Notice No. 08/2021 of 5 July

PUBLISHED IN THE OFFICIAL GAZETTE, FIRST SERIES, NO. 124, OF 5 JULY 2021 NOTICE No. 08/2021 of 18 June SUBJECT: FINANCIAL SYSTEM

• Prudential Requirements
• Own Funds Requirements
• Supervision and Risk Management Process
• Market Discipline

Whereas it is necessary to align the prudential rules of the Angolan financial system with the highest standards and guidelines issued by international reference bodies, in order to ensure the convergence of the supervision process with international best practices. Considering it crucial to develop a prudential framework that promotes the credibility, solidity and transparency of the Angolan financial system, ensuring its integration and cooperation with other national and international regulatory and supervisory bodies. In accordance with the combined provisions of points (d) and (f) of paragraph 1 of Article 21, and point (c) of paragraph 1 of Article 51, both of Law No. 16/10 of 15 July - Law of the Banco Nacional de Angola, as well as Section II of Chapter VII and Chapters VIII and IX, all of Law No. 14/21 of 19 May - Law on the General Regime of Financial Institutions.

CONTINUATION OF NOTICE No. 08/2021 Page 2 of 71 I HEREBY DETERMINE:
Chapter I
Subject Matter, Scope and Definitions
Article 1.
(Subject Matter)
This Notice establishes the characteristics of the elements comprising own funds and uniform rules on general prudential requirements that Institutions must comply with regarding the following items:
a) Own funds requirements relating to fully quantifiable, uniform and standardized elements of credit risk, market risk, operational risk, settlement risk and leverage; b) Limits on large exposures; c) Liquidity requirements relating to fully quantifiable, uniform and standardized elements of liquidity risk; d) Reporting and public disclosure of information requirements; and e) Risk governance.

Article 2.
(Scope)
This Notice applies to Banking Financial Institutions, under the supervision of the Banco Nacional de Angola, provided for in Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions, hereinafter abbreviated as Institutions.

Article 3.
(Definitions)
Without prejudice to the definitions established in Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions, for the purposes of this Notice the following shall be understood:

CONTINUATION OF NOTICE No. 08/2021 Page 3 of 71 a) Credit Valuation Adjustment: adjustment to the mid-market valuation of the portfolio of transactions carried out with a counterparty, which reflects the current market value of the counterparty's credit risk to the institution, excluding the current market value of the institution's credit risk to the counterparty. b) Leverage: the relative level of the institution's Level 1 own funds in relation to the total exposure measure, including on-balance sheet and off-balance sheet items. c) Risk Appetite: the aggregate level and types of risk that an institution is willing to assume, defined in advance and within each institution's risk capacity in order to achieve its strategic objectives and business plan. d) Sub-consolidation Base: consolidation perimeter based on the consolidated situation of a parent company, excluding a subgroup of entities or based on the consolidated situation of a parent company. e) Risk-taking Capacity: the level of risk that an institution can assume at any time without compromising its solvency and liquidity, considering a prospective view and adverse circumstances. f) Banking Book: the set of financial instruments of an institution not held in the trading book. g) Trading Book: all positions in financial instruments and commodities held by an institution for trading purposes or to hedge their held positions, which are considered the following:
i. Proprietary positions and positions resulting from the provision of services to clients and market making;
ii. Positions intended for short-term resale; and,
iii. Positions intended to profit from short-term actual or expected differences between bid and ask prices or other price or interest rate variations.
h) Management Responsible Person: person responsible for a function or organizational unit, who reports directly to the management body.

