Notice No. 2/GBM/2022 of May 31: Recovery Plan Elements and Procedures

SUMMARY
NOTICE
The matter to be published in the "Boletim da República" must be submitted in a duly authenticated copy, one for each subject, containing, in addition to the necessary indications for this purpose, the following endorsement, signed and authenticated: For publication in the "Boletim da República". NATIONAL PRESS OF MOZAMBIQUE, E. P. Ministry of Economy and Finance:
Ministerial Diploma No. 60/2022:
Approves procedures on planning and budgeting, to ensure that public investment projects formulated by state bodies and institutions, public companies, and decentralized entities guarantee environmental sustainability and resilience to environmental shocks. Ministry of Public Works, Housing and Water Resources:
Order:
Delegates to the Vice-Minister of Public Works, Housing and Water Resources, the competence to evaluate personnel in management, leadership, and trust positions, whose evaluation is the competence of the Minister. Bank of Mozambique:
Notice No. 2/GBM/2022:
Establishes the informational elements that recovery plans must contain, as well as the procedures related to their submission, maintenance, and review.
Tuesday, May 31, 2021 I SERIES — Number 103
MINISTRY OF ECONOMY AND FINANCE
Ministerial Diploma No. 60/2022 of May 31
Given the need to approve procedures on planning and budgeting, in order to ensure that public investment projects formulated by state bodies and institutions, public companies, and decentralized entities guarantee resilience to climate change and environmental shocks, in accordance with paragraph 1 of Article 35 of the SISTAFE Regulation approved by Decree No. 26/2021, of May 3, under paragraph 2 of Article 2 of the same Decree, the Minister of Economy and Finance determines:

ARTICLE 1
(Object)
This Ministerial Diploma establishes the procedures to be observed in the planning and budgeting process, in order to ensure that Public Investment Projects formulated by state bodies and institutions, public companies, and decentralized entities guarantee resilience to climate change and environmental shocks.

ARTICLE 2
(Classification of Projects)
Public investment projects elaborated by state bodies and institutions, public companies, and decentralized entities are classified into:
a) infrastructure projects; and b) projects that do not involve infrastructure.

ARTICLE 3
(Formulation of Projects)

1. The projects referred to in the previous article must observe all formulation phases, before their approval in accordance with Article 35 of the SISTAFE Regulation approved by Decree No. 26/2021, of May 3.
2. Infrastructure projects include the following phases:
   a) profile phase; b) pre-feasibility phase; c) feasibility phase; d) proposal phase; and e) budgeting phase.
3. Projects that do not involve infrastructure include:
   a) profile phase; and b) budgeting phase.
4. The profile phase consists of formulating the project objective, results, and preliminary cost estimates, and must evaluate the alignment of the project with previously approved national and sectoral development strategies.
5. In the pre-feasibility phase, a cost-benefit analysis of various options is conducted to achieve the project objective, and the most viable option for implementation is determined.
6. In the feasibility phase, detailed cost estimates for the option identified in the pre-feasibility phase are presented, and the cost-benefit analysis is updated.
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7. In the proposal phase, which is the final phase of project development, the project implementation plan is prepared along with all measures that ensure its implementation.
8. In the budgeting phase, the budgetary allocation for the project is confirmed, and it moves to the execution phase.

ARTICLE 4
(Approval of Project Proposals)

1. The approval of the proposal includes projects in the portfolio ready for implementation, subject to the availability of resources.
2. After their approval, the projects must be integrated into the national public investment portfolio.

ARTICLE 5
(Mitigation of Climate Change)

1. Public investment projects must indicate benefits for the mitigation of climate change.
2. The benefits referred to in the previous paragraph are described in detail, highlighting their nature and quantification.
3. In the case of infrastructure projects, the estimate of benefits is updated according to their respective development phases.

