ANNUAL REPORT and ACCOUNTS 2019 Annual Report Accounts • 2019

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ANNUAL REPORT AND ACCOUNTS 2019 Annual Report Accounts • 2019

Publicação do Banco Nacional de Angola (BNA)

É permitida a reprodução das matérias, desde que mencionada a fonte: Relatório Anual e Contas do BNA de 2019. Eventuais divergências entre dados e totais ou variações percentuais são provenientes de arredondamentos. Não são citadas as fontes das tabelas e dos gráﬁcos de autoria exclusiva do Banco Nacional de Angola.

Banco Nacional de Angola Av. 4 de Fevereiro nº 151 - Luanda - Angola Caixa Postal 1243 Tel.: (+244) 222 679200 www.bna.ao

Table of Contents

MISSION, VISION AND VALUES OF THE NATIONAL BANK OF ANGOLA 5 Message from the Governor 6 BOARD OF DIRECTORS 9 EXECUTIVE SUMMARY 10 PART I – MACROECONOMIC CONTEXT 12 1. International Economy 13 2. National Economy 16 PART II – ANGOLAN BANKING SYSTEM 23 3. Performance of the Angolan Banking System 24 4. Performance of the Non-Banking Financial System Angolan 28 5. Payment System 33 PART III – CENTRAL BANK POLICIES 37 6. Monetary Policy and Liquidity Management 38 7. Management of International Reserves 44 8. Impactos das Operações de Mercado sobre a Base Monetária e Agregados Monetários 46 9. Monetary Aggregates and the Balance of Payments 48 10. Corporate Governance and Internal Control System 55 PART IV – RELEVANT ACTIVITIES OF THE BNA 56 11. Activities of the National Bank of Angola 57 12. Equity Situation and Financial and Budgetary Performance 61 13. Organization 65 14. Regulation and Organization of the Financial System 69 15. Risk Management and Compliance 71 16. Global Analysis of Product Licensing, Services and Advertising Campaigns 72 17. Prevention of Money Laundering and Terrorist Financing Policy 77 18. Letter of Recommendation and Proposal for Sanctions 78 19. International Relations 79 20. Communication and Currency Museum 80 21. Financial Education 81 22. Information and Credit Risk Center 84 23. Human Capital 85 PARTE V – FINANCIAL STATEMENTS 87 PART VI – Note Appended to the Financial Statements 93 PARTE VII – ANNEXES 171 ANEXO I AUDIT COMMITTEE CERTIFICATION 172 ANEXO II INDEPENDENT AUDITOR’S REPORT 178 PARTE VIII REGULATIONS 185 PARTE IX ABBREVIATIONS 192

MISSION, VISION AND VALUES OF THE NATIONAL BANK OF ANGOLA • 5

MISSION, VISION AND VALUES OF THE NATIONAL BANK OF ANGOLA

Mission • The Banco Nacional de Angola (BNA) is the central bank of the Republic of Angola and its primary function is to ensure the preservation of the value of the national currency and to participate in the definition of monetary, financial and exchange rate policies. Vision • Be a credible and competent central bank in the strict fulfilment of its institutional mission. Values The values of the National Bank of Angola are:

• Team Spirit - BNA employees work together/united towards a common goal, and share knowledge with loyalty and transparency;

• Transparency - BNA employees, in compliance with their obligations, report to the Government and to the Society without adulterating the truth;

• Integrity - BNA employees demonstrate their capacity to be incorruptible in the exercise of their duties;

• Competence - BNA employees demonstrate the capacity/ability to add value in the resolution of certain issues or tasks that fall within or outside their scope of action;

• Attitude - BNA employees demonstrate the ability to adapt and react to changing scenarios.

Generate Value for the Society 6 • Annual Report and Accounts • 2019

Message from the Governor

The Angolan economy continues to face major macroeconomic challenges with a recession that has lasted since 2016. In this particular environment, 2019 began with the implementation of a macroeconomic adjustment programme agreed between the Angolan authorities and the International Monetary Fund. With the implementation of this programme, which will last until the year 2021, it is expected to achieve the balance in the ﬁscal and external accounts and, consequently, the necessary macroeconomic stability to promote economic growth.

Thus, throughout 2019, with the objective of achieving the goals established within the scope of the referred programme and in the exercise of its main attributions and competences, the National Bank of Angola (BNA) sought to carry out a set of measures, decisions, activities, in an effective, efﬁcient and transparent manner. The main guidelines were taken in the three collegial committees, namely the Monetary Policy Committee (MPC), which had seven meetings, the Financial Stability Committee (COMEF) with four meetings and the Investment Committee (IC) with three meetings.

In this path, it should be noted that the process of foreign exchange market liberalisation already started in 2018 continued, with several measures being implemented: i) removal of the 2.00% margin on the reference exchange rate, practiced by commercial banks in the marketing of foreign currency in the interbank market and to their customers; ii) creation of a new type of ceiling for the opening of import letters of credit (CDI); iii) adjustments to the methodology for calculating the reference exchange rate; iv) reduction of the overall exchange position of ﬁnancial institutions; and v) revocation of Notice N. 7/2014, allowing oil companies to again interact with commercial banks in the sale of foreign currency as from January 2nd, 2020.

This gradual easing of the foreign exchange market led to an expected depreciation of the exchange rate, thus converging to an equilibrium that resulted in a sharp reduction in the exchange rate spread and a relative stability of the stock of international reserves. For the ﬁrst time since 2013, gross international reserves have accumulated. Gross international reserves increased by 6.44% (USD 1.04 million) when compared to USD 16.1 billion at 31 December 2018, reaching USD 17.21 billion at 31 December 2019.

In addition, the National Bank of Angola has consolidated its commitment to best practices in terms of corporate governance, transparency and internal control. In fact, the BNA, in collaboration with other national institutions, revised the Act number 34/11 of December 12th - Act on Combating Money Laundering and Terrorist Financing, which was approved at the beginning of 2020. Internally, it created the Corporate Governance Committee and its subcommittees (Risk Management (SGR), Information Technology Governance (SGTI), Human Capital (SCH) and Ethics (SET)).

The National Bank continues to work on the process of innovation of the Angolan Payment System. Thus, the direct debit subsystem was implemented as part of the retail systems. It should be noted that actions are underway to implement the Mobile and Instantaneous Transfer Subsystem, which will provide payment services accessible to the non-banked population anywhere in the national territory, which is a very important step in the integral process of banking and ﬁnancial inclusion.

In addition to implementing the Mobile and Instantaneous Transfer Subsystem, the BNA has implemented other measures aimed at inclusion and financial education. Mention should be made of the thematic conferences which are held on a monthly basis with the aim of addressing and sharing issues that can contribute towards greater financial inclusion. On the other hand, we have continued to organise financial education fairs aimed at children and adolescents.

With regard to the achievement of a low and stable level of inflation, as enshrined in the Law of the National Bank of Angola, throughout 2019, the CPM monitored the evolution of the economic environment both at a national and international level, on the basis of which it took a number of decisions, including the maintenance of the restrictive course of monetary policy, through a more refined management of liquidity in the system, with recourse to open market operations. Despite an adverse economic environment, economic recession, the introduction of new taxes and tariffs, and the total liberalisation of the exchange rate, which had a significant impact on the depreciation of the national currency, national inflation at the end of the year was 16.90%, lower than in 2018. Message from the Governor of the National Bank of Angola • 7

At the level of the Financial Statements, we managed to substantially reduce the number of reserves of our external auditors from 6 in 2018 to only 1, thus showing an effort and commitment to remedy situations arising from previous years.

In 2020, given the current domestic and international economic climate, affected by the impacts of Covid-19, the central bank, with a view to deepening, diversifying and ensuring the stability of the ﬁnancial system, will spare no effort to create a healthy environment, favourable to the development of banking institutions and their transformation into an engine for the growth of economic activity in Angola.

Luanda, May 2020

José de Lima Massano

Governor

BOARD OF DIRECTORS • 9

BOARD OF DIRECTORS

(In the center) Governador José de Lima Massano

(To the left of the Governor) Vice-Governor Rui Miguêns de Oliveira

(To the right of the Governor) Vice-Governor Manuel António Tiago Dias

Row from top left to right

Administrator Miguel Bartolomeu Miguel

Administrator Pedro Rodrigo Gonçalves de Castro e Silva

Administrator Beatriz Ferreira de Andrade dos Santos

Administrator Tavares André Cristóvão 10 • Annual Report and Accounts • 2019

EXECUTIVE SUMMARY

The year 2019 was quite challenging in economic terms because of the trade tensions between the United States of America (US) and China that have dragged on since 2018, tensions between the US and Europe, as well as the countries of Latin America, which have greatly affected world trade. On the other hand, the uncertainties surrounding the UK’s exit from the European Union have been an obstacle to more robust economic growth in the Eurozone.

According to estimates by the International Monetary Fund (IMF), uncertainties over trade issues, geopolitical tensions and stress in the main emerging economies continued to affect the world economy, with the industrial and trade sectors in particular. Moreover, the intensiﬁcation of social unrest in several countries posed new challenges to the world economy. Thus, IMF projections were strongly inﬂuenced by the sharp economic decline of emerging economies (Brazil, India, Mexico, Russia and Turkey), as well as by trade tensions between the US and China.

In this context, the IMF, in its World Economic Outlook report of January 2020, revised downwards the growth rate of the world economy for 2019 and 2020 to 2.90% and 3.30% respectively.

In the energy commodities market, crude oil prices fell in 2019 compared to 2018 as a result of increases in US oil production and fears about global demand, which overshadowed supply disruptions and declines in some OPEC member countries, notably Saudi Arabia and Venezuela. Thus, the average price of Brent stood at USD 64.20/barrel, a reduction of 10.57% compared to the previous year (USD 71.79/barrel).

Gross International Reserves increased by 6.44% (USD 1.04 million) when compared to USD 16.17 billion at 31 December 2018, reaching USD 17.21 billion at 31 December 2019. This increase was due to adjustments made to the exchange rate regime, disbursements by the International Monetary Fund of USD 1.50 billion, the issue of Eurobonds in the amount of USD 3 billion in November 2019, as well as the transfer of USD 1 billion from the Sovereign Fund of Angola (FSDEA) in August 2019, within the scope of the Integrated Plan for Intervention in Municipalities (PIIM).

In turn, the import coverage ratio stood at 8.42 months of imports of goods and services, higher than the previous year’s, being above the Southern African Development Community (SADC) convergence target, set at 6 months of imports of goods and services.

Within the scope of monetary and exchange rate policies, the National Bank of Angola (BNA) adopted a set of measures in 2019. These measures allowed inﬂation to continue its downward trend from 18.60% in 2018 to 16.90% in 2019.

As a result of the continuous deceleration of inflation and the prospect of maintaining this behaviour, the Monetary Policy Committee (CPM) reduced the BNA Rate on two occasions, the first on 25 January, reducing it from 16.50% to 15.75%, maintaining the other rates unchanged. The second on 24 May, where it reduced it by 0.25 p.p., setting it at 15.50%, again keeping the other rates unchanged. However, in October, in an extraordinary session, to ensure the implementation of the second phase of the liberalisation of the foreign exchange market, the CPM decided on a restrictive policy to control the excessive liquidity level of the financial system with a view to minimising the exchange-rate pass-through effect on the prices of goods and services in the economy. To this end, it increased the reserve requirement coefficient in national currency to 22.00%, the seven-day liquidity absorption standing facility rate to 10.00%, while keeping the remaining rates unchanged.

As regards exchange rate policy, several measures were implemented during 2019 to achieve a floating exchange rate regime where the exchange rate is freely defined by the market: (i) Removal of the 2.00% margin on the reference exchange rate, practiced by commercial banks in the marketing of foreign currency in the interbank market and to their customers; (ii) Definition of the maximum annual amount of USD 120 thousand for private exchange operations, except for those related to health and education expenses, which will not be subject to any limits, whenever paid directly to the institutions; (iii) Relaxation of the limits applicable to the various payment instruments for the import of goods; (iv) Reduction of the limit on the foreign exchange position of commercial banks from 5.00% to 2.50%, with effect from 02 January 2020; (v) Cancellation of the acquisition by the BNA of foreign currency from the oil companies, with the latter selling it directly to commercial banks, with effect from 02 January 2020. Executive Summary • 11

In view of these changes, the national currency depreciated considerably in the last quarter of 2019, bringing the accumulated depreciation to 36.00% on the formal market. The exchange rate was ﬁxed at USD/KZ 482.23 at the end of the period and USD/KZ 374.84 on average. The exchange rate differential between the formal and informal markets narrowed from 28.26% in 2018 to 22.97% in 2019.

In order to ensure the stability of the banking system and in compliance with its strategic plan, the BNA carried out the Asset Quality Assessment (AQA) exercise for 13 of the banks, whose aggregate assets represented 92.8% of the total banking system, with reference to 31 December 2018, with the results showing that the Angolan banking system is globally robust.

In turn, the process of revision of the Act No. 34/11 of 12 December - Act on Combating Money Laundering and Terrorist Financing - was completed. In this regard, in order to verify the technical compliance of Angola’s legal framework on the Prevention of Money Laundering and Terrorist Financing (ML/TF) with the recommendations of the Financial Action Task Force, in May 2019, the BNA and the Financial Intelligence Unit (FIU) began to complete the Technical Compliance Questionnaire, on the basis of which it is hoped to identify some shortcomings for correction.

As part of the innovation process of the Angolan Payment System, the direct debit subsystem was implemented as part of the retail systems. It should be noted that actions to implement the Mobile and Instant Transfer Subsystem, which will provide payment services accessible to the non-banked population anywhere in the country, are underway, which is an important step in the full process of banking and ﬁnancial inclusion.

The BNA is exposed to ﬁnancial and non-ﬁnancial risks, originating from internal and external factors that may jeopardise the achievement of its strategic objectives. In order to mitigate these risks, the institution is committed to a robust risk culture and has implemented a framework that promotes their integrated management.

At the end of 2019, the BNA had a total of 1,967 employees, representing a negative variation of 4.42% in relation to the 2018 workforce. In terms of training and capacity building, 2019 was a year of consolidation of the model deﬁned in 2018, aimed at the continuous development of the workers’ skills, with a view to improving processes and focusing on continuous investment and growth of the workers.

On 31 December 2019, BNA’s assets stood at Kz 11.04 trillion, representing an increase of Kz 3.98 trillion (+56.35%) on 31 December 2018. On the Liabilities side, there was an increase of Kz 3.04 trillion (+49.22%) to Kz 9.22 trillion.

In relation to Equity Capital, which amounts to Kz 1.82 trillion, there was an increase in relation to the previous ﬁnancial year of Kz 939.35 billion (106.09%).

In 2019, there was a positive result of Kz 90.09 billion, corresponding to an increase of 384.57% over the previous ﬁnancial year.

The 2019 budget showed a surplus of Kz 336.28 million, reﬂecting a 54.36% lower than estimated (Kz 618.55 billion). PART I Macroeconomic Context Part I – Macroeconomic Context • 13

1. International Economy 1.1. Estimates for 2019 and 2020 The International Monetary Fund (IMF), in its January 2020 World Economic Outlook (WEO) report, revised downwards the growth rate of the world economy for 2019 and 2020 from the October 2019 forecasts by 0.10 p.p. for both years, culminating in projections of 2.90% in 2019 and 3.30% in 2020. However, with the emergence of the coronavirus outbreak in early January 2020, which has greatly affected the Chinese economy, as well as the Euro Zone economies, it is expected that the projections will be revised downwards again by the IMF at its next WEO.

For 2019, uncertainties over trade issues, geopolitical tensions and stress in the main emerging economies continued to affect the world economy, with the industrial and trade sectors in particular In addition, the intensification of social unrest in several countries has posed new challenges to the world economy and climate change has caused several natural disasters, ranging from hurricanes in the Caribbean, drought and fires in Australia, floods in the East and drou- ghts in the south of Africa.

Thus, IMF projections were strongly inﬂuenced by the sharp economic decline of emerging economies (Brazil, India, Mexico, Russia and Turkey), as well as trade tensions between the United States of America (US) and China.

In the emerging and developing economies, India was the country that most affected the group, as a result of weaker than expected domestic demand, as well as stress in the ﬁnancial market and a decline in credit growth. Thus, it is estimated for 2019 that the Indian economy grew 4.80%, below the growth rate of the previous year. For 2020, an improvement with a growth rate of 5.80% was expected, which would be supported by ﬁscal stimuli, as well as more moderate oil prices in international markets, however, since the appearance of the coronavirus outbreak, it is expected that its exports, like those of the other emerging countries, to advanced countries, will reduce due to weak external demand.

In China, there was an economic slowdown in the course of 2019, with the IMF estimating a growth rate of 6.10%, below the 2018 growth rate of 6.60%, as a result of trade tensions with the US, with tax applications on products from both countries. For 2020, the Chinese economy is expected to remain under pressure, not only because of trade disputes with the US and ﬁnancial system regulation issues, but also because of the emergence of the coronavirus outbreak (Covid-19). With the emergence of this virus, there has already been a sharp reduction in industrial activity and a reduction in the services sector, jeopardising the growth of the Asian giant.

For the Euro Zone, growth of 1.20% is forecast, below the 1.90% in 2018, with the German economy slowing down due to the fall in industrial production. In addition, political uncertainties in Spain affected domestic demand and exports in 2019. With regard to 2020, the IMF projected growth slightly above the previous year, reaching a rate of 1.30%, where an improvement in domestic consumption was predicted, but since the countries of Europe have been devastated by the coronavirus, especially Italy, which has decreed quarantine for the whole country, it is expected that the other European countries will take similar or even more drastic measures to contain the outbreak of the virus, which could affect the growth of the European bloc in that year.

In the US, a growth rate of 2.30% is estimated for 2019, lower than in 2018 (2.90%), but above the forecasts for 2020 (2.00%). This economic slowdown in 2019 is the result of a return to a neutral ﬁscal policy and a reduction in the further easing of ﬁnancial conditions1 by the US government.

In sub-Saharan Africa, the growth rate for 2019 is estimated at 3.30% as a result, on the one hand, of the better performance of the Nigerian economy, which in turn is influenced by the improvement in its oil production, which in recent years has been severely damaged by terrorist attacks. On the other hand, the solid growth of 20 other economies in the region (45% of the region’s total GDP) also contributed as a result of their higher level of diversification in relation to the others. IMF expects the region’s main economy, South Africa, to grow by 0.40% in 2019 as a result of structural constraints and deteriorating public finances, but data released by the South African Department of Statistics point to an even lower growth rate of around 0.20%. Ethiopia is also noteworthy, where the vulnerabilities caused by the level

1 The American government had adopted policies to encourage investment, with tax incentives such as tax cuts and reductions, which attracted many companies, mainly those in the car industry, but the effect of these policies on the American economy is already at a neutral stage. 14 • Annual Report and Accounts • 2019

of public debt were the main obstacles to the country’s growth. However, for the year 2020, the IMF forecasts a growth rate of 3.50% for the region.

In short, the risks to the world economy remain high. Geopolitical tensions between the US and Iran could lead to interruptions of oil supply from the Middle East on the world market and weaken possible future investments. The high rates imposed between the US, China and Europe, which have greatly affected world trade and the emergence of Covid-19 around the world, could pose strong challenges for global growth.

TABLE 1: WORLD GROSS DOMESTIC PRODUCT

2018 2019 2020 GDP growth (%) Estimates Estimates Forecasts World economy 3,60 2,90 3,30 Advanced Economies 2,20 1,70 1,60 USA 2,90 2,30 2,00 Euro Zone 1,90 1,20 1,30 Japan 0,30 1,00 0,70 United Kingdom 1,40 1,50 1,60 Emerging and developing economies 4,50 3,70 4,40 Russia 2,30 1,10 1,90 China 6,60 6,10 6,00 India 6,80 4,80 5,80 Brazil 1,30 1,20 2,20 Sub-Saharan Africa 3,20 3,30 3,50 Nigeria 1,90 2,30 2,50 South Africa 0,80 0,40 0,80

Note:(E) Estimates Source: IMF, World Economic Outlook (Update), January 2020

1.2. Conjuncture of 2019 OThe year 2019 was already proving to be a difﬁcult year in economic terms, with trade tensions between the USA and China, which have dragged on since 2018, tensions between the USA and Europe and with Latin American countries (Mexico and Argentina), which have greatly affected world trade. In turn, uncertainties over the UK’s exit from the European Union have been an obstacle to more robust economic growth in the Eurozone.

There have been a number of US tariff impositions on Chinese as well as European products. In addition, the US withdrew India from the preferential trade programme known as the Generalized System of Preferences, which gives developing countries easy access to the US market and reduces US taxes on their exports.

At the same pace of tariff imposition, the U.S. announced the refund of import tariffs on aluminium and steel from Argentina and Brazil, accusing both countries of premeditated depreciation of their currencies, damaging the competitiveness of U.S. companies in international markets.

In Europe, they applied tariffs of 10.00% and 25.00% on imports, worth USD 7.5 billion, especially on imports of Airbus aircraft, due to the 15-year stalemate over European countries’ favouritism over the European company, thus hindering the sales of its direct competitor, the American company, Boeing.

The implementation of trade tariffs by the US to its trading partners followed by retaliatory measures by the latter led to a decline in global trade and industrial production, which led the IMF to revise its downward perspective on world trade to 2.50% in 2019 and 3.70% in 2020.

In the industrial sector, there was a decline in production in the largest economies, particularly in the Euro Zone, inﬂuenced in turn by the poor performance of the German economy, which was affected by the reduction of new orders, mainly in the steel industries. Part I – Macroeconomic Context • 15

The uncertainty, in the lack of agreement between the United Kingdom and the European Union, about the “Brexit”, was another reason that affected investors’ confidence in the European market, with the various requests for postponement, accom- panied by the political crisis that took place in the United Kingdom, with former Prime Minister Theresa May resigning after the rejection in the House of Lords of her exit programme. This event increased fears of an exit without agreement, which would make trade and financial relations between the United Kingdom and the other countries of the Eurozone more difficult.

With the international environment characterized by uncertainties and fears, the central banks of the main economies changed the course of their monetary policies, the US Federal Reserve (Fed) made three cuts in its rate over the year, to the range of 1.50% to 1.75% in 2019 and in 2020, in March, made another cut of 50 basis points, to the range of 1.00% to 1.25%. As for the European Central Bank (ECB), it resumed its asset purchase programme (quantitative easing) on 1 November 2019 with a monthly value of EUR 20 billion. In turn, the People’s Bank of China also acted actively to revive the economy weakened by the trade war with the US, having made at the end of the year three cuts in the coefﬁcients of the compulsory reserves, increasing the liquidity of the system.

The US dollar showed a tendency to appreciate throughout 2019, as it served as a refuge for investors throughout the year, as a result of the uncertainties resulting from the worsening of trade tensions that led to poor economic performance in the main advanced economies and emerging countries.

1.3. Commodities Market 1.3.1. Energy Commodities In 2019, crude oil prices fell compared to 2018, reﬂecting the increase in oil production in the US and fears about the evolution of world demand, which overshadowed interruptions and decreases in supply in some OPEC member countries, mainly Saudi Arabia and Venezuela.

Throughout the year, the oil market was also inﬂuenced by the trade war between the United States and China, the impasse over the “Brexit”, the political crisis in Italy and the escalation of the conﬂict between the US and Iran, which contributed to increased uncertainty, leading to a reduction in investment worldwide.

In average terms, the price of Brent was 64.20 USD/barrel, a reduction of 10.57% on the previous year (71.79 USD/barrel). In relation to the price of Angolan branches, which has as a reference the behaviour of Brent, its average annual price was 64.99 USD/barrel. As for the WTI, its price, in annual average terms, was around 56.31 USD/barrel.

CHART 1: ENERGY COMMODITIES PRICES

USD/barrel 54

24 dec/16 feb/17 apr/17 jun/17 oct/17 dec/17 feb/18 apr/18 jun/18 oct/18 dec/18 feb/19 apr/19 jun/19 oct/19 dec/19 aug/17 aug/18 aug/19

BRENT WTI Source: Bloomberg 16 • Annual Report and Accounts • 2019

1.3.2. Food Commodities In 2019, the food price index of the United Nations Food and Agriculture Organization (FAO) closed the year at an average of 171.21 points, reaching the highest level since December 2014, representing an increase of 1.83% over the previous year. This increase was supported by strong increases in the prices of vegetable oils, sugar and dairy products.

CHART 2: FOOD COMMODITIES PRICES 350

300

250

Points 200

150

100 dec/16 feb/17 apr/17 jun/17 oct/17 dec/17 feb/18 apr/18 jun/18 oct/18 dec/18 feb/19 apr/19 jun/19 oct/19 dec/19 aug/17 aug/18 aug/19

FAO Food Price Index Meat price index Dairy price index Cereal price index Oil price index Sugar price index Source: FAO

The price of sugar increased due to higher oil prices in the last quarter of 2019, which encouraged Brazilian factories to produce more ethanol at the expense of sugar, reducing the supply of sugar to the world market. In turn, the increase in oil and fat prices was inﬂuenced by the increase in the price of palm oil due to strong demand, mainly from the biodiesel sector, coinciding with forecasts of supply shortages. While dairy product prices were inﬂuenced upwards on the one hand by the rising price of cheese due to strong world demand at a time when availability in the European Union and Oceania was lower. Already at the end of 2019, the rise in the price of skimmed-milk powder, driven by a tightening of supply, mainly from the European Union, also contributed further to the increase in the dairy price index.

2. National Economy 2.1. Real Sector 2.1.1. Economic Activity In 2019, the economic activity continued its contractionary trend which began in 2016, however, there was a smaller contraction in relation to the previous year, as a result of a less sharp drop in oil production.

Thus, the most recent estimates set out in the General State Budget for 2020 (OGE 2020) reveal a growth rate of gross domestic product (GDP) in 2019 of 1.10% less when the previous year was 1.20% less, justiﬁed by the contraction in oil activity of around 5.20% and the expansion of non-oil activity by around 0.60%.

The trend of contraction in oil activity in 2019 is related to the lack of investment in exploration, observed mainly in the period from 2015 to 2017, which continues to impact the sector’s production, leading to an economic recession since 2016. Also noteworthy in the year under review was the occurrence of operational problems, such as the closure of some wells, resulting from scheduled and unscheduled stoppages, with emphasis on Block 3/05, Block 15, Block 15/06, Block 17 and Block 32.

As for the evolution of non-oil activity, this was mainly associated with the fall in economic activity in the energy sectors from 22.30% in 2018 to 10.70% in 2019 and in the manufacturing industry with 3.60% less when last year it registered a positive ﬁgure of 4.60%. Part I – Macroeconomic Context • 17

The less dynamic activity in the energy sector was largely the result of the slight increase in electricity generation capacity, reﬂecting the poor execution of new projects to increase already existing installed capacity, as well as to improve the distribution network in order to contribute to the development of the economy’s value chain. In turn, the contraction in manufacturing activity resulted from the limited acquisition of raw materials and spare parts and also from the non-appearance of new units.

PANEL 1: GROWTH RATE REAL GDP AND REAL GDP GROWTH RATES BY SECTORS OF ACTIVITY

Real GDP growth rate (%) Real GDP growth rate by activity sectors (%) 2

0 Others Mercantile Services

-2 Energy

Construction -4 Manufacturing Iindustry

-6 Oil Diamonds and others

-8 Fisheries and related products

Agriculture -10 Total GDP Oil Sector Non-oil Sector -25,00-15,00-5,00 5,00 15,00 25,00 35,00 45,00

2016 2017 2018 (Estimate) 2019 (Estimate) 2016 2017 2018 2019 Source: INE (2016-2018) and OGE (2019)

It is estimated that in 2019, the sectors that mitigated the level of economic recession were the diamond sector, which went from 6.30% less to 17.90% more and the market services sector (due to the weight of this sector in the composition of GDP) with 0.50% compared to 0.21% less in 2018.

TABLE 2: GDP PERCENTUAL STRUCTURE (PRICES OF 2002)

Percentage Structure (%) 2016 2017 2018E 2019E Primary Sector (%) 31,37 30,39 29,72 36,96 Agriculture 5,78 6,27 6,42 5,72 Fisheries and related products 3,44 3,76 3,16 2,54 Diamonds and others 0,64 0,67 0,54 0,90 Oil 21,51 19,70 19,59 27,80 Secondary Sector (%) 20,64 22,51 21,87 19,91 Manufacturing Iindustry 5,64 6,73 7,12 6,24 Construction 14,48 15,21 14,18 13,14 Energy 0,52 0,58 0,57 0,53 Tertiary Sector (%) 47,99 47,09 48,41 43,13 Mercantile Services 38,56 38,49 38,96 34,65 Others 9,43 8,61 9,45 8,48 Source: INE and OGE

With regard to the weight of each sector in the GDP structure, in the year under review the primary sector’s weight increased from 29.72% to 36.96%, explained by the performance of the oil and diamond sectors. It should also be noted that the other two sectors (secondary and tertiary) saw reductions in their weights, as shown in Table 2 above.

It should be noted that although the weight of the tertiary sector decreased in the period under review, it continues to be the sector with the highest weight in the total GDP structure and most dependent on imports, reﬂecting the imperative need to intensify the diversiﬁcation of the economy. 18 • Annual Report and Accounts • 2019

2.1.2. Prices In 2019, the growth rate of the National Consumer Price Index (CPIPI) decreased from 18.60% in 2018 to 16.90% in the period under analysis. This performance was justiﬁed by the reduction in the contribution of most of the classes in its basket, with the exception of class 01. “Food and Non-Alcoholic Beverages”, which increased its contribution from 7.19 p.p. to 8.65 p.p.

In this context, the disinflationary process that began in 2017 was maintained, allowing the inflation target for 2019 to be achieved (17.73%), notwithstanding the increase in the electricity tariff, the introduction of Value Added Tax (VAT) and the Special Consumer Tax (IEC), combined with the sharp exchange rate depreciation that occurred in the last quarter of 2019. This performance was underpinned by the monetary and exchange rate policy measures adopted by the BNA, which, on the one hand, aimed at more efficient control of liquidity in the economy and, on the other, the elimination of all distortions that obstructed the transmission channels of monetary policy. In addition to these measures, there was an improvement in BNA’s communication with economic agents and a loss of financial availability for families, which caused less inflationary pressure from the demand side.

TABLE 3: CONTRIBUTION AND VARIATION OF EXPENDITURE CLASSES TO THE CPI

Annual Contribution (p.p.) Annual Variation (%) Expense Class Weights Difference 2018 (p.p.) 2019 (p.p.) 2018 2019 (2019-2018) 01. Non-alcoholic Food and Beverages 47,11 02. Alcoholic drinks and tobacco 2,13 0,46 0,45 -0,01 17,77 17,67 03. Clothing and footwear 6,39 1,80 1,37 -0,43 25,36 18,23 04. Housing, Water, Electricity. gas and fuel 10,77 2,39 1,08 -1,31 28,29 11,86 05. Furniture, Household appl.and maintenance 6,59 1,45 1,26 -0,19 20,35 17,40 06. Health 3,50 1,07 0,96 -0,11 23,24 20,00 07. Transport 7,68 1,04 0,77 -0,28 15,59 11,78 08. Communications 3,19 0,03 0,03 0,00 1,22 1,30 09. Leisure, recreation and culture 2,26 0,48 0,43 -0,05 22,01 19,08 10. Education 1,89 0,29 0,04 -0,25 14,46 1,99 11. Hotels, cafes and restaurants 3,13 0,55 0,53 -0,02 17,84 17,34 12. Miscellaneous goods and services 5,36 1,85 1,33 -0,52 26,40 17,83 National Inﬂation 18,60 16,90 -1,70 18,60 16,90

Source: INE

Regarding the accumulated variation by class, in the year under analysis, the highest rate of price variation was observed in class 06. “Health” (20.00%), justiﬁed by the increase observed in the prices of pharmaceutical products, especially strong bactrim (36.12%), vitamin B complex (33.21%) and paracetamol (30.60%), followed by class 09. “Leisure Recreation and Culture” (19.08%), mainly explained by the increase in the prices of colour TV (25.10%), toys (22.96%) and car radio (21.86%). The third highest rate was recorded in class 01. “Food and Non-Alcoholic Beverages” (19.00%), where the biggest increases occurred in the prices of ice cream (44.55%), massango ﬂour (44.09%) and wholemeal bread (38.38%).

As for the contribution by class in the accumulated variation of the NICP, class 01 stands out. “Food and Non-Alcoholic Beve- rages” is the largest contributor (8.65 p.p.), followed by class 03. “Clothing and Footwear” (1.37 p.p.) and class 12. “Miscella- neous Goods and Services” (1.33 p.p.). With regard to the representativity of the classes in the variation of the IPCN, it should be noted, essentially, the increase in the representation of class 01. “Food and Non-Alcoholic Beverages” with 51.18% when last year it was 38.65%. Part I – Macroeconomic Context • 19

PANEL 2: CONTRIBUTION AND REPRESENTATIVENESS OF EXPENSE CLASSES IN INFLATION Contribution of Classes on year on year Inﬂation Representativeness of classes which has most contributed for the Inﬂation in terms of 12 months 60,00 60

40,00 40 In p.p. In % 20,00 20

- 0 jun/17 jun/18 jun/19 oct/17 oct/18 oct/19 feb/17 apr/17 feb/18 apr/18 feb/19 apr/19 jun/17 jun/18 jun/19 dec/16 dec/17 dec/18 dec/19 aug/17 aug/18 aug/19 dec/16 sep/17 dec/17 sep/18 dec/18 sep/19 dec/19 mar/17 mar/18 mar/19 Miscellaneous goods and services Food Non-alcoh. beverages Hotels, cafes and restaurants Education Alcoh. Beverages and tobacco Leisure, recreation and culture Communication Clothing and footwear Transport Housing, Water, Elect. gas and fuel Health Furniture, Household appl. maintenance Furniture, Household appl. maintenance Housing, Water, Elect. gas and fuel Clothing and footwear Health Alcoh. Beverages and tobacco Miscellaneous goods and services Food Non-alcoh. beverages

Fonte: INE

The increase in the variation of class 01. “Food and Non-Alcoholic Beverages” in the year in question may have resulted from the reduction of food imports, in value, by around 21.06%2 compared to the previous year, as a result, on the one hand, of the depreciation of the national currency, resulting from the ﬂexibility of the foreign exchange market, and on the other hand, of the acceleration of food prices on the international market, by around 1.83% compared to a decrease of 3.52% in 2018. It should also be noted that the fall in food imports should be in line with the Executive’s programme aimed at boosting domestic production and reducing imports of the products that make up the basic food basket.

The analysis of the variation by province, allows us to highlight that the largest price variations, in 2019, were seen in the province of Bengo with 20.90%, Huambo with 19.70% and Huila with 19.64%. The province of Bié with 14.43%, Benguela with 15.71% and Namibe with 16.44% showed the smallest price variations.

As for the contribution by province, Luanda with 10.50 p.p. contributed the most, followed by the provinces of Benguela with 1.25 p.p. and Huíla with 1.16 p.p. Of the provinces with the lowest contributions, Bengo with 0.10 p.p., Zaire with 0.12 p.p. and Lunda Sul with 0.14 p.p. were the most signiﬁcant.

TABLE 4: CONTRIBUTION AND VARIATION OF EXPENDITURE CLASSES TO THE IPCN

Annual Contribution (p.p.) Annual Variation (%) Provinces Weights Difference Provinces Difference 2018 2019 2018 2019 (2019-2018) (2019-2018) 01. Luanda 63,06 11,49 10,50 -1,00 01. Bengo 24,26 20,90 -3,36 02. Benguela 8,18 1,44 1,25 -0,19 02. Huambo 17,28 19,70 2,42 03. Huíla 6,07 0,98 1,16 0,18 03. Huíla 16,18 19,64 3,46 04. Cuanza Sul 3,07 0,66 0,55 -0,10 04. Cuanza Norte 20,32 18,94 -1,38 05. Huambo 2,67 0,46 0,51 0,05 05. Uíge 20,16 18,75 -1,41 06. Malange 2,28 0,59 0,39 -0,20 06. Cuando Cubango 14,83 18,72 3,89 07. Cabinda 2,20 0,39 0,36 -0,03 07. Cuanza Sul 21,45 18,53 -2,92 08. Uíge 2,16 0,44 0,40 -0,04 08. Moxico 22,52 18,25 -4,27 09. Moxico 1,55 0,35 0,28 -0,07 09. Lunda Norte 25,26 17,70 -7,57 10. Cunene 1,37 0,34 0,23 -0,11 10. Lunda Sul 17,74 17,65 -0,09 11. Lunda Norte 1,37 0,35 0,24 -0,11 11. Malange 25,73 17,60 -8,12 12. Namibe 1,14 0,20 0,18 -0,02 12. Zaire 23,27 17,35 -5,92 13. Bié 1,02 0,17 0,14 -0,02 13. Cunene 25,01 17,28 -7,73 14. Cuando Cubango 0,99 0,15 0,18 0,03 14. Luanda 18,21 17,06 -1,15 15. Cuanza Norte 0,87 0,18 0,16 -0,02 15. Cabinda 17,74 16,67 -1,07 16. Lunda Sul 0,81 0,14 0,14 0,00 16. Namibe 17,51 16,44 -1,07 17. Zaire 0,69 0,16 0,12 -0,04 17. Benguela 17,58 15,71 -1,87 18. Bengo 0,51 0,12 0,10 -0,02 18. Bié 16,36 14,43 -1,92 Annual inﬂation 18,60 16,90 -1,70 Source: INE

2 2019 Preliminary Asset Account 20 • Annual Report and Accounts • 2019

The Wholesale Price Index (IPG), in 2019, recorded an upward trend, showing an accumulated change at the end of the year of 18.92%, an increase of 2.06 p.p. compared to 2018 (16.86%). This performance was due to the increase in the pace of growth of prices of domestic products (from 17.85% in 2018 to 22.10% in 2019) and imported products (from 16.59% in 2018 to 18.07% in 2019).

The analysis of the IPG by sections shows that the fisheries section recorded the greatest price variation (29.72%) within domestic products and is in line with the fall in fishing activity exposed in the point above. Among imported products, the Agriculture, Animal Production, Hunting and Forestry section with the highest inflation (30.63%) is the highlight.

PANEL 3: WHOLESALE PRICE INDEX (IPG)

Monthly and Year - on - year variation of IPG (%) IPG Variation - national vs. imported products (%)

2 35 35 30 30 25 25 20 20 1 15 15 10 10

5 Homologous variation 5 0 0 0 FEB/17 FEB/18 FEB/19 FEB/17 FEB/18 FEB/19 DEC/16 DEC/17 DEC/18 DEC/19 APR/17 OCT/17 APR/18 OCT/18 APR/19 OCT/19 DEC/16 APR/17 OCT/17 DEC/17 APR/18 OCT/18 DEC/18 APR/19 OCT/19 DEC/19 JUN/17 JUN/18 JUN/19 JUN/17 JUN/18 JUN/19 AUG/17 AUG/18 AUG/19 AUG/17 AUG/18 AUG/19

Monthly IPG Year-on-year IPG (right axis) IPG (National Products) IPG (Imported Products) Source: INE

2.2. Fiscal sector 2.2.1. Primary Market of Government Securities The issue of Treasury securities in national currency in 2019 stood at Kz 698.84 billion (78.63% of the volume programmed by the Treasury), of which Kz 401.64 billion in Treasury Bills (BT) and Kz 297.20 billion in Treasury Bonds (OT). The volume of Treasury bond issues in national currency was signiﬁcantly lower than in 2018, at around 53.25%. These issues were mainly aimed at the payment of 65.06% of the domestic debt service.

PANEL 4: ISSUANCE AND REDEMPTION OF SECURITIES IN 2019 Issues Redemptions 140 000 350 000 120 000 300 000 100 000 250 000 80 000 200 000

60 000 Kz millions 150 000 Kz millions 40 000 100 000 20 000 50 000 0 0 jul/19 jul/19 jan/19 jun/19 jan/19 jun/19 oct/19 oct/19 feb/19 apr/19 feb/19 apr/19 sep/19 nov/19 dec/19 sep/19 nov/19 dec/19 aug/19 aug/19 mar/19 mar/19 may/19 may/19

BT OT BT OT Source: BNA

On the other hand, payments by the National Treasury arising from the redemption of public securities in 2019 totalled Kz 2.11 trillion, of which Kz 803.87 billion for Treasury Bill redemptions and Kz 1.31 trillion for Treasury Bond redemptions. Compared to 2018, the volume of domestic public debt service securities was 47.75% lower, mainly due to the reduction in the volume of short-term issues in 2019. Part I – Macroeconomic Context • 21

The stock of public securities at 31 December 2019 stood at Kz 10.50 trillion, of which around Kz 225.45 billion (2.15%) in Treasury Bills and Kz 10.28 trillion (97.85%) in Treasury Bonds. Compared to 2018, there was an increase in the stock in 2019 of about 31.98%, mainly inﬂuenced by the effect of exchange rate depreciation.

The net effect of issues of Treasury Bonds (BT and OT) on liquidity was expansionist in Kz 1.41 trillion, as a result of the volume of redemptions and interest payments during the year being higher than the volume of issues.

CHART 3: STOCK OF SECURITIES IN 2019 12 000

10 000

8 000

6 000

Kz millions 4 000

2 000

April May June July March August January February October September November December

BT OT Source: BNA

With regard to interest rates on the primary market for Treasury Bills, they fell across all maturities, showing a downward trend during the ﬁrst quarter of the period under review, and remained constant until the end of the year, except for the 91-day maturity which fell sharply at the end of the third quarter.

Thus, at the end of 2019, the average nominal interest rates for Treasury Bills stood at 12.07%, 12.00% and 14.68% for maturities of 91, 182 and 364 days, respectively. In comparison with the previous year, nominal rates for short-term securities fell by 1.53 p.p., 5.05 p.p. and 4.37 p.p., respectively. PANEL 5: GOVERNMENT BOND MARKET INTEREST RATES IN 2019

25,00% 25,00% 23,00% 23,00% 21,00% 21,00% 19,00% 19,00% 17,00% 17,00% 15,00% 15,00% 13,00% 13,00% 11,00% 11,00% 9,00% 9,00% 7,00% 7,00% 5,00% 5,00% feb/16 feb/17 feb/18 feb/19 feb/16 feb/17 feb/18 feb/19 nov/16 nov/17 nov/18 nov/19 nov/16 nov/17 nov/18 nov/19 aug/16 aug/17 aug/18 aug/19 aug/16 aug/17 aug/18 aug/19 may/16 may/17 may/18 may/19 may/16 may/17 may/18 may/19

OT-NR 2 years OT-NR 3 years BT 91 days BT 182 days OT-NR 4 years OT-NR 5 years OT-NR OT 1,5 years OT-NR OT 6 years 10,00%

9,50% 9,00% 8,50% 8,00%

7,50% 7,00%

6,50% 6,00% 5,50%

5,00% fev/16 fev/17 fev/18 fev/19 nov/16 nov/17 nov/18 nov/19 mai/16 ago/16 mai/17 ago/17 mai/18 ago/18 mai/19 ago/19

OT-TXC 2 years OT-TXC 6 years

OT-TXC 7 years OT-TXC 5 years Source: BNA 22 • Annual Report and Accounts • 2019

Regarding medium and long-term National Treasury securities, namely Treasury Bonds in national currency indexed to the exchange rate, there were only operations in maturities of 6 and 7 years, with interest rates remaining unchanged at 5.25% and 5.50%, respectively. In relation to non-adjustable Treasury Bonds in local currency, interest rates were 20.00% (-1.00 p.p.), 22.25% (+0.25 p.p.), 23.25% (+0.25 p.p.) and 23.00% (-1.00 p.p.) in maturities of 1.5 years, 2 years, 3 years and 4 years, respectively. Part I – Macroeconomic Context • 23

PART II ANGOLAN BANKING SYSTEM 24 • Annual Report and Accounts • 2019

3. Performance of the Angolan Banking System

The persistent adverse macroeconomic environment has imposed several challenges on the banking sector, in particular the contribution to strengthen the credibility of the ﬁnancial system, the promotion of credit to the productive sector of the economy, the strengthening of the regulatory framework within the scope of corporate governance and internal control system, CB/FT, the effective implementation of risk-based supervision, as well as the maintenance of stability, solidity and resilience of the ﬁnancial system.

In this regard, with the objective of carrying out a comprehensive, robust and independent assessment of the risks inherent in the banks’ activities, in compliance with the BNA’s strategic plan, the Asset Quality Assessment (AQA) exercise was carried out for 13 banks in the system, whose aggregate assets represented 92.8% of the total banking system as at 31 December 2018, the results showed that the banking system is globally robust.

However, in order to mitigate the high credit risk, it urged the need for some banks to increase their credit impairment, with a negative impact on the performance of the banking sector, above all, negative results which in turn reduced the solvency of the banking sector, while remaining above the regulatory limit (10.00%).

3.1. Composition of the Banking System At the end of 2019, 26 financial banks were authorised to operate in the Angolan financial system, compared to 27 in 2018, of which 3 were public banks, 17 private domestic banks, 5 subsidiaries of foreign banks and 1 branch. In the last three years, there has been a decrease in the number of banks operating in the market, essentially due to the strengthening of the BNA’s intervention and supervision role in line with best international practices, with the main objective of ensuring stability in the financial system.

CHART 4: BANKING FINANCIAL INSTITUTIONS IN OPERATION

30 29 28 27 26 25 24 23 22 21 20 2016 2017 2018 2019

Source: BNA

3.2. Banking System Activity At the end of the 2019 ﬁnancial year, Banking System Assets were valued at around Kz 15.76 trillion, an increase of around Kz 2.86 trillion (22.21%) compared with the same period of the previous year, mainly inﬂuenced by an increase of 57.90% in investments in central banks and other credit institutions.

Assets denominated in foreign currency showed a higher representation with 51.50% and also a higher increase of Kz 1.78 trillion (28.14%) against Kz 1.08 trillion (16.48%) of assets in national currency, associated with the sharp depreciation of the national currency that occurred throughout 2019. Part II – Angolan Banking System • 25

With the economic slowdown continuing, the aggregate asset structure of the banking sector remained similar to that recorded in 2018. Thus, although it slowed down (15.07% compared to 27.84% in the same period of the previous year), the increase in funding for the State continued, via securities, remaining the largest item of banking assets, accounting for 32.46%, to the detriment of investments in credits3 , which accounted for 31.28%. However, it should be noted that credit in the payment system was the only asset item that recorded a negative variation (27.10%).

Chart 5:STRUCTURE OF TOTAL ASSETS

Other ﬁxed assets 18,00 30,00%

26,11% Commercial and industrial inventories and advances to 16,00 suppliers 25,00% Other assets

14,00 22,21%

20,55% Net Credit

12,00 20,00% Foreign exchange operations

10,00 Credits in the payment Kz Billion 15,00% system 8,00 Hedge derivatives with positive fair value

6,00 10,00% Securities

4,00 Applications in central banks and other credit institutions 5,00%

2,00 Cash and availabilities 1,15%

- 0,00% Annual Variation of Assets 2016 2017 2018 2019 Source: BNA

Bad debts were signiﬁcantly worsened, rising 42.45% on the previous year, standing at Kz 1.60 trillion. Since mid-2014, when structural imbalances began in the Angolan economy until the year 2019, the level of default tripled, i.e. there was a worsening of around 336%. This worsening was mainly due to an increase in the level of domestic public debt, currency depreciation and deﬁciencies in credit risk control policy.

Chart 6: BAD DEBTS OVER TOTAL LOANS

6,00 35,00%

30,00% 5,00

25,00% 4,00

20,00% 3,00

Billion 15,00% 2,00 10,00%

1,00 5,00%

- 0,00% 2017 2018 2019

Gross Credit Bad Credit Ratio of Default Source: BNA

3 Total gross credit 26 • Annual Report and Accounts • 2019

Total liabilities of the banking sector amounted to around Kz 14.12 trillion, an increase of Kz 3.04 trillion (27.45%), mainly inﬂuenced by the increase in customer resources and other loans by around Kz 2.35 trillion (24.97%). This remains the main source of funds for ﬁnancial institutions, with a weight of 83.35% of total liabilities, corresponding to Kz 11.77 trillion, of which 53.19% represented term deposits, with an increase of Kz 1.64 trillion (35.46%), higher than the increase of Kz 735.14 billion (15.87%) in sight deposits.