CONTINUATION OF NOTICE No. 08/2021 Page 4 of 71 i) Risk Concentration: concentrations associated with holding multiple correlated risk positions, which can be divided into:
i. Inter-risk concentration: concentrations associated with simultaneous exposure to different risks; and,
ii. Intra-risk concentration: concentrations associated with simultaneous exposure to the same risk from multiple risk positions.
j) Counterparty: natural or legal person, resident or non-resident, on which an institution assumes one or more exposures. k) Central Counterparty: entity that legally interposes itself between counterparties with contracts traded on one or more financial markets, acting as buyer to all sellers and as seller to all buyers. l) Credit default swap: a financial derivative instrument whereby the buyer is protected by the seller against the default risk of a third reference entity, in exchange for an annual premium. m) Credit Derivatives: financial derivative instrument that results in the transfer of credit risk between contracting parties. n) Own Elements: all and any financial instruments whose issuer and holder is the institution itself. o) Parent Company: legal person that exercises a relationship of control or group relationship over another legal person, designated as a subsidiary, when referring to financial institutions under the supervision of the Banco Nacional de Angola. p) Non-Financial Company: legal person, resident or non-resident, whose nature does not fall under the definition of "Financial Institutions" present in Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions. q) Service Provider: supplier of services, including products or facilities, to a financial institution authorized by the Banco Nacional de Angola. r) Total Exposure: set of risk positions, regardless of whether they are assets, liabilities or off-balance sheet items.

CONTINUATION OF NOTICE No. 08/2021 Page 5 of 71 s) Subsidiary: legal person over which another legal person, designated as a parent company, is in a relationship of control, considering that the branch of a subsidiary is also a subsidiary of the parent company from which both depend. t) Key Management Functions: functions decisive for the execution of activities and financial solidity of the Institution. The relevance of the function depends on the nature, size, complexity of the business and geographical footprint of the Institution, highlighting, among others:
i. Finance;
ii. Compliance;
iii. Risk control;
iv. Information technology;
v. Business lines; and,
vi. Audit.
u) Regulatory Own Funds: corresponds to the sum of the institution's Level 1 and Level 2 own funds. v) Guarantor: natural or legal person who provides a personal guarantee or the holder of the asset pledged as real security. w) Personal Guarantee: commitment assumed by a third party, the guarantor, regarding the fulfillment of an obligation. x) Real Security: encumbrance of an asset for the fulfillment of an obligation. y) Large Exposures: situation where the sum of exposures to a counterparty or set of interconnected counterparties is equal to or greater than 10% (ten percent) of Level 1 own funds. z) Group of Interconnected Counterparties: set of persons, natural or legal, that constitute a single entity from the point of view of assumed risk, due to being so linked that, in the event of financial problems occurring, the other parties may face difficulties in fulfilling their obligations. Indications of the existence of a group of interconnected counterparties are always present when common shareholders or directors, cross-guarantees or commercial interdependence cannot be replaced in the short term, with the substance of transactions and economic relations prevailing over

CONTINUATION OF NOTICE No. 08/2021 Page 6 of 71 their formal aspects, not applying, to relationships between companies with majority public capital, headquartered in Angola, without mutual participation relationships, and between them and the Angolan State. aa) Financial Group: set of resident and non-resident companies, having 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 Banco Nacional de Angola over the other companies comprising it. bb) Confidential Information: whenever there is an obligation towards the client or relations with other counterparties that bind the institution to a duty of confidentiality, in accordance with Law No. 14/21 of 19 May, Law on the General Regime of Financial Institutions, or agreement of the parties. cc) Relevant Information: information whose omission or incorrect presentation is likely to alter or influence the assessment or decision of a user who relies on it to make decisions. dd) Reserved Information: information whose public disclosure harms the institution's competitive position. ee) Systemically Important Institutions: institutions qualified as such by the Banco Nacional de Angola, through regulation to be published on a periodic basis. ff) Financial Derivative Instrument: any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity, respecting the following characteristics:
i. Its value changes in response to changes in an interest rate, financial instrument price, commodity price, exchange rate, price or interest rate index, credit rating or credit index, or another variable, provided that, in the case of a non-financial variable, that variable is not specific to one of the parties to the contract;
ii. Requires no net initial investment or requires a net initial investment that is lower than what would be required for other types of contracts that would be expected to have a similar response to changes in market factors; and,
iii. is settled at a future date.

