Institutions must consider the type, size, complexity, business model, as well as the operational environment, nature and risks of the activities carried out, taking into account internal information on risk management.

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4.5. ILAAP must be forward-looking, with Institutions having an internal strategy to maintain adequate liquidity levels, including in recession or crisis scenarios, taking into account strategic plans and how they relate to macroeconomic factors.
4.6. Institutions must ensure the existence of an organizational and technological structure, as well as governance and internal control practices adequate to liquidity and funding assessment, management and planning, and must guarantee that ILAAP and its respective management processes are formalized, with a historical record of information maintained.
4.7. Institutions must have the capacity to demonstrate to the National Bank of Angola that ILAAP is solid, effective and comprehensive, as well as to clarify the methodologies and calculations used and the risks they seek to incorporate.

5. Information Reporting
   5.1. Institutions must report annually to the National Bank of Angola the ILAAP report, on an individual or consolidated basis, by April 30 of each year, with reference to December 31 of the previous year, based on the following models:
   a) Full model: includes all sections set out in Annex I, with the reader's manual defined in Section III corresponding to report model A, set out in Annex II, both of this Instruction; b) Intermediate model: includes all sections set out in Annex I, with the reader's manual defined in Section III corresponding to report model B, set out in Annex II; and, c) Simplified model: includes Sections I, III and IV set out in Annex I, with the reader's manual defined in Section III corresponding to report model C, set out in Annex II.

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5.2. For the purposes of the preceding subsection, Institutions must report the Full model to the National Bank of Angola.
5.3. Without prejudice to the preceding subsection, the National Bank of Angola may request Institutions to change their report model and provide any additional information it deems relevant.
5.4. Without prejudice to subsection 5.1, Institutions must submit quarterly, within 30 (thirty) calendar days of the following month, to the National Bank of Angola the quantitative report on ILAAP, according to Annex III of this Instruction, with reference to the end of each quarter.
5.5. For the purposes of subsection 5.1, Institutions must report information through the Financial Institutions Supervision System (SSIF), observing the provisions, requirements and specifications of the XML message on the PIF Portal.
5.6. Without prejudice to the preceding subsection, while the Financial Institutions Portal (PIF) is not available for sending and receiving information as provided in this Instruction, Financial Institutions must send the same in Excel format to the email address dsb@bna.ao
5.7. Without prejudice to the preceding subsection, the ILAAP report must take into account the principle of proportionality, i.e., the type, size and systemic importance of institutions, as well as their risk profile, management, strategy, complexity and exposure to risks.
5.8. Information included in the report models defined in subsection 5.1 of this Instruction, which has been reported to the National Bank of Angola with the same reference date and remains valid, updated or unchanged, should not be resubmitted; in the applicable model, the report, its date and the location where the reported information is described must be identified.
5.9. The National Bank of Angola may determine that Institutions review the reported document when the reported information contains errors or inaccuracies.

6. Sanctions
   Non-compliance with the mandatory rules established in this Instruction constitutes an offense punishable under Law No. 14/21, dated May 19, Law on the General Regime of Financial Institutions.

7. Doubts and Omissions
   Doubts and omissions resulting from the interpretation of this Instruction are resolved by the National Bank of Angola.

8. Entry into Force
   The present Instruction enters into force on the date of its publication.
   PUBLISHED.
   Luanda, July 7, 2021.
   THE GOVERNOR
   JOSÉ DE LIMA MASSANO

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ANNEX I
Information Related to ILAAP
Section I - Liquidity Adequacy Declaration
a) Summary of the main conclusions on ILAAP, including a precise opinion on the Institution's current liquidity positions, its capacity to cover risks it is or may be exposed to and any planned measures to ensure liquidity is maintained or restored to adequate levels in the short term; b) Significant changes made or planned in risk management, based on ILAAP results, as well as any action plan; c) Significant changes made or planned in business models, strategies or risk appetite model based on ILAAP results, including management measures and any action plan; d) Significant changes made or planned in the ILAAP structure, including improvements to be introduced and any action plan; e) Formally approved by the governing body.

Section II - Report with Institution-Specific Elements
A. Business Model and Strategy a) Description of the current business model, identifying main business lines, markets, geographies, branches and products in which the institution operates, as well as a description of main cost and revenue sources, distributed by business lines, products, markets and branches, where applicable; b) Description of planned changes by the Institution to the current business model and its underlying activities (including operational changes, such as technological infrastructure, or internal governance issues), whenever they impact the liquidity and funding management process; c) Presentation of projections for key financial indicators for main business lines, markets and branches, where applicable. B. Organizational Information a) Description of general internal governance procedures for liquidity and funding risk, including functions and responsibilities of risk management and control, notably at the governing body and top management level across the entire group, covering risk taking, risk management and liquidity/funding risk control; b) Description of reporting circuits and respective reporting frequency to the governing body on liquidity and funding risk management and control matters; c) Description of the interaction process between measurement and monitoring of liquidity and funding risks, including details on limit definition and tracking, as well as the process and measures defined for handling limit breaches.
C. Risk Appetite
a) Description of the integration of the risk appetite model into the Institution's strategy and business model; b) Description of the process and general internal governance procedures, including functions and responsibilities at the governing body and top management level regarding the design and implementation of the risk appetite model. D. Stress Testing General description of the Institution's stress testing program, which must include details on the type of stress tests performed, set of assumptions, methodological aspects and models used, frequency and technological infrastructure.

