Instruction No. 15/2016 of August 8 on Information Provision Regarding Own Funds Requirements for Market Risk and Counterparty Credit Risk in the Trading Book

INSTRUCTION NO. 15/2016 of August 8
SUBJECT: INFORMATION PROVISION ON OWN FUNDS REQUIREMENT FOR MARKET RISK AND COUNTERPARTY CREDIT RISK IN THE TRADING BOOK

Given the need to regulate the submission of information to the Bank of Angola by Financial Institutions, within the scope of the provisions contained in Notice No. 04/2016, of June 22, regarding the regulatory own funds requirement for market risk and counterparty credit risk in the trading book;

Under the combined provisions of letters d) and f) of paragraph 1 of Article 21.º and letter d) of paragraph 1 of Article 51.º, both of Law No. 16/10, of July 15 – Law of the Bank of Angola, and Article 88.º of Law No. 12/15, of June 17 – Basic Law of Financial Institutions;

I DETERMINE:

1. Information Provision
   1.1 Financial Institutions must provide the information required in paragraph 1 of Article 4.º of Notice No. 04/2016, of June 22, regarding the regulatory own funds requirement for market risk and counterparty credit risk in the trading book, to the Bank of Angola, on an individual basis, monthly, and on a consolidated basis, quarterly, using for this purpose the forms and filling notes attached to this Instruction.

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1.2 Without prejudice to the provision of information on an individual basis, the parent companies of the financial group must submit the information provided for in this Instruction on a consolidated basis, in accordance with the consolidation perimeter for prudential purposes provided for in Notice No. 03/2013, of April 22, on prudential supervision on a consolidated basis.
1.3 Institutions that, due to the nature of their activity, do not have information to provide in any of the forms, must declare this fact through the forms attached to this Instruction.
1.4 Institutions must, at any time, be in a position to justify the information submitted, through supporting documentation.

2. Sanctions
   Non-compliance with the mandatory norms established in this Instruction constitutes an offense punishable under the Basic Law of Financial Institutions.

3. Transitional Provisions
   Institutions must comply with the provisions of this Instruction under the terms of the transitional provisions of Notice No. 02/2016 of June 15, regarding regulatory own funds.

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4. Doubts and Omissions
   Doubts and omissions that arise in the interpretation and application of this Instruction are resolved by the Bank of Angola.

5. Entry into Force
   This Instruction enters into force on the date of its publication.

PUBLISH
Luanda, on August 8, 2016
THE GOVERNOR
VALTER FILIPE DUARTE DA SILVA

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ANNEX I
Filling Notes for the form "Limit for the method to be used" This Annex aims to specify the filling notes for the purpose of verifying compliance with the limit described in paragraph 2 of Article 4.º of Notice No. 04/2016, of June 22, regarding the regulatory own funds requirement for market risk and counterparty credit risk in the trading book, in order to select the method to be used for the determination of the own funds requirement for the positions recorded in the trading book.

1. The values to be recorded are those related to the trading book activity and global activity determined on the day when the ratio "total trading book activity/total global activity" registered its highest value, in the 6 (six) months prior to the reporting date.
2. Lines 1.1.1 to 1.1.3 comprise the total of the trading book positions referred to, respectively, in Annexes II, III, and X of Instruction No. 12/2016, regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book.
3. Lines 1.2.1 to 1.2.3 comprise the total of the risks related to the trading book referred to in Annexes VII and VIII of Instruction No. 12/2016, regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book.
4. Line 1.3 comprises the total trading book activity.
5. Lines 2.1 to 2.4 aim to determine the value of the Institution's global activity, which corresponds to the aggregation of the total net asset of provisions and amortizations with the total liability according to the Chart of Accounts Manual for Financial Institutions (CONTIF) and with the off-balance sheet elements considered for the solvency ratio purposes, according to Notice No. 02/2016, of June 15, regarding regulatory own funds.
6. Line 3 results from the multiplication of line 2.4 by 5% (five percent).
7. Lines 4 and 5 refer to the limit of 5% (five percent) of global activity and 1,000,000,000,000 AKZ (one trillion Kwanzas), respectively. The value of line 4 corresponds to the division between the value recorded in line 1.3 and the value recorded in line 3. The value of line 5 corresponds to the difference between 1,000,000,000,000 AKZ (one trillion Kwanzas) and the value recorded in line 3.

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ANNEX II
Filling Notes for the forms "Debt Instruments" When filling in the reporting form to which this Annex refers, positions in:
a) bonds and other debt securities that can be traded on a capital market and any other instruments that confer the right to acquire these debt securities by subscription or exchange or that give rise to a cash settlement; b) money market instruments; c) forward purchases and sales of debt instruments; d) interest rate futures; e) forward rate agreements (FRAs); f) interest rate swaps; g) other operations on debt instruments, including equivalent instruments, that give rise to a cash settlement.

