Notice No. 01/GBM/2008 of January 18 - Mandatory Reserves

1 NOTICE NO. 01/GBM/2008 SUBJECT: Mandatory Reserves Notice No. 2/GBM/2007, dated February 28, issued by the Governor of the Bank of Mozambique, which reviewed the regime for the constitution of mandatory reserves, set the rate at 10.15%. Meanwhile, the recent positive evolution of the country's macroeconomic indicators justifies the reduction of the mandatory reserve rate to a single-digit level. Thus, under the provisions of paragraphs 1 and 2 of Article 27 of Law No. 1/92, dated January 3, the Bank of Mozambique determines:

CHAPTER I SCOPE, CALCULATION, AND CONSTITUTION

Article 1 (Scope of Application)

1. The provisions of this Notice apply to all credit institutions covered by Law No. 15/99, dated November 1 – Law of Credit Institutions and Financial Companies, with the amendments introduced by Law No. 9/2004, dated July 21, holding liabilities referred to in Article 2 of this Notice, and monetary assets, with the Bank of Mozambique.
2. Excluded from the provisions of the preceding paragraph are credit institutions that do not receive deposits from the public, in accordance with the provisions of Law No. 15/99, dated November 1, with the amendments introduced by Law No. 9/2004, dated July 21.

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Article 2 (Liabilities Subject to Levy) The Tax Base (TB) for mandatory reserves consists of all liabilities of class 4 (Four) of the Chart of Accounts of the Banking System, excluding deposits from other institutions resulting from applications in the Interbank Money Market.

Article 3 (Levy Rate) The incidence base referred to in Article 4 of this Notice is subject to a coefficient designated as the minimum daily rate, fixed at 9.00%, which must be observed daily.

Article 4 (Calculation of the Tax Base)

1. The incidence base upon which the daily rate will be applied shall be calculated from the simple arithmetic mean of the balances of the liabilities referred to in Article 2 verified over the calculation period.
2. The calculation periods for the incidence base are, in each month, the following: 1st period - from the 1st to the 15th day; 2nd period - from the 16th to the last day of each month.

Article 5 (Constitution Period)

1. The constitution periods for mandatory reserves under this regime are the following: 1st period – from the 7th to the 21st day; 2nd period – from the 22nd to the 6th day of the following month.
2. The mandatory reserve of the 1st constitution period shall correspond to the 2nd calculation period and vice-versa.

Article 6 (Form of Constitution)

1. The mandatory reserve shall always be constituted in national currency, the Metical.
2. The mandatory reserve may be constituted in at least one of the following forms: a) Cash;

3 b) Checks drawn by the institutions themselves on other national credit institutions; c) Account-to-account transfer; d) Other financial assets capable of integrating the clearing system, excluding demand deposits in foreign currency of credit institutions, with the Bank of Mozambique. e) Cash in the institution's vault, maintained in branches and/or counters in rural areas, as defined by the Bank of Mozambique.

Article 7 (Methodology for Constitution to Observe the Daily Rate) The daily balances of demand deposits in National Currency of credit institutions with the Bank of Mozambique may not be lower, on any given day, than the amount of mandatory reserve resulting from the multiplication of the rate fixed in Article 3, by the incidence base calculated in the terms described in Article 4 of this Notice.

CHAPTER II SANCTIONS

Article 8 (Calculation of Penalties)

1. Penalties under this Notice apply to the deficit of mandatory reserves and to the delay in sending information requested by the Bank of Mozambique, and shall take the form of a monetary penalty.
2. Penalties on the deficit of mandatory reserves calculated at the end of each day are determined based on the following formula: Penalty = [(SD+CX – (r x TB)) x T] Where: SD – is the daily accounting balance of demand deposit accounts in National Currency of credit institutions with the Bank of Mozambique, obtained from statements issued by the Operations and Treasury Department of the Bank of Mozambique, assuming always that SD is greater than or equal to zero. CX – is the value in cash maintained daily in the vaults of credit institutions, obtained from information sent by the institutions to the Markets Department of the Bank of Mozambique.

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r - is the minimum daily incidence rate of the mandatory reserve, in accordance with Article 3 of this Notice. TB - is the incidence base of the mandatory reserve, in accordance with Article 2 of this Notice. T - is the penalty rate for the deficit of mandatory reserves, in accordance with the following paragraph 3.

3. The penalty T, provided for in the preceding paragraph 2, shall correspond to the highest interest rate among the following: a) Interest rate of the Overnight Facility in force on the date of the infringement, plus two percentage points. b) Highest interest rate of the active operations of the infringing institution, plus two percentage points.
4. Without prejudice to other measures that may be adopted, the Bank of Mozambique shall charge a penalty of five hundred meticais, for each business day of delay in sending the information referred to in Article 12 of this Notice.
5. The Bank of Mozambique shall debit the demand deposit account of the infringing credit institution for the value of the penalties calculated according to the preceding paragraphs.

Article 9 (Aggravation of Penalty) The penalty rate provided for in paragraph 3 of the preceding Article shall be aggravated by 10 (ten) percentage points whenever an institution incurs a deficit of mandatory reserves in 03 (three) consecutive constitution periods.