In relation to the sector of economic activity, the banking sector registered greater deposits in the sectors of “Individuals” (29.55%), Real Estate Activities, Rentals and Services Rendered to Employees” (21.28%), “Wholesale and Retail Trade” (11.54%) and “Other Collective, Social and Personal Services Activities” (9.81%). Chart 7:TOTAL LIABILITIES STRUCTURE Technical provisions 16 30,00% 27,45% Provisions

14 24,14% 25,00% Commercial and industrial suppliers Other liabilities 12 19,78% 20,00% Advances from customers

10 Subordinate liabilities 15,00% Foreign exchange operations (P) 8

10,00% Bonds in the payment Kz Billion system 6 Hedge derivatives with negative fair value 5,00% Financial liabilities at fair value 4 through proﬁt or loss -0,75% Responsibilities represented 0,00% by securities 2 Resources from central banks and other credit institutions

0 -5,00% Customer resources and other loans 2016 2017 2018 2019 Var. Annual Liabilities

In recent years, the banking sector has continued to show positive results, despite the economic slowdown. These results were mainly achieved by foreign exchange gains, reaching in 2018 a signiﬁcant increase of about Kz 363.04 billion (173.61%), which provided a sharp growth of 105.20% in banking income. Meanwhile, with the exchange rate regime changes that began in the ﬁrst quarter of 2018 and the subsequent liberalisation of the exchange rate in the last quarter of 2019, in the period under review several banks saw a decrease in their foreign exchange income, with a slight increase in net operating income (3.01%).

Associated to this and to the results of the second Assets Quality Assessment, there was the need for some banks to reinforce their credit impairment, thus leading to a loss of Kz 117.49 billion for the banking sector.

Gráﬁco 8: Resultados 1 600 80%

1 400 70% 1 200 60% 1 000 50% 800 40% 600 Kz Thousand millions 30% 400 20% 200 0 10% 2016 2017 2018 2019 -200 0%

Net income for the year Financial Margin

Banking product Financial margin/banking product (right axis) Part II – Angolan Banking System • 27

3.3. Main Indicators of the Banking System Considering the volume of non-performing loans in December 2019, the default ratio worsened from 26.97% to 32.40%. As a result, appetite for credit risk remained limited and against this background, the transformation ratio remained on a downward trend, falling from 44.15% to 41.88%.

As an effect of the negative results recorded in the period, both ROE (Return on Equity) and ROA (Return on Assets) were negative, with a sharp drop from 27.78% to 5.09% and from 4.74% to 0.82%, respectively.

The capacity of the banking sector to cover short-term liabilities in national currency increased from 20.11% to 25.40%, to the detriment of immediate liquidity in foreign currency, which fell from 35.51% to 32.78%.

Panel 6: IMMEDIATE LIQUIDITY RATIO AND TRANSFORMATION RATIO Transformation ratio (Kz billion) 40 Immediate liquidity ratios 12 60 11 30 10 50 9 8 40 7 20 6 30 % 5 4 20 10 3 2 10 1 0 0 - 2016 2017 2018 2019 2016 2017 2018 2019

Immediate liquidity FC (Level 1) Total gross credit Immediate liquidity NC (Level 1) Total Deposits Total gross credit/total deposits (right axis) Immediate liquidity NC and FC (Level 1)

With regard to the solvency ratio, after recording a sharp growth of 6.82 p.p. in 2018, due to the increase in the share capital paid up by banks, under Notice No. 02/2018 of 2 March, there was a decrease of 2.41 p.p. in 2019, due to the negative results recorded in the period. However, the banking sector remained solid and robust with capital levels above the regulatory limit.

CHART 9: REGULATORY SOLVENCY RATIO

2,50 30,00%

25,00% 2,00

20,00% 1,50

15,00% Kz Billion 1,00 10,00%

0,50 5,00%

- 0,00% 2016 2017 2018 2019

Regulatory Own Funds Regulatory Solvency Ratio 28 • Annual Report and Accounts • 2019

4. Performance of the Non-Banking Financial System Angolan

The promotion of non-banking financial institutions (IFNB) represents a challenge for the Angolan financial system, highlighting among other aspects, the promotion of the micro-business segment, the fight against poverty, the promotion of micro-finance, the adequate adoption of international accounting standards, the implementation of risk-based supervision, aggregating quantitative and qualitative information on the risks to which institutions are exposed, thus contributing to the strengthening of the credibility and robustness of the Angolan financial system.

The performance of the non-banking ﬁnancial system was also affected by the current macroeconomic environment, thus impacting on the volume of foreign exchange operations, remittances, microcredits granted, as well as the ability of microentrepreneurs, individuals and companies to repay loans, factors that contributed to the deceleration of loans granted and the increase in bad credit from microcredits.

4.1. Composition of the Non-Banking System The main areas of activity of the institutions under the supervision of the BNA are foreign exchange (purchase and sale of foreign currency), remittances (sending and receiving money to and from abroad) and micro-credit activity. There are 67 bu- reaux de change in activity, with a total of 119 branches, 17 micro-credit companies, with 45 branches, 12 payment service companies, with 24 branches and 1 credit cooperative, with only one branch. As for the geographical distribution, most of the NBFI’s are based in Luanda, with a representation of about 85%, followed by the province of Cabinda with 9%, Benguela and Uíge with 6% each.

In contrast to 2018, the non-banking ﬁnancial sector registered a decrease in its performance, on the one hand justiﬁed by the inactivity of some NBFI’s, resulting from the scarcity of foreign currency in recent years, consequently reducing the activity of these institutions, on the other hand, and more evident, by the sharp loss of purchasing power, resulting from the depreciation of the currency.

It should also be noted that the ﬂow of immigrants in the period under review has decreased sharply.

4.2. Activity of the Non-banking Financial System In view of the economic situation in recent years, the non-banking sector has been recording a sharp decline in the purchase of foreign currency and, consequently, in its sale.

In the period under review, the volume of foreign currency purchases by currency exchange ofﬁces reached the equivalent of USD 97.12 million, with the sales of foreign currency recording the equivalent amount of USD 46.76 million.

It should be noted that the difference between sales in foreign currency exchange transactions and the purchases of currency exchange ofﬁces was channelled into remittance operations. Part II – Angolan Banking System • 29

Chart 10: EXCHANGE OPERATIONS

1 000,00

800,00

600,00

400,00 USD Millions

200,00

- 2014 2015 2016 2017 2018 2019

Purchase of FC in USD Sale of FC in USD

In December 2019, the assets of currency exchange ofﬁces in activity fell by Kz 850.28 million (7.23%) compared with the same period of the previous year, thus recording the amount of Kz 10.91 billion. This reduction was mainly due to the decrease of Kz 362.78 million (4.76%) in Cash, considering its weight in total assets (66.55%). Other items also contributed to this performance, namely Liquidity Investments in Kz 207.47 million, Securities in Kz 144.65 million, Fixed Assets in Kz 102.47 million, Foreign Exchange Operations in Kz 62.12 million and Other Assets in Kz 6.68 million.

As for the results, in 2019 the currency exchange ofﬁces obtained positive results due to the operating proﬁt for the year.

PANEL 7: COMPOSITION OF TOTAL ASSETS AND LIABILITIES OF CURRENCY EXCHANGE OFFICES

Asset Structure Dec-18 Asset Structure Dec-19

Availabilities

Liquidity 14% applications 14% 65% Securities 16% Derivative ﬁnancial 17% instruments 1% 1% Credits in the 1% 67% 3% payment system 1%

Foreign exchange operations

Other values

Fixed Assets

Liability Structure Dec-19 Liability Structure Dec-18

Liquid funds raisings 4% 18% Raisings with securities 13%

3% Derivative ﬁnancial instruments 3% Bonds in the payment system

Foreign exchange 86% operations 72% Other raises

Other liabilities

Provisions for probable liabilities 30 • Annual Report and Accounts • 2019

4.2.2. Payment Service Providers The volume of remittances sent compared with those received has behaved in a similar way to recent years, but in rather small proportions.

In 2019, the volume of remittances sent abroad reached Kz 24.35 billion, equivalent to USD 70.63 million, of which the jurisdictions that beneﬁted the most were Portugal with 91.60%, Brazil with 1.71%, the United Arab Emirates with 1.63%, Namibia with 0.96% and Cape Verde with 0.52%, the remaining 63 countries representing only 3.58%.

The volume of remittances received from abroad reached Kz 1.29 billion, equivalent to USD 3.54 million. Portugal was also the country with the highest representation with 21.51%, followed by the United Kingdom with 13.32%, the United States with 11.31%, France with 10.47% and Brazil with 9.74%, and the remaining 106 countries with a representation of 33.65%.

It should be noted that the volume of receipts from remittance operations represents only about 5% of the volume of remittances abroad.

Chart 11: REMITTANCE OPERATIONS 120

100

60 Millions

USD 40

0 2016 2017 2018 2019

Sent Received

The companies providing payment services (remittances), in the period under analysis, registered a reduction of Kz 157.71 million in their assets, corresponding to a variation of 9.69% in relation to the same period of the previous year, standing at Kz 1.47 billion. This reduction was mainly due to a 65.51% decrease in the Other Assets item, despite Cash and Cash Equivalents, the item with the greatest weight, having increased by 28.88%.

Panel 8: COMPOSITION OF ASSETS AND TOTAL LIABILITIES OF PAYMENT COMPANIES

Asset Structure Dec-18 Asset Structure Dec-19

11% Availabilities 12% Liquidity applications 13% Securities

53% Credits in the payment 34% system 76% 1% Other values Fixed Assets

Liability Structure Dec-18 Liability Structure Dec-19

11% 13%

Bonds in the payment 31% system

Other liabilities

Provisions for 59% probable liabilities 87% Asset Structure Dec-18 Asset Structure Dec-19

11% Availabilities 12% Liquidity applications 13% Securities

53% Credits in the payment 34% system 76% 1% Other values Fixed Assets

Part II – Angolan Banking System • 31

Liability Structure Dec-18 Liability Structure Dec-19

11% 13%

Bonds in the payment 31% system

Other liabilities

Provisions for 59% probable liabilities 87%

4.2.3. Micro-credit companies O sistema não bancário, no período em análise, registou um aumento do volume de microcréditos concedidos no montante de Kz 1,55 mil milhões, comparativamente ao período homólogo, tendo sido beneﬁciados 24 163 microem- preendedores.

As taxas médias de juro praticadas tiveram um aumento de 19,79 p.p., comparativamente ao período homólogo.

PANEL 9: MICROCREDIT VOLUME AND INTEREST RATES

Annual Microcredit Volume 80,00% Annual Average Interest Rate 75,00% 8 000,00 70,00% 6 000,00 65,00% 60,00% 4 000,00 55,00%

Kz Millions 50,00% 2 000,00 45,00% 0,00 40,00% 2016 2017 2018 2019 2016 2017 2018 2019

With regard to the geographical distribution of micro-credit, the province of Luanda continues to stand out with the highest volume of credit granted, with a representation of 70.37%, followed by Cabinda with 6.55% and Uíge with 5.54%.

CHART 12: VOLUME OF MICROCREDIT BY PROVINCE IN 2019 6000

5000

4000

3000 Kz Millions 2000

1000

Luanda Cabinda Uíge Benguela Huambo Other 12 Provinces 32 • Annual Report and Accounts • 2019

The gross credit portfolio of credit unions stood at around Kz 59.13 million, rising Kz 1.68 million (2.94%) compared to the same period last year. The average monthly interest rate was 6.31%, beneﬁting 42 microentrepreneurs and was granted only in Luanda province.

In December 2019, the assets of micro-credit companies increased by Kz 3.26 billion, corresponding to 39.00% in relation to the same period of the previous year, reaching a ﬁgure of Kz 11.61 billion, essentially as a result of an increase of 19.08% in Cash and Credits Granted and 215.70% in relation to the same period of the previous year.

In 2019, micro-credit companies maintained the composition of their assets. In fact, in 2019, 68.38% of assets were made up of three items, namely Credits, Liquidity Investments and Securities, with 30.50%, 20.17% and 17.71% of total assets, respectively. On the other hand, 79.31% of assets in the same period were made up of three items, namely Loans, Liquidity Investments and Securities, with 35.60%, 26.35% and 17.35% of total assets, respectively.

PANEL 10: STRUCTURE OF TOTAL ASSETS OF CREDIT NBFI AND OTHERS

Asset Structure Dec-18 Asset Structure Dec-19

Availabilities 6% 10% 12% 14% Liquidity applications 5% 6% 26% Securities 20%

36% 30% Credits 17% 18% Other values

Fixed Assets

Regarding the total liabilities of micro-credit companies, this amounted to Kz 9.61 billion, having increased by Kz 2.74 billion, the equivalent of 40.02% over the same period. This growth was particularly due to the increase in Other Funding by around Kz 2.32 billion, representing 80.79% of total liabilities.

PANEL 11: STRUCTURE OF TOTAL NBFI CREDIT AND OTHER LIABILITIES

Liabitily Strucuture Dec-18 Liability Structure Dec-19 Financial Derivative Instruments

2% Other raises 1% 11% 1% 8% 9% 1% 8% Advances from customers 78% Other liabilities 81%

Provisions for probable liabilities

Technical provisions Part II – Angolan Banking System • 33

5. Payment System

From a conceptual point of view, the Angolan Payment System (Sistema de Pagamentos de Angola - SPA) means the set of instruments, banking procedures and interbank funds transfer subsystems designed to facilitate the circulation of currency in Angola. From a conceptual point of view, the Angolan Payment System (Sistema de Pagamentos de Angola - SPA) means the set of instruments, banking procedures and interbank funds transfer subsystems designed to facilitate the circulation of currency in Angola. The SPA is regulated by the BNA, in accordance with the provisions of the Act No. 05/05 of 29 July, the SPA Act, with a view to complying with the objectives of public interest deﬁned in the said Act Security, Operational Reliabi- lity, Efﬁciency and Transparency. In this context, the BNA and the Technical Council of the Angolan Payment System, among others, are actors in the SPA.

With regard to the architecture of the SPA, the composition has undergone a slight change in relation to the previous year, with the implementation of the Direct Debit Subsystem as an integral part of the retail systems. Thus, the SPA currently has the following sub-systems in operation:

– Real Time Payment System - SPTR;

– Multicaixa Subsystem - MCX;

– Credit Transfer Subsystem - STC;

– Check Clearing Subsystem - SCC;

– Direct Debit Subsystem -SD4.

It should be noted that actions to implement the Mobile and Instantaneous Transfers Subsystem (STMI) are currently being developed, and one of the focuses of the World Bank’s technical assistance to the BNA’s Payment System Department.

With regard to the processing of operations in the SPA, some 610 million operations were carried out in the period under review, to the amount of Kz 51.30 trillion. The growth in the number of operations, and in the share of sub-systems, reﬂects the positive evolution in the use of payment instruments. As regards MCX operations in particular, they accounted for about 98.06% of the total transactions processed in the SPA and increased by 29.51% in year-on-year terms, as a consequence of the greater use of cards compared to the other payment instruments of the SPA.

Table 5: Number and Amount of Transactions Processed in the Subsystems of the SPA5

2016 2017 2018 2019 Annual Var.(%) Number SPTR 248 364 219 081 239 170 250 786 4,86% SCC 447 000 319 185 229 092 131 443 -42,62% STC 6 693 119 9 999 553 10 624 595 11 480 368 8,05% MCX 304 937 270 386 885 525 461 963 891 598 278 419 29,51% Total 312 325 753 397 423 344 473 056 748 610 141 016 28,98% Amount SPTR 46 247 140 50 190 050 55 059 710 37 414 549 -32,05% SCC 1 199 968 927 793 801 938 549 295 -31,50% STC 1 679 401 3 268 958 4 007 528 5 507 455 37,43% MCX 3 156 945 4 380 576 5 655 223 7 823 729 38,35% Total 52 283 454 58 767 377 65 524 399 51 295 028 -21,72%

4 The Direct Debit System has been implemented, but it does not yet have statistical information, and technical adjustments are being implemented for its use and streamlining. 5 SCC and STC data include returned operations. Amount in Millions of Kz. 34 • Annual Report and Accounts • 2019

Chart 13: EVOLUTION OF THE USE OF PAYMENT INSTRUMENTS 500 8 000

7 000 400 6 000

300 5 000

4 000 Number Number 200 3 000

2 000 100 1 000

0 0 2016 2017 2018 2019

MT 102 103 Checks Transfer cred. (right axis) Lev+Pgt MCX (right axis.)

5.1. Operation of the SPTR The SPTR is a system operated by the BNA, aimed at processing high-value transactions (greater than or equal to Kz 20.00 million), where all transactions in national currency are settled, including those of retail systems and the securities market.

At the end of 2019, 31 ﬁnancial institutions participated in the SPTR, of which 28 were banking ﬁnancial institutions (minus one in relation to 2018, due to non-compliance with Notice No. 02/18 of 2 March on the adequacy of the minimum share capital and own funds), one State institution (Ministry of Finance) and two Financial Market Infrastructure (IMF)6, namely the Angolan Automated Clearing House and the Central Securities Depository (CEVAMA).

Panel 12: EVOLUTION OF OPERATIONS LIQUIDATED IN THE SPTR

300 000 60 000

Others 250 000 50 000 Clients 200 000 FX 40 000 Draw/Dep 30 000 150 000 Intrad. Kz millions SIGMA 20 000 100 000 Interb. 10 000 50 000

0 0 2016 2017 2018 2019 2016 2017 2018 2019

In terms of transactions processed, in 2019, the SPTR settled over 250 thousand transactions to the amount of Kz 37.41 trillion, representing an increase of 4.86% in terms of the number of transactions in relation to the previous year, inﬂuenced mainly by the increase in customer payment transactions. In turn, the amounts transacted registered a reduction of 32.05% in relation to the previous year, essentially due to the decrease in operations in the Interbank Monetary Market (MMI).

6 In accordance with the Financial Market Infrastructure Principles (FSIP) developed by the Committee on Payments and Market Infrastructure (CPMI) and the International Organization of Securities Commissions (IOSCO), published by the Bank for International Settlements (BIS) in April 2012, a Financial Market Infrastructure (IMF) is by deﬁnition a multilateral system between participating institutions, including the system operator, used for the clearing, settlement or recording of payments, securities, derivatives or other ﬁnancial transactions. Part II – Angolan Banking System • 35

5.2. Oversight of the SPA Oversight, or oversight of a system, consists in ensuring that the infrastructure components and markets for the provision of payment services function in a stable, efﬁcient and fair manner for all participants and users, controlling and minimising the risk of shocks transmitting to the economy by passing on through payment systems the failures of participants to settle their payment obligations, aspiring to achieve the level of institutional and technological development necessary to meet the payment needs of an open and growing economy.

In addition to the continuous analysis of the functioning of the systems and instruments of the SPA, which culminated in actions to induce change, the following standards were recommended and published at the level of compliance with the norms in force and standards internationally:

– Instruction No. 07/19, of 8 July, on value limits on transactions carried out in payment systems; – Instruction No. 03/19, of 03 April, on guarantees for settlement of balances in the automated clearing house in Angola; – Directive No. 002/DSP/DRO/2019 of 21 February, on the period of validity of payment cards; – Directive No. 04/DSP/DRO/2019 of April, on parameters for determining minimum guarantees and penalties for default in the automated clearing house of Angola.

In addition to the regulatory actions, participants were penalised for non-compliance with the minimum guarantee for settlement of clearing balances and for not conﬁrming the return ﬁle of cleared transfers in the OTC, as well as for not reporting statistical information on the mobile payments service.

In addition, a diagnosis was made by the World Bank on the Superintendence Policy based on the CPMI-IOSCO Prin- ciples of Financial Market Infrastructure. The aim of this diagnosis was to improve the BNA’s Superintendence Policy, ensuring better execution in the control and monitoring of IMF’s in the high-value and retail payments segment. The World Bank’s technical assistance was also intended to help in the creation of mechanisms to provide better control over market development and the emergence of new payment service providers, including companies that develop pla- tforms or technological solutions for the ﬁnancial area, namely, Fintech, blockchain and other payment systems players.

Also in this context, a diagnosis of the regulatory framework was made to ensure that the SPA has a legal basis consistent with best practices and international standards, and that it promotes access to and use of payment accounts, including mobile payments, as well as compliance with public interest objectives and full compliance with the CPMI- -IOSCO Principles for Financial Market Infrastructure (PIMF). As a result of this diagnosis, Law No. 05/05 of 29 July 2005 - the Angolan Payment System Law - is being revised and is expected to be published in the ﬁrst half of 2020.

With regard to the SPA’s innovation, the World Bank’s assistance has consisted of improving the deﬁnition of actions and policies aimed at addressing new trends in the international ﬁnancial sector with an impact on payment systems, namely, new payment service delivery paradigms, players, payment systems and instruments, types of human and institutional skills required. This pillar includes assistance from the World Bank in creating the necessary conditions for the implementation of the Mobile and Instantaneous Transfer System in Angola.

5.3. Outlook of the SPA Developments in the SPA reform are expected to ensure a better payments ecosystem as part of Angola’s payment systems development strategy. Therefore, with the reform of the SPA, it is expected to achieve greater efficiency and security in the functioning of the payment subsystems and instruments, contributing effectively to the stability of the Angolan financial system, taking into account the following benefits:

– Improvement of the legal framework;

– Fair and equitable competition among payment service providers;

– Improved cost-efﬁciency; 36 • Annual Report and Accounts • 2019

– Immediate availability of funds traded by participants;

– Strengthening the security, reliability and efﬁciency of the system;

– Improving the information and education of SPA users and payment service providers;

– Interoperability of the subsystems;

– Promotion of the SPA at regional and international level;

– Aligning the SPA with international best practices;

– Greater openness and approach to trends in the international ﬁnancial industry with an impact on payment systems (FinTech’s, Cryptocurrencies, Mobile and Instantaneous Payments, Regulatory Sandbox, among others).

In terms of regulation, the publication of the SPA Bill is expected and, consequently, the revision of the regulations related to the provision of electronic payment services, opening the way for new players and providers of ﬁnancial technology services (Fintech) and distributed registries (DLT). It is also envisaged that the implementation of the SPA’s laboratory will continue, with the aim of stimulating technological innovation so that the payment system may become increasingly efﬁcient.

With regard to retail payments, it should be noted that the implementation of the plan for the massiﬁcation of electronic payments is planned with the aim of dematerialising cash payments, i.e. to contribute to the gradual reduction of physical currency in circulation and to evolve towards electronic payments, with the diversiﬁed provision of automatic payment channels (ATMs, automated payment terminals and home banking solutions) and electronic payment instruments such as the card. Part II – Angolan Banking System • 37

PART III CENTRAL BANK POLICIES 38 • Annual Report and Accounts • 2019

6. Monetary Policy and Liquidity Management

6.1. The Monetary Policy Operational Framework - Policy Instruments As a result of the fragility of monetary policy transmission mechanisms, a transition strategy characterised by a monetary target regime was adopted, incorporating some principles of inﬂation targets.

Accordingly, the BNA adopted three instruments for the implementation of monetary policy:

a. Permanent Liquidity Provision and Absorption Facilities; b. Open Market Operations; c. Mandatory Reserves.

6.1.1. Permanent Lending and Liquidity Absorption Facilities The Permanent Liquidity Facilities are carried out on the initiative of banking financial institutions and aim to provide and absorb liquidity, as well as to control interbank market interest rates, since they define a corridor (maximum and minimum) for the definition of the interest rate at overnight maturity of the Interbank Monetary Market (MMI). In 2019, these operations were traded with overnight and 7-day maturities.

The Permanent Liquidity Facilities (FCLs) are reversible operations supported by Government Bonds in national currency (BT, OT and TBC) in the various maturities, aimed at providing liquidity to banking ﬁnancial institutions in overnight or 7-day maturity. The interest rate on these operations is predeﬁned by the BNA, in a meeting of the Monetary Policy Committee.

Contrary to the effect of the FCL, the Permanent Liquidity Absorption Facilities (FAL) correspond to deposits made by banking ﬁnancial institutions with the BNA, intended to absorb liquidity, without limits for the amounts deposited. The BNA has available operations with overnight maturities (FAO) and 7 days (FAL7), both with a zero rate until the end of October 2019, after this period, an interest rate of 10.00% was established for FAL7 in an extraordinary session of the CPM.

6.1.1.1. Open Market Operations (OMO) Despite the operational framework created in 2011, already providing for the use of Open Market Operations (OMO) with various speciﬁcations and different modes of operation, the BNA has made use only of Occasional Regularisation Operations, both for the provision and absorption of conventional liquidity. However, in 2019, new modalities were implemented for the OMO’s:

– Collaterized OMO - CDI, consist of liquidity absorption operations with a maturity of 45 days carried out at an interest rate of 14.50% for the allocation of the IDC (Import Documentary Credit) ceiling on the launch of the corresponding bids at around 50% of the actual countervalue in Kwanzas, in the quantity auction sections;

– Collaterized OMO MAX - IDC, in terms of characteristics are identical to collaterized OMO, only differs in the remuneration of the collateral required, which in turn depends on the amount applied;

– OMO convertible into foreign exchange - are conventional OMO operations taken in maturities from 7 to 63 days, however, in the period of maturity of the operations, the capital redeemed bid the price auction for acquisition and settlement of foreign exchange for all purposes.

These operations, referred to above, are executed at the initiative of the BNA by means of auctions, and bilateral procedures may also be used.

Thus, in the liquidity-providing operations, the BNA takes the initiative to buy securities from the commercial banks, by paying the securities, crediting the account of the commercial banks with the BNA. This operation translates into an increase in the amount of reserves held by them and hence, an expansion of the Monetary Base. Part III – Central Bank Policies • 39

In liquidity absorption operations, in turn, the BNA takes the initiative of selling securities to the commercial banks, such as the payment of securities, debiting the account of the commercial banks, reﬂecting the reduction in the quantity of reserves held by the commercial banks and also the contraction of the Monetary Base.

6.1.2. Compulsory Reserves The main purpose of the compulsory reserves or minimum cash holdings regime is to stabilise money market interest rates, allowing greater regulation of liquidity levels in the banking system.

6.2. Monetary Policy Objectives and Measures The ultimate goal of monetary policy is to ensure price stability, the prospect is to achieve inﬂation below one digit in the medium to long term.

6.2.1. Monetary Policy Measures In 2019, the BNA maintained regular interventions to absorb and provide liquidity in the money market, through the implementation of the WCO and used the other regulatory instruments, with particular emphasis on the overnight and intraday liquidity standing facilities (FCO and FCL) and the mandatory reserves. The reference interest rate remained unchanged at 15.75% until the end of May 2019 when it was decided to reduce it to 15.50% (minus 0.25 p.p.), a situation that continued until the end of the year.

In addition, the overnight liquidity facility interest rate rose from 15.75% in February 2019 to 15.50% in June 2019, at the end of the year, as a result of the pressure caused by the demand for liquidity, in November and December, rates of 25.00% and 30.02%, respectively, were reached. In turn, the rates of the Liquidity Absorption Facility with overnight and 7-day maturities were set at 0.00% and 10.00%, respectively.

The policies for setting up the Mandatory Reserves remained constant until the third quarter, having increased in the fourth quarter from 17.00% to 22.00%. Also, during this period, the BNA maintained the decision to set up the Compulsory Reserves only in cash.

After the increase in the coefﬁcient of Mandatory Reserves, it was found that the banking system as a whole did not have sufﬁcient free reserves to meet the increase in demand, in this respect BNA intervened in the market through open market operations to provide liquidity in order to avoid situations of default by the banks and, at certain times, through open market operations to provide liquidity in order to reduce or increase the level of liquidity in the market and thus restore equilibrium once again.

Gráﬁco 14: Evolução da Liquidez

1 500

1 300

1 100

900

700

Kz Millions 500

300

100

-100 1/dec 2/dec 3/dec 4/dec 5/dec 6/dec 7/dec 8/dec 9/dec 18/nov 19/nov 20/nov 21/nov 22/nov 23/nov 24/nov 25/nov 26/nov 27/nov 28/nov 29/nov 30/nov 10/dec 11/dec 12/dec 13/dec 14/dec 15/dec 16/dec 17/dec 18/dec -300 Titles and Contracts Captives 40 • Annual Report and Accounts • 2019

6.3. Monetary Market 6.3.1. Open Market Operations (OMO) As part of the liquidity regularisation through monetary operations, the overall volume of WBOs for liquidity absorption in 2019 was Kz 1.89 trillion and their impact on liquidity was Kz 148.25 billion, while open market operations to provide liquidity totalled around Kz 509.56 billion and contributed to a liquidity expansion of Kz 80.90 billion.

In net terms, the resulting impact of the two operations on the Monetary Base was a contraction of about Kz 58.18 billion.

Compared with 2018, the volume of OMO for absorption and lending in 2019 was up by around 446% and 553% respectively, demonstrating that the implementation of new modalities for OMO’s in the period under review had a positive impact, safeguarding the appropriate proportions.

The average OMO interest rates at the beginning of the year for the 7-day, 14-day, 28-day and 63-day maturities were 1.25%, 4.00%, 7.00% and 10.00%, respectively, but by the end of 2019 they stood at 13.00%, 11.40%, 13.33% and 23.00%, respectively. It should be noted that the overnight maturity was implemented in December 2019, with the rate set at 15.50%.

On the other hand, the average interest rates for the provision of liquidity were 15.50%, 30.41%, 23.00%, 15.50%, 25.00% and 25.00% for overnight maturities, 7, 28, 45, 60 and 90 days, respectively. It should be noted that these maturities were, in general, implemented in 2019.

6.3.2. Permanent Liquidity Facilities In 2019, recourse to the Liquidity Facility operations (FCO/FCL) allowed banking institutions to access overnight and 7-day maturity funding from the BNA under regulatory terms. The volume of these operations in the year totalled Kz 268.77 billion.

For the FAL7, the operations started to be remunerated only in the fourth quarter of the period under review, reaching the amount of Kz 63.20 billion.

In net terms, the existence of the lending and absorption facilities corridor resulted, in 2019, in the contraction of the Monetary Base in national currency of Kz 53.04 billion.

The National Bank of Angola also provided liquidity in Rediscount operations at the ﬁrst level and especially in the amounts of Kz 200.00 billion and Kz 6.05 billion, at 7.50% and 5.50% interest rates, respectively.

PANEL 13: INTEREST RATES OF MONETARY POLICY

36,00% 33,00% 27,00% 30,00% 27,00% 24,00% 24,00% 21,00% 21,00% 18,00% 18,00% 15,00% 15,00% 12,00% 12,00% 9,00% 6,00% 9,00% 3,00% 6,00% 0,00% 3,00% jul/18 jul/19 jan/18 jun/18 jan/19 jun/19 oct/18 oct/19 feb/18 apr/18 feb/19 apr/19 sep/18 nov/18 dec/18 sep/19 nov/19 dec/19 aug/18 aug/19 mar/18 mar/19 0,00% may/18 may/19 OMO 7d Taken OMO 14d Taken jul/18 jul/19 jan/18 jun/18 jan/19 jun/19 oct/18 oct/19 feb/18 apr/18 feb/19 apr/19 sep/18 nov/18 dec/18 sep/19 nov/19 dec/19 aug/18 aug/19 mar/18 mar/19 may/18 may/19 OMO 28d Taken OMO 63d Taken OMO Overnight Assing. OMO 07 d Assign. BNA Rate FAL 7 DAYS OMO 28 d Assign. OMO 45 d Assign. FAO FCO OMO 60 d Assisn. OMO 90 d Assing. Part III – Central Bank Policies • 41

6.4. Interbank Money Market As regards the interbank money market, liquidity-providing operations between banks fell signiﬁcantly by 58.63%, in monthly average terms from Kz 755.68 billion in 2018 to Kz 312.60 billion in 2019, justiﬁed by the slowdown in the demand for liquidity in the market, which may be at the root of the slowdown in economic activity, as well as greater predictability in the foreign exchange market.

PANEL 14: DEVELOPMENTS IN MMI RATES VS. TRADING VOLUME 2018 35 2018 2019 30 2019 1 400 000 30 25 1 200 000 25 1 000 000 20 20 15 800 000

15 % % 600 000 10 Kz millions 400 000 10 5 200 000 5 0 0 0 jul/18 jul/19 jan/18 jun/18 jan/19 jun/19 oct/18 oct/19 feb/18 apr/18 feb/19 apr/19 sep/18 nov/18 dec/18 sep/19 nov/19 dec/19 aug/18 aug/19 mar/18 mar/19 may/18 may/19 jul/18 jul/19 jan/18 jun/18 jan/19 jun/19 oct/18 oct/19 feb/18 apr/18 feb/19 apr/19 sep/18 nov/18 dec/18 sep/19 nov/19 dec/19 aug/18 aug/19 mar/18 mar/19 may/18 may/19 LUIBOR overnight 1 Month 3 Months 6 Months VOL - MMI LUIBOR overnight (right axis) 9 Months

The overnight LUIBOR, calculated on the basis of the exchange of liquidity between banking institutions, showed a downward trend until the end of the third quarter. This situation was reversed after the increase in the reserve requirement coefﬁcient, the overnight LUIBOR started, in the fourth quarter, an upward trend and reached a peak of 29.91%, the highest since its implementation in mid-December. At the end of December 2019, it resumed its downward trend, standing at 22.48% at the end of the year, showing an increase of 5.73 p.p. compared with December 2018 (16.75%).

LUIBOR in the remaining maturities 1, 3, 6, 9 and 12 months also showed a downward trend throughout the period under review, reversing the trend only in August and by the end of the year resumed the downward trend, standing in December at 19.53%, 19.66%, 19.19%, 19.24% and 20.55%, respectively, for each of the maturities, representing an increase of 2.72 p.p., 2.57 p.p., 1.84 p.p., 1.42 p.p. and 5.09 p.p., in comparison with the same period of the previous year.

6.5. Exchange Policy Instruments The exchange rate policy in 2019 was essentially marked by the total easing of the exchange rate, aiming at the elimination of distortions to the normal functioning of the economy.

Several measures were implemented in the course of 2019, of which the following should be highlighted:

– Elimination of the 2.00% margin on the reference exchange rate, practiced by commercial banks in the sale of foreign currency in the interbank market and to their customers;

– Creation of a new type of ceiling for the opening of letters of credit to imports (CDI), where it was required that part of the liquidity for CDI be captivated in cash at the BNA, and remunerated at the equivalent rates of open market operations;;

– Adjustment to the methodology for calculating the reference exchange rate:

a. On the days on which auctions are held, the reference exchange rate (sale) is the weighted average of the sale rates of the organised foreign exchange auctions, regardless of the amount sold;

b. On days when no auctions are held, the reference exchange rate (sale) is calculated on the basis of the weighted average of the sales in the interbank market, provided that the cumulative value of these sales is USD 20 million (twenty million US dollars) or more; 42 • Annual Report and Accounts • 2019

c. On days when neither auctions nor sales in the interbank market are carried out at a value higher than that established in the previous point, the previous reference rates are maintained.

– Deﬁnition of the maximum annual amount of USD 120,000 for private foreign exchange transactions, with the exception of those related to health and education expenses, which will not be subject to any limits, whenever they are paid directly to the institutions, in order to ensure greater ﬂexibility in sending foreign currency abroad;

– Authorisation for oil sector companies to sell to commercial banks. with which they have a business relationship, foreign currency for the settlement of goods and services provided by foreign exchange residents at an exchange rate freely negotiated between the parties;

– Reduction of the banks’ overall foreign exchange position from 5.00% to 2.50%, obliging them to sell the excess foreign exchange position on the interbank foreign exchange market or to the BNA immediately after sending the daily foreign exchange position limit map, and banks with short foreign exchange positions that do not comply with the limit should seek to buy foreign currency on the interbank foreign exchange market in order to restore their foreign exchange position within the limits.

The implementation of the above measures had a signiﬁcant effect on the behaviour not only of the reference exchange rate, but also of the differential between the reference exchange rates and the informal market exchange rate.

6.5.1. Primary Foreign Exchange Market As a result of the need for foreign exchange for the import of goods and services as well as the fulﬁlment of various external commitments, foreign exchange resources equivalent to USD 9.35 billion were placed on the primary foreign exchange market during 2019, compared to USD 13.47 billion in 2018, representing a reduction of 30.58%.

CHART 15: FOREIGN EXCHANGE SALES

16 000

14 000

12 000

10 000

8 000

USD Millions 6 000

4 000

2 000

0 2016 2017 2018 2019 Direct Sales

In 2019, in the primary market, the reference exchange rate of the Kwanza against the US Dollar closed at USD/Kz 482.23 against USD/Kz 308.61 in December 2018, representing a depreciation of approximately 36.00% of the Kwanza against the US Dollar. Part III – Central Bank Policies • 43

6.5.2. Secondary Foreign Exchange Market Kwanza, in the secondary foreign exchange market, depreciated by 36.81% at the end of 2019 in relation to the same period, from USD/Kz 310.55 in December 2018 to USD/Kz 491.50 in December 2019.

As a result of the foreign exchange market environment, all market segments witnessed the depreciation of the national currency.

TABLE 6: EXCHANGE RATES IN THE VARIOUS MARKETS

dec/16 dec/17 dec/18 dec/19 PRIMARY MARKET (USD/Kz) 165,90 165,92 308,61 482,23 Average variation (%) -18,44 -0,01 -46,23 -36,00 Secondary market - foreign currency (USD/Kz) 169,01 202,61 310,55 491,50 Average variation (%) -18,51 -16,59 -34,76 -36,81 Exchange Ofﬁces (USD/Kz) 378,40 248,00 330,98 535,11 Average variation (%) -41,58 52,58 -25,07 -38,15 44 • Annual Report and Accounts • 2019

7. Management of International Reserves The management of the International Reserves has as its basic principles the preservation of the capital, security and liquidity of the ﬁnancial assets that make up the structure of the BNA’s investment portfolio. This management takes into consideration the conservative risk proﬁle in the light of the current regulatory framework, namely, the Investment Policy, the Master Investment Guidelines and the Manual for Selection and Contracting of Counterparties, Custodians and External Managers, approved by the BNA’s Board of Directors, by means of Order No. 006/2019 of 7 February.

Accordingly, the objectives of the Investment Policy for the Management of International Reserves are as follows:

– Diversifying the investment portfolio taking into account new opportunities;

– Deﬁning the limits per type of ﬁnancial instrument and per exposure to portfolio risks;

– Defining the yield benchmark for the portfolio of assets under management and the limits of fluctuation against the defined reference portfolio (stop-loss);

– Restructuring and reducing exposure to external managers and the number of management companies;

– Adjusting the number of deposit correspondents as deﬁned in the Master Lines and the Counterparty Valua- tion Model;

– Deﬁning the powers of approval.

On 31 December 2019, the volume of Gross International Reserves (GER) amounted to USD 17.21 billion, corresponding to an expansion of 6.44% (USD 1.04 billion) compared to USD 16.17 billion on 31 December 2018. As for the Net International Reserves (RIL), they increased from USD 10.65 billion at the end of December 2018 to USD 11.71 billion at 31 December 2019, which represents an increase of 10.01%, thus standing above the minimum amount of USD 9.43 billion agreed between the Angolan Government and the IMF under the Extended Fund Facility (EFF).

This growth in external accounts in 2019 was to some extent justiﬁed by IMF disbursements of USD 1.50 billion, the issue of Eurobonds to the value of USD 3.00 billion, as well as the transfer of USD 1 billion from the Sovereign Fund of Angola (FSDEA) under the scope of the Integrated Plan for Intervention in Municipalities (PIIM) to be implemented by the Angolan Executive.

With regard to the evolution of the International Reserves by tranches, we highlight the reinforcement of the weighting to 50% of the liquidity tranche (weighting of 10.00% from 2018, based on the previous Investment Policy), adding USD 8.61 billion at the end of 2019, compared to USD 1.62 billion in 2018. The main factors behind this development were the increase in the maturity band limit based on the entry into force of the new Investment Policy, IMF resources, FSDEA, Eurobond issuance and the resources from the disinvestment process with external managers that continue to be profitable for very short maturities. In fact, there was a reduction in the weight of the transition tranche of around 1.00%, due to the maturity criteria for selecting tranches defined in the Investment Policy in force, when compared to the weighting criterion of around 40.00% defined in the previous Investment Policy. Thus, this tranche amounted to USD 172.11 million at the end of December 2019, compared to USD 6.47 billion in the same period of the previous year. In addition, the volume of the investment tranche showed moderate annual growth of 4.31%, increasing to USD 8.43 billion on 31 December 2019 compared with USD 8.09 billion at the end of 2018.

With regard to the evolution of tranches, it should be noted that, in addition to resources from the IMF, Eurobonds and FSDEA, the current Investment Policy deﬁnes the selection of tranches by asset maturity criteria (liquidity tranche housing assets with maturities of 0 to 6 months, The bridging tranche comprises assets with maturities from 6 months to 12 months and the investment tranche comprises assets with maturities from 12 months to 60 months), instead of the weighting criteria deﬁned in the previous Investment Policy (liquidity tranche 10.00%, bridging tranche 40.00% and investment tranche 50.00% of total International Reserves).

Regarding the disposal of International Reserves by asset classes, we highlight the weights of around 48% and 43%, referring to Debt Securities (sovereign, supranational, government and corporate agencies with high quality) and Money Market instruments, with amounts in the order of USD 8.47 billion and USD 7.56 billion at the end of 2019, compared with USD 8.36 billion and USD 6.92 billion as at 31 December 2018, respectively. In addition, the International Reserves included investments in Alternative Assets, Part III – Central Bank Policies • 45

namely Gold and Private Equity, whose market value contracted from USD 1.71 billion at the end of 2018 to USD 1.43 billion at De- cember 31, 2019, corresponding to a weight of approximately 8% of the total.

Meanwhile, investments were mainly focused on US Treasury Debt securities (Fixed Income Market), due to their higher level of remuneration and liquidity compared to their main counterparts worldwide. The impact of the Sino-American trade war favoured the holders of these assets, through the fall in price, to the detriment of the increase in yields. On the other hand, investments in money market instruments focused more on short maturity, due to the three Fed cuts in the basic interest rate. The Fed’s decisions resulted in the fall of Libor rates in the various maturities, embodying the reversal of the curves, i.e. short maturities being remunerated above longer maturities.

However, investments are made on the basis of the annual strategy approved by the Board of Directors, in accordance with the conservative proﬁle of the central bank, with a focus on preserving the capital invested, in line with good international practice emanating from international bodies, namely the International Monetary Fund and the World Bank, respectively. Accordingly, as at 31 December 2019, around 73% of the assets in the investment portfolio managed by the BNA had a high quality and low risk investment rating (ranging from AAA to A-, in accordance with the rating attributed by Standard & Poor’s, Moody’s and FicthRating).

TABLE 7: ALLOCATION BY ASSET CLASS

Asset Classes (%) 2018 2019 Money market instruments (bank deposits and equivalents) 40 43 Debt Securities (sovereign, supranational and government agencies) 49 48 Gold 4 5 Other investments 7 4

Source: BNA

With regard to the degree of exposure by currency, in the period in question the investment portfolio of the International Reserves was composed of assets denominated in US Dollars (weight of 90%), Pound Sterling (3%), Euro (1%) and Yuan (1%), respectively.

The average maturity of the investment portfolio was extended to 1.77 years at the end of 2019, compared to 1.67 years at 31 De- cember 2018. In addition, the weight of highly liquid assets in the investment portfolio remained high at around 91%, compared with around 90% in the same period of the previous year.

As for the risk assessment parameters, in 2019 the total Value at Risk of the portfolio stood at 1.31%, compared with 1.61% at the end of 2018, representing a decrease in the value of the maximum expected loss of the investments made in the period in question, justiﬁed to a certain extent by the continuous process of disinvesting high-risk assets, mainly through the portfolio under external management.

In turn, the average annualised return on the investment portfolio stood at around 6.62% in 2019, up from 5.44% in 2018. This evolution was based on the increase in the annualised Return on Term Deposits to 16.31% in 2019, compared with 13.05% in December 2018, due to the effect of the amount of investments in the money market, notwithstanding the fall in the basic interest rate by the Fed. 46 • Annual Report and Accounts • 2019

8. Impacts of Market Transactions on the Monetary Base and Monetary Aggregates Analysing the BNA’s Balance Sheet from an analytical point of view, it can be seen that in 2019 the Monetary Base expanded by 33.83% compared with the previous year, standing at Kz 2.29 trillion. This expansion was due to the 61.26% increase in Net Foreign Assets, fundamentally as a result of the exchange rate effect, with an increase of 3.20%, which in turn was inﬂuenced by the 71.90% expansion of BNA’s Reserve Assets (an increase of 10.01% removing the exchange rate effect). In turn, the Monetary Base in local currency (operational variable of monetary policy) expanded by 22.21%.

TABLE 8: MONETARY BASE 2018 2019 2018 2019 Kz billion T.V.H. (%) Monetary Base 1 708,60 2 286,62 5,45 33,83 Banknotes and coins in circulation 498,39 540,01 -5,56 8,35

Bank Reserves 1 210,21 1 746,61 10,77 44,32 Mandatory deposits 841,04 1 394,42 -5,66 65,80 Mandatory deposits - NC 584,15 923,17 -24,13 58,04 Mandatory deposits - FC 256,89 471,25 111,32 83,45 Free Deposits 369,17 352,18 83,67 -4,60 Free Deposits - NC 215,13 122,76 38,16 -42,94 Free Deposits - FC 154,04 229,42 240,08 48,94 Other obligations in relation to other monetary institutions 87,91 240,11 32,43 173,14

Memorandum: Monetary base in national currency 1 297,67 1 585,94 -10,71 22,21

The expansion of the Monetary Base in 2019 was reflected in an increase of 44.32% in the Banking Reserve and 8.35% in the Curren- cy in circulation. The positive evolution of the Banking Reserve is associated with the 65.80% expansion of the Compulsory Deposits, with Free Deposits contracting by 4.60%. However, it should be noted that the increase in the Compulsory Deposits was influenced by the increase in the coefficient of compulsory reserves for the national currency from 17.00% to 22.00%.

Analysing the Bank Reserve by currency shows that the Compulsory Deposits registered increases in both national and foreign currency by 58.04% and 83.45%, respectively. In relation to the Mandatory Reserves in foreign currency, these had an increase of 17.40%, removing the exchange rate effect. It should be noted that the increase in the Mandatory Reserves in national currency partly contributed to the reduction in Free Deposits in national currency, which was 42.94%. On the other hand, the Free Deposits in foreign currency expanded by 48.94%, as a result of the exchange rate effect (a decrease of 4.69% removing the exchange rate effect).

PANEL 15: BANK RESERVE - COMPULSORY AND FREE DEPOSITS

1 000 350 900 300 800 250 700 200 600 500 150 100 KZ Millions 400 300 50 200 0 100 2016 2017 2018 2019 0 2016 2017 2018 2019 Free Deposits - NC

Free Deposits - FC Mandatory deposits - NC Mandatory deposits - FC Other obligations in relation to other monetary institutions Part III – Central Bank Policies • 47

In the context of monetary issuance, in the ﬁnancial year 2019 the availability of banknotes and coins in the quality and quantity desired by the market was ensured.

During the period under review, the Banco Nacional de Angola issued 5.98% less notes (in quantity) than in the previous period, with the issue of 155 600 000 notes, compared with 165 500 000 notes in 2018. Contrary to the quantity scenario, in monetary terms there was an increase in the value issued by 27.99%, i.e. Kz 57.10 billion more than the amount issued in 2018.

At the end of 2019, the currency circulation was split into 368,746,343 banknotes and 426,221,313 coins, equivalent in monetary terms to a total of Kz 540.66 billion, made up of 98.25% banknotes (Kz 530.61 billion) and 1.75% coins (Kz 9.46 billion).

Compared with 2018, there was an increase in the quantity of banknotes by 0.32%, equivalent to the entry into circulation of 1,158,666 banknotes. The number of coins in circulation increased by 4.37%, i.e. 17 860 965 more coins than in the previous period. Financially, there was an expansion of 8.36%, i.e. Kz 41.65 billion more in circulation.

CHART 16: ISSUE VS. CURRENCY IN CIRCULATION

600 000,00

500 000,00

400 000,00

300 000,00 Kz Millions

200 000,00

100 000,00

0,00 Issue Monetary Circulation 2018 2019 48 • Annual Report and Accounts • 2019

9. Monetary Aggregates and the Balance of Payments

9.1. Evolution of Monetary Aggregates The stock of Net Domestic Credit in the year under review increased by 13.02%, which in turn was inﬂuenced by the expansion of the stock of Credit to the Economy by 22.23% and the stock of Net Credit to the Central Government by 0.24% compared with the previous period. On the other hand, Net External Assets registered an expansion of 65.47% in relation to the previous year, however, purging the exchange rate effect, they expanded 5.89%.