ARTICLE 6
(Degree of Climate Change and Environmental Shock Risk)

1. Public investment projects must present an assessment of the degree of risk of climate change and environmental shocks.
2. In projects that do not involve infrastructure, if the risk is significant, measures for its mitigation and their respective cost, as well as the residual risk, must be indicated.
3. In infrastructure projects, the analysis of climate change risk and risk mitigation options are updated throughout the development phases described in paragraph 2 of Article 3 of this Ministerial Diploma.
4. In the projects referred to in the previous paragraph, regarding the profile phase, one must:
   a) indicate whether the probability of the project being affected by natural disasters is high; b) provide a qualitative description of the shocks and possible ways to mitigate them; and c) include a climate risk analysis in the respective pre-feasibility study, which considers:
   i. various climate change scenarios and the adverse impacts resulting for the project;
   ii. the cost of infrastructure rehabilitation; and
   iii. economic losses associated with service interruptions.
5. The feasibility study referred to in letter c) of the previous number must include a quantitative assessment of climate risks, using the most likely climate change scenario.
6. The quantitative assessment referred to in paragraph 5 of this article must consider three options for infrastructure resistance to climate change, namely:
   a) minimum response; b) moderate response; and c) high response.
7. For each option referred to in the previous number, a cost-benefit analysis of the infrastructure is carried out, and the most profitable option must be selected.
8. In the proposal phase, the cost of the selected option for the project's resistance to climate change is updated, benefiting from engineering studies.
9. In the budgeting phase, the associated cost of mitigation measures is documented for all projects, so that the Government can monitor expenses related to the increase in resilience to climate change.

ARTICLE 7
(Entry into Force)
This Ministerial Diploma enters into force on the date of its publication.
Maputo, May 30, 2022. – The Minister of Economy and Finance, Ernesto Max Elias Tonela.

MINISTRY OF PUBLIC WORKS,
HOUSING AND WATER RESOURCES
Order
Decree No. 55/2009, of October 12, which creates the Public Administration Performance Management System, abbreviated as SIGEDAP, and approves its respective Regulation, imposes the annual evaluation of the individual performance of state employees and agents, starting on January 1 of each year and ending on December 31, by the hierarchical superior. Given the need to delegate the competence provided for in the aforementioned norm, the Minister of Public Works, Housing and Water Resources, in accordance with Article 42 of Law No. 14/2011, of August 10, determines:

1. The competence to evaluate personnel in management, leadership, and trust positions, whose evaluation is the competence of the Minister, is delegated to the Vice-Minister of Public Works, Housing and Water Resources.
2. The competence hereby delegated is not subject to sub-delegation.
3. This Order is valid for evaluations corresponding to the year 2021.
4. This Order enters into force on the date of its publication.
   Maputo, May 5, 2022. - The Minister, Carlos Alberto Fortes Mesquita.

BANK OF MOZAMBIQUE
Notice No. 2/GBM/2022 of May 31
Given the need to identify, in a more comprehensive manner, measures that can be implemented to promptly correct situations that compromise or may compromise the financial equilibrium of credit institutions, namely some of the situations provided for in paragraphs 1 and 3 of Article 119 of Law No. 20/2020, of December 31, Law MAY 31, 2022 797 of Credit Institutions and Financial Companies, the Bank of Mozambique, using the competence conferred upon it by paragraph 3 of Article 111 of the same Law, determines:

CHAPTER I
General Provisions

ARTICLE 1
Object
This Notice establishes the informational elements that recovery plans must contain, as well as the procedures related to their submission, maintenance, and review.

ARTICLE 2
Objective of Recovery Plans
Recovery plans aim to institute measures that can be implemented to restore adequate levels of capital and liquidity, and preserve the viability of institutions, in response to situations of severe financial stress.

ARTICLE 3
Scope

1. This Notice is applicable to banks with headquarters in Mozambique, hereinafter generally referred to as "institutions".
2. Entities to whom the Bank of Mozambique requires the presentation of recovery plans, in accordance with paragraph 2 of Article 111 of Law No. 20/20, of December 31, are also subject to the provisions of this Notice.

CHAPTER II
Content of the Recovery Plan

ARTICLE 4
Content of Recovery Plans

1. Recovery plans are elaborated and approved by the administration body of the institutions, taking into account various adverse macroeconomic scenarios and severe financial stress, appropriate to the specific conditions of the institution, namely systemic events and specific stress situations.
2. Recovery plans must contain the following modules:
   a) executive summary; b) strategic analysis; c) governance and supervision structure; d) recovery strategies and indicators; e) scenario analysis; f) communication and disclosure plan; and g) preparatory measures.
3. Institutions must ensure that the level of detail and depth of analysis in the recovery plan is proportional to the following elements:
   a) size, nature, and business structure of the institution; b) complexity and substitutability of the institution's activities, including the scale of cross-border operations; and c) degree of intra-group, external, and systemic dependencies, interconnectivity with the economy, and essential components of the financial system.
4. The recovery planning process must be integrated into the institution's overall risk appetite, strategic planning, and risk management structures, and be an integral part of risk management.
5. In preparing the recovery plan, institutions must take into account recovery plans developed by their foreign branches and/or subsidiaries, as well as group-wide recovery plans developed by their controlling entity.
6. The content of recovery plans cannot be disclosed to any natural or legal person, including the institution's shareholders, even if it is a listed institution, except for persons involved in its respective elaboration and approval.

