Notice No. 11-2011 of October 20, 2011

NOTICE NO. 11/2011 of October 20

Given the need to make adjustments to the regulatory provisions on interbank money market operations for liquidity management, as well as on Rediscounting;

Under the combined provisions of Article 23 of Law No. 16/10, of July 15 – Law of the Bank of Angola, and Article 74 of Law No. 13/05, of September 30 – Law of Financial Institutions;

In the exercise of the competence conferred upon me by Article 51 of the Law of the Bank of Angola:

I DETERMINE:

Article 1
(Approval of Regulations)
The operations are instituted and the following respective regulations are approved, which constitute annexes and form an integral part of this Notice:

1. Regulation on Permanent Lending and Absorption Facilities for Liquidity;
2. Regulation on Open Market Operations (OMO)
3. Regulation on the Rediscounting of the Bank of Angola.

Article 2
(Complementary Rules)
The Bank of Angola shall establish the complementary norms and procedures necessary for the operationalization of the operations defined in their respective regulations.

Article 3
(Clarifications)
Doubts and omissions arising from the interpretation of this Notice shall be clarified by the Bank of Angola - Department of Asset Markets.

Article 4
(Entry into Force)
This Notice enters into force on November 1, 2011.

ARTICLE 5.
Repeal
All regulatory provisions that contradict the provisions of this Notice and its regulations are hereby repealed, namely the following:

1. Instruction No. 06/2003, of February 07;
2. Instruction No. 02/2005, of November 09
3. Instruction No. 03/2007, of August 06
4. Notice No. 02/2005, of November 09.
5. Notice No. 04/2010, of November 08.

PUBLISHED
Luanda, October 20, 2011
THE GOVERNOR
JOSÉ DE LIMA MASSANO

ANNEX TO NOTICE NO. 11/2011, OF OCTOBER 20, 2011
REGULATION NO. 1: ON PERMANENT LENDING AND ABSORPTION FACILITIES FOR LIQUIDITY

I. OBJECT
This regulation aims to define the rules and establish the operational mode of the Permanent Lending and Absorption Facilities for Liquidity.

1. The Permanent Lending and Absorption Facilities for Liquidity aim to lend and absorb very short-term liquidity to banking financial institutions, signal the orientation of monetary policy, and regulate market interest rates.
2. The interest rates and the spread for the calculation of the return of the operations of the Permanent Lending and Absorption Facilities for Overnight Liquidity are defined and published by the Bank of Angola.

II. TYPES OF FACILITIES

1. The Liquidity Facilities referred to in this Regulation are the following:
   a) Permanent Overnight Liquidity Lending Facilities (FCO) b) Permanent Intraday Liquidity Lending Facilities (FCI) c) Permanent Overnight Liquidity Absorption Facilities (FAO)
2. The Permanent Lending and Absorption Facilities for Liquidity are made available by the Bank of Angola, and executed at the initiative of Banking Financial Institutions.

III. PARTICIPATING INSTITUTIONS

1. Access to the Permanent Lending and Absorption Facilities for Liquidity is granted to participating banks, simultaneously members of the Asset Market Management System (SIGMA) and the Real-Time Payments System (SPTR), of the Bank of Angola.

2. A banking financial institution may at any time be suspended or excluded from participating in permanent facility operations, based on prudential grounds, or in the event of non-compliance with its obligations, in the interbank money and foreign exchange markets and in the Payments System of Angola.

IV. DEFINITIONS

1. Permanent Lending and Overnight Liquidity Facilities (FCL), are reversible operations, backed by national currency public bonds of any maturity, intended to lend liquidity to Banking Financial Institutions (Banks), for a period of one day (overnight).
2. Permanent Intraday Liquidity Lending Facilities (FCI), are reversible operations, backed by national currency public bonds of any maturity, intended to lend liquidity to Banking Financial Institutions (Banks), during the operational day (intraday).
3. Permanent Overnight Liquidity Absorption Facilities (FAO), are national currency deposits constituted by Banking Financial Institutions (Banks) with the Bank of Angola, without guarantee, intended to absorb liquidity for a period of one day (overnight), with no limits on the amounts deposited.