Article 10 (Blocked Account Regime)

1. If in 04 (four) consecutive constitution periods of mandatory reserves, in 02 (two) of them (successively or not), an institution incurs deficits of mandatory reserves in 03 (three) business days of the same constitution period, the Bank of Mozambique shall automatically block the balance of the free movement account, allowing only credit movements, without prejudice to any additional measures provided for in the Interbank Clearing and Settlement Regulation, approved by Notice No. 9/GBM/2005, dated August 22.
2. The institution whose account is blocked is obliged to immediately instruct the opening of an account for clearing and other types of operations.

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3. The institution is also obliged to fund the blocked account to comply with the mandatory reserve.
4. The Bank of Mozambique reserves the right to transfer from the free movement account to the blocked account the balances necessary to comply with mandatory reserves.
5. As long as deficits persist in the blocked account, the penalty on daily deficits shall be applied based on the formula provided for in paragraph 2 of Article 8.
6. Within a period of no less than 04 (four) constitution periods of mandatory reserves, the Bank of Mozambique may instruct the lifting of the account block.

CHAPTER III FINAL PROVISIONS

Article 11 (Exemption Period)

1. All credit institutions are exempt from the constitution of mandatory reserves for a maximum period of 03 (three) months, starting from the date of the commencement of their activity.
2. The exemption referred to in the preceding paragraph is automatic, and its terms shall be formally communicated by the Banking Supervision Department of the Bank of Mozambique.

Article 12 (Sending of Information)

1. Credit institutions covered by this Notice shall send to the Bank of Mozambique, with reference to the calculation period of the incidence base indicated in paragraph 2 of Article 4, the information contained in the Mandatory Reserves Calculation Map attached, which forms an integral part of this Notice.
2. The Mandatory Reserves Calculation Map referred to in the preceding paragraph must be received by the Bank of Mozambique by the third business day following the end of the calculation period to which it refers, and may be corrected until the last business day preceding the start of the respective constitution period. Late submission of maps is an indispensable condition for acceptance regarding subsequent periods.
3. Any correction that occurs during the constitution period to which the information refers and that implies a reduction of the incidence base

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shall not be considered for the purpose of calculating the penalty; the previous information shall prevail for these cases. 4. Credit institutions are obliged to keep, for a period of 5 (five) years, all documents that allow them to prove the information contained in the map referred to in paragraph 1 of this Article.

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Article 13 (Efficacy and Revocation) This Notice shall take effect from the mandatory reserve constitution period starting on 07/04/2008, revoking Notice No. 02/GBM/2007, dated February 28.

Article 14 (Clarification of Doubts) Doubts arising in the interpretation and application of this Notice shall be submitted to the Markets Department of the Bank of Mozambique.

Maputo, January 18, 2008.

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Ernesto Gouveia Gove Governor

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ANNEX – MANDATORY RESERVES CALCULATION MAP DESIGNATION DAILY BALANCES* AVERAGE RO's (XX%) A) RESIDENT DEPOSITS Demand Deposits (4200 + 4210 – 42000-42100) Notice Deposits (4201 + 4211 – 42010- 42110) Time Deposits (4202 + 4212 – 42020-42120) Mandatory Deposits (4208+4218) Other Deposits (4209 + 4219 – 42090-42190) B) NON-RESIDENT DEPOSITS Demand Deposits (4300 + 4310 ) Notice Deposits (4301 + 4311 ) Mandatory Deposits (4308+4318) Time Deposits (4302 + 4312 ) Other Deposits (4309 + 4319 ) C) STATE DEPOSITS (42000 + 42010 + 42020 + 42090 + 42100 + 42110

• 42120 + 42190) D) DEPOSITS FROM OTHER NATIONAL CREDIT INSTITUTIONS (Which do not result from applications in the Interbank Money Market) (4011+4012+4013+4014+4015+4019) E) LOANS (4400+4401+4410+4411) F) LIABILITIES REPRESENTED BY SECURITIES Deposit Certificates (450) Bonds (451) Own Acceptances (452) Others (459) G) OTHER RESOURCES Checks and Payment Orders (4600+4610) Consigned Resources (4602+4612) Fixed Account Resources (4603+4613) Pledge Account Resources (4604+4614) Subscription Account Resources (4605+4615) Others (4609+4619)

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H) CREDITORS Suppliers (4800+4810) Creditors from Factoring Contracts (4801+4811) Creditors from Credit Card Operations (4802+4812) Other Creditors (4809+4819) I) DUE LIABILITIES Taxes Payable (490) Withheld Taxes (491) Social Security Contributions (492) Collections on Behalf of Third Parties (493) Interest, Dividends and Other Remuneration of Capital Payable (494) Drawn Bonds (495) Complementary Social Security Schemes (496) Others (499) J) DEPOSITS OF THE BANK OF MOZAMBIQUE (Which do not result from applications in the Interbank Money Market) (4001+4002+4003+4004+4005+4009) K) DEPOSITS OF FOREIGN CENTRAL BANKS (Which do not result from applications in the Interbank Money Market) (4101+4102+4103+4104+4105+4106+4109) L) DEPOSITS OF FOREIGN CREDIT INSTITUTIONS (Which do not result from applications in the Interbank Money Market) (4111+4112+4115+4116+4119) M) DEPOSITS OF INTERNATIONAL FINANCIAL ORGANIZATIONS (415) TOTAL

• In the first line of the balances columns, indicate the respective dates.