Notice No. 05/2016 of June 22: Regulatory Capital Requirement for Operational Risk

Published in the Official Gazette, First Series, No. 102, of June 22

NOTICE NO. 05/2016

SUBJECT: REGULATORY CAPITAL REQUIREMENT FOR OPERATIONAL RISK

Considering the development of the Angolan Financial System, international best practices, and the issuance of Notice No. 02/2016 on Regulatory Capital (RC), which establishes new risk categories considered in the calculation of the regulatory solvency ratio, it is necessary to establish the capital requirement for coverage of operational risk.

In these terms, and under the combined provisions of letters d) and f) of paragraph 1 of Article 21st and letter d) of paragraph 1 of Article 51st, both of Law No. 16/10, of July 15 – Law of the Bank of Angola, and Article 88th of Law No. 12/15, of June 17 – Law of the Basic Framework of Financial Institutions.

I DETERMINE:

Article 1.
(Object)
This Notice establishes the regulatory capital requirement that Financial Institutions must consider within the scope of operational risk, in accordance with the provisions of letter c) of paragraph 4 of Article 4th of Notice No. 02/2016, on RC.

Article 2.
(Scope)
This Notice applies to Financial Institutions under the supervision of the Bank of Angola, hereinafter designated as Institutions under the terms and conditions provided for in the Law of the Basic Framework of Financial Institutions.

CONTINUATION OF NOTICE NO. 05/2016 Page 2 of 4

Article 3.
(Definitions)
Without prejudice to the definitions established in the Law of the Basic Framework of Financial Institutions, for the purposes of this Notice, the following are understood:

1. Regulatory Capital: "RC" as defined and calculated in accordance with Notice No. 02/2016, on RC.
2. Financial Group: a set of resident and non-resident companies that have the nature of banking and non-banking financial institutions, with the exception of financial institutions linked to insurance and social security activities, in which there is a relationship of control by a parent company supervised by the Bank of Angola over the other companies comprising it.
3. Risk: the possibility of a future event occurring with a negative impact on the net worth of Institutions.
4. Operational Risk: arising from inadequate internal processes, people, or systems, the possibility of occurrence of internal and external fraud, as well as external events. It includes information system and compliance risk:
   a) Compliance Risk: arising from violations or non-compliance with laws, rules, regulations, contracts, prescribed practices, or ethical standards; b) Information System Risk: arising from inadequacies in information technologies in terms of processing, integrity, control, availability, and continuity, arising from inadequate strategies or uses.

Article 4.
(Regulatory capital requirement for coverage of operational risk) Institutions must calculate the regulatory capital requirement for coverage of operational risk, in accordance with the basic indicator, standard, or alternative methods, established in the Instruction on Calculation and Regulatory Capital Requirement for Operational Risk.

CONTINUATION OF NOTICE NO. 05/2016 Page 3 of 4

Article 5.
(Consolidation)

1. The calculation of the regulatory capital requirement for coverage of operational risk must occur on a consolidated basis according to the method used by the Institution, at the individual level, provided that the applicable requirements are met by all entities of the financial group.
2. By way of exception, the Bank of Angola may authorize the combined use of different methods for calculating the regulatory capital requirement for coverage of operational risk on a consolidated basis, notably in cases of acquisition of new institutions or activity segments where a transition period for the application of the authorized method may be required.
3. The combined use referred to in the preceding paragraph depends on the commitment assumed by the institution to eventually apply only one method, according to a calendar approved by the Bank of Angola.

Article 6.
(Information Reporting)
The Bank of Angola establishes, in the Instruction on Information Reporting on Regulatory Capital Requirement for Operational Risk, the structure and minimum content of reports and other information elements that must be submitted within the scope of this Notice.

Article 7.
(Sanctions)
Non-compliance with the mandatory norms established in this Notice constitutes an offense punishable under the terms of the Law of the Basic Framework of Financial Institutions.

CONTINUATION OF NOTICE NO. 05/2016 Page 4 of 4

Article 8.
(Transitional Provision)
Institutions must comply with the provisions of this Notice under the terms of the transitional provisions of Notice No. 02/2016, on regulatory capital.

Article 9.
(Doubts and Omissions)
Doubts and omissions resulting from the interpretation and application of this Notice are resolved by the Bank of Angola.

Article 10.
(Entry into Force)
This Notice enters into force on the date of its publication.

PUBLISH
Luanda, April 28, 2016

THE GOVERNOR
VALTER FILIPE DUARTE DA SILVA