TABLE 9: MONETARY OVERVIEW 2018 2019 2018 2019 Kz billion T.V.H. (%) Liquid external assets 4 218,12 6 979,60 57,00 65,47 BNA 3 526,56 5 686,91 45,94 61,26 Net international reserves 3 285,45 5 647,73 45,73 71,90 Commercial banks 691,56 1 292,69 155,93 86,92 Net Internal Assets Net Internal Credit 36 358,73 32 395,10 848,05 -10,90 Net Credit to the Central Government 63 710,89 72 004,22 963,85 13,02 Credit to Central Government 26 678,48 26 741,26 930,87 0,24 Central Government Deposits 53 764,08 62 619,60 1 077,02 16,47 Credit to Economy 27 085,60 35 878,33 1 268,05 32,46 Other net assets 37 032,41 45 262,96 988,95 22,23 Outros activos líquidos -2 735,22 -3 960,91 27,01 44,81

Money supply in the broadest sense, represented by the monetary aggregate M3 expanded by 30.11% in relation to the previous year, reﬂected in the expansion of the monetary aggregate M2 by 30.21%. The increase in M3 reﬂects mainly the exchange rate depreciation, with the total deposits in foreign currency reported in national currency contracting by 4.80%. Thus, the monetary aggregates M2 and M3, without exchange rate effect, registered an increase of 5.54% and 5.60%, respectively.

TABLE 10: MONETARY AGGREGATES 2018 2019 2018 2019 Kz billion T.V.H. (%) M3 7 853,99 10 219,11 20,43 30,11 M3 NC 4 245,17 4 857,78 -6,10 14,43 M2 7 844,61 10 214,36 20,36 30,21 M2 NC 4 240,43 4 853,03 -6,21 14,45 M1 4 086,85 4 939,36 9,50 20,86 M1 NC 2 781,60 3 206,39 -1,54 15,27 Banknotes and Coins held by the public 373,03 418,99 -10,91 12,32 Sight Depósits 3 713,81 4 520,37 12,08 21,72 Sight Depósits - NC 2 408,56 2 787,40 0,09 15,73 Sight Depósits - FC 1 305,25 1 732,97 43,90 32,77

Near-Currency 3 757,76 5 275,00 34,90 40,38

Term Deposits - NC 1 458,83 1 646,64 -13,98 12,87 Term Deposits - FC 2 298,94 3 628,36 110,99 57,83 Other instruments similar to deposits* 9,38 4,75 132,89 -49,42

Nota: * Includes securities and repurchase agreements in national and foreign currency Part III – Central Bank Policies • 49

The monetary aggregate M2 totalled Kz 10.21 trillion (against Kz 7.84 trillion in 2018), reﬂected in an increase of 12.32% in Notes and Coins in Public ownership, Sight Deposits and Term Deposits (Almost currency), 21.72% and 40.38%, respectively. The expansion of the Sight Deposits was essentially due to an increase of 15.73% in the Sight Deposits in local currency, as well as of the Sight Deposits in foreign currency, which expanded by 32.77% (15.03% less purging the exchange rate effect). The increase in Term Deposits is justiﬁed by an increase of 57.83% in Term Deposits in foreign currency (an increase of 1.00% removing the exchange rate effect) and 12.87% in Term Deposits in national currency. M2 in national currency increased 14.45% compared to 2018, standing at Kz 4.85 trillion.

In aggregate terms, in 2019, Deposits in the banking system stood at Kz 9.80 trillion, an increase of 31.10% over the previous year. The positive evolution of deposits was inﬂuenced by the expansion of Deposits in foreign currency by 48.75% and Deposits in national currency by 14.65%. Excluding the exchange rate effect, Deposits in foreign currency contracted 4.80%, with Total Deposits expanding 5.27%.

The stock of credit to the economy increased by 22.23%, inﬂuenced by an increase of 33.25% in foreign currency credit and 18.77% in local currency credit, respectively. Excluding the exchange rate effect, the stock of Loans in foreign currency decreased by 14.72%, with an increase of 10.79% in the total stock of loans to the economy.

In terms of weight in the total stock of credit, it should be noted that in 2019 there was a similar scenario to that of the previous year, where most of it continues to be directed towards sectors that do not promote economic diversiﬁcation, namely the Wholesale and Retail Trade Sector accounted for 22, 04% of the total (22.29% in 2018), followed by Individuals with 14.38% (14.26% in 2018), Real Estate, Rentals and Services Provided to Companies with 13.70% (16.21% in 2018), Construction with 13.03% (12.11% in 2018) and Other Collective, Social and Personal Service Activities with 11.94% (11.50% in 2018).

However, in 2019, there was an increase in the weight of credit in the Extractive Industry (1.28 p.p.), Construction (0.92 p.p.), Transport, Warehousing and Communications (0.52 p.p.) and Other Collective, Social and Personal Services Activities (0.44 p.p.). It is also noted that key sectors for the process of economic diversiﬁcation continue to have a negligible weight on total credit granted, namely Manufacturing (8.12%), Agriculture, Animal Production, Hunting and Forestry (5.20%), Extractive Industry (3.10%) and Fisheries (0.36%).

With regard to ﬁnancing conditions in the banking sector, it should be noted that in 2019 interest rates on lending operations to the business sector in national currency fell over all maturities. Thus, interest rates on maturities of up to 180 days, from 181 days to 1 year and more than 1 year, fell by 5.44 p.p., 11.74 p.p. and 9.77 p.p. in relation to 2018, respectively, and oscillated, in annual average terms, between 17.55% and 19.45%, showing a reduction in the cost of ﬁnancing.

Interest rates on loans to individuals in national currency fell by 6.93 p.p., 0.68 p.p. and 1.68 p.p. in maturities of up to 180 days, 181 days to 1 year and more than 1 year, respectively. In average annual terms, rates in this credit segment oscillated between 18.45% and 24.69%.

7 Interest rates at the end of the period. 50 • Annual Report and Accounts • 2019

PANEL 16: INTEREST RATES ON CREDIT AND DEPOSITS IN THE BANKING SYSTEM7

40 35 37 32 34 29 31 26 23 28 % 25

% 20 17 22 14 19 11 16 8 5 13 10 jun/17 jun/18 jun/19 oct/17 oct/18 oct/19 feb/17 apr/17 feb/18 apr/18 feb/19 apr/19 dec/16 dec/17 dec/18 dec/19 aug/17 aug/18 aug/19 jun/17 jun/18 jun/19 oct/17 oct/18 oct/19 feb/17 apr/17 feb/18 apr/18 feb/19 apr/19 dec/16 dec/17 dec/18 dec/19 aug/17 aug/18 aug/19

Up to 180 days NC From 181 days to 1 year NC Up to 180 days NC From 181 days to 1 year NC Over 1 year NC Over 1 year NC

6 24 22 5 20 18 4 16 3 14 % % 12 2 10 8 1 6 4 0 2 jun/17 jun/18 jun/19 oct/17 oct/18 oct/19 feb/17 apr/17 feb/18 apr/18 feb/19 apr/19 dec/16 dec/17 dec/18 dec/19 aug/17 aug/18 aug/19 jun/17 jun/18 jun/19 oct/17 oct/18 oct/19 feb/17 apr/17 feb/18 apr/18 feb/19 apr/19 dec/16 dec/17 dec/18 dec/19 aug/17 aug/18 aug/19 DP up to 90 days FC DP up to 90 days NC DP 91 to 180 days NC DP 91 to 180 days FC DP 181 days - 1 year FC DP de 181 dias - 1 ano MN DP over 1 year NC DP over 1 year FC

The interest rates applied in the deposit operations in national currency had a mixed behaviour. In maturities of up to 90 days and from 91 to 180 days, decreases of 0.58 p.p. and 2.32 p.p., respectively, were recorded, while in maturities from 181 days to 1 year and more than 1 year, increases of 0.60 p.p. and 3.76 p.p., respectively, were recorded. These rates varied, in annual average terms, between 5.30% and 10.18%.

Similarly, interest rates on foreign currency liabilities fell by 0.49 p.p. 0.45 p.p. in maturities of up to 90 days and 91 to 180 days, respectively, while there were increases of 0.21 p.p. and 1.77 p.p. in maturities of 181 days to 1 year and more than 1 year, respectively. The rates under analysis, in annual average terms, ranged from 1.45% to 2.04%. .

In April 2019, BNA published Notice No. 4/2019 of 3 April on the granting of credit to the real sector of the economy, with the aim of stimulating the granting of credit by banking ﬁnancial institutions to national producers of essential goods, whose national production does not yet satisfy domestic demand. This credit may contribute to the promotion of diversiﬁcation of the Angolan real economy and, in this way, reduce excessive dependence on imports of goods and contribute to the sustainability of the country’s external accounts.

In the fourth quarter of the year, the BNA published Notice No. 7/2019 of 7 October on the granting of credit to the real sector of the economy, which aims to satisfy the need to broaden the range of national products considered essential and extinguish the priority to cover foreign exchange needs that directly or indirectly compete for the production of goods.

Thus, in the year 2019, within the scope of the abovementioned Notice, 119 projects were submitted to commercial banks, 45 of which were approved totalling Kz 232.51 billion, thus representing 112.60% of the 2.00% of banking sector assets as at 31 December 2018. Of this amount, 51.39% corresponded to restructured credits, 25.09% to undisbursed credits and 23.52% to new disbursed credits.

The sector that beneﬁted most from the loans granted was the Manufacturing sector with Kz 124.62 billion, of which 5.01% of the ﬁnancing was disbursed, followed by the Agriculture, Livestock, Hunting and Services Activities related to Kz 92.46 billion, of which 51.88% was disbursed and the Fisheries and Aquaculture sector with Kz 7.79 billion, of which 2.20% was disbursed.

With regard to the geographical distribution of approved ﬁnancing by province, Malanje received the largest share (Kz 115.70 billion), followed by Kwanza Norte (Kz 41.33 billion), Luanda (Kz 25.36 billion) and Kwanza Sul (Kz 19.49 billion). Part III – Central Bank Policies • 51

9.2. Balance of Payments Performance The Balance of Payments information reﬂects the accumulated up to the third quarter of 2019, of the set of real and ﬁnancial transactions carried out by the country with the rest of the world, it should be noted that the data analysed in this document are preliminary.

The downward trend in the price of oil on the international markets, as well as in the volume exported in 2019, had a negative inﬂuen- ce on Angola’s export revenues, leading to a slowdown in the performance of the economy’s external accounts, notwithstanding the current account surplus position.

Preliminary data up to the third quarter of 2019 showed a balance of payments deﬁcit of USD 756.19 million, against the accumulated deﬁcit of USD 336.68 million in the same period, which represented a deterioration of the balance of 126.60%.

9.1. Current Account AThe Balance of Payments Current Account, up to the third quarter of 2019, decreased from a surplus of USD 6.14 billion up to the third quarter of 2018 to a surplus of USD 3.23 billion in the period. Thus, the current account surplus up to the third quarter of 2019 corresponded to 4.81% of GDP, against a positive 7.35% in the same period of the previous year.

The performance of the Current Account was fundamentally based on the negative performance of the Assets Account, whose surplus balance reached USD 14.87 billion, against USD 19.13 billion in the same period of the previous year, a reduction of around 22.23%. The poor performance of this account was essentially due to the reduction in revenues from crude oil exports, driven in turn by the 9.32% drop in the price of Angolan crude, as well as the volume that fell by 29.01 million barrels (7.44%). The services and primary income accounts (which include donations, remittances and other transfers) improved their deﬁcit balances by 17.28% and 2.06%, respectively, while the secondary income account worsened its deﬁcit balance by 4.89%.

CHART 17: CURRENT ACCOUNT AND ITS COMPONENTS

25 000 20 000 15 000 10 000 5 000 0 USD Millions -5 000 -10 000 -15 000 2016 2017 2018* 2019*

Goods Services R. Primary R. secondary Current Account

Note: (*) Data up to III quarter

In turn, the amount of goods imports also fell by 8.48% in cumulative terms until the third quarter of 2019, about USD 1.02 billion, from USD 12.06 billion in 2018 to USD 11.04 billion in 2019, with emphasis on reducing imports of machinery, mechanical and electrical appliances (USD 423.92 million) and food (USD 222.00 million). It should be noted that in the period under review, compared to 2018, there was an increase in imports of paper or board and its works (USD 205.91 million) and of plastics, rubber, leather and hides (USD 41.66 million). 52 • Annual Report and Accounts • 2019

TABLE 11: MAIN IMPORTED PRODUCTS

USD million Product Category 2018* 2019* T.V.H. (%) Food goods 2 355,97 2 133,97 -9,42 Machinery, mechanical and electrical appliances 2 319,68 1 895,76 -18,27 Fuel 1 670,33 1 604,53 -3,94 Vehicles 1 705,80 1 577,51 -7,52 Chemical Products 877,01 779,69 -11,10 Construction Material 718,71 695,86 -3,18 Plastics, rubbers, fur and leather 499,23 540,89 8,35 Miscellaneous works 481,15 475,30 -1,22 Textiles and clothing 425,14 413,38 -2,77 Paper or cardboard and their works 153,07 358,98 134,52 Other products 857,76 564,91 -34,14 Total 12 063,84 11 040,80 -8,48

Nota: (*) Dados até III trimestre

France was the main country of origin of imported goods until the third quarter of 2019, with a cost estimated at USD 1.86 billion (16.86% of the total value), against USD 322.54 million in the same period of 2018. In the categories of goods imported from France, aircraft and boats, food and machinery, mechanical and electrical appliances led with a weight of 83.27%, 5.34% and 3.31%, respectively. It should be noted that in the period under review, a platform from the oil sector with a budget of over USD 1.50 billion was imported from France, a fact that resulted in the great rise of this country, making way for the usual leaders on the list (Portugal and China).

CHART 18: MAIN COUNTRIES OF IMPORTS

4 500 4 000 3 500 3 000 2 500 2 000 USD Millions 1 500 1 000 500 0 USA Togo India Brazil China France Belgium Portugal South Africa Rep. of Korea

2018* 2019* Note: (*) Data up to III quarter

In second position is China with USD 1.43 billion (13.00% of the total value), highlighting the import of machinery, mechanical and electrical appliances, construction material and plastics, rubbers, leather and leather with a weight of 38.97%, 14.93% and 10.41%, respectively.

Imports from Portugal, the country that originates from China, with USD 1.34 billion, represent 12.17% of the total expenditure of imports. Among the various goods imported from this country, the highlights are the imports of machinery, mechanical and electrical appliances, food and chemical products with a weight of 25.36%, 17.18% and 12.18%, respectively. Part III – Central Bank Policies • 53

9.2. Capital and Financial Account The accumulated data up to the third quarter of 2019 showed a decrease in the Capital and Financial Account deficit, with the negative balance standing at USD 1.81 billion, against a deficit of USD 6.39 billion recorded in the same period, representing an improvement of USD 4.58 billion, explained by the reduction of medium and long-term capital by 166.50%, as well as by the reduction of the net balance deficit of Foreign Direct Investment (FDI), which stood at around USD 1.07 billion, against a figure of USD 4.30 billion calculated up to the third quarter of 2018, which represents a reduction of 75.15%. It should be noted that FDI has a strong link with the performance of the oil sector in that its inflows depend essentially on the implementation of projects mainly linked to this sector.

CHART 19: FINANCIAL ACCOUNT AND ITS COMPONENTS

10 000 8 000 6 000 4 000 2 000 0 -2 000 USD Millions -4 000 -6 000 -8 000 -10 000 2016 2017 2018* 2019*

Direct Investment Medium and long term capital Other capitals Financial account

Note: (*) Data up to III quarter

The recovery of capital by the oil sector stood at USD 9.32 billion until the third quarter of 2019, against USD 9.78 billion in the same period, a decrease of 4.69%. With regard to external indebtedness, there was a reduction in disbursements of USD 2.53 billion from USD 6.62 billion up to the third quarter of 2018 to USD 4.09 billion up to the third quarter of 2019, while amortisation of external debt rose from USD 5.20 billion in 2018 to USD 5.03 billion in the period under review. Thus, the net ﬂow related to the external debt resulted in a negative balance of USD 943.51 billion in 2019, against a positive balance of USD 1.42 billion in 2018.

The Capital Account has shown residual amounts over the years, with the balance of the Capital and Financial Account being determined primarily by the Financial Account.

9.3. Evolution of International Reserves As previously mentioned, the position of the Gross International Reserves, on 31 December 2019, showed an increase of 6.44% (USD 1.04 billion), rising from USD 16.17 billion in 2018 to USD 17.21 billion in 2019, according to preliminary data, corresponding to a coverage of 8.39 months of imports of goods and services.

Also, in the same period, the Net International Reserves stood at USD 11.71 billion, compared with USD 10.65 billion in 2018, equivalent to an increase of 10.01%. 54 • Annual Report and Accounts • 2019

CHART 20 GROSS INTERNATIONAL RESERVES AND IMPORT COVERAGE RATIO

26 000 12

24 000 11 22 000 10 20 000 9 18 000

8 Months

USD millions 16 000 7 14 000

12 000 6

10 000 5 dec/16 dec/17 dec/18 dec- 2019*

Gross reservers Imports coverage ratio (right axis) Note: (*) Preliminary data

Overall, the Gross International Reserves at the end of 2019 remained at comfortable levels, with coverage above the SADC convergence target of 6 months of imports of goods and services. Part III – Central Bank Policies • 55

10. Corporate Governance and Internal Control System In terms of the requirements set out in Notice No. 01/13 of 19 April on Corporate Governance, it is reiterated that, within the scope of good practices, they constitute an effective instrument for the proper functioning of the banking sector and the economy, since weaknesses in governance models may result in significant financial losses, considerable impact on reputation, problems in terms of liquidity, misalignment of strategy or of its ethical and deontological values, imbalances in management, behaviour not in line with the interests of the institution, as well as jeopardising the effective and efficient performance of the management body.

In 2019, it was noted that banks showed improvements in terms of compliance with the requirements, in comparison to the same period in the previous year. These improvements resulted from statutory changes, at organisational, strategic, procedu- ral and operational levels, in particular with regard to the materialisation and operationalisation of procedures and processes inherent in the code of conduct, responsibilities and composition of governing bodies, deﬁnition of strategy and transparency in the disclosure of information.

However, a low level of implementation was also identiﬁed in the regulatory requirements concerning the distribution of portfolios, the appointment of the independent director, the implementation of processes concerning the prevention of conﬂicts of interest and related parties, as well as the operationalization of the bodies with delegated powers, namely risk management and internal control committees.

Challenges to the effective implementation of corporate governance requirements in the banking sector remain related to shortcomings in the implementation of relevant requirements, such as formalisation of training policies, conﬂicts of interest and related parties.

With regard to the internal control system envisaged in Notice No. 02/13 of 19 April, there was an improvement in the performance of the level of compliance with requirements compared with the same period of the previous year, where a large number of banks showed satisfactory progress in terms of operationalisation and adequacy of key functions of the internal control system, namely risk management, compliance and internal audit. 56 • Annual Report and Accounts • 2019

PART IV RELEVANT ACTIVITIES OF THE BNA PartePart IV IV – – Actividades Relevant Activities Relevantes of the do BNA • 57

11. Activities of the National Bank of Angola According to Act No. 16/10, of 15 July, the BNA’s main functions are to ensure the preservation of the value of the national currency and to participate in the deﬁnition of monetary, ﬁnancial and exchange rate policies.

Within this framework, the BNA is responsible for implementing, monitoring and controlling monetary, exchange rate and credit policies, managing the payment system and administering the current environment within the scope of the country’s economic policy.

In order to establish guidelines for the implementation of its main attributions, the BNA has constituted three collegial committees, namely the Monetary Policy Committee (CPM), the Financial Stability Committee (COMEF) and the Invest- ment Committee (CI).

11.1. Monetary Policy Committee The Monetary Policy Committee of the National Bank of Angola, abbreviated to the CPM, is a coordinating body in matters of Monetary Policy, which is responsible for establishing monetary policy guidelines, analysing and deciding on related matters, with a view to enabling the Bank’s Board of Directors to fulﬁl its duties.

The CPM’s objective is to ensure the preservation of the value of the national currency and the achievement of a low and stable level of inﬂation, as enshrined in the BNA’s Law. It is presided over by the Governor of the BNA and is composed of the following members:

i). Full Members:

– Governor; – Vice-Governor;

– Directors who are responsible for the areas of monetary and exchange rate policy.

ii). Permanent Invited Members:

– Department of Economic Studies (DEE), which acts as secretariat; – Department of Asset Markets (DMA); – Department of Statistics (DES); – Department of Payment Systems (DSP); – Reserve Management Department (DGR); – Foreign Exchange Control Department (DCC).

Meetings are held bimonthly and extraordinary meetings may be convened at the initiative of the Chairman.

Thus, throughout 2019, the CPM monitored the evolution of the economic environment both at a national and international level, on the basis of which it took the following decisions:

i). In its eightieth ordinary session, on 25 January, the CPM, considering the downward trend of year-on-year inﬂation in 2018, decided to reduce the BNA Rate from 16.50% to 15.75%, maintaining the other rates and the mandatory reserve coefﬁcients in national and foreign currency unchanged;

ii). In its eightieth ordinary session, on 24 May, the CPMR again reduced the BNA Rate from 15.75% to 15.50%. It also decided to keep the interest rates of the Permanent Liquidity Absorption Facility unchanged at 0.00% and the mandatory reserve coefﬁcients in national currency at 17.00% and 15.00% in foreign currency. These decisions were underpinned by the fact that year-on-year inﬂation continued its downward trend, as well as by the evolution of the Monetary Base in national currency, which had contracted in the last twelve months; 58 • Annual Report and Accounts • 2019

iii). On 23 October, the CPM met in extraordinary session to assess the implementation of monetary and exchange rate measures, following the phased reform of the foreign exchange market that started in January 2018. In this vein, a number of measures were taken within the scope of monetary and exchange rate policy, including the following:

– Maintain the basic interest rate “BNA Rate” unchanged at 15.50%;

– Establishing the interest rate at 10.00% for the permanent liquidity absorption facility, with a maturity of 7 days;

– Maintain the interest rate of 0.00% for the liquidity-absorbing permanent facility, with overnight maturity; – Adjust the reserve requirement coefﬁcient for the national currency from 17.00% to 22.00%;

– Remove the margin of 2.00% on the reference exchange rate, practiced by commercial banks when marketing foreign currency in the interbank market and with their clients. In addition, it decided to relax the limits applicable to the various payment instruments for importing goods.

iv). Finally, on 29 November, in its eightieth ordinary session, the CPM noted that the process of disinflation of the economy continued, despite the implementation of the Value Added Tax (VAT) and the liberalisation of the exchange rate, which occurred in October 2019. In this context, taking into account greater price stability and the consolidation of the floating exchange rate regime, it reiterated the maintenance of the restrictive course of monetary policy, through a finer management of liquidity in the system, with recourse to open market operations. Thus, it decided to maintain the BNA Rate at 15.50%, as well as the other rates and the mandatory reserve coefficients.

Some measures have been taken in the foreign exchange market, such as:

– Cease the acquisition by the BNA of foreign currency from the oil companies, with the latter having to sell it directly to commercial banks as from 2 January 2020;

– Reduce the limit of the commercial banks’ foreign exchange position from 5.00% to 2.50%, with effect from 02 January 2020.

11.2. Financial Stability Committee The Financial Stability Committee (COMEF) is a consultative body of the Management Board in the field of financial stability, supporting the definition of guidelines and strategies for the mitigation of systemic risk, as well as the adoption of macro-prudential policies in liaison with the other supervisory bodies of the national financial system.

The COMEF is responsible, on the one hand, for defining prevention mechanisms and contingency plans for the solution of financial crises and, on the other hand, for assessing macroeconomic implementation and the behaviour of the main variables that may affect financial stability, including the situation of the global financial system from the perspective of systemic risk and the probability of contagion at a national level. To this end, the behaviour of the main indicators of growth, profitability, liquidity and solvency of the Angolan financial system is analysed and evaluated, proposing policies that promote its solidity and efficiency.

This Committee is chaired by the Governor of BNA and includes the other members of the Board of Directors, members of the BNA’s governing body, whose matters are related to ﬁnancial stability, and other ﬁnancial system regulatory bodies and invited individuals may also participate. The COMEF meets ordinarily once a quarter and extraordinarily whenever convened by its Chairman.

In 2019, four quarterly meetings were held with the objective of identifying, assessing and proposing measures to mitigate the main risk factors of the Angolan financial system. In particular, the evolution of macroeconomic and financial vulnerabilities was analysed, including the analysis of the monetary sector, external sector, banking sector, credit monitoring, non-banking sector, payment system, exchange control, financial sector conduct, regulation and sanctioning processes, as well as financial inclusion. Part IV – Relevant Activities of the BNA • 59

In the course of 2019, the stability of the banking sector fluctuated in line with market conditions, i.e. in the first quarter of 2019 there was a deterioration in the stability of the banking sector compared with the same period of the previous year, mainly due to a decline in results, as well as in the levels of financial intermediation. With the settlement of credit impairment, which considerably mitigated the credit risk of the banking sector, there was a slight improvement in the second quarter compared with the same period of the previous year. Associated with this, the increase in foreign currency liquidity, as well as the lower depreciation of the Kwanza against foreign currency, this improvement continued until the third quarter. However, due to the negative performance (loss) of the sector, which consequently decreased solvency, as well as the sharp depreciation of the Kwanza against foreign currency, in the last quarter of the year, the stability of the banking sector was reduced compared to the last quarter of 2018.

Throughout the year, the following issues were highlighted:

a) Realisation and publication of the results of the asset quality assessment exercise - AQA;

b) Revision of the regulations on corporate governance requirements and internal control systems;

c) Revision of the basic law on ﬁnancial institutions and ML/TF;

d) Movement of accounts of private clients in foreign currency;

e) Revocation of licenses to 3 banks for insufﬁcient share capital and regulatory own funds;

f) Revocation of licenses to 6 exchange bureaus and 1 credit cooperative company, due to inactivity for a period longer than 6 months;

g) Monitoring the business model of banks with targeted activity;

h) Start of the equivalence project of regulation and supervision;

i) Regulations on the prevention and management of conﬂicts of interest;

j) Supervisory actions to banks that presented liquidity ratios below or very close to the regulatory minimum limit;

k) Draft amendment to the regulatory regime on microﬁnance institutions;

l) Revision of Notice No. 02/2010 of 20 October on the Central Credit Information and Risk Ofﬁce;

m) Revision of Notice No 11/2013, of 10 June, on the requirements and procedures for the special registration of ﬁnancial institutions and authorization to exercise the functions of members of corporate bodies.

11.3. Investment Committee The Investment Committee (IC) is an internal body of the BNA, created under Order No. 181/2010 of the Governor of the BNA, with the objective of supporting the Board of Directors in the definition, analysis, approval and monitoring of investments under the responsibility of the central bank in the international financial market. For this purpose, the evolution of the assets comprising the global investment portfolio (portfolio under internal management and portfolio under external management) is analysed and evaluated, taking into account security, liquidity and profitability.

In view of the brief notes set out above, the IC is responsible for the following:

i). Proposing to the Board of Directors the Master Lines for the management of the International Reserves under the responsibility of the BNA;

ii). Deﬁning, coordinating and monitoring the applications of the International Reserves under the responsibility of the BNA;

iii). Defining the market risk indicators for the applications of the International Reserves; iv). Defining and controlling the tactical Benchmark, taking into account the Strategic Plan defined by the Board of Directors of the BNA; 60 • Annual Report and Accounts • 2019

v). Supervising the compliance with the Investment Policies and Master Lines in the management of the Inter- national Reserves under the responsibility of the BNA; vi). Formulating opinions for improving the management of the International Reserves and submitting them to the BNA’s Board of Directors; vii). Proposing the model for selecting, contracting, monitoring and replacing external managers, based on proposals prepared by the DGR, based on previously defined performance indicators; viii). Periodically evaluate internal and external managers and replace those with poor performance, based on the proposal submitted by the RGD; ix). Following up and monitoring the results of internal management and proposing on the basis of the “Master Lines for International Reserve Management” and the allocation of resources between internal and external management; x). Monitoring the evolution of the markets in relation to new products, investment modalities and management practices, through material provided by the DGR and through participation in courses, lectures, seminars and other events related to matters of reserve management; xi). Monitoring macroeconomic and market variables that may influence international financial markets and BNA applications; xii). Anticipate the risks that may affect BNA’s investments in the international financial market and reserve management in general and forward to the Board of Directors all suggestions relating to the taking of precautionary measures, preserving the foreign exchange policy.

This Committee is chaired by the Governor of the BNA and includes the two Vice-Governors, three Directors and the members of the BNA’s Management Body, whose matters are related to the management of the International Reserves, and other individuals invited by the Chairman of the IC may also participate. The Committee meets ordinarily once a quarter whenever convened by the Chairperson, and extraordinarily at the request of one of its members, at least three working days in advance.

In 2019, three meetings of the Investment Committee were held, where a number of issues relating to the management of International Reserves were discussed, of which the following deliberations are of particular importance:

i). Approval of the 2019 Investment Strategy;

ii). Approval of the Investment Policy, Master Lines and Hiring Manual for Counterparties, Custodians and External Managers;

iii). Reduction of the exposure level of the portfolio under external management by up to 10.00%, being considered the SADC benchmark;

iv). Maintain the Investment Funds with the Carlyle Group and Riverstone until maturity, excluding the possibility of accepting any investment proposal in question;

v). Maintain the “UBS and Credit Agricole” managers until the contract renewal phase;

vi). Approval to change the name of the Investment Committee (IC) to the Reserve Management Committee (CGR), as in some SADC8 countries.

8 This Deliberation was formalized in 2020 by Order no. 07/2020 of 27 January. Part IV – Relevant Activities of the BNA • 61

12. Equity Situation and Financial and Budgetary Performance

12.1. Budgetary Performance The budget for the financial year 2019 foresaw a surplus of Kz 618.55 billion. However, the budget as at 31 December showed a surplus of Kz 336.28 billion, reflecting a 54.36% lower implementation rate than expected for the year. Thus, the accumulated budget result until the end of the year was mainly influenced by foreign exchange gains and interest and similar income which represent 52.12% and 24.63% of BNA’s revenue, respectively.

TABLE 12: 2019 BUDGET

Planned until Held until Degree Held until Approved Deviation % Implementation December 2019 December 2019 of execution December 2018 BNA Revenues Exchange gains 440 041 440 041 588 789 134% 34% 561 082 5% Interest and similar income 298 820 298 820 278 175 93% -7% 170 009 64% Gains in financial operations 15 453 15 453 241 120 1560% 1460% 79 469 203% Income from services and commissions 32 709 32 709 16 397 50% -50% 13 000 26% Other operational revenues 165 165 5 109 3097% 2997% 4 347 18% Total Expenses (BNA+UIF) (168 635) (168 635) (793 315) 470% 370% (727 108) 9% BNA Expenses (164 882) (164 882) (792 558) 481% -381% (727 108) 9% Administrative expenses (74 545) (74 545) (550 734) 739% -639% (203 221) 171% Operational and financial expenses (72 471) (72 471) (234 097) 323% -223% (515 275) -55% Investment expenses (17 866) (17 866) (7 726) 43% 57% (8 612) -10% UIF Expenses (3 753) (3 753) (757) 20% 80% - 100% Superavit / (Deficit) 618 554 618 554 336 275 54% -46% 100 799 234%

In view of the estimated budget for 2019, the following could be veriﬁed:

– Total income was 43.50% higher than expected, resulting from (i) the recognition of gains on financial operations, arising from results on available-for-sale financial assets, (ii) foreign exchange results and gains associated with exchange differences, due to changes in the exchange rate, (iii) interest and similar income on available-for-sale financial assets, interest on investments and on deposits with credit institutions abroad; – Total expenses were executed above schedule with a deviation of 370.43%, mainly explained by administrative, operating and financial expenses, arising from the increase in provisions, potential losses in fair value associated with the positions of portfolios managed by external entities and interest on repurchase agreements (REPO). 62 • Annual Report and Accounts • 2019

12.2. Main Changes in the Composition of the Balance Sheet TABLE 13: COMPOSITION OF THE BALANCE SHEET

(Values in millions of Kwanzas) 2019 2018 Variation Montante % ASSET 11 040 832 7 061 495 3 979 337 56% Gold 435 391 234 495 200 896 86% Assets abroad 8 509 576 5 268 297 3 241 279 62% Internal Assets 1 923 758 1 468 080 455 678 31% Tangible and Intangible assets 62 608 50 642 11 966 24% Other asset values 109 499 39 981 69 518 174% ASSET 9 216 104 6 176 112 3 039 992 49% Banknotes and coins in circulation 540 009 498 390 41 619 8% Bank Reserves 2 618 631 1 749 197 869 434 50% Interbank money market 240 110 87 881 152 229 173% Treasury Single Account 1 436 425 1 513 820 (77 395) -5% Deposit Guarantee Fund 14 408 - 14 408 100% Other internal responsibilities 1 684 404 530 196 1 154 208 218% Other external responsibilities 2 536 728 1 690 385 846 343 50% Other liabilities 145 389 106 243 39 146 37% EQUITY 1 824 728 885 383 939 345 106%

On 31 December 2019, BNA’s assets stood at Kz 11.04 trillion, representing an increase of Kz 3.98 trillion compared with 31 December 2018. This positive variation of 56.35% is explained by the following factors:

– A positive variation of Kz 3.24 trillion (+61.52%) in “Assets over abroad”, essentially explained by i) the disinvestment in portfolios managed by external entities, ii) the increase in investments in ﬁnancial assets available for sale, iii) the increase in investments in credit institutions and iv) the sale of foreign currency, payments made on instruction from the National Treasury and on behalf of BNA; – An increase of Kz 455.68 billion (+31.04%) in “Domestic Assets”, essentially due to i) the increase in securities for compliance with the mandatory foreign currency reserve and occasional liquidity-providing operations and ii) the updating of the fair value of the National Treasury Bond issued in July 2016, resulting from the change in the coupon interest rate from 0.00% to 12.00% on 18 March 2019; – Increase in the “Gold” position in Kz 200.90 billion (+85.67%), explained on the one hand by the variation in the Kwanza exchange rate against the US Dollar (36.00%), and on the other hand by the appreciation of its market quotation by 18.82%, from USD 1,281.58 on 31 December 2018 to USD 1,522.81 on 31 December 2019.

On the other hand, BNA’s liabilities totalled Kz 9.22 trillion, resulting in an increase of Kz 3.04 trillion (+49.22%) compared with 31 December 2018. The main variations in Liabilities are explained by the following facts:

– An increase of Kz 1.15 trillion (+217.69%) in “Other internal liabilities”, mainly explained by the increase in provisions and liabilities for pensions and other beneﬁts and the amount received from the Sovereign Fund of Angola; – An increase of Kz 869.43 billion (+49.70%) in “Bank Reserves”, explained by the increase in National Treasury Bonds in foreign currency delivered to comply with the mandatory reserve and the effect of the depreciation of the Kwanza against the US Dollar by about 36.00%; – An increase of Kz 846.34 billion (+50.07%) in “Other external liabilities”, mainly explained by the depreciation of the Kwanza against the US Dollar and the increase in interest on repurchase agreement (REPO) sales operations; Part IV – Relevant Activities of the BNA • 63

– An increase of Kz 152.23 billion (+173.22%) in “Interbank money market” operations, explained by the greater adherence of commercial banks to open market operations; – An increase of Kz 14.41 billion (100.00%) in the balance of the “Deposit Guarantee Fund”, resulting from the initial contributions of ﬁnancial institutions to it; – A decrease of Kz 77.40 billion (-5.11%) in the balance of the “Single Treasury Account” (CUT), substantially explained by the various payments made by instruction of the Ministry of Finance..

Regarding Equity, there was an increase of Kz 939.35 billion (+106.09%) justiﬁed by:

– the positive result for the year of Kz 90.09 billion; – An increase in “Revaluation Differences” of Kz 937.44 billion (+105%), mainly explained by the increase in “Foreign exchange revaluation differences” and “Fair value revaluation differences”, resulting from changes in the fair value of “Available-for-sale ﬁnancial assets” and “Gold”.

12.3. Evolution of results In the 2019 ﬁnancial year, the main indicators in the proﬁt and loss account developed as shown in the table below.

TABLE 14: MAIN INDICATORS IN THE PROFIT AND LOSS ACCOUNT

(Values in millions of Kwanzas) 2019 2018 Variation Montante % Financial Margin 211 009 131 778 79 231 60% Net Commissions 12 061 10 084 1 977 20% Results on ﬁnancial operations 88 921 (70 112) 159 033 227% Operational results 585 289 487 593 97 696 20% Operating results (807 189) (540 751) (266 438) -49% RESULT FOR THE YEAR 90 091 18 592 71 499 385%

A positive result of Kz 90.09 billion was recorded in 2019, with the positive variation over the previous year being explained essentially:

– An increase of Kz 79.23 billion (+60.12%) in “Net interest income”, justified by i) the accrual of interest and similar income from “Available for sale financial assets”, ii) the increase in interest on term deposits abroad and iii) the interest on financial assets granted to the State; – An increase of Kz 1.98 billion (+19.61%) in “Net commissions” as a result of the increase in commissions received for transactions with the Ministry of Finance and the reduction in commissions paid for banking services provided by third parties; – An increase of Kz 159.03 billion (+226.83%) in “Results from financial operations”, mainly due to i) the update of the fair value of National Treasury Bonds issued in July 2016, due to the change in the future coupon interest rate from 0.00% to 12.00% and for the gains generated in the sale of foreign and domestic sovereign debt securities recorded under the item “Financial assets available for sale” and ii) for the gains generated in the fair value adjustment and divestments of investments managed by external entities; – An increase of Kz 97.70 billion (+20.04%) in “Operating profit” arising mainly from foreign exchange results; – Reduction of Kz 266.44 billion (-49.27%) in “Operating profit” arising mainly from the:

a. Increase of Kz 352.86 billion (+181%) in administrative expenses, justiﬁed by i) the increase in staff costs, in the amount of Kz 350.18 billion, mainly due to the increase in pension and other beneﬁts liabilities, due to the actuarial assumptions update and ii) the increase in supplies and services and depreciation, in the amount of Kz 2.68 billion and Kz 1.06 billion, respectively; b. Increase of Kz 192.57 billion (+225%) in “Provisions net of replacements and write-offs” as a result of the increases in provisions for systemic risk in the banking sector and social fund. 64 • Annual Report and Accounts • 2019

13. Organization

13.1. Planning As part of the monitoring of the 2018-2022 Strategic Plan, NZIMBU, deﬁned on the basis of the pillars and strategic objectives illustrated in the ﬁgure below, for the execution of its Annual Activity Plans, the Organic Units (OUs) of the BNA had as a reference the Strategic Actions with a timeframe of 2019.

FIGURE 1: NZIMBU 2018 - 2022 OVERVIEW

Strategic Benchmark strategic pillars Strategic Objectives

SO 1 • Adopt policies which contribute to the Mission Pilar 1 macroeconomic stability. • Ensure price stability and the • Macroeconomic stability. SO 2 soundness of the ﬁnancial system • Guarantee the ﬁnancial system stability. SO 3 • Ensure the integration of payment system with Pilar 2 the international system. • Financial system stability. SO 4 Vision • Promote the credibility and strengten the institutional • Be a credible and competent relationship.

central bank in the strict fulﬁllment SO 5 of its institutional mission. Pilar 3 • Contribute to the deepening of ﬁnancial • Support the pursuit of inclusion and social responsability. public development Values SO 6 policies. • Reinforce the corporate governance model • Team spirit and the internal control system. • Transparency SO 7 • Integrity Pilar 4 • Ensure the optimization of the funcional • Competence • BNA Operation Model. structure and the maintenance of the infrastructure. SO 8 • Attitude • Reinforce the mission and competence culture of the human capital.

In view of the above, for the 2nd cycle of the NZIMBU 2019 - 2022, 206 deliveries of a strategic nature were deﬁned within the objectives illustrated in chart 23 below:

CHART 21: CONCLUSION OF DELIVERIES BY STRATEGIC OBJECTIVES 2019

45 OE 2 21

35 OE 7 27

35 OE 1 31

33 OE 5 13

24 OE 6 14

14 OE 4 13

13 OE 3 13

12 OE 8 8

0 5 10 15 20 25 30 35 40 45 50

Forecast deliveries Delivery Completed Part IV – Relevant Activities of the BNA • 65

The NZIMBU 2019 was implemented at a level of around 79%, in which it is important to highlight the balance of the prospects that contributed to this result:

– Society - 84%; – Financial System - 71%; – Internal processes - 76%; – Learning and Growth - 92%.

FIGURE 2: DEGREE OF IMPLEMENTATION

S.O 1: Adopt policies S.O 4: Promote the credibility and S.O 5: contribute to the deepening of Society 84% which contribute to the strengthen the institutional ﬁnancial indusion and social macroeconomic stability. 89% relationship. 92% responsibility. 76%

S.O 3: Ensure the integration of Financial S.O 2:Guarantee the ﬁnancial 71% the payment system with the System system stability. 82% international systems 100%

S.O 6: Reinforce the corporate S.O 7: Ensure the optimization of Internal 76% governance model and the functional structure and Processes internal control system. 67% maintenance of infrastructure. 83%

Learning and Growth 92% S.O 8: Reinforce the mission and competence culture of the humam capital. 92%

13.2. Processes Within the scope of the processes, for the period in question, the Process Governance Methodology was approved and the respective dissemination was carried out, which involved all BNA departments, ensuring understanding about the management of processes within the institution.

In addition, in 2019, the review of the procedures manuals of the various UO was begun, of which the following departments are particularly noteworthy: the Department of the Circulating Environment (DMC), the Department of Banking Supervision (DSB), the Department of Reserve Management (DGR), the Internal Audit Department (DAI), the Department of Organisation and Planning (DOP), the Department of Foreign Exchange Control (DCC), the Department of Asset Markets (DMA) and the Department of Financial System Regulation and Organisation (DRO).

13.3. Projects With regard to initiatives with an impact on processes, information systems, human resources and physical and technological infrastructure, during the period under analysis the BNA’s project portfolio comprised a total of 49 projects, of which the most structural stand out:

– Creation of the Financial Inclusion Observatory; – Upgrade of the SPTR for the Environment 24/7; – Implementation of the Instantaneous Mobile Transfer System; – Deposit Guarantee Fund; – Optimisation of the Other Financial Companies Module (OSF); – Inﬂation Expectations Index; – New version of SIGMA; – New version of OPICS; – Imparities Model; 66 • Annual Report and Accounts • 2019

– Integrated Management Support System; – IT Governance Model.

In turn, 6 projects were concluded in 2019:

– Deposit Guarantee Fund; – Optimisation of the Other Financial Companies Module (OSF); – Inﬂation Expectations Index; – Automation and Calculation of auctions; – Robotization of the reconciliation process; – Upgrade of the Bloomberg AIM Solution.

CHART 22: STRATEGIC OBJECTIVES VS. 2019 PROJECT PORTFOLIO

4 3 1 2

OE 1 OE 3 OE 4 OE 5 OE 7

13.4. Organization Within the organisation, initiatives in the ﬁeld of organisational development in line with the deﬁned objectives are highlighted:

i). Updating and implementation of standards and internal management tools, in particular:

– Revision of the Manual of General Principles of Organic Structure - MPGEO; – Revision of the Procurement Regulations and of the Goods, Services and Contracts Procurement Committee; – Revision of the Regulations of the Investment Committee (CI); – Revision of the Financial Stability Committee (COMEF) Regulations, and consequently the creation of the Financial Inclusion Sub-committee (SIF); – Creation of the Corporate Governance Committee and its subcommittees (Risk Management (RMS), Informa- tion Technology Governance (ITG), Human Capital (HCH) and Ethics (SET)); – Creation of the Bolsa de Educadores Financeiros (Financial Educators Grant) - BEF; – Creation of the Conference Cycle of the National Bank of Angola; – Implementation of different policies, namely Risk Management and Compliance, Anti Money Laundering, and Governance and Management of Regional Delegations; – Homologation of the Process Governance Methodology. Part IV – Relevant Activities of the BNA • 67

ii). Adequacy of the organic and functional structure of the BNA, focusing on the following:

– Centralisation of the sanctioning action process; – Centralisation of the bidding process (Procurement); – Disaggregation of supervisory processes by banking and non-banking ﬁnancial institutions; – Restructuring of the Banking Operations Department (DOB) and the Payments System Department (DSP); – Creation of the Credit Monitoring Ofﬁce (GAC).

A total of 156 internal and external communication documents were issued and standardised within the scope of the review and adequacy of the regulatory system, 15 Notices, 19 Instructions and 122 Orders, distributed according to table 18 below:

TABLE 3: DOCUMENTS AND REGULATIONS ISSUED

Order Notices Instructions Year Monetary Monetary Organiza- Nomina- End of Com- Public Monetary Financial Payment Financial Payment Projects and Exchan- and Exchan- tion tions mission Tender Circulation System System System System ge Policy ge Policy

2019 51 18 15 4 24 10 11 3 1 4 12 3

Total 122 15 19 68 • Annual Report and Accounts • 2019

14. Regulation and Organization of the Financial System

As part of the ongoing adaptation of the regulatory framework and supervision processes to the requirements of Basel II and III, in 2019, the BNA approved and published a range of 52 regulations, namely 14 Notices, 19 Instructions and 19 Directives, as can be seen in the Annexes (issued regulations).

Considering that the process of adapting the Angolan Financial System to good international practices is continuous, especially with regard to the recommendations of the Basel Committee on Banking Supervision, there are still some matters to be regulated and developed. Thus, the BNA has drawn up a macroplan which is being implemented (Figure 3), with a view to materialising this desire.

With regard to the process of monitoring the full adoption of international accounting and ﬁnancial reporting standards (IAS/IFRS) by the national banking sector, various activities have been carried out, namely:

i). Updating of the Plan of Accounts of financial institutions (Adjusted CONTIF), following the entry into force of the International Financial Reporting Standard IFRS 9 - Financial Instruments; ii). Presentation of a proposal regarding the standardisation of the reporting models for the financial sector, within the scope of the publication of Executive Decree No. 456/17, of 2 October, regarding the reporting models for taxes; iii). Monitoring of the implementation plan of IFRS 9 - Financial Instruments, at the level of financial banking institutions; iv). Updating of complementary regulations arising from the entry into force of IFRS 9; v). Analysis of the action plans reported by financial institutions, within the scope of the implementation of IFRS 9; vi). Completion of the third stage of the full adoption of IAS/IFRS project.

With regard to the organisation of the ﬁnancial system, within the scope of its attributions, the BNA carried out the special registration of 42 authorisation processes for members of corporate bodies of banking and non-banking ﬁnan- cial institutions, 2 processes for the special registration of directors by co-option, 8 authorisation processes for the special registration of directors with relevant management functions and 20 authorisation processes for the special registration of statutory amendments.

The BNA granted 18 authorisation processes for share capital increases, 4 authorisation processes for contracting the external auditor, 6 authorisation processes for statutory amendments, 5 authorisation processes for the transfer of shares, 1 cancellation process for the transfer of shares of a banking financial institution, 2 processes for representative office establishments, 1 process for establishing a subsidiary of a banking financial institution, 1 procedure for refusal to enforce a bank guarantee issued by a financial institution, 1 procedure for recognition of the expiry of 16 non-banking financial institutions, 1 procedure for closure of a representative office, 1 procedure for extension of the start of operations of a representative office of a financial institution and 1 procedure for refusal to enforce a bank guarantee issued by a financial institution.

In the meantime, 918 proceedings have been initiated, 500 of which have been concluded resulting in ﬁnes totalling Kz 907.16 million.

A Manual of Procedures for the Sanctioning Action was prepared and discussed at a meeting of the Board of Directors and changes were recommended and are under review.