V. FREQUENCY OF OPERATIONS

1. The operations of the Permanent Lending and Absorption Facilities for Liquidity are of daily frequency, carried out during the hours defined for this purpose within the SIGMA and SPTR systems.
2. The permanent facilities for lending and absorbing liquidity can only be carried out on banking business days.

VI. OPERATIONAL RULES

1. The operational limit for carrying out operations of the Permanent Lending Facilities for Liquidity is the volume of national currency public bonds issued by the National Treasury and the Bank of Angola, from the own and available portfolio of banks.

2. The operational limit for carrying out operations of the Permanent Absorption Facilities for Liquidity is the balance in the bank reserve accounts, in national currency, with the Bank of Angola, minus the value of the mandatory reserve.

VII. ELIGIBLE ASSETS

1. Eligible assets for carrying out operations of the Permanent Lending Facilities for Liquidity are public bonds, issued by the National Treasury and the Central Bank, in national currency, of any maturity, on which a discount (haircut) will apply. Bonds with longer maturities are subject to larger discounts.
2. The assets used as collateral for the Permanent Lending Facilities for Liquidity must have a maturity date subsequent to the maturity date of the operation by at least two business days.

VIII. INTEREST RATES OF OPERATIONS

1. The interest rates of the Permanent Lending and Absorption Facilities for Liquidity are announced in advance and may, at any time, be altered by the Bank of Angola.
2. The Permanent Overnight Liquidity Lending Facility is remunerated at the BNA rate plus a "spread".
3. The Permanent Intraday Liquidity Lending Facility (FCI) is not subject to remuneration.
4. The Permanent Liquidity Absorption Facility is remunerated at the BNA rate minus a "spread".
5. The BNA rate is the basic interest rate periodically defined by the BNA Monetary Policy Committee.

IX. FINANCIAL SETTLEMENT VALUE OF OPERATIONS
The settlement amount of these operations is calculated as follows:

1. In Permanent Overnight Liquidity Lending Facility operations,
   a) The financial value of the Overnight lending "VFCO" is the value determined by the quantity of bonds multiplied by the accepted unit price of the bond from the list of eligible assets prices of SIGMA and according to the following expression:
   VFCO = PUida × Qtd.Títulos
   Where:

• VFCO = financial value of Overnight lending;

• PUida = Market price of the bond, minus the haircut and available in the list of eligible bond prices of SIGMA. Same as accepted price.

• Qty of bonds = number of bonds necessary to guarantee the operation.
  b) The financial settlement value of the repayment "VFLR" corresponds to the lent value "VFCO" by the BNA to the bank, plus the interest of the operation, according to the following expression:
  VFLR = VFCO × (1 + (ic + spreadc) × n / 365)
  Where:

• VFLR = financial value of the settlement of the repayment;

• VFCO = financial value of Overnight lending;

• ic = BNA Rate, basic annual interest rate;

• spreadc = Value of the increase, defined by the BNA;

• PUvolta = PUida Price × Market adjustment factor of the bond, minus the haircut and available in the list of eligible bond prices of SIGMA. Same as accepted price.

• n = maturity of the operation, overnight, noting that in cases where the repayment date of the operation is a non-business day, it moves to the next immediate business day, and for the purpose of calculating interest, the number of calendar days of the operation is considered.

• Qty of bonds = number of bonds necessary to guarantee the operation

2. In Permanent Intraday Liquidity Lending Facility operations,
   a) The financial value of the Intraday lending "VFCI" is the value determined by the quantity of bonds multiplied by the accepted unit price of the bond from the list of eligible assets prices of SIGMA and according to the following expression:
   VFCI = PUida × Qtd.Títulos
   Where:

• VFCI = financial value of Intraday lending;
• PUida = Market price of the bond, minus the haircut and available in the list of eligible bond prices of SIGMA. Same as accepted price.
• Qty of bonds = number of bonds necessary to guarantee the operation
  b) The financial value for settlement of the repayment is equal to the financial value lent by the BNA.
  VFLR = VFCI
  Where:
• VFLR = financial value of the settlement of the repayment;
• VCI = value initially lent by the BNA