Section III - Template for ILAAP-Specific Information (Reader's Manual), as defined in Annex II of subsection 5.1 of this Instruction.
a) The reader's manual presents a list of requested information elements, referencing internal documentation that supports them; b) The reader's manual must be completed according to the filling instructions set out in the template.

Section IV - Internal Documentation Referenced in the Reader's Manual.
Section V - ILAAP Quantitative Information, as defined in Annex III

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ANNEX II
Reader's Manual
ILAAP
Identification
Institution
Consolidation Basis
Applicable Report Model
Contact Person
(Include Name, Role, Email and Telephone Contact) Contact Person:
<Include name, role, email contact and telephone contact> Filling Instructions Column A Institution must:
Implementation of the Proportionality Principle Identification of the obligation to submit elements requested for each defined model, according to the proportionality principle, as provided in subsection 5.3 of this Instruction. The need for submission of each element must follow the following legend:
1 - Mandatory submission element, where applicable.
2 - Conditional submission element depending on the existence of significant changes compared to previous submission.
3 - Optional submission element.
Applicability
Select "Applicable" or "Not applicable" to indicate whether the specified information element is applicable in the context of your institution. If "Not applicable", non-applicability must be duly justified in the "Comments" column; the remaining columns of the respective row should not be filled. Document Reference Indicate reference(s) identifying internal document(s) submitted for ILAAP assessment, or the section of the document, that supports the information element requested at the reference date and/or submission date. When the volume of documents containing the same information is high, institutions should not submit all available documents; they must reference one example and the general policies governing these documents, while also mentioning exclusions made in the "Brief Description" column. Effective Date Indicate the date of first application of each document referenced in the "Document Reference" column. Clarify effective and termination dates for documents applicable at the reference date and subsequently discontinued, as well as for documents applicable after the reference date but before the submission date. Brief Description Concisely describe referenced document(s), including how they respond to the requested information element. Status vs Last Report Date Where applicable, select the status of referenced document(s) ("New", "Unchanged", "With some changes") compared to the previous ILAAP submission. Any significant changes compared to the last submission and/or changes applicable after the reference date must be clearly identified in the "Brief Description" column. Organizational Unit(s) Responsible for Creation Identify organizational unit(s) responsible for elaboration, identifying respective periodicity where applicable. Organizational Unit(s) Recipient(s) Identify organizational unit(s) receiving the produced document, identifying respective periodicity where applicable. Governing Body(ies) Responsible for Approval Identify organizational unit(s) responsible for approving referenced document(s). Comments Include comments the Institution considers relevant.

Information Requirement	Implementation of Proportionality Principle	Applicability	Document Reference	Effective Date	Brief Description	Status vs Last Report Date	Organizational Unit(s) Responsible for Creation	Organizational Unit(s) Recipient(s)	Governing Body(ies) Responsible for Approval	Comments
Model A	Model B	Model C
1. Liquidity and Funding Risk Management Model	To demonstrate the existence of a process ensuring the Institution has a solid and specific model for liquidity and funding risk management, including a process for identifying, measuring and controlling these risks, the Institution must:	Document describing internal methodology and policy	P1.1. • Identify entities considered within ILAAP scope, justifying any differences from the prudential perimeter.	1	1	2
P1.2 • Present ILAAP structure description, explaining the relationship between all its components and justifying how this structure ensures the Institution has access to sufficient liquidity.	1	1	2
P1.3 • Justify main identified liquidity and funding risk sources.	1	1	2
P1.4 • Present criteria used in selecting instruments and assumptions for ILAAP, such as measurement and projection methods for current and future cash flows of assets, liabilities and off-balance sheet items over adequate time horizons.	1	1	2
P1.5 • Present description of the relationship between business strategy and ILAAP process.	1	1	2
P1.6 • Present description of risk appetite model integration into risk management, detailing the relationship with business strategy, risk strategy and ILAAP.	1	1	2
P1.7 • Present information on risk data, aggregation and IT systems used for ILAAP purposes.	1	1	2
P1.8 • Present description of processes and mechanism ensuring ILAAP integration into risk management and overall Institution management.	1	1	2
P1.9 • Present description of risk appetite/tolerance levels, thresholds and limits defined for liquidity and funding risks, as well as time horizons and process used to keep these thresholds and limits updated.	1
To demonstrate full implementation of the aforementioned process, the Institution must:	Operational documents evidencing implementation	0.1.1 • Provide assessment of intra-group funding positions and liquidity cash flows, where applicable, including any possible legal or regulatory impediments to liquidity transfer within the (sub)group.	1	1	3
0.1.2 • Present quantitative information on liquidity risk sources.	1
0.1.3 • Present quantitative information on funding profile and its stability in all significant currencies.	1
0.1.4 • Demonstrate monitoring of compliance with minimum prudential requirements related to liquidity and funding risk, including forecasting compliance across different scenarios over an adequate time horizon.	1	1	3
Where applicable, demonstrate monitoring of compliance with additional liquidity requirements.	2
2. Funding Strategy	Regarding funding strategy, the Institution must:	Document describing internal methodology and policy	P.2.1 • Present description of underlying orientations for the funding plan.	1	1	2
P.2.2 • Where applicable, present policies on maintaining market presence used to guarantee and periodically test access to markets and fund-raising capacity.	1	1	2
P.2.3 • Where applicable, present policies on concentration and funding risk, including measurement and monitoring principles for correlation between funding sources and economic relationship between depositors and other liquidity providers.	1	1	2
P.2.4 • Where applicable, present foreign currency funding policies, including the most relevant assumptions regarding availability and convertibility of these currencies.	1	1	2