Finally, 2 applications were developed on Licensing and Registration processes, as well as compliance investigations of the BNA’s standards. Part IV – Relevant Activities of the BNA • 69

FIGURE 3: MACRO PLAN IN EXECUTION 2017 2018 2019 2020 2021 2022 LEVEL I • ICAAP • Leverage Ratio • Effort Tests • Deﬁnition of capital • ECAIS • ILAAP • Risk Governance • Effective use of MAIF • Leverage Ratio • Follow up on the IFS on Basel II • Capital Buffer • Proviasion of information on prudential limits • Basel II internal model approach • Counter cyde capital buffer • Effectiveimplementation of IAS/IFRS • Recovery plan and resolution • SIBs (Global and Domestic) • Monitoring of action plans • Protocolary procedures • IFRS standards update • Frame of Consolidared Supervision • analysis of impairment models for credit • Implementation of techonological solution on impairment

Effective Supervision

LEVEL II • Advanced credit, market and operational risk methods • Titularizations • Counterparty credit risk • Market risk environment according to BII • Baking exposure to central counterparties (CCPs) • Subcontracting of supervisory services (regulatory) • Disclosure requirements BII/III (continuation) LEVEL I: Minimum to be development Effective Supervision LEVEL II: Next stage of evolution 70 • Annual Report and Accounts • 2019

15. Risk Management and Compliance

The BNA is exposed to ﬁnancial and non-ﬁnancial risks, originating from internal and external factors that may jeopardise the achievement of its strategic objectives. In order to mitigate these risks, BNA is committed to a robust risk culture and has implemented a framework that promotes their integrated management.

To this end, the BNA has implemented the Three Lines of Defence Model for the segregation of functions related to risk management.

In order to strengthen the corporate governance model and internal control system, the Board of Directors of the BNA reviewed and implemented the following:

– Revised risk management and compliance policies: These policies aim to provide guidelines for a systematic, comprehensive and coordinated management of the BNA’s risks; – Implementation of a transaction monitoring tool: This aims to monitor payments made by the BNA, generating alerts for transactions outside its proﬁle.

Also, within the scope of strengthening the internal control measures to ensure compliance at the BNA, the following has been developed:

– Financial risk reporting structure: This aims to ensure that the management of internal and external assets are aligned with the measures deﬁned by the BNA (investment policy, master lines for the management of international reserves and rediscount operations) and to allow an integrated view of risks; – Business impact analysis: This analysis aims to have an overview of the BNA’s key processes (maximum downtime and recovery requirements for critical processes), which serves as the basis for the design of the BNA’s Business Continuity strategy.

The following dissemination and training activities were carried out within the scope of the BNA workers’ capacity building action:

– Organisation of the Risk Management Week: directed at risk partners with the aim of guaranteeing the effective implementation and maintenance in their units of these tools; – Organisation of the Compliance Week: directed at workers with the objective of training them in Complian- ce and ML/TF matters; – International Business Continuity Awareness Week, under the slogan “Investing in Resilience”: a cycle of workshops and a competition (awarded with purchasing vouchers) was held. The initiative was aimed at strengthening the culture of organisational resilience and business continuity at the BNA.. Part IV – Relevant Activities of the BNA • 71

16. Global Analysis of Product Licensing, Services and Advertising Campaigns

In 2019, the volume of licensing processes by the BNA, which encompassed product, service and advertising campaign processes, registered an increase of 7.34% (16 processes) compared with 2018.

CHART 23: NUMBER OF PRODUCT LICENSING PROCESSES

Products/Services 153 155

Advertising Campaigns 65 79

2018 2019

16.1. Numbers of Products and Services Processes As for the ﬁnancial products and services submitted for appraisal and validation, there were a total of 155 related cases, representing an increase of 1.31% (2 cases) compared to 2018. As for the category by documental support, the FTI represented a large part of the volume of processes submitted by ﬁnancial institutions, with a weight of 55.48%, totaling 86 processes

GRAPH 24: NUMBERS OF PRODUCTS AND SERVICES PROCESSES

Contracts 55 51

FTI´s 82 86

Account Form 13 17

Code of Conduct Manuals 1

Others 3

2018 2019 72 • Annual Report and Accounts • 2019

16.2. Numbers of Advertising Campaigns During the period in question, the financial institutions submitted 79 advertising campaign files for appraisal by the BNA, representing an increase of 21.54% (14 files) in relation to the same period in the previous year. In relation to the advertising media, the posters/ flyers represented a weight of 41.77%, totalling 33 cases.

CHART 25: VOLUME OF ADVERTISING CAMPAIGN PROCESSES

TV 7 9

Radio 9 4

Press 14 14

Folders/Leaﬂets 24 33

Internet/Mailings 9 17

SMS 2 2

2018 2019

16.3. Inspections 16.3.1. Off-Site Off-site inspections are carried out at a distance, without the BNA inspectors travelling to the ﬁnancial institutions, checking the information available on their websites, as well as the information reported to the BNA: (i) prices (commission and expense tables and interest rates); (ii) payment card tariffs; (iii) the number of active customers of the ﬁnancial institutions, technical information sheets on term deposits, general conditions for the use of payment cards.

In 2019, a total of 343 inspections were carried out on 26 ﬁnancial institutions, representing an increase of 47.84% over the same period.

CHART 26:OFF SITE INSPECTIONS

232

2018 369

2019 Part IV – Relevant Activities of the BNA • 73

These actions were aimed at assessing the degree of compliance with the rules of conduct, general duties of information and other legal and regulatory norms in force, and some non-conformities were identiﬁed, which deserved a recommendation or proposal for the initiation of sanction proceedings, depending on the seriousness of the irregularity

16.3.2. On-Site On-site inspections are characterised by the presence of BNA inspectors at the headquarters and agencies of ﬁnancial institutions and can take two types, accredited onsite inspections and “mystery client” inspections. With regard to accredited onsite inspections, 244 inspections were carried out during the period in question, resulting in an increase of 320.69% in relation to the corresponding period, the aim of which was to (i) to assess the degree of compliance with foreign exchange margins in the marketing of foreign currency; (ii) commissions charged for the loading and use of international ﬂag cards; (iii) complaints by consumers; (iv) commissions charged for foreign exchange transactions; (v) compliance with deadlines in the execution of transfers of values in national currency; (vi) compliance with the regulations on exemptions from the charging of minimum banking services.

CHART 27:ON SITE INSPECTIONS

2018 2019 244

In addition, 631 “mystery client” type inspections were carried out, in which the inspector poses as an ordinary consumer in order to assess the conduct of professionals in ﬁnancial institutions, in compliance with current regulations, resulting in an increase of 92.38% over the same period.

CHART 28: MYSTERY CLIENT INSPECTIONS

328 2018 631 2019

During the period under review, the evolution of interest rates offered on term deposits, commissions charged on the return of cheques to the beneficiary, account maintenance commissions, the issue and annuity of multicaixa cards and credit cards, commissions for opening consumer credit, commissions on transfers of values in national and foreign currency and on the loading of prepaid international flag cards were also monitored. In this direction, there was an increase in existing commissions and the creation of other commissions in the prices of banking financial institutions in comparison to 2018. 74 • Annual Report and Accounts • 2019

16.4. Complaints Management The analysis of complaints constitutes a barometer for measuring compliance with the rules in force by the supervised institutions, which are relevant to the activities of supervising the conduct of the financial market, and these include those presented to financial institutions and reported to the BNA, as well as those submitted by consumers of financial products and services directly for the supervisor’s analysis.

Thus, during 2019, the ﬁnancial system registered a total of 23,930 complaints, representing an increase of 17.72% (3602 complaints) compared to 2018 (20,328 complaints). Of this total of complaints, 12,781 related to domestic private banks, 3408 to foreign parent banks and 7741 to domestic public banks, as illustrated in Chart 31 below.

CHART 29: COMPLAINTS BY TYPE OF BANK 25 000

20 000

15 000

10 000 Number of complaints 5 000

0 National private banks Foreign private banks Public banks

2018 2019

Source: BNA and Banking ﬁnancial institutions

16.4.1 Complaint Subjects With regard to the share of the most frequently claimed matters, those related to payment cards, automatic teller machine and automatic payment terminal (TPA), deposit accounts, transfers, internet banking, credit and foreign operations should be highlighted. The 7 most complained subjects represent 91.07% (21,794 complaints) of total complaints.

Table 16: COMPLAINTS BY SUBJECT

Annual Variation Weight Most complained subjects 2018 2019 (%) Absolute 2018 2019 Payment cards 5 723 5 470 -4,42% -253 28,15% 22,86% ATM and Automatic Payment Terminal 3 055 5 210 70,54% 2 155 15,03% 21,77% Deposit accounts 2 992 4 330 44,72% 1 338 14,72% 18,09% Internet and Mobile Banking 1 791 1 605 -10,39% -186 8,81% 6,71% Operations with foreign countries 1 889 1 265 -33,03% -624 9,29% 5,29% Transfers 2 208 2 339 5,93% 131 10,86% 9,77% Credit 797 1 575 97,62% 778 3,92% 6,58% Services 627 631 0,64% 4 3,08% 2,64% Foreign exchange operations 287 251 -12,54% -36 1,41% 1,05% Others 959 1 254 30,76% 295 4,72% 5,24% Total 20 328 23 930 17,72% 3 601 100,00% 100,00%

It should be noted that the high number of complaints about transfers and operations abroad is essentially the result of delays in making funds available to beneﬁcial owners and the remainder is related to increased awareness among consumers of ﬁnancial products and services of their rights and duties. Part IV – Relevant Activities of the BNA • 75

16.4.2. TABLE 16: COMPLAINTS BY RESULT In the period under review, of the total number of complaints registered in the Angolan ﬁnancial system, 13,686 were concluded, corresponding to 57.19% of the total, the remainder being in progress9.

TABLE 17: COMPLAINTS BY RESULT

Number of complaints received by ﬁnancial institutions Status of complaints Weight 2018 2019 Variation 2018 2019 Completed 14 862 13 686 -7,91% 73,11% 57,19% Under analysis 5 466 10 244 87,41% 26,89% 42,81% Total 20 328 23 930 17,72% 100,00% 100,00%

9 It should be noted that in 2019 the National Bank of Angola concluded 69% of the complaints submitted by consumers of ﬁnancial products and services / Source: Consumer Portal 76 • Annual Report and Accounts • 2019

17. Prevention of Money Laundering and Terrorist Financing Policy

In 2019, the ﬁnal phase of the exercise of the National Risk Assessment of Angola was concluded with the holding of the III Workshop organised by the World Bank, where it was possible to discuss (i) the results of the national risk assessment (ii) the action plans and (iii) the strategy of the National Risk Assessment for the coming years.

In addition, the conclusion of the process of revision of Law 34/11 of 12 December - Act on Combating Money Launde- ring and Terrorist Financing.

In May 2019, in order to verify the technical compliance of Angola’s legal framework in matters of Prevention to the ML/TF with the recommendations of the Financial Action Task Force, the BNA and the Financial Intelligence Unit (FIU) began to complete the Technical Compliance Questionnaire, on the basis of which it is hoped to identify some shortcomings for correction.

In the context of the preparation of the Mutual Evaluation, in September 2019, the BNA, in collaboration with the FIU, held an international conference on the theme “Preparation of the Mutual Evaluation of the Angolan ML/TF Combat System”, with a view to raising awareness beforehand among all the institutions that make up the Angolan ML/TF combat system. Given the importance of the subject, the event was attended by representatives of some countries, namely Malawi, Namibia and Zambia, who shared their experiences on the Mutual Evaluation process.

From the point of view of supervisory action on the prevention of money laundering and terrorist ﬁnancing, several on-site actions were carried out in 2019, with a particular focus on follow-up activities to non-banking ﬁnancial institutions. In addition, the BNA continued, in the context of the traditional off-site monitoring, the evaluation of the corporate governance and internal control systems allocated to the prevention of the ML/TF, which focused fundamentally on (i) the analysis of Chapter 5. of the Corporate Governance and Internal Control System Report and (ii) the analysis of the Self-Assessment Questionnaire.

With regard to the banking sector, in February 2019 the BNA carried out inspections of the banks operating in the An- golan ﬁnancial system in order to verify the evolution of procedures adapted for the monitoring of listed entities. In this context, the banks have developed various initiatives to comply with the BNA’s requirements.

With regard to capacity building actions in the area of ML/TF, the BNA signed an agreement with Financial Services Volunteer Corps (FSVC) for technical assistance in the area of ML/TF supervision, having held the ﬁrst training session by the FSVC in December 2019. Part IV – Relevant Activities of the BNA • 77

18. Letter of Recommendation and Proposal for Sanctions Last year, the BNA issued a total of 81 letters of recommendation and 185 proposals for sanctioning actions, distributed as follows across the different divisions:

- Licensing of financial products and services: 50 letters of recommendation were sent to financial institutions to confirm irregularities detected in the files submitted and inspected;

- Inspection: 14 letters of recommendation were issued for the sanctioning of irregularities and 84 proposals for the opening of the appropriate infringement proceedings;

- Ombudsman: 31 proposals for sanctioning actions were sent out, consisting of irregularities detected in complaint procedures presented by consumers of ﬁnancial products and services;

- Monitoring: 70 sanction actions were proposed, 19 for banking financial institutions and 51 for non-banking financial institutions, and 21 letters of recommendation were issued to banking financial institutions with a view to remedying the shortcomings identified in these within the framework of the Prevention of Money Laundering and Financing for Terrorism. 78 • Annual Report and Accounts • 2019

19. International Relations In 2019, the BNA’s institutional relations materialised through various actions, standing out in terms of bilateral cooperation with the central banks, culminating in ofﬁcial visits by the Governors of the Central Banks of Portugal, Mozambique and Namibia to the BNA. In the multilateral context, the BNA participated in various events held under the aegis of regional and international institutions of which it is a full member, as well as representing the Angolan state. In this regard, in those held within the Bretton Woods institutions, the Community of Portuguese Speaking Countries (CPLP), the Alliance for Financial Inclusion (AFI), SADC, the Institute for Macroeconomic and Financial Management of Southern and Eastern Africa (MEFMI) and the Bank for International Settlements (BIS).

In terms of internal institutional relations, the main emphasis is on continuing the partnership with the IMF representation to report on the “Regional Economic Outlook for Sub-Saharan Africa” (REO). Likewise, the creation of a new institutional partnership with the opening in Angola of the Commerzbank Representation Ofﬁce, as well as the re-establishment of an internal agenda for the strengthening and improvement of the relationship with other supervisory bodies of the national ﬁnancial system, with some ministerial departments and with the General Tax Administration (AGT), with a view to improving the level of articulation with these entities and the strengthening of institutional cooperation between them and the BNA. Part IV – Relevant Activities of the BNA • 79

20. Communication and Currency Museum The BNA has adjusted the structure of the Communication and Museum Department (DCM) to coincide with its main responsibilities, which can be summarised essentially in the management of stakeholders, the production of content and digital communication, the relationship with the media and the management of the Currency Museum.

As a complement to the knowledge produced in its areas of mission and in order to address issues in the current context, the BNA organised, in 2019, within the scope of the Annual Cycle of Conferences, several conferences with national and international projection, with speakers of recognised reputation in the economic and ﬁnancial world.

Similarly, the BNA once again reinforced its communication activities, including on the social networks, with the aim of promoting knowledge on themes related to its areas of mission:

– It published communications, press releases and public interventions by the Board of Directors; – It joined Instagram and Facebook with the opening of ofﬁcial accounts, continuing the effort to diversify the channels of contact with the public; – Disseminated information on developments with an impact on bank customers, with a focus on the defence of the rights and duties of bank consumers in the provision of services by commercial banks.

Regarding the Currency Museum, in the year 2019, it hosted two temporary exhibitions: “Active Africa” from April to June 2019 and “The Art of Money” from October 2019 to January 2020.

In this context, there were 80 293 visitors to the Museum, and the same number visited the aforementioned exhibitions, since their space is located at the Museum’s entrance. Of the visitors, around 2.14% were foreign citizens from Portugal, Brazil, France, China, Spain, South Africa, the USA and Russia.

There were also 978 group visits, 72.49% of which were to private schools, 12.78% to churches, 4.29% to public institutions, 3.37% to children’s centres and the remainder to other private institutions. 80 • Annual Report and Accounts • 2019

21. Financial Education

21.1. Financial Literacy Actions The consolidation of activities under the Education and Financial Inclusion Programme for 2019 was summarised in the adoption of new perspectives for its extension and effectiveness, in order to promote habits and attitudes in dealing with financial services and products with a view to achieving a high level of literacy, as well as greater financial inclusion towards achieving the objectives set out in the National Plan for Financial Inclusion (PNIF 2018-2022). This plan foresees the inclusion of 5 million people in the financial system within a time horizon of five years, i.e. from 2018 to 2022, with particular attention to the inclusion of women.

In this path, it was highlighted in 2019, among the various educational activities for the promotion of ﬁnancial literacy of the population, the holding of the 2nd edition of the Global Money Week in the province of Huambo, an initiative of Child & Youth Finance International that aims to inspire children and young people to learn about money, livelihoods and entrepreneurship.

Thus, 16,357 visitors, mostly children and young people, participated in Global Money Week 2019, of which 15,386 visited the fair and 971 participated in the ﬁnancial education lectures given during the event.

Chart 30: GLOBAL MONEY WEEK STATISTICS (FAIRS AND LECTURES)

4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 - Friday Saturday Sunday Monday Tuesday Wednesday Thursday 29.03.2019 30.03.2019 31.03.2019 01.04.2019 02.04.2019 03.04.2019 04.04.2019

Total Visitors Participants of the Lectures

In addition, on 31 October, the 2nd edition of the Financial Education Workshop (OEF) was held in the province of Huila, in commemoration of World Savings Day, with 18 488 participants, mostly children and young people. Of these visitors 17 878 went to the kiosks and the rest to the ﬁnancial education lectures held.

Also in 2019, the “Financial Educators Scholarship” (BEF in Portuguese) was created, a virtual decision-making support body for the development of programmes, innovative projects and actions in the ﬁeld of Financial Education. The BEF is only established and functions as long as the programmes, projects and actions associated with it function.

The Director of the Department of Financial Inclusion (DIF), which coordinates it, and the Director of the Department of Communication and Museum (DCM) are members of the BEF. BEF has the members of the Board of Directors (Board of Directors) as ephemeral members and senior staff appointed by the Organizational Mission Units, whose contribution should be in accordance with the need and relevance of the topic to be addressed.

The activities programmed for this purpose focused on the holding of lectures on the combination of macro and domestic themes for the training and capacity building of the providers and consumers of financial products and services towards the construction of the concept of national financial citizenship. For the focal group of this programme, consisting of universities, medium-sized institutes, business associations, financial institutions, among others, 30 lectures were held during the period in question, with 2877 participants.

In addition to the lectures mentioned above, the lectures held at the Financial Education Workshops and requesting institutions totalled 372 in the year, 127 of which were held in Luanda, organised by the DIF at the level of the BNA Part IV – Relevant Activities of the BNA • 81

headquarters and 245 in the remaining provinces of the country by the BNA Regional Delegations. These lectures were attended by 29,526 participants from the various regions of the country, mostly young people, of whom 8862 in the province of Luanda and 20,664 in the provinces where the BNA Regional Delegations are represented.

Chart 31: FINANCIAL EDUCATION LECTURES BY REGION

29 526 Total 372

20 664 Regional delegations 245

8 862 BNA/ Headquarter 127

0 5 000 10 000 15 000 20 000 25 000 30 000 35 000

No. of participants No. of Lectures

In 2019, of the 372 lectures given, 302 (81.18%) were held as part of the BNA’s ﬁnancial training activities, 30 (8.06%) as part of the Financial Educators’ Exchange, 20 (5.38%) at the Financial Education Workshop in celebration of World Savings Day and 20 (5.38%) at the Financial Education Workshop in celebration of Global Money Week. It should be noted that the lectures given during the Financial Education Workshops counted on the collaboration of speakers from the other regulators of the National Financial System, namely the Market and Capital Commission (CMC), the Angolan Insurance Regulation and Supervision Agency (ARSEG) and AGT.

Chart 32: DISTRIBUTION OF FINANCIAL EDUCATION LECTURES

5% 6%

Financial Training - (DIF+BR's)

Financial Educators Scholarship

Financial Education Workshop

Global Money Week 81%

The BNA’s activities during the year in question focused on achieving the following objectives, with a view to increasing the levels of ﬁnancial literacy of the national citizen: 82 • Annual Report and Accounts • 2019

– Improving the ﬁnancial knowledge and attitudes of the target group; – Developing savings habits; – Promote responsible recourse to credit and create habits of precaution in relation to its use; – Raise awareness among providers and users of ﬁnancial products and services in situations of risk that may affect deposits and income; – Developing savings habits.

21.2. Awareness Campaigns and Impact Assessment In order to boost access to the financial system for the excluded, the BNA promotes awareness campaigns throughout the country, in collaboration with the commercial banks that adhere to the “Bankita” product. This product is a financial product with reduced costs and minimum requirements in terms of documentation required for the inclusion of the low-income population under the “Simplified Accounts” scheme, with a view to contributing to the stability of the financial system, providing greater investment, greater economic growth with an impact on improving social welfare. On the other hand, it promotes gender empowerment aiming at reducing gender inequality towards the construction of a more inclusive society.

During the year under analysis, 118 awareness raising campaigns were carried out throughout the country, in places of great population concentration, such as markets, supermarkets, registration and identiﬁcation posts.

Chart 33: SENSITIVITY CAMPAIGNS FOR OPENING “BANKITA” ACCOUNTS

12 896 Total 118

9 525 Regional delegations 105

3 371 BNA/ Headquarter 13

0 2 000 4 000 6 000 8 000 10 000 12 000 14 000

Open Bankita Accounts No. of Campaigns

Of the total number of awareness campaigns conducted during the year, 105 (89.0%) were promoted by the Regional Delegations of the BNA and 13 (11%) by Headquarters (DIF), which may have contributed to the opening of 12 896 accounts, of which 9525 (74%) in the provinces under the jurisdiction of the Regional Delegations and 3367 (26.0%) in Luanda.

In accumulated terms, 765,087 “Bankita” accounts were opened in 2019, representing an increase of 18.85% over the same period. Of these accounts, 151,454 migrated to conventional accounts, consisting of 7,363 “Bankita” Growing accounts, representing a reduction of 1.08% in relation to the previous period. Part IV – Relevant Activities of the BNA • 83

22. Information and Credit Risk Center

In 2019, there was a total of 229 138 consultations accumulated on the CIRC (Central Information and Credit Risk) platform, an increase of 115,738 compared with 2018. This increase resulted from a greater volume of credit application processes for analysis, essentially by individuals.

Chart 34: CIRC CONSULTATION EVOLUTION

250 000

200 000

150 000

100 000

50 000

0 2016 2017 2018 2019

22.1. Issue of Declarations of Credit Liability In 2019, 4845 declarations of credit liabilities were issued, an increase of 116.58% compared to 2018 (2237 declarations), of which 4652 were for natural persons and 193 for legal persons.

Likewise, declarations for change of domicile of wages and credit applications outside the country were issued, speci- ﬁcally for Portugal, Spain, Cape Verde, Dubai and the United States of America.

Chart 35: DISTRIBUTION OF DECLARATIONS BY TYPE OF PERSON

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2017 2018 2019

unique colectives

Luanda province, due to regional asymmetries in the granting of credit in the country, continues to register the highest number of requests for declarations of credit responsibility, representing 90.29% of the total, followed by the Western Regional Delegation with 3.71% and the Southern Regional Delegation with 2.88%. 84 • Annual Report and Accounts • 2019

23. Human Capital At the end of 2019, the BNA had a total of 1967 workers, representing a decrease of 4.42% in relation to the 2018 workforce, of which approximately 84% is allocated to the central services, with the remainder distributed among the 7 Regional Delegations, namely, North, Northeast, West, Central, South, East and Southeast.

During the period in question, 87 workers retired and 11 terminated their contracts with the BNA for various reasons.

Table 18: WORKERS BY EMPLOYEES/GENDER BAND Gender Group Role QTY WEIGHT MALE FEM. GOVERNOR 1 0 1 0% ADMINISTRATION VICE GOVERNOR 2 0 2 0% ADMINISTRATOR 3 1 4 0% SUB-TOTAL 6 1 7 0% DIRECTOR 25 10 35 2% MANAGEMENT SUBDIRECTOR 16 15 31 1% SUB-TOTAL 41 25 66 3% HEAD OF DIVISION 61 43 104 5% COORDINATION HEAD OF DEPARTMENT 83 75 158 8% SUB-TOTAL 144 118 262 13% SPECIALIZED 17 11 28 1% TECHNICAL TECHNICIANS 428 442 870 45% SUB-TOTAL 445 453 898 46% SUPPORT 155 114 269 14% SUPPORT AUXILIAR 378 87 465 24% SUB-TOTAL 533 201 734 38% TOTAL 1 169 798 1 967 100%

The distribution of staff per academic background is described in the table below.

Table 19: WORKERS BY ACADEMIC EDUCATION

LEVEL QTY. WEIGHT

UP TO HIGH SCHOOL (12TH GRADE) 665 34%

UNIVERSITY ATTENDANCE 554 28%

LICENCIATURE 612 31%

POST GRADUATION(*) 136 7%

TOTAL 1967 100%

In the area of training and capacity building, the year 2019 was one of consolidation of the model defined in 2018, aimed at the continuous development of the workers’ skills, with a view to aligning with BNA’s strategy, improving the processes and focusing on continuous investment and growth of the workers. This model was structured into six thematic blocks, namely, institutional, general technical, specific technical, central banking technique, management and leadership program and certification and post-graduate program.

Thus, in 2019 there were 141 training sessions, in the 6 blocks deﬁned, as shown below: Part IV – Relevant Activities of the BNA • 85

FIGURE 4: BALANCE SHEET OF ACTIONS CARRIED OUT PER BLOCK

Institutional 3 Certiﬁcation and 8 Post Graduation

141 Course Actions Leadership General Technique 13 11 Program

1.388 Participants Central Bank 42 64 Speciﬁc Technique

At the same time, and with the aim of enhancing the internal staff of the BNA and greater sharing of knowledge and information regarding the activities of the central bank, the BNA has been holding an Internal Cycle of Technical Workshops since 2018, it is worth mentioning the Training Plan and the Risk Management and Compliance workshops. In 2019, 13 workshops were held, with a total of 1038 participations.

FIGURE 5: TECHNICAL WORKSHOPS HELD

13 Implementation Structure and of the Incident Operation of 1.038 Workshops Register tool of the Payment made BNA System Participation

Information New The Human Financing to Regulation Technology for Letters the Angolan Capital in the the Private vs Solidity Financial of Credit Sector of Institutions Financial System System

External Audit Control vs IFRS Export Control Risk Execution Training Sustainability Financial Management of Foreign of International Demonstration Exchange Plan Reserves Presentation and Operations Compliance Executed

Within the scope of Social Policy, the BNA continues to be guided by the well-being and quality of life of its workers, and therefore maintains the same range of beneﬁts, of which we highlight access to housing, health insurance for the worker and the family, public transport, pension fund, among others. 86 • Annual Report and Accounts • 2019

PART V FINANCIAL STATEMENTS Part V – Financial Statements • 87

PART V – Financial Statements

The National Bank of Angola (hereinafter referred to as “BNA” or “Bank”), the Central Bank of Angola, is mandated by law to promote the economic and ﬁnancial well-being of the country. The BNA is committed to keeping Angolans informed of its policies, operations and activities.

In accordance with Article 86 of Act No. 16/10 of 15 July, the Financial Statements of the National Bank of Angola for the year ending on 31 December 2019 are presented, which comprise the Balance Sheet, the Income Statement, the Statement of other comprehensive income, the Statement of changes in equity, the Cash Flow Statement of foreign currency operations and the respective Notes to the Accounts, approved by the Board of Directors on 31 March 2020.

The preparation and presentation of the Financial Statements, in accordance with the procedures and International Accounting and Financial Reporting Standards, were deﬁned as an objective of the BNA, reﬂecting the direction taken by its Board of Directors, with a view to modernising the Governance and Management Model. This objective took the form of the partial adoption of the International Accounting and Financial Reporting Standards (IAS/IFRS) as an accounting reference for the preparation and presentation of the Financial Statements for the year ending 31 December 2019.

The Financial Statements are presented in millions of Kwanzas.

At 31 December 2019, the depreciation of the Kwanza against the US Dollar was approximately 36% compared to 31 December 2018. 88 • Annual Report and Accounts • 2019 - - 26 243 112 000 420 809 820 471 914 166 004 592 390 881 383 197 495 544) 900) 994)

(2 43 18 87 106 176 270 895 513 292 397 346 184 498 885 749 061

(135 (203 6 1 1 1 7 2018

- - 389 104 000 858 246 425 408 870 126 602 375 159 091 009 110 728 631 832 900) 567)

51 14 90 145 216 270 832 436 460 600 936 758 465 540 240 824 618 040

(135 (283 9 1 1 1 1 2 11 Director of DCG 2019 Maria J. C. V. de Fontes Pereira Maria J. C. V. 6 19 20 20 20 21 22 22 15 15 15 16 17 18 13 14 14 ______Notes LIABILITIES AND OWN CAPITALS LIABILITIES AND OWN CAPITALS Treasury Single Account Treasury Deposit Guarantee Fund Other responsibilities International Monetary Fund Resource of ﬁnancial institutions Interbank money market Bank Reserves national related to monetary policy operations Other liabilities Liabilities Total Capital Subscribed capital not paid in Discount of capital issue Revaluation differences Other Reserves Retained Earnings External responsibilities to other entities Pension and other beneﬁts liabilities Provisions Income for the year Banknotes and coins in circulation Responsibilities to credit institutions Internal responsibilities towards other entities Equity Total Total Liabilities and Equity Total 961 555 993 731 106 080 487 548 297 734 917 495 197 394 725 671 981 495

9 12 49 39 752 537 154 468 297 313 268 234 448 622 586 061

1 2 5 1 7 2018 962 797 409 731 067 758 326 709 576 792 067 391 462 903 541 176 499 832

2 11 15 60 006 650 238 923 673 632 509 435 196 483 523 109 040

2019 1 1 3 8 3 11 5 9 7 6 3 8 2 5 5 3 4 10 11 11 12 Notes ASSET Governor José de Lima Massano Beatriz Ferreira de Andrade dos Santos Administrator of the Financial Department with monetary policy operations ______Financial assets available for sale Financial assets granted to the State Investments in associates and other entities Other internal assets receivable International Monetary Fund Internal Assets Cash and deposits at credit institutions Operations to related credit institutions Financial assets at fair value through proﬁt or loss Financial assets available for sale Cash and deposits at credit institutions Applications in credit institutions Tangible Assets Tangible Gold Intangible Assets Assets abroad Other asset values Total Assets Total Balance Sheet at 31 December 2019 The attached notes are an integral part of this ﬁnancial statement. Part V – Financial Statements • 89

Income Statement for the year ended 31 December 2019

Notes 2019 2018

Interest and similar income 24 278 175 170 009

Interest and similar charges 25 (67 166) (38 231)

Financial Margin 211 009 131 778

Income from services and commissions 26 16 397 13 000

Charges with services and commissions 27 (4 336) (2 916)

Net Commissions 12 061 10 084

Results of ﬁnancial assets valued at fair value through proﬁt or loss 28 13 667 (70 306)

Results of available-for-sale ﬁnancial assets 29 75 248 (782)

Results on held to maturity investments 30 - 964

Results of investments in associates and other entities 31 6 12

Results on ﬁnancial operations 88 921 (70 112)

Exchange rate results 32 580 600 498 647

Costs related to the issue of banknotes and coins 33 (2 708) (2 898)

Results of disposal of other assets 34 1 054 (1 101)

Other operational results 35 6 343 (7 055)

Operational results 585 289 487 593

Custos com pessoal

Responsibilities for pensions and other beneﬁts 36 (486 512) (146 500)

Remuneration and other beneﬁts 36 (43 053) (32 881)

Third party supplies and services 37 (17 783) (15 105)

Amortization for the year 11 (4 248) (3 189)

Net provisions for replacements and cancellations 18 e 19 (277 960) (85 395)

Impairment losses net of reversals 5/8/12/38 22 367 (257 681)

Operating results (807 189) (540 751)

Income for the year 90 091 18 592

The attached notes form an integral part of this ﬁnancial statement.

Statement of other comprehensive income for the year ended December 31, 2019 2019 2018

Net proﬁt for the year 90 091 18 592

Items that can be reclassiﬁed later for results

Changes in fair value revaluation difference of:

Financial assets available for sale 63 613 (80 104)

Gold 26 320 (37 138)

Changes in the exchange rate revaluation difference 847 505 626 221

Income / (expense) recognized directly in Equity 937 438 508 979

Full income for the year 1 027 529 527 571

The attached notes form an integral part of this financial statement. 90 • Annual Report and Accounts • 2019 - - 728 728 119 119 529 529 303 303 592 592 592 592 383 383 571 571 813 813

24 18 -18 824 027

885 527 357 -112 Total Total 1 1 ------091 091 091 091 592 592 592 592 592 592 750 750 750 750

90 90 18 18 59 -18 -59 the year “ “ Income for ------567 567 119 119 303 303 611 611 994 994 750 750 244 244

8 24 -59 -112 -283 -203 -144 earnings Retained ------567 567 718 718 849 849 849 849

3 25 21 21 Free reserve ------678 678 718 718 960 960 960 960

3 Other Reserves 25 21 21 Legal reserve ------773 773 505 505 268 268 221 221 047 047

903 056

847

626 430 1 1 Exchange ------915 915 933 933 848 848 242 242 606 606

Reserves 89 -70 -43 -117 -160 Revaluation differences Fair value ------900 900 900 900 900 900

-135 -135 -135 issue Discount of capital ------0 0 544 544 544 544 544 544

2 -2 -2 not paid in Subscribed capital ------000 000 000 000 000 000

270 270 270 Capital Fair value of securities issued to cover losses Full income for the year Adjustment of previous years Distribution of 2018 results Transfer of 2018 results results 2018 of Transfer Full income for the year Transfer of 2017 results Transfer Balances at 12-31-2019 Balances at 12-31-2018 Balances as of 12-31-2017 Statement of changes in equity for the year ended December 31, 2019 Statement of changes in equity for The attached notes form an integral part of this financial statement. Part V – Financial Statements • 91

the year ended December 31, 2019 In the years ended 31 December 2019 and 2018, the aggregate “Cash and its equivalents in foreign currency” presents the following composition:

2019 2018

Operational Activities

Income from securities 277 183 72 632

Income from liquidity applications 45 306 31 368

Financial Banking Institutions - 3 286

Currency conversion agreement with Bank of Namibia - (23 562)

Payment of administrative costs (2 630) (4 864)

Banknote and coin production expenses (128) (3 615)

Other payments and receipts 353 849 95 335

Cash ﬂows from operating activities 673 580 170 580

Investment Activities

Investments in:

Applications managed by external entities 630 431 745 731

Foreign exchange operations (3 614 706) (3 255 793)

Foreign sovereign debt securities 32 756 (370 995)

Asset acquisitions and disposals (143) (318)

Cash ﬂows from investment activities (2 951 662) (2 881 375)

Financing Activities

Decreases (increases) of resident deposits:

National Treasury 1 483 824 958 920

Financial Institutions - Bank Reserves 1 566 938 1 707 966

Interest on Financing (12 955) (26 285)

Increases (decreases) in foreign banknotes and coins 1 110 (14 833)

Cash ﬂows from ﬁnancing activities 3 038 917 2 625 768

Effect of exchange rate variation on cash and cash equivalents 929 130 985 303

Variation of cash and its equivalents 1 689 965 900 276

Cash and its foreign currency equivalents at the beginning of the year 2 040 441 1 140 165

Cash and its foreign currency equivalents at the end of the year 3 730 406 2 040 441

The attached notes form an integral part of this ﬁnancial statement.

In the years ended 31 December 2019 and 2018, the aggregate “Cash and its equivalents in foreign currency” presents the following composition:

Cash and its foreign currency equivalents 2019 2018 Variação

Cash and deposits at credit institutions (Note3)

Foreign banknotes and coins on hand 12 402 7 579 4 823

Sight deposits in foreign currency:

Abroad 523 176 586 671 (63 495)

In the country 3 251 1 909 1 342

Applications in Credit Institutions (Note 4)

Term Deposits

Abroad 3 191 577 1 444 282 1 747 295

3 730 406 2 040 441 1 689 965 92 • Annual Report and Accounts • 2019

PART VI NOTE APPENDED TO THE FINANCIAL STATEMENTS Part VI – Note Appended th the Financial Statements• 93

PART VI – Note Appended to the Financial Statements The origin of the National Bank of Angola dates back to August 14, 1926, when the Bank of Angola was created, with its headquarters in Lisbon. Until 1957, the Bank of Angola exclusively held banking business, when the Commercial Bank of Angola, strictly Angolan in law, appeared on the market, representing a new milestone in the country’s history.

In the panorama of the political and economic transformations that followed until the 1980s, and taking into account the importance of the country’s monetary and ﬁnancial system, in August 1975 the so-called process of bank takeover was developed, which led to the conﬁscation of the assets and liabilities of the Bank of Angola and the creation of the National Bank of Angola, one year after national independence, through Law no. 69/76, published in the Diário da República no. 266 - 1st Series, of 10 November 1976.

From 1978 onwards and through Law no. 4/78, of 25 February, banking activities were exclusively carried out by State banks, to the extent that private commercial banks were formally closed, thus facilitating the extension of the BNA’s branch network throughout the national territory.

In 1991 and on the basis of Law No. 5/91 of 20 April 1991 - the Financial Institutions Law, a new step was taken in the implementation of a two-tier banking system, with the result that the BNA began to exercise the function of the Central Bank as the monetary authority and agent of the foreign exchange authority, thus withdrawing from the commercial functions that it had performed until then. The Head Ofﬁce is located in Luanda, at Avenida 4 de Fevereiro, 151.

At the moment, the BNA is present in the country through its regional ofﬁces located in the provinces of (i) Cabinda; (ii) Huila; (iii) Benguela; (iv) Malange; (v) Huambo; (vi) Moxico; and (vii) Cuando Cubango.

In accordance with Law No. 16/10 of 15 July - Law of the National Bank of Angola, which establishes its Organic Law, its functions now have two main vectors: (i) to ensure the preservation of the value of the national currency and (ii) as the Central Bank:

a) Act as the sole banker of the State;

b) Advise the State in the monetary, ﬁnancial and exchange rate ﬁelds;

c) Collaborate in the deﬁnition and implementation of monetary, exchange rate and credit policies, as well as the respective markets;

d) Manage the country’s external assets or those entrusted to it;

e) Act as an intermediary in the State’s international monetary relations;

f) Ensure the stability of the national ﬁnancial system, ensuring, for this purpose, the function of lender of last resort;

g) Guarantee and ensure an information system, compilation and treatment of monetary, ﬁnancial and exchange rate statistics and other documentation, in the areas of its activity in order to serve as an efﬁcient instrument of coordination, management and control;

h) Elaborate and keep updated the complete record of the country’s external debt, as well as its management;

i) Elaborate the country’s external balance of payments.

The Board of Directors, as the body responsible for deﬁning the BNA’s management and administration policies, is responsible for the preparation and presentation of the ﬁnancial statements and other information contained in this report, ensuring that they are complete and objective in order to guarantee that the operations and transactions arising from its mission are carried out and processed in accordance with the rules and procedures in force.

The ﬁnancial statements as at 31 December 2019 were approved by the Board of Directors on 31 March 2020 and prepared for the appreciation of the holder of the Executive Power. 94 • Annual Report and Accounts • 2019

1. Basis of presentation and summary of main accounting policies 1.1 BASIS OF PRESENTATION The BNA’s ﬁnancial statements for the ﬁnancial year ending on 31 December 2019 were prepared on a going concern basis, based on the plan of accounts approved by the Board of Directors in 2013. This plan of accounts takes into account, in its entirety, the technical guidelines and principles established in the International Accounting and Financial Reporting Standards (IAS/IFRS) issued by the International Accounting Standards Board (IASB), with the derogations described in paragraph 1.2 below.

The Bank adopted International Accounting Standards and Financial Reporting (IAS/IFRS) for the ﬁrst time for the year ended 31 December 2013, considering for this purpose the terms of IFRS 1 - First-time Adoption of International Finan- cial Reporting Standards, which were applied retrospectively for all periods presented.

The Bank’s Organic Law does not determine the structure of presentation of the financial statements that the Bank should adopt. Thus, it is up to the Board of Directors of BNA to decide on the applicability of IAS/IFRS in the financial statements, taking into consideration its Organic Law and its functions as the operator of the country’s financial, exchange and monetary policies.

The BNA’s ﬁnancial statements as at 31 December 2019 and 2018 are expressed in millions of Kwanzas, and assets and liabilities denominated in other currencies have been converted into the national currency on the basis of the average exchange rates on the last working day of the following year:

Currencies 2019 2018 Depreciation 1 American Dollar (USD) 482,227 308,607 36% 1 Euro (EUR) 540,817 353,015 35% 1 Canadian Dollar (CAD) 370,061 226,683 39% 1 Rand of South Africa (RND) 34,343 21,344 38% 1 Pound Sterling (GBP) 634,972 390,079 39% 1 Chinese Yuan Renmimbi (CNY) 69,290 44,931 35% 1 Special Drawing Right (SDR) 666,8379624 324,675 51%

During 2019, the exchange rate of the Kwanza against the other currencies was fixed on a flexible exchange rate basis and monitored with significant variations from January to December 2019, as shown in the table above.

On 31 December 2019, the SDR/Kz exchange rate was calculated based on the interpolation of the SDR/USD and USD/ Kz rates.

At 31 December 2019, the depreciation of the Kwanza against the US Dollar was approximately 36% compared to 31 December 2018.

1.2 DEROGATIONS FROM STANDARDS AND INTERPRETATIONS At the transition date, and considering the specificities of its activity as regulator of the financial system and responsible for the implementation of the country›s monetary and exchange rate policies, as well as for the management of international reserves, the Bank decided not to adopt the following standards issued by the International Accounting Standards Board (IASB) and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and its predecessor bodies:

IFRS 9 – Financial Instruments: The Bank maintained unchanged the accounting treatment regarding the clas- siﬁcation and measurement of ﬁnancial assets and liabilities, the methodology for calculating impairment and the application of hedge accounting rules, in accordance with IAS 39;

IAS 21 – The effects of changes in foreign exchange rates: The Bank maintained unchanged the accounting treatment given to exchange rate variations arising from the updating of assets and liabilities denominated in foreign currency at the exchange rates in force, with potential foreign exchange gains recognised under an equity item called Part VI – Note Appended th the Financial Statements• 95

“Foreign Exchange Revaluation Reserves” and only recorded as income when realised. Given the great volatility of these capital gains and their potential condition, the Board of Directors considered that the adoption of the standard could result in a possible alteration to the Bank’s capitalisation principles and in interference in the management of monetary policy, considering that the distribution of dividends or the coverage of losses resulting therefrom would directly affect the magnitude of the monetary base with possible inflationary effects, in addition to generating financial flows between the National Treasury and BNA based on non-effective results;

IFRS 10, IAS 28, IAS 27, IFRS 12 – Consolidated financial statements: The Bank has decided not to present consolidated financial statements, keeping its investments valued at acquisition cost with the recognition of possible impairment losses, regardless of the control and/or significant influence that it may have over the participated entities.

These derogations from standards and interpretations continued to be applied in the Bank’s ﬁnancial statements for the year ended 31 December 2019.

Additionally, the Bank decided to partially adopt the following standards and interpretations issued by the IASB and IFRIC:

IAS 39 - Financial Instruments - Recognition and Measurement and IFRS 13 - Fair Value Measurement: The “securities allocated to comply with mandatory reserves” correspond to Treasury Bonds delivered by commercial banks to comply with mandatory reserves in local and foreign currency, in accordance with the provisions of Instruction no. 4/2016, and are similarly recorded under the heading “Bank Reserves”, at their nominal value, on initial recognition.

Additionally, the Bank classifies in the category financial assets at fair value through profit or loss the investments managed by external entities, which include a diversity of financial instruments, including derivatives, whose position is offset under the same balance sheet item (including the negative fair value of some financial instruments).

The position with each manager is updated based on the valuation reported in the statement sent periodically by the respective external entities, as well as other available information. The Bank has no internal valuation models for unlisted ﬁnancial instruments using as benchmark the valuation reported by external managers and in the case of funds it obtains the audited ﬁnancial statements.

IAS 19 - Employee Benefits: The Bank is applying IAS 19 to all employee benefits except for the calculation and related recognition of pension and other post-employment benefits liabilities. In order to determine these liabilities, the Bank requests an annual actuarial study from an independent expert, which is based on actuarial and financial assumptions that best fit the population and the reality of the Bank, which may not be in line with IAS 19. As far as the form of recognition is concerned, all pension liabilities are recorded against income. With the constitution of the pension plan to cover defined contribution liabilities, which has an associated autonomous Pension Fund, which came into force on 1 January 2016, in accordance with Dispatch no. 335/15, of 27 October 2015, Series I - no. 147 of the Official Gazette, it is voluntary for the Bank’s active employees, who will have the right to receive the benefits provided for in the contract disclosed. Thus, in accordance with Article 88 of the Bank’s Organic Law, defined contributions to the Pension Fund are recorded as a result of the year. In view of the above, the BNA does not present all the disclosures envisaged in this rule.

Finally, in the context of IAS 37 - Provisions, Contingent Liabilities and Contingent Assets, it should be noted that the Board of Directors annually deﬁnes the appropriations for the constitution or reinforcement of provisions intended to cover doubtful debts and the risk of depreciation of other assets, or the occurrence of other eventualities to which it is deemed necessary to provide, as provided for in no. 2 of article 5 and in article 88 of Act 16/10 of 15 July - The National Bank of Angola Act.

The accounting principles and criteria used by the BNA in the process of preparing the ﬁnancial statements are described in the attached notes.

These derogations from standards and interpretations continued to be applied in the Bank’s ﬁnancial statements for the year ended 31 December 2019. 96 • Annual Report and Accounts • 2019

1.3 NEW STANDARDS AND INTERPRETATIONS APPLICABLE TO THE FINANCIAL YEAR AND STANDARDS, INTERPRETATIONS, AMENDMENTS AND REVISIONS THAT WILL COME INTO FORCE IN FUTURE FINANCIAL YEARS The description of the new standards and interpretations is given in note 43.

1.4 SUMMARY OF MAIN ACCOUNTING POLICIES Além dos princípios contabilísticos aplicáveis a certas rubricas das demonstrações financeiras, descritos especifica- mente ao longo do presente anexo, de uma forma geral o BNA utiliza na preparação das suas demonstrações financeiras os seguintes princípios contabilísticos e critérios valorimétricos:

1.4.1 ACCRUAL BASIS O BNA adopta o princípio contabilístico da especialização de exercícios em relação às rubricas das demonstrações ﬁnanceiras. Desse modo, os proveitos e custos são reconhecidos em função do período de vigência das operações, sendo registados à medida que são gerados, independentemente do momento do seu recebimento ou pagamento.

1.4.2 FOREIGN CURRENCY TRANSACTIONS The Bank’s accounts are prepared in the currency of the economic environment in which it operates (“functional currency”) and are expressed in Kwanzas.

Transactions in foreign currency are recorded according to the principles of the “multi currency” system, i.e., they are recorded in the respective currencies of denomination and converted into Kwanzas on the basis of the exchange rates prevailing on the date on which they occur. Assets and liabilities denominated in foreign currency are converted into Kwanzas using the average exchange rate published by the Bank on the ﬁnancial reporting date.

Costs and income relating to potential exchange differences are recorded under a speciﬁc equity item called “Foreign exchange revaluation differences”, and the exchange differences, whether negative or positive, are actually realised in the income statement for the year in which they occur, under the respective items of “Losses and gains associated with exchange differences” (Notes 21 and 32).

The deﬁnition of “realised foreign exchange gain” used by the BNA is the gain resulting from the irreversible conversion of an amount in foreign currency by an amount in Kwanzas. The main operations that result in the recording of a foreign exchange gain are, essentially, the sale of foreign currency and payments in foreign currency (interest, services, supplies, etc.).

Given that potential foreign exchange gains are recorded under “Foreign exchange revaluation differences” in equity, BNA has deﬁned an internal methodology which allows part of the potential foreign exchange gains to be attributed to an operation which qualiﬁes for the recording of a realised foreign exchange gain.

One of the central elements in the methodology for the transfer of unrealised to realised exchange rates is the Exchange Rate Coefﬁcient (CC). This coefﬁcient is calculated by dividing the exchange rate revaluation differences recorded in equity by the value of foreign currency assets held by BNA, all previously converted into the US Dollar (USD). The CC establishes the amount of exchange rate revaluation differences at USD 1.

