Notice No. 20/2020 of August 21 on Operational Rules for Credit Guarantee Companies

PUBLISHED IN THE GAZETTE OF THE REPUBLIC, FIRST SERIES, NO. 128, OF AUGUST 21

NOTICE NO. 20/2020

SUBJECT: CREDIT GUARANTEE COMPANIES

• Operational Rules

Whereas it is necessary to define the operating rules for Credit Guarantee Companies provided for in Presidential Decree No. 193/20, of July 24, which establishes the Regulation of the Activity of Credit Guarantee Companies;

In the exercise of the competence conferred upon me by the combined provisions of paragraph f) of number 1 of Article 21 of Law No. 16/10, of July 15 – Law of the National Bank of Angola, combined with Article 106 of Law No. 12/15, of June 17 – Law of the Bases of Financial Institutions.

I DETERMINE:

Article 1. (Object) This Notice defines the operational rules applicable to the exercise of activities by credit guarantee companies (SGCs).

Article 2. (Scope) This Notice is applicable to credit guarantee companies subject to the supervision of the National Bank of Angola.

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Article 3. (Minimum Regulatory Solvency Ratio) Credit guarantee companies must maintain a capital level compatible with the nature and scale of their operations, as well as with the inherent risks, maintaining the Regulatory Solvency Ratio (RSR) equal to or greater than 10%.

Article 4. (General Formula for Calculating the Regulatory Solvency Ratio)

1. The Regulatory Solvency Ratio (RSR) corresponds to the relationship between Regulatory Own Funds (ROF) and the value of assets exposed to the risks inherent in the operations carried out by credit guarantee companies.
2. For calculation purposes, risk values are segregated according to exposure, in accordance with the following formula:

RSR = (Regulatory Own Funds) * 100 ----------------------- APR

Where: • RSR = Regulatory Solvency Ratio. • Regulatory Own Funds (ROF) = Base Own Funds (Level 1) + Supplementary Own Funds (Level 2). • APR = Risk-Weighted Assets, which correspond to the asset and off-balance sheet values exposed to credit risk by signature weighted by their respective risks. • Minimum Regulatory Solvency Ratio = limit fixed at 10% to determine the minimum necessary value of Regulatory Own Funds in relation to the amount of assets exposed to the risks inherent in the operations carried out.

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Article 5. (Elements of the Calculation of Regulatory Own Funds)

1. Base Own Funds (Level 1) consist of the algebraic sum of the elements referred to in paragraph a) minus the elements referred to in paragraph b), namely: a) Elements to aggregate: i. Paid-up share capital, in accordance with paragraph a) of Article 9 of Presidential Decree No. 197/15, of October 16; ii. Positive carried-forward results from previous years; iii. Legal, statutory, and other reserves arising from undistributed results, or constituted for the increase of capital; iv. Positive net result of the current year; and v. Positive net result of the previous year b) Elements to deduct: i. Negative results, carried forward from previous years; ii. Negative net result of the previous year; iii. Provisional negative net result of the current year; iv. Net intangible fixed assets after amortization; v. Insufficiency of provisions in relation to the provisions of Notice No. 12/2014. vi. Other net intangible assets after amortization; and vii. Other values, as determined by the National Bank of Angola.

2. Supplementary Own Funds (Level 2) consist of the algebraic sum of: a) Generic funds and provisions; b) Reserves arising from the revaluation of own-use real estate; and c) Other instruments authorized by the National Bank of Angola.

Article 6. (Eligibility of Supplementary Own Funds to compose ROF) Supplementary Own Funds may correspond, at most, to 100% (one hundred percent) of the value of Base Own Funds, net of the deductions provided for in paragraph b) of number 1 of Article 5, and which satisfy the other conditions provided for in this Notice.

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Article 7. (Minimum Own Funds and Limits of Counter-Guarantees for Signature Credits)

1. It is the responsibility of credit guarantee companies to maintain own funds adequate to the volume of their active and passive operations, as established in this Notice.
2. For the calculation of the solvency ratio, credit guarantee companies must consider in their Risk-Weighted Assets the guarantees and counter-guarantees provided to their clients.
3. The total volume of guarantees provided by credit guarantee companies must observe the provisions of Notice No. 09/2016, of June 22, on prudential limits to large risks.
4. For the purpose of calculation and requirements of Regulatory Own Funds for credit risk and counterparty credit risk, Credit Guarantee Companies must observe the provisions of Instruction No. 12/2016, of August 08.
5. For the purpose of the weighting to be attributed to risk positions assumed by credit guarantee companies, or an equivalent entity accepted by the National Bank of Angola, the minimum risk level must be considered, as defined by Notice No. 11/2014, of December 17, on specific requirements for credit operations.
6. The minimum risk level defined in number 5 of this article applies to risk positions assumed by the Credit Guarantee Fund in the form of counter-guarantees to the guarantees provided by credit guarantee companies.

Article 8. (Classification and Provisioning of Credit Guarantees)

1. For the purposes of classification and provisioning of credit guarantees, credit guarantee companies must observe the provisions of Notice No. 10/2014, of December 10, on guarantees for prudential purposes, in Notice No. 11/2014, of December 17, on specific requirements for credit operations, in Notice No. 12/2014, of December 17, on the constitution of provisions, and in Instruction No. 9/2015, of June 4, on methodologies for the constitution of provisions.
2. For the purposes of credit risk governance, the Credit Guarantee Fund must observe the provisions of Instruction No. 25/2016, of November 16.

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Article 9. (Guarantee Commissions, Collateral, Interest Rates and Other Profits) In joint operations between credit guarantee companies and the Credit Guarantee Fund, including the provision of counter-guarantees, the sharing of defined profits is freely negotiated between the parties, without prejudice to the obligations of transparency and communication to the market.