ARTICLE 5
Executive Summary

1. The executive summary must contain, at a minimum, the following elements:
   a) assessment of the institution's overall recovery capacity, with sufficient justification; b) description of any material changes made or preparatory measures taken since the previous submission, if any; and c) assessment of the interconnections between the recovery plans prepared by the institution and related entities, if any, including the extent to which the plans would affect the overall recovery capacity of the financial sector.
2. The institution must also outline the main conclusions and connections existing between all components of the recovery plan, including:
   a) clear and concise mapping of main business lines, critical functions, and critical shared services; b) overview of recovery indicators and governance structures that ensure an effective and efficient recovery planning process, highlighting main considerations for the calibration of recovery indicators, thresholds, and interconnections with existing governance and risk management structure; c) overview of the set of actionable and viable recovery options, including a brief assessment of the likely effectiveness of each recovery option, highlighting financial impact and potential impediments; d) broad narrative of severe stress scenarios, including the impact and viability of the selected recovery strategy for each scenario; e) description of the communication and disclosure plan to be provided to support the effective implementation of the recovery plan, taking into account potential reputation risks that may undermine public confidence in the institution; and f) assessment of the selected preparatory measures to improve the probability of successful implementation of each preferred recovery strategy. Electronic Edition by Pandora Box, Lda.

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ARTICLE 6
Strategic Analysis

1. The strategic analysis must provide detailed information on the institution's structure, strategy, business model, financial situation, risk profile, intra-group, external, and systemic dependencies.
2. The strategic analysis must comprise indicators and other quantitative and qualitative information with the following objectives:
   a) allow adequate monitoring of risks incurred by the institution; b) reflect the magnitude and speed of change in the institution's economic-financial and liquidity situation; c) allow the timely adoption of recovery strategies; d) consider the horizon necessary for recovery strategies to produce effects; and e) consider the business model, the nature, complexity, and risk profile of the institution.
3. The strategic analysis must establish critical levels for the set of most relevant indicators, with a view to monitoring risks and eventual execution of the recovery plan.
4. The strategic analysis must provide, at a minimum, for the monitoring of the following elements:
   a) indicators that demonstrate the actual or potential deterioration of the institution's capacity to meet its capital needs; and b) indicators that demonstrate the actual or potential deterioration of the institution's capacity to meet its liquidity and financing needs.

ARTICLE 7
Stress Scenario Analysis

1. Stress scenarios must be comprehensive and encompass events that may threaten the continuity of business and the viability of the institution.
2. Stress scenarios must encompass, at a minimum, hypotheses of asset devaluation, reduction in deposit-taking capacity, deterioration in earnings generation capacity, deterioration in liquidity situation, or arising from systemic or idiosyncratic instabilities, of national or external origin.
3. With a view to testing the adequacy of the critical levels defined in the strategic analysis, the viability, and the effectiveness of recovery strategies, stress scenarios must include the hypothesis of the unviability of the institution's business model.
4. The Bank of Mozambique may determine the inclusion of additional stress scenarios in the recovery plan and the carrying out of stress tests that consider these scenarios.
5. The deadline for the inclusion of scenarios and the carrying out of stress tests is fixed by the Bank of Mozambique, according to the complexity of the circumstances of each case.

ARTICLE 8
Recovery Strategies

1. The recovery plan must provide for a comprehensive and robust set of recovery strategies in response to different stress scenarios.
2. The institution must evaluate the inclusion, at a minimum, of the following recovery strategies:
   a) strengthening of capital and liquidity position; b) alienation of assets; c) refinancing of debts; d) restructuring of liabilities; e) access to financial support from entities belonging to the same economic group, if any; f) access to liquidity assistance lines, if any, regardless of the nature of the source; g) changes in the corporate or organizational structure, in the operating strategy, or in the business model of the institution; and h) maintenance of the supply of services provided by third parties, necessary for the operational continuity of the institution.
3. The recovery plan must contain the justification of the viability and analysis of the expected impact of the adoption of each recovery strategy individually and, where applicable, of the joint adoption of more than one strategy.
4. The justification of viability and impact analysis referred to in the previous number must highlight the time necessary for recovery strategies to produce effects and the expected costs and benefits.