The other central element in the methodology is the value of the foreign currency whose exchange rate has been irreversibly ﬁxed. In order to calculate this value, all the foreign currency outﬂows that were made are added together by currency, being deducted from this value the foreign currency amount bought on the same day (“netting”). In the end, the values in the various currencies are all converted to the USD. Part VI – Note Appended th the Financial Statements• 97

In the case that more foreign currency has been acquired than the one that came out, then there is no place for the recognition of any exchange value. In the opposite situation the respective realized exchange value is calculated.

Being calculated the CC and the net value of foreign currency exit, the value of the realized exchange value is given by the following formula:

Outgoing foreign currency x [(exchange rate USD n - exchange rate USD n-1) + CC]

There is another exchange rate component which is calculated for each operation individually and which is calculated using the following formula:

Value of the operation in foreign currency (contracted exchange rate - exchange rate of n)

The sum of the two components results in the value shown in the proﬁt and loss account item “Foreign exchange result”.

The value of the Exchange Coefﬁcient at the end of each month can be presented as follows: 2019 2018 January 62,82 46,35 February 65,35 49,67 March 66,43 46,80 April 65,61 50,63 May 69,71 46,40 June 71,46 51,40 July 74,97 58,39 August 77,11 65,91 September 83,73 65,74 October 140,95 69,83 November 119,11 67,42 December 115,54 63,28

1.4.3. FINANCIAL INSTRUMENTS (a) Initial recognition

Financial assets and liabilities are recorded at their fair value on the date they are contracted, except for securities received to comply with mandatory reserves, costs directly attributable to the transaction are added to the acquisition cost in the balance sheet, except for ﬁnancial instruments at fair value through proﬁt or loss, in which case transaction costs are immediately recognised in the income statement.

The fair value of a financial instrument corresponds to the price that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. b) Classification and measurement of financial instruments

B.1) Financial assets

Financial assets are recognised on the trade date, i.e. the date on which the Bank undertakes to acquire the asset and are classiﬁed considering the intention behind them, according to the categories described below:

Financial assets at fair value through results;

Financial assets available for sale;

Held-to-maturity investments.

The classification and measurement of these financial assets reflect the Bank’s intention for each investment.

B.1.1) Financial assets at fair value through results

Financial assets at fair value through results include: 98 • Annual Report and Accounts • 2019

Fixed and variable income securities that the Bank has chosen, at inception, to record and measure at fair value through results;

Derivative ﬁnancial instruments with positive fair value (including those embedded in assets);

Others.

Financial assets classiﬁed in this category are carried at fair value, with potential gains arising from subsequent valuation being recorded in the income statement under “Income from assets and liabilities measured at fair value through results”.

The Bank classiﬁes investments managed by external entities and investment funds in this category. The sources of valuation of these investments are based on the following information:

Reports made by external managers;

Audited ﬁnancial information on investment funds;

Market value for listed securities;

Other information available, namely for illiquid investments.

The Bank has no internal valuation models for unlisted ﬁnancial instruments, using the above-mentioned information as a reference when available.

The amount of the remaining capital commitments, entered into with the external managers, is recorded in an off-balance-sheet item and updated simultaneously whenever a capital call is made and the investment position with the entity in question is increased.

B.1.2). Financial asset available for sale

The financial assets available for sale are non-derivative financial assets which: (i) are intended to be held for an inde- finite period of time, (ii) are designated as available-for-sale at initial recognition or (iii) do not fit into the categories of financial assets at fair value through profit or loss or held-to-maturity investments.

The ﬁnancial assets available for sale are measured at fair value, with changes in fair value recognised directly in equity, under the caption “Fair value revaluation reserve”, until the assets are derecognised or impaired, at which time the cumulative gain or loss previously recognised in equity is transferred to results.

Accrued interest on ﬁxed income securities and the differences between the acquisition cost and the nominal value (premium or discount) are recorded in the income statement, in accordance with the effective interest rate method.

Securities transferred under repurchase agreements remain recorded in the Bank’s securities portfolio and are recorded under “Sale transactions with repurchase agreement”, additionally recorded in off-balance sheet accounts.

With reference to the ﬁnancial reporting date, the Bank assesses the existence of situations of objective evidence of impairment in ﬁnancial assets available for sale, considering the situation of the markets and the information available on issuers.

In accordance with IAS 39, a financial asset is impaired when there is objective evidence of impairment as a result of one or more events that occurred after its initial recognition, such as (i) for shares and other equity instruments, a significant or prolonged decline in the fair value of the security below its cost; and (ii) for debt securities, when that event (or events) has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.

Objective evidence of impairment is considered to exist when such events exist:

Significant financial difficulties of the issuer;

Contractual breach of the issuer in terms of principal or interest payments;

Probability of bankruptcy of the issuer;

The disappearance of an active market for the financial asset due to financial difficulties of the issuer. Part VI – Note Appended th the Financial Statements• 99

Where there is objective evidence that an available-for-sale ﬁnancial asset is impaired, the potential loss is taken to the income statement after the potential losses recognised in fair value revaluation reserves have been derecognised.

Impairment losses recorded in ﬁxed income securities are reversed through the income statement whenever there is a positive change in the fair value of the security resulting from an event occurring after the impairment was determined. Impairment losses on variable income securities cannot be reversed. In the case of ﬁxed income securities or variable income securities for which impairment has been recognised, subsequent negative changes in fair value are always recognised in the income statement.

B.1.3) Held-to-maturity investments

Held-to-maturity investments include financial assets with fixed or determinable payments and fixed maturity for which the Bank has the intention and ability to hold them until maturity.

These assets are initially recognised at fair value. In general, fair value at inception corresponds to the transaction value and includes income and expenses directly attributable to the transaction. Subsequently, held-to-maturity investments are carried at amortised cost, based on the effective interest rate method and subject to impairment tests.

Accrued interest on ﬁxed income securities and the differences between the acquisition cost and the nominal value (premium or discount) are recorded in the income statement under the caption “Interest and similar income”, in accordance with the effective interest rate method.

Treasury Bonds issued in national currency indexed to the US dollar exchange rate are subject to the nominal value of the security being updated in accordance with the variation in the respective indexes. In this way, the result of the said updating of the nominal value of the security is reﬂected in the income statement for the year in which it occurs.

When there is objective evidence that a held-to-maturity investment is impaired, the possible impairment loss corresponds to the difference between the carrying amount of the ﬁnancial asset and the present value of estimated future cash ﬂows (excluding the effect of future events), discounted at the original effective interest rate calculated at initial recognition, which should be taken to the income statement.

If in a subsequent period the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognised, the impairment is reversed through the income statement.

B.1.4) Financial assets granted to the State

As part of the reinforcement of the State treasury, the ﬁnancial assets granted to the Ministry of Finance (MINFIN) provided for in the BNA Law are recognised in the balance sheet at their fair value at the outset and subsequently at amortised cost.

B.1.5) Investments in Credit Institutions

They are classified under this heading Short-term and highly liquid financial investments in international financial institutions. These assets are recorded at amortised cost, with interest being accrued on a periodic basis.

B.1.6) Financing operations with credit institutions related to monetary policy and operations

As provided for in the BNA’s Act, the Bank may grant loans to ﬁnancial institutions for a period not exceeding three months. These may be granted with a guarantee waiver, provided that, in the opinion of the Board of Directors, the liquidity requirements of the debtor credit institution and the public interest are involved.

These ﬁnancings are recorded at their fair value at the beginning and subsequently at amortised cost.

At each balance sheet date, the Board of Directors analyses the existence of objective signs of impairment. The amount of the impairment loss is recognised directly in the income statement under the caption “Impairment losses net of reversal”. If, in a subsequent period, the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the impairment loss is reversed through the income statement. 100 • Annual Report and Accounts • 2019

B.2) Financial liabilities

Financial liabilities include currency in circulation, deposits from other institutions, securities issued by the Bank, other monetary policy instruments and ﬁnancing obtained from the International Monetary Fund (IMF).

Financial liabilities are recorded on the contract date at their fair value less costs directly attributable to the transaction and are subsequently measured at amortised cost.

Any difference between the amount received net of transaction costs and the amount payable on maturity is recognised in the income statement during the liability’s life using the effective interest rate method.

B.2.1) Banknotes and coins in circulation

Banknotes and coins in circulation are recorded at their issue value (face value) under the item ‘Banknote and coin issues’ Production costs are recognised on a straight-line basis as expenses over the useful life of the banknotes and coins, under the item “Other costs and expenses - banknote and coin issues”, currently estimated at 5 years.

B.2.2) Open market liability operations

The funds raised from ﬁnancial institutions as a result of the operations to absorb liquidity are recorded under liabilities item “Liabilities to credit institutions - Interbank money market”, with the respective interest payable being recognised at the effective rate for the duration of the operations.

B.2.3) International Monetary Fund

The recognition of transactions and balances with the IMF follows the indications given by the IMF, which take into account the speciﬁc characteristics of member countries’ ﬁnancial relations with the Fund.

Positions with the IMF are denominated in Special Drawing Rights (SDRs) and converted to Kwanzas at the exchange rate at the reference date, with assets and liabilities recorded separately. In addition, all potential foreign exchange changes in the positions with the IMF are recognised under Equity “Foreign exchange revaluation reserve”, rather than interest and commissions paid, arising from the relationship with this entity, which are recognised in the income statement.

B.2.4) Banking Reserves

Part of the Bank’s bank reserves is made up of deposits from national ﬁnancial institutions. Instruction no. 10/2018 and Directive 04/DSP/DRO/2018 foresee that commercial banks may constitute part of the mandatory reserves with foreign currency securities. These are recorded at nominal value, in the balance sheet line of bank reserves with reﬂection in the balance sheet line “Other assets”.

B.2.5) Other deposits

The BNA receives deposits from various public entities and from the Angolan State itself, given that according to Law 16/10, the BNA is the sole banker of the State.

These ﬁnancial liabilities are initially recognised at fair value and subsequently at amortised cost. Part VI – Note Appended th the Financial Statements• 101

c) Valuation methods

ASSET Evaluation method / Source of information

Cash and deposits at credit institutions Amortized cost Applications in credit institutions Amortized cost Financial assets at fair value through proﬁt or loss Fair value based on statements from external entities and other sources Financial assets available for sale Fair value based on bloomberg and with market rates International Monetary Fund Cost / Amortized cost Other external assets receivable Amortized cost Investments held to maturity Amortized cost Financial assets received in the capital increase Fair value based on market rates Investments in associates and other entities Acquisition cost Financing operations to institutions of credit related to monetary policy operations Amortized cost Financial assets granted to the State Amortized cost Other internal assets receivable Amortized cost

LIABILITIES Evaluation method / Source of information

Banknotes and coins in circulation Face Value Responsibilities to credit institutions national related to monetary policy operations Amortized cost International Monetary Fund Cost / Amortized cost Resource of financial institutions Amortized cost Sale operations with repurchase agreement Amortized cost Internal responsibilities towards other entities Amortized cost d) Reclassification of financial assets

In accordance with IAS 39, financial assets classified as at fair value through profit or loss or available for sale may be reclassified to other categories of financial assets if certain requirements are met and reclassifications to the category of financial assets at fair value through results are not allowed.

Reclassiﬁcation to the held-to-maturity investments categories is only possible if the Bank has the intention and ability to hold the assets until maturity.

Reclassification or sale of held-to-maturity financial assets is not allowed, except in very specific situations. If the BNA makes a sale or transfer that is not covered by the particular situations established in the standard, the portfolio must be compulsorily transferred to the available-for-sale financial assets category and the BNA cannot use the held-to-maturity financial assets category for 2 years.

1.4.4. GOLD Gold is valued in US dollars at the daily closing price available on the New York Stock Exchange. Potential gains arising from valuation at fair value and foreign exchange revaluation are recorded in separate accounts under “Revaluation Differences”. The actual gains are recorded in the income statement when the gold positions held are sold. Actual gains arising from fair value are recorded under “Gains on non-ﬁnancial assets” or “Losses on non-ﬁnancial assets”, depending on whether they are a gain or loss, respectively. Actual gains arising from foreign exchange revaluation are recorded under “Gains associated with foreign exchange differences” or “Losses associated with foreign exchange differences”, depending on whether they are a gain or loss respectively.

With reference to the ﬁnancial reporting date, the Bank assesses the existence of situations of objective evidence of impairment, considering for this purpose a prolonged and signiﬁcant decline in its value over time. 102 • Annual Report and Accounts • 2019

When there is objective evidence that gold is impaired, the potential loss accumulated in the item “Fair value revaluation differences” is derecognised from equity and recorded in the income statement for the period, with subsequent potential negative changes in fair value always being recognised in the income statement.

Impairment losses recorded in gold are reversed through the income statement if there is a positive change in the fair value of the security as a result of an event occurring after the impairment was determined.

1.4.5. FINANCIAL INVESTMENTS Financial investments are recorded at acquisition cost, with receipts arising from proﬁt distributions recognised in the income statement.

Additionally, impairment tests are performed at each ﬁnancial reporting date in order to assess the recoverability of the investment in accordance with IAS 36 - Impairment of Assets, being recorded as impairment when there are permanent losses.

1.4.6. TANGIBLE ASSETS Tangible assets are recorded at acquisition cost, revalued in accordance with Decree-Law 6/96 of 26 January, in order to reﬂect the effect of the depreciation of the national currency, being deducted from the respective accumulated depreciation and impairment losses. Repair costs, maintenance and other expenses incurred after initial recognition, associated with their use, are recognised as costs for the year. Costs incurred with improvements that allow for an increase in future economic beneﬁts estimated initially, as well as an increase in the useful life of the asset, are capi- talised at asset value.

Depreciation is calculated on a straight-line basis and over the expected useful life of the asset, corresponding to the period in which the asset is expected to be available for use:

Lifetime years Real Estate 50 Equipment: Furniture and material 10 Machinery and tools 10 IT equipment 3 a 10 Interior installations 10 Transport material 3 Safety Equipment 3 a 10 Other equipment 10 Works on rented property 3 a 5

The land and artistic assets held by the Bank are not depreciated.

Expenditure on works on leasehold property is depreciated over a period consistent with that of its expected usefulness or that of the lease contract.

If there are market indicators that may lead to the identiﬁcation of evidence of impairment in tangible assets, the BNA will perform impairment tests. Whenever the net book value of tangible assets exceeds their recoverable amount (greater than the value in use and the fair value), an impairment loss is recognised with effect on the proﬁt and loss for the year, under the item “Impairment of other assets”.

Fixed assets in progress are recorded at the total value of expenses invoiced to the Bank, and are transferred to ﬁxed assets when available for use, and then depreciation begins. Part VI – Note Appended th the Financial Statements• 103

1.4.7. INTANGIBLE ASSETS This item essentially includes costs with the acquisition of data processing systems used in the development of the Bank’s business.

Intangible assets are stated at acquisition cost, less depreciation and impairment losses. Depreciation is recorded on a straight-line basis over the estimated useful life of the assets, which corresponds to a period of three years. An analysis for impairment losses is performed annually.

If there are market indicators that may lead to the identiﬁcation of evidence of impairment in intangible assets, BNA will carry out impairment tests. Whenever the net book value of intangible assets exceeds their recoverable amount (greater than the value in use and the fair value), an impairment loss is recognised with effect on the proﬁt and loss for the year, under the item “Impairment of other assets”.

1.4.8. EMPLOYEE BENEFITS a. Short-term beneﬁts

Short-term benefits such as salaries, Christmas, holiday and 14 August allowances are reflected in the results under “Staff costs” in the period to which they relate, in accordance with the accrual principle. b. Post-employment benefits

In 2010, the Bank established a deﬁned beneﬁt plan, ensuring to its employees, or their relatives in the event of death, the payment of supplementary retirement pensions, survivors’ pensions and death grants. At this date, this plan only covers retirees and pensioners, and therefore will not have new adhesions.

Following the entry into force of the new General Labour Law regarding article 262 - Retirement Compensation, the Board of Directors decided on 27 December 2016 to continue this beneﬁt for all employees hired before 13 September 2015.

However, at the 10th Ordinary Session of the Board of Directors held on 29 October 2019, it was decided to cancel this beneﬁt for all employees who retired after 31 December 2019.

During the ﬁnancial year 2015, through the publication of Order no. 335/15 of 27 October, the BNA employees’ pension fund was set up to cover the deﬁned contribution plan set up in 2015.

The Board of Directors decided on an initial ﬁnancial contribution in the form of an extraordinary contribution to each employee who joined the pension fund, in proportion to the length of service each employee has dedicated to BNA since they joined the Bank, with the aim of stimulating membership of the pension fund, as well as to remunerate the contribution made by each employee to the development and consolidation of the institution. The amount of the initial ﬁnancial contribution was calculated on the basis of an actuarial study for liabilities up to 13 September 2015.

The Bank guarantees to pensioners and their spouses the payment of medical assistance and medicine expenses through a health insurance policy. In addition, the Bank offers its retirees annual Christmas compensation.

The total amount of liabilities with defined benefit post-employment plans is determined by independent actuaries using the projected unit credit method and recorded in full under liabilities “Pension and other benefits liabilities”, against income statement caption “Staff costs”.

The calculation of the liability with medical assistance and medication and with Christmas compensation as at 31 December 2018 was estimated by the Board of Directors and is now determined by independent actuaries as from the ﬁnancial year 2019.

1.4.9. PROVISIONS AND CONTINGENT LIABILITIES A provision is made when there is a present obligation (legal or constructive) resulting from past events for which the future expenditure of resources is probable, and this can be reliably determined. The amount of the provision corres- 104 • Annual Report and Accounts • 2019

ponds to the best estimate of the amount to be disbursed to settle the liability at the balance sheet date. In accordance with Article 5(2) of the Bank’s Organic Law, the Board of Directors may create other reserves and provisions to cover depreciation risks or losses to which certain types of assets or operations are particularly subject.

The item “Provisions for sundry risks” includes provisions to cover potential liabilities of a speciﬁc nature, namely the execution of guarantees given or other commitments, the opening of contingencies relating to foreign exchange issues and other legal and ﬁscal liabilities or contingencies.

If the future expenditure of resources is not probable, it is a contingent liability. Contingent liabilities are only subject to disclosure, unless the possibility of their materialisation is remote.

In its role as supervisor, the BNA must always evaluate the systemic risk to which the national ﬁnancial system is subject. Additionally, taking into consideration the current macroeconomic context, the supervision of the BNA has proved increasingly necessary within the ﬁnancial system.

In order to reflect this concern in the BNA’s financial statements, a provision should be made for the systemic risk of the financial sector. In this sense, its calculation is based on a scoring model that essentially aims to evaluate the exposure of financial institutions to risk and considers in its calculation basis the total financial liabilities, deducted from the net availabilities of the financial institutions.

1.4.10. OTHER REGULATORY RISKS GUARANTEES GIVEN AND IRREVOCABLE COMMITMENTS Liabilities for guarantees given and irrevocable commitments are recorded off-balance sheet at value at risk, with the ﬂow of interest, commissions or other income being recognised in the income statement over the lifetime of the transactions.

1.4.11. TAXES The BNA is exempt from taxation and payment of any contributions, taxes, fees, emoluments and other tax levies.

In this context, as its income is not subject to Industrial Tax, BNA is not bound to submit the Annual Industrial Tax Return (“Model 1 Return”).

Notwithstanding the exemptions established in the Law of the National Bank of Angola, BNA is nevertheless obliged to settle the tax due through withholding tax (as a tax substitute) and to deliver the tax due to the State, in the cases where such responsibility falls, namely:

Urban Property Tax: The Bank is responsible for withholding the IPU at the rate of 15% at the time of payment of the rent for the rented property and for delivering the tax withheld to the tax ofﬁce of the property until the end of the month following that in which the rent is paid;

Stamp Tax: Stamp Tax is levied on rental contracts and the Bank is responsible for withholding tax at the rate of 0.4% on the monthly rent received and its subsequent delivery to the State;

Industrial Tax (Withholding Tax): The Bank is responsible for withholding tax at the rate of 6.5% on the invoice of service suppliers (resident and non-resident legal persons) and for delivering the tax withheld to the tax ofﬁce until the end of the month following that to which the payment relates;

Labour Income Tax (Self-Employed): The Bank is responsible, when paying the invoice of individual self- employed service providers, for withholding Labour Income Tax at the rate of 10.5% and delivering the tax withheld to the tax ofﬁce until the end of the month following that to which the payment relates;

Value Added Tax: Following the implementation of VAT in Angola on 1 October 2019, its adoption was decided by the Board of Directors of BNA on 3 October 2019. Under the terms of the VAT Law (Law No. 7/19 of 24 April, in conjunction Part VI – Note Appended th the Financial Statements• 105

with Law No. 17/19 of 13 August), the BNA falls within the general VAT regime provided for in the VAT Code as a taxable person registered with the Tax Ofﬁce for Large Taxpayers (cf. Article 3 (2) (a) of Act 7/19, of 24 Abril). In this context, the BNA must capture 50% of the tax contained in the invoice or equivalent document when goods or services are transferred by suppliers resident in Angola (cf. art. 21 (2) of the VAT Code), with the remaining 50% being paid to these suppliers. In addition, when services are supplied by suppliers who are not resident in Angola, the BNA shall (self) pay the Angolan VAT when such services are located, for the purposes of this tax, in Angolan territory (cf. article 29 (2) of the VAT Code). Given that the BNA carries out non-taxable VAT transactions that do not confer the right to deduct, it will not be able to deduct the VAT incurred on purchases of goods and services.

1.4.12. SOCIAL CAPITAL Capital increases are recognised under the equity item “Capital” at the time they are subscribed for at nominal value, with the unpaid amount being recorded under the item “Subscribed unpaid capital”. If the capital increase is made with the delivery of securities for an amount different from their fair value, the difference to the fair value of the securities received, on the date of their realisation, is recorded under the item “Discount of capital issue” (Note 20).

1.4.13. RESERVES AND RETAINED EARNINGS The Bank’s reserves are constituted and traded in accordance with article 89 of the Bank’s Organic Law and are divided between (i) the legal reserve and (ii) other reserves that the Board of Directors may decide.

Retained earnings represent earnings from previous periods that are awaiting application by the Board of Directors.

In accordance with paragraph 1, c) of art. 89 of the BNA Law, the proﬁt for the year, if positive, should be distributed to the Ministry of Finance through dividends of at least 60%.

1.4.14. CASH FLOW STATEMENTS OF FOREIGN CURRENCY OPERATIONS For the purpose of preparing the cash ﬂow statements of foreign currency transactions, the Bank considers as cash and cash equivalents all demand deposits and term deposits with less than three months’ maturity from the date of acquisition/contract, integral parts of the items “Cash and deposits with credit institutions” (Note 3) and “Investments in credit institutions” (Note 4).

1.4.15. MAIN ESTIMATES AND UNCERTAINTIES ASSOCIATED WITH THE APPLICATION OF ACCOUNTING POLICIES NEstimates and expected future values are used in the preparation of the Bank’s ﬁnancial statements. These estimates are subjective in nature and may affect the value of assets and liabilities, income and expenses, as well as contingent liabilities disclosed. Estimates with the greatest impact on the Bank’s ﬁnancial statements include those presented below: a. Retirement and survival pensions and compensation for retirement

The liabilities for retirement and survivors’ pensions are estimated on the basis of actuarial valuations carried out by external experts. These estimates incorporate a number of ﬁnancial and actuarial assumptions, namely the discount rate, mortality tables, disability, pension and salary growth, among others.

The assumptions adopted correspond to the best estimate of the Board of Directors regarding the future behaviour of the referred variables. 106 • Annual Report and Accounts • 2019

b. Liabilities with Christmas subsidy and medical and pharmaceutical assistance to working and retired people

Liabilities for Christmas subsidy and medical and pharmaceutical assistance to working and retired people are estimated based on actuarial valuations performed by external experts, based on actuarial and ﬁnancial assumptions, namely the discount rate, the inﬂation rate, the wage growth rate and mortality tables.

The Bank considers that the liabilities recorded in the financial statements adequately reflect the best estimate at the balance sheet date of the amounts to be disbursed. c. Determination of impairment losses on available-for-sale financial assets

In accordance with the valuation requirements of these assets, capital losses resulting from the devaluation of the respective market value are recognised against fair value revaluation reserves. Whenever there is objective evidence of impairment, the accumulated losses that have been recognised in the fair value revaluation reserve should be transferred to costs of the year.

In the case of debt instruments classified in this category, capital losses are transferred from the revaluation reserve to profit and loss whenever there are indications that a breach of the contractual cash flows may occur, namely due to financial difficulties of the issuer, the existence of a default on other financial liabilities, or a significant downgrade of the issuer’s rating. d. Determination of impairment losses on loans to credit institutions related to monetary policy operations

Impairment losses on operations with credit institutions related to monetary policy operations take into account prudential criteria with a view to covering future risks and contingencies. The assumptions adopted to determine impairment losses correspond to the best estimate of the Board of Directors. e. Determination of impairment losses on other internal assets receivable

Impairment losses on balances of other internal assets receivable take into consideration prudence criteria, in order to hedge future risks and contingencies. The assumptions used to determine impairment losses correspond to the best estimate of the Board of Directors at the date of approval of the ﬁnancial statements. f. Provisions for sundry risks

The Law of the National Bank of Angola provides for the existence of a provision for sundry risks, whose reinforcements and replacements are made directly against the income statement. The provision for sundry risks is intended to cover other risks and future contingencies, the amounts being calculated on the basis of prudence criteria for other on and off-balance sheet items. g. Provisions for systemic risk in the banking sector

In its role as supervisor, the National Bank of Angola must assess the systemic risk to which the national financial system is subject. The provision for systemic risk is based on a scoring model that essentially aims to assess the exposure of financial institutions to risk considering the total of their financial liabilities deducted from the net assets of the financial institutions. h. Responsibilities for the social fund

In accordance with Law no. 16/10, of 15 July, article 81 and 82 - Law of the National Bank of Angola, the BNA may acquire or construct real estate, intended for the housing of its employees, under the terms and conditions to be established by the Board of Directors. The amount of the provision corresponds to the best estimate of the amount to be disbursed to ﬁnance real estate investments of a social nature on the balance sheet date, the terms and assumptions of which have been duly communicated to the BNA employees covered.

Additionally, in accordance with the Social Fund Regulation, approved by Order no. 008/2014, of 31 January, an amount of financial resources to be allocated to the Social Fund is defined annually by the Board of Directors, at the time of approval of the Bank’s accounts for the financial year, which is calculated in accordance with assumptions assumed annually, taking into account the social context on the balance sheet date, thus the amount of the provision corresponds to the best estimate of the amount to be disbursed to settle this liability on the balance sheet date. Part VI – Note Appended th the Financial Statements• 107

i. Provision for the debt of employees’ loans

As part of its social action role, the National Bank of Angola grants loans to its employees for the purpose of housing acquisition. At the end of each ﬁnancial year, the BNA assesses the existence of impairment associated with these loans, with particular focus on loans to retired persons and deceased employees.

2. Gold At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 Oz (*) Amount Oz (*) Amount 592 901 435 391 592 901 234 495

(*) 1 ounce of ﬁne gold = 31,103481 grams of ﬁne gold.

As at December 31, 2019 and 2018, the Bank holds 592.90 ounces of gold (Oz) at an average price of USD 1.68 thousand, with a market value on these dates of USD 1.52 thousand and USD 1.28 thousand, respectively.

As at 31 December 2019 and 2018, the item “Fair value revaluation differences” in equity related to the gold position, recorded a potential loss amounting to Kz 49.49 billion and Kz 75.81 billion, respectively (Note 21).

The Bank did not recognise any impairment losses for gold in the year 2019, as compared with the impairment analyses performed during the year 2019, the potential loss of 10% is below the limit deﬁned by the accounting policy of 30% potential loss, i.e. the market value is above the limit deﬁned by the accounting policy.

3. Cash and deposits with credit institutions At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 Abroad Sight Depósits 523 176 586 671 In the country Sight Depósits In foreign currency 3 251 1 909 In national currency 118 232 Banknotes and coins on hand In foreign currency 12 402 7 579 In national currency 21 14 15 792 9 734 538 968 596 405

During the 2019 ﬁnancial year, the item “Demand deposits abroad” recorded a negative variation of Kz 63.50 billion compared to 31 December 2018. This variation is essentially explained by the demobilisation of investments managed by external entities, by investments made in credit institutions and by sales of foreign currency and payments made on instruction from the Treasury.

At 31 December 2019 and 2018, this item includes a total of overnight operations amounting to Kz 382.7 billion and Kz 337.0 billion, respectively. 108 • Annual Report and Accounts • 2019

At 31 December 2019 and 2018, the balances shown under “In the country - banknotes and coins in cash - foreign currency” are mostly denominated in US dollars.

At 31 December 2019 and 2018, the balances shown under “In the country - Banknotes and coins in cash - In national currency” are the physical resources in the treasuries of the structure units in Luanda and each of the regional ofﬁces, its monitoring being carried out regularly by means of physical inventories.

4. Investments in credit institutions At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 Abroad Term Deposits Invested value 3 191 577 1 444 282 Receivable Interest 4 885 3 915 3 196 462 1 448 197

At 31 December 2019 and 2018, the breakdown of “Term deposits - Amount invested” in terms of residual maturities to maturity is as follows:

2019 Até 1 mês Entre 1 a 3 meses Entre 3 e 6 meses Mais 6 meses Total Term deposits (applied amount) Abroad 1 608 255 1 333 304 250 018 - 3 191 577 1 608 255 1 333 304 250 018 - 3 191 577

2018 Até 1 mês Entre 1 a 3 meses Entre 3 e 6 meses Mais 6 meses Total Term deposits (applied amount) Abroad 735 769 439 428 114 407 154 678 1 444 282 735 769 439 428 114 407 154 678 1 444 282

At 31 December 2019 and 2018, the item “Abroad - Term deposits” represents BNA’s investments in international banks, with maximum maturities of up to one year and remunerated at an average annual rate of 1.7% and 2.6%, respectively. Part VI – Note Appended th the Financial Statements• 109

At 31 December 2019 and 2018, the breakdown of financial instruments is as follows: 2019 2018 Assets abroad Financial assets at fair value through profit or loss Debt instruments: Corporate and Public Debt 184 045 212 114 Structured debt 61 768 37 873 Capital instruments: Venture capital funds 230 084 166 885 Alternative investment funds (hedge funds) - 1 669 Deposits and other monetary assets 8 006 26 425 Other capital instruments - 62 Real estate investment company - 177 366 483 903 622 394 Financial assets available for sale Foreign sovereign debt securities Foreign public issuers Nominal value 1 292 326 798 043 Variation of fair value 11 542 8 520 Prize or discount 6 488 (1 808) Earnings to receive 5 579 3 774 Sale operations with repurchase agreement Nominal value 2 019 041 1 461 382 Variation of fair value 24 397 (18 756) Prize or discount (9 964) (6 619) Earnings to receive 7 574 4 409 International financial organizations Nominal value 312 201 48 683 Variation of fair value 942 178 Prize or discount 1 127 (571) Earnings to receive 2 073 252 3 673 326 2 297 487

4 157 229 2 919 881

Internal Assets Financial assets available for sale Treasury Bonds Nominal value Non-readjustable national currency bonds 1 242 538 1 201 883 Foreign currency bonds 3 496 1 543 Indexed to the exchange rate of the American Dollar 1 250 2 Variation of fair value (58 305) (74 929) Prize or discount (562 099) (603 746) Earnings to receive 23 917 12 802 650 797 537 555

4 808 026 3 457 436

As at 31 December 2019, the balance sheet item “financial assets at fair value through profit or loss” in the amount of Kz 484.00 billion (31 December 2018: Kz 622.39 billion) is composed of two portfolios of financial assets, one managed by external managers and the other managed internally, the latter having been transferred to the management of the Bank following the termination of the management contract with external managers. 110 • Annual Report and Accounts • 2019

As at 31 December 2019 and 2018, the breakdown by portfolio is as follows:

2019 Deposits and Structured Public and Venture capital other monetary TOTAL debt Corporate Debt funds assets External Managers WORLD BANK - 103 919 - 36 103 955 UBS - 80 126 - 1 471 81 597 CA INDOSUEZ 61 768 - - 50 61 818 ATRIUM - - - 6 449 6 449 Investment Funds GEMCORP FUND LIMITED - - 171 160 - 171 160 RIVERSTONE - - 42 043 - 42 043 CARLYLE - - 16 881 - 16 881 Portfolios under internal management GOLDEN ASSET - - - - - GOLDEN ASSET - ABD - - - - - Q. INVESTMENT - - - - - Q. PLAZA - - - - - Quantum Liquidity - - - - - Swank - - - - - Total 61 768 184 045 230 084 8 006 483 903

2018 Public and Venture Deposits and Real estate Structured Other capital Hedge Corporate capital other monetary investment TOTAL debt instruments funds Debt funds assets company External Managers Q. PLAZA ------173 869 173 869

BANCO MUNDIAL - 63 334 - - - 1 028 - 64 362

UBS - 49 322 - 62 - 1 053 - 50 437

ATRIUM - 37 311 - - 1 669 7 311 3 497 49 788

Swank - 42 093 - - - 394 - 42 487

CA INDOSUEZ 37 873 - - - - 349 - 38 222

GOLDEN ASSET - 20 054 - - - 16 290 - 36 344

GOLDEN ASSET - ABD ------Investment Funds GEMCORP FUND LIMITED - - 97 960 - - - - 97 960

RIVERSTONE - - 52 424 - - - - 52 424

CARLYLE - - 16 501 - - - - 16 501 Portfolios under internal management Q. INVESTMENT ------

Quantum Liquidity ------

Total 37 873 212 114 166 885 62 1 669 26 425 177 366 622 394

During 2019, in accordance with the disinvestment plan determined by the Board of Directors for this portfolio, the Bank received approximately USD 983 million and approximately EUR 30 million. Part VI – Note Appended th the Financial Statements• 111

The future liabilities assumed by the BNA for capital calls, arising from investments in alternative investment funds with external managers, recorded in off-balance sheet accounts - commitments to non-resident third parties, amounted at 31 December 2019 and 2018 to approximately Kz 65.41 billion and Kz 24.26 billion, respectively (Note 23).

The realised and potential gains and losses on these investments are reflected in the income statement item “Income from financial assets valued at fair value through profit or loss” (Note 28).

Due to the deliberation of the BNA’s Board of Directors and taking into consideration the investment policy, the Bank reduced the portfolio managed by external entities during 2019, by selling a number of assets.

As at 31 December 2019, the Banco Nacional de Angola has a number of assets remaining from the portfolios previously managed by other external entities, without liquidity in the market and for which it has no estimates of their potential market value at this date. In order to remedy this situation, the Bank contracted an external consultant to carry out a study on its recovery and subsequent placement with other investors. As these are contingent assets, the book value of these assets is null.

As at 31 December 2019 and 2018, the breakdown of “Financial assets available for sale - Foreign sovereign debt securities - Nominal value” in terms of residual maturities to maturity is as follows:

2019 Until 1 year Between 1 and 3 years Between 3 and 5 years Over 5 years Total Foreign sovereign debt securities Sale operations with repurchase agreement 385 781 922 824 710 436 - 2 019 041 Foreign public issuers 200 238 918 004 174 084 - 1 292 326 International ﬁnancial organizations 45 615 266 586 - - 312 201 631 634 2 107 414 884 520 - 3 623 568

2018 Until 1 year Between 1 and 3 years Between 3 and 5 years Over 5 years Total Foreign sovereign debt securities Sale operations with repurchase agreement 400 418 617 986 412 118 30 861 1 461 382 Foreign public issuers 232 250 267 967 263 391 34 435 798 043 International ﬁnancial organizations - 48 683 - - 48 683 632 667 934 636 675 509 65 296 2 308 108

Potential gains and losses arising from the valuation of the available-for-sale ﬁnancial assets - foreign sovereign debt securities at fair value are recognised in Equity under “Fair value revaluation differences” (Note 21). Realized results of this portfolio are recognised in the income statement under “Income from available-for-sale ﬁnancial assets” (Note 29).

At 31 December 2019 and 2018, foreign sovereign debt securities are remunerated at an average annual rate of 2.1% and 2.4%, respectively.

At 31 December 2019 and 2018, the breakdown of “Available-for-sale ﬁnancial assets - National Public Debt Securi- ties” is as follows:

12.312019

Nominal Amortized Prize or Receivable Variation in Treasury Bonds Fair value Book value value cost discount Interest fair value

Non-readjustable national currency bonds 1 242 538 680 680 622 143 (561 858) 23 899 (58 538) 646 042

Foreign currency bonds 3 496 3 487 3 501 (9) 10 14 3 511

Indexed to the exchange rate of the American Dollar 1 250 1 018 1 237 (232) 8 219 1 244

1 247 284 685 185 626 881 (562 099) 23 917 (58 304) 650 797

At 31 December 2019, the change in the balance of the item “Financial assets available for sale - Domestic assets” is explained by the updating of the fair value of National Treasury Bonds issued in July 2016, due to the approval of the Presidential Decree on 18 March 2019, which revoked article no. 2 of Presidential Decree no. No. 130/16 of 13 June and changed the coupon interest rate from 0% to 12%, for the receipt of securities to cover the negative result for 2017, for the sale of bonds to 112 • Annual Report and Accounts • 2019

pay 50% of the initial contribution of the Pension Fund of BNA employees and for the fair value gains on the remaining bonds.

As at 31 December 2019 and 2018, the breakdown by residual maturity of the nominal value of Treasury Bonds classi- ﬁed under “Financial assets available for sale” is as follows:

2019 Between 1 Between 3 Until 1 year Over 5 years Total and 3 years and 5 years Financial assets available for sale Treasury Bonds Non-readjustable national currency bonds - - 38 347 1 204 191 1 242 538 Foreign currency bonds - - 3 496 - 3 496 Indexed to the exchange rate of the American Dollar - 1 250 - - 1 250

2018 Between 1 Between 3 Until 1 year Over 5 years Total and 3 years and 5 years Financial assets available for sale Treasury Bonds Non-readjustable national currency bonds - - 73 509 1 128 374 1 201 883 Foreign currency bonds - - 1 543 - 1 543 Indexed to the exchange rate of the American Dollar - - 2 - 2

At 31 December 2019 and 2018, domestic public debt securities are remunerated at an average annual rate of 20.8% and 19.7%, respectively.

The deferral of the premium/discount on domestic government bonds is recognised under the income statement item “Interest and similar income” (Note 24).

At 31 December 2019 and 2018, the balance of the item Bonds in Angolan currency which cannot be adjusted, includes Treasury Bonds issued by the Ministry of Finance to pay up part of the share capital subscribed in 2011, as deﬁned in Act no. 16/10 of 15 June, BNA Act. These securities, which have a maturity of 20 years, are characterised by no associated remuneration (zero rate), a situation which is contrary to the provisions of the BNA Act.

6. International Monetary Fund As at 31 December 2019 and 2018, the asset and liability positions with the IMF comprised the following:

2019 2018 International Monetary Fund SDR Kwanza SDR Kwanza IMF Quote 740 493 527 740 240 483 IMF current account deposits (626) (417 784) (626) (203 567) IMF reserve position 114 75 743 114 36 916 Special Drawing Right (SDR) 208 139 182 225 73 065 Active position on the IMF 322 214 925 339 109 981 Accounts No.2 0 52 0 35 Allocation of Special Drawing Rights (SDR) 273 182 290 273 88 869 Passive position on the IMF 273 182 342 273 88 904

On 31 December 2019 and 2018, the “IMF reserve position” is equivalent to SDR 113.59 million (Kz 50.86 billion) and SDR 113.61 million (Kz 36.92 billion) respectively. On 31 December 2019 and 2018, the “Liability position - SDR allocation” is equivalent to SDR 273.36 million (Kz 122.39 billion) and SDR 273.50 million (Kz 88.87 billion) respectively. Part VI – Note Appended th the Financial Statements• 113

The change in positions is primarily justiﬁed by the exchange rate revaluation resulting from the SDR/Kz exchange rate change of around 105% and the recording of potential exchange rate differences. On 31 December 2019 and 2018, the exchange rate of 1 SDR to Kz corresponds to approximately 666.84 and 324.68, respectively. 7. Other internal assets receivable At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 In the countryside

Amount receivable from ﬁnancial institutions 256 963 256 963 Impairment - Amount receivable (256 963) (256 963)

Amount receivable from non-ﬁnancial entities 20 944 25 009 Imparity - Sundry debtors - Suppliers (9 877) (12 903) 11 067 12 106

At 31 December 2019, the balance shown under “Amounts receivable from ﬁnancial institutions” corresponds to the amount relating to the transfer of the contractual position, through a “Payment Agreement” signed between ENSA - Inves- timentos e Participações, S.A. and a Financial Institution for the total amount of Kz 256.96 billion, to settle the amounts owed relating to rediscount operations. Considering that no payments have yet been made by ENSA Group and that to date there has been no direct relationship between BNA and ENSA Group in the recoverability of these assets, BNA’s management prudently decided to maintain the impairment loss recorded in 2018 over the entire amount.

An agreement is being formalised between BNA and a Financial Institution with a view to defining a restructuring plan for its debt. However, at the date of approval of these financial statements, no significant impact on them is estimated as a result of the aforementioned agreement.

On 31 December 2019, the balances recorded under “Amounts receivable from non-financial entities” include amounts paid under contracts signed for the acquisition of tangible fixed assets, as well as for the provision of services which showed signs of irregularities in previous financial years, mainly because the acquisition of goods or service consideration was not proven. The values recorded are broken down as follows:

2019 2018 Amount receivable from non-ﬁnancial entities Suppliers of tangible ﬁxed assets 18 135 19 716 Service providers 2 809 5 293 Imparity - Sundry debtors - Suppliers (9 877) (12 903) 11 067 12 106

During 2019, the value receivable from non-ﬁnancial entities decreased by approximately Kz 4.1 billion compared with 31 December 2018, as a result of BNA’s negotiation actions with suppliers. As a result, it was possible to reverse impairment losses in the amount of Kz 2.1 billion. 114 • Annual Report and Accounts • 2019

8. Operations to credit institutions related with monetary policy operations At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 Interbank money market Securities allocated for RO-ME compliance 872 025 538 989 Redemption operations Assigned value 232 580 257 178 Impairment losses (179 778) (93 168) Receivable Interest 5 008 1 614 Occasional liquidity-providing operations Invested value 80 906 - Receivable Interest 634 - Impairment losses (4 413) - Liquidity Providing Facilities - Overnight Invested value - 42 554 Receivable Interest - 794 Provision of liquidity Assigned value 7 771 11 575 Impairment losses (7 771) (6 575) 1 006 962 752 961

The item “Securities allocated for compliance with RO-ME” corresponds to Treasury Bonds delivered by commercial banks with a nominal value of USD 1.81 billion, for compliance with mandatory reserves in foreign currency, in accordance with the provisions of Instruction no. 17/2019 and Directive no. 08/DMA/DRO/2019, and is also recorded under the item “Bank Reserves” (Note 14), which are recorded at the value calculated by the Assets Markets Department (DMA). This item changed due to the inclusion of one more ﬁnancial institution, the increase in securities in others and the effect of the exchange rate devaluation of the Kwanza against the US Dollar by around 36%.

Rediscount operations are aimed at providing liquidity for a longer period to ﬁnancial institutions, and are granted at the exclusive discretion of the BNA, at the formal request of the ﬁnancial institution, under regulatory terms. They are carried out with a commitment to repurchase the assets given as collateral.

As at 31 December 2019 and 2018, the item “Rediscount operations” shows the following distribution per ﬁnancial institution: 2019 2018 Assigned Earnings to " Imparity Net Balance Assigned Earnings to " Imparity Net Balance Financial institution value receive Accumulated " Sheet Value value receive Accumulated " Sheet Value Banco de Poupança e Crédito 200 000 4 940 (153 250) 51 690 230 600 1 614 (66 590) 165 624 Banco de Poupança e Crédito 6 052 68 - 6 120 - - - - Banco Angolano de Negócios e Comércio 26 528 - (26 528) - 26 578 - (26 578) 0

232 580 5 008 (179 778) 57 810 1 614 (93 168) 165 624 257 178

Under the terms of Article 23 of the BNA’s Law, loans granted to financial institutions may not have a maturity of more than three months. However, due to the liquidity difficulties of the credit institutions, the rediscount operations and other financing have been successively renewed.

The Board of Directors, based on information gathered and also taking into consideration the estimated fair value of the collaterals obtained, with a nominal value of Kz 233.38 billion in securities and USD 15.00 million in deposits, presents as at 31 December 2019, impairment losses of Kz 153.25 billion, representing 100% of the total exposure not covered.

As at December 31, 2019 and 2018, the item “Liquidity lending operations” shows the following distribution: Part VI – Note Appended th the Financial Statements• 115

2019 2018

Assigned Earnings to “ Imparity Net Balance Assigned Earnings to Net Balance Financial institution value receive Accumulated “ Sheet Value value receive Sheet Value

Banco de Poupança e Crédito 30 000 215 - 30 215 - - -

Banco Prestigio 20 033 157 - 20 190 - - -

Banco Económico 14 222 104 (4 413) 9 913 - - -

Banco Sol 14 010 159 - 14 169 - - -

Banco Regional Keve 1 709 - - 1 709 - - -

Banco Caixa Geral Angola 932 - - 932 - - -

80 906 634 (4 413) 77 127 - - -

As at December 31, 2019 and 2018, the provision of liquidity facility is distributed as follows: 2019 2018

Assigned Earnings to “ Imparity Net Balance Assigned Earnings to “ Imparity Net Balance Financial institution value receive Accumulated “ Sheet Value value receive Accumulated “ Sheet Value

Banco de Poupança e Crédito - - - - 42 554 794 - 43 348

- - - - 42 554 794 - 43 348

At December 31, 2019 and 2018, the balance “Provision of liquidity” is distributed as follows: 2019 2018

Assigned Earnings to “ Imparity Net Balance Assigned Earnings to “ Imparity Net Balance Financial institution value receive Accumulated “ Sheet Value value receive Accumulated “ Sheet Value

Banco Angolano de Negócios e Comércio 6 838 - (6 838) - - - - -

Banco Mais 933 - (933) - - - - -

Banco Económico - - - - 11 575 - (6 575) 5 000

7 771 - (7 771) - 11 575 - (6 575) 5 000

In the ﬁrst quarter of 2019, the Economic Bank settled the outstanding amount of Kz 11.58 billion, which represented liquidity in foreign currency as at 31 December 2018, to serve as collateral in the opening of letters of credit for food import operations, and was therefore reversed for the same amount of impairment associated with it.

In 2019, the item “Provision of liquidity” corresponds to reversible reﬁnancing operations providing liquidity in national currency to national ﬁnancial institutions for which the operating licence was withdrawn.

At the end of the 2019 financial year, financing to two credit institutions related to monetary policy operations, which are not fully covered by collateral, continued. For this reason, and given that these operations do not have specific maturities, the Bank opted for a more conservative approach, taking into consideration the coverage of future risks and contingencies with an impairment of Kz 7.77 billion, representing 100% of total exposure.