CONTINUATION OF NOTICE No. 08/2021 Page 7 of 71 gg) Minority Interest: the value of the subsidiary's Level 1 common own funds attributable to natural or legal persons, not included in the prudential consolidation scope of the institution. hh) Mortgage Bond: title or financial instrument associated with a mortgage on real estate. ii) Margin Lending Operation: operation in which the institution grants credit through the loan of normally fungible assets, within the scope of purchase, sale, transfer or trading of securities, not including other loans because they are secured by securities. jj) Long Settlement Operation: operation in which a counterparty commits to deliver a security, a commodity or a certain amount of currency in exchange for cash, other financial instruments or commodities, or vice-versa, on a contractually defined settlement or delivery date that is longer than market practice for this type of operation or occurs 5 (five) business days after the date on which the Institution carries out the operation, whichever occurs first. kk) Cross-holding: the holding, by an institution, of own funds instruments or other capital instruments issued by Financial Institutions, when those Financial Institutions also hold own funds instruments issued by the institution. ll) Indirect Participation: any exposure to an intermediate entity that has exposures to capital instruments issued by a financial institution when, in case of permanent write-off from assets of the capital instruments issued by the financial institution, the resulting loss to the institution is not significantly different from the loss the institution would incur if it held a direct participation in those capital instruments issued by the Financial Institution.

CONTINUATION OF NOTICE No. 08/2021 Page 8 of 71 mm) Synthetic Participation: an investment by an institution in a financial instrument, the value of which is directly linked to the value of capital instruments issued by a financial institution. nn) Risk Profile: representation of the Institution's actual risk exposure, which is intrinsically linked to the business strategy and depends on the type of activities carried out by the Institution, as well as the risk inherent to them. oo) Risk Weight: coefficient that reflects the credit risk of the counterparty or the transaction. pp) First Degree Credit Privilege: the preferential right of a creditor over the others in satisfying their credit or in case of execution of a real security. qq) Credit Risk Mitigation: technique used by an institution to mitigate the credit risk associated with one or more risk positions. rr) Liquidity Ratio: ratio between liquid assets and the difference between cash outflows and inflows. ss) Countercyclical Reserve: constituted by Level 1 common own funds with the objective of protecting the financial system during periods when cyclical systemic risk increases, due to excessive credit growth. tt) Capital Conservation Reserve: constituted by Level 1 common own funds with the objective of mitigating the impact of losses underlying an adverse economic context, allowing Institutions to maintain a stable flow of financing to the real economy. uu) Systemically Important Institutions Reserve: constituted by Level 1 common own funds as a risk mitigation measure with impact on the stability of the Angolan financial system, thus considered for Systemically Important Banking Financial Institutions. vv) Combined Reserves Requirement: total value of Level 1 common own funds necessary to meet the capital conservation reserve requirement, plus, as applicable, the:
i. Countercyclical reserve; and,
ii. Systemically Important Institutions reserve.

CONTINUATION OF NOTICE No. 08/2021 Page 9 of 71 ww) Risk: possibility of a future event occurring with a negative impact on the net worth of Institutions. xx) Concentration Risk: arising from exposure, or group of exposures, to interconnected counterparties, with a sufficiently high quantitative expression to produce significant potential losses, which call into question the institution's solvency or its ability to maintain current activity. yy) Credit Risk: arising from the failure to meet contractually established financial commitments by a borrower or counterparty in transactions. zz) Counterparty Credit Risk: arising from the counterparty's failure to fulfill an operation before the final settlement of the respective financial flows. aaa) Settlement or Delivery Risk: arising from payments by Institutions of debt instruments, equity securities or commodities that remain unsettled after the agreed delivery date. bbb) Liquidity Risk: arising from the institution's inability to meet its liabilities when they become due; ccc) Market Risk: arising from adverse movements in the prices of bonds, shares or commodities, which includes exchange rate and interest rate risk. ddd) Exchange Rate Risk: arising from movements in exchange rates resulting from currency positions originating from the existence of financial instruments denominated in different currencies; eee) Interest Rate Risk: arising from movements in interest rates resulting from mismatches in value, maturities or repricing periods of interest rates observed in financial instruments with interest to be received and paid. fff) Incomplete Transactions Risk: arising from price differences, to which Institutions are exposed in the case of having paid for securities, currencies or commodities before their receipt or having delivered securities, currencies or commodities before receiving the respective payment.