ARTICLE 9
Recovery Plan Indicator Framework

1. Institutions must include indicators of a qualitative and quantitative nature in recovery plans, containing, at a minimum, the following mandatory categories:
   a) capital indicators; b) liquidity indicators; c) profitability indicators; and d) asset quality indicators.
2. Unless they justify that the categories are not relevant to the legal structure, risk profile, size, or complexity, institutions must also include in the recovery plan the following categories:
   a) market indicators; b) macroeconomic indicators; c) specific recovery indicators.
3. The recovery plan indicator framework must:
   a) be adapted to the business model and strategy of the institutions and adequate to their risk profile; b) identify the main vulnerabilities most likely to impact the financial situation of the institutions, forcing them to make a decision regarding the activation of the recovery plan; c) be adequate to the size and complexity of each institution, with the number of indicators being sufficient to alert institutions to the deterioration of their situation in various areas; d) be properly focused and feasible for institutions to monitor; e) be capable of defining the situation in which the institution decides to adopt a measure referred to in the recovery plan or abstains from adopting it; f) be aligned with the overall risk management framework and with the indicators of the emergency plan related to liquidity or capital and the operational continuity plan; MAY 31, 2022 799 g) be integrated into the governance of the institutions and covered by decision and notification procedures of the higher levels of the hierarchical chain; and h) include prospective indicators.
4. When defining the quantitative indicators of the recovery plan, the institution must consider the use of a progressive measurement method ("traffic light approach"), in order to inform the administration body that these can be reached.
5. For indicators to be considered effective, institutions must be able to present to the Bank of Mozambique an explanation of how the calibration of the recovery plan indicators was determined and demonstrate that the breach of thresholds will be detected in a timely manner.
6. The information management systems of institutions must ensure easy and frequent monitoring of indicators by the institution and allow for the timely presentation of indicators to the Bank of Mozambique whenever requested.
7. The monitoring of recovery plan indicators must be carried out continuously, in order to allow institutions to adopt, in a timely manner, measures to restore their financial situation after it has suffered significant deterioration.
8. Institutions must reassess the indicators of the recovery plan whenever necessary and, at least, once a year.

ARTICLE 10
Communication and Disclosure Plan

1. The communication plan aims to contribute to the effectiveness of the strategies provided for in the recovery plan.
2. The communication plan must consider the relevance, adequacy, and timeliness of communication with stakeholders throughout the execution process of the recovery plan.

ARTICLE 11
Preparatory Measures

1. The recovery plan must identify any barriers to the effectiveness of recovery strategies and the risks associated with their execution.
2. When submitting the recovery plan to the Bank of Mozambique, the institution must indicate the actions to be taken to eliminate or mitigate barriers and risks.

ARTICLE 12
Governance and Supervision Structure

1. The recovery plan must describe the governance mechanisms necessary for the execution of the recovery plan.
2. The elaboration and revision of the recovery plan must be integrated into the institution's information management, risk management, capital, and crisis management processes, as well as contingency and capital plans.
3. The Bank of Mozambique may determine that the process of elaborating the recovery plan of an institution and its revisions be subject to evaluation by an independent auditor, through the preparation of a specific report.
4. The recovery plan must be submitted for review by an institutional unit independent of the areas responsible for its elaboration.
5. The review referred to in the previous number must:
   a) involve the assessment of critical functions and essential services, the adequacy and robustness of the strategic analysis and stress scenarios, the mapping of preparatory measures to the effectiveness of recovery strategies, governance, and other criteria and procedures associated with the operationalization of the plan; and b) be carried out at least every three years, or whenever there is a relevant change in the economic-financial scenario, operating strategies, business model, organizational structure, or processes linked to critical functions and essential services.
6. The recovery plan must be approved and revised by the institution's administration body, annually or whenever there is a relevant change in the economic-financial scenario, operating strategies, business model, organizational structure, or processes linked to critical functions and essential services.
7. The administration body must:
   a) ensure the timely identification of those responsible for the execution of the recovery plan; b) have a comprehensive and integrated understanding of critical functions Electronic Edition by Pandora Box, Lda.