Law No. 1/92, of January 3 – Defines the Nature, Objectives and Functions of the Bank of Mozambique as the Central Bank of the Republic of Mozambique

Friday, January 3, 1992 I SERIES — Number 1
REPUBLIC BULLETIN
OFFICIAL PUBLICATION OF THE REPUBLIC OF MOZAMBIQUE 2nd SUPPLEMENT NATIONAL PRESS OF MOZAMBIQUE NOTICE Material to be published in the «Republic Bulletin» must be submitted in a duly authenticated copy, one for each matter, which must include, in addition to the necessary information for that purpose, the following endorsement, signed and authenticated:
For publication in the «Republic Bulletin».
SUMMARY
Assembly of the Republic:
Law No. 1/92:
Defines the nature, objectives and functions of the Bank of Mozambique as the Central Bank of the Republic of Mozambique. Law No. 2/92:
Amends the global amounts of Revenues and Expenditures of the Current Budget for 1991 to 442.6 and 487.8 million contos respectively. Law No. 3/92:
Approves the General State Budget for 1992.
ASSEMBLY OF THE REPUBLIC
Law No. 1/92 of January 3
The current political and economic situation of the country imposes a new dynamic on credit institutions in their performance as drivers of economic development. The implementation of the Economic and Social Rehabilitation Program and the increasingly broad relationship of the Bank of Mozambique with international financial institutions have accelerated the need for greater operationality of the Central Bank in its role as formulator and manager of monetary and credit policy and supervisor of the national financial system. The materialization of these objectives necessarily involves the institutional separation of Central Bank functions from those of a commercial bank, in order to allow the Bank of Mozambique to fully assume its functions as a Central Bank and to confer greater competitiveness on commercial banks. In these terms, under the provisions of paragraph 1 of article 135 of the Constitution, the Assembly of the Republic determines:
CHAPTER I
Of the nature, headquarters, object and purposes
ARTICLE 1

1. The Bank of Mozambique, hereinafter referred to as the «Bank», is a public law legal entity,
   endowed with administrative and financial autonomy, with the nature of a public enterprise.

2. The Bank is governed by the provisions of this diploma
   and the regulations that may be adopted in its execution.

3. The Bank has its headquarters in Maputo and will create branches
   or agencies, generically designated as dependencies, where the needs of the exercise of its functions justify it.
   ARTICLE 2
   The Bank of Mozambique is the Central Bank of the Republic of Mozambique.
   ARTICLE 3

4. The Bank's main objective is the preservation
   of the value of the national currency.

5. In pursuing its objective, the Bank also aims
   to achieve the following purposes:
   a) promote the implementation of a correct monetary policy; b) Guide credit policy with a view to promoting the economic and social growth and development of the country; c) manage external availabilities in order to maintain an adequate volume of means of payment necessary for international trade; d) regulate banking activity.

6. In achieving the objectives defined in paragraphs 1 and 2
   of this article, the Bank observes Government policies.
   CHAPTER II
   Of own funds and other financial resources
   ARTICLE 4

7. The Bank's capital is fifty billion
   meticais, fully subscribed by the State.

8. The Bank's capital may be increased upon
   proposal of the Board of Directors to the Government.

9. The Bank also has the funds resulting
   from the application of profits under the terms of article 65 of this diploma.
   ARTICLE 5
   For the financing of operations included in its object, in addition to the use of the resources indicated in article 4, the Bank may:
   a) accept sight deposits from the State and credit institutions; b) use funds from loans granted by foreign or international individuals or legal entities; c) use funds from mandatory deposits of credit institutions; d) carry out any other passive operations that are not prohibited by law.
   ARTICLE 6

10. Deposits made in the Bank by credit institutions, even if they refer to mandatory deposits, may be remunerated.

11. The State guarantees the reimbursement of deposits made
    in the Bank.
    CHAPTER III
    Of monetary issuance and foreign exchange reserves
    SECTION I
    Of monetary issuance
    ARTICLE 7

12. The Bank has the exclusive right and obligation to issue
    notes and fractional currency in Mozambique.

13. The issuance and face values will be fixed in harmony with the interests of the national economy, reserving
    the State, for itself, the right to issue commemorative currency.

14. Notes and coins are legal tender throughout the country
    and have unlimited legal tender power and are exempt from stamp duty and any other taxes.

15. The characteristics and face value of the notes and coins
    to be issued by the Bank will be decided by the Governor of the Bank, after prior approval by the President of the Republic, under the terms of Law No. 1/91, of January 9.

16. Notes bear the date of general issue and are signed,
    by seal, by the Governor of the Bank.

17. The Bank has the obligation to provide the national community, under the best conditions of security and convenience,
    notes and coins of good quality and difficult to imitate.