9. Financial assets granted to the State Under the terms of Article 29(1) of Law 16/10 of 15 July, the BNA may grant the State a current account credit up to a limit equivalent to 10% of the current revenue collected in the last year, and the value of the current account must be settled by 31 December of the year to which it relates and the respective interest. On 31 December 2019 and 2018, the BNA fails to comply with the provisions of the Law. At 31 December 2019, this heading comprises the following:

2019 2018 Financial assets granted to the State 238 409 154 993 238 409 154 993

At 31 December 2019, the item “Financial assets granted to the State” includes the ﬁnancing obtained from Gemcorp, for the total amount of USD 500 million, transferred to the Ministry of Finance (MINFIN). The debt onlending agreement provided for an annual interest rate of 2.6% and repayment in accordance with the original contract between BNA and GemCorp, i.e. the payment of interest over 3 years and the principal outstanding at the end. 116 • Annual Report and Accounts • 2019

10. Investments in associates and other entities At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 In the country EMIS, SARL 731 731 731 731

At 31 December 2019 and 2018, BNA holds 18% of the share capital of EMIS - Empresa Interbancária de Serviços S.A., registered at acquisition cost, whose corporate purpose is the management of the Multicaixa network and the consolidation of Angola’s retail payment system. As established in the mandate authorising this shareholding, BNA has been reducing its shareholding and will be wound up in 2020, with the transfer of the remaining 18%. Part VI – Note Appended th the Financial Statements• 117 66 66 562 725 642 917 372 917 681 541 608 471 849 067

2 11 50 16 21 49 12 62 23 23 60 “Net “Net Value “ Value Value “ Value ------(75) (73) (75) (75) (73) (73) Imparity Imparity - - - - 212) 963) 543) 897) 915) 132) 718) 755) 944) 029)

(8 (3 (5 (4 (6 (10 (17 (13 (21 (17 Balances at 12-31-2018 Balances at 12-31-2019 amortization amortization Accumulated Accumulated 66 66 774 372 688 435 535 747 578 849 456 625 676 169

4 7 19 21 68 22 63 23 23 84 29 77 value“ value“ “Gross “Gross ------22 (22) (Amortization) (Amortization) Transfers Transfers ------899 496 395)

1 (2 value“ value“ “Gross “Gross ------2 2 2 130 130

2 2 Reversal or or Reversal Reversal or or Reversal (reinforcement) of of (reinforcement) (reinforcement) of of (reinforcement) impairment losses impairment losses ------22 22 22 130 228 228

2 (Amortization) (Amortization) Movements in 2018 Movements in 2019 Disposals Disposals ------28 28 28 228 028) 028)

(8 (8 value“ value“ “Gross “Gross - - - - - 259 524) 028) 265) 663) 248) 296)

(952) (633)

(2 (8 (2 (2 (4 (3 for the year for the year Amortization Amortization - - 825 787 525 137 905 872 768 162 617 394 189)

(924) 2 4 8 2 4 2 5 (3 16 13

Acquisitions Acquisitions 66 66 261 585 298 435 804 716 562 372 725 642 917 917

8 11 16 21 49 11 21 50 16 49 “Net Value“ “Net Value“ ------552 (75) (75) (75) 653) 205) 205)

(1 (2 (2 Imparity Imparity - - - - 039) 757) 030) 688) 963) 543) 212) 718) 718) 755)

(3 (6 (5 (3 (5 (8 (14 (11 (17 (13 Balance at 12-31-2017 Balance at 12-31-2018 amortization amortization Accumulated Accumulated 66 66 390 029 038 949 585 639 688 435 535 774 372 747

4 4 68 30 16 16 63 68 22 19 21 63 “Gross value“ “Gross value“ Artistic heritage Software Real Estate Equipment assets in progress Tangible Artistic heritage Software Real Estate Equipment assets in progress Tangible Intangible Assets Tangible Assets Tangible Intangible Assets Tangible Assets Tangible 11. Tangible and Intangible Assets 11. Tangible The movements in tangible and intangible ﬁxed assets progress during the years 2019 2018 were as follows: 118 • Annual Report and Accounts • 2019

During 2019, it was possible to reverse impairment losses in the amount of Kz 2.00 million, so as at 31 December 2019 the total impairment losses on tangible assets (real estate) correspond to the amount of Kz 73.00 million considering that the process of legalisation of a group of real estate assets is still in progress.

At 31 December 2019 and 2018, the item “Tangible assets in progress” refers to the following works in progress, by delegation:

2019 2018 Luanda 19 132 16 059 Moxico 3 406 2 646 Kuando Kubango 823 645 Cabinda 348 276 Benguela 81 82 Huila 55 397 Huambo 4 1 267 23 849 21 372

At 31 December 2019 and 2018, the balance of the “Luanda” item essentially includes work in progress on the head ofﬁce building.

At 31 December 2019, the increase in “Moxico” and “Cuando Cubango” is mainly explained by the rehabilitation of the buildings of these regional delegations.

12. Other assets At 31 December 2019 and 2018, this heading comprises the following:

2019 2018

Debtors and other applications Personnel 27 237 23 628 Advances to suppliers 7 635 5 401 Sundry debtors 19 1 646 Expenses with deferred charge Issues of banknotes and coins 11 242 11 280 Third party supplies and services 774 21 Other assets Foreign exchange transgression deposits 9 252 7 757 Economat 2 301 2 358 Regularization accounts 55 106 141 113 566 52 232 Imparity - Personal (4 067) (12 251) 109 499 39 981

At 31 December 2019 and 2018, the balance of “Debtors and other applications - staff” can be detailed as follows:

2019 2018 Social Fund Housing projects 14 902 11 175 Social support 764 532 Purchase of workers' debts 8 240 4 700 Loans to employees 3 331 7 221

Imparity (4 067) (12 251)

23 170 11 377 Part VI – Note Appended th the Financial Statements• 119

Within the scope of BNA’s current social policy and in order to provide support in obtaining its own housing, the Board of Directors decided to grant housing loans to its employees in the form of a resolvable rent, ensuring a correct allocation of ﬁnancial resources in relation to the institution’s other responsibilities. In this context, the balance of the items “Loans to employees” and “Housing projects” represents the amount in debt not subsidised by BNA which is being repaid by the employees.

The item “Purchase of employees’ debt” corresponds to the purchase of the employees’ debt from the ﬁnancial institutions, which is being periodically amortised by the employees in favour of the Bank.

The Bank, taking into account some assumptions related to the recoverability of some balances, has been recording impairment losses, which as at 31 December 2019 corresponds to the amount of Kz 4.07 billion.

The item “Social Fund” refers to the amount receivable in respect of extraordinary aid granted by the Bank to its employees for payment of one-off social expenses. These amounts are subsequently collected from the respective beneﬁciaries during salary processing.

The item “Debtors and other investments - Advances to suppliers” corresponds in full to the amounts advanced to the company producing national notes and coins.

As at December 31 2019 and 2018, the item “Debtors and other applications - Sundry debtors” shows the following detail:

2019 2018 Bonds to be received 17 17 Repatriated values Banco Namibia 2 2 Other MinFin receivables - 1 444 By transfer of shares to EMIS - 183 19 1 646

At 31 December 2019 and 2018, the balance of the item “Deferred charges - Banknote and coin issues” corresponds to expenses associated with the production of Kwanza banknotes and coins. The costs incurred with their production are initially recorded under this item and recognised on a straight-line basis in the income statement over their useful life, currently estimated at 5 years.

As at 31 December 2019 and 2018, costs incurred with the production of banknotes and coins are distributed as follows:

2019 2018 Notes 10 788 10 453 Currencies 454 827 11 242 11 280

In 2019 and 2018, costs related to the issue of banknotes and coins were recognised in the amounts of Kz 2.71 billion and Kz 2.89 billion (see note 33), respectively.

As at 31 December 2019, the balance under “Accruals and deferred income” relates to the collateral of a REPO operation which matured on the last day of the ﬁnancial year 2019 and is awaiting settlement in the ﬁrst few working days thereafter. 120 • Annual Report and Accounts • 2019

13. Banknotes and coins in circulation At 31 December 2019 and 2018, this heading comprised the following:

2019 2018 Monetary Issue Notes issued 643 602 699 348 Coins issued 9 639 9 491 Banknotes and coins for circulation Notes (113 138) (208 915) Currencies (94) (1 534) 540 009 498 390

This item represents the issue of notes and coins that the Banco Nacional de Angola has placed on the market as an instrument to facilitate the country’s commercial transactions, less the denominations that the BNA holds and which are awaiting entry into circulation in the market.

The costs associated with the annual depreciation of the notes are reﬂected in the item “Other assets - Deferred charges” (Note 12).

14. Liabilities to national credit institutions related to monetary policy operations At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 Bank Reserves In national currency Net reserve 1 045 929 799 276 In foreign currency Bonds 872 025 538 989 Net reserve 700 677 410 932 2 618 631 1 749 197 Interbank money market Liquidity absorbing operations FAL7 Absorbed Value 2 000 - Liquidity absorbing occasional operations Absorbed value 236 073 87 516 Charges to be paid 2 037 365 240 110 87 881 2 858 741 1 837 078

The item “Bank reserves” net represents the deposits in national and foreign currency made by national ﬁnancial banking institutions, with a view to meeting the legal requirements relating to the minimum levels of compulsory reserves deﬁned by the BNA, which are not remunerated.

On 31 December 2019, in accordance with Instruction no. 17/2019 in conjunction with Directive no. 08/DMA/DRO/2019, which revokes Instruction no. 10/2018, Treasury Bonds in foreign currency belonging to the own portfolio registered in SIGMA, issued from 2015 onwards, are also eligible for compliance with the mandatory reserves in foreign currency. These securities (OT in foreign currency) are also recorded at nominal value under the heading “Operations to credit institutions related to monetary policy operations” (Note 8). Part VI – Note Appended th the Financial Statements• 121

As at 31 December 2019 and 2018, the coefﬁcient taken into account for the calculation of bank reserves in national currency amounts to 22% and 17%, respectively, of the reserve base.

The item “Interbank money market” includes all liquidity-absorbing ﬁne-tuning operations conducted in national currency, aimed at managing the liquidity of the national banking system.

On 31 December 2019 and 2018, BNA’s liabilities for carrying out “Liquidity-absorbing ﬁne-tuning operations” in the open market were distributed as follows by ﬁnancial institution:

2019 2018 Absorbed Charges to Absorbed Charges to Financial institution Total Total value be paid value be paid Banco Angolano de Investimentos 42 033 93 42 126 21 000 114 21 114 Banco de Desenvolvimento de Angola 31 000 1 164 32 164 - - - Banco Internacional de Crédito 24 464 38 24 502 10 000 5 10 005 Banco de Fomento de Angola 23 752 134 23 886 45 500 223 45 723 Banco de Investimento Rural 12 528 63 12 591 - - - Banco Privado Atlântico 12 433 77 12 510 - - - Banco de Crédito do Sul 12 277 73 12 350 - - - Banco de Negócios Internacional 9 780 80 9 860 523 3 526 Banco Económico 7 832 45 7 877 - - - Banco VTB Africa 7 690 30 7 720 - - - Banco Comércio e Indrustria 6 868 32 6 900 - - - Banco Regional do Keve 6 796 31 6 827 1 500 0 1 500 Banco YETU 6 228 24 6 252 - - - Banco Comercial Angolano 5 556 38 5 594 - - - Standard Bank Angola 5 535 46 5 581 - - - Banco Comercial do Huambo 4 058 17 4 076 - - - Banco Prestígio 3 515 4 3 519 - - - Banco Valor 3 202 10 3 212 - - - Finibanco Angola, SA 3 106 14 3 120 - - - Banco BAI Micro Finanças SA 2 500 3 2 503 - - - Banco Sol SARL 2 291 1 2 292 - - - Banco da China Limitada 1 845 15 1 860 - - - Standard Chartered Bank de Angola 784 5 788 6 600 17 6 617 Banco Postal, S.A - - - 1 793 3 1 796 Banco Kwanza Invest - - - 600 1 601 236 073 2 037 238 110 87 516 365 87 881 122 • Annual Report and Accounts • 2019

As at 31 December 2019 and 2018, the composition of the item “Liquidity-absorbing operations - Amount absorbed” in terms of residual maturities to maturity is as follows:

2019 Between 1 and Between 3 and Financial institution Until 1 month Total 3 months 6 months Banco Angolano de Investimentos 29 425 12 608 - 42 033 Banco de Desenvolvimento de Angola - 9 000 22 000 31 000 Banco Internacional de Crédito 17 539 6 925 - 24 464 Banco de Fomento de Angola 5 505 18 247 - 23 752 Banco de Investimento Rural 4 174 8 354 - 12 528 Banco Privado Atlântico 1 604 10 829 - 12 433 Banco de Crédito do Sul 2 937 9 339 - 12 276 Banco de Negócios Internacional - 9 780 - 9 780 Banco de Espirito Santo SARL 1 146 6 686 - 7 832 Banco VTB Africa 4 000 3 690 - 7 690 Banco Comércio e Indrustria 2 701 4 167 - 6 868 Banco Regional do Keve 1 846 4 950 - 6 796 Banco YETU 3 000 3 228 - 6 228 Banco Comercial Angolano 850 4 706 - 5 556 Standard Bank Angola - 5 535 - 5 535 Banco Comercial do Huambo 1 941 2 117 - 4 058 Banco Prestígio 3 146 369 - 3 515 Banco Valor 1 407 1 795 - 3 202 Finibanco Angola, SA 1 239 1 867 - 3 106 Banco BAI Micro Finanças SA 2 500 - - 2 500 Banco Sol SARL 1 145 1 146 - 2 291 Banco da China Limitada - 1 845 - 1 845 Standard Chartered Bank of Angola - 785 - 785 86 105 127 968 22 000 236 073 2018 Between 1 and Between 3 and Instituição ﬁnanceira Until 1 month Total 3 months 6 months Banco Fomento de Angola 30 000 15 500 - 45 500 Banco Angolano de Investimentos 16 000 5 000 - 21 000 Standard Chartered Bank of Angola 10 000 - - 10 000 Banco Regional Keve 6 600 - - 6 600 Banco Kwanza Invest 1 611 182 - 1 793 Banco Postal, S.A 1 500 - - 1 500 Banco Comercial Angolano 600 - - 600 Banco Pungo Andongo 523 - - 523 66 834 20 682 - 87 516

On December 31, 2019 and 2018, the average rate of return on “Liquidity-absorbing ﬁne-tuning operations” is 10% and 8.6%, respectively. Part VI – Note Appended th the Financial Statements• 123

As at December 31, 2019, the composition of the “Liquidity-absorbing ﬁne-tuning operations - Amount absorbed” item is as follows:

2019 2018 Absorbed Charges to Absorbed Charges to Financial institution Total Total value be paid value be paid Standard Chartered Bank of Angola 2 000 - 2 000 - - - 2 000 - 2 000 - - -

15. Internal liabilities to other entities At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 Treasury Single Account In foreign currency 1 378 343 1 306 844 In national currency 53 909 202 803 Values to return to CUT 4 173 4 173 1 436 425 1 513 820

Deposit Guarantee Fund 14 408 -

Other responsibilities Sovereign Development Fund of Angola 438 325 - National Asset Recovery Service 22 545 - Loans in the country - 26 460 870 26

The item “Single Treasury Account” is included in the scope of the protocol signed in 2002 with the Ministry of Finance, relating to the management of Fiscal and Monetary Policy, and represents an account in which the National Treasury deposits with the BNA, among other income, that resulting from taxes on oil exploration and ﬁnancing obtained. The remuneration of this account, although provided for in the protocol, has never been implemented, and the Bank’s Board of Directors believes that the remuneration referred to for 2019 and previous years is not due, since the protocol is still under review.

At 31 December 2019, the change in the balance of the “Single Treasury Account” item is explained by two effects, namely, i) the depreciation of the Kwanza against the US Dollar by approximately 36% and ii) the decrease in cash holdings in national currency justiﬁed essentially by the various payments made on behalf of the Treasury.

At 31 December 2019, the 100% increase in the item “Deposit Guarantee Fund” is essentially explained by the realisation of the commercial banks, the initial entry to set up the Fund in Kz 14.03 billion (point 1.5.3 - Financial instruments line B.2.6 - Financial liabilities).

At 31 December 2019, the increase in “Other liabilities” is explained by the 460.87 billion increase in “Other liabilities”, justiﬁed by the constitution of deposits from the Angolan Sovereign Development Fund and the National Asset Recovery Service. 124 • Annual Report and Accounts • 2019

At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 Operations Financing Charges Total Financing Charges Total Obtained to be paid Obtained to be paid Sale operations with repurchase agreement 1 928 909 7 693 1 936 602 1 388 732 9 182 1 397 914 1 928 909 7 693 1 936 602 1 388 732 9 182 1 397 914

At December 31, 2019 and 2018, the breakdown of “Sale transactions with repurchase agreement” is as follows:

2019 2018 Instituição ﬁnanceira Financing Charges to Total Financing Charges Total Obtained be paid Obtained to be paid GemCorp 964 455 4 431 968 885 771 518 7 095 778 613 ICBC Standard Bank 964 454 3 262 967 716 617 214 2 087 619 301 1 928 909 7 693 1 936 602 1 388 732 9 182 1 397 914

At 31 December 2019 and 2018, “Sale transactions with repurchase agreement” refers to ﬁnancing obtained from two external entities, GemCorp and ICBC Standard Bank, for a total amount of USD 4 billion (Kz 1.93 trillion), with foreign sovereign debt securities registered in the balance sheet under the category of available-for-sale ﬁnancial assets, amounting to USD 4.19 billion (Kz 2.02 trillion) at 31 December 2019 (Note 5), having been sold as guarantees.

As at 31 December 2019, the “Operations” item increased by 39%, while in foreign currency there was a decrease of USD 500 million relating to the repayment of the ﬁrst operation in July 2019.

2019

Start Date Maturity Interest Accrual Cur- Interest Amount to Amount to Entity Financing (Disburse- date (reim- payment MN Financing of interest rency Rate pay MN pay MN ment) bursement) frequency ME

GEMCORP 500 USD 05/09/17 02/06/20 Annual 2,54% 241 114 4 2 024 243 138

GEMCORP 500 USD 03/11/17 04/05/21 Annual 3,00% 241 114 2 1 145 242 259

GEMCORP 1 000 USD 01/12/17 01/12/22 Quarterly 3,25% 482 227 3 1 262 483 489

ICBC 1 000 USD 27/01/17 27/10/21 Quarterly 2,70% 482 227 5 2 351 484 578

ICBC 1 000 USD 09/12/17 09/12/21 Quarterly 3,09% 482 227 2 911 483 138

4 000 1 928 909 16 7 693 1 936 602

2018

Start Date Maturity Interest Accrual Cur- Interest Amount to Amount to Entity Financing (Disburse- date (reim- payment MN Financing of interest rency Rate pay ME pay MN ment) bursement) frequency ME

GEMCORP 500 USD 05/07/17 05/07/19 Annual 2,35% 154 304 6 1 803 156 106

GEMCORP 500 USD 05/09/17 02/06/20 Annual 2,54% 154 304 4 1 285 155 588

GEMCORP 500 USD 03/11/17 04/05/21 Annual 3,00% 154 304 2 720 155 024

GEMCORP 1 000 USD 01/12/17 01/12/22 Quarterly 3,25% 308 607 11 3 288 311 895

ICBC 1 000 USD 27/01/17 27/10/21 Quarterly 2,70% 308 607 5 1 504 310 111

ICBC 1 000 USD 09/12/17 09/12/21 Quarterly 3,09% 308 607 2 583 309 190

4 500 1 388 732 30 9 182 1 397 914

At 31 December 2019 and 2018, the average rate of return on “Sale transactions with repurchase agreement” is 2.95% and 2.89%, respectively. Part VI – Note Appended th the Financial Statements• 125

As at 31 December 2019 and 2018, the estimate of liabilities for services provided to pensioners and the active population of the eligible Bank is as follows

Type of plan 2019 2018 Retired Retirement and survival pensions Defined benefit 472 895 197 770 Medical assistance and medication Defined benefit 110 482 35 858 Death grant Defined benefit 17 143 5 369 Christmas compensation Defined benefit 16 964 6 946 Pension fund asset value 125 -

Active workers Medical assistance and medication Defined benefit 120 627 30 690 Christmas compensation Defined benefit 20 139 4 834 Retirement Compensation Defined benefit - 5 378 Retirement and survival pensions Defined contribution - 59 321 758 375 346 166

The Bank has undertaken, on a voluntary basis, to provide its employees, or their families, with cash benefits as a supplement to old-age, disability, early retirement and survivors’ pensions. In this sense, liabilities with pensions and other benefits consist of provisions that the Board of Directors decided to set up as from 2010, with the aim of covering liabilities with past services relating to old-age pensions, early retirement and survivors’ pensions for its employees, based on a defined benefit plan.

BNA also grants to its retirees and their respective spouses a medical assistance and medicine beneﬁt, through which it provides access to a wide range of health services. These liabilities are also recognised in the Bank’s balance sheet through the recording of provisions.

During 2015, the BNA employees’ pension fund was set up through the publication of Order no. 335/15 of 27 October. Contributions to the pension fund began on 1 January 2016, and the Board of Directors decided on an initial ﬁnancial contribution in the form of an extraordinary contribution to each employee who joined the pension plan, in proportion to the length of service with the Bank since their admission, with the aim of stimulating their membership of the pension fund, as well as to remunerate the contribution made by each employee to the development and consolidation of the institution. As at 31 December 2019, the variation is explained by the settlement of the initial contribution to the Pension Fund of BNA employees in the amount of Kz 59.32 billion and by the increase in employee liabilities.

At 31 December 2019 and 2018, the number of participants covered by the deﬁned beneﬁt plan (pension plan) is shown in the table below:

Number of participants 2019 2018 Retired and pre-retired 1 760 1 718

The liabilities arising from the pension plan were determined on the basis of actuarial studies as at 31 December 2019 and 2018, using the projected unit credit method. 126 • Annual Report and Accounts • 2019

The main actuarial and ﬁnancial assumptions are as follows:

Actuarial and financial assumptions 2019 2018 Nominal interest rate (discount rate) 7,30% 7,30% 8,5 % ao ano (equivalente a 77,7% da infla- Nominal rate of wage growth 13,70% ção) 8,5 % ao ano (equivalente a 77,7% da infla- Pension growth rate 13,70% ção) Inflation rate 13,70% 11,0 % ao ano Plan retroactivity date 01.01.1987 01.01.1987 Reference date 31.12.2019 31.12.2018 Mortality/survival table PF-60/64 PF-60/64 Time of assignment 60 years old with minimum 60 years old with minimum of the retirement pension of 5 years of service of 5 years of service Reference currency of the calculation Kz (Kwanzas) Kz (Kwanzas)

The liabilities with retirement compensation corresponded to the amount to be paid to the employees who retired, in accordance with articles 218 and 262 of Law no. 2/2000 and articles 218 and 262 of the General Labour Law (Note 1.5.8). The General Labour Law was amended by Law no. 7/15 of 15 June, revoking Law no. 2/2000 of 11 February, however the Board of Directors decided on 27 December 2016 to continue this beneﬁt for all workers hired before 13 September 2015.

However, at the 10th Ordinary Session of the Board of Directors held on 29 October 2019, it was decided to cancel this beneﬁt for all employees who retired after 31 December 2019.

As at 31 December 2019 and 2018, the Bank recognised liabilities in respect of the obligation associated with medical care and medicine for retirees and expenses with Christmas compensation for retirees and active workers. The liabilities relating to the constructive obligation associated with medical assistance and medication were calculated based on the insurance plan contracted with SAHAM Angola Seguros.

18. Provisions At 31 December 2019 and 2018, provisions amounted to:

2019 2018 For systemic risk in the banking sector 463 824 180 781 For various risks 1 335 3 223 465 159 184 004

In December 31st , 2019 and 2018, the movements occurred under Provisions were as follows:

“Balance in Liquid reinfor- “Balances at Liquid reinfor- “Balance in Uses Regularization Uses 31-12-2017” cements 12-31-2018” cements 31-12-2019”

Provision for systemic risk in the banking sector 37 583 143 198 - 180 781 283 043 - 463 824

Provision for miscellaneous risks 1 834 1 693 (304) 3 223 (1 888) 1 335

Provision for market risks 59 144 (59 144) ------

98 562 85 747 (304) - 184 004 281 155 - 465 159

As at 31 December 2019 and 2018, the item “Provision for systemic risk of the banking sector” corresponds to the risk exposure of banking financial institutions and considers in its calculation basis the total financial liabilities deducted from the net cash holdings of banking financial institutions. Based on the scoring assigned to each financial institution, the Board of Directors has defined risk-based percentages in order to safeguard against possible losses related to financial difficulties of credit institutions. This provision falls within the functions determined by BNA’s Law, namely to ensure the stability of the national financial system, ensuring, for this purpose, the function of lender of last resort.

During 2019, licenses were withdrawn from three banking ﬁnancial institutions, namely Banco Angolano de Negócios Part VI – Note Appended th the Financial Statements• 127

e Comércio, S.A. (BANC), Banco MAIS, S.A. and Banco POSTAL, S.A., for not meeting the legal requirement for the continuity of banking activity, under the terms of subparagraph b), in conjunction with subparagraph c) of paragraph 15, and subparagraph f), both of Article 29 of Act no. 12/15, of 17 June, the Basic Act of Financial Institutions, as well as in compliance with Notice no. 02/2018, of 2 March.

During the 2019 ﬁnancial year, work was carried out to assess the quality of the assets of ﬁnancial institutions, i.e., in addition to the ratios that have historically been considered for the calculation of provisions, an increase was made for those banks, whose results under the AQA had a material and minor impact.

The balance of the item “Provisions for sundry risks” corresponds to the amount estimated to cover potential liabilities of a speciﬁc nature, namely legal and/or tax liabilities or contingencies, which at 31 December 2019 amounted to Kz 1.34 billion.

19. Other liabilities At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 Creditors and other resources Other liabilities 75 741 36 915 Various creditors 32 853 28 567 Social Fund 25 544 28 765 Taxes payable 4 257 6 782 World Bank 80 153 Advances from ﬁnancial institutions 58 182 Charges to be paid 5 639 3 450 Regularization accounts 1 217 1 429 145 389 106 243

A rubrica “Credores e outros recursos – Credores diversos” apresenta o seguinte detalhe: 2019 2018 Suppliers 12 609 18 478 Foreign exchange transgression deposits (Note12) 9 512 7 833 Guarantees received 7 233 - Company bonds 3 499 2 256 32 853 28 567

At 31 December 2018, part of the balance recorded under the “Suppliers” heading results from contracts whose assessment of their execution revealed a series of signs of irregular procedures in 2017, so that the collectability of these amounts is conditioned by the process of negotiations being undertaken by the BNA’s Legal Department, and it has been possible to rescind and/or renew the respective contracts.

Similarly, the amounts already paid under these contracts because they occurred without the respective consideration for service or purchase of goods, also went through the negotiation process, and it was possible to recover part of the amounts advanced.

The item “Creditors and other resources - Social Fund” corresponds to the estimate of the Board of Directors to finance real estate investments and other purposes of a social nature, in accordance with the provisions of the BNA Act. As at 31 December 2019, the Bank has a provision for social fund in the amount of Kz 25.54 billion, since it corresponded to the best estimate for financing real estate investments and other social purposes, the assumptions and contribution having been duly communicated to the employees with the benefit.

The balance of the item “Creditors and other resources - Taxes payable” corresponds essentially to the amounts withheld from taxes on capital investments in interbank money market operations, on services rendered and property tax for the month of December 2019. 128 • Annual Report and Accounts • 2019

At 31 December 2019 and 2018, a net reversal of Kz 3.20 billion and an increase of Kz 665 million were made, respectively, relating to the provision for the Social Fund, as shown in the table below:

“Balance in Liquid rein- Balances at Liquid rein- “Balance in Uses Regularization Uses 31-12-2017” forcements 12-31-2018 forcements 31-12-2019”

Social Fund (Note 19) 28 246 665 - (146) 28 765 (25) 25 545

28 246 665 - (146) 28 765 (25) 25 545

As at 31 December 2019 and 2018, the item “Charges payable” corresponds essentially to the accrual of the holiday and Christmas subsidy and the performance bonus to be granted to staff and management. Considering that the amount of holiday allowance granted in a given year is a right acquired in the immediately preceding year, the Bank records in its accounts, at the end of each year, the value of this allowance and the respective deliverable social charges. The performance bonuses to be paid to the staff and management bodies attributed are recorded as a cost for the year to which they refer, although they are paid only in the following year.

At 31 December 2019, the balance of the item “Creditors and other resources - World Bank” corresponds in full to the amount received for provisioning the IBRD - International Bank for Reconstruction and Development account.

The item “Creditors and other resources - Advances from financial institutions” corresponds to advanced deposits from banking and non-banking financial institutions to realize part of the Share Capital. At 31 December 2019, the variation in this item is justified by the restitution of the amounts to an entity related to the advance for the constitution of a banking financial institution.

20. Capital BNA’s capital may be increased by incorporation of reserves, deliberated by the Board of Directors and ratiﬁed by the Holder of the Executive Power (Act No. 16/10 of 15 June). On 31 December 2019, the “Capital” item amounts to Kz 270 billion.

At 31 December 2019 and 2018, this heading comprises the following:

2018 2018 Capital 270 000 270 000 Subscribed capital not paid in - (2 544) Discount of capital issue (135 900) (135 900) 134 100 131 556

The Bank calculated the fair value of the Treasury Bonds received in capital increase and recorded under “Discount of capital issue” the amount of Kz 135.90 billion representing the difference between the fair value and the nominal value on the date of capitalisation.

In the years of 31 December 2019 and 2018, the variation in the balance of the item “Subscribed capital not paid up” arises from the following movements:

Balances at 12-31-2018 (2 544) Dividend allocation for 2018 2 544 Balance in 31-12-2019 - Part VI – Note Appended th the Financial Statements• 129

21. Revaluation differences At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 Fair value revaluation differences Financial assets available for sale (21 424) (85 037) Gold (49 491) (75 811) (70 915) (160 848)

Exchange revaluation differences 1 903 773 1 056 268 1 832 858 895 420

The variation in “Revaluation Differences” is justiﬁed by the potential gains from the valuation of the price of Gold and the fair value of sovereign debt securities, as well as from the transfer to proﬁt and loss of the actual gains from the sale of sovereign debt securities and the potential foreign exchange gains on assets and liabilities denominated in foreign currency.

In accordance with the note “1.5.2. Transactions in foreign currency”, the amounts relating to potential foreign exchange differences are recorded under “Foreign exchange revaluation differences”. These amounts are recorded in the income statement on the date on which the gains become effective.

22. Other reserves and retained earnings At 31 December 2019 and 2018, this heading comprises the following:

2019 2018 Other Reserves Legal reserve 25 679 21 960 Free Reserve 25 567 21 849 51 246 43 809

Retained earnings (283 567) (203 994)

The variation in retained earnings amounting to Kz 79.57 billion is explained by: i) the negative result of previous years, ii) the distribution of results for 2018 and iii) the recording of impairment losses of a ﬁnancial institution.

In accordance with Presidential Decree 210/19 of 27 June 2019, the issuance of Treasury Bonds in local currency up to the amount of Kz 75.8 billion was authorised, with a view to covering the negative net result determined by the Bank in the ﬁnancial year 2017. The bonds have a maturity of 10 years and are remunerated at 5% p.a., and were recognised in the Balance Sheet under “Internal assets available for sale”, against retained earnings for the amount corresponding to the fair value of Kz 24.1 billion. 130 • Annual Report and Accounts • 2019

23. Off balance sheet accounts At 31 December 2019 and 2018, the off-balance-sheet items break down as follows:

2019 2018

Responsibilities for providing services 9 593 753 7 767 366 Guarantees given and other contingent liabilities 1 398 967 1 298 504 Banknotes and coins out of circulation 518 650 733 112 Commitments to third parties Non-residents 65 407 24 257 Residents 36 252 13 956 Guarantees received 15 370 10 007 Services provided by third parties 665 665 11 629 064 9 847 867

The item “Liabilities for the provision of services” records the liabilities of the BNA acting as custodian of the securities issued by the Ministry of Finance. This item is broken down as follows:

2019 2018 Responsibilities for providing services Treasury Bonds in national currency 8 698 016 6 721 167 Treasury Bonds in foreign currency 670 291 466 348 Treasury Tickets 225 446 581 549 Other amounts deposited - (1 699) Values managed by the institution - 1 9 593 753 7 767 366

The item “Guarantees provided and other contingent liabilities” refers essentially to guarantees and sureties provided and to promissory notes taken on by BNA to foreign entities.

At 31 December 2019 and 2018, this item is broken down into:

2019 2018 Guarantees given and other contingent liabilities Institutional guarantees provided Financing from China 1 435 752 1 227 305 1 435 752 1 227 305 Promissory Deﬁnitive Promissory notes of the Brazil line - 18 865 Promissory notes in favor of the IMF 642 922 330 057 Promissory in favor of others 25 277 19 689 668 199 368 611 Guarantees provided under the protocols of credit with commercial banks 9 000 9 000 9 000 9 000 Other institutional guarantees provided IMF - Extended Funding Program (PFA) (713 984) (306 412) 1 398 967 1 298 504 Part VI – Note Appended th the Financial Statements• 131

These responsibilities are supported by the Protocol on Fiscal and Monetary Policy Management signed with the Ministry of Finance (MINFIN). This protocol identifies the said Ministry as the person responsible for its payment, the BNA being the guarantor of the debt in the event of default by the MINFIN. The value of the guarantees is updated according to the information received from MINFIN. As at December 31, 2019, the heading “Other institutional guarantees provided - IMF - Extended Funding Programme (AFP)” includes the equivalent of SDR 1.07 billion (Kz 430.06 billion) relating to the total financing disbursed by the IMF to MINFIN under the Extended Funding Programme (AFP) that Angola has benefited from.

The item “Banknotes and coins out of circulation” consists entirely of the printed notes of the new Kwanza family (Series 2012) that are ready for issue.

As at 31 December 2019 and 2018, the item “Commitments to third parties - Non-residents” corresponds to the future commitments assumed by the Bank for capital calls, arising from investments in alternative investment funds with external entities where the BNA has discretionary management portfolios, which amount to Kz 65.41 billion and Kz 24.26 billion, respectively.

24. Interest and similar income In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018

Financial assets available for sale National public debt securities 138 241 58 565 Foreign sovereign debt securities 55 074 34 082 Applications in credit institutions Abroad - Term Deposit 39 128 26 613 Operations to credit institutions related to monetary policy operations Redemption operations 16 379 23 842 Occasional liquidity-providing operations 2 343 1 010 Overnight operations 1 901 13 678 Provision of liquidity 317 - Financial assets granted to the State 19 167 4 772 Availabilities in other credit institutions 4 228 2 979 IMF - SDR interest 1 397 977 Investments held to maturity - 3 490 278 175 170 009

The item “Available-for-sale ﬁnancial assets” represents the gain obtained from coupon interest and the income resulting from the application of the effective rate method of the differences between the acquisition cost and the nominal value (premium or discount) of foreign and domestic sovereign debt securities held in portfolio and from the change in the coupon rate of Treasury Bonds issued in July 2016, which rose from 0% to 12% in March 2019.

At 31 December 2019 and 2018, the Bank recognised a total of Kz 4.7 billion and Kz 4.4 billion in net interest income on the Treasury Bonds received from the Angolan government’s capital increases through bonds.

In the ﬁnancial years 2019 and 2018, the item “Investments in credit institutions” refers essentially to gains obtained with interest on term deposits abroad and interest on operations to credit institutions related to monetary policy operations, namely, rediscount operations and liquidity supply operations carried out by BNA.

The item “Interest on ﬁnancing granted to the State” essentially corresponds to: (i) the gains obtained by virtue of the credit granted in 2019 in kwanzas in the amount of Kz 9.13 billion, and (ii) the interest obtained on the REPO on lending operation in the nominal value of USD 500 million in the amount of approximately Kz 10.04 billion. 132 • Annual Report and Accounts • 2019

25. Interest and similar charges In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018

Resources of credit institutions 60 818 37 312 Other interest and similar charges 5 163 101 Net SDR Interest 1 181 810 Interest on loans 4 8 67 166 38 231

The item “Resources from credit institutions” refers to the costs incurred with the interest on the liquidity absorption operations carried out by the BNA and the interest arising from the “Sale operations with repurchase agreement” carried out with GemCorp and ICBC. In the 2019 ﬁnancial year, the interest relating to “Sale operations with repurchase agreement carried out with GemCorp and ICBC” amounts to Kz 45.51 billion.

The item “Other interest and similar charges” also includes the amount of Kz 4.3 billion of interest paid to the Sovereign Fund of Angola.

26. Income from services and commissions In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018 Commissions received for transactions performed by third parties account Ministry of Finance 16 348 12 952 Commissions received for services provided Real Time Payment System 49 48 16 397 13 000

The item “Commissions received for operations carried out on behalf of third parties” refers in full to commissions collected as a result of bank transfers made on behalf of the National Treasury, under the terms of the protocol signed between BNA and MINFIN.

27. Charges for services and commissions In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018 Commissions paid for banking services provided by third parties Financial instruments 3 611 2 910 For operations performed by third parties 693 - Sight Depósits 32 6 4 336 2 916

In the ﬁnancial years 2019 and 2018, this heading amounts to Kz 3.61 billion and Kz 2.92 million, respectively, and concerns the recognition of commissions charged by external entities where the BNA has discretionary management portfolios, commissions for the custody of foreign sovereign debt securities, commissions paid arising from relations maintained with the IMF and commissions for the maintenance of current accounts. Part VI – Note Appended th the Financial Statements• 133

results In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018 Gains on financial assets at fair value through profit or loss 160 028 77 236 Losses on financial assets at fair value through profit or loss (146 361) (147 542) 13 667 (70 306)

In the financial years 2019 and 2018, this caption totals gains of Kz 13.67 million and losses of Kz 70.31 billion, respectively, representing the net profit of the potential fair value gains and losses associated with the positions of the portfolios managed by external entities. The breakdown of profit in 2019 can be seen in the table below:

Valuables Dividends Total External Managers UBS 10 141 - 10 141 CA INDOSUEZ 1 010 - 1 010 WORLD BANK (3 125) - (3 125) ATRIUM (8 555) - (8 555)

Investment Funds RIVERSTONE 10 190 4 431 14 621 GEMCORP FUND LIMITED 12 064 - 12 064 CARLYLE (1 027) 3 344 2 317

Portfolios under internal management GOLDEN ASSET 3 450 - 3 450 GOLDEN ASSET - ABD 3 365 - 3 365 Swank 776 - 776 Q. PLAZA (22 398) - (22 398) Q. INVESTMENT - - - Quantum Liquidity - - - Total 5 891 7 775 13 667

In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018 Gains on available-for-sale ﬁnancial assets National public debt securities 71 429 434 Foreign sovereign debt securities 9 663 - 81 092 434

Losses on available-for-sale ﬁnancial assets National public debt securities (5 844) - Foreign sovereign debt securities - (1 216) (5 844) (1 216) 75 248 (782) 134 • Annual Report and Accounts • 2019

The item “Gains on available-for-sale ﬁnancial assets” represents essentially the gains generated on the fair value adjustment of National Treasury Bonds issued in 2016, due to the change in the future coupon rate from 0% to 12%. This impact can be detailed as follows:

Fair value consi- Fair value con- Difference recor- Description dering the coupon sidering the 12% ded in results rate of 0% coupon rate Treasury bond issued to pay current account Nominal value 190 000 190 000 - Prize or discount (135 364) (64 555) 70 809 Variation in fair value (14 895) - 14 895 39 741 125 445 85 704

In 2019 and 2018, this item totals net gains of Kz 75.25 billion and net losses of Kz 782 million, respectively, representing the gains obtained from the sale of domestic and foreign sovereign debt securities, classiﬁed under available-for-sale ﬁnancial assets.

30. Results in Investment income held to maturity In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018 Gains on held to maturity investments National public debt securities - 1 799 - 1 799

Losses on held to maturity investments National public debt securities - (835) - (835) - 964

31. Results of investments in associates and other entities In 2019 and 2018, this item totals net gains of Kz 6 million and Kz 12 million, respectively, representing the return on supplementary payments and capital gains obtained from the sale of investments in associates, namely the transfer of 17% of BNA shares in EMIS, to the other commercial banks, respectively.

32. Foreign exchange results In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018 Exchange gains Gains associated with exchange rate differences 516 908 514 677 Gains in foreign exchange operations 71 881 46 406 588 789 561 083

Exchange losses Losses in foreign exchange operations (8 189) (62 436) (8 189) (62 436) 580 600 498 647 Part VI – Note Appended th the Financial Statements• 135

Based on the deliberation of the Board of Directors’ minute no. 08/A/2008 of 26 July, only the realized exchange rate variations are reﬂected in the items “Gains associated with exchange rate differences” and “Losses associated with exchange rate differences” of the income statement of the ﬁnancial years in which they occur. Potential exchange rate differences are recognised under the item “Exchange rate revaluation differences” in Equity (Note 21). During 2019, foreign exchange sales were predominantly in the form of foreign exchange auctions.

33. Costs related to the issue of banknotes and coins In 2019 and 2018, this item amounts to Kz 2.71 billion and Kz 2.90 billion, respectively, and consists of the accrual of costs relating to the issue of banknotes and coins.

34. Results of the sale of other assets In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018 Gains from disposal of other assets Gains on non-ﬁnancial assets 1 261 66 1 261 66

Losses with disposal of other assets Losses on non-ﬁnancial assets (207) (1 167) (207) (1 167) 1 054 (1 101)

In the ﬁnancial years 2019 and 2018, the balance of the items “Gains on non-ﬁnancial assets” and “Losses on disposals of other assets” correspond to gains and losses on disposals of tangible assets, respectively.

35. Other operational results In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018 Other income and revenue Supervision Fines and penalties 1 569 1 308 Others 7 592 2 959 9 161 4 267

Other charges and expenses Quotations and donations (227) (571) Operational lease rentals (636) (352) Other charges and miscellaneous expenses (1 239) (10 399) Taxes VAT (716) - (2 818) (11 322) 6 343 (7 055) 136 • Annual Report and Accounts • 2019

In the financial years 2019 and 2018, the item “Supervision - Fines and penalties” corresponds to the fines imposed by the BNA on financial institutions for non-compliance with the legal provisions in force.

The heading “Quota and donations” corresponds in full to donations granted by the BNA to various local institutions.

36. Personnel costs In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018 Optional social charges 201 864 61 604 Mandatory social charges 296 349 92 398 Remuneration of employees 29 886 24 107 Remuneration of management bodies 628 377 Others 838 895 529 565 179 381

In the financial years 2019 and 2018, the item «Compulsory social charges» consists essentially of the increases made in the estimates of liabilities for services rendered relating to retirement and survivor›s pensions and funeral and bereavement allowances, the balance of which amounts to Kz 293.33 billion and 88.70 billion, respectively.

In 2019 and 2018, the caption «Compensation of employees» includes the recognition of liabilities with current employees.

In the financial years 2019 and 2018, the number of active employees is shown in the table below:

2019 2018 Active workers Management Bodies 7 7 Direction 66 59 Intermediate Manager 262 244 Technicians 1 632 1 748 1 967 2 058 Part VI – Note Appended th the Financial Statements• 137

37. Third party supplies and services In the ﬁnancial years 2019 and 2018, this heading comprises the following:

2019 2018 Supplies Other third party supplies 1 007 345 Water, energy and fuel 283 283 Current consumption material 106 315 Material for assistance and repair 97 96 Hygiene and cleaning material 45 58 Publications 44 40 Decoration and comfort material 13 6 Services Specialized services 10 027 8 182 Conservation and repair 2 795 3 028 Traveling, stays and representation 1 374 871 Rentals 800 654 Communications 505 514 Transport 333 285 Advertising and publishing 282 312 Insurances 72 116 17 783 15 105

In the ﬁnancial years 2019 and 2018, the item “Services - Specialised services” is detailed as follows:

2019 2018

User License 3 220 1 179 Consulting and auditing 3 265 4 363 IT 1 686 920 Judicial 480 60 Cleaning 472 543 Other costs with independent work 310 494 Wages and fees 264 355 Security and surveillance 205 184 Other specialized services 78 31 Gardening 40 37 Disinfestation of installations 6 16 Personnel Recruitment 1 - 10 027 8 182

In 2019 and 2018, “Consultancy and Auditing” essentially records costs relating to services provided as part of consultancy projects as well as external audit services for the Bank’s ﬁnancial statements. 138 • Annual Report and Accounts • 2019

38. Losses due to impairment net of reversals In the ﬁnancial years 2019 and 2018, this heading comprises the following:

(Reinforce- Reinforce- (Reinforce- ment) net of "Balance in Balances at ment against "Balance in ment) liquid Uses reversion Uses Transfers 12-31-2017" 12-31-2018 Retained 12-31-2019" reversal against Earnings Results Credit to non-ﬁnancial institutions - ENSA (Note 7) 256 963 - - 256 963 - - - - 256 963 Imparity - Rediscount operations (Note 8) 40 457 (55 405) 2 694 93 168 17 550 (104 160) - - 179 778 Impairment - transfer of values (Note 8) 43 902 37 327 - 6 575 (1 196) - - - 7 771 Irregular service purchases (Note 7) 31 520 17 916 5 084 8 520 2 130 - 784 (112) 5 494 Acquisitions of irregular assets (Note 7) 3 940 (443) - 4 383 - 4 383 Impairment - Occasional liquidity-providing operations (Note 8) - - - - (4 413) - - - 4 413 Losses due to impairment of employee loans (Note 12) 3 498 (443) - 3 941 (15) - - 112 4 068 Imparity of Real Estate (Note 11) 2 205 660 1 470 75 - - 2 - 73 Losses due to impairments for unfunded employee loan contracts (Note 12) 8 310 - - 8 310 8 310 - - - - Settlement in cash with Treasury Bonds (Note 5) 1 907 1 907 ------National Treasury bonds issued for payment of current account (Note 5) - (259 200) 259 200 ------392 702 (257 681) 268 448 381 935 22 367 (104 160) 786 - 462 943

During the ﬁnancial year 2019, BNA recorded the impairment losses presented in the table above, the framework of which is presented in the notes in detail.

39. Transactions with related entities The related entities of the Bank with which it maintained balances or transactions during the years ended 31 December 2019 and 2018 are as follows:

39.1. Ministry of Finance The Ministry of Finance (MINFIN) represents the State as the sole shareholder of the BNA, constituting the Bank’s main related entity.

As at 31 December 2019 and 2018, balances or transactions with this entity may be presented as follows:

2019 2018 Asset Financial assets available for sale (Note5) 650 797 537 555 Financial assets granted to the State (Note 9) 238 409 154 993 Total Assets 889 206 692 548

Liabilities (Note 15) Treasury Single Account In foreign currency 1 378 343 1 306 844 In national currency 53 909 202 803 Values to return to CUT 4 173 4 173 Other responsibilities 460 870 - Total Liabilities 1 897 295 1 513 820

Equity (Note20) Capital 270 000 270 000 Subscribed capital not paid in - (2 544) Discount of capital issue (135 900) (135 900) Total Equity 134 100 131 556 Net Book Value (1 142 189) (952 828) Part VI – Note Appended th the Financial Statements• 139

2019 2018 Results Interest on available-for-sale ﬁnancial assets (Note 24) 138 241 58 565 Interest on ﬁnancial assets granted to the State (Note 24) 19 167 4 772 Commissions received (Note 26) 16 348 12 952 Taxes (Note 35) 716 - Interest on investments held to maturity (Note 24) - 3 490 Total Results 174 472 79 779

2019 2018 Off-balance sheet (Note 23) Responsibilities for providing services Custody of securities issued by the Treasury Treasury Bonds in national currency 8 698 016 6 721 167 Treasury Bonds in foreign currency 670 291 466 348 Treasury Tickets 225 446 581 549 Guarantees given and other contingent liabilities Institutional guarantees provided 1 435 752 1 227 305 Promissory 668 199 368 611 Extrapatrimonial Total 11 697 704 9 364 980

Under the terms of Article 29(1) of the BNA Act, the Bank may open a current account credit to the State up to a limit equivalent to 10% of the amounts of current income collected in the last year. On 31 December 2019, contrary to what is deﬁned in Article 33 of the BNA Act, the National Assembly did not approve, on the occasion of the approval of the General State Budget, the limit of credits by way of membership or participation in international organisations (Article 30 of the aforementioned Act) and Securities issued and guaranteed by the State (Article 31 of the Act) to be granted by the BNA to the State.

39.2. Interbank Services Company of Angola (EMIS) It is the reference processor and operator of the payment system at national level.

The BNA is the largest shareholder, with a majority holding of 18% being gradually reduced. This shareholding, which was intended to promote the development of Angola’s payment system, will be terminated on 31 December 2020, with the transfer of the remaining 18%, as provided for in the “shareholders’ agreement”.

On 31 December 2019 and 2018, the BNA’s active balances with EMIS include the share capital participation amounting to Kz 731 million, representing 730 749 shares, with a nominal unit value of Kz 1 000.

39.3. Board of Directors of the Bank It represents the body with exclusive decision-making power in the Bank and is currently composed of seven members.

As at 31 December 2019 and 2018, the remuneration paid to the Bank’s Board of Directors, as well as other beneﬁts attributed under the respective regulations, amounted to Kz 627.68 million and Kz 377.16 million, respectively (Note 36).

39.4. Pension Fund In 2019, the BNA made an allocation to its employees’ pension fund of Kz 900.65 million.

In addition, the BNA paid the initial contribution of the fund in the amount of Kz 59.3 billion, 50% of which was in cash and the remainder in securities. 140 • Annual Report and Accounts • 2019

39.5. Sovereign Wealth Fund of Angola On 18 July 2019, the transfer of ﬁnancial resources from the Sovereign Fund of Angola in the amount of USD 1.00 billion was approved by Presidential Decree no. 222/19, as part of the implementation of the Integrated Programme for Intervention in Municipalities (PIM).