3. In Permanent Liquidity Absorption Facility operations,
   a) The financial value of Overnight absorption "VFAO" is the value deposited by the Banking Financial Institution in the Bank of Angola, according to the following expression:
   VFAO = Value deposited in BNA b) The financial settlement value of the repayment "VFLR" corresponds to the value deposited in the bank's reserve account at the BNA "VFAO", plus the interest of the operation, according to the following expression:

VFLR = VFAO × (1 + (ic - spreadc) × n / 365)
Where:

• VFLR = financial value of the settlement of the repayment;
• VFAO = value deposited by the banking institution in the BNA;
• ic = BNA Rate, basic annual interest rate
• spreadc = Value of the deduction, defined by the BNA;
• n = maturity of the operation, overnight, noting that in cases where the repayment date of the operation is a non-business day, it moves to the next immediate business day, and for the purpose of calculating interest, the number of calendar days of the operation is considered.

X. PROCEDURES FOR FINANCIAL SETTLEMENT AND ELIGIBLE ASSETS.

1. Financial and bond settlements are subject to the rules and operational procedures provided for in the regulations of the respective settlement systems.
2. The financial settlement of operations related to the Permanent Lending and Absorption Facilities for Liquidity are executed through the SIGMA systems, according to the provisions in sections XII to XVI of the Manual of Norms and Procedures (MNP-SIGMA) and the Manual of Norms and Procedures of the SPTR (MNP-SPTR), according to their respective manuals of norms and procedures.

XI. SANCTIONS

1. Without prejudice to the provisions in other regulatory norms in the interbank money market and the payments system of Angola, non-payment by the banking financial institution of the repayment of the amounts lent through operations of the Permanent Lending Facilities for Liquidity by the indicated date and time constitutes non-compliance.
2. Banking financial institutions in a situation of non-compliance are subject to the measures provided for in specific norms.

ANNEX TO NOTICE NO. 11/2011, OF OCTOBER 20, 2011
REGULATION NO. 2: ON OPEN MARKET OPERATIONS

I. OBJECT

1. This regulation aims to define the rules and the operational mode of Open Market Operations, abbreviated as OMO.
2. Open market operations aim to manage liquidity and regulate short-term interest rates.

II. TYPE OF OPERATIONS

1. The open market operations dealt with under this regulation are the following:
   a) Refinancing Operations (Lending of Liquidity) i) Short-Term Refinancing Operations ii) Extended-Term Refinancing Operations b) Occasional Regularization Operations i) Occasional Liquidity Absorption Operations

• Reversible Operations
• Fixed-Term Deposit Constitution
  ii) Occasional Liquidity Lending Operations
• Reversible Operations
• Foreign Exchange SWAPs
  c) Issuance of Central Bank Bonds (Liquidity Absorption) d) Structural Operations - Definitive Operations i) Of Liquidity Absorption ii) Of Liquidity Lending

2. Occasional Regularization Operations are generally executed through auctions, but bilateral procedures may also be used.
3. Open Market Operations (OMO) are carried out in national currency, at the initiative of the Bank of Angola.

III. PARTICIPATING INSTITUTIONS

1. Access to these operations is granted to all financial institutions authorized by the Bank of Angola that are simultaneously participants in the Asset Market Management System (SIGMA) and the Real-Time Payments System (SPTR).
2. A banking financial institution may at any time be suspended or excluded from participating in permanent facility operations, based on prudential grounds, or in the event of non-compliance with its obligations, in the interbank money and foreign exchange markets and in the Payments System of Angola.

IV. DEFINITIONS

1. Short-Term Refinancing Operations are reversible liquidity lending operations, in national currency, with a weekly frequency and a term of 7 (seven) calendar days. They are executed through fixed-price or variable-price auctions, and may also be by spread auction. Eligible assets are national currency Public Bonds (BT, OT, and TBC) of any maturity. Bonds with longer maturities are subject to larger discounts (haircut) than those with shorter maturities.