18. The acts of the Governor of the Bank in the exercise of the
    powers attributed in paragraph 4 of this article shall observe the form of a notice to be published in the Republic Bulletin.
    ARTICLE 23

19. The Bank is responsible for setting the period within which notes and coins of any type or plate that
    are to be withdrawn from circulation must be exchanged, the disclosure of which must be through public notice.

20. After the period fixed under the previous paragraph,
    notes and coins withdrawn from circulation lose their legal tender power and their legal course throughout the national territory.

21. Collected notes will be duly listed
    and then rendered unusable in the manner to be regulated by the Bank.
    ARTICLE 9
    The Bank assumes responsibility for the notes and coins issued under article 7.
    ARTICLE 10
    The Bank supervises activities related to numismatics, being responsible for regulating the commercialization of coins and the activity of their respective agents.
    ARTICLE 11
    Monetary issuance, represented by notes and coins in circulation and other sight liabilities in national currency, is the object of an annual program, with periodic revisions whenever deemed necessary, which must foresee the evolution of this issuance and respective factors, in order to coordinate the management of foreign exchange reserves and the credit to be granted by the Bank with the needs of stabilization and development of the economy.
    SECTION II
    Of the monetary reserve
    ARTICLE 12

22. Foreign exchange reserves shall consist of:
    1st Gold coin or bar;
    2nd Fine silver and platinum;
    3rd Special drawing rights;
    4th Foreign currency and other assets expressed in foreign currency of assured convertibility in the form of:
    a) sight or term credits not exceeding one hundred and eighty days and represented by balances of accounts opened with banks of recognized credit domiciled abroad and in international monetary institutions or organizations; b) checks and payment orders issued by entities of recognized credit on prime banks domiciled abroad; c) bills in portfolio, payable at sight or within a period not exceeding one hundred and eighty days, accepted by prime banks domiciled abroad; d) treasury bonds or other similar obligations of foreign States, due or to mature within one hundred and eighty days; e) foreign notes and coins.

23. The Bank may include in the foreign exchange reserve any
    other type of active external values that it considers adequate, in accordance with international standards and after being duly authorized by the Government.
    ARTICLE 13

24. Net external assets must ensure the needs of international trade.

25. If such net external assets fall or are about to fall to the point of jeopardizing their adequacy in relation to the country's international transactions,
    the Bank's Board of Directors will inform the Government of the position of the reserves and the causes that led or could lead to such a situation, with the recommendations it deems necessary for their coverage.
    ARTICLE 14

26. If there is a change in the value of the Bank's assets
    or liabilities as a result of adjustments of the national currency in relation to other currencies, the Bank will account for profits or losses in a special account for value fluctuations.

27. If, at the end of the Bank's financial year, a debit balance is found in the special account for value fluctuations,
    the State will regularize this balance by issuing public debt securities in favor of the Bank or other modality proposed by the Bank's Board of Directors.

28. Any credit balance in the special account for value fluctuations
    at the end of the financial year will be credited to a captive account in the name of the State in relation to which the Bank may pay interest at the rate determined by the Board of Directors.

29. The balance referred to in the previous paragraph can only be used for the settlement of liabilities arising from paragraph 2 of this article.

30. Both the profits and losses referred to in this article will not be included in the final result of each financial year.

31. The special account for value fluctuations cannot be debited or credited except in the cases provided for in this article.
    ARTICLE 15
    The Bank's monetary issuance, to the extent that it exceeds the level of foreign exchange reserves, must have full coverage constituted by the following values:
    a) credits on the State arising from the operations provided for in articles 18 and 19; b) securities that constitute the Bank's commercial portfolio; c) credits resulting from loan operations granted to credit institutions under subparagraph b) of article 41.
    CHAPTER IV
    Of the functions of the Central Bank
    SECTION I
    General provisions
    ARTICLE 16

32. As Central Bank, the Bank will be the State's banker, financial advisor to the Government, guide and controller of monetary, financial and
    exchange policies, manager of the country's external availabilities, intermediary in international monetary relations, supervisor of financial institutions.

33. The Bank is responsible for ensuring the centralization and compilation of monetary, financial and exchange statistics
    that it deems necessary for the pursuit of an efficient policy in those areas.

34. The Bank is also responsible for controlling the activity of monetary, financial and exchange markets.
    SECTION II
    Of the functions of the State's banker
    ARTICLE 17
    The Bank will be the State's banker, inside and outside the country.
    ARTICLE 18

35. The Bank may grant the State, annually,
    interest-free credit in the form of a current account, in national currency, up to a maximum amount of ten percent of the ordinary revenues of the General State Budget collected in the penultimate financial year.