In 2019, the balances or transactions maintained with the Sovereign Fund of Angola amount to Kz 438.33 billion (USD 908.96 million).

2019 2018 Sovereign Fund of Angola (Note 15) Term Deposits Invested value 434 004 - Interest payable 4 321 - Total Deposit Guarantee Fund 438 325 -

39.6. Deposit Guarantee Fund In 2019, the balances or transactions held with the Deposit Guarantee Fund amount to Kz 14.41 billion.

2019 2018 Deposit Guarantee Fund (Note 15) Term Deposits Invested value 13 694 - Interest payable 540 - Other deposits 174 - Total Deposit Guarantee Fund 14 408 -

In order to strengthen the Angolan banking system, guaranteeing ﬁnancial stability and safeguarding depositors’ interests, the Deposit Guarantee Fund (FGD) was created by Presidential Decree no. 195/18 of 22 August.

The Deposit Guarantee Fund aims to ensure, within the limits and in accordance with the law, the repayment of money deposited by savers in the event of the insolvency of a participating bank ﬁnancial institution.

The financial resources of the Deposit Guarantee Fund are essentially the result of the initial and periodic annual contributions of the participating financial banking institutions as well as the income from financial investments, as a result of fines imposed and donations.

The balance of the item “Deposit Guarantee Fund (FGD)”, corresponding to the contributions of commercial banks to the FGD as well as income arising from its activity and are initially recognised at fair value and subsequently at amortised cost.

Risk management at the Bank aims to ensure the sustainability and profitability of the institution itself, safeguarding its independence and ensuring its effective participation in the National Financial System. Thus, BNA follows a rigorous and prudent risk management policy, reflected in the profile and degree of tolerance to risk defined by the Board of Directors. Part VI – Note Appended th the Financial Statements• 141

Management of international reserves

The Bank is exposed to ﬁnancial risks in its business. The management of ﬁnancial risks related to international reserves is ensured by the Reserve Management Department, while the Risk Management Department - Independent Unit - is responsible for monitoring and reporting these risks.

The assessment and control of credit, liquidity, market and operational risk are carried out in accordance with the investment guidelines and risk proﬁle reﬂected in the Investment Policy and Master Lines approved by the Board of Directors (currently under review), the primary objective of which is the preservation of capital.

In pursuing this objective, reserve management should take into account the liquidity required to meet the commitments of the Angolan State and the BNA, as well as maximising proﬁtability, based on deﬁned risk tolerance.

Considering the need to optimise performance and achieve the BNA’s strategic objectives, the Investment Policy and the Master Lines have promoted the development of the system in force, deﬁning limits/restrictions in relation to the exposure of international reserves, of which the following should be highlighted:

Deﬁnition of limits per type of ﬁnancial instrument;

Deﬁnition of limits per counterparty, taking into account their creditworthiness; ;

Deﬁnition of limits per currency;

Deﬁnition of average investment terms;

Definition of profitability benchmarks and stop-loss limits against the defined reference portfolio;

Deﬁnition of a delegation of powers for investments under management.

Monetary and exchange rate policy management

For the implementation of monetary policy during the ﬁnancial year of 31 December 2019, the BNA maintained regular interventions to absorb and provide liquidity in the money market, through the realisation of open market operations (OMA), an instrument provided for in its operational monetary policy framework. The BNA used the other regulatory instruments, with particular emphasis on the Overnight and Intraday liquidity standing facilities (FCO and FCL) and the mandatory reserves.

In addition to the measures mentioned above, within the scope of the process of normalising the foreign exchange market which aims to reduce BNA’s direct intervention in the market, increase the number of participants on the supply side and make the interbank foreign exchange market more dynamic, it was decided to cease acquiring foreign currency from the oil sector and to reduce the limit of the commercial banks’ foreign exchange position from 5% to 2.5%, but with effect from 2 January 2020.

The open market operations carried out by BNA were supported by its own securities portfolio, and the magnitude of its interventions was appropriate to the seasonality of the factors conditioning their variation, with a view to pursuing the objectives of regulating liquidity and the variation of the monetary base.

The BNA’s role as monetary authority and stabiliser of the financial system was also aimed at creating remuneration re- ferences for the investment of financial resources. Thus, during the 2019 financial year the following facts were noted:

i. Alteration to the Basic Rate of the National Bank of Angola (BNA Rate), which by decision of the Monetary Policy Committee was reduced by 0.25 percentage points, from 15.75% to 15.50% per year;

ii. Keep the interest rate of the Permanent Liquidity Absorption Facilities unchanged, at 0%;

iii. Change in the coefﬁcient of Mandatory Reserves in national currency, from 17% to 22%, following that deﬁ- ned in Instruction no. 17/2019, of 24 October. 142 • Annual Report and Accounts • 2019

iv. As a reﬂection of a rigorous liquidity management exercise, LUIBOR was stable with slight decreasing inter- vals until the end of October, when Instruction 17/2019 came into force, a period in which LUIBOR reversed direction, moving to a crescendo, mainly to LUIBOR Overnight, impacted by the interest rate on interbank liquidity-providing operations in the interbank market, short-term ﬁnancing opportunities at high costs.

From the point of view of exchange rate stability, BNA moved from a floating exchange rate regime by bands to a floating regime, the exchange rate being freely defined by the market, in accordance with the demand and supply of foreign currency, the removal of the 2% margin on the reference exchange rate practised by commercial banks in the marketing of foreign currency in the interbank market and to their customers.

In addition to the above measures, the limits applicable to the various payment instruments for the import of goods were also relaxed, the establishment of a maximum annual value of USD 120,000.00 for private foreign exchange operations, with the exception of those related to health and education expenses which will not be subject to any limits, whenever they are paid directly to the institutions, and the settlement period for letters of credit opened under the terms of plafonds attributed by the BNA was shortened.

Fair value of ﬁnancial instruments

As at 31 December 2019 and 2018, ﬁnancial instruments and gold show the following balance sheet value by valuation methodology:

2019 2018 Valorizados Custo amortizado / Valorizados Custo amortizado / Total Total ao justo valor aquisição ao justo valor aquisição

Asset Gold 435 391 - 435 391 234 495 - 234 495 Assets abroad Cash and deposits at credit institutions - 523 176 523 176 - 586 671 586 671 Applications in credit institutions - 3 196 462 3 196 462 - 1 448 197 1 448 197 Financial assets at fair value through proﬁt or loss 483 903 - 483 903 622 394 - 622 394 Financial assets available for sale 3 673 326 - 3 673 326 2 297 487 - 2 297 487 International Monetary Fund - 632 709 632 709 - 313 548 313 548 Internal Assets Cash and deposits at credit institutions - 15 792 15 792 - 9 734 9 734 Financing operations to institutions of credit related to monetary policy operations - 1 006 962 1 006 962 - 752 961 752 961 Financial assets available for sale 650 797 - 650 797 537 555 - 537 555 Financial assets granted to the State - 238 409 238 409 - 154 993 154 993 Investments in associates and other entities - 731 731 - 731 731 Other internal assets receivable - 11 067 11 067 - 12 106 12 106 Total 5 243 417 5 625 308 10 868 725 3 691 931 3 278 941 6 970 872 Liabilities Banknotes and coins in circulation - 540 009 540 009 - 498 390 498 390 Responsibilities to credit institutions national related to monetary policy operations Bank Reserves - 2 618 631 2 618 631 - 1 749 197 1 749 197 Interbank money market - 240 110 240 110 - 87 881 87 881 Internal responsibilities towards other entities Treasury Single Account - 1 436 425 1 436 425 - 1 513 820 1 513 820 Deposit Guarantee Fund - 14 408 14 408 - - - Other responsibilities - 460 870 460 870 - 26 26 External responsibilities to other entities International Monetary Fund - 600 126 600 126 - 329 386 329 386 Resources in credit institutions 1 936 602 1 936 602 1 397 914 1 397 914 Total - 7 847 181 7 847 181 - 5 576 614 5 576 614 Part VI – Note Appended th the Financial Statements• 143 ------13 913) 271) 291) 557) 462) 659)

(102)

(6 (4 (5 (20 (16 (20 Difference - - 26 671 284 548 734 690 702 106 479 390 197 779 820 386 357 955

744

9 87 12 441 262 498 749 513 329 377 555 586

313 748 149

1 1 1 5 1 3 2018 Fair value - - 26 671 197 548 734 961 993 106 941 390 197 881 820 386 914 614

731

9 87 12 448 278 498 749 513 329 397 576 586

313 752 154

1 1 1 5 1 3 balance" "Value of "Value ------13 075 010 038 073)

038)

449 712)

023)

(710)

(7 (1 16 18 18 (34 (23 Difference 176 389 709 792 037 371 744 067 285 009 641 559 425 408 160 126 890 219

15 11 14 523 189 632 025 602 540 636 240 436 460 600 934 863

204

3 2 1 1 7 1 5 2019 Fair value 176 462 709 792 962 409 067 308 009 631 110 425 408 870 126 602 181

731

14 15 11 196 006 625 540 618 436 460 600 936 847 523

632

238

240

2 1 1 7 3 1 5 balance" "Value of "Value Total Total Cash and deposits at credit institutions Applications in credit institutions International Monetary Fund Bank Reserves Interbank money market Treasury Single Account Treasury Deposit Guarantee Fund Other responsibilities International Monetary Fund Resources in credit institutions Cash and deposits at credit institutions Financing operations to institutions of credit related to monetary policy operations Financial assets granted to the State Investments in associates and other entities Other internal assets receivable Assets abroad Internal Assets Banknotes and coins in circulation Responsibilities to credit institutions national related to monetary policy operations Internal responsibilities towards other entities External responsibilities to other entities Asset Liabilities Fair value for ﬁnancial assets and liabilities not recognised in the balance sheet at fair 144 • Annual Report and Accounts • 2019

The following assumptions were used in the fair value calculation presented in the table above:

For the purpose of calculating the fair value of “Loans and advances to banks”, future cash ﬂows at market rates were discounted, taking into consideration the currencies and residual maturities of the loans, plus a risk spread represented by the CDS (Credit Default Swaps) curves of the respective counterparties;

For instruments classiﬁed in the categories of “Financing operations to credit institutions related with monetary policy operations” and “Interbank money market”, the fair value was calculated on the basis of the forecasted future cash ﬂows discounted at the current rates for these operations. The fair value of Treasury Bonds received in order to comply with Minimum Bond Reserves in foreign currency was calculated taking into account market interest rates;

For instruments classiﬁed under “Financial assets granted to the State” and “Loans and advances to credit institutions”, the fair value was calculated based on estimated future cash ﬂows discounted at a market rate;

For the purpose of calculating the fair value of “Investments in associates and other entities”, the equity method was considered, based on EMIS’s net worth at the date of the last available and audited ﬁnancial statements on the percentage of shareholding held by the Bank;

For the asset and liability positions with the “International Monetary Fund” it was considered as approximation of the fair value of the positions disclosed by this entity;

For the remaining items, the fair value is considered to be similar to their book value, as they represent short- term investments and ﬁnancing (less than 1 year).

Fair value for ﬁnancial assets recognised in the balance sheet at fair value

As at 31 December 2019 and 2018, the fair value of the ﬁnancial instruments and gold recognised in the balance sheet at fair value is detailed as follows by valuation hierarchy at fair value:

2019 Valorization techniques “Level 2 “Level 3 “Level 1 Market Observa- Other valuation Market quotes” ble Inputs” techniques” Total Asset Gold 435 391 - - 435 391 Assets abroad Financial assets at fair value through proﬁt or loss - 253 819 230 084 483 903 Financial assets available for sale 3 673 326 - - 3 673 326 Internal Assets Financial assets available for sale - 650 797 - 650 797 Total 4 108 717 904 616 230 084 5 243 417

2018 Valorization techniques “Level 2 “Level 3 “Level 1 Market Observa- Other valuation Market quotes” Asset ble Inputs” techniques” Total Gold 234 495 - - 234 495 Assets abroad Financial assets at fair value through proﬁt or loss - 373 088 249 306 622 394 Financial assets available for sale 2 297 487 - - 2 297 487 Internal Assets Financial assets available for sale - 537 555 - 537 555 Total 2 531 982 910 643 249 306 3 691 931

For purposes of presentation in this note, ﬁnancial instruments recorded in the balance sheet at fair value are classi- Part VI – Note Appended th the Financial Statements• 145

ﬁed in accordance with the following hierarchy, based on the guidelines in IFRS 13 - Fair Value Measurement:

Level 1 - Financial instruments recorded at fair value based on quotations published in active markets to which the Bank has access. This category includes securities valued on the basis of executable prices (with immediate liquidity) published by external sources;

Level 2 - Financial instruments carried at fair value through the use of data observable directly or indirectly in active markets. This category includes securities valued on the basis of valuations provided by external counterparties and internal valuation techniques using exclusively observable market data;

Level 3 - Financial instruments that are valued using internal models with some inputs that do not correspond to observable market data.

In the form of fair value calculation presented in the previous tables, the following assumptions were considered:

In the case of a net asset traded on an active market, the fair value of gold corresponds to the product of the quantity of gold held by the BNA by the quotation of the ounce on the international markets at each ﬁnancial reporting date. In addition, the calculation of the acquisition cost took into account the exchange rate practiced in each transaction, so that the potential gains calculated include an exchange rate component;

The fair value of instruments classified in the category “Financial assets at fair value through profit or loss” corresponds to the valuation shown in the periodic reports sent by the counterparties. The Bank considers all venture capital funds and other illiquid assets in level 3, while in level 2 it considers all other instruments managed by external managers, which include listed financial instruments, real estate funds and other financial instruments;

The fair value of the item “Available-for-sale financial assets” was determined on the basis of the market prices of the foreign sovereign debt securities held in portfolio. For this purpose, the “bid” price given by the BGN contributor, extracted from the Bloomberg financial terminal, as well as the exchange rates in force on the financial reporting date were considered;

The fair value of the domestic assets - available-for-sale financial assets and financial assets received in capital increase item was calculated on the basis of future forecast cash flows, the discount rate used being the average of the interest rates of the last issues of Treasury Bonds placed by BNA in the primary market with residual maturities equivalent to those of the constant issues in the portfolio. The forecast cash flows were calculated by setting the nominal value at each financial reporting date;

On 31 December 2019, the value of ﬁnancial assets at fair value through proﬁt or loss includes a number of assets remaining in the portfolios previously managed by other external entities, without liquidity in the market and for which no estimates of their potential market value are available at this date. In order to remedy this situation, the Bank contracted an external consultant to carry out a study on its recovery and subsequent placement with other investors. As these are contingent assets, the book value of these assets is null.

Credit Risk

Credit risk management is carried out by the Bank’s business areas, namely the Reserve Management Department (DGR) and the Asset Markets Department (DMA), which are responsible for risk segmentation according to the characteristics of the products and their issuers.

Counterparty risk consists of the credit risk inherent in transactions in the ﬁnancial markets, corresponding to the possibility of non-compliance by counterparties with the terms contracted and the subsequent occurrence of ﬁnancial losses for the Bank. The types of transactions covered include liquid assets and investments in credit institutions, the purchase and sale of securities and the contracting of sale transactions with repurchase agreements. 146 • Annual Report and Accounts • 2019

In the management and application of international reserves and internal assets, the DGR and DMA assume a certain level of exposure to credit risk. These business departments regulate exposure to credit risk in a careful and prudent manner, establishing risk concentration limits, which are reviewed periodically.

Maximum Exposure to Credit Risk

As at December 31, 2019 and 2018, the maximum exposure to credit risk can be detailed as follows:

2019 2018 "Collateral "Collateral Maximum Maximum Received Received exposition exposition (Nominal value)" (Nominal value)"

Asset Assets abroad Cash and deposits at credit institutions 523 176 - 586 671 - Applications in credit institutions 3 196 462 - 1 448 197 - Financial assets at fair value through proﬁt or loss 253 819 - 276 412 - Financial assets available for sale 3 673 326 - 2 297 487 - Internal Assets Cash and deposits at credit institutions 3 369 - 2 141 - Financing operations to institutions of credit related to monetary policy operations 1 006 962 328 237 752 961 253 780 Financial assets available for sale 650 797 - 537 555 - Financial assets granted to the State 238 409 - 154 993 - Other internal assets receivable 11 067 - 12 106 - Other asset values 38 317 - 30 675 - Sub-total 9 595 704 328 237 6 099 198 253 780

Guarantees given and other contingent liabilities 1 398 967 - 1 298 504 -

Total 10 994 671 328 237 7 397 702 253 780 Part VI – Note Appended th the Financial Statements• 147

Credit quality of ﬁnancial assets

As at December 31, 2019 and 2018, exposure to credit risk by counterparty rating can be detailed as follows:

Rating externo Without AAA+ to AAA- AA+ to AA- A+ to A- BBB+ to BBB- BB+ to BB- B+ to B- Inferior to B- Total Rating

Asset Assets abroad Cash and deposits at credit institutions 357 348 19 142 142 142 - 4 481 - - 64 523 176 Applications in credit institutions - - 2 395 549 249 189 327 406 - - 224 318 3 196 462 Financial assets at fair value through proﬁt or loss 145 674 44 989 42 119 532 1 114 193 - 19 198 253 819 Financial assets available for sale 3 498 016 31 946 48 258 60 506 34 600 - - - 3 673 326 Internal Assets Cash and deposits at credit institutions ------3 369 3 369 Financing operations to credit institutions related to monetary policy operations ------1 006 962 1 006 962 Financial assets available for sale - - - - - 650 797 - - 650 797 Financial assets granted to the State - - - - - 238 409 - - 238 409 Other internal assets receivable ------11 067 11 067 Other asset values ------38 317 38 317 Sub-total 4 001 038 96 077 2 628 068 310 227 367 601 889 399 - 1 303 295 9 595 704

Guarantees given and other contingent liabilities - - - - - 1 398 967 - - 1 398 967

Total 4 001 038 96 077 2 628 068 310 227 367 601 2 288 366 - 1 303 295 10 994 671

External Rating Without AAA+ to AAA- AA+ to AA- A+ to A- BBB+ to BBB- BB+ to BB- B+ to B- Inferior to B- Total Rating

Asset Assets abroad Cash and deposits at credit institutions 338 415 - 21 089 - 13 257 - - 213 911 586 671 Applications in credit institutions 119 377 - 608 003 191 005 465 563 1 142 - 63 107 1 448 197 Financial assets at fair value through proﬁt or loss 148 503 22 487 61 099 18 210 8 538 9 515 - 8 059 276 412 Financial assets available for sale 2 252 159 4 698 34 464 6 167 2 297 487 Internal Assets Cash and deposits at credit institutions ------2 141 2 141 Financing operations to credit institutions related to monetary policy operations ------752 961 752 961 Financial assets available for sale - - - - - 537 555 - - 537 555 Financial assets granted to the State - - - - - 154 993 - - 154 993 Other internal assets receivable ------12 106 12 106 Other asset values ------30 675 30 675 Sub-total 2 858 454 22 487 690 191 213 913 521 822 709 372 - 1 082 960 6 099 198

Guarantees given and other contingent liabilities - - - - - 1 298 504 - - 1 298 504

Total 2 858 454 22 487 690 191 213 913 521 822 2 007 876 - 1 082 960 7 397 702

The following assumptions were considered in the construction of these tables:

The rating considered for counterparties is extracted from Bloomberg’s ﬁnancial terminal, through the ratings assigned between Standard & Poors, Moody’s or equivalent;

For the Federal Reserve System (Fed) and Bank for International Settlements (BIS) the AAA rating was considered because they represent a central and international institution, respectively, aiming at monetary and ﬁnancial stability;

For ﬁnancial instruments issued by the State recorded under the items “Financial assets available for sale” and “Financial assets received in the capital increase”, the Republic of Angola’s rating was considered;

For the remaining asset and liability items there is no rating information available. 148 • Annual Report and Accounts • 2019

Credit risk concentration

As at December 31, 2019 and 2018, exposure to credit risk by geographic region is detailed as follows:

2019

Geographical Area

Europe America Africa Asia Oceania Supranational Total

Asset Assets abroad Cash and deposits at credit institutions 49 039 474 107 26 4 - - 523 176 Applications in credit institutions 1 287 752 1 375 868 50 178 482 664 - - 3 196 462 Financial assets at fair value through proﬁt or loss 142 970 98 132 - 4 482 5 317 2 918 253 819 Financial assets available for sale 131 231 3 110 988 5 999 108 764 - 316 344 3 673 326 Internal Assets Cash and deposits at credit institutions - - 3 369 - - - 3 369 Financing operations to credit institutions related to monetary policy operations - - 1 006 962 - - - 1 006 962 Financial assets available for sale - - 650 797 - - - 650 797 Financial assets granted to the State - - 238 409 - - - 238 409 Other internal assets receivable - - 11 067 - - - 11 067 Other asset values 5 876 - 32 441 - - - 38 317 Sub-total 1 616 868 5 059 095 1 999 248 595 914 5 317 319 262 9 595 704

Guarantees given and other contingent liabilities - - 1 398 967 - - - 1 398 967

Total 1 616 868 5 059 095 3 398 215 595 914 5 317 319 262 10 994 671

2018

Geographical Area

Europe America Africa Asia Oceania Supranational Total

Asset Assets abroad Cash and deposits at credit institutions 44 126 542 527 - 19 - - 586 671 Applications in credit institutions 1 026 403 169 772 70 845 181 401 - - 1 448 197 Financial assets at fair value through proﬁt or loss 131 799 105 165 2 473 16 539 15 438 4 997 276 412 Financial assets available for sale 170 363 1 991 586 23 004 - 33 413 79 122 2 297 487 Internal Assets Cash and deposits at credit institutions - - 2 141 - - - 2 141 Financing operations to credit institutions related to monetary policy operations - - 752 961 - - - 752 961 Investments held to maturity - - 537 555 - - - 537 555 Financial assets granted to the State - - 154 993 - - - 154 993 Other internal assets receivable - - 12 106 - - - 12 106 Other asset values - - 30 675 - - - 30 675 Sub-total 1 372 691 2 809 050 1 586 753 197 959 48 851 84 119 6 099 198

Guarantees given and other contingent liabilities - - 1 298 504 - - - 1 298 504

Total 1 372 691 2 809 050 2 885 257 197 959 48 851 84 119 7 397 702

Liquidity risk

Liquidity risk is the risk that an institution does not have the funds needed to meet its payment obligations at all times.

The Board of Directors of the Bank sets concentration limits by maturity dates, which are reviewed annually, and it is the responsibility of the Asset Markets Department (DMA) and the Reserve Management Department (DGR) to verify, on a daily basis, compliance with the limits.

Below are the liquidity risk tables, considering all the contractual undiscounted cash ﬂows of the ﬁnancial instruments, according to their contractual maturity. Part VI – Note Appended th the Financial Statements• 149

At 31 December 2019 and 2018, the undiscounted contractual cash ﬂows of ﬁnancial assets and liabilities are structured as follows:

2019 Residual periods Between Between Between 6 Between Between Until 1 Over 5 1 and 3 3 and 6 months and 1 and 3 3 and 5 Undetermined Total month years months months 1 year years years

Asset Assets abroad Cash and deposits at credit institutions 523 176 ------523 176 Applications in credit institutions 1 611 369 1 339 137 251 999 - - - - - 3 202 505 Financial assets at fair value through proﬁt or loss 10 206 15 209 12 759 31 288 152 107 17 848 14 498 229 988 483 903 Financial assets available for sale 78 937 97 139 291 778 121 506 2 238 144 957 935 - - 3 785 439 International Monetary Fund ------632 709 632 709 Internal Assets Cash and deposits at credit institutions 15 792 ------15 792 Financing operations to institutions of credit related to monetary policy operations 105 339 31 310 - 33 274 793 345 45 406 - - 1 008 674 Financial assets available for sale 11 400 4 241 42 723 58 805 275 009 201 699 1 678 889 - 2 272 766 Financial assets granted to the State - - - - 248 447 - - - 248 447 Investments in associates and other entities - - - 731 - - - - 731 Other internal assets receivable ------11 067 11 067 Total 2 356 219 1 487 036 599 259 245 604 3 707 052 1 222 888 1 693 387 873 764 12 185 209

Liabilities Banknotes and coins in circulation ------540 009 540 009 Responsibilities to credit institutions national related to monetary policy operations Bank Reserves 229 424 - - 33 273 793 345 45 406 - 1 517 183 2 618 631 Interbank money market 204 060 38 372 ------242 432 Internal responsibilities towards other entities Treasury Single Account 1 436 425 ------1 436 425 Deposit Guarantee Fund 174 14 214 539 - - - - - 14 927 Other responsibilities 5 163 193 327 242 264 - - - - 22 545 463 299 External responsibilities to other entities - - 537 555 - - - 537 555 International Monetary Fund ------600 126 600 126 Resources of credit institutions 3 327 7 728 258 367 29 494 1 755 217 - - - 2 054 133 Total 1 878 573 253 641 501 170 62 767 2 548 562 45 406 - 2 679 863 7 969 982

Adjusted liquidity 477 646 1 233 394 98 089 182 837 1 158 490 1 177 482 1 693 387 (1 806 099)

Accumulated liquidity 477 646 1 711 041 1 809 129 1 991 966 3 150 456 4 327 938 6 021 325 4 215 226

2018 Residual periods Between Between Between 6 Between Between Until 1 Over 5 1 and 3 3 and 6 months and 1 and 3 3 and 5 Undetermined Total month years months months 1 year years years

Asset Assets abroad Cash and deposits at credit institutions 586 671 ------586 671 Applications in credit institutions 698 143 482 187 115 394 159 837 - - - - 1 455 561 Financial assets at fair value through proﬁt or loss 3 063 10 150 10 294 30 701 121 882 61 037 27 222 358 045 622 394 Financial assets available for sale 40 422 78 085 67 225 393 026 913 557 705 425 73 317 - 2 271 057 International Monetary Fund ------313 548 313 548 Internal Assets Cash and deposits at credit institutions 9 734 ------9 734 Financing operations to institutions of credit related to monetary policy operations 43 349 168 069 5 000 216 418 Financial assets available for sale 2 310 43 617 46 522 186 087 230 856 1 616 582 - 2 125 974 Financial assets granted to the State - - - - 163 677 - - - 163 677 Investments in associates and other entities ------731 731 Other internal assets receivable ------12 106 - 12 106 150 • Annual Report and Accounts • 2019

Total 1 381 382 740 801 241 531 630 086 1 385 203 997 318 1 729 226 672 324 7 777 871

Liabilities Banknotes and coins in circulation ------498 390 498 390 Responsibilities to credit institutions national related to monetary policy operations Bank Reserves 367 464 ------1 381 733 1 749 197 Interbank money market Internal responsibilities towards other entities 67 419 21 123 ------88 543 Treasury Single Account 1 513 820 ------1 513 820 Other responsibilities - 15 15 3 - - - - 33 External responsibilities to other entities International Monetary Fund ------329 386 329 386 Resources of credit institutions 2 083 4 891 6 975 176 801 986 246 318 637 - - 1 495 633 Total 1 950 785 26 029 6 990 176 804 986 246 318 637 - 2 209 509 5 675 002

Adjusted liquidity (569 404) 714 772 234 541 453 282 398 957 678 681 1 729 226 (1 537 185)

Accumulated liquidity (569 404) 145 368 379 910 833 192 1 232 149 1 910 830 3 640 056 2 102 871

The main assumptions used in constructing the above tables are the following:

Interest dependent on market indexes or other benchmarks, only determinable at a future date (for example, interest on National Treasury Bonds indexed to the exchange rate or to the consumer price index) were calculated based on the indexes at each ﬁnancial reporting date;

Demand deposits (including interest) are considered as spot assets and are therefore included in the column “Up to 1 month”;

For the item “Financial assets at fair value through proﬁt or loss”, managed by external entities, the contractual periods underlying the assets in the portfolios have been considered and no future cash ﬂows have been projected;

For the remaining ﬁnancial assets it was considered that their maturity was undetermined, having been included in the column “Undetermined”, as well as the notes and coins in circulation, bank reserves and Single Treasury Account which, although they are ﬁnancial liabilities payable at sight, are not expected to have such a settlement period;

Any default or early repayment has not been considered.

Market risk

Market risk corresponds to the probability of negative impacts on results or equity due to unfavourable movements in the market price of ﬁnancial instruments held by the Bank, such as the risk of ﬂuctuations in interest and exchange rates.

The Bank takes on exposure to market risks, that is, to risks arising from open positions in interest rates, foreign currency and other products exposed to market movements.

Foreign exchange risk

It translates into the probability of the value of a ﬁnancial instrument changing due to the ﬂuctuation of the foreign currency exchange rate associated with the instrument.

Foreign currency investment policy is defined by one of the Bank’s business areas, namely the Reserve Management Department (DGR). Liquid assets, investments and resources in credit institutions, securities held in internally and ex- ternally managed portfolios, as well as financing, expose the Bank to foreign exchange risk, even if managed with the definition of exposure limits for each currency, to the composition of International Reserves. These limits are defined by the DGR and approved by the Bank’s Board of Directors.

As a result of the accounting policy described in b) of Note 2.1.4, the Bank records all costs and income relating to Part VI – Note Appended th the Financial Statements• 151

potential foreign exchange differences under an equity heading and has no impact on the Bank’s income statement.

As at 31 December 2019 and 2018, ﬁnancial instruments, by local and foreign currency, are analysed as follows: details:

2019 American Pounds Yuan Kwanzas Euros Others Total Total in USD Dollars Sterling Renminbi

Asset Gold - 435 391 - - - - 435 391 903 External Assets Cash and deposits at credit institutions - 496 958 24 697 86 26 1 409 523 176 1 085 Applications in credit institutions - 2 982 639 - 213 823 - - 3 196 462 6 629 Financial assets at fair value through proﬁt or loss - 481 297 1 688 - - 918 483 903 1 003 Financial assets available for sale - 3 579 074 8 402 31 946 47 904 6 000 3 673 326 7 617 International Monetary Fund - - - - - 632 709 632 709 1 312 Total in KZ - 7 975 359 34 787 245 855 47 930 641 036 8 944 967 18 549

Total in USD - 16 539 72 510 99 1 329 18 549 18 549

Internal Assets Cash and deposits at credit institutions 21 13 897 1 858 - - 16 15 792 33 Financing operations to institutions of credit related to 1 006 962 - - - - - 1 006 962 2 088 monetary policy operations Financial assets available for sale 647 286 3 511 - - - - 650 797 1 350 Financial assets granted to the State - 238 409 - - - - 238 409 494 Investments in associates and other entities 731 - - - - - 731 2 Other internal assets receivable 11 067 - - - - - 11 067 23 Total in KZ 1 666 067 255 817 1 858 - - 16 1 923 758 3 989

Total in USD 3 455 530 4 - - 0 3 989 3 989

Passivo Notas e moedas em circulação 540 009 - - - - - 540 009 1 120 Responsabilidades para com instituições de crédito nacionais rela- cionadas com operações de política monetária Reservas bancárias 1 045 928 1 572 703 - - - - 2 618 631 5 430 Mercado monetário interbancário 1 045 928 1 572 703 - - - - 2 618 631 5 430 Responsabilidades internas para com outras entidades 240 110 - - - - - 240 110 498 Conta Única do Tesouro Fundo de Garantia de Depósitos 58 082 1 378 343 - - - - 1 436 425 2 979 Outras responsabilidades 14 408 - - - - - 14 408 30 Responsabilidades externas para com outras entidades 9 894 450 976 - - - - 460 870 956

Fundo Monetário Internacional

Recursos em instituições de crédito - - - - - 600 126 600 126 1 244 Total in KZ - 1 936 602 - - - - 1 936 602 4 016

Total in USD 1 908 431 5 338 624 - - - 600 126 7 847 181 16 273

Net position in Kz 3 958 11 071 - - - 1 244 16 273 16 273

Net position of foreign currency assets and liabilities in USD (242 364) 2 892 552 36 645 245 855 47 930 40 926 3 021 544 6 265 152 • Annual Report and Accounts • 2019

2018 American Pounds Yuan Kwanzas Euros Others Total Total in USD Dollars Sterling Renminbi

Asset Gold - 234 495 - - - - 234 495 760 External Assets Cash and deposits at credit institutions - 577 591 6 586 45 17 2 432 586 671 1 901 Applications in credit institutions - 1 365 845 - 82 575 - - 1 448 197 4 693 Financial assets at fair value through proﬁt or loss - 531 975 21 266 65 637 - 3 516 622 394 2 017 Financial assets available for sale - 2 097 849 135 280 19 438 - 44 920 2 297 487 7 445 International Monetary Fund - - - - - 313 548 313 548 1 016 Other external assets receivable ------Total in KZ - 4 807 755 163 132 167 695 17 364 416 5 502 792 17 831

Total in USD - 15 579 529 543 0 1 181 17 831 17 831

Internal Assets Cash and deposits at credit institutions 246 8 081 1 399 - - 8 9 734 32 Financing operations to institutions of credit related to monetary policy operations 752 961 - - - - - 752 961 2 440 Financial assets available for sale 536 004 1 551 - - - - 537 555 1 742 Financial assets granted to the State - 154 993 - - - - 154 993 502 Investments in associates and other entities 731 - - - - - 731 2 Other internal assets receivable 12 106 - - - - - 12 106 39 Total in KZ 1 302 048 164 625 1 399 - - 8 1 468 080 4 757

Total in USD 4 219 533 5 - - 0 4 757 4 757

Liabilities Banknotes and coins in circulation 498 390 - - - - - 498 390 1 615 Responsibilities to credit institutions

national related to monetary policy operations

Bank Reserves 799 276 949 921 - - - - 1 749 197 5 668 Interbank money market 87 881 - - - - - 87 881 285 Internal responsibilities towards other entities Treasury Single Account 206 976 1 191 994 114 850 - - - 1 513 820 4 905 Other responsibilities 26 - - - - - 26 0

External responsibilities to other entities

International Monetary Fund - - - - - 329 386 329 386 1 067 Resources in credit institutions - 1 397 914 - - - - 1 397 914 4 530 Total in KZ 1 592 549 3 539 830 114 850 - - 329 386 5 576 615 18 071

Total in USD 5 160 11 470 372 - - 1 067 18 070 18 071

Net position in Kz (290 501) 1 432 550 49 681 167 695 17 35 038 1 394 257 4 517

Net position of foreign currency assets and liabilities in USD (941) 4 642 161 543 0 114 4 517 4 517

Interest rate risk

Interest rate risk refers to the impact that movements in interest rates have on the Bank’s results and on the equity value of its assets and liabilities. This risk arises essentially from the existence of different maturities or repricing of the entity’s assets, liabilities and off-balance sheet positions, in view of changes in the slope of the interest rate curve. Thus, interest rate risk corresponds to the risk that the present value of the future cash flows of a financial instrument may fluctuate due to changes in market interest rates. Part VI – Note Appended th the Financial Statements• 153

As at 31 December 2019 and 2018, ﬁnancial instruments by type of interest rate are detailed as follows:

2019 Exposition Subject to interest rate Not subject to Total Fixed rate Variable rate interest rate

Asset Gold - - 435 391 435 391 External Assets Cash and deposits at credit institutions - 382 677 140 499 523 176 Applications in credit institutions 3 196 462 - - 3 196 462 Financial assets at fair value through proﬁt or loss 225 522 19 050 239 331 483 903 Financial assets available for sale 3 673 326 - - 3 673 326 International Monetary Fund - 214 924 417 785 632 709 Internal Assets Cash and deposits at credit institutions - - 15 792 15 792 Financing operations to institutions 134 937 - 872 025 1 006 962 of credit related to monetary policy operations Financial assets available for sale 639 990 - 10 807 650 797 Financial assets granted to the State 238 409 - - 238 409 Investments in associates and other entities - - 731 731 Other internal assets receivable - - 11 067 11 067 Total 8 108 646 616 651 2 143 428 10 868 725

Liabilities Banknotes and coins in circulation - - 540 009 540 009 Responsibilities to credit institutions national related to monetary policy operations Bank Reserves - - 2 618 631 2 618 631 Interbank money market 240 110 - - 240 110 Internal responsibilities towards other entities Treasury Single Account - - 1 436 425 1 436 425 Deposit Guarantee Fund 14 235 - 173 14 408 Other responsibilities - 438 325 22 545 460 870 External responsibilities to other entities International Monetary Fund - 182 289 417 837 600 126 Resources in credit institutions 1 936 602 - - 1 936 602 Total 2 190 947 620 614 5 035 620 7 847 181 154 • Annual Report and Accounts • 2019

2018 Exposition Subject to interest rate Not subject to Total Fixed rate Variable rate interest rate

Asset Gold - - 234 495 234 495 External Assets Cash and deposits at credit institutions - 336 971 249 700 586 671 Applications in credit institutions 1 448 197 - - 1 448 197 Financial assets at fair value through proﬁt or loss 223 501 26 253 372 640 622 394 Financial assets available for sale 2 297 487 - - 2 297 487 International Monetary Fund - 73 065 240 483 313 548 Internal Assets Cash and deposits at credit institutions - - 9 734 9 734 Financing operations to institutions 752 961 - - 752 961 of credit related to monetary policy operations Financial assets available for sale 499 367 - 38 188 537 555 Financial assets granted to the State 154 993 - - 154 993 Investments in associates and other entities - - 731 731 Other internal assets receivable - - 12 106 12 106 Total 5 376 505 436 289 1 158 078 6 970 872

Liabilities Banknotes and coins in circulation - - 498 390 498 390 Responsibilities to credit institutions national related to monetary policy operations Bank Reserves - - 1 749 197 1 749 197 Interbank money market 87 881 - - 87 881 Internal responsibilities towards other entities Treasury Single Account - - 1 513 820 1 513 820 Other responsibilities - - 26 26 External responsibilities to other entities International Monetary Fund - 329 386 - 329 386 Resources in credit institutions 1 397 914 - - 1 397 914 Total 1 485 795 329 386 3 761 433 5 576 614

The following assumptions were considered in the preparation of the previous tables:

In the item “Cash and deposits with credit institutions”, a distinction was made between regular sight deposits with credit institutions, not subject to the interest rate, and those subject to the variable interest rate, namely deposits with overnight investments contracted;

Taking into account the insufficient information disclosed by external entities on the securities held in the various discretionary portfolios classified under the category “Financial assets at fair value through profit or loss”, it is not possible to disclose the exposure by type of interest rate of these investments;

Although the coupon paid for National Treasury bonds, classified under the category “Investments held to maturity”, is variable due to the fluctuation of the nominal value according to the exchange rate at the settlement date, the coupon rate associated to each security is fixed.

It should be noted that there are investments made by external management (included under «Financial assets at fair value through profit or loss») that are exposed to interest rate risk, however, the Bank classifies this risk globally as market risk. Part VI – Note Appended th the Financial Statements• 155

As at 31 December 2019 and 2018, the financial instruments by maturity date or rate setting period are detailed as follows:

2019 Data de Reﬁxação Between Between Between 6 Between Between Until 1 Over 5 1 and 3 3 and 6 months and 1 and 3 3 and 5 Undetermined Total month years months months 1 year years years

Asset Gold ------435 391 435 391 External Assets Cash and deposits at credit institutions 382 677 ------140 499 523 176 Applications in credit institutions 1 610 534 1 335 492 250 436 - - - - - 3 196 462 Financial assets at fair value through proﬁt or loss 15 183 27 090 11 742 31 288 140 478 17 830 10 208 230 085 483 903 Financial assets available for sale 78 792 96 647 337 466 120 278 2 134 625 905 518 - - 3 673 326 International Monetary Fund ------632 709 632 709 Internal Assets Cash and deposits at credit institutions ------15 792 15 792 Financing operations to institutions of credit related to monetary policy operations 104 913 30 024 - 33 274 793 345 45 406 - - 1 006 962 Financial assets available for sale - - 649 514 36 071 - 613 563 - 650 797 Financial assets granted to the State - - - - 238 409 - - - 238 409 Investments in associates and other entities ------731 731 Other internal assets receivable ------11 067 11 067 Total 2 192 099 1 489 253 600 293 185 354 3 342 928 968 754 623 771 1 466 274 10 868 726

Liabilities Banknotes and coins in circulation ------540 009 540 009 Responsibilities to credit institutions national related to monetary policy operations Bank Reserves 229 424 - - 33 273 793 345 45 406 - 1 517 183 2 618 631 Interbank money market 202 827 37 283 ------240 110 Internal responsibilities towards other entities Treasury Single Account ------1 436 425 1 436 425 Deposit Guarantee Fund 174 13 732 503 - - - - - 14 408 Other responsibilities 4 320 192 891 241 114 - - - - 22 545 460 870 External responsibilities to other entities International Monetary Fund ------600 126 600 126 Resources in credit institutions - - 243 138 - 1 693 464 - - - 1 936 602 Total 436 745 243 905 484 755 33 273 2 486 809 45 406 - 4 116 288 7 847 181 156 • Annual Report and Accounts • 2019

2018 Data de Reﬁxação Between Between Between 6 Between Between Until 1 Over 5 1 and 3 3 and 6 months and 1 and 3 3 and 5 Undetermined Total month years months months 1 year years years

Asset Gold ------234 495 234 495 External Assets Cash and deposits at credit institutions 336 971 ------249 700 586 671 Applications in credit institutions 697 671 480 180 114 673 155 673 - - - - 1 448 197 Financial assets at fair value through proﬁt or loss 3 063 10 150 10 294 30 701 121 882 61 037 27 222 358 045 622 394 Financial assets available for sale 40 335 77 894 128 039 383 701 926 518 672 952 68 047 - 2 297 487 International Monetary Fund ------313 548 313 548 Internal Assets Cash and deposits at credit institutions ------9 734 9 734 Financing operations to institutions of credit related to monetary policy operations 43 349 165 623 5 000 - 538 989 - - - 752 961 Financial assets available for sale - - - - 2 59 463 478 090 - 537 555 Financial assets granted to the State - - - - 154 993 - - - 154 993 Investments in associates and other entities ------731 731 Other internal assets receivable ------12 106 12 106 Total 1 121 389 733 848 258 006 570 075 1 742 384 793 452 573 358 1 178 359 6 970 872

Liabilities Banknotes and coins in circulation ------498 390 498 390 Responsibilities to credit institutions national related to monetary policy operations Bank Reserves ------1 749 197 1 749 197 Interbank money market 67 172 20 709 ------87 881 Internal responsibilities towards other entities Treasury Single Account ------1 513 820 1 513 820 Deposit Guarantee Fund - 11 11 4 - - - - 26 External responsibilities to other entities International Monetary Fund ------329 386 329 386 Resources in credit institutions - - - 156 082 1 241 832 - - - 1 397 914 Total 67 172 20 720 11 156 086 1 241 832 - - 4 090 793 5 576 614

41. Events after the reference date The relevant events subsequent to 31 December 2019 are presented below, and the BNA’s Board of Directors believes, in accordance with IAS 10, that these do not give rise to adjustments to the Bank’s ﬁnancial position as at 31 December 2019. a) COVID-19 Pandemic

The World Health Organization (WHO) has declared the outbreak of the COVID-19 coronavirus a pandemic. Many go- vernments have taken strict measures to contain and/or delay the spread of the virus.

The World Health Organization (WHO) and national authorities can be consulted on the implications for people’s health. This crisis also has signiﬁcant economic effects on businesses, for example due to production, trade and consumption restrictions or travel bans.

The President of the Republic, within the framework of his constitutional prerogatives, has decreed a State of National Emergency, starting at 00.00 on 27 March 2020 and lasting 15 days, with a renewal possibility.

On 31 March 2020, the BNA carried out a cross-sectional assessment of the possible impacts of this pandemic on the following segments:

i. Business Continuity Plan

With regard to BNA’s Business Continuity, the Board of Directors decided in a meeting held on 22 March to activate a First Level Business Continuity Plan (BCP) which consisted of reducing the workforce by 70% in home-ofﬁce. This measure was reinforced with the Declaration of the State of Emergency, with the face-to-face team set at around 10% of the total active workforce, thus moving to the fourth level of the PCN. Part VI – Note Appended th the Financial Statements• 157

The Crisis Management Plan (PGC) is part of the BNA’s Business Continuity Management documentation and deﬁnes the actions and responsibilities of the various entities involved, which were implemented in the context of the CO- VID-19 Pandemic.

In addition, a Response Plan to COVID-19 was implemented as follows:

a. Creation of conditions for remote work by technicians linked to some critical functions and processes. The- se, together with the workers present at the BNA’s facilities, guarantee the delivery of the BNA’s minimum services;

b. Distribution of biosafety material as well as the placement of hand sanitizers dispensers throughout the building;

c. Reinforcement of cleaning and sanitization measures at the work stations through disinfection;

d. Reinforcement of communication, with appealing and instructive messages of the main forms of contami- nation and recommended hygiene measures, using all available means of communication (Communications, Corporate TV, among others);

e. Closure of the Currency Museum;

f. Suspension of all business trips, as well as face-to-face meetings and conferences. ii. Net international reserves and market price ﬂuctuations

With reference to 31 March 2020, the Net International Reserves decreased by 6.75% when compared to the amount observed on 31 December 2019. At this date, the level of gross International Reserves allowed the country to reach about eight (8) months of imports of goods and services.

With regard to the impact of COVID-19 on foreign assets, it should be noted that the asset class in the Money Market recorded a more signiﬁcant negative impact in relation to the asset classes in the Fixed Income Market “Bonds” and the Commodities “Gold”, due mainly to two interest rate cuts by the US Federal Reserve (FED), in the emergency meetings of the Monetary Policy Committee, where the ﬁrst was 75 bp on March 6, 2020 and the second was 100 bp on March 16, 2020, thus bringing the interest rate to 0.25%.

In this context, the other Central Banks also made cuts, with the Bank of England and the European Central Bank interest rates currently at o.10% and -0.50%, respectively.

Despite this, there were no restrictions on the movement of funds with our counterparties.

Due to the cuts made by the main Central Banks, the effects spread to the other asset classes, in which the fall of LIBOR in USD and GBP stands out, with direct impacts on the Term Deposits negotiated in this period, to the detriment of the valuation of the Bond portfolio through prices, due to the fact that yields fell, with negative impacts on the coupons to be received in subsequent periods.

It should be noted that, notwithstanding the inverse price/yield relationship, the Bond Portfolio shows a positive variation (in relation to the acquisition price), which represents a capital gain for the strategy of early redemption of US Bonds.

In addition, the external shock due to the fall in oil prices may be reﬂected in the depreciation of the kwanza during the coming months and in the loss of International Reserves. iii. Interbank Money Market

In the ﬁrst quarter of 2020, bank reserves in the ﬁnancial system remained relatively stable compared to the fourth quarter of 2019, with a slight reduction of around 0.2%, with the stock rising from Kz 1.045 billion in December 2019 to Kz 1.043 billion in March.

The performance of the banking reserve was inﬂuenced by the contraction of the factors conditioning the monetary base and liquidity, which in the quarter registered a total contraction of Kz 47.833 billion, reﬂected in the combined 158 • Annual Report and Accounts • 2019

reduction of commercial banks’ deposits of around Kz 758 million of currency in circulation at around Kz 47.075 billion. (map of monetary base conditioning factors).

By 31 March 2020, the evolution of monetary policy indicators does not appear to have been impacted by the evolution of the COVID-19 pandemic. This can be seen in the increase in the system’s liquidity levels, which in the ﬁrst quarter registered an increase of around 95.7%, with the liquidity stock rising from Kz 121.394 billion in December 2019 to Kz 237.512 billion in March 2020. This increase in the system’s liquidity was inﬂuenced by about 50.7% by tax execution and 3.9% by monetary operations.

For the coming periods, as observed in the first quarter, a strong fiscal expansion and possibly monetary expansion is expected, which will be strongly influenced by the redemption of Treasury bonds in significantly large amounts and by the liquidity line made available by the BNA for the purchase of Treasury Bonds from companies, and whose impact will be on the increase in liquidity and on a strong expansion of monetary aggregates, a fact that may attenuate the possible negative impacts of COVID-19 on the economy. In fact, the monetary policy should act to absorb liquidity, with no additional need initially to provide liquidity to the market.

In fact, the BNA announced the creation of a line for the purchase of Treasury Bonds from small and medium-sized companies, in the amount of approximately Kz 100 billion.

Com efeito, o BNA anunciou a criação de uma linha de compra de Obrigações do Tesouro a pequenas e médias empe- sas, no montante de cerca de Kz 100 000 milhões. iv. Foreign exchange market and currency ﬂuctuations

In the ﬁrst quarter of 2020, the oil companies made USD 815.99 million available to the commercial banks (market), which together with the volume made available by the BNA of around USD 1 785.97 million, totalled around USD 2 759.57 million made available to the market in this period. In comparison with the same period of the previous year, there was an increase of 28.77% in the volume made available to the market.

However, there was an 8.66% reduction in the volume of foreign exchange made available by the oil sector in the ﬁrst quarter of 2020 compared to the same period of the previous year, which may be justiﬁed by the sharp drop in the price of a barrel of oil resulting from the effects of COVID-19. Thus, one notes an additional effort by the BNA to satisfy the demand for foreign exchange and attenuate the pressure experienced in the foreign exchange market.

The reference exchange rate, there was greater variation between the months of February and March 2020, which may derive from the current situation. v. Angolan banking sector systemic risk

With the reduction in the volume of corporate activity and in view of the high exposure of the banking sector to the Trade, Construction, Real Estate and Services sectors, which depend essentially on imported goods, it is expected that the ability of these borrowers to honour their credit commitments to banks will deteriorate considerably, resulting in an increase in the level of default of the sectors, which may affect the banks’ liquidity levels, net income and consequently the deterioration in the sector’s soundness level.

Thus, three sensitivity analyses were carried out, one on the level of solvency, another on a possible pressure on liquidity levels and a last one on a possible depreciation of the exchange rate. In this context, the results attested to the following:

a. A rise in default levels of 10%, 20%, 40% and 50%, the banking sector would be resilient to withstanding a probable increase in credit risk of up to 40% of overdue credit, with the solvency ratio (10.79%) remaining slightly above the regulatory minimum limit. However, with a worsening of 50%, the solvency ratio of the banking sector would fall from 23.42% to 8.48%, staying below the regulatory minimum limit of 10%;

b. In a stress scenario where 35% and 50% of deposits were withdrawn, the banking sector would be able to cover its liquidity needs, with Level I Assets at only 67.29% and 47.10%, respectively. For the remainder of the banking ﬁnancial institutions would have to resort to other liquid assets of level II and level III, respectively; Part VI – Note Appended th the Financial Statements• 159

c. In terms of the exchange rate, in the ﬁrst scenario, a 15% depreciation of the Kwanza against the USD is simulated, the banking sector would be solvent although its solvency ratio (12.32%) would become very close to the regulatory minimum, with 5 (ﬁve) banks being below the minimum of which 3 (three) would be insolvent.

d. In the second scenario, a 30% depreciation of the Kwanza against the USD was simulated, in this scenario the solvency ratio (8.10%) would be below the regulatory minimum in view of the increased risk requirements, with 7 (seven) banks operating below the minimum.

In short, taking into account the situation of COVID-19, the banking sector may face several challenges, among which pressure on liquidity, increase in the level of default on credit instalments and reduction of own funds. The BNA, during the last week of March, took a number of measures (easing of deadlines for the fulﬁlment of credit obligations and liquidity facility lines of Kz 100.00 billion), the materialisation of which may contribute towards mitigating the risks listed here. vi. Evolution of inﬂation

Data published by the National Statistics Institute (INE) for the ﬁrst quarter of 2020 indicates an increase in the quarterly variation of the National Consumer Price Index (CPI), reaching 5.72% (2.05% in January, 1.72% in February and 1.85% in March), higher than that observed in the previous quarter (4.90%) and in the same quarter (3.31%).

Therefore, year-on-year inﬂation showed an upward trend during the ﬁrst quarter of 2020, rising from 16.9% in Decem- ber 2019 to 19.6% in March 2020.

It should be noted that the increase in inﬂation in the ﬁrst quarter of 2020 was caused not only by the effects of the pandemic on the national economy, but also by other domestic factors, namely the increase in fees and other emoluments in the education sector, with a strong incidence in January 2020.

This emergency situation led to the temporary closure or restriction of the activities of some productive and commercial units of non-essential goods and services, as well as some informal markets with a high risk of contagion, which also contributed to the wave of price speculation, especially of basic basket products, biosafety and hygiene material.

The expectation of recession in the world economy, the imposition of some export limitations by some countries and ﬁnally the restrictions on the movement of people and goods, are likely to lead to a reduction in the supply of goods in the international market. Consequently, this factor may cause some upward pressure on the prices of goods and services at the international level and especially in countries with low domestic production, such as Angola. b) Other assets receivable from non-ﬁnancial institutions

As at December 31, 2018 and 2017, the item “Amounts receivable from non-ﬁnancial entities” corresponds to amounts paid under contracts signed for the acquisition of tangible ﬁxed assets, as well as for the provision of services which showed signs of irregularities in previous years, mainly because the acquisition of goods or service consideration was not proven. On 31 December 2019, BNA recorded an additional reversal of an impairment loss of Kz 32.30 million, based on the actual receipts that occurred up to 15 March 2020, arising from agreements signed between BNA and suppliers. c) Financial assets granted to the State

On 20 February 2020, BNA granted a credit to the National Treasury, in a current account in national currency in the amount of Kz 150.00 billion, with a remuneration of 15.50% p.a. maturing on 31 December 2020. 160 • Annual Report and Accounts • 2019

42. Allocation of the 2019 result Taking into account that the result for the ﬁnancial year was Kz 90.09 billion, the Board of Directors decided on 31 Mar- ch 2020 to make the following distribution of that result, in accordance with the provisions of Article 89 of the BNA Act:

– 20%, i.e. Kz 18.02 billion to Legal Reserve;

– 20%, i.e. Kz 18.02 billion to free Reserve;

– 60%, or Kz 54.05 billion for the National Treasury, as dividends.

These Financial Statements were approved by the Board of Directors in session held on 31 March 2020 and are therefore signed by its members.

43. New rules and interpretations applicable to the year or which will come into force in future years Tendo em consideração que o resultado apurado no exercício foi de Kz 18,59 mil milhões, o Conselho de Administração deliberou no dia 29 de Março de 2019, no sentido de se proceder à seguinte distribuição daquele resultado, nos termos do disposto no artigo 89.º da Lei do BNA:

Adoption of standards (new or revised) issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC)

The following standards, interpretations, amendments and revisions are mandatory for the ﬁrst time in the ﬁnancial year ended December 31, 2019:

Applicable for ﬁscal years Standard/Interpretation Issue date beginning on or after

IFRS 9 - Financial Instruments (Amendment) 28-05-2014 01-01-2019 IFRS 16 - Leases 01-01-2019 IFRS 15 - Revenue from Customer Contracts 28-05-2014 01-01-2018 IFRS 15 - Revenue from Contracts with Customers (Amendment) 11-09-2015 01-01-2018

IFRS 9 Financial instruments:

This standard is part of the draft revised IAS 39 and establishes the new requirements for the classiﬁcation and measurement of ﬁnancial assets and liabilities, the methodology for calculating impairment and the application of hedge accounting rules.

The project to implement IFRS 9 establishes new rules for classifying and measuring ﬁnancial assets and liabilities and has been structured in three stages:

Stage 1: Classiﬁcation and measurement of ﬁnancial assets and liabilities;

Stage 2: Impairment of ﬁnancial assets: reduction in recoverable value;

Stage 3: Hedge accounting. Part VI – Note Appended th the Financial Statements• 161

As regards the classification of financial assets and liabilities, the main aspects to be retained in IFRS 9 are identified below:

Classiﬁcation and measurement of ﬁnancial assets

All financial assets are measured at fair value at initial recognition, adjusted for transaction costs if the instruments are not carried at fair value through profit loss. However, customer accounts without a significant financing component are initially measured at their transaction value, as defined in IFRS - 15 income from contracts with clients;

Debt instruments are subsequently measured based on their contractual cash flows and the business model in which such instruments are held. If a debt instrument has contractual cash flows that are only the principal and interest payments on the principal outstanding and is held within a business model for the purpose of holding the assets to collect contractual cash flows, then the instrument is accounted for at amortised cost. If a debt instrument has contractual cash flows that are exclusively the principal and interest payments on the principal outstanding and is held within a business model for the purpose of collecting contractual cash flows and selling financial assets, then the instrument is measured at fair value through other comprehensive income with subsequent reclassification to profit or loss;

All other debt instruments are subsequently accounted for by the FVTPL. In addition, there is an option that allows financial assets on initial recognition to be designated as FVTPL if this eliminates or significantly reduces significant accounting decompensation in the profit or loss for the year;

Equity instruments are generally measured in the FVTPL. However, entities have an irrevocable option, on an instrument by instrument basis, to present changes in the fair value of the instruments in the statement of comprehensive income (without subsequent reclassiﬁcation of the change to proﬁt or loss for the year).

Classiﬁcation and measurement of ﬁnancial liabilities

For financial liabilities designated as at fair value through profit or loss, using the fair value option, the amount of change in the fair value of those financial liabilities that is attributable to changes in credit risk shall be presented in the income statement in full. The rest of the change in fair value shall be presented in profit or loss unless the presentation of the change in fair value in respect of the liability’s credit risk in the statement of comprehensive income will create or extend an accounting decompensation in profit or loss for the period.

All other IAS 39 classiﬁcation and measurement requirements for ﬁnancial liabilities have been carried forward to IFRS 9, including the embedded derivative separation rules and the criteria for using the fair value option.

In summary, regarding the classification and measurement of financial assets and liabilities, the new standard reduced the complexity of accounting for financial instruments by reducing the number of classes where financial instruments can be accounted for from the 4 classes of IAS 39 to 2 classes (Fair value or Amortised cost) and the foreseeable reduction in the number of instruments accounted for at fair value.

However, for debt instruments, the elimination of held-to-maturity investments enables more debt instruments to be accounted for at amortised cost without having to demonstrate the intention and ability to hold them to maturity. It should be noted that the only way to account for debt instruments quoted at amortised cost in IAS 39 was through the held-to-maturity investment class. Reclassifications of financial assets are possible when there are changes in business models. These reclassifications should affect all financial instruments included in the class that has been reclassified. In relation to the accounting for financial liabilities, little change is made in IFRS 9 compared with what was provided for in IAS 39, i.e. the possibility of separating embedded derivatives included in financial liabilities and keeping the host instrument accounted for at amortised cost is maintained. Additionally, the possibility of applying an option at fair value and accounting for financial liabilities at fair value is maintained, with a separation from changes in fair value occurring. When these changes are due to changes in the credit risk of the issuer, they should be recognised in full income. When they are due to causes beyond the control of the entity, they shall be recognised in the income statement.

In the second step of implementing this standard, a change has been introduced in the way ﬁnancial institutions calculate impairments on their ﬁnancial instruments. IFRS 9 introduced an expected loss model replacing the incurred 162 • Annual Report and Accounts • 2019

loss model used by IAS 39. According to this new model, entities should recognise expected losses before the events of loss occur. There is also a need to include prospective information (‘forward looking’) in the estimates of expected loss, including future trends and scenarios, namely macroeconomic.

The concept of expected loss of credit differs from the concept of expected loss foreseen in the Basel III Accord, namely in Capital Requirements Directive IV (CRD IV). According to this new model, assets subject to the impairment calculation should be categorised in one of the following stages, according to changes in credit risk since the initial recognition of the asset and not according to the credit risk at the reporting date:

Fase 1 – From the initial recognition of the asset and whenever there is no signiﬁcant degradation of credit risk since that date, the assets are classiﬁed in this 1st phase. For these assets an impairment corresponding to the expected loss for the time horizon of one year from the reference date of reporting should be recognised;

Fase 2 – If there is a significant degradation of risk since the initial recognition, the assets should be classified in the 2nd phase. In this phase, the impairment will correspond to the expected loss for the remaining life of that asset. The concept of significant degradation of credit risk, recommended by IFRS 9, introduces a higher level of subjectivity in the calculation of impairment, also requiring a greater connection with the credit risk management policies of the entity. The lifetime and forward-looking perspectives introduce challenges in financial institutions’ modelling of credit risk parameters;

Fase 3 – Assets under impairment should be classiﬁed in this phase, with impairment corresponding to the expected loss for the remaining life of that asset. In relation to the previous phase, the distinction corresponds to the form of recognition of effective interest, which should be based on the net balance sheet value (in the 2nd phase it was based on the gross balance sheet value).

Impairment: reduction in recoverable value

The impairment requirements are based on an expected credit loss model, which replaces the incurred loss model in IAS 39;

The expected credit loss model applies: (i) debt instruments accounted for at amortised cost or at fair value through full income; (ii) most loan commitments; (iii) ﬁnancial guarantee contracts; (iv) contractual assets under IFRS 15 and (v) lease receivables under IAS 17 Leases;

The measurement of SCPs shall reﬂect the weighted probability of net income, the effect of the time value of money, and be based on reasonable and supportable information that is available without excessive cost or effort.

Finally, the third stage of implementation of IFRS 9 concerns hedge accounting and the new requirements arising from the application of the new accounting standard. IFRS 9 has simpliﬁed the current needs and the alignment between hedge accounting and risk management of institutions.

Hedge accounting

Coverage effectiveness tests should be prospective and may be qualitative, depending on the complexity of the coverage, without the 80.0% - 125.0% test;

A risk component of a financial or non-financial instrument may be designated as the hedged item if the risk component is separately identifiable and reliably measurable;

The time value of an option, the forward element of a forward contract and any foreign currency base spread may be excluded from designation as hedging instruments and accounted for as costs of the hedge;

broader sets of items may be designated as hedged items, including layer designations and some net positions.

IFRS 15 Revenue from contracts with clients:

This standard was adopted in 2014 and came into force in January 2018. It was the subject of a joint project of the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB), which issues accounting guidance in the United States of America. Part VI – Note Appended th the Financial Statements• 163

The main objective of the IFRS 15 project was to eliminate the conﬂicting positions between the concepts of the IASB and the FASB in relation to the recognition of revenues arising from the supply of goods and/or services to its customers by an entity identiﬁed as a supplier.

The standard states that an entity may recognise revenues only when performance obligations are settled.

The performance obligation shall be understood as the contractual obligation to provide goods or services to clients.

A performance obligation is regarded as settled when the customer receives all the beneﬁts associated with that performance obligation and is able to use and enjoy the asset at its own discretion.

An entity shall apply this standard to all contracts with customers except the following:

a) Lease contracts within the scope of IAS 17 Leases (the Standard superseded by IFRS 16); b) Insurance contracts within the scope of IFRS 4 Insurance contracts; c) Financial instruments and other contractual rights or obligations under IFRS 9 Financial instruments (read also IAS 39), IFRS 10 Consolidated financial statements, IFRS 11 Joint arrangements, IAS 27 Consolidated financial statements and IAS 28 Investments in associates and joint ventures; d) non-monetary exchanges between entities in the same industry to facilitate sales to clients or potential clients. For example, this Standard would not apply to a contract between two oil companies that agree to exchange oil to meet customer demand in different specific locations in a timely manner.

The revenue structure of the BNA is made up, materially and for the most part, of those arising from applications of Financial Instruments, as can be seen in Table 1 below. Being exempt operations, they immediately fall outside the scope of the application of IFRS 15.

Table 1 - BNA Income Statements.

Applicables Rules Interest and similar income IAS 39 Interest and similar charges Financial margin Income from services and commissions IFRS 15 * Charges for services and commissions Net commissions Results of financial assets valued at fair value through profit or loss IAS 39 Results of financial assets available for sale IAS 39 IAS 39

Results from ﬁnancial operations Exchange rate results IAS 39/IAS 21 Costs related to the issuance of banknotes and coins Results of disposal of other assets Other operational results Operational results Personnel costs Supply of third party services Amortization of the year Net provisions for replacements and cancellations Impairment of assets (losses / reversions) Net impairment losses from reversions Exploration results Income of the year

* Commissions receved for transactions carried out on behalf of third parties * Commissions receved for services rendered 164 • Annual Report and Accounts • 2019

BNA carries out operations on behalf of MINFIN and others for the provision of payment services that generate revenues falling within the deﬁnitions stipulated by IFRS 15. They are, namely:

i. Commissions received for operations carried out on behalf of third parties” which correspond to commissions collected for bank transfers made on behalf of the National Treasury, under the terms of the protocol signed between BNA and MINFIN;

ii. Commissions received for services rendered corresponding to commissions received within the framework of the management of the Real Time Payments System (SPTR).

The above-mentioned commissions are recognised in BNA’s accounts when and only when the respective services are rendered and the customers are satisﬁed by the use of the respective beneﬁts.

Thus, the current accounting procedure at BNA is in line with the normative speciﬁcations of IFRS 15.

Impacts resulting from the application: the entry into force of IFRS 15 has not produced any quantitative impact to the extent that the current procedure is in line with the normative speciﬁcations.

IFRS 16 Leases:

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases.

Published on 13 January 2016, it is mandatory to apply from 1 January 2019.

IAS 17 (Lease Operations), an accounting standard in force until December 2018, gave a heterogeneous accounting treatment to leases, distinguishing between “operating leases” and “finance leases”. Under this standard, financial leases should appear in the financial statements (Balance Sheet) while operating leases were mentioned only in the annex to the financial statements.

IFRS 16 eliminates the difference mentioned above and requires operating leases to have a similar accounting treatment to ﬁnance leases and to be included in the ﬁnancial statements (Balance Sheet).

Under the Standard, lessees are required to recognise the asset acquired over which they have a right to economic bene- ﬁts and, at the same time, to recognise a lease liability for all leases.

In practical terms, the immediate accounting events resulting from the adoption of the Standard can be presented as follows:

– At the starting date of the lease contract, the “right of use” is recorded under assets, while the debt contracted “for the use of the asset” is recorded under liabilities;

– The right of use corresponds to the present value of future payments of the debt during the term of the lease contract, plus any potential direct cost that may be charged to the lessee;

– The rate applied for the present value calculation corresponds to the interest rate implicit in the lease contract if directly determinable;

– The interest and the respective accruals of leasing debt are recorded in the income statement;

– Depreciation expense (amortization of the asset) is recognised in the income statement.

The reduction in liabilities (lease debt) arises from payments incurred up to the effective date of the contract.

IFRS 16 is of mandatory application, except in the following two cases, where the lessee has the right to opt to apply it or not:

– If the lease is for less than 12 months;

– If the value of the asset is not signiﬁcant, i.e. it does not exceed the material limit established (USD 5,000 under the Standard) Part VI – Note Appended th the Financial Statements• 165

At the BNA, the operations covered relate to computer equipment and buildings taken on lease, the quantitative impact of which was considered immaterial for the size of the BNA’s accounts.

There were no signiﬁcant effects on the ﬁnancial statements for the year ended 31 December 2019, resulting from the adoption of IFRS 16.

Standards, interpretations, amendments and revisions that will be effective in future years

The standards and interpretations recently issued by the IASB whose application is mandatory only for periods beginning after 1 January 2019 or later and which the Bank has not adopted in advance are the following:

Applicable for fiscal years Standard/Interpretation Issue date beginning on or after IAS 1 and IAS 8 - Presentation of financial statements 28-05-2017 01-01-2020 IFRS 3 Business Definition (Amendment) 01-01-2020 IFRS 17 - Insurance contracts 01-01-2021 IFRS 9, IAS 39 and IFRS7 - Interest Rate Reform 01-01-2020 (Amendment)

Luanda, 31 March 2020

______

José de Lima Massano (Governor)

______

Rui Miguêns de Oliveira (Vice-Governor)

______

Manuel António Tiago Dias (Vice-Governor)

______

Beatriz Ferreira de Andrade dos Santos (Administrator)

______

Miguel Bartolomeu Miguel (Administrator)

______

Pedro Rodrigo Gonçalves de Castro e Silva (Administrator)

______

Tavares André Cristóvão (Administrator) 166 • Annual Report and Accounts • 2019

PARTE VII Anexos Part VII – Annexes I • 167 168 • Annual Report and Accounts • 2019 Part VII – Annexes I • 169 170 • Annual Report and Accounts • 2019 Part VII – Annexes I • 171 172 • Annual Report and Accounts • 2019 Part VII – Annexes II • 173 174 • Annual Report and Accounts • 2019 Part VII – Annexes II • 175 176 • Annual Report and Accounts • 2019 Part VII – Annexes II • 177 178 • Annual Report and Accounts • 2019 Part VII – Annexes II • 179 180 • Annual Report and Accounts • 2019

PARTE VIII Normatives Part VIII – Normatives • 181

I. NOTICES

NOTICES PUBLISHED IN 2019 PUBLICATION/DR SERIES I N.º NOTICES SUBJECT DR N.º DIA MÊS ANO Financial System - Calculation of Contributions of Participating Finan- 1 Notice No. 01/2019, of January 3 6 11 January 2019 cial Institutions to the Deposit Guarantee Fund 2 Notice No. 02/2019, of January 3 6 11 January 2019 Financial System -Information Report to the Deposit Guarantee Fund Foreign Currency Transaction Pricing - Maximum Limits of Commis- 3 Notice No. 03/2019, of March 22 42 28 March 2019 sions and Expenses - Maximum Exchange Margin Applicable to Certain Operations - Currency of Collection of Commissions 4 Notice No. 04/2019 of April 2 46 3 April 2019 Credit Grant to the Real Sector of the Economy - Terms and Conditions Financial System - Accounting Normalization and Harmonization 5 Notice No. 05/2019, of August 23 113 30 August 2019 Process of the Angolan Banking Sector Microcredit Societies - Change of text of articles 2 and 6 of Notice 6 Notice No. 06/2019, of August 26 113 30 August 2019 08/12, of March 30 Granting of Credit to the Real Sector of the Economy - Change in the 7 Notice No. 07/2019, of September 30 55 24 April 2019 text of Article 1 of Notice No. 04/19 of April 03 - Revocation of Article 5(3) of Notice No. 4/19 of April 03 8 Notice No. 08/2019, of November 06 143 6 November 2019 Exchange Ofﬁces - Operational Rules Payment Services Provided - Operational Rules for Value Remittance 9 Notice No. 09/2019, of November 06 143 6 November 2019 Service Foreign Exchange Policy - Procedures for Foreign Exchange Transac- 10 Notice No. 10/2019, of November 06 143 6 November 2019 tions by Individuals Foreign Currency Transaction Pricing - Maximum Limits of Commis- 11 Notice No. 11/2019, of November 20 151 26 November 2019 sions and Expenses - Currency of Collection of Commissions Foreign Exchange Policy - Rules Procedures for Foreign Exchange 12 Notice No. 12/2019, of November 26 155 2 December 2019 Transactions by Individuals Foreign Exchange Policy - Foreign Exchange Operations of the Oil and 13 Notice No. 13/2019, of November 29 155 2 December 2019 Gas Sector for the Settlement of Assets and Services Provided by Foreign Exchange Residents 14 Notice No. 14/2019, of November 29 155 2 December 2019 Exchange Policy - Exchange Position Limit Foreign Exchange Policy - Foreign Investment by Non-Residents - 15 Notice No. 15/2019, of December 23 165 30 December 2019 Capital Operations and Associated Income

Source: Organization and Planning Department - DOP 182 • Annual Report and Accounts • 2019

II. INSTRUCTIONS

INSTRUCTIONS - 2019 N.º INSTRUCTIONS SUBJECT Payment System - Automated Clearing Chamber of Angola - Guarantees for Settlement of 1 Instruction No. 01/2019, of January 3 Balances 2 Instruction No. 02/2019, of January 3 Financial System - Duty to Provide Information to Clients about the Deposit Guarantee Fund Payment System - Automated Clearing Chamber of Angola - Guarantees for Settlement of 3 Instruction No. 03/2019 of April 3 Balances 4 Instruction No. 04/2019 of April 26 Financial System - Credit Concession "Financial System - Treatment of Bank Notes with Doubtful Legitimacy 5 Instruction No. 05/2019 of July 5 " "Financial System - Kwanza Deposit and Bank Note Collection Operations 6 Instruction No. 06/2019, of June 22 " 7 Instruction No. 07/2019, of June 5 Angolan Payment System - Value Limits on Operations Carried Out on Payment Systems 8 Instruction No. 08/2019, of August 27 Financial System - Impairment Losses for the Credit Portfolio "Financial System - Financial Instruments Disclosures 9 Instruction No. 09/2019, of August 27 " 10 Instruction No. 10/2019 of August 28 Leases - Alteration of the text of points 7.3 and 8.2 of Instruction No. 08/16 of August 08 11 Instruction No. 11/2019 of August 28 Financial System - Stone Treatment in the Credit Portfolio 12 Instruction No. 12/2019 of October 24 Financial System - Securities Financial System - Effective Interest Rate Method in the Recognition of Income and Expen- 13 Instruction No. 13/2019 of August 28 ses of Financial Instruments 14 Instruction No. 14/2019, of September 06 Financial System - Accounts Plan of Banking Financial Institutions 15 Instruction No. 15/2019, of September 06 Financial System - Plan of Accounts of Non-Banking Financial Institutions Foreign Exchange Policy -Reference Exchange Rates - Calculation Methodology - Exchange 16 Instruction No. 16/2019 of October 24 Rates of Banking Financial Institutions 17 Instruction No. 17/2019 of October 24 Monetary Policy - Mandatory Reserves 18 Instruction No. 18/2019, of October 25 Exchange Policy - Limits for Exchange Operations of Good Imports 19 Instruction No. 19/2019 of November 06 Foreign Exchange Policy- Foreign Currency Auctions - Organization and Operation Procedures

Source: Organization and Planning Department - DOP Part VIII – Normatives • 183

III DIRECTIVES

DIRECTIVES - 2019 Nº DATE INDIVIDUAL DIRECTIVES SUBJECT Directive No. 01/DMA/2019, of 1 Asset Markets Department (DMA) BNA Rate - Notice No. 10/2011 of October 20 January 31 "Exchange Policy - Provision of Information Regarding Payment Com- Directive No. 01/DCC/2019, of mitment Statements, Issued by Commercial Banks, for the Realization 2 Exchange Control Department (DCC) February 5 of Exports of Goods " 3 Directva No. 02/2019, of May 14 Exchange Control Department (DCC) Foreign Exchange Policy - Definition of "Foreign Exchange Delays" BNA Basic Interest Rate - BNA Rate, Interest Rate of Permanent Loan 4 Directive No. 02/2019, of October 24 Asset Markets Department (DMA) and Liquidity Absorption Facilities Operations 5 Directive No. 03/2019, of October 25 Exchange Control Department (DCC) Settlement of Letters of Credit to the Shelter of Quantity Auctions 6 Directive No. 04/2019, of November 5 Exchange Control Department (DCC) Foreign Exchange Policy - Definition of "Foreign Exchange Delays" Guarantees in the CAAC Subsystems Parameters for Determining 7 Directive No. 04/2019, of April 11 Payment System Department (DSP) Minimum Guarantees and Penalty for Non-Compliance Nº DATE JOINT DIRECTIVES SUBJECT Payment System Department (DSP), Finan- Guarantees in the CAAC Subsystems Parameters for Determining 1 Directive No. 01/2019, of January 3 cial System Organization and Regulation Minimum Guarantees and Penalty for Non-Compliance Department (DRO) Payment System Department (DSP), Finan- 2 Directive nº 02/2019, of February 21 cial System Regulation and Organization Payment Card Expiration Date Department (DRO) Department of Economic Studies (DEE) Sending Additional Information on New Credits and Deposits through Department of Banking Supervision (DSB) 3 Directive Nº 03/2019, of March 28 the Financial Institutions Supervision System - SSIF - Monthly Informa- Department of Regulation and Organiza- tion - Commercial Banks tion of the Financial System (DRO) Banking Supervision Department (DSB) Reporting on the Granting of Credit to the Real Sector of the Economy 5 Directive No. 20/2019, of May 5 Financial System Regulation and Organi- through the Financial Institutions Supervision System (SSIF) zation Department (DRO) Foreign Exchange Policy - Tax Documentary Credit - Allocation of Foreign Exchange Control Department 6 Directive No. 06/2019, of July 5 Plafonds by the National Bank of Angola - Applicable Terms and (DCC) Asset Markets Department (DMA) Conditions Banking Supervision Department (DSB) Financial System Regulation and Organi- 7 Directive No. 07/ 2019, of January 2 Exchange Position Limit - Daily Information - Commercial Banks zation Department (DRO) Asset Market Department (DMA) Markets and Assets Department (DMA) Requirements for the Calculation and Fulfillment of Mandatory 8 Directive No. 08/2019, of October 24 Financial System Regulation and Organi- Reserves zation Department - (DRO) Payment System Department (DSP) 9 Directive no. 09/2019, of October 24 Mobile Payment Services Statistical Information Financial Inclusion Department (DIF) Banking Supervision Department (DSB) 10 Directive No. 10/2019, of December 9 Financial System Regulation and Organiza- Information Reporting Deadlines via Financial Institutions Portal (PIF) tion Department (DRO) Banking Supervision Department (DSB) 11 Directive No. 11/2019, of December 18 Financial System Regulation and Organiza- Information Reporting Deadline via Financial Institutions Portal (PIF) tion Department (DRO) Banking Supervision Department (DSB) Guide on the Implementation Recommendations of the AQA Methodo- 13 Directive No. 13/2019, of December 27 Financial System Regulation Department logies for Exercise 2019 (DRO)

“Source: Organization and Planning Department 184 • Annual Report and Accounts • 2019

IV. ORDERS

ORDERS - 2019 DATE OF NORMATIVES Nº YEAR ORGANIZATION PUBLICATION Financial System - Designation of Representatives of the National Bank of Angola as the Depositary of Banco ORDER 1 2019 10.01.2019 Mais S.A. E Postal Bank - Revocation of licenses ORDER 2 2019 Circulação Monetária - Constituição para Conferencia e Destruição de Notas Retiradas de Circulação 18/01/19 ORDER 3 2019 Personnel - Nomination of Members of the Monitoring Committee of the Pension Fund of the Workers of the BNA 22/01/19 ORDER 4 2019 Organization - Ethics and Integrity Culture Building Project - Constitution of the Project Team 28-01-2019 ORDER 5 2019 Organization - Investment Committee Regulations 07/02/19 Organization - Investment Main Lines - Investment Policy - Manual for Selection and Contracting ORDER 6 2019 07/02/19 of Custodians, Counterparties and External Managers ORDER 7 2019 Organization -Promotion of Credit Increase to the Private Sector - Constitution of the Working Group 07/02/19 ORDER 8 2019 Organization - Approval of the Organic Structure of the Banking Operations Department - DOB 07/02/19 Monetary Circulation - Constitution Commission for Conference and Destruction of Banknotes Withdrawn ORDER 10 2019 19/02/19 from Circulation ORDER 11 2019 Personnel - End of Service Commission, DES, DMA and DCH 21/02/19 ORDER 12 2019 Personnel - End of Service Commission, DGR, DCC, DCF, BRS, DSB and DSP 21/02/19 ORDER 13 2019 Personnel - Nominations, GSI,DOB, DCC,BRD, BRS,DMA and DRC 21/02/19 ORDER 14 2019 Organization - Reconciliation of Accounting and Statistical Information - Constitution of the Working Group 25/02/19 Limited Tender by Invitation - Hiring Coaching in the Operationalization of the Governance Model and the ORDER 15 2019 06/03/19 Strategic Information Technology Plan of the BNA Limited Tender by Invitation - Hiring a Consulting Company to Assess the Quality of Assets - Establishment ORDER 16 2019 06/03/19 of the Committee to Evaluate the Proposals Public Tender - Contracting Companies to Supply Table Water for Northeastern Regional Delegation - Consti- ORDER 17 2019 06/03/19 tution of the Commission for Evaluation of Proposals Public Tender - Contracting Companies to Supply Table Water for Northern Regional Delegation - Constitution ORDER 18 2019 06/03/19 of the Commission for Evaluation of Proposals Public Tender - Contracting Companies to Supply Table Water for Southern Regional Delegation - Constitution ORDER 19 2019 06/03/19 of the Commission for Evaluation of Proposals Public Tender - Contracting Companies to Supply Table Water for Western Regional Delegation - Constitution ORDER 20 2019 06/03/19 of the Commission for Evaluation of Proposals Public Tender - Contracting Companies to Supply Table Water for Central Regional Delegation - Constitution ORDER 21 2019 06/03/19 of the Commission for Evaluation of Proposals Public Tender - Hiring Companies for General Maintenance and Cleaning for Northeastern Regional Delega- ORDER 22 2019 06/03/19 tion - Constitution of the Commission for Evaluation of Proposals Public Tender - Hiring Companies for General Maintenance and Cleaning for Northern Regional Delegation - ORDER 23 2019 06/03/19 Constitution of the Commission for Evaluation of Proposals Public Tender - Contracting Companies to Supply Table Water for Headquarter Regional Delegation - Constitu- ORDER 24 2019 06/03/19 tion of the Commission for Evaluation of Proposals Public Tender - Hiring Companies for General Maintenance and Cleaning for Western Regional Delegation - ORDER 25 2019 06/03/2019 Constitution of the Commission for Evaluation of Proposals Public Tender - Hiring Companies for General Maintenance and Cleaning for Central Regional Delegation - ORDER 26 2019 06/03/19 Constitution of the Commission for Evaluation of Proposals Public Tender - Hiring Companies for General Maintenance and Cleaning for Southern Regional Delegation - ORDER 27 2019 06/03/19 Constitution of the Commission for Evaluation of Proposals ORDER 28 2019 Organization - Change of the Organic Structure of the Payment System Department - DSP 06/03/19 ORDER 29 2019 Organization - Change of the Organic Structure of the Asset Markets Department - DMA 11/03/19 ORDER 30 2019 Organization - Functional Structure Adequacy 20/03/19 ORDER 31 2019 Monetary Circulation - Constitution Commission for Conference and Destruction of Banknotes Withdrawn from Circulation 20/03/19 ORDER 32 2019 Organization - Cycle of Conferences of the National Bank of Angola - Constitution of the Organizing Comission 20/03/19 ORDER 33 2019 Organization - Financial Conduct Department -DCF - Administrative Organization Manual 20/03/19 ORDER 34 2019 Organization - Alteration of the Organic Structure of the Banking Supervision Department -DSB 20/03/19 ORDER 35 2019 Organization - Equivalence of Banking Regulation and Supervision Processes - Constitution of a Working Group 20/04/19 ORDER 36 2019 Organization - Financial Inclusion Department - DIF - Administrative Organization Manual 20/03/19 ORDER 37 2019 Organization - Alteration of the Organic Structure of the Department of Patrimony and Services - DPS 20/03/19 ORDER 38 2019 Organization - Change of the Organic Structure of the Communication and Branding Department - DCM 20/03/19 ORDER 39 2019 Personnel - End of Service Commission, DMA 21/03/19 ORDER 40 2019 Personnel - End of Service Commission, GJU, DSB, DSC, GRI, DGR, DEF and DCC 21/03/19 ORDER 41 2019 Personnel - Nominations, GRI, DSB, DCF, DSN, DMA, 21/03/19 ORDER 42 2019 Foreign Exchange Operations - Delegation of Expertise 02/04/19 ORDER 43 2019 Personnel- Absence of the Governor 02/04/19 ORDER 44 2019 Organization - Review of the Act of the National Bank of Angola - Constitution of the Working Group 23/04/19 ORDER 45 2019 Personnel - End of Service Commission, Mário Eglicério Baptista Ferreira do Nascimento 03/05/19 ORDER 46 2019 Personnel - Nominations, Daniela Marisa Belo Pereira de Sousa - Fernando Luciano Dala 15/05/19 Organization - Creation of the Corporate Governance Committee - Regulations of the Corporate Governance ORDER 47 2019 15/05/19 Committee and its Sub-Committees Continued on next page Part VIII – Normatives • 185

IV. ORDERS

ORDERS - 2019 DATE OF NORMATIVES Nº YEAR MONETARY AND EXCHANGE RATE POLICY PUBLICATION Monetary Circulation - Constitution Commission for Conference and Destruction of Banknotes Withdrawn from ORDER 48 2019 15/05/19 Circulation ORDER 49 2019 Financial Policy - Regulation Financial Stability Committee - COMEF - Subcommittee on Financial Inclusion -SIF 15/06/19 ORDER 50 2019 Financial Policy - Financial Educators Scholarship - BEF 15/05/19 Limited Tender - Hiring a Company to Produce and Supply Notes - Establishment of the Committee to Evaluate ORDER 51 2019 20/05/19 the Proposals ORDER 52 2019 Organization- Credit Monitoring Ofﬁce - GAC - Administrative Organization Manual 20/05/19 ORDER 53 2019 Organization - Change of Name of the Communication and Branding Department - DCM 20/05/19 ORDER 54 2019 Organization - Board of Directors - Distribution of Attributions 20/05/19 ORDER 55 2019 Personnel - End of Service Commission, DCC 22/05/19 ORDER 56 2019 Personnel - End of Service Commission, DSB 22/05/19 ORDER 57 2019 Personnel - Nominations, Marcos de Nazaré Arsénio do Rosário Neto - Rui Murthala de Carvalho Guimarães 22/05/2019 ORDER 58 2019 Personnel - End of Service Commission, DSB 22/05/19 ORDER 59 2019 Personnel - Nominations, DRO; DSP 28/05/19 ORDER 60 2019 Financial Policy - Regulation of the Markets Subcommittee -SME 30/05/19 ORDER 61 2019 Organization - Management Support Integrated System Project (SIAG) - Constitution of the Project Team 12/06/19 Organization - User Meeting of the SADC Regional Settlement System - Establishment of the Organizing ORDER 62 2019 12/06/19 Committee ORDER 63 2019 Organization - Governance and Management Policy of Regional Delegations 13/06/19 ORDER 64 2019 Inventory - Commission for the Inventory of Goods and Other Materials in the Safekeeping of Vaults 17/06/19 ORDER 65 2019 Organization - Annual Plan of Activities - Quarterly Management Report 17/06/19 Monetary Circulation - Constitution Commission for Conference and Destruction of Banknotes Withdrawn ORDER 66 2019 17/06/19 from Circulation ORDER 67 2019 Organization - Project Acquisition Committee - CAP 24/06/19 ORDER 68 2019 Organization - Representatives of the Acquisitions and Projects Committee - CAP 24/06/19 ORDER 69 2019 Personnel - Absence of the Governor 25/06/19 Monetary Circulation - Constitution Commission for Conference and Destruction of Banknotes Withdrawn ORDER 70 2019 10/07/19 from Circulation ORDER 71 2019 Personnel - End of Service Commission, DHC, DMC, DRC, DPS, and BRN 15/06/19 ORDER 72 2019 Personnel - Nominations, DRC; DCH, DPS, and BRN 15/07/19 Limited Contest by Invitation - Hiring of Companies to Provide Communication Services - Constitution of the ORDER 73 2019 23/07/19 Committee for Evaluation of Proposals ORDER 74 2019 Organization - General Principles on Organic Structure Manual 23/07/19 Organization - XVII Meeting of Human Resources of the Central Banks of Portuguese Speaking Countries ORDER 75 2019 23/07/19 (BCPLP) - Establishment of the Organizing Committee ORDER 76 2019 Organization - Social Responsibility Policy - Constitution of the Working Group 24/07/19 ORDER 77 2019 Personnel - Absence of the Governor 25/07/19 Monetary Circulation - Constitution Commission for Conference and Destruction of Banknotes Withdrawn ORDER 78 2019 14/08/19 from Circulation ORDER 79 2019 Organization - Approval of Process Governance Methodology 14/08/19 ORDER 80 2019 Organization - Regulation of Acquisitions and Payments of Goods, Services and Contracts 19/08/19 ORDER 81 2019 Organization - Board of Directors - Distribution of Attributions 22/08/19 ORDER 82 2019 Foreign Exchange Operations - Delegation of Expertise 26/08/19 ORDER 83 2019 Personnel - End of Service Commission, DGR 23/08/19 ORDER 84 2019 Personnel - Nominations, DGR 30/08/19 ORDER 85 2019 Organization - XXIX Lisbon Meeting - Constitution of the Working Group 02/09/19 ORDER 86 2019 Organization - Fostering Microﬁnance Activity in Angola - Working Group Constitution 02/09/19 ORDER 87 2019 Personnel - Nominations, DCF 03/09/19 ORDER 88 2019 Personnel - Absence of the Governor 05/09/19 ORDER 89 2019 Organization - Celebrations Allusive to the Institutional Anniversary - Constitution of the Organizing Committee 18/09/19 ORDER 90 2019 Organization - Board of Directors - Functional Replacement Matrix 19/09/19 ORDER 91 2019 Personnel - Absence of the Governor 20/09/19 Public Tender - Hiring of Companies for General Maintenance and Cleaning - Constitution of the Commission ORDER 92 2019 30/09/19 for Evaluation of Proposals ORDER 93 2019 Personnel - Revocation of the Absence of the Governor Order 30/09/19 ORDER 94 2019 Personnel - Absence of the Governor 22/10/19 ORDER 95 2019 Organization - Bicycle Use Regulations 22/10/19 Monetary Circulation - Constitution Commission for Conference and Destruction of Banknotes Withdrawn ORDER 96 2019 22/10/19 from Circulation ORDER 97 2019 Organization - V National Meeting of Treasury - Constitution of the Organizing Committee 22/10/19

Continued on next page 186 • Annual Report and Accounts • 2019

IV. ORDERS

ORDERS - 2019 DATE OF NORMATIVES Nº YEAR MONETARY AND EXCHANGE RATE POLICY PUBLICATION ORDER 98 2019 Personnel - End of Service Commission, BRO 23/10/19 ORDER 99 2019 Personnel - End of Service Commission, BRO 23/10/19 ORDER 100 2019 Personnel - Nominations, West 23/10/19 Public Tender - Hiring a Company to carry out an Inquiry on the Quality of Banking Services from a Consumer ORDER 101 2019 28/10/19 Point of View - Constitution of the Commission for the Evaluation of Proposals ORDER 102 2019 Monetary Circulation - Constitution Commission for carrying out tests of the destructions machine off-line 31/19/2019 ORDER 103 2019 Personnel - End of Service Commission, DSB 06/11/19 ORDER 104 2019 Personnel - Nominations, DSB 06/11/19 ORDER 105 2019 Personnel - Nominations, DTI 06/11/19 ORDER 106 2019 Personnel - End of Service Commission, GJU, and DRO 07/11/19 ORDER 107 2019 Personnel - Nominations, DRO 07/11/19 ORDER 108 2019 Personnel - End of Service Commission, DCF 07/11/19 ORDER 109 2019 Personnel - Nominations, DCF 07/11/19 Public Tender - Hiring a Company to Deﬁne the Cyber Security Management Plan - Constitution of the Com- ORDER 110 2019 27/11/19 mission for the Evaluation of Proposals Monetary Circulation - Constitution Commission for Conference and Destruction of Banknotes Withdrawn from ORDER 111 2019 04/12/19 Circulation ORDER 112 2019 Personnel - Absence of the Governor 10/12/19 ORDER 113 2019 Personnel - End of Service Commission, BRC, 16/12/19 ORDER 114 2019 Personnel - Nominations, BRC 16/12/19 ORDER 115 2019 Personnel - Nominations, DCF and DES 16/12/19 Public Tender - Hiring Companies to Supply Meal Security Body and Milk Supply to Cash Operators - Constitu- ORDER 116 2019 17/03/19 tion of the Commission for Evaluation of Proposals Public Tender - Hiring Companies to Supply Meal Security Body and Milk Supply to Cash Operators - Constitu- ORDER 117 2019 17/03/19 tion of the Commission for Evaluation of Proposals Public Tender - Hiring Companies to Supply Meal Security Body and Milk Supply to Cash Operators - Constitu- ORDER 118 2019 17/03/19 tion of the Commission for Evaluation of Proposals Public Tender - Hiring Companies for General Maintenance and Cleaning - Constitution of the Commission for ORDER 119 2019 17/03/19 Evaluation of Proposals Limited Tender By Invitation - Hiring a Private Security Company for the Protection of the Residence Function ORDER 120 2019 17/03/19 of the Northeast Regional Delegation - Constitution of the Committee for the Evaluation of Proposals Limited Bid By Invitation - Exploration of the Snack Bar of the National Bank of Angola - Constitution of the ORDER 121 2019 19/12/19 Commission for the Evaluation of Proposals ORDER 122 2019 Organization - Travel Management Regulation 27/12/19

Source: Organization and Planning Department - DOP IX. ABBREVIATIONS 188 • Annual Report and Accounts • 2019

ABBREVIATIONS

AFI: Alliance for Financial Inclusion DOP: Organization and Planning Department

AGT: General Tax Administration DCC: Foreign Exchange Control Department

ARSEG: Angolan Insurance Regulatory and Supervisory DEE: Economic Research Department Agency DES: Statistics Department AQA: Asset Quality Assessment DGR: Reserve Management Department ATM: Automatic Teller Machine DIF: Financial Inclusion Department ECB: European Central Bank DMC: Department of Transportation ML/FT: Money Laundering and Terrorist Financing DSB: Banking Supervision Department CPLP: Community of Portuguese Speaking Countries DSN: Non-Banking Supervision Department BCPLP: Central Banks of the Community DMA: Asset Markets Department of Portuguese Speaking Countries DOB: Banking Operations Department BIS: International Bank for Payments DPS: Department of Heritage and Services BM: Monetary Base DRO: Financial System Regulation and Organization BEF: Financial Educators Grant Department

BNA: National Bank of Angola DSP: Payment Systems Department

BR: Regional Delegations EFF: Extended Fund Facility

BT: Treasury Bills USA: United States of America

CCBG: Committee of Central Bank Governors FAO: Liquidity Absorption Facility of SADC FAO: Food and Agriculture Organization of the CDI: Import Letter of Credit United Nations

CEVAMA: Central Securities Office FAL: Liquidity Absorption Facility

CI: Investment Committee FAL7: Seven Day Liquidity Absorption Facility

CIRC: Credit Risk Information Center FCL: facility for Liquidity Assignment

CMC: Capital Market Commission FCO: Overnight Liquidity Facility

COMEF: Financial Stability Committee Fed: US Federal Reserve

CONTIF: Chart of Accounts of Financial Institutions FGD: Deposit Guarantee Fund

CGR: Reserve Management Committee IMF: International Monetary Fund

CPM: Monetary Policy Committee FSDEA: Sovereign Fund of Angola

CPMI: Payments and Market Infrastructure Committee FSVC: Financial Services Volunteer Corps

DAI: Internal Audit Department FTI: Technical Information Sheets

DCF: Financial Conduct Department GAC: Credit Monitoring Office

DCM: Communication Department and Museum GRI: Institutional Relations Office Part IX – Abbreviations • 189

FDI: Foreign Direct Investment ROA: Asset Profitability

IEC: Excise Tax ROE: Return on Capital

IFNB: Non-Banking Financial InstitutionsINE: SADC: Southern African Development Community Instituto Nacional de Estatística SCC: Check Clearing Subsystem INE: National Statistical Institute SCV: Securities Clearing Service IMF: Financial Market Infrastructure SDD: Direct Debit System IOSCO: International Organization of Securities Commissions SFA: Angolan Financial System

CPI: Consumer Price Index SIF: Financial Inclusion Subcommittee

IPCN: National Consumer Price Index SIGMA: Market and Asset Management System

IPG: Wholesale Price Index SPA: Angolan Payment System

VAT: Value Added Tax SPTR: Real Time Payment System

MCX: Multicaixa JTS: Credit Transfer Subsystem

MN: National Currency TBC: Central Bank Securities

ME: Foreign Currency TPA: Automatic Payment Terminal

MMI: Interbank Money Market IT: Information Technology

MEFMI: Institute of Macroeconomic and Financial UO: Organic Unit Management of Southern and Eastern Africa FIU: Financial Intelligence Unit

OEF: Financial Education Workshop WTI: West Texas intermediate

GSB: General State Budget SPA: Sistema de Pagamento Angolano

WCO: Open Market Operations SPTR: Sistema de Pagamento em Tempo Real

OPEC: Organization of Petroleum Exporting Countries STC: Subsistema de Transferência a Crédito

OSF: Optimization of the Other Financial Companies TBC: Títulos do Banco Central Module TPA: Terminal de Pagamento Automático OT: Treasury Bonds TI: Tecnologias de Informação GDP: Gross Domestic Product UO: Unidade Orgânica PIIM: Integrated Plan of Intervention in Municipalities UIF: Unidade de Informação Financeira PIMF: Principles of Financial Market Infrastructure WTI: West Texas intermediate NFIP: National Financial Inclusion Plan

RIB: Gross International Reserves Av. 4 de Fevereiro nº 151 - Luanda - Angola Caixa Postal 1243 Tel: (+244) 222 679200 - Fax: (+244) 222 339 125 www.bna.ao