Debt instruments that are in the Institution's trading book and that have been issued by the same are not taken into consideration in the determination of the own funds requirement for specific risk.

The requirements based on Parts I and II below detailed must be obtained separately by the denomination currency of the debt instruments, and these requirements are aggregated in Part III.

Part I

1. Column 1 lists the weightings to be applied to exposures depending on the maturity of the instruments and whether or not the coupon rate is equal to or greater than 3% (three percent).
2. The values to be recorded in columns 2 and 3 comprise the total of long and short (illiquid) positions in debt instruments, which must be appropriately allocated according to the maturity intervals and coupon payment. In the case of fixed-rate instruments, the residual maturity is considered, while for variable-rate instruments, the time remaining until the next interest rate reset is considered.
3. The values to be recorded in column 4 correspond to the reduction effect regarding positions held as a result of firm commitment, according to Annex IV of Instruction No. 12/2016, regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book.
4. The net positions, for the various debt instruments, after considering the reduction effect of positions related to firm commitment, must be recorded in column 5 or 6 depending on whether they are, respectively, long or short, and allocated according to the appropriate maturity intervals.
5. The values of columns 7 and 8 result from the multiplication of the values of column 1 by the values of columns 5 and 6, respectively.
6. For each interval and within each zone, the amount of weighted long positions that are offset by weighted short positions is recorded in column 9. The remainder should be recorded in column 10 or 11, if the unoffset weighted position is, respectively, long or short. Subsequently, the subtotals in each of the zones are presented, and finally, the total of weighted positions offset from all intervals, recording this last value in the total line of the respective column.

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Part II

1. Values related to column 1:
   a) the value to be inserted in line (A) corresponds to the total of column 9 of Part I of this form; b) the value to be inserted in line (B) corresponds to the subtotal of zone one, recorded in column 12 of Part I of this form; c) the value to be inserted in line (C) corresponds to the subtotal of zone two, recorded in column 12 of Part I of this form; d) the value to be inserted in line (D) corresponds to the subtotal of zone three, recorded in column 12 of Part I of this form; e) the value to be inserted in line (E) corresponds to the value recorded in column 15 of Part I of this form; f) the value to be inserted in line (F) corresponds to the value recorded in column 18 of Part I of this form; g) the value to be inserted in line (G) corresponds to the value recorded in column 21 of Part I of this form; h) the value to be inserted in line (H) corresponds to the total of column 24 of Part I of this form;
2. The values recorded in column 3 represent the weightings to be applied to the offset and residual weighted positions for general risk purposes.
3. The values of column 3 result from the multiplication of the values recorded in column 1 by the weighting recorded in column 2.

Part III

1. The values to be recorded in line 1 (general risk) result from the aggregation of positions in debt instruments and the own funds requirement for general risk, determined from Parts I and II for each currency. This value must be detailed in lines 1a) to 1g).
2. The value to be recorded in line 2 (specific risk) results from the aggregation of positions in debt instruments and the own funds requirement for specific risk, determined for each of lines 2.1 to 2.4 and according to the following:
   a) the values to be recorded in columns 1 to 5 are calculated using the methodology explained in numbers 1 to 4 in Part I of this Annex; b) the values to be inserted in columns 6 and 7 are obtained based on the methodology established in Annex V of Instruction No. 12/2016, regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book.
3. The values to be recorded in column 8 comprise the positions that, at the level of each item of this reporting form, are relevant for the determination of the own funds requirement for position risk.
4. Column 10 comprises the own funds requirement calculated for position risk in debt instruments.
5. The value of the last line corresponds to the total requirement for the purposes of this Annex.

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ANNEX III
Filling Notes for the form "Equity Securities"

1. In line (A), values related to positions in:
   a) shares, participation securities, other instruments that confer the right to acquire equity securities by subscription or exchange, or that give rise to a cash settlement, and other variable income securities whose behavior, in terms of the market, is assimilable to that of shares; b) forward purchases and sales of equity securities; c) options on equity securities, including warrants;
2. In line (B), values related to positions in futures on stock indices and options on indices or futures of stock indices must be included.
3. Lines (C) and (D) comprise, respectively, the determination of the own funds requirement for general risk and for specific risk of the positions mentioned in numbers 1 and 2 of this Annex.
4. In columns 1 and 2, the value of the long and short positions, respectively, that the Institution has taken in each of the instruments referred to in numbers 1, 2, and 4 of this Annex must be recorded.
5. Column 3 comprises the values related to the reduction effect regarding positions held as a result of firm commitment, according to Annex IV of Instruction No. 12/2016, regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book.
6. Columns 4 and 5 comprise the values of columns 1 and 2 net of the values of column 3.