36. State withdrawals from the same account will be made solely in representation of the budgetary revenues of the respective financial year and the credit must be settled by the last day of the financial year in which it was opened and if not, the balance will accrue interest at the Bank's rediscount rate.
    ARTICLE 19
    In addition to the case provided for in the previous paragraph, the limit for granting credit by the Bank to the State is, each year, dependent on the Government's definition of public financing needs, which will be adjusted to the programming referred to in article 11.
    SECTION III
    Of the functions of advisor to the Government in the financial domain
    ARTICLE 20
    As advisor to the Government, the Bank is responsible for:
    a) providing information and opinions on monetary, financial and exchange matters; b) advising on negotiations on external agreements and financing; c) participating in «ad hoc» meetings on monetary, financial and exchange policy.
    SECTION IV
    Of monetary and financial policy
    ARTICLE 21

37. As guide and controller of monetary policy,
    the Bank is responsible for regulating the functioning of the monetary market.

38. As supervisor of financial institutions, the Bank is also responsible for regulating the functioning of the financial market and establishing the link between the activity of those and the directives of monetary and financial policy.
    ARTICLE 22
    The Bank will determine, according to the conveniences of monetary and financial policy, the modalities, in qualitative and quantitative terms, in which loans or credits may be granted to each of the financial institutions, as well as the legal formalism of these operations.

ARTICLE 23

1. The Bank will fix the rediscount rate.
2. The Bank is responsible for regulating, by fixing limits,
   terms and other conditions, rediscount operations.
   ARTICLE 24
   In rediscount operations that exceed the quantitative limits fixed or the qualitative rules established, the Bank may apply different rates than normal.
   ARTICLE 25
3. The Bank will fix the rates and commissions applicable to
   other own operations.
4. The Bank will fix the regime of interest rates, commissions
   and any other forms of remuneration for operations carried out by financial institutions.
   ARTICLE 26
   The Bank may, when necessary, issue instructions regarding the volume, structure, terms and conditions of credit to be granted by financial institutions and control its application.
   ARTICLE 27
5. The Bank will establish for credit institutions a minimum limit of mandatory deposits, to be collected at the Bank, proportional to the values of demand deposits, with prior notice and term, and other sight liabilities of these institutions, as well as the minimum percentage of their cash availabilities.
6. The Bank may alter, for reasons of monetary conjuncture,
   the minimum limit and the minimum percentage referred to in the previous paragraph.
   SECTION V
   Of the functions of manager of the country's external availabilities and exchange policy
   ARTICLE 28
   The Bank is the exchange authority of the Republic of Mozambique.
   ARTICLE 29
   Unless expressly provided by law, no external payments may be made without being duly authorized by the Bank.
   ARTICLE 30
   The Bank is responsible for:
   a) defining, for the defense of the national currency, the principles regulating operations on gold and foreign currencies; b) fixing the limits of gold and foreign currency availabilities that may be held by entities authorized to carry out foreign exchange trade; c) fixing exchange rates and publicizing them daily; d) licensing and supervising any activity of recovery, by chemical or mechanical means, of gold, silver and platinum, which are incorporated in metal alloys or other products.
   ARTICLE 31
   The Bank may enter into, in its own name or on behalf of the State and on its account and order, with similar establishments, public or private, domiciled abroad, compensation and payment agreements or any contracts that serve the same purposes.
   ARTICLE 32
7. The opening, abroad, of accounts in foreign currency by national residents depends on special and prior authorization from the Bank, with the terms and conditions established in the authorization being observed for their movement.
8. The opening of accounts in national currency by non-resident entities depends on prior authorization from the Bank, which will define the terms and conditions for their movement.
   ARTICLE 33
   The Bank, in coordination with the Ministry of Finance, is responsible for managing external debt, registering it, and intervening in its contracting and renegotiation in accordance with Government guidelines.
   SECTION VI
   Of International Monetary Relations
   ARTICLE 34
   The Bank may relate to foreign and international financial institutions.
   ARTICLE 35
   The Bank may enter into contracts and sign banking or cooperation agreements with similar institutions, public or private, of other countries and international organizations.
   ARTICLE 36
   The Bank may participate in the capital of foreign or international institutions with monetary and exchange attributions and be part of their corporate bodies.
   SECTION VII
   Of the functions of supervisor of financial institutions
   ARTICLE 37
9. For the purposes of this diploma, all credit institutions and others that the law confers upon it, with the exception of insurance companies, are considered subject to the supervision of the Central Bank.
10. To ensure the supervision of the institutions subject to it, the Bank is responsible, namely, for:
    a) appreciating and giving an opinion on requests for the constitution of the referred institutions, with a view to their operation, as well as on their merger, spin-off or transformation and proposing the revocation of the authorizations granted, when applicable; b) defining the conditions for opening branches, agencies, delegations and other forms of representation of the mentioned institutions, in the national territory or abroad and deciding on the respective requests; c) assessing the suitability of the holders of social participations in institutions where they represent more than ten percent of the respective share capital, as well as the technical-professional aptitude of their administrators or directors and defining the imperative conditions for the exercise of these functions;

d) establishing directives for the action of these institutions; e) ensuring credit information and risk centralization services.
ARTICLE 38

1. The Bank is responsible for carrying out inspections in the establishments of financial institutions subject to its supervision under the terms of the law.