2. Extended-Term Refinancing Operations are reversible liquidity lending operations, in national currency, with a monthly frequency and a term of 28 (twenty-eight) calendar days. They are executed through fixed-price or variable-price auctions, and may also be by spread auction. Eligible assets are national currency Public Bonds (BT, OT, and TBC) of any maturity. Bonds with longer maturities are subject to larger discounts (haircut) than those with shorter maturities.

3. Occasional Liquidity Absorption Operations are operations in national currency, of non-normalized frequency, and are carried out to neutralize unexpected liquidity fluctuations in the banking system. They are executed in the form of reversible operations of 1 to 28 days, or of fixed-term deposits of 1 to 28 days. They are carried out through fixed-price or variable-price auctions, and may also be by spread auction.

4. Occasional Liquidity Lending Operations are operations in national currency, of non-normalized frequency, and are carried out to address imbalances in the liquidity situation. They are executed in the form of reversible operations of 1 to 28 days, through fixed-price or variable-price auctions, and may also be by spread auction, or still in the form of foreign exchange swaps. Eligible assets are national currency Public Bonds (BT, OT, and TBC) of any maturity, or foreign currency, in the case of Foreign Exchange SWAPs. Bonds with longer maturities are subject to larger discounts (haircut) than those with shorter maturities.

5. Central Bank Bond Issuances (TBC) are operations in national currency, of liquidity absorption, carried out in accordance with specific regulation.

6. Structural Operations are definitive operations, in national currency, which imply the definitive transfer of ownership of the public bond, from the seller to the buyer, without any agreement for reverse transfer. They are executed only for structural purposes, through variable-price or fixed-price auctions, and may also be by spread auction. They are operations carried out with non-normalized frequency. Eligible assets for Definitive Liquidity Absorption and Lending Operations are national currency Public Bonds, of any maturity and from the own portfolio, observing the legal financing limits of the BNA.

V. FREQUENCY OF OPERATIONS

1. Short-term refinancing operations are carried out once a week and have a maturity of 7 (seven) days.

2. Extended-term refinancing operations are carried out once a month and have a maturity of 28 (twenty-eight) days.

3. Occasional Liquidity Absorption Operations are of non-normalized frequency and have a maturity of 1 to 28 days.

4. Occasional Liquidity Lending Operations are of non-normalized frequency and have a maturity of 1 to 28 days.

5. Central Bank Bond Issuances (TBC) are carried out in accordance with specific regulation.

6. Structural Operations are of non-normalized frequency and maturity, observing the legal financing limits of the BNA.

VI. OPERATIONAL RULES AND PROCEDURES FOR FINANCIAL SETTLEMENT.

1. The operational rules and financial settlement of open market operations are executed through the SIGMA systems, according to the provisions in sections XII to XVI of the SIGMA Manual of Norms and Procedures (MNP-SIGMA) and the SPTR Manual of Norms and Procedures.
2. The operational rules and procedures for the financial settlement of operations related to the Foreign Exchange Swap are defined in a specific norm of the Bank of Angola.

VII. ELIGIBLE ASSETS
Eligible assets for carrying out open market operations are:

1. National currency public bonds, of any maturity, issued by the National Treasury and the Bank of Angola, available in the own portfolio, subject to discount (haircut).
2. Foreign currency, in the case of Foreign Exchange SWAPs.

VIII. INTEREST RATES OF OPERATIONS
i) The interest rates of open market operations are defined in the respective auctions, according to the type of operation.

ii) The interest rates determined are published by the Bank of Angola, through the BNA website and other public communication means.

