Notice No. 13/GBM/2001 of 28 December - Mandatory Reserves

BANCO DE MOÇAMBIQUE NOTICE No. 13/GBM/2001 SUBJECT: Mandatory Reserves

Given the need to review the regime for the constitution of mandatory reserves, the Bank of Mozambique, under the provisions of paragraphs 1 and 2 of Article 27 of Law 1/92 of January 3, determines:

CHAPTER I SCOPE, CALCULATION, AND CONSTITUTION

Article 1 Scope of Application The provisions of this Notice apply to all credit constitutions covered by Law 15/99 of November 1, holding liabilities referred to in Article 2 and monetary assets, with the Bank of Mozambique.

Article 2 Liabilities Subject to Incidence The liabilities that constitute the Incidence Base (IB) for Mandatory Reserve are as follows: a) Demand Deposits, in National Currency b) Notice Deposits, in National Currency c) Time Deposits, in National Currency d) Demand Deposits, in Foreign Currency, of Residents; e) Notice Deposits, in Foreign Currency, of Residents; f) Time Deposits, in Foreign Currency, of Residents; g) State Deposits in Commercial Banks; h) Deposits of other credit institutions that do not result from the application of the interbank money market.

Article 3 Daily and Average Incidence Rates

1. The incidence base referred to in the following article is subject to two coefficients, namely, the daily rate and the average rate.
2. The minimum incidence rate for mandatory reserve is fixed at 10.00% and must be observed daily.
3. The average incidence rate for mandatory reserve is fixed at 11.51% and must be observed at the end of each constitution period.

Article 4 Calculation of the Incidence Base

1. The incidence base will be calculated from the balances of the liabilities referred to in Article 2, verified on the last day of each of the calculation periods described in paragraph 2 of this Article.
2. The calculation periods for the incidence base are, in each month, as follows: 1st period - from day 1 to day 15 2nd period - from day 16 to the last day of each month.
3. At the end of each month, the Bank of Mozambique will adjust the incidence base of the 2nd calculation period, based on the accounting information of credit institutions regularly made available in the form of monthly balance sheets.

Article 5 Constitution Periods The constitution periods for mandatory reserve under this regime begin and end on the six days subsequent to the start and end dates, respectively, referred to in paragraph 2 of the preceding Article, that is: 1st period – from day 7 to day 21 2nd period – from day 22 to day 6 of the following month

Article 6 Form of Constitution Mandatory reserve may be constituted in the following forms: a) Cash 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.

Article 7 Methodology of Constitution for Observance of the Average Rate

1. Mandatory reserve is constituted on an average basis.

2. For the purposes of complying with mandatory reserves on an average basis, the following formula will be applied:

   DO`s Average Balance = --------- N

Where: DO`s – is the sum of the daily accounting balances of demand deposits in national currency, of credit institutions with the Bank of Mozambique, calculated for each of the constitution periods of the mandatory reserve, based on the statements issued by the Operations and Treasury Department of the Bank of Mozambique. N – is the number of days comprising the constitution period of the mandatory reserve. 3. The measure of the daily values obtained according to the deposit in the previous paragraph of this Article cannot be lower than the amount of mandatory reserve resulting from the multiplication of the rate fixed in paragraph 3 of Article 3 by the incidence base calculated under the terms described in Article 4 of this Notice. 4. Mandatory reserve will be constituted in national currency.

Article 8 Methodology of Constitution for Observance of the Minimum Daily Rate The daily balances of demand deposits in National Currency of credit institutions with the Bank of Mozambique cannot be lower, on each day, than the amount of mandatory reserve resulting from the multiplication of the rate fixed in paragraph 2 of Article 3 by the incidence base calculated under the terms described by Article 4 of this Notice.

CHAPTER II SANCTIONS

Article 9 Calculation of Penalties

1. Penalties under this Notice apply to the mandatory reserve deficit calculated at the end of each day and/or each constitution period, and will take the form of a monetary penalty.
2. Penalties are calculated based on the following formulas: a) For non-compliance with the daily incidence rate: Penalty = (SD – (r´x BI)) x T´ (per day) b) For non-compliance with the average incidence rate: Penalty = ( SM – r x BI) x T x N 36500

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. SM – is the average of the accounting balances of demand deposit accounts in national currency of credit institutions with the Bank of Mozambique, calculated for the respective constitution period, as indicated in Article 5, based on statements issued by the Operations and Treasury Department of the Bank of Mozambique. r - is the minimum daily incidence rate of the mandatory reserve. r - is the average incidence rate in the mandatory reserve. BI - is the incidence base of the mandatory reserve. T - is the penalty rate for the deficit of mandatory reserves. T - is the penalty rate for the deficit of mandatory reserves, expressed in percentage points.