CONTINUATION OF NOTICE No. 08/2021 Page 10 of 71 ggg) Specific Risk: arising from a variation in the price of the instrument due to factors associated with the issuer. hhh) Operational Risk: arising from inadequate internal processes, people or systems, possibility of occurrence of fraud, internal and external, as well as external events, which includes information systems and legal risk. iii) Close Relationship: a situation where two or more natural or legal persons are linked in one of the following ways:
i. Participation in the form of holding, directly or through a control relationship, 20% (twenty percent) or more of the voting rights or capital of a company;
ii. Control;
iii. Linkage of both or all of them in a lasting manner through a control relationship;
jjj) Information and Communication System: provide information for the management of organizations, including processes for their collection, processing and disclosure, which facilitate operational and strategic activities, used for the management of key components, namely hardware, software, data, processes and people. kkk) Limits System: composed of risk exposure limits, defined by the Management Body, taking into account the risk strategy, risk appetite, risk profile and risk-taking capacity, which are incorporated into information and communication systems in order to enable their effective compliance, notably, by issuing alerts to relevant staff whenever risk levels approach or exceed limits. lll) Outsourcing: use by an institution of a third entity to carry out activities that would normally be performed by the Institution. mmm) Swap: financial derivative instrument consisting of a contract in which two counterparties agree to exchange financial flows between them, at a future date based on specific rules defined in said contract.

CONTINUATION OF NOTICE No. 08/2021 Page 11 of 71 nnn) Security: fungible and freely negotiable financial instrument that confers on its holders credit, property or equity participation rights, encompassing, notably, shares, bonds, debentures, participation certificates, units in collective investment institutions and associated subscription rights. ooo) Securitization: an operation or mechanism through which the credit risk associated with a position or set of positions is divided into credit risk segments or tranches. ppp) Firm Take-up Process: process by which Institutions commit to buying securities from an entity with the objective of quickly selling them to investors in the financial market. qqq) Incomplete transactions: situation where securities, currencies or commodities were paid for before their receipt or were delivered before receiving the respective payment. rrr) Notional Value: face value declared on which future payments in some financial derivative instruments are based. sss) Business Unit: element or segment of an organization that represents and performs a specific business function.
Chapter II
Level of Application of Requirements
Section I
Individual and Consolidated Supervision
Article 4.
(Individual Supervision)

1. Institutions, with the exception of holding companies, must apply the provisions of this Notice on an individual basis.
2. The Banco Nacional de Angola may exempt any subsidiary of an Institution from the application of the preceding paragraph, whenever the subsidiary and the Institution are subject to the supervision of the Banco Nacional de Angola and the subsidiary is included in the consolidated supervision of the Institution which is the parent company, and the following conditions are cumulatively met to ensure an adequate distribution of own funds between the parent company and the subsidiary:
   a) No significant actual or foreseeable impediments to a rapid transfer of own funds or prompt repayment of liabilities by the parent company; b) Ensure prudent management of the subsidiary, with the authorization of the Banco Nacional de Angola, guaranteeing the commitments assumed by the subsidiary; c) The risk assessment, calculation and control procedures of the parent company cover the subsidiary; d) The Parent company holds more than 50% (fifty percent) of the voting rights corresponding to the holding of shares in the capital of the subsidiary and/or has the power to appoint or dismiss the majority of the members of the Management Bodies of the subsidiary.
3. The Banco Nacional de Angola may exempt from the application of the provisions of paragraph 1 of this article, whenever these Institutions are subject to supervision by the Banco Nacional de Angola, included in consolidated supervision, and the following conditions are cumulatively met, intended to ensure an adequate distribution of own funds between the parent company and the subsidiaries:
   a) No significant legal or factual impediments to a rapid transfer of own funds or prompt repayment of liabilities to the parent company headquartered in Angola; b) The risk assessment, calculation and control procedures relevant for consolidated supervision cover the parent company headquartered in Angola.

CONTINUATION OF NOTICE No. 08/2021 Page 12 of 71
Article 5.
(Consolidated Supervision)

1. Without prejudice to the provisions of the previous article, the parent company of the financial group is subject to consolidated supervision, for prudential purposes, under the terms of this Notice.
2. The perimeter of consolidated supervision, for prudential purposes, encompasses companies belonging to the same financial group.
3. The Banco Nacional de Angola may extend the supervision perimeter whenever one of the following situations occurs:
   a) A company belonging to the financial group exercises significant influence over another company despite not holding a participation in it; b) Two or more Institutions have similar shareholder structures or management and supervisory bodies composed mainly of the same persons; and, c) The inclusion of a company is adequate to the objectives of supervision.
4. An Ins