IX. FINANCIAL SETTLEMENT VALUE OF OPERATIONS
The settlement amount for the repayment of these operations is calculated as follows:

1. REFINANCING OPERATIONS
   In refinancing operations, the financial value of the refinancing "VRA" corresponds to the value of the bank's refinancing proposals and accepted by the BNA, calculated according to the following expression:
   a. VALUE OF CONCESSION where:

• VFR = Financial Value of the Refinancing accepted by the BNA;
• PUida = Unit Market Price of the bond minus a haircut, according to the SIGMA Eligible Bonds List.
  b. VALUE OF REPAYMENT
  The financial settlement value of the repayment "VFLR" corresponds to the Value lent "VFR" by the BNA to the bank, plus the interest of the operation, calculated according to the following expression:
  VFLR = VFR × (1 + ic × n / 365)
  VFR = PUida × QTd.Títulos

where:

• VFLR = Financial Value of the Repayment;
• VFR = Value of the Refinancing accepted by the BNA
• ic = Interest rate of the operation;
• n = number of days of the operation.

2. ABSORPTION OPERATIONS
   a. VALUE OF ABSORPTION
   In Absorption Operations, the financial value corresponds to the product of the quantity of bonds multiplied by the unit market price of the bond, calculated according to the following expression:
   VFA = PUida × QTd.Títulos where:

• Value Absorbed by BNA
• PUida = Market PU (extracted from SIGMA-Eligible Bonds List)
  a. VALUE OF REPAYMENT
  VFLR = VFA × (1 + ic × n / 365) where:
• VFLR = Financial Value of the Repayment;
• PUvolta = Updated Market Price
• ic = Interest rate of the operation;
• n = number of days of the operation

X. LEGAL NATURE

1. Reversible operations are carried out in the form of repurchase/resale agreements, that is, the ownership of the asset is transferred to the creditor and the parties agree to reverse the operation, on a future date.
2. The difference between the purchase or sale price and the resale or repurchase price of the assets corresponds to the interest due on the funds granted or obtained during the term of the operation. The repurchase price includes the respective interest to be paid and the resale price includes the interest to be received.
3. A definitive operation implies the transfer of full ownership from the seller to the buyer, of the bond, without any agreement for reverse transfer.

XI. SANCTIONS

1. Without prejudice to the provisions in other regulatory norms in the interbank money market and the payments system of Angola, non-payment by the banking financial institution of the repayment of the amounts lent through operations of the Permanent Lending Facilities for Liquidity by the indicated date and time constitutes non-compliance.
2. Institutions in a situation of non-compliance are subject to the penalties provided for in specific norms.

ANNEX III
REGULATION NO. 3: ON REDISCOUNT OPERATIONS

I. OBJECT

1. This regulation aims to define the rules and establish the operational mode of the Rediscounting operations of the Bank of Angola.
2. Rediscounting aims to lend liquidity for a longer term by the Bank of Angola, in the capacity of lender of last resort, to banking financial institutions (banks) that are in difficulty.

II. TYPE OF OPERATIONS

1. First-level rediscount operations
2. Second-level rediscount operations

III. PARTICIPATING INSTITUTIONS
Access to the Rediscounting of the Bank of Angola (BNA) is exclusively granted to Banking Financial Institutions (banks) authorized by the BNA.

IV. DEFINITIONS

1. Rediscount: are liquidity lending operations for a longer term carried out by the Bank of Angola, in the capacity of lender of last resort, to banking financial institutions (banks) that are in difficulty, in accordance with Articles 23 and 24 of Law No. 16/10, of July 15 – Law of the Bank of Angola.

First-Level Rediscount: are rediscount operations carried out for a term of 30 calendar days, which may be renewed cumulatively up to 60 calendar days, and are intended to meet liquidity needs of Banking Financial Institutions to correct short-term imbalances in their cash flow, but which do not yet constitute a structural imbalance. The operation is carried out at the request of the Banking Financial Institution, accompanied by the demonstration of projected cash needs for the period of the operation and will be subject to appreciation by the Department of Supervision of Financial Institutions.

1. Second-Level Rediscount: are rediscount operations carried out for a term of 45 calendar days, which may be renewed cumulatively up to 90 calendar days, and are intended to enable the asset adjustment of Banking Financial Institutions with structural imbalance. The operation is carried out at the request of the Institution