N - is the number of days of the constitution period to which the mandatory reserves relate. 3. The penalty T`, provided for in the preceding paragraph 2, is fixed at 0.10%. 4. The penalty T provided for in the same paragraph 2 of this Article will correspond to the highest interest rate among the following: a) Interest rate of the Overnight Facility in force on the last day of the constitution period, plus two percentage points; b) Highest interest rate of the active operations of the infringing institution, plus two percentage points. 5. The penalty attributable to infringing credit institutions is subject to adjustment if the value of the incidence base determined under paragraph 3 of Article 4 implies a deficit of mandatory reserves or an increase in the same. 6. The Bank of Mozambique will debit the demand deposit account of the infringing credit institutions with the value of the penalty.

Article 10 Aggravation of Penalty The penalty rate provided for in paragraph 4 of the preceding Article will be aggravated by 10 (ten) percentage points whenever an institution incurs a new deficit of mandatory reserves within the same economic year.

Article 11 "Blocked Account" Regime

1. If in 6 consecutive constitution periods of mandatory reserves, an institution incurs deficits at the end of 4 of them (successively or not), the Bank of Mozambique will automatically "block" the balance of the free movement account, allowing only credit movements, without prejudice to any additional measures provided for in the Clearing Service Regulation approved by Notice No. 4/GVBBM/2001 of June 1.
2. The institution whose account is blocked is obliged to immediately instruct the opening of an account for clearing and other types of operations.
3. The institution is also obliged to provision the "blocked account" for compliance 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 for the compliance of mandatory reserves.
5. While deficits persist in the blocked account, the penalty will be applied on (i) daily deficits based on the formula inscribed in paragraph a) of paragraph 2 of Article 9 and on (ii) deficits at the end of the constitution period based on the provisions of the previous Article.
6. Within a period never less than 6 (six) constitution periods of mandatory reserve, the Bank of Mozambique may instruct the lifting of the "blocking" of the account.

CHAPTER III FINAL PROVISIONS

Article 12 Exemption Period

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

Article 13 Submission of Information

1. Credit institutions covered by this Notice must submit to the Bank of Mozambique, with reference to the last day of each of the incidence base calculation periods indicated in paragraph 2 of Article 4, the information referred to in the attached standard table, which forms an integral part of this Notice.
2. The table referred to in the previous paragraph must be received at the Bank of Mozambique by the sixth business day following the end of the period to which it refers. The delivery of tables late is an indispensable condition for the acceptance of information relating to subsequent periods.
3. 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 table referred to in paragraph 1 of this Article.

Article 14 Clarification of Doubts Doubts arising in the interpretation of this Notice must be submitted to the Markets Department of the Bank of Mozambique.

Article 15 Entry into Force and Repeal This Notice takes effect from the constitution period of mandatory reserve from 22/01/2002 to 06/02/2002, repealing Notice No. 05/GBM/2001 of June 5.

Maputo, on December 28, 2001 The Governor (Adriano Afonso Maleiane)

ANNEX TABLE FOR CALCULATION OF MANDATORY DEPOSITS

INSTITUTION NAME: Constitution Period of //____ to // Unit: Thousand Contos Unit: Thousand Contos

DESIGNATION MANDATORY DEPOSIT 10.00% MANDATORY DEPOSIT 11.51% 1 2 3 4

A) LIABILITIES IN NC Demand Deposit (4200+4300) Notice Deposit (4201+4301) Time Deposit (4202+4302)

B) LIABILITIES IN FC Demand Deposit of Residents (4210) Notice Deposit of Residents (4211) Time Deposit of Residents (4212)

C) STATE DEPOSITS (42000+42010+42020+42100+42110+42120)

D) DEPOSITS OF OTHER CREDIT INSTITUTIONS (That do not result from applications in the Interbank Money Market) (4012)

TOTAL