Article 10. (Guarantee and Counter-Guarantee Operations) All guarantee operations carried out by credit guarantee companies with their clients must be conducted in national currency, except in cases where the credit guarantee company itself or the credit guarantee companies are beneficiaries of counter-guarantees in foreign currency, provided by national or foreign entities in foreign currency, with the approval of the National Bank of Angola.

Article 11. (Own Funds, Minimums and Limits of Credit Guarantees)

1. It is the responsibility of the credit guarantee company to maintain own funds adequate to the volume of its active and passive operations, as established in the Notice on Regulatory Own Funds.
2. Without prejudice to the provisions of the Notice on prudential limits to large risks, the total volume of guarantees provided, per client, cannot exceed 10% (ten percent) of the own funds of the credit guarantee company.

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Article 12. (Provision of Guarantees)

1. Credit guarantee companies cannot grant guarantees in favor of beneficiary shareholders, until the participation whose ownership is required, in accordance with number 3 of Article 16 of Presidential Decree No. 193/20, of July 24, has been fully paid up.
2. Between the moment of granting the guarantee and its extinction, the shares that make up the participation whose ownership is required as a condition for obtaining that guarantee cannot be the subject of transfer, except in the cases provided for in number 4 of this article, and are given as pledge in favor of the society as counter-guarantee for the guarantee provided by the society.
3. Both the non-transferability and the constitution of the pledge are, under general terms, subject to endorsements in the registration or deposit accounts where the shares of the society subject to that limitation and that bonus are registered or deposited.
4. The shares may be the subject of transfer, under the terms that the statutes of the credit guarantee company may establish, if any of the following conditions occur: a) Spin-off or merger of the beneficiary shareholder; b) Assignment of contractual position in the business from which the guaranteed obligations result; and c) Liquidation of the beneficiary shareholder.

Article 13. (Non-Compliance with Guaranteed Obligations) In the cases mentioned in number 3 of Article 13 of Presidential Decree No. 193/20, of July 24, Regulation of the activity of credit guarantee companies, the adjudication value will be the nominal value and the selling price cannot be lower than the nominal value.

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Article 14. (Interest Rates) Interest rates and commissions on the guarantees provided are freely negotiable between the credit guarantee company and the beneficiary shareholders.

Article 15. (Reserves)

1. Without prejudice to the provisions of Article 327 of Law No. 1/04, of February 13, Law of Commercial Companies, credit guarantee companies must obligatorily constitute the following reserves: a) Generic reserve not less than 10% (ten percent) of the net profits ascertained in each year up to a limit equivalent to the value of the share capital, intended to support any eventualities and to cover extraordinary losses or depreciations; and b) Special reserve not less than 10% (ten percent) of the net profits ascertained in each year up to a limit equivalent to the value of the share capital, intended to support losses resulting from the claims of the portfolio of guarantees granted and has the nature of a technical provision fund.
2. The National Bank of Angola may, whenever it deems necessary, increase the percentage referred to in number 1 of this article.

Article 16. (Accounting) Credit guarantee companies must proceed with the accounting registration of their operations, in accordance with Instruction No. 15/2019, of September 06, on the Chart of Accounts for Non-Bank Financial Institutions (PCIFNB).

Article 17. (External Audit) Credit guarantee companies must comply with the stipulated in Notice No. 04/2013, of April 22, on External Audit.

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Article 18. (Information Provision)

1. Credit guarantee companies must submit to the National Bank of Angola balance sheets and the information it deems necessary, in accordance with the provisions of specific regulation.
2. For the purposes of the provisions of the previous number, credit guarantee companies must observe the provisions of Directive No. 11/DSB/DRO/2019, of December 18, on the Deadlines for Reporting Information via the Financial Institutions Portal.
3. Credit guarantee companies must publish their financial statements annually, in accordance with the provisions of Notice No. 5/2019, of August 30, on the Process of Standardization and Harmonization of Accounting in the Angolan Banking Sector.
4. Credit guarantee companies must register the counter-guarantees and signature credits provided to their clients, as well as the credits resulting from the execution of guarantees and counter-guarantees, with the Central Information and Credit Risk (CIRC), in accordance with current regulation.
5. The balance sheets and financial statements referred to in numbers 1 and 3 of this article, respectively, must be prepared by a accountant registered with the representative entity of accountants and certified public accountants of Angola, in accordance with Law No. 3/01, of March 23, Law of Accounting and Audit, as established in the Law of the Bases of Financial Institutions.
6. Credit guarantee companies must appoint an interlocutor qualified to answer any questions regarding the information reported to the National Bank of Angola.
7. Credit guarantee companies must ensure the permanent availability of the designated interlocutor, obligatorily proceeding to the appointment of 1 (one) substitute, definitive or temporary, in the event of impediment of the designated interlocutor.

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Article 19. (Transitional Provision) Pending processes at the date of entry into force of this regulation must be adapted within 12 (twelve) months.

Article 20. (Penalties) Non-compliance with the provisions of this Notice is punishable in accordance with Law No. 12/2015, of June 17 – Law of the Bases of Financial Institutions.

Article 21. (Repealing Norm) All provisions contrary to the provisions of this Notice are repealed.

Article 22. (Doubts and Omissions) Doubts and omissions resulting from the interpretation and application of this Notice are resolved by the National Bank of Angola.

Article 23. (Entry into Force) This Notice enters into force after the date of its publication.

PUBLISH.

Luanda, on August 05, 2020.

THE GOVERNOR JOSÉ DE LIMA MASSANO