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7. Column 6 comprises the value of positions subject to own funds requirement. In the case of general risk, this value respects net positions, and in the case of specific risk, gross positions.
8. Column 7 lists the weighting to be applied to each of the positions referred to in the previous number, and column 8 comprises the product between columns 6 and 7.
9. The value of the last line corresponds to the total requirement for the purposes of this Annex.

ANNEX IV
Filling Notes for the form "Collective Investment Schemes (CIS)"

1. In column 1, the name of each CIS in which the Institution has taken a position must be recorded.
2. In columns 2 and 3, the value of the long and short positions, respectively, that the Institution has taken in each CIS must be recorded.
3. Column 4 comprises the values related to the reduction effect regarding positions held as a result of firm commitment, according to Annex IV of Instruction No. 12/2016, regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book.
4. In column 5, the value of the net position in each CIS must be recorded.
5. Column 6 lists the weightings to be applied to each net position.
6. The value of column 7 results from the multiplication of the value of column 5 by the value of column 4, for each line.
7. The value of the last line corresponds to the total requirement for the purposes of this Annex.

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ANNEX V
Filling Notes for the form "Settlement Risk"

1. Regarding column 1, the value of the difference between the agreed settlement price for debt instruments, equity securities, currencies, or commodities that are physically and financially pending settlement, after the agreed date for delivery, and their current market value, if this difference may involve a loss for the Institution, must be recorded in the respective category.
2. Column 2 lists the weightings to be applied to each of the categories of exposures subject to settlement risk.
3. The value of column 3 results from the multiplication of the value of column 1 by the value of column 2, for each line.
4. The value of the last line corresponds to the total requirement for the purposes of this Annex.

ANNEX VI
Filling Notes for the forms "Foreign Exchange Risk"

Part I

1. In column 1, the name of each currency in which the Institution has taken a position must be recorded, accompanied, in column 2, by the corresponding code present in the auxiliary table "04-Currencies" of the Chart of Accounts Manual for Financial Institutions (CONTIF).
2. In columns 3 and 4, the aggregated value of the long and short positions, respectively, that the Institution has taken in each currency must be recorded. For this purpose, Financial Institutions must consider the description in number 4 of Annex IX of Instruction No. 12/2016, regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book. The values to be recorded in these columns must include the values inserted in columns 5 and 6.
3. In columns 5 and 6, the positions provided for in letter b) of number 5 of Annex IX of Instruction No. 12/2016 regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book must be recorded.
4. Columns 7 and 8 only apply to information provision on a consolidated basis. They comprise the net positions, calculated entity by entity, that cannot be offset with the positions of other Financial Institutions subject to the same consolidated prudential supervision, according to number 8 of Annex IX of Instruction No. 12/2016, regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book.
5. Columns 9 and 10 comprise the net long or short positions, respectively, in each currency. The values of these columns are those referred to in number 4 of Annex IX of Instruction No. 12/2016, regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book.

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Part II

1. In line 1.1, values related to currencies as closely correlated in terms of numbers 5 to 7 of Annex IX of Instruction No. 12/2016, regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book, must be included.
2. In lines 1.2 and 1.3, values related to the remaining currencies and gold must be included, respectively.
3. In line 2, the value of the limit referred to in number 2 of Annex IX of Instruction No. 12/2016 regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book must be included.
4. In columns 11 and 12, the values of the net long and net short positions, respectively, must be recorded.
5. The value of column 13 corresponds to the global net foreign exchange position, according to number 3 of Annex IX of Instruction No. 12/2016, regarding the calculation and regulatory own funds requirement for market risk and counterparty credit risk in the trading book.
6. Columns 14, 15, and 16 detail the values subject to own funds requirement, respectively, the global net long or short foreign exchange position, subject to the 8% requirement, and the offset part of currencies treated as closely correlated, subject to the 4% requirement.
7. Columns 17, 18, and 19 list the weightings to be applied to each of the values referred to in the previous number for the calculation of the own funds requirement.

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8. Column 20 comprises the own funds requirement for foreign exchange risk. This requirement is equal to zero if the limit referred to in number 3 of Part II of this Annex is not exceeded. Otherwise, the requirement results from the respective multiplication of the values mentioned in number 6 by the values mentioned in number 7, both of Part II of this Annex.
9. The value of the last line corresponds to the total requirement for the purposes of this Annex.

