Updates from Mozambique

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NOTICE No.7/GBM/2017 OF 2 JUNE 

Regarding the Minimum Capital for Credit Institutions, Financial Companies and Micro-Finance Operators, and repeals Notice no. 4/ GBM/2005 of 20 May.

Following the need to update the minimum share capital required to the Banks, the Notice No. 4 / GGBM / 2005 of 20 May which lays down the Minimum Capital for credit institutions, financial companies and microfinance operators, was amended and the Bank of Mozambique has established that the minimum share capital for credit institutions, financial companies and microfinance operators should be as follows:

  • Banks………………………………………………….…….1.700.000.000,00 MT
  • Leasing companies……………………………………………25.000.000,00 MT
  • Investments companies……………………………………….25.000.000,00 MT
  • Venture capital companies……………………………………10.000.000,00 MT
  • Factoring companies……..…………………………………….3.500.000,00 MT
  • Investment funds management companies……………………700.000,00 MT
  • Dealers…………………………………………………………….1.400.000,00 MT
  • Brokers………………………………….………………………….420.000,00 MT
  • Asset management companies…………………………….…….700.000,00 MT
  • Group purchasing management companies…………………….700.000,00 MT
  • Exchange Offices……………………………………………..…2.500.000,00 MT
  • Credit cooperative……………………..…………………………200.000,00 MT
  • Micro-banks
    • Savings and credit bank…………………………..….5.000.000,00 MT
    • Savings bank…………………………………..……….2.400.000,00 MT
    • Postal savings bank……………………………………1.800.000,00 MT
    • Rural bank…………….…………………………..……1.200.000,00 MT
  • Electronic Money institutions…………….………………….25.000.000,00 MT
  • Credit card issuers and management companies……………3.500.000,00 MT
  • Discount houses……………………………..…………………10.000.000,00 MT
  • Microfinance operators subject to monitoring:
  • Savings and loans organizations………………………150.000,00 MT
  • Microcredit operators………………….…………………75.000,00 MT
  • Savings intermediaries………………………………………….exempt

In regard to Banks already incorporated on the date of publication of this notice, they must adjust their share capital to the minimum set out above, by means of cash entry, according to the following terms:

Adaptation term                                                                                  New share capital

Up to 1 year after the publication of this Notice……………………………………570.000.000,00 MT

Up to 2 years after the publication of this Notice………………………………..1.140.000.000,00 MT

Up to 3 years after the publication of this Notice………………………………..1.700.000.000,00 MT

NOTICE No. 8/GBM/2017 OF 2 JUNE 2017

Passes the Regulation on Shareholders’ Equity of Credit Institutions, and repeals Notice no. 14/GAM/2013 of 31 December

The Regulation on Shareholders’ Equity of Credit Institutions applies to all credit institutions subject to supervision of the Bank of Mