## EXECUTIVE SUMMARY ## Source details **Canonical URL:** [EXECUTIVE SUMMARY](https://www.imf.org/-/media/files/publications/cr/2026/english/1agoea2026003-source-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2026/english/1agoea2026003-source-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2026/english/1agoea2026003-source-pdf.pdf.json) --- ### Background and recent reforms - FSSA prepared by IMF staff for Executive Board consideration on May 1, 2026; reflects discussions with the authorities held in June and September 2025. - Assessment completed prior to the recent war in the Middle East and does not reflect potential implications; findings and recommendations remain pertinent for medium-term challenges. - Since the 2011 FSAP: - 2015–2020: prolonged recession, closure of non-viable banks, transfer of non-performing assets to a government-owned asset management company. - Institutional reforms: designation of the National Bank of Angola (BNA) as resolution authority and formalization of its financial stability mandate; 2021 creation of the Council of Supervisors of the Financial System; 2019 launch of the Deposit Guarantee Fund. ### Macrofinancial context and structural features - Banking sector dominance and structural weaknesses: - Banking sector dominates but remains small; high dollarization persists across banking assets and liabilities. - Problem assets from past crises are not fully resolved; some banks continue to generate substantial non-performing loans (NPLs). - Large holdings of government securities increase the sovereign-bank nexus. - Uneven access to primary foreign exchange (FX) flows. - Credit to the private sector continued to decline as a share of GDP, indicating difficulties in financial deepening. - High dependence on hydrocarbons exposes the system to transition risks from a global shift to renewable energy and electrified transport. - AML/CFT gaps risk impairing correspondent banking relationships. - Key macroeconomic and financial indicators: - Growth: reached 5 percent in 2024; expected to slow to 3.1 percent in 2025; medium-term projected at around 3.1 percent annually. - Oil sector: accounts for over three-quarters of economic activity; provides about 92 percent of exports and 57 percent of fiscal revenue in 2025. - Private sector credit: about 6 percent of GDP in 2024 and 2025. - Inflation: about 15.7 percent in December 2025; earlier “28 percent in December 2024” and “16 percent in Q4 2025” referenced. - BNA policy rate: raised by 150 basis points in 2024 to 19.5 percent; reduced to 17.5 percent in January 2026. - Exchange rate: official rate unchanged since October 2024; parallel market rates traded 15–30 percent higher. - Gross international reserves: US$15.4 billion as of December 2024, covering 7.5 months of imports or 137 percent of the ARA metric under a floating exchange rate. - Total financial system assets: 26.9 percent of GDP at end-2024 (down from 63.6 percent in August 2011). - Banks held 87 percent of total financial system assets at end-2024. - Five largest banks hold over 60 percent of system-wide assets. - Banks’ exposure to the sovereign: about 29 percent of total bank assets at end-2024. - Private sector credit: 24.5 percent of bank assets. - Banking system CAR: 21 percent in December 2024; minimum Pillar I requirement 8 percent. - Systemwide NPL ratio: 19.2 percent (90-day past-due definition). - Lending to central government and public sector: 3.4 percent of bank assets at end-2024. - One-year T-bill nominal return: 16.5 percent. - Aggregate bank Net Open Position (NOP): about 26 percent of regulatory capital by end-2024. - Deposit composition (2024): households 32 percent; non-financial corporations 47 percent; government 10 percent; other public sector entities 6.5 percent. - Private credit-to-GDP ratio: low and declining. - Oil production decline: from 1.9 million barrels per day in 2008 to 1.1 mbpd in 2024. ### Stress tests, liquidity, and climate risk findings - Overall assessment: - Banks may be vulnerable to severe macrofinancial shocks; the war in the Middle East significantly increases uncertainty of results. - Adverse scenario severity comparable to extreme scenarios; short-term oil price effects may benefit Angola due to unaffected export routes to main customers (e.g., China and India). - Given evolving uncertainty, assessment should be interpreted with caution. - Solvency stress-test results: - Under the adverse scenario, capital pressures arise mainly from higher provisions on rising NPLs and losses on a large trading book predominantly composed of domestic sovereign securities. - Aggregate CAR under adverse scenario: would fall to 7.8 percent—just below the 8 percent Pillar I minimum—corresponding to a shortfall of about 800 billion kwanzas (1.1 percent of GDP). - Four banks, including three D‑SIBs, would fall below minimum CAR under the adverse scenario. - Measured against combined buffer requirements, six banks would have shortfalls totaling 1.8 percent of GDP, with half concentrated in one bank. - Sensitivity analysis: a hypothetical capital charge on the entire government bond portfolio consumes nearly one‑third of banks’ systemwide capital; underscores sovereign‑bank nexus intensity. - Liquidity analysis: - System-level liquidity is adequate, but heavy reliance on sovereign bonds as a source of liquidity and depositor concentration poses challenges. - Several banks are vulnerable to foreign-currency liquidity shortages. - Systemwide liquidity stress tests with cross-sector shock transmission indicate FX gaps, but central bank international reserves appear sufficient to backstop liquidity needs. - Systemwide liquidity stress test shock parameters (ranges in percent): - Shock 1 HH FX deposit shock: [10, 20] - Shock 2 NFC FX deposit shock: [40, 50] - Shock 3 Nonresident deposit shock: [10, 20] - Shock 4 Sovereign bond outflows: [70, 100] - Medium scenario assumptions: 10 percent outflow of household and nonresident FX deposits; 40 percent run on NFC FX deposits; 70 percent outflow of sovereign bonds. - Severe scenario assumptions: 20 percent outflow of household and nonresident FX deposits; 50 percent run on NFC FX deposits; 100 percent outflow of sovereign bonds. - Single-factor sensitivity: NFC FX deposit outflow shock reduces banks’ FX liquid assets the most; order of impact largest to smallest: NFC FX deposit outflows; household FX deposit outflows; sovereign bond outflows; non-resident FX deposit outflows. - Climate-related risk analysis: - Transition risk: under Accelerated Energy Transition scenario, aggregate CAR would decline to 7.8 percent; four banks breach minimum capital threshold in year one with a 780 billion kwanza shortfall (1 percent of GDP), mostly concentrated in one large D‑SIB. - Textual figure note: "Three out of nine D‑SIBs would be below minimum CAR in the Accelerated Energy Transition scenario." - Physical risks: moderate short-term exposure; total CAR remains above regulatory minimum across the risk horizon though localized damage may be underestimated. - Compound risk: under Compound Risk scenario, total CAR falls below regulatory requirement for two consecutive years; four out of nine D‑SIBs below combined buffer requirements. - Recommendation: build capacity on climate scenario analysis among regulators and policymakers. ### Macroprudential policy and systemic risk oversight - Progress and gaps: - Progress made: expanded systemic risk monitoring and macroprudential toolkit; BNA designated macroprudential authority, Financial Stability Committee operational. - Remaining priorities: formalize macroprudential governance and improve interagency coordination; enhance data quality and analytical capacity; address sovereign risk concentration, FX mismatches, household sector weaknesses. - Key recommended macroprudential measures: - Introduce a positive‑neutral countercyclical capital buffer (CCyB) during normal times. - Strengthen liquidity tools to address FX mismatch risks. - Enhance borrower‑based measures. - Enhance tools addressing sovereign‑bank linkages (including Pillar II measures or targeted macroprudential capital buffers). - Introduce additional FX liquidity tools and increase risk weights on FX exposures. - Monitor funding concentration risks and regularly conduct systemwide liquidity analysis. - Strengthen capacity on climate risk analysis among policymakers and regulators. ### Banking supervision and regulation - Legal and regulatory framework: - Broadly aligned with international standards, but significant gaps remain: insufficient adaptation to local context; limited supervisory intrusiveness; human resource constraints, especially in risk expertise. - Supervisory weaknesses and recommended reforms: - Make supervision more risk-sensitive, forward‑looking, and intrusive. - Increase supervisory capacity, on‑site inspection frequency and depth. - Leverage SupTech and centralized data systems to improve data quality and real-time monitoring. - Apply Basel standards proportionately; improve governance and integrate qualitative assessments. - Recruit risk specialists (corporate governance, liquidity, market, interest rate, operational, IT risk) and enhance recruitment/training, including secondments/staff exchanges. - Address data quality issues: overlap and unclear NPL definitions; expand SAS use; require structured ICAAP/ILAAP submissions. - Governance, consolidated supervision, and related risks: - Consolidated supervision is nascent; only one bank currently subject to consolidated supervision. - Related-party regulation improvements required; country and transfer risk unaddressed. - Market risk and IRRBB supervision limited; market risk specialists lacking. - Liquidity regulation: LCR thresholds set (100 percent local currency; 150 percent foreign currency); NSFR not implemented; recommend automatic alert systems and simplified ILAAP for non-systemic banks. ### Financial safety net, crisis management, and AML/CFT - Safety net and resolution framework: - Comprehensive legal framework broadly aligned with international standards; operationalization incomplete. - Priorities: early intervention, clear resolution triggers and tools, full funding and operationalization of the DGF and Resolution Fund; ELA accessibility subject to government guarantee if needed; strengthen interagency coordination; document extraordinary government funding policies. - DGF underfunded at 0.4 percent of eligible deposits vs. a 2.75 percent target; reimbursement processes under development. - Authorities should take decisive actions to resolve or liquidate current problem banks to maintain safety net credibility, protect small depositors, and minimize taxpayer costs. - AML/CFT: - Angola placed on the FATF grey list in 2024 and listed by the EU as a high‑risk third country for AML/CFT; could impair correspondent banking relationships. - Key AML/CFT deficiencies needing remediation: - adequate criminalization of money laundering; - strengthening AML/CFT risk‑based supervision, notably among non‑banking institutions; - enforcement of timely access to beneficial ownership information; - effective process to implement targeted financial sanctions. - Addressing deficiencies essential to meet international standards and strengthen financial system integrity. ### Financial sector development and World Bank inputs - World Bank recommendations areas: - NPL resolution, insurance and pension sector development, the state’s role in financial sector growth, capital market development, SME access to finance, digital financial inclusion, and payments system enhancements. - Financial inclusion and payments: - Recalibrate microfinance capital and limits; enable digital credit licensing; develop movable collateral registry; enhance private credit bureau. - Expand instant and government digital payments, agent networks, and adopt activity‑based regulation. - SPTR remains inaccessible to non-bank PSPs; governance and operational issues in instant payment system (KWIK). ### Selected key FSAP recommendations (timing legend preserved) - Cross‑cutting: - Strengthen reporting and validation of data and adopt a single NPL definition. — BNA, ST - Increase supervision staffing and establish a formal planning process for recruitment and training. — BNA, ST - Systemic and climate risk analysis: - Improve monitoring of banks’ domestic and foreign government bond holdings from a market risk perspective. — BNA, ST - Improve scenario-based solvency stress testing and implement cashflow-based liquidity stress testing. — BNA, MT - Monitor funding concentration risks and regularly conduct systemwide liquidity analysis. — BNA, MT - Strengthen capacity on climate risk analysis among policymakers and regulators. — BNA, ST - Banking regulation and supervision: - Adjust SREP indicators, improve qualitative assessments, and mandate meetings with senior bank management. — BNA, ST - Enhance on-site supervision of non-credit risks and increase frequency/depth. — BNA, ST - Reflect related-party regulation enhancements within supervisory practice and monitor related-party transactions closely. — BNA, ST - Close gaps in corporate governance and risk management; introduce country and transfer risk regulation. — BNA, ST - Adjust disclosure requirements to introduce main quantitative information quarterly and disclose related parties and group structure. — BNA, ST - Macroprudential framework and policies: - Prioritize development of macroprudential policy framework, institutional coordination, accountability, communication, and capacity to assess impacts. — BNA, CSSF, MT - Strengthen toolkit to address sovereign risk concentration, FX mismatches, and household sector risks. — BNA, CSSF, MT - Financial integrity: - Address AML/CFT deficiencies from the 2023 Mutual Evaluation Report, including full criminalization of money laundering; strengthen risk-based supervision of higher-risk institutions; ensure timely and verified beneficial ownership information with proportionate sanctions; remedy gaps for targeted financial sanctions. — FIU, BNA, CMC, ARSEG, MJDH, ST - Financial safety net and crisis management: - Establish an interagency forum and memorandum of understanding for crisis coordination; document extraordinary government funding policies to DGF and Resolution Fund. — BNA, DGF, Resolution Fund, MINFIN, I - Take decisive actions to resolve or liquidate current problem banks. — BNA, I - Strengthen early intervention and entry in resolution with clear triggers. — BNA, I - Operationalize transfer and bridge bank tools and ensure DGF is fully funded. — BNA, DGF, MT - Ensure ELA is accessible to banks that may need to be resolved or are in resolution, subject to government guarantee if needed. — BNA, ST - Timing legend: - I: Immediately; ST: short term= less than 1 year; MT: medium term= 1-5 years ### Authorities’ views and implementation intent - Authorities acknowledged the FSAP findings and broadly agreed with the recommendations. - Plan: integrate FSAP recommendations into financial sector reform strategy; expressed preliminary interest in capacity development and technical assistance. - Data enhancement program: expected completion by 2028; SupTech tool to automate supervisory processes. - Macroprudential framework: approved by end-2025; expected implementation in 2026. - Liquidity stress testing operationalization: expected to begin in 2026. - NPL regulatory revisions: revised Notice will require full write-offs of exposures in arrears for more than five years. - Internal Governance Code revision: expected by end-Q1 2026. - BNA developing climate scenario exercise and preparing a survey on non-financial companies’ exposure to climate risks. *Source: IMF Financial Sector Stability Assessment (FSSA), Executive Summary (prepared for Executive Board consideration on May 1, 2026).* ### EXECUTIVE SUMMARY __________________________________________________________________________ 7 ### EXECUTIVE SUMMARY ### Background and recent reforms - FSSA prepared by IMF staff for Executive Board consideration on May 1, 2026; reflects discussions with the authorities held in June and September 2025. - Assessment completed prior to the recent war in the Middle East and does not reflect potential implications; findings and recommendations remain pertinent for medium-term challenges. - Since the 2011 FSAP, Angola’s financial system experienced significant changes: - 2015–2020: prolonged recession, closure of non-viable banks, transfer of non-performing assets to a government-owned asset management company. - Institutional reforms: designation of the National Bank of Angola (BNA) as resolution authority and formalization of its financial stability mandate; 2021 creation of the Council of Supervisors of the Financial System; 2019 launch of the Deposit Guarantee Fund. ### Macrofinancial context and structural features - Banking sector dominates but remains small; high dollarization persists across banking assets and liabilities. - Key structural weaknesses: - Problem assets from past crises are not fully resolved; some banks continue to generate substantial non-performing loans (NPLs). - Large holdings of government securities increase the sovereign-bank nexus. - Uneven access to primary foreign exchange (FX) flows. - Credit to the private sector continued to decline as a share of GDP, indicating difficulties in financial deepening. - High dependence on hydrocarbons exposes the system to transition risks from a global shift to renewable energy and electrified transport. - AML/CFT gaps risk impairing correspondent banking relationships. ### Stress tests, liquidity, and climate risk findings - Overall assessment: banks may be vulnerable to severe macrofinancial shocks; the war in the Middle East significantly increases uncertainty of results. - Adverse scenario context: - Severity comparable to extreme scenarios in depth and duration of the ongoing war and consequent global disruptions. - Short-term terms: Angola, as an oil exporter, benefits from higher oil prices because export routes to main customers (e.g., China and India) are not affected by the war. - Given evolving uncertainty, assessment should be interpreted with caution. - Solvency stress-test results: - Under the adverse scenario, capital pressures arise mainly from higher provisions on rising NPLs and losses on a large trading book predominantly composed of domestic sovereign securities. - The average capital adequacy ratio (CAR) for banks—mainly domestic systemically important banks (D-SIBs)—would fall just below the required minimum. - Sensitivity analysis: a hypothetical capital charge on the entire government bond portfolio consumes a large share of systemwide bank capital, underscoring sovereign-bank nexus intensity. - Liquidity analysis: - System-level liquidity is adequate, but heavy reliance on sovereign bonds as a source of liquidity and depositor concentration poses challenges. - Several banks are vulnerable to foreign-currency liquidity shortages. - Systemwide liquidity stress tests with cross-sector shock transmission indicate FX gaps, but the central bank’s international reserves appear sufficient to backstop liquidity needs. - Climate-related risk analysis: - Elevated credit risks from an accelerated energy transition. - Only moderate short-term exposure to physical risks. - Staff will continue to monitor developments and reassess implications for macrofinancial stability. ### Macroprudential policy and systemic risk oversight - Progress made: expanded systemic risk monitoring and macroprudential toolkit. - Remaining priorities: - Formalize macroprudential governance and improve interagency coordination. - Enhance data quality and analytical capacity (data infrastructure and advanced risk analysis) for accurate calibration and early detection. - Address key vulnerabilities: sovereign risk concentration, FX mismatches, household sector weaknesses. - Key recommended measures include: - Introduce a positive-neutral countercyclical capital buffer (CCyB) during normal times. - Strengthen liquidity tools to address FX mismatch risks. - Enhance borrower-based measures. ### Banking supervision and regulation - Legal and regulatory framework broadly aligned with international standards, but significant gaps remain: - Insufficient adaptation of regulations to local context. - Limited supervisory intrusiveness and human resource constraints, especially in risk expertise. - Recommended supervisory reforms: - More risk-sensitive, forward-looking supervision. - Increase supervisory capacity, on-site inspection frequency and depth. - Leverage technology for data quality and real-time risk monitoring. - More proportionate application of Basel standards, improved governance, and stronger integration of qualitative assessments. ### Financial safety net, crisis management, and AML/CFT - Safety net and resolution framework: - Comprehensive crisis management and resolution legal framework broadly aligned with international standards, but complex and not fully tailored to Angola; operationalization incomplete. - Priorities: early intervention, clear resolution triggers and tools, full funding and operationalization of the Deposit Guarantee Fund (DGF) and Resolution Fund, ELA accessibility subject to government guarantee if needed, strengthen interagency coordination, and document policies for extraordinary government funding. - Authorities should take decisive actions to resolve or liquidate current problem banks to maintain safety net credibility, protect small depositors, and minimize taxpayer costs. - AML/CFT: - Angola placed on the FATF grey list in 2024 and listed by the EU as a high-risk third country for AML/CFT; these listings could impair correspondent banking relationships. - Addressing AML/CFT deficiencies is essential to meet international standards and strengthen financial system integrity and stability. ### Financial sector development and World Bank inputs - World Bank recommendations focus areas: - NPL resolution, insurance and pension sector development, the state’s role in financial sector growth, capital market development, SME access to finance, digital financial inclusion, and payments system enhancements. ### Selected key FSAP recommendations (from Table 1) - Cross-cutting: - Strengthen reporting and validation of data and adopt a single NPL definition. — BNA, ST - Increase supervision staffing and establish a formal planning process for recruitment and training. — BNA, ST - Systemic and climate risk analysis: - Improve monitoring of banks’ domestic and foreign government bond holdings from a market risk perspective. — BNA, ST - Improve scenario-based solvency stress testing and implement cashflow-based liquidity stress testing. — BNA, MT - Monitor funding concentration risks and regularly conduct systemwide liquidity analysis. — BNA, MT - Strengthen capacity on climate risk analysis among policymakers and regulators. — BNA, ST - Banking regulation and supervision: - Adjust SREP indicators, improve qualitative assessments, and mandate meetings with senior bank management. — BNA, ST - Enhance on-site supervision of non-credit risks and increase frequency/depth. — BNA, ST - Reflect related-party regulation enhancements within supervisory practice and monitor related-party transactions closely. — BNA, ST - Close gaps in corporate governance and risk management; introduce country and transfer risk regulation. — BNA, ST - Adjust disclosure requirements to introduce main quantitative information quarterly and disclose related parties and group structure. — BNA, ST - Macroprudential framework and policies: - Prioritize development of macroprudential policy framework, institutional coordination, accountability, communication, and capacity to assess impacts. — BNA, CSSF, MT - Strengthen toolkit to address sovereign risk concentration, FX mismatches, and household sector risks. — BNA, CSSF, MT - Financial integrity: - Address AML/CFT deficiencies from the 2023 Mutual Evaluation Report, including full criminalization of money laundering; strengthen risk-based supervision of higher-risk institutions; ensure timely and verified beneficial ownership information with proportionate sanctions; remedy gaps for targeted financial sanctions. — FIU, BNA, CMC, ARSEG, MJDH, ST - Financial safety net and crisis management: - Establish an interagency forum and memorandum of understanding for crisis coordination; document extraordinary government funding policies to DGF and Resolution Fund. — BNA, DGF, Resolution Fund, MINFIN, I - Take decisive actions to resolve or liquidate current problem banks. — BNA, I - Strengthen early intervention and entry in resolution with clear triggers. — BNA, I - Operationalize transfer and bridge bank tools and ensure DGF is fully funded. — BNA, DGF, MT - Ensure ELA is accessible to banks that may need to be resolved or are in resolution, subject to government guarantee if needed. — BNA, ST - Timing legend preserved from source: - I: Immediately; ST: short term= less than 1 year; MT: medium term= 1-5 years *Source: IMF Financial Sector Stability Assessment (FSSA), Executive Summary (prepared for Executive Board consideration on May 1, 2026).* ### 1. Angola’s macroeconomic challenges intensified in 2025, reflecting deepening ### 1. Angola’s macroeconomic challenges intensified in 2025, reflecting deepening imbalances amid a sustained decline in oil production ### Macroeconomic developments and outlook - Growth recovered from 2021 and reached 5 percent in 2024—the highest since 2015—driven by a rebound in non-oil sectors. - Growth is expected to slow to 3.1 percent in 2025 due to lower global oil prices and a sustained decline in oil production. - Medium-term growth is projected at around 3.1 percent annually, supported by the non-oil sector, with oil production expected to remain stable. - The oil sector accounts for over three-quarters of economic activity—directly and through linkages to the non-oil sector—and provides about 92 percent of exports and 57 percent of fiscal revenue in 2025. - Nominal credit growth was strong, but private sector credit accounted for only about 6 percent of GDP in 2024 and 2025, having nearly halved over the past five years. - Inflation eased from a peak in July 2024 but remained high at about 15.7 percent in December 2025. - The BNA raised its policy rate by 150 basis points in 2024 to 19.5 percent and subsequently reduced the policy rate to 17.5 percent in January 2026 after inflation moderated, while signaling a tightening bias. - The official exchange rate against the US dollar remained unchanged since October 2024 and throughout 2025; parallel market rates traded 15–30 percent higher, reflecting misalignment and FX shortages. - As of December 2024, gross international reserves were US$15.4 billion, covering 7.5 months of imports or 137 percent of the Assessing Reserve Adequacy (ARA) metric under a floating exchange rate. - Risks highlighted: a sharper-than-expected oil price drop, geopolitical tensions, shifts in global financial conditions, fiscal slippages, delayed reforms, and social tensions from high inflation and real income losses. ### Financial system structure and indicators - Total financial system assets were 26.9 percent of GDP at end-2024, down from 63.6 percent in August 2011. - Banks held 87 percent of total financial system assets at end-2024. - The five largest banks hold over 60 percent of system-wide assets. - Banks’ exposure to the sovereign was about 29 percent of total bank assets at end-2024, mostly through holdings of government securities and, to a lesser extent, direct loans. - Private sector credit comprised 24.5 percent of bank assets. - The banking system’s CAR was 21 percent in December 2024—above the 8 percent minimum—but declining since 2022; two banks, including one insolvent, failed to meet the minimum CAR. - Systemwide NPL ratio remained elevated at 19.2 percent (publicly reported NPLs defined as 90-day past-due loans). - Lending to the central government and public sector was 3.4 percent of bank assets at end-2024. - One-year T-bill nominal return cited as 16.5 percent. - Aggregate bank Net Open Position (NOP) was about 26 percent of regulatory capital by end-2024. - Deposit composition in 2024: 32 percent of total deposits from households and 47 percent from non-financial corporations; banks held 10 percent of deposits from the government and 6.5 percent from other public sector entities. - FX deposits concentrated among wealthy individuals and corporations; FX loan share increased since 2022. - Bank branches are relatively sparse compared to peers; private credit-to-GDP ratio is below comparators and on a declining path. ### Systemic vulnerabilities and sources of risk - Main vulnerabilities: - Sovereign-bank nexus risk: high sovereign debt exposure in banks could transmit sovereign stress to banks. - Spillover from the oil sector: indirect banking impact via macro channels (economic activity, FX availability, external and fiscal positions, exchange rate, inflation, interest rates). - Elevated banking sector NPLs: NPLs exceed peer averages and are concentrated in a few banks, partly reflecting legacy loans. - FX liquidity imbalances: uneven access to primary FX flows and limited interbank liquidity complicate management within the ±10 percent regulatory NOP limit. - Climate-related risks: transition risks from oil-dependence (oil production declined from 1.9 million barrels per day in 2008 to 1.1 mbpd in 2024) and physical risks from floods and droughts. - Other risks: cybersecurity threats and AML/CFT weaknesses; Angola was included on the FATF grey list in October 2024 based on ESAAMLG findings. - Network exposures (as of December 2024) show general government as most exposed, with net borrowing equal to -42.9 percent of GDP in foreign currency; NFCs have over half of liabilities in foreign currency; households and other domestic sectors play minor FX roles. ### Stress testing, contagion analysis, and scenario results - FSAP quantitative analysis focused on banks with top-down solvency and liquidity stress tests and contagion analysis covering all banks; horizon of three years. - Solvency stress test scenarios: - Baseline follows April 2025 World Economic Outlook (WEO) projections. - Adverse scenario models a global downturn with a sharp oil price drop, kwanza depreciation, and a short-term spike in interest rates. Domestic real GDP is assumed to contract by 7.8 percent in year one and 7.4 percent in year two. - The adverse scenario GDP contraction matches two standard deviations of Angola’s historical two-year GDP growth rate deviation, spread over the first two years. - Stress test outcomes: - Under the baseline, the system is well capitalized. - Under the adverse scenario, aggregate CAR would decline to 7.8 percent—slightly below the 8 percent Pillar I minimum—corresponding to a shortfall of about 800 billion kwanzas (1.1 percent of GDP). - Four banks, including three D-SIBs, would fall below minimum CAR under the adverse scenario. - Measured against combined buffer requirements, six banks would have shortfalls totaling 1.8 percent of GDP, with half concentrated in one bank. - Capital deterioration is most severe in year one, driven by rising provisions linked to higher NPLs and trading book losses dominated by domestic sovereign bonds amid higher short-term interest rates (3-month LUIBOR). - Stress testing caveats: - Non-linear confidence effects—owing to high public debt and concentrated holdings of domestic sovereign bonds—are not modeled and could worsen outcomes. - Results based on historical data and do not fully capture rising gross financing needs, reduced external market access, or increasing reliance on domestic financing highlighted in the 2024 Article IV. ### Policy implications and supervisory recommendations - Monitor closely the financial stability implications of recent BNA measures to stimulate private sector lending (subsidized loans and reductions in banks’ cash reserve requirements) because they may pose financial stability risks. - Authorities are encouraged to use satellite regression models to link macro variables with CAR components for risk assessment and scenario analysis. - Addressing AML/CFT deficiencies is critical to mitigate impacts on correspondent banking relationships following FATF grey listing; authorities are taking steps to address identified deficiencies. - Strengthen risk management and reduce sovereign concentration risk: - Recent amendments to banking regulations increase risk weights to 100 percent for Angolan foreign-currency-denominated securities and investments and for exposure to a single large counterparty above 25 percent of shareholders' equity; these regulations will be phased in by January 1, 2027, with risk-weights rising to 75 percent from 50 percent in 2025. - Enhance FX market functioning and interbank liquidity to reduce segmentation and FX shortages; closely monitor banks’ NOP positions and FX access constraints. - Continue resolving legacy problem loans and address restructuring challenges at troubled banks, particularly any systemic bank that failed to meet minimum CAR. *International Monetary Fund staff.* ### 18. To assess sovereign-bank nexus intensity, a sensitivity test was done on banks’ ### Sovereign-bank Nexus, Liquidity Stress Tests, Climate Risks, and Financial Oversight (Angola) ### Sovereign‑bank nexus sensitivity - A sensitivity test on banks’ government bond portfolios shows credit spread risk in banks’ trading books are manageable, on average. - A hypothetical capital charge on the entire government bond portfolio reveals excessive concentration, consuming nearly one-third of banks’ systemwide capital (Figure 9). - Hypothetical credit spread risk requirement computed based on a simulated credit spread risk requirement (Basel’s Internal Models Approach). ### Bank liquidity stress test and interconnectedness analysis - Baseline LCR-style maturity‑ladder test (overnight to one year) analyzes overall liquidity and kwanzas versus foreign currency separately. - Adverse scenario assumption: all sovereign securities (mostly domestic sovereign bonds) are illiquid—cash inflow occurs only at maturity, not immediately. - Key findings: - Baseline: large positive cumulative, aggregate net cashflows. - Adverse: cumulative net cashflows shrink near zero in short-term maturity bands (up to 15 days); over half the banks experience negative cashflow. - FX: while system FX cashflow is positive in aggregate under baseline, more than a third of banks would face liquidity shortfalls at individual level, indicating a skewed FX distribution across banks. - High depositor concentration increases risk of losing significant funding for several banks. - Interconnectedness: many interbank exposures are overnight and can be unwound easily, but a significant portion has longer maturity, potentially amplifying contagion during a crisis. - Policy implication: authorities are advised to incorporate these analyses into systemic risk toolkits. ### Systemwide liquidity analysis - Systemwide liquidity stress tests simulate a loss of confidence triggered by a sharp oil price fall, causing simultaneous outflows: domestic household and corporate deposits, nonresident deposits, and sovereign bond maturities. - Result: Banks’ FX liquid buffers would deplete, requiring central bank liquidity support; estimated central bank liquidity support would suffice to cover extreme outflows (Appendix III). - Recommendation: Authorities should monitor funding concentration risks and regularly conduct systemwide liquidity assessments. ### Climate‑related risk analysis (transition, physical, and compound scenarios) - Scenarios evaluated: - Accelerated Energy Transition: rapid global electrification and transport advances, pressuring Angola’s oil sector and broader economy. - Extreme Weather Event: more frequent and intense floods and droughts causing capital stock and infrastructure damage, crop yield losses, and reduced productivity. - Compound Risk: combination of transition and physical effects. - Transition risk findings: - Under the Accelerated Energy Transition scenario, aggregate CAR would decline to 7.8 percent. - Four banks breach the minimum capital threshold in year one, with a 780 billion kwanza shortfall (1 percent of GDP), mostly concentrated in one large D‑SIB (Figure 11). - Textual figure note: "Three out of nine D‑SIBs would be below minimum CAR in the Accelerated Energy Transition scenario" (Figure 11 caption). - Physical risk findings: - Physical risks have smaller sectoral impact than transition risks; total CAR remains above regulatory minimum across the risk horizon. - Localized damage may be underestimated by macro analysis; physical risks could increase as economic diversification and agricultural exposure grow. - Compound risk findings: - Under the Compound Risk scenario, the banking system’s total CAR falls below the regulatory requirement for two consecutive years. - Four out of nine D‑SIBs would be below combined buffer requirements in the Compound Risk scenario (Figure 13). - Drivers: decreasing output, rising inflation, increasing credit risks, and higher sovereign bond yields; higher provisions and lower trading income drive CAR deterioration. - Recommendation: build capacity on climate scenario analysis among regulators and policymakers. ### Systemic risk oversight and macroprudential framework - Institutional setup: - BNA is the designated macroprudential authority with responsibility carried out through the Financial Stability Committee (FSC). - BNA has legal authority to collect data from a broad range of entities and has bilateral memorandums with foreign supervisors. - Gaps and priorities: - A comprehensive macroprudential framework with clear governance and stronger interagency coordination is not yet finalized; completing this by end-2025 is a priority. - Communication and transparency need strengthening via timely publication of Financial Stability Reports and meeting records. - Data scope and quality need improvement for robust systemic risk monitoring and tool calibration. - Targeted recommendations: - Enhance tools addressing sovereign‑bank linkages (including measures such as Pillar II measures or targeted macroprudential capital buffers). - Strengthen borrower‑based measures to address household vulnerabilities. - Introduce additional FX liquidity tools and increase risk weights on FX exposures given high dollarization and FX mismatches. - Consider adopting a CCyB with a positive‑neutral setting during normal times. - Build institutional capacity to monitor compliance and evaluate policy impact. ### Banking supervision and regulation - Progress since 2011–12 FSAP: - New Central Bank and Banking Laws (2021) clarified BNA’s financial stability role and designated it as the resolution authority. - Regulatory enhancements: Basel III‑aligned capital and liquidity requirements, IFRS 9 implementation, steps toward risk‑based supervision. - Remaining weaknesses and recommended actions: - Regulatory framework insufficiently tailored to the Angolan context; proportionality and simplification are needed (e.g., D‑SIB framework covers an excessively wide range of banks). - 2024 full‑scope Basel Core Principles (BCP) assessment identified: weaknesses in supervisory intrusiveness and qualitative assessments; human resource constraints; corporate governance and risk management deficiencies; data and reporting issues; lack of country and transfer risk regulation and supervision; related‑party and concentration vulnerabilities; AML/CFT supervision limitations. - Recommendations: adjust regulatory frameworks to Angolan context, improve supervisory capacity, advance risk‑based supervision, increase supervisory intrusiveness, leverage technology, and invest in data quality. - BSD is under‑resourced with acute shortages in specialists (corporate governance, liquidity, market, interest rate, operational, and IT risk); recruit risk specialists and strengthen recruitment/training, including secondment/staff exchange opportunities. - Increase on‑site inspections and qualitative assessments; address persistent data quality issues (discrepancies between financial statements and prudential reports). - Implement SupTech, centralized data systems, automated alerts, and a centralized database aggregating bank and other information to improve monitoring—especially for concentration risk, related‑party exposures, transfer of ownership, and AML/CFT assessments. *Source: IMF staff calculations.* ### 36. Limited progress has been made to address AML/CFT weaknesses and ensure a timely ### 36. Limited progress has been made to address AML/CFT weaknesses and ensure a timely ### AML/CFT deficiencies and risks - Limited progress made to address AML/CFT weaknesses needed for timely exit from the FATF’s grey list. - Key areas requiring improvement: - (i) adequate criminalization of money laundering; - (ii) strengthening AML/CFT risk-based supervision, notably among non-banking institutions; - (iii) enforcement of timely access to beneficial ownership information; and - (iv) an effective process to implement targeted financial sanctions. - Following the grey listing in October 2024, Angola was included in the EU’s high-risk third countries list for AML/CFT deficiencies in June 2025 (and effective as of August 2025), which could create further impact on correspondent banking relationships. - Footnote: Relevant as some Angolan banks resumed USD clearing correspondent relationships with major US and EU banks. ### Financial safety net and crisis management framework — findings - Angola established a comprehensive legal framework for crisis preparedness, management and bank resolution broadly aligned with international standards. - The 2021 reforms made BNA the Resolution Authority, providing extensive powers per the Financial Stability Board’s Key Attributes on Effective Resolution Regimes. - The framework includes clear objectives, legal powers, and creditor safeguards to support effective bank resolution and liquidation processes. - Implementation progress: - BNA created a dedicated Resolution Department, separate from the BSD. - Regulations and guidance on recovery and resolution planning issued. - In 2024 (first annual cycle), most banks, including D-SIBs, submitted recovery plans; BNA feedback has focused on compliance. - D-SIBs submitted resolution planning information in a first annual cycle; BNA used this to develop resolution plans and provide feedback on potential impediments to resolvability. - Establishment of the Deposit Guarantee Fund (DGF) aims to protect depositors; efforts underway to create a Resolution Fund, partly funded ex ante by industry levies. - Authorities conducted crisis simulation exercises and established memoranda of understanding with foreign counterparts. ### Financial safety net — gaps and risks - The legal framework is complex and may not be fully tailored to Angola’s less complex financial system; proportional implementation of the Key Attributes could improve BNA’s capacity for decisive and timely action. - Full operationalization and testing remain incomplete: - No interagency crisis coordination forum; roles and responsibilities of financial safety net participants are not well defined. - Triggers for early intervention and entry in resolution are unclear or set too close to insolvency. - BNA lacks a comprehensive early intervention framework enabling prompt action. - Recovery and resolution planning are in early stages; key resolution tools (transfer and bridge bank) are not yet fully operational. - The DGF is underfunded at 0.4 percent of eligible deposits vs. a 2.75 percent target, with reimbursement processes under development. - The ELA framework is not designed for resolution and there are implementation issues on the collateral framework, haircut calibration and operationalization. - Staff shortages further slow progress. - BNA’s past handling of problem banks did not demonstrate prompt supervisory intervention and timely resolution: - Intervention measures were used when banks’ CARs were well below minimum requirements. - The resolution framework remains untested, despite one large bank — with a 6 percent share in system assets — having failed to restructure and having been insolvent for several years, and other banks experiencing acute regulatory capital breaches or accounting insolvency. - Unwillingness to act could undermine the financial safety net's credibility. ### Financial safety net — policy recommendations - Strengthen early intervention, entry in resolution, resolution tools, deposit insurance and ELA: - BNA should strengthen its early intervention framework and entry in resolution by improving the early warning system and developing internal guidance with clear triggers allowing earlier supervisory and resolution authority action. - BNA should operationalize key resolution tools (transfer and bridge bank) to ensure it can execute a resolution in practice. - Accelerate efforts to fully fund the DGF and ensure it can reimburse depositors within seven working days. - Strengthen the ELA framework to allow BNA to provide liquidity support to illiquid banks that are solvent on a forward-looking basis, including those undergoing resolution with the possibility of a government guarantee, when solvency is doubtful and the exit uncertain. - Strengthen interagency coordination and formalize policies for extraordinary, temporary government funding: - Establish an interagency coordination forum including the Ministry of Finance (MINFIN). - MINFIN should proactively participate in crisis preparedness in normal times given potential risks to public funds associated with the resolution of systemic banks. - Establish arrangements for temporary back-up government credit lines for the DGF and the Resolution Fund in advance; these arrangements should define conditions for using public funds in resolution and the mechanism for recovering funds from the industry. - To maintain credibility of the financial safety net: - BNA should resolve or liquidate current problem banks as necessary, protect small depositors and minimize costs to taxpayers. - Remove impediments to early intervention and timely resolution actions, and prioritize preparation and/or refinement of resolution plans for weak banks. ### Financial sector development — findings and recommendations - Improve access to finance via a multipronged strategy mindful of financial stability implications: - Recalibrate microfinance institutions capital and limits, enable digital credit licensing, develop a movable collateral registry, and enhance the private credit bureau. - Adopt risk-based pricing with subsidy transparency, link fiscal transfers to measurable outcomes. - Clarify mandates and consolidate overlapping government initiatives. - Expand digital financial inclusion by broadening instant and government digital payments, agent networks, adopting activity-based regulation, simplifying transaction account rules, improving national ID access, and establishing a BNA innovation hub. - Base measures to promote financial inclusion and SME access to finance on robust analysis, aligned with prudential standards, and consistent with financial stability objectives. - National Payment System (NPS) issues: - SPTR (real-time gross settlement system) remains inaccessible to non-bank PSPs. - No participation of non-bank PSPs in governance of the retail payment system operator (EMIS), which is owned by commercial banks. - Concerns about operational and pricing issues with the instant payment system (KWIK). - BNA's oversight is well-established but understaffed. - Depository, clearing, and settlement systems lack regular international standard assessments. - State ownership and governance: - Government reduced its presence in the financial sector and strengthened oversight of state-owned enterprises, but further reforms are needed. - Authorities should define a clear rationale for state ownership and institutional mandates and enhance segregation of duties between boards and management in state-owned financial institutions. - Insurance and pensions: - Insurance and pension sectors strengthened, but insurance penetration remains very low. - Opportunities: enforce existing mandatory insurance products; promote new ones for low-income households and agriculture; launch a well-managed, subsidized public parametric agricultural insurance program to protect small and medium producers from climate risks; expand affordable coverage for low-income populations. - Capital markets and public debt management: - Capital market growth constrained by a weak macroeconomic environment and a small, concentrated investor base. - Authorities should adjust insurance and pension investment regulations to promote asset-liability matching and risk diversification, discourage BNA overnight deposit facility overuse by liquidity-rich banks, and boost auction competition. - Define benchmark issuance schedules and target sizes supported by liability management operations to manage liquidity risk. - Ensure the government bond yield curve reflects only recent benchmark trades and enhance transparency in financial intermediation, with targeted exceptions for banks dealing in government securities. ### Authorities’ views - The authorities appreciated the assessment of their financial system, finding it comprehensive and useful to bring an additional perspective to their risk analysis, explore emerging issues, and discuss the evolution of their financial sector policy and regulatory frameworks. *Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1agoea2026003-source-pdf.pdf* ### 50. The authorities acknowledged the FSAP findings and broadly agreed with the ### The authorities acknowledged the FSAP findings and broadly agreed with the recommendations ### Authorities’ overall position and implementation intent - The authorities acknowledged the FSAP findings and broadly agreed with the recommendations. - Overall plan: integrate FSAP recommendations into the financial sector reform strategy over the coming years, with the goal of making the financial system robust, inclusive, and resilient, and better aligned with international standards and best practices. - The authorities expressed preliminary interest in capacity development, including technical assistance, to support implementation of FSAP recommendations. - The authorities will incorporate accepted recommendations into a corresponding action plan within a broader reform process. ### Observations on recent macrofinancial progress - The authorities noted that the report does not always adequately highlight progress from recent monetary, exchange rate, and financial sector policies aimed at achieving macrofinancial stability, citing: - “the rapid reduction of the inflation rate from 28 percent in December 2024 to 16 percent in Q4 2025.” ### Data enhancement and supervisory technology - To address data gaps and quality issues: - The BNA has finalized a data enhancement program to strengthen data management at reporting banks and within the BNA, focusing on improved coverage, consistency, timeliness, and regular data quality checks. - Implementation will proceed through institution-specific action plans with semi-annual monitoring. - Expected completion: by 2028. - A SupTech tool will be rolled out to automate supervisory processes. ### Macroprudential framework and supervisory instruments - Greater progress has been made in formalizing the macroprudential policy framework: - Framework approved by end-2025. - Expected implementation in 2026. - Approval of the CSSF Strategic Plan and ongoing work on a CSSF communication portal. - The methodology for the designation of D-SIBs was revised to more accurately reflect systemic relevance (Communiqué No. 110, “Revision of the Methodology for Identifying D-SIBs”). ### Liquidity stress testing and NPL regulatory framework - Development of the liquidity stress testing framework has been completed. - Operationalization expected to begin in 2026. - Revisions to the NPL regulatory framework are ongoing. - The revised Notice will require full write-offs of exposures in arrears for more than five years. ### Climate risk assessment - To assess climate risks: - The BNA is developing a climate scenario exercise. - The BNA is preparing a survey on non-financial companies’ exposure to these risks. ### Financial safety net and institutional coordination - To enhance the financial safety net: - The MoU between MINFIN and the BNA is being updated to foster stronger coordination, in line with their law-established mandates. ### Internal governance and supervisory divergence - Revisions to the Notice on the Internal Governance Code are underway and expected to be published by end-Q1 2026. - Within the scope of the assessment of the BCP, divergences are observed between the FSAP experts’ evaluation and the national authorities’ perspective on: - the licensing process; - supervisory approach, techniques and instruments of prudential supervision; - consolidated supervision. - Despite these divergences, the authorities acknowledge and accept the recommendations and will incorporate them into action plans. ### Key statistics and timelines referenced in the section - Inflation: “28 percent in December 2024” and “16 percent in Q4 2025.” - Data enhancement program expected completion: “by 2028.” - Macroprudential framework: approved by “end-2025”; expected to be implemented in “2026.” - Liquidity stress testing operationalization: expected to begin in “2026.” - Publication timing for Internal Governance Code revision: expected by “end-Q1 2026.” - NPL write-off requirement for exposures in arrears: “more than five years.” *Source: IMF staff report excerpt (content unit).* ### Appendix I. Banking Sector Stress Testing Matrix (STeM) ### Appendix I. Banking Sector Stress Testing Matrix (STeM) ### Solvency Stress Test — framework and assumptions - Institutional perimeter: All 22 banks in the country. - Data and starting position: - Bank-by-bank supervisory data on a solo basis. - Cut-off date: Year-end 2024. - Objective: Estimate the impact of a given macro scenario on regulatory capital through P&L for individual banks under a baseline (WEO) and an adverse (modelled) scenario. - Horizon: 3 years. - Data vintage for estimation: quarterly data from 2011. - Scenarios: - Baseline scenario aligned with IMF April 2025 WEO forecasts. - Adverse scenario: depreciation of the kwanzas and a decline in oil prices, triggered by a global economic downturn. - Methodology and risk factors: - P&L estimated through three main risks: credit, interest rate, and market risks. - Credit risk: - New flows of nonperforming exposures and loss provisions estimated using satellite models with NPLs as the dependent variable. - Publicly disclosed NPL ratios used; no segmentation of the loan portfolio in the satellite model. - Provisioning rates: - Performing loans: PD 14 percent and LGD 50 percent. - NPLs: PD 83 percent and LGD 60 percent. - Interest rate risk: - Interest income and interest expenses projected separately using satellite models; no segmentation of income or expenses. - Market risk: - Projected interest rate used to estimate security gains/losses on debt securities in trading and banking books separately. - Projected exchange rates used to estimate foreign currency gains/losses in open positions. - Other income statement items projected using a simplified approach based on predicted credit growth. - Balance sheet growth assumed to follow credit growth (from system loan portfolio size) with adjustments in the loan portfolio. - Risk-weighted assets (RWA) follow a corresponding estimate, assuming performing and NPLs are the same as for end-2024 respectively. - Sensitivity analysis: - Sovereign-bank nexus risks measured via the credit spread component of market risk. - Hurdle rates (capital requirements): - National minimum requirements on pillar I (8 percent), pillar I + D-SIB buffer (1-2 percent), and Pillar II (13.2-19 percent) respectively. - Output presentation (solvency): - Evolution of total capital over the horizon. - Number of banks below/above hurdle rate. - Aggregated shortfall in kwanzas and to GDP. - All output presented in total and separately by banking category: SOCBs, domestic private banks, foreign private banks, and D-SIBs. ### Liquidity Stress Test — framework and assumptions - Institutional perimeter: All 22 banks in the country. - Data and starting position: - Bank-by-bank supervisory data on a solo basis. - Cut-off date: Year-end 2024 and 2023. - Methodology and risk factors: - Liquidity cash flow analyses aligned with the LCR framework, in total and separately for kwanza and foreign currency. - Horizon: 1 year. - Scenarios: - Baseline scenario based on parameters from LCR. - One country-specific adverse scenario: all sovereign bonds in Angola are illiquid. - Sensitivity analyses: - Outcomes recalculated assuming a domestic currency depreciation of 30 percent. All foreign currency cashflows are revalued and added to domestic currency cashflows to evaluate total impact. - Hurdle rates: - Zero for the cumulated net cash flow position for all time buckets up to one year. A bank is not assumed to survive a scenario if it has at least one negative cumulative net cashflow in any time bucket below one year. - Output presentation (liquidity): - Evolution of cumulative net cash flow positions. - Number of banks below/above hurdle rate. - Aggregated shortfall in kwanza and as a percentage of GDP. - All output presented in total and separately by banking category: SOCBs, domestic private banks, foreign private banks, and D-SIBs. ### Contagion Analysis — framework and assumptions - Institutional perimeter: All 22 banks in the country. - Data and starting position: - Bilateral credit exposures among institutions on a solo basis. - Cut-off date: Year-end 2024 and 2023. - Methodology and risk factors: - Network model based on Espinosa-Vega and Solé (2010), capturing credit and funding risks. - Solvency–contagion interaction considered by projecting additional losses from interbank exposures. - Scenarios: - One adverse scenario assuming substantial spillover effects among domestic banks. - Sensitivity analyses: NA - Hurdle rates: NA - Output presentation: - Network charts, contagion and vulnerability indices. ### Systemwide Liquidity Analysis — framework and assumptions - Institutional perimeter: All 7 institutional sectors in the economy. - Data and starting position: - Sectoral assets and liabilities positions from Balance Sheet Analysis (BSA) Data. - Methodology and risk factors: - Balance Sheet Analysis to identify sectoral balance sheet vulnerabilities, financial interlinkages, and potential contagion channels. - Cash flow-based liquidity stress tests to estimate decline of liquid assets and their composition at sector level. - Scenarios: - A medium and a severe stress scenario capturing FX liquidity outflows arising from: - Capital outflows from household and non-resident deposits. - Investors’ demand for FX to repatriate sales of local currency investment. - Output presentation: - Network matrix and charts; in-depth balance sheets analysis. - Bank cash flow analysis and gross international reserves position under stress scenarios. ### Transition Risk Analysis — framework and modules - Institutional perimeter: All 22 banks in the country. - Data and starting position: - Bank-by-bank supervisory data from BNA. - Oil field data from Rystad Energy. - Cut-off date: Year-end 2024. - Horizon: 3 years. - Methodology and risk factors — interconnected modules: - Global energy module: - Global oil prices based on IEA’s World Energy Outlook 2024. - Oil prices in the first two years match those used in the solvency stress test and decline to $25 per barrel in the third year. - Oil sector module: - Potential stranded assets estimated using Rystad Energy Economic Model; stranded assets arise from changing expectations affecting present value of discounted future profits. - Macro module: - Changes in unemployment estimated using the ENVISAGE model; unemployment levels derived based on corresponding oil price and production shocks. - Macrofinancial module: - QIPF model with persistent oil price and endowment shocks. - Bank module: - Same satellite models developed for solvency stress test. - Scenarios: - Baseline: current policies, limited technological advancements, no transition or physical risk; calibrated to WEO April 2025. - Accelerated Energy Transition: accelerated electrification and transport technology advancements exert persistent downward pressure on Angolan oil sector. - Compound Risk: sustained pressure on oil sector plus heightened risks from extreme weather events; transition risk assumptions align with Accelerated Energy Transition. - Output presentation: - Measures of credit risk at the system-wide level. - Comparison between baseline and energy transition scenarios. ### Physical Risk Analysis — framework and assumptions - Institutional perimeter: All 22 banks in the country. - Data and starting position: - Bank-by-bank supervisory data from BNA. - Cut-off date: Year-end 2024. - Horizon: 3 years (mid-century climate shocks applied to three-year horizon due to climate variability). - Methodology and risk factors: - Physical risk analysis assesses combined impacts of floods and droughts, considering co-occurrence within the same year and distinct transmission channels (droughts affect agriculture; floods damage capital stock and infrastructure). - Direct damages from flood events estimated using a catastrophe modeling approach combining: - Hazard module: WRI Aqueduct Floods Hazard Maps. - Exposure module: spatially disaggregated capital stock from Eberenz et al. (2020). - Vulnerability module: damage functions for Africa from Huizinga et al. (2017). - Agricultural impact assessed using empirical approach from Hultgren et al. (2025) leveraging agricultural, historical and projected weather, income, and irrigation data to estimate staple crop production responses while accounting for adaptation and development. - Scenarios: - Baseline: No transition or physical risk; calibrated based on WEO April 2025. - Extreme Weather Event: under RCP 8.5, increasing frequency and intensity of floods and droughts leading to direct damage to capital stock and infrastructure, a significant reduction in crop yields, and decreased productivity. - Compound Risk: Angola faces both sustained pressure on the oil sector and heightened risks from extreme weather events; physical risk assumptions align with Extreme Weather Event scenario. - Output presentation: - Measures of credit risk at the system-wide level. - Comparison between scenarios with and without climate change. *Source: Appendix I. Banking Sector Stress Testing Matrix (STeM), cut-off dates and scenario calibrations as specified in the source document.* ### Appendix II. Table 1. Angola: Implementation of 2011 FSAP Recommendations—Assessment ### Appendix II. Table 1. Angola: Implementation of 2011 FSAP Recommendations—Assessment ### Fiscal and Reserve Management - Fiscal policy mandated to ensure sustainability of public finances with a clear objective of consistently reducing the public debt-to-GDP ratio to 60 percent or less in the long run. Executive must outline concrete measures annually when updating and presenting the General State Budget and the Medium-Term Debt Strategy. - Macroprudential policy measures to address oil-related inflows and dollarization: - New Foreign Exchange Regime for the Petroleum Sector: Foreign Exchange Law for the Petroleum Sector (Law No. 2/2012). - Notice No. 13/2022—limits daily foreign exchange position to 10 percent of Own Funds. - Notice No. 11/2014—limits credit operations to the State and exporting entities. - Assessment status: NT Partially Implemented. - Reserve management: - Governance model implemented: Board of Directors responsible for BNA policies; Reserves Management Committee meets quarterly to analyze foreign asset investment portfolio. - Investment Policy and Investment Guidelines based on three pillars: i) capital preservation, ii) liquidity guarantee, iii) profitability. - Assessment status: I Implemented. ### Financial Sector Stability — Supervision, Data, Stress Testing, and International Cooperation - Regulatory and supervisory reforms: - Publication of BNA Law (Law No. 24/21) and General Regime of Financial Institutions (Law No. 14/21, of 19 May). - Strengthened licensing, introduction of Corporate Governance principles, internal control systems, risk governance, capital adequacy, quantitative liquidity risk measurement, and adoption of IAS/IFRS. - Creation of MAIF and implementation of SREP model for risk-based supervision. - Remaining gaps: full implementation of risk-based approaches, risk management regulatory gaps, and supervisory capacity constraints. - Assessment status: I Partially Implemented. - Data collection and offsite surveillance: - Implemented optimized Financial Institutions Supervision System and other technological solutions aligned with regulatory framework. - Material data quality issues in prudential reports persist; monitoring needs further development. - Assessment status: I Partially Implemented. - Stress testing and financial stability monitoring: - Creation and operationalization of BNA's Financial Stability Committee on May 12, 2012. - Financial Stability Department created in 2022 with subunit for stress tests. - Instruction No. 03/2022—Stress Tests establishes institutions' stress test program. - Directive "Standardized stress tests for supervisory purposes" requires standardized stress tests to be reported regularly. - Assessment status: I Implemented. - International cooperation: - Cooperation protocols established with central banks of Cape Verde, Brazil, Portugal, Namibia and South Africa. - Assessment status: I Implemented. - Financial stability analysis and reporting: - Financial Stability Report published; since 2024 a summary statement on macroprudential policy decisions published. - BNA disclosure and reporting on the banking system not comprehensive. - Assessment status: MT Partially Implemented. - Corporate governance of banks: - BNA issued code of corporate governance (Aviso 1/22) and guidance; banks report annually; BNA reviews and aggregates governance reports. - Remaining issues: Aviso 1/22 (Article 13.1) allows board or shareholder to elect management (not best practice); supervisory process remains compliance-based rather than intrusive. - Assessment status: MT Partially implemented. - FX law implementation prerequisite: - Law No. 2/12—on the Foreign Exchange Regime Applicable to the Petroleum Sector published. - Assessment status: I Implemented. ### Financial Safety Net - Financial Stability Committee (FSC) and coordination: - National Financial Stability Council created and extinguished in 2021. - Council of Supervisors of the Financial System (CSSF) created to coordinate supervisory bodies and act as macroprudential authority (Law No. 14/21, of 19 May). - No structure encompassing all financial safety net participants with a clear mandate for crisis management. - Assessment status: NT Partially Implemented. - Lender-of-last-resort (LOLR) policies and emergency liquidity assistance (ELA): - Notice No. 10/23—Procedures for Granting Credit by BNA to Solvent Banking Financial Institutions Facing Temporary Liquidity Problems (under Law No. 24/21). - ELA framework not designed for resolution. - Assessment status: NT Partially Implemented. - Contingency planning and recovery planning: - Crisis Simulation Exercise conducted March 26–April 6, 2018; new exercise being prepared for 2025. - Notice No. 1/24 on Recovery Plan published; banks preparing recovery plans annually. - No authority-based or interagency contingency plans. - Assessment status: I Partially Implemented. - Deposit insurance: - Deposit Guarantee Fund established and in operation (2019) under Presidential Decree No. 195/18, August 22. - Fund currently underfunded; payout period specified in regulation is too long and payout process not fully operationalized. - Assessment status: NT Partially Implemented. - Interim liquidity buffers: - Institutions must maintain a liquidity conservation reserve of 10 percent above the minimum thresholds defined in Instruction No. 01/2024 – Liquidity Risk. - Assessment status: I Implemented. ### Financial Sector Development — Development Bank, Capital Markets, Insurance, Microfinance, Payments - Development Bank of Angola (BDA): - Evolved legal status to a state-owned joint-stock limited company wholly owned by IGAPE. - New mandate since July 2024 to plan, promote and execute economic and social development activities through financing the domestic private sector (Presidential Decree No. 142/24 of 2 July); mandate remains broad and BDA’s additionality unclear. - New Board and executive committee appointed with experienced professionals since July 2024. - Assessment status: NT Partially implemented. - Safety of overseas placements: - BDA implemented a risk management system; internal prudential limits in addition to regulatory ones. - As of end-2024, overseas placements represented only 2.3 percent of assets. - Assessment status: I Implemented. - Capital market development: - Capital Markets Commission (CMC) first Board appointed in 2012; Action Strategies implemented: 2012–2017, 2017–2022, 2023–2027 (ongoing). - BODIVA launched in 2014. - Law No. 11/19 (Privatization Program Law—PROPRIV) launched privatization; PROPRIV 2023-2026 covers 73 assets and companies, 21 are National Reference Companies, 9 expected to be privatized via IPO and Stock Exchange Auction. - Introduction of asset classes: public and corporate debt securities, shares and Participation Units (PUs) of Collective Investment Undertakings (CIUs). - Tax Benefits Code for CIUs approved; reduction in Capital Investment Tax on securities traded in regulated markets. - Successful public offerings: bonds by SONANGOL E.P.; public offering of shares in BAI, BCGA, ENSA and BODIVA. - Separation between commercial and investment banking advanced specialized financial intermediaries. - Assessment status: MT Implemented. - Insurance and pension sectors (ARSEG/ISS): - Independent insurance supervisor ARSEG created in 2013; comprehensive insurance and reinsurance law adopted in 2022. - Regulatory Standards on Governance of Insurance Companies established; defined criteria for registration of relevant management function. - Risk-based supervision began in 2025; Solvency II style regime targeted for 2028. - ARSEG needs greater independence, resources, technology, and stronger onsite oversight. - Pension fund legal framework outdated and under revision; law should give ARSEG full authority over authorizations and tighten supervision of defined-benefit assumptions and related-party limits. - Assessment status: MT Partially Implemented. - Microfinance and microcredit: - Presidential Decree No. 165/24 of 18 July establishes requirements and procedures for constitution, operation, supervision and monitoring of MFIs. - Notice No. 10/2022 (April 6) on Granting of Credit to the Real Sector of the Economy; Notice No. 06/2019 on Microcredit Companies; amendments to Notice no. 08/12. - Government credit programs have not yet moved toward a market-based approach. - Assessment status: MT Partially Implemented. - Secured transactions, collateral registry, and payments: - Law No. 11/21, April 22—Legal Framework of Movable Securities; Presidential Decree No. 114/21, April 29, on Integration and Interoperability of the collateral registry. - Revision and publication of Payments Systems Law and Law on the General Regime of Financial Institutions with provisions on bankruptcy, liquidation or dissolution proceedings; Insolvency Act; Notice on MFI regulation; revision of procedures manual. - Creation of the Automated Clearing House of Angola; extinction of credit documents and Value Clearing Service; introduction of technical specifications of the standard cheque. - Implementation of first and second phases of a real-time payment system 24/7; BNA Oversight Policy for the national payment system prepared and published; instant payment scheme (Kwik) introduced. - Number of electronic payments per capita has significantly grown in recent years, but still below potential. - Assessment status: MT Partially Implemented. *Based on the assessments and material provided in Appendix II and Appendix III of the source document.* ### Appendix III — Systemwide Liquidity Analysis and Stress Test Parameters - Purpose and scope: - Systemwide liquidity stress test evaluates financial linkages across key domestic sectors using sectoral Balance Sheet Analysis (BSA) dataset. - Findings: general government is the most exposed sector, particularly in foreign currency, representing a large and growing share of net borrowing; NFCs hold the second-largest FX exposure and maintain strong links with overseas counterparts. - Cash-flow-based liquidity stress test results: - Banks’ FX liquid asset buffers sufficient under the medium stress scenario; under the severe scenario, banks exhaust excess reserves and rely on liquidity support from the central bank. - Exercise assumes joint outflows from domestic household and corporate deposits, nonresident deposits, and sovereign bond maturity. - Deposit outflows and sales of local currency sovereign bonds are key drivers reducing FX liquidity of banks and the central bank. - Central bank maintains a strong reserve position and has capacity to cover extreme liquidity outflows. - Shock parameters (ranges in percent) — Appendix III. Table 1: - Shock 1 HH FX deposit shock: [10, 20] based on LCR - Shock 2 NFC FX deposit shock: [40, 50] based on LCR - Shock 3 Nonresident deposit shock: [10, 20] based on LCR - Shock 4 Sovereign bond outflows: [70, 100] - Source attribution in table: IMF staff. ### Appendix III. Figure 1. Stress Analysis: Impact on Bank and Central Bank FX Liquidity Buffers ### Appendix III. Figure 1. Stress Analysis: Impact on Bank and Central Bank FX Liquidity Buffers ### Stress scenarios used in the analysis - Medium scenario assumes a 10 percent outflow of household and nonresident FX deposits, a 40 percent run on non-financial corporations’ FX deposits, and a 70 percent outflow of sovereign bonds. - Severe scenario assumes a 20 percent outflow of household and nonresident FX deposits, a 50 percent run on non-financial corporations’ FX deposits, and a full (100 percent) outflow of sovereign bonds. - Sources: IMF Balance Sheet Approach (BSA) Matrix; and IMF Staff calculations. ### Single-factor sensitivity analysis (complement to scenario-based analysis) - Method: - Individual FX liquidity outflow shocks are introduced one at a time to assess respective impacts on banks’ FX liquid assets. - Findings: - NFC FX deposit outflow shock reduces banks’ FX liquid assets the most — reflecting vulnerabilities from oil companies. - Order of impact on banks’ FX liquid assets (largest to smallest): non-financial corporations’ (NFC) FX deposit outflows; household FX deposit outflows; sovereign bond outflows; non-resident FX deposit outflows. - The impacts are stronger across all shocks under the severe scenario. - Operational assumptions shown in Appendix III. Figure 2: - Medium Scenario: Banks use reserve first; Other sectors use local FX deposit first. - Severe Scenario: Banks use reserve first; Other sectors use local FX deposit first. - Sources: IMF Balance Sheet Approach (BSA) Matrix; and IMF Staff calculations. ### Policy recommendations and supervisory implications - The FSAP recommends BNA to develop stress testing approaches to assess funding risks from non-financial corporations. - Rationale and recommended actions: - NFC deposits account for 47 percent of bank deposits, making them a key source of funding. - Outflows from NFCs have the largest impact on banks’ FX liquidity positions, and NFCs can rapidly change their investment behavior by relocating assets across borders. - To mitigate these risks, the central bank should: - Closely monitor the concentration risks of funding. - Regularly conduct systemwide liquidity stress tests to ensure that banks have sufficient capacity to provide the needed FX liquidity to support the financial system. ### Related liquidity and asset-quality context (selected metrics from adjacent analysis) - Overdue loans (90 days past due, considered NPLs in Angola) surged and reached 19 percent of total loans in Q4 of 2024. - Stage 3 loans stood at 46 percent of the loan portfolio in March 2024, with the stage 3 ratio for corporate loans reaching 50 percent. - As of 2024, half of Stage 3 loans had been in that category for five years or longer; most of them being denominated in foreign currency. *Source: Appendix III. Figure 1. Stress Analysis: Impact on Bank and Central Bank FX Liquidity Buffers; IMF Balance Sheet Approach (BSA) Matrix; and IMF Staff calculations.* ### 8. The BNA is the sole regulator and supervisor for all banking financial institutions and ### 8. The BNA is the sole regulator and supervisor for all banking financial institutions and for certain types of non-banking financial institutions including nonbank payment service providers, currency exchange units, Savings and Loans Associations, and credit registry bureaus. ### Institutional roles and coordination - BNA is the sole banking regulator and supervisor; insurance and pension sector supervised by the Insurance Supervisory Body (ARSEG); capital markets by the Capital Market Commission (CMC). - The National Commission for Financial Markets (NCFM) oversees consumer protection, capital markets, investment companies, and voluntary pension funds. - Since July 2023, the BNA has participated in the CSSF alongside ARSEG and the CMC. - The CSSF, chaired by the BNA Governor, benefits from the BNA’s role as Angola’s macroprudential authority, providing administrative support and secretariat services. - CSSF facilitates consolidated supervision of financial conglomerates and joint on-site inspections conducted by the three supervisors; MINFIN participates as an observer. ### Macrofinancial context and macroprudential oversight - Angola’s economy has strengthened since 2021, driven by gains in both oil and non-oil sectors, but structural challenges and external risks persist. - Key risks to the outlook include lower oil prices, slower global growth, tighter external financing, possible fiscal slippages before upcoming elections, and social strains from high inflation and declining real incomes. - The BNA is designated as the authority responsible for systemic risk identification, monitoring, and mitigation via its Financial Stability Committee. - BNA holds legal authority to collect data from diverse entities and maintains bilateral agreements with foreign supervisors to enhance macroprudential cooperation. - Systemic risk monitoring is progressing alongside an expanding macroprudential toolkit; the overall framework remains under development. - Findings are published in biannual Financial Stability Reports, which are generally released with delays. ### Payment system oversight - BNA is responsible for ensuring the proper functioning of the payment system under the Payment System Law. - The Payment System Superintendence Policy was updated; key measures include: - (i) licensing mobile operators to provide mobile payment services; - (ii) enabling mobile operators to connect with the Interbank Services Company (EMIS) for Multicaixa Express channel access without using mobile data; - (iii) allowing cash withdrawals via automatic payment terminals (POS) installed at merchants, which were previously only possible through automated teller machines (ATMs). ### Judicial reform, collateral, and recovery - Judicial reform lost momentum since 2022 despite earlier progress under the Justice and Law Reform Commission (JLRC). - JLRC established in 2020 facilitated adoption of key laws including a revised penal code and creation of regional and specialized courts; JLRC mandate expiration led to stalled progress. - Reactivation of the JLRC in mid-2024, plus reorganizing the judiciary and expanding legal professional training, is expected to revive reforms and strengthen contract enforcement, property rights, and legal certainty. - Significant challenges exist in recovering collateral: difficulties in property registration and securitization, limited mechanisms for pledging movable assets. - Use of georeferencing technology could enhance property registration and improve recovery processes. ### Accounting, reporting, and supervisory data tools - Since 2016, the BNA has fully adopted IAS/IFRS for financial statements that financial institutions must submit to the BNA and disclose to the public. - External auditors must be licensed firms registered under Audit and Accounting Regulations; the General Regime of Financial Institutions embeds specific auditor rules. - The BNA intervenes to request replacement of external auditors when concerns arise. - BNA has implemented the Credit Risk Information Center (CIRC), improving monitoring of credit activity and borrower risk analysis. - In 2024, BNA granted access to CIRC via its institutional website, allowing borrowers rapid information retrieval and reducing risks linked to fraudulent credit information. - Most supervisory reporting uses the SSIF system—an electronic platform called the Financial Institutions Portal (FIP) managed by the BNA, but banks continue to submit substantial data (e.g., ICAAP and ILAAP) in unstructured formats such as emails. - BNA launched a Data Quality Assessment program and plans to deploy a new SupTech tool. ### Crisis management and market transparency - Angola has established a comprehensive legal framework for crisis management and resolution broadly aligned with international standards, but the framework is complex and not fully tailored to Angola’s financial system; significant work remains to operationalize and test the financial safety net. - Disclosure rules exist but market transparency and consumer information remain limited; prudential disclosures lack sufficient frequency and detail. - The legal framework governing mergers, acquisitions, and foreign entry is underdeveloped; BNA reviews shareholding changes based on suitability and financial capacity, but the process lacks transparency and predictability. - BNA has issued regulations on public disclosure of prudential information, but further improvements in disclosure by both banks and BNA are needed. ### Main findings — Responsibility, Objectives, Powers, Independence, Accountability (CPs 1-2) - The BNA’s responsibilities and objectives for banking supervision are clear, but the safety and soundness mandate should be explicitly enshrined in law; current primary legislation assigns the BNA’s main mission as ensuring price stability, with financial system stability as a secondary objective. - Central Bank Law grants the BNA macroprudential and resolution authority; recommendation to explicitly state the safety and soundness (S&S) mandate and translate it into operational risk tolerance and supervisory powers, including explicit legal power to access boards, managers, and staff of banks. - Since 2022, cooperation among Angola’s financial supervisors has been formalized within the scope of CSSF. ### Main findings — Ownership, Licensing, and Structure (CPs 4-7) - Permissible activities for banks are clearly defined; use of “bank” in names is restricted; only banks and microfinance institutions may accept public deposits. - BNA is the sole licensing authority and publishes a list of licensed banks on its website. - Implementation weaknesses: evidence did not demonstrate comprehensive due‑diligence on applicants’ legal, managerial, operational, and ownership structures on a consolidated basis; assessments do not evaluate the capacity of major shareholders to support institutions under stress; review of financial projections and shareholder information lacks sufficient depth. - Fit‑and‑proper framework is insufficiently differentiated across roles and lacks systematic ongoing reassessment. - Business plans are required but not adequately analyzed or challenged after licensing. - The LRGIF defines significant ownership and control concepts but lacks identification of ultimate beneficial owners; beneficial owner identification relies on self‑declaration. - In the past five years, the BNA approved four transfers of significant ownership, rejected one request, and subsequently granted an appeal of the refusal. - The LGRIF’s 20 percent threshold constrains the control definition; recommendation to remove the 20 percent threshold because dominant influence—not percentage alone—is the determining factor. - Prior approval by the BNA is foreseen for qualified acquisitions, but coverage is incomplete, particularly for domestic non‑bank financial institutions such as insurance companies; no provisions require BNA review of major acquisitions and investments by other entities in the banking group. ### Main findings — Methods of Ongoing Supervision (CPs 8-10) - DSB has adopted a risk-based supervision framework, but supervisory practice remains insufficiently risk-based and qualitatively shallow. - Of 22 banks supervised, 9 are D-SIBs, which may strain supervisory capacity. - BNA is revising its D-SIB identification methodology and should apply stricter criteria reflecting systemic importance. - BNA regularly monitors an Aggregate Financial Stability Index; efforts continue to integrate macroprudential findings into micro-prudential supervision. - Supervisory shortcomings include: - off-site supervision lacking qualitative, forward-looking focus; - fragmented off-site supervisory tasks across departments; - corporate governance reviews largely compliance-based and shallow; - insufficient qualitative on-site inspections of core risk areas. - Recommendations include assigning a dedicated relationship manager or focal point for each bank, better integrating off-site and on-site supervision, and developing tools to assess forward-looking risk profiles. ### Main findings — Data quality, corrective powers, and cooperation (CP11; CPs 3, 12-13) - Significant data quality issues persist; many key submissions (e.g., ICAAP and ILAAP) are provided in unstructured formats; validity checks are insufficient; supervisory information is fragmented and not readily accessible. - BNA launched a Data Quality Assessment program and plans deployment of a SupTech tool. - Corrective and sanctioning powers are applied mainly to material compliance breaches; sanctions lack a forward-looking focus on governance and risk management weaknesses; the early intervention process needs to be more proactive and forward-looking. - Coordination domestically occurs through the CSSF and specific MoUs; BNA has a dedicated sub-unit for institutional relationships that serves as CSSF secretariat. - Supervision of financial groups is not adequately covered in the supervision manual. *Source: INTERNATIONAL MONETARY FUND — ANGOLA* ### 32. Consolidated supervision is a new area for BNA supervisors and requires significant ### 32. Consolidated supervision is a new area for BNA supervisors and requires significant ### Consolidated supervision and group identification - CSSF exists and consolidated supervision is applied to a financial group under its patronage, but identification of group structures remains incomplete. - Beyond the entities supervised by the three CSSF member supervisors, non-financial holdings may not be considered within the broader conglomerate definition. - Currently, only one bank is subject to consolidated supervision. ### International cooperation and home-host relationships - BNA has established multiple cooperation agreements to exchange experiences and discuss supervisory matters. - The supervisory college is the main communication channel between the BNA and supervisory authorities of foreign-based banks. - Branches of banking financial institutions headquartered abroad and operating in Angola are supervised by the BNA under the same terms as domestically headquartered banking institutions. ### Corporate governance and internal control (CPs 14, 26) - Regulatory framework is comprehensive but not fully aligned with international standards; board committee requirements differ from the Basel Committee’s 2015 Corporate Governance Principles for Banks. - Regulations allow combining audit and internal control committees and do not require full independence or separation of committee chair roles. - No regulatory requirement for banks to maintain board succession plans or for a material part of the board to be independent. - Supervisory practices are largely compliance-based and lack intrusiveness: - Off-site assessments rely heavily on self-reported checklists without systematic engagement. - On-site inspections are infrequent and limited in scope, with only 11 conducted over the past three years, focused on formal compliance rather than effectiveness. - Significant deficiencies impair assessment of internal control functions: - Internal audit reporting lines and subordination in several banks may undermine independence. - No evidence supervisors evaluate back-office staff skills, resources, and expertise. - No indication supervisors evaluate internal audit authority over outsourced or third-party activities. ### Capital (CP 16) - Angola’s capital framework combines Basel II and III standards adapted to local conditions, maintaining strong capital levels. - Regulatory capital requirements: - Common Equity Tier 1 (CET1) at 4.5 percent - Tier 1 at 6 percent - Total capital at 8 percent of risk-weighted assets (RWA) - Framework supplemented by institution-specific Pillar II Requirements (P2R) and buffers for capital conservation, countercyclicality, and systemic importance. - Ongoing development of the countercyclical buffer framework and absence of a market for loss-absorbing instruments indicate scope for refinement and proportionality. - Supervisory practices: - Annual imposition of additional capital based on SREP outcomes, adjusting both Pillar I and Pillar II risks. - Banks are subject to Pillar II guidance (P2G) calculated from BNA’s stress test outcomes. - All banks conduct an Internal Capital Adequacy Assessment Process (ICAAP), but supervisory challenge of ICAAP results and integration into banks’ strategic decisions remain limited. ### Risk management and supervisory capacity (CPs 15 and 17–28) - Regulatory framework advanced but missing key elements for forward-looking supervision: - No explicit regulatory requirement for banks to acknowledge limitations and uncertainties in risk measurement. - No mandates requiring banks to assess longer-term risks. - No requirement for supervisory notification or public disclosure when Chief Risk Officers (CROs) are removed; no assurance of CROs’ authority and independence. - Supervisory practices constrained by limited resources and shallow qualitative assessments: - Off-site evaluation mainly through structured questionnaires with minimal bank engagement; simplified SREP common. - On-site inspections provide greater insight but lack systematic evaluation of risk culture integration across staff levels. - Key supervisory processes underdeveloped, limiting assurance that risk frameworks are robust and aligned with strategic profiles. ### Credit risk framework and IFRS 9 - Regulatory framework lacks a comprehensive mandate for sound, bank-wide credit risk management; no specific regulation mandates integrated credit risk processes for early identification and accurate measurement of credit losses. - Repeal of an earlier regulation has created a gap; BNA plans to reintroduce a more comprehensive framework. - Current regulations do not require escalation of major credit exposures to senior management or the board. - Supervisory practices for credit risk: - Off-site supervision evaluates credit indicators, ICAAP results, and risk appetite statements but lacks exception tracking or breach reporting. - On-site inspections are infrequent and have not covered all systemic banks recently. - Credit file reviews use an undocumented sampling method that may not capture high-risk exposures adequately. - IFRS 9 adoption progressed, but regulatory shortcomings persist: - Overlapping and unclear definitions of non-performing loans; "unlikely to pay" criterion not fully integrated. - Discretionary nature of IFRS 9 allows banks to delay write-offs; non-binding guidance on non-performing exposures and write-offs limits enforcement. - Recovery of overdue exposures is challenging; collateral formalization problems led to supervisory interventions requiring reclassifications and additional provisions. - Risk mitigation concentrated on real estate and land without systematic evaluation of effectiveness. - BNA’s Impairment Tool (SAS) identified under-provisioning in several institutions; expanding SAS use to quarterly off-site assessments would strengthen early detection of provisioning gaps. ### Concentration risk - Regulatory framework partially aligns with international standards but lacks comprehensive scope: - Concentration risk defined mainly through large credit exposures, excluding market, funding, or sectoral concentrations. - Large exposure limit broadly consistent with Basel III but lacks detailed criteria for economic interdependence among counterparties; connected party definition weakened. - Reporting framework does not support a holistic view of concentration risk across portfolios. - Supervisory oversight limited: - No systematic process to assess aggregation to single or connected counterparties. - BNA does not exercise discretion nor has capacity to challenge banks’ identification of connected parties. - Recent data: 7 of 18 banks exceed concentration limits. - Absence of mechanisms to validate or override banks' connectedness assessments poses material risk in a system with high name concentration. ### Related-party transactions - Regulation recently updated but remains incomplete and lacks enforcement: - Updated regulation limited to credit-related transactions; excludes asset sales, services, and off-balance-sheet arrangements. - No evidence BNA has assessed completeness or accuracy of related-party lists submitted by banks or evaluated materiality of related-party exposures. - Historical importance of related-party risks in Angola implies absence of robust supervisory process is a material vulnerability. ### Country and transfer risk - Country and transfer risks are unaddressed and undefined under national standards: - No regulatory requirements for banks to develop policies or mechanisms for identification, monitoring, and management of these risks. - Banks are not obliged to aggregate or report country exposures systematically or timely. - IFRS 9 provisioning models may implicitly capture some aspects, but no specific prudential provisions or supervisory expectations exist. ### Market risk and IRRBB - Market risk framework underdeveloped despite materiality: - Market risk represents about 10 percent of RWA on average, exceeding 20 percent in four banks, including two systemic ones. - FX risk dominates; significant interest rate risk particularly in the largest bank. - No dedicated regulation for market risk management; trading and banking books distinguished by accounting classifications instead of Basel principles (RBC25). - Supervisory oversight limited: - No on-site market risk inspections conducted; BNA lacks market risk specialists. - Off-site SREP indicators focus mainly on portfolio size and inadequately capture FX risk. - Valuations follow IFRS, but BNA lacks expertise to challenge valuation adjustments or conduct independent verification. - Interest Rate Risk in the Banking Book (IRRBB) oversight limited to off-site reviews; no on-site IRRBB inspections and no specialized experts. - Off-site supervision relies on checklist-based SREP that does not evaluate robustness of internal models or assumptions. - Leveraging bottom-up stress tests suggested to enhance supervisory capacity. ### Liquidity risk - Strong liquidity thresholds enforced but dedicated regulation lacking: - Minimum LCR thresholds: 100 percent in local currency and 150 percent in foreign currency. - Observation ratios for short-term maturity mismatches in place. - Net Stable Funding Ratio (NSFR) is not implemented. - All banks required to maintain an Internal Liquidity Adequacy Assessment Process (ILAAP); supervision at early stages with limited integration into strategic decision-making. - Supervisory oversight constrained: - Lack of dedicated liquidity risk specialists. - Off-site supervision relies on four SREP indicators, including a transformation ratio that penalizes both excessive leverage and surplus liquidity. - Qualitative assessments are compliance-based; on-site inspections rare and not intrusive. - BNA lacks an automated real-time alert system to monitor liquidity indicators. ### Operational risk and resilience - Regulatory framework fragmented, non-binding, and lacking enforceability: - Multiple laws, notices, and directives address operational risk, cybersecurity, and business continuity, but no comprehensive regulation aligned with BCBS Principles. - No standardized operational risk event classification; no requirement for banks to maintain rights for accessing service providers’ records or to ensure supervisory access to outsourced functions. - Incident reporting limited to ICT-related events via email; no centralized system for broader operational risk events. - Supervisory oversight limited by scarce resources and immature methodologies: - SREP indicators inadequate for capturing operational and resilience risks; qualitative assessments rely on checklists. - On-site inspections infrequent: only seven operational risk and two cyber risk on-site inspections over the past three years. - Supervisory review of recovery and business continuity plans is at an early stage; no process to assess change management or launch of new products and services. - Outsourcing practices, including cloud services, are widespread while supervisory framework for oversight remains underdeveloped. ### Staffing, auditors, and disclosure - Staffing shortages are a major concern across BNA, especially in market, liquidity, and operational risk supervision: - A single team with only two full-time employees (one section head) conducts non-credit risk on-site inspections. - Audit and valuation oversight: - All banks must prepare externally audited financial statements in accordance with IFRS and International Auditing Standards (ISA). - BNA lacks structured procedures and technical capacity to verify valuation processes or assess material differences between financial and regulatory valuations. - External auditors must rotate every four years, with exceptions; BNA can require auditor replacement and has exercised this authority. - Auditors must report material issues to the BNA; these reports aid supervision. - Prudential disclosure framework limited: - Banks required to disclose financial statements, corporate governance information, and Pillar III reports annually only. - No requirement for quarterly disclosure of key prudential metrics. - No mandatory disclosure of related-party exposures and material entities within groups. - No authority enforces disclosure compliance. ### Abuse of financial services (CP 29) and financial-crime supervision - New regulation consolidates framework for preventing ML/FT/P and requires banks to implement: - A risk management framework - Effective Customer Due Diligence (CDD) - Reporting requirements - BNA created the Department of Financial Conduct (DCF) to use an AML/CFT methodology to assess institutions’ risk profiles, aligning with FATF recommendations. - Supervisory challenges remain: - BNA faces challenges aligning ML/FT/P supervision with BCBS recommendations and adopting a fully risk-based approach. - DCF findings during SREP assessment and inspection planning lack thorough Quality of Risk Management (QRM) assessments at senior management, Board, and internal controls/auditing levels. - Despite a 2013 information-exchange agreement, no evidence of programmatic and transparent cooperation between the BNA and FIU to improve banks’ financial-crime controls. ### Authorities’ response to the BCP assessment - Authorities acknowledge the progress and broadly agree with conclusions and recommendations. - They support strengthening the supervisory function, adapting prudential regulation to the national financial system, and adopting a more robust risk-based approach. - Commitments include consolidating legal and regulatory framework, enhancing technical training for supervisory staff, and gradually aligning with international standards in financial stability and banking supervision. *Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1agoea2026003-source-pdf.pdf* ### 59. In broadly supporting the recommendations, the authorities made the following ### 59. In broadly supporting the recommendations, the authorities made the following ### Authorities’ observations on Basel Core Principles (BCPs) - BCP 1 – Responsibilities, Objectives, and Powers: - The CSSF cooperation framework has been in force since 2022 rather than being under development, as noted. - BCP 2 – Independence, Accountability, Resourcing, and Legal Protection: - The Governor’s appointment by the President of the Republic is preceded by a hearing in the National Assembly, which issues an opinion. - The Governor, Vice-Governors, and BNA Directors must be individuals of recognized good repute, management capacity, technical competence, and experience in economics, law, accounting, banking, finance, and management, with at least 10 years of relevant experience. - BNA employees are entitled to legal aid provided by the BNA. - BCP 3 – Cooperation and Collaboration: - The duties, responsibilities, and operating procedures of the CSSF are defined in legislation. - BCP 5 – Licensing Criteria: - The BNA cannot prohibit the opening of new banking financial institutions, as this would violate free private enterprise. - Situations where proposed legal, managerial, operational, and ownership structures hinder effective supervision are grounds for refusal of authorization to establish a bank. - No evidence was presented for the five‑year assessment because of the cut‑off date of 31 December 2024; at that time, the incorporation process of the African Bank of Oman had just been submitted and its review was conducted in accordance with the criteria set out in Article 51 of the LRGIF and Notice No. 11/24. - Under Article 51(1)(d) of the LRGIF, qualifying shareholders must provide detailed information demonstrating their financial soundness, including capacity to inject additional funds if necessary; the BNA consistently requires evidence of financial capacity exceeding the level of subscribed capital. - Fit-and-proper requirements: Article 62 of the LRGIF defines these requirements objectively and applies them to members of management and supervisory bodies, as well as holders of key internal control functions. - BCP 7 – Major Acquisitions: - Good repute is a crucial criterion for becoming a shareholder of a bank. - The requirement that prospective shareholders have the capacity to support the bank in times of stress is already provided for in the regulatory framework. - BCP 8 – Supervisory approach: - The BNA does not concur with the observation that the supervisory approach lacks forward‑looking analysis. - The SREP already incorporates forward-looking analysis for capital, impairments, liquidity, and Pillar 2 capital (OP2) requirements based on macroprudential stress testing. - The BNA maintains an Aggregate Financial Stability Index to monitor systemic risks and support mitigation strategies. - Ongoing efforts aim to further integrate macroprudential and economic analysis into the microprudential framework. - The macroprudential framework remains in an initial development stage, and full integration into supervisory assessments is still underway. - BCP 9 – Supervisory techniques and tools: - The BNA does not concur with the observation. Under the risk-based supervision methodology, the SREP is the primary driver of supervisory actions. - Inspection planning begins with the SREP global risk assessment and considers both individual risk profiles and systemic importance. - Ad hoc targeted inspections are conducted whenever emerging risks warrant them. - Results are conveyed to banks immediately upon completion of the analysis; perceived delays arise because the 2024 SREP uses 2023 audited data, which may give an incorrect impression of outdatedness to external observers—this comment should be removed or appropriately adjusted. - Off-site inspectors already serve as permanent relationship managers; despite removal of functions such as licensing, regulation, sanctions, and AML from the supervision department, off-site staff continue to act as the primary liaison for all bank-related matters—this recommendation should therefore be removed as well. - BCP 12 – Consolidated supervision: - The BNA does not agree with the observation and requests its removal. - Banks are required to comply with prudential ratios, including capital and liquidity requirements, on both a solo and consolidated basis. - Corporate governance regulations impose obligations for the oversight of group-wide activities, including the submission of a consolidated corporate governance report. - These requirements demonstrate that the BNA already fulfills its responsibilities as home supervisor for banks with overseas operations. ### Appendix VI — Table 1. Angola: Summary Compliance with the Basel Core Principles (selected findings) - Core Principle 1 — Responsibilities, objectives and powers: - Primary mission of the BNA is to ensure price stability; secondary mission is to ensure stability of the financial system. - No explicit mention in the LBNA or the LRGIF that the primary objective of banking supervision is to “promote the safety and soundness of banks and the banking system.” - S&S mandate has not been translated at the operational level in determining BNA’s risk tolerance. - Legal/regulatory framework is not explicit on BNA’s full access to boards, management, and staff of banks; assessors recommend law explicitly state this power. - Assessors did not receive evidence that BNA conducts forward-looking assessment of boards and board members beyond formal review. - BNA's macroprudential and resolution authority functions are operationally independent and do not conflict with supervisory function, but no provision in LBNA or LRGIF stating these responsibilities are subordinate to the primary objective of banking supervision. - Creation of departments for Financial Conduct and Financial Stability resulted in reduction in staffing of the DSB. - A cooperation framework has been developed by the BNA through the CSSF with ARSEG and the CMC. - Some smaller banks and those without foreign parent support struggle with pace of implementation of prudential framework and new regulations; require training and support from the BNA. - Principle of proportionality is in article 22 of the LRGIF but not fully taken into consideration in establishing regulatory framework. - Core Principle 2 — Independence, accountability, resourcing and legal protection for supervisors: - Independence established in the law. - 2024 BNA annual report emphasizes strengthening the BNA role as a macroprudential authority; monitoring of banking financial institutions focused on corporate governance and internal control via reports and on-site verification. - LBNA outlines circumstances for removal of Governor and Deputy Governors, but no law provision requiring public disclosure of reasons for removal. - Quantitative and qualitative inadequacy of resources for supervisory activities needs to be addressed given RBS implementation. - Supervisory staff recommendations: prepare specific inceptions program for supervisors; invest in targeted training programs; promote secondments and staff exchanges with other central banks and supervisory authorities. - Shortage of specialists in corporate governance, risk management, liquidity, market, interest rate risk in banking book, operational and IT risk supervision. - While legal aid exists in the LBNA, no provision clearly states that the BNA will protect its staff against costs of defending their actions and/or omissions made while discharging their duties in good faith. - Core Principle 3 — Cooperation and collaboration: - Laws and regulations provide framework for cooperation with domestic and foreign authorities. - BNA active in presidency of the CSSF and international agenda via protocols and MoUs. - Domestic coordination actions taken in financial stability, financial inclusion and AML/CFT risk mitigation. - Progress in initiatives to foster domestic coordination on crisis management: new resolution unit, information sharing mechanisms, reinforced discussion with MINFIN, Deposit Guarantee Fund and the Resolution Fund. - Core Principle 4 — Permissible activities: - Law defines permissible activities of financial institutions, including taking deposits and granting credit. - Use of the term "bank" or combinations with "bank" restricted to entities licensed to carry out banking activities; verification by the DRO (Department of Regulation and Organization of the Financial Sector). - Credit Cooperatives may collect deposits only from their own registered members. - DRO Division is understaffed. - Microfinance financial institutions are licensed under specific requirements, can take small deposits, are subject to same regulation and oversight as commercial banks, but there is no early warning system to monitor deposits held by Microfinance Financial Institutions. - Core Principle 5 — Licensing criteria: - In the past five years, BNA received no applications for commercial banking licenses from domestic entities and only two applications from foreign entities (one withdrawn by the applicant). - BNA is the sole authority for licensing banking financial institutions. - BNA must consult with the CMC when applicant’s purpose includes intermediation of financial instruments and with the Insurance Supervisory Body when applicant is a subsidiary of an insurance company or controlled by same persons that control an insurance company. - Evidence did not allow assessors to verify that BNA conducts due assessment of proposed legal, managerial, operational and ownership structures to prevent future supervisory shortcomings on solo and consolidated basis. - When reviewing applications, BNA assesses transparency of ownership structure and sources of initial capital, but not whether a prospective shareholder could support the bank in times of stress and need. - Evidence did not allow assessors to verify that BNA conducts in‑depth review of financial projections and information on main shareholders of the applicant. - Criteria and procedures are in place for licensing but should be enhanced regarding suitability of major shareholder. - BNA updated minimum capital requirement: Kz 15,000 million for commercial banks and Kz 50,000 million for development banks. - Fit and proper tests should be enhanced for each category of candidates with differentiated approaches for board members, executive directors, senior management, and three lines of defense/control functions. - A newly licensed bank was asked to submit a new business plan, but documentation did not allow the assessor to verify that the initial business plan was adequately analyzed. - Core Principle 6 — Transfer of significant ownership: - Legal framework exists but requires strengthening to reinforce BNA supervisory function and consider supervisor’s point of view. - In the past five years, BNA approved four requests for transfer of significant ownership (either in 2024 or in 2025), rejected one and granted an appeal to a decision of refusal. - Assessors recommend removing the limitation to 20 percent in paragraph 43 of article 3 of the LGRIF regarding the notion of control. - No definition of Ultimate Beneficial Owner (UBO) in the LRGIF. - Beneficial owner identification is based on self-declaration; identification of ultimate ownership is lacking. - Framework for monitoring transfer of significant ownership appears to be based on limited compliance approach rather than risk-based approach. - Beyond fit and proper verification, BNA should assess whether a prospective significant shareholder would be able to support the bank in times of stress and need. - Core Principle 7 — Major acquisitions: - BNA has power to approve qualified acquisitions within the banking sector (art. 3 of Notice 10/13), foreign financial subsidiaries (art. 6) and non-financial companies (art. 7). - Authorities should ensure all cases of banks’ acquisitions and investments in domestic financial sector are covered by law/regulation to include non-bank financial institutions such as insurance firms. - No provision obliges banks to inform BNA about non-qualified acquisitions and investments, limiting BNA’s scope to identify undue risks. - Lack of requirements for ex-post notification for non-qualified investments may mean BNA has shortcomings in assessing potential risks from an individual or consolidated point of view. - Assessors found evidence that BNA conducts analysis of economic/financial impact from qualified acquisitions/investments. - Regulation gives BNA power to review major acquisitions when they exceed regulatory threshold of risk exposure to non-financial companies and to impose capital requirements and require a plan for compliance with operational limits. - No provisions require BNA to review major acquisitions and investments by other entities in the banking group; it is not BNA’s practice to approve such operations—this gap limits consolidated supervision and hinders timely identification of undue risks to banks. - Core Principle 8 — Supervisory approach: - Supervisory approach is based on a well-designed and documented framework. - Supervisory activities focus more on monitoring quantitative data, with insufficient focus on analysis of core supervisory issues. - Assessors observed no forward-looking approach to the risk profile of banks. - BNA had not provided evidence regarding methodologies and processes to address group-wide risks (reflecting lack of adequate consolidated supervision, see CP 12). - Evidence of resolvability assessment at BNA exists, though work is in progress. - Insufficient assessment of the role and activity of boards regarding effectiveness of internal control systems and independence of internal audit (see CP 14). - BNA (FSD) conducts regular assessments of emerging systemic risks, including interconnectedness analysis and regular stress testing. - Efforts are underway to improve DSB capacity by integrating economic and macroprudential findings into microprudential toolbox. - Triggers for early intervention and entry into resolution are unclear or set too close to insolvency; BNA lacks a comprehensive early intervention framework. - BNA has designated 9 of its 22 banks as domestic systemically important banks (D-SIBs); this may burden supervision and BNA should review its D-SIB definition and adopt an operational approach to differentiate supervision for systemic banks. - Core Principle 9 — Supervisory techniques and tools: - While built following a RBS approach, BNA’s supervisory process still appears largely compliance-based and may spread limited supervisory staff across too many units, risking duplicated work. - BNA should better integrate off-site and on-site supervision with clearer off-site responsibility, including corporate governance issues. - BNA has adopted a SREP inspired by the EU’s Single Supervisory Mechanism. *Source: 1agoea2026003-source-pdf - 59. In broadly supporting the recommendations, the authorities made the following* ### Appendix VI. Table 1. Angola: Summary Compliance with the Basel Core Principles ### Appendix VI. Table 1. Angola: Summary Compliance with the Basel Core Principles ### 10. Supervisory reporting - Banks required to report financial results to the supervisory authority through mandatory reporting sets as outlined in legal/regulatory framework. - Reports submitted through the SSIF system (FIP Financial Institutions Portal) and controlled by the BNA present instructions for inputs of financial institutions. - Information reported lacks reliability and consistency. - BNA instituted the Data Quality Assessment program, composed of special audits of data quality and consistency and reporting of banking risk information. - Overlapping and unclear definitions of NPLs on regulatory reporting cause confusion for banks and could negatively affect supervision. - Supervisor faces shortcomings to determine whether valuations are sufficiently consistent and prudent despite regulatory framework on governance structures and control processes for methodologies that produce valuations. - BNA requests prudential information to be reported in an unstructured form, via emails or other less secure channels, due to deficiencies in its electronic platform (SSIF) designed to collect data for supervisory purposes, including quality validity checks. - Supervisory information is fragmented (prudential data reported by financial institutions, supervisory reports and other workpapers), managed in decentralized folders not promptly accessible to many interested parties within the BNA. - Banks, despite their size and business model, are requested to provide the same data and the same number of data points. - BNA does not collect information that allows for the assessment of the materiality of climate-related financial risks. ### 11. Corrective and sanctioning powers of supervisors - LBNA and LRGIF grant powers to the BNA to take corrective action and impose sanctions (registered warning, fine, suspension or disqualification from the exercise of a function, revocation of the license). - BNA adopts public intervention measures, including corrective intervention and provisional administration under article 240 of the LRGIF. - BNA can revoke a bank's license and impose compulsory closure under article 57 of the LRGIF (there is evidence in this regard). - Legal framework not conducive to timely action: no escalation mechanism and trigger for supervisory intervention, although forward-looking, is set at minimum regulatory requirements. - Recommendation: complete legal and regulatory framework with an explicit early intervention framework. - BNA follows a structured and documented process to sanction. - Most sanction procedures concern material breaches and focus on compliance rather than governance or risk management weaknesses; recommendation to develop an RBS approach to sanctions. - Recommendation: develop methodology for early intervention with defined triggers that enable supervisors to act early. ### 12. Consolidated supervision - Consolidated supervision is a new area for BNA supervisors. - Gaps in identification of banking groups mean de facto banking groups could elude consolidated supervision. - No regulatory reference about consolidation of information from non-financial companies for prudential reporting. - No specific guidelines issued for banks’ operations abroad; such operations are subject to host supervisor requirements provided they comply with rules in the host country and the parent company's (home) country. - Supervision doesn’t extend to companies affiliated to the group’s parent company. - BNA has power to restrict or limit activities, operations, or branch networks of financial institutions, or request divestment from activities that pose excessive risks, but assessors did not find evidence that BNA has imposed limits on the range of activities of a consolidated group. ### 13. Home-host relationships - Law establishes BNA cooperation with similar institutions of other countries to strengthen security and stability of national financial systems. - MoUs define initiatives of interest from supervisors to enhance capacity to execute legal mandates. - BNA establishes supervisory colleges for banking groups with cross-border operations; supervisory college is main channel of communication with foreign supervisory authorities. - Branches of foreign-headquartered Banking Financial Institutions established in Angola are subject to BNA supervision under the same terms as domestic Banking Financial Institutions. - No evidence of a structured and effective internal process at BNA to carry out activities under MoUs. - No evidence of a consistent and methodological process to define priorities and enhance consistency in supervisory activities in line with MoUs and supervisory manuals. ### 14. Corporate governance - Updated legal framework: Law No. 14/21 and Notice No. 1/22 provide formal regulatory basis for corporate governance in banking sector. - BNA has an established process for approving board members and key function holders, with documented enforcement actions for non-compliance with fit and proper requirements. - Dedicated supervisory team within BNA’s horizontal division responsible for corporate governance and internal control. - Updated law reflects alignment with the FSB Principles and Standards on Sound Compensation Practices (2018). - Concerns and gaps: - Requirements on number of independent directors might not be sufficient to guarantee independence. - Regulatory provisions on committees not in line with BCBS Corporate Governance principles for banks. - No regulatory requirement for board to maintain succession plans, notify BNA or disclose bona fide information that may affect fitness and propriety of senior management, or require understanding of opaque structures. - No intrusive supervision and no supervision of compensation practices. ### 15. Risk management process - Notice No. 8/21 issued to align Angola’s risk management regulations with international best practices. - Regulation requires active board participation in risk management processes. - SREP includes a detailed questionnaire covering governance, control functions, risk culture, and reporting; supported by Risk Appetite Statement and Annual Risk Management Report. - On-site inspections review board and committee minutes, interview key function holders, and evaluate alignment between decisions and risk appetite. - Supervisory feedback has been provided on ICAAP reports, indicating initial ICAAP integration. - Gaps: - No requirement that banks consider risks over longer time horizons, specifically climate and digitalization. - No clear guidance on requirement to appoint a CRO. - No requirement that bank discuss reasons for head of risk management/CRO removal with supervisor or publicly disclose such removal. - Supervision not yet able to challenge ICAAP, stress tests and risk management of new products. ### 16. Capital adequacy - Banks in Angola are highly capitalized. - Capital framework reflects a hybrid adoption of Basel II and III standards, adapted to local conditions; definitions of capital components and deductions broadly aligned with Basel III. - Minimum capital requirements clearly defined for CET1, Tier 1, and Total Capital, with institution-specific Pillar II Requirements (P2R) based on supervisory assessments. - Capital buffers in place: conservation, countercyclical, and systemic importance buffers, with mechanisms for dividend restrictions in case of non-compliance. - Pillar II Guidance (P2G) applied based on stress test results, requiring capital conservation plans in case of non-compliance. - BNA adjusts Pillar II and Pillar II requirements based on SREP ratings. - Leverage ratio requirement: 3percent is in place, broadly aligned with Basel III. - ICAAPs required annually and reviewed during off-site and on-site supervision; all banks required to prepare ICAAP with no application of proportionality. ### 17. Credit risk - Extensive regulatory provisions except for risk management. - SREP methodology evaluates intrinsic and control dimensions of credit risk, incorporating indicators such as NPLs, PD, LGD, and governance factors. - Supervisors assess board-level approval and periodic review of credit risk policies and strategies. - On-site inspections analyze board and committee minutes, risk management reports, and internal audit findings. - BNA conducts credit file checks to verify compliance with policy criteria and approval limits. - On-site inspections engage bank representatives at various levels. - Gaps and weaknesses: - No regulation mandates a comprehensive credit risk management framework. - No requirement for board-level approval of major or risky exposures. - No formal tracking or reporting of breaches in internal credit limits to BNA; exception monitoring lacks robustness. - Off-site supervision is document-heavy but lacks depth in qualitative analysis. - On-site inspections are infrequent, including across systemic banks. - Sampling practices are not documented, standardized or fully risk sensitive. ### 18. Problem assets, provisions, and reserves - Full adoption of IFRS 9 since 2018. - Impairment Tool – SAS developed by BNA effective in identifying provisioning gaps during on-site inspections, leading to supervisory actions such as additional provisioning requirements. - SAS tool resulted in targeted recommendations to more than five institutions during the 2023–2024 cycle. - Recommendation: expand SAS use to quarterly off-site assessments to enhance early detection of provisioning issues and improve inspection prioritization. - Complex and unclear definitions related to problem assets; "Unlikely to pay" should be part of the main indicator. - BNA assesses trends and concentration based on 90 days past due loans, not problem loans. - Write-off policy guidance is non-binding. - Supervisory process on governance, board reporting and processes for reviewing classifications and write-offs is not sufficiently intrusive. ### 19. Concentration risk and large exposure limits - Multiple concentration limits implemented: large exposures, aggregate exposures, holdings in non-financial companies, and net open positions in foreign currency; broadly aligned with international standards. - Conservative treatment of sovereign FX exposure: application of a 100% credit conversion factor (CCF) for foreign currency-denominated sovereign exposures. - Banks submit detailed reports on their 20 largest exposures. - BNA has access to credit bureau (CIRC) data to monitor portfolios by sector, currency, and exposure quality. - Definition of connected counterparties broadly aligned with BCBS standards. - Supervisory documentation recognizes concentration risk as material. - Gaps: - Regulation not in line with Basel III large exposure framework (deviations on calculations of exposure to real estate and to STF and simplified criteria for identifying connected counterparties). - Regulation does not consider sources of concentration other than credit and currency. - No systematic monitoring and reporting of concentrations beyond prudential limits. - No assessment of banks’ aggregation to single or connected counterparties. - No supervisory exercise of discretion on connected parties. - Several banks have exposures exceeding regulatory limits. ### 20. Transactions with related parties - Notice No. 1/2025 issued to improve compliance with international best practices on related-party transactions. - Shortcomings in alignment with CP 19: - Regulation does not include transactions other than credit exposures and therefore exposure is not calculated consistently with CP 19 (as explained in footnote 10). - "Related parties" are not fully compliant with footnote 9. - No provision grants BNA power to exercise discretion in applying the related party definition on a case-by-case basis. - No assessment of related parties list provided by banks. - No evidence of supervisory practices based on the recently issued regulation. - No evidence of materiality of related parties exposures. ### 21. Country and transfer risks - No regulatory framework. - No supervisory framework. ### 22. Market risk - Foreign exchange risk controls: regulatory measures limit FX risk, including restrictions on FX loans and a cap on net open FX positions (<10%). - Valuation of market risk exposures based on IFRS 13. - Quarterly market risk reporting to BNA includes fair-valued information and daily FX net open positions. - Gaps: - Trading and banking book boundary not in line with BCBS RBC25. - No specific regulation on market risk management. - No on-site supervision for market risk. - Off-site supervision not intrusive; qualitative assessments not sufficiently robust. - SREP methodology needs adjustments: current indicators fail to capture FX risk. - BNA lacks market risk experts. - Valuation follows IFRS, but BNA lacks capacity to challenge valuation adjustments and there is no independent verification. *Source: Appendix VI. Table 1. Angola: Summary Compliance with the Basel Core Principles (continued).* ### 23. Interest rate risk ### 23. Interest rate risk in the banking book ### Regulatory framework and scope - Established regulatory framework: Law No. 14/21, Notice No. 08/2021, and Instruction No. 22/2021 define requirements for risk identification, measurement, and reporting. - Limitation: The provisions do not encompass all IRRBB BCBS principles, particularly those related to having an appropriate interest rate risk strategy and interest rate risk management framework. ### Quantitative assessment and reporting - Quantitative risk assessment requirement: Banks are required to assess IRRBB using a 200-bps parallel shock to estimate impacts on both EVE and NII. - Quarterly reporting requirements: Banks report two key IRRBB quarterly indicators, enabling both economic value and earnings-based assessments. - Thresholds and escalation: Threshold breaches (e.g., >20% of own funds) trigger immediate reporting and potential supervisory action. ### Integration with capital and supervisory frameworks - Integration into Pillar II: IRRBB is incorporated into Pillar II capital requirements, with ICAAP-based calculations subject to supervisory adjustment via multipliers based on SREP ratings. ### Supervisory practices and capacity gaps - No on-site supervision. - Off-site supervision is not intrusive. - BNA does not challenge or assess whether banks’ internal capital models adequately capture IRRBB. *Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1agoea2026003-source-pdf.pdf — Section 23.* ### Appendix VI. Table 2. Recommended Actions to Improve Compliance with the Basel Core ### Appendix VI. Table 2. Recommended Actions to Improve Compliance with the Basel Core Principles and the Effectiveness of Regulatory and Supervisory Frameworks (continued) ### Loan write-off, provisioning, and qualitative assessments - Issue a stricter prudential approach to encourage banks to timely write off loans, and consider introducing mandatory NPL write-off rules based on the period an exposure has been classified as ‘Loss’ or after the exposure has been classified as NPL for a certain period. - Enhance supervisory processes to improve qualitative assessments, in particular for write-off policies. - Conduct off-site quarterly reviews of provisioning based on the in-house impairment model. ### Principle 19 - Amend regulation to remove deviations from Basel III large exposures framework, improve identification of connected counterparties, and require banks to clearly identify other sources of concentration (beyond credit and currency risk.) - Develop a phased approach to identify the list of connected parties: first build a database from different sources (including banks) then develop software (that can be used for different purposes such as in related parties, transfer of ownership and AML/CFT assessment) to be able to fully challenge (and exercise discretion) the identified connected counterparties. - Improve BNA’s monitoring capabilities, for instance by adding alerts to SSIF and expanding monitoring beyond prudential limits to other types of concentration. - Require banks exceeding the thresholds to develop an action plan to reduce concentration to counterparts. ### Principle 20 - Amend regulation to remove deviations from this CP: align to footnotes 9 and 10 and explicitly grant BNA the power to exercise discretion in applying the related party definition on a case-by-case basis. - Develop a phased approach to identify the list of related parties: first build a database from different sources (including banks) then develop software (that can be used for different purposes such as concentration, transfer of ownership and AML/CFT assessment) to be able to fully challenge the identified related parties. - Reflect recent improvements in related parties regulation in supervisory practices. ### Principle 21 - Develop a regulatory and supervisory framework. ### Principle 22 - Amend regulation to align trading and banking book boundary with BCBS RBC25, making simplifications to consider proportionality. - Introduce market risk management regulation. - Enhance the intrusiveness of off-site supervision, in particular on qualitative aspects - Conduct on-site supervision. - Hire/reassign/train market risk experts. - Tailor SREP indicators to the Angolan banking system to consider FX. - Enhance supervisory capabilities to effectively challenge valuation practices. ### Principle 23 - Use in-house stress tests performed by the financial stability department to challenge banks’ IRRBB. - Enhance the intrusiveness of off-site supervision, in particular on qualitative aspects. - Conduct on-site inspections on IRRBB. ### Principle 24 - Introduce liquidity risk management regulation. - Implement an automatic alert system for breaches of liquidity indicators. - Introduce simplified ILAAP for non-systemic banks. - Optimize supervisory resources during on-site by automating accounting verification. Use the freed resources to assess liquidity risk. - Enhance the intrusiveness of off-site supervision, in particular on qualitative aspects. - Tailor SREP indicators to the Angolan banking system by, inter alia, removing the transformation ratio. - Hire/train liquidity risk experts. - Increase on-site inspections on liquidity risk to guarantee minimum frequency, in particular for systemic banks. - Enhance supervisory capabilities to effectively challenge ILAAP. ### Principle 25 - Amend regulation to cover all requirements in the CP, in particular the ones related to operational risk management and operational resilience. - Introduce guidance on identification of operational risk events, including legal risk. - Reflect recent improvements in ICT and cloud services regulation in supervisory practices - Strengthen the depth and scope of supervisory assessment of operational risk. - Review SREP indicators to incorporate operational resilience and to increase sensitivity to operational risk. - Continue enhancing supervisory capabilities to effectively assess and challenge recovery plans and business continuity plans. - Increase staffing. - Conduct more on-site inspections, including for cyber risk. - Adjust disruptions reporting to include processes/persons/infrastructure types of incidents. - Use an appropriate IT channel for reporting incidents. ### Principle 26 - Improve the assessment of internal control functions independence and require the internal audit function to report directly to the internal audit committee/board. - Enhance the intrusiveness of supervision of control functions, including back office and compliance. - Conduct assessment of the resources of internal control functions, including resources, skills, compensation. - Increase the frequency of in-depth qualitative assessment of internal controls. ### Principle 27 - Develop supervisory expertise to perform valuation assessments and engage more with external auditors for that purpose. ### Principle 28 - Require banks to disclose: - main quantitative information quarterly (at least capital definition and requirements, RWA, leverage ratio and liquidity), - aggregate exposures and transactions with related parties; and entities in groups’ structure. - Improve the BNA’s Financial Soundness Indicators disclosure by adding balance sheet structure, income earning capacity, among others, and ensure data quality. Information on nonperforming should be adjusted to include all exposures that are credit-impaired. ### Principle 29 - Reinforce cooperation between the financial conduct and prudential functions of BNA to improve the assessment of proper governance arrangements and the three lines of defense in banks to prevent financial crimes and facilitate better allocation of staff based on the risk-based approach. - Develop detailed questionnaires for on-site inspections (joint DCF/DSB, for instance), in line with the directives of the Supervision Manual, to support supervisors in forming an early perspective of the bank’s risk management and risk control quality assessment (QRM), including questions on Board and senior management’s oversight of operational management, compliance and auditing services in banks. - Apply the upcoming SupTech tool to allow DCF offsite teams to conduct sample testing. In line with the risk-based approach, integrate standardized metrics into periodic risk assessments to facilitate horizontal analyses, on customer, sector and transaction risks. - Strengthen cooperation with the FIU on information exchange and capacity building for the financial sector, preferably by conducting joint training activities to make detecting and reporting suspicious activities more transparent for banks and enhancing communication mechanisms based on the current cooperation agreement. *Appendix VI. Table 2. Recommended Actions to Improve Compliance with the Basel Core Principles and the Effectiveness of Regulatory and Supervisory Frameworks (concluded)* --- _Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1agoea2026003-source-pdf.pdf_