ANNEX VII
Filling Notes for the form "Commodity Risk"

1. In column 1, the name of each commodity in which the Institution has taken a position must be recorded.
2. In columns 2 and 3, the values, in Kwanzas, of the long and short positions, respectively, that the Institution has taken in each commodity must be recorded.
3. Columns 4 and 5 comprise, respectively, the gross and net position in each commodity.
4. Column 6 comprises the own funds requirement for each commodity.
5. The value of the last line corresponds to the total requirement for the purposes of this Annex.

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ANNEX VIII
Form "Own Funds Requirement for Hedging Market Risk and Counterparty Credit Risk in the Trading Book"

*The header must be part of all tables

Forms Submitted
Limit - Method
Debt Instruments
Commodity Risk
Equity Securities
Collective Investment Schemes
Settlement Risk
Foreign Exchange Risk

It is declared that there are no values to report for the forms not marked above.

Month:
IDENTIFICATION AND INDEX
Institution Name:
Reporting Basis: Year:

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Limits for the purposes of the method to be used 0
4. COMPLIANCE WITH THE 5% LIMIT ON GLOBAL ACTIVITY (1.3./3.)
VALUE
LIMIT FOR THE PURPOSES OF THE METHOD TO BE USED
1.2.4. Total risks (1.2.1.+1.2.2.+1.2.3.)
1.3. Total trading book activity (1.1.+1.2.)
2.1. Net asset of provisions and amortizations
2.2. Liability
2.3. Off-balance sheet elements considered for solvency ratio purposes
2.4. Total global activity (2.1.+ 2.2. + 2.3.)
3. 5% OF GLOBAL ACTIVITY (5%*2.4.)
5. COMPLIANCE WITH THE ONE TRILLION KWANZAS LIMIT (1,000,000,000,000-1.3.)

1. TRADING BOOK ACTIVITY
   1.1. Positions
   1.1.1. Debt Instruments
   1.1.2. Equity Securities
   1.1.3. Commodities
   1.1.4. Total positions (1.1.1.+ 1.1.2. +1.1.3.)
   1.2. Risks
   1.2.1 Settlement/Delivery Risk
   Month:
   1.2.2. Incomplete Transactions
   1.2.3. Counterparty Credit Risk
   Year:
   Institution Name:
   Reporting Basis:

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Debt Instrument
Part I
Part I
Residual Positions
≥ 3% Coupon < 3% Coupon Long Short Long Short Long Short Offset Long Short Offset Long Short Offset Long Short Offset Long Short Offset Long Short Offset Long Short Offset 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (2-4) (3) (15) (16) min{7;8} max{0;7-8} max{0; - (7-8)} min{10;11} max{0;10-11} max{0; - (10-11)} 0 ≤ 1 month 0 ≤ 1 month 0.00% 0 0

1 ≤ 3 months > 1 month ≤ 3 months 0.20% 0
3 ≤ 6 months > 3 ≤ 6 months 0.40% 0.0 0.0 0
6 ≤ 12 months > 6 ≤ 12 months 0.70% 0.0, 0
Subtotal 0.0 0.0 0.0
1 ≤ 2 years > 1 ≤ 1.9 years 1.25% 0
2 ≤ 3 years > 1.9 ≤ 2.8 years 1.75% 0
3 ≤ 4 years > 2.8 ≤ 3.6 years 2.25% 0
Subtotal 0
4 ≤ 5 years > 3.6 ≤ 4.3 years 2.75% 0
5 ≤ 7 years > 4.3 ≤ 5.7 years 3.25% 0
7 ≤ 10 years > 5.7 ≤ 7.3 years 3.75% 0
10 ≤ 15 years > 7.3 ≤ 9.3 years 4.50% 0
15 ≤ 20 years > 9.3 ≤ 10.6 years 5.25% 0
20 years > 10.6 ≤ 12 years 6.00% 0
12 ≤ 20 years 8.00% 0
20 years 12.50% 0
Subtotal 0.00 0.00
Total 0

Part II
Value Weighting Requirement
1 2 3
0.00 10% 0.00
0.00 40% 0.00
0.00 30% 0.00
0.00 30% 0.00
0.00 40% 0.00
0.00 40% 0.00
0.00 150% 0.00
0.00 100% 0
0.000
Sum of weighted positions offset within each interval (A) THREE Weighted positions between zone one and three ZONE not offset not offset ONE TWO Month:
not offset not offset
Institution Name:
Reporting Basis: Year:
not offset
Weighted positions in interval Weighted positions within the same zone Weighted positions between zone one and two Weighted positions between zone two and three Weighted position offset between zones one and three (G) Residual unoffset position (H) Total (I and II) Weighted position offset of zone one (B) Weighted position offset of zone two