2. The Bank's employees in charge of inspection actions must present themselves duly accredited and enjoy the attributes and powers of State authority agents when exercising their functions.
   ARTICLE 39
   All institutions subject to supervision are obliged to send to the Bank, in accordance with the instructions transmitted by it, monthly balance sheets and other elements relating to their situation and the operations they carry out.
   CHAPTER V
   Of the functions of Treasury Cashier
   ARTICLE 40

3. The Bank will perform the treasury cashier service where it exercises banking functions, paying on behalf of the State, up to the limit of the funds entrusted to its custody, all its expenses, receiving its revenues, carrying out all its banking operations and collecting or returning all deposits for guarantee or under the custody of the State.

4. The provisions of paragraph 1 of this article are extended to institutions subordinate to the State and to local State bodies, under the terms to be established.

5. For the services provided to the State, under the terms of paragraph 1 of this article, the Bank will charge a commission to be determined by the Board of Directors.
   CHAPTER VI
   Of the Bank's operations
   ARTICLE 41
   In accordance with credit policy, the Bank may carry out the operations justified by its quality as Central Bank and, namely, the following:
   a) rediscount and discount, for a period not exceeding one hundred and eighty days, bills of exchange, promissory notes, invoice extracts, warrants and other similar securities, originating from productive or commercial activities, duly guaranteed by the rediscounting entity, under the conditions to be defined by the Bank; b) grant credit institutions loans, for a period not exceeding one hundred and eighty days, in the modalities and conditions it deems advisable, secured by: gold; Treasury bonds and other securities of foreign States quoted on the stock exchanges of the main financial markets; securities issued by other national public law entities, when they possess the privileges and guarantees attributed to public debt securities; bills of exchange and promissory notes payable in the country or abroad, in national or foreign currency; c) accept sight deposits from the State and credit institutions; d) accept deposits of State securities belonging to financial institutions; e) issue securities for a period not exceeding one year, with the objective of intervening in the monetary market; f) carry out all operations on gold and foreign currencies; g) carry out, on its own account or on behalf of others, collections, payments and transfers of funds and any other banking operations that are not expressly prohibited in this law.
   ARTICLE 42
   The Bank is prohibited from:
   a) accepting deposits and granting credit to individuals; b) accepting deposits and granting credit to legal entities, except in the case of credit institutions; c) carrying out other operations typical of commercial banks.
   ARTICLE 43
   At the Bank, the clearing of checks and other credit instruments will operate under terms to be fixed by specific regulation.
   CHAPTER VII
   Of the administration and supervision of the Bank
   SECTION I
   General provisions
   ARTICLE 44

6. The Bank's administration and supervision bodies are the board of directors and the audit board.

7. The advisory board constitutes a support and consultation body for the Bank's board of directors.

8. The following cannot be members of the bodies indicated in paragraph 1 of this article:
   a) individuals who, in the national banking system information records, are found to be in default of their contractual obligations, b) those who have been judicially convicted of intentional crimes against State or private property, regardless of the penalty applied; c) those judicially declared responsible for irregularities in the exercise of public or private functions; d) persons in leadership positions in any credit or financial institutions.
   SECTION II
   Of the board of directors
   ARTICLE 45

9. The Bank's board of directors is composed of a Governor, who presides over its sessions, a Vice-Governor and four to six administrators.

10. The Governor of the Bank may determine the participation in the board of directors of other elements whose presence he deems convenient.

11. The members of the board of directors exercise their functions for renewable periods of five years.

12. The Governor and Vice-Governor of the Bank are appointed, dismissed and removed by the President of the Republic, under the terms of the Constitution of the Republic.

13. The administrators are appointed, dismissed and removed by the Prime Minister, and the appointment must fall on persons of recognized competence in monetary and financial, economic or legal matters.

14. Members of the board of directors can only be dismissed for just cause.
    ARTICLE 46

15. The board of directors is generally responsible for carrying out all acts necessary for the pursuit of the purposes entrusted to the Bank in this law.

16. It is especially responsible for:
    a) deliberating on the general organization of the Bank and on the establishment or closure of any branch, agency or dependency of the bank and appointment of correspondents; b) defining the Bank's personnel management policy and approving the respective staff and salaries; c) approving internal regulations; d) approving the Bank's annual budget; e) preparing the management report and accounts and proposing the application of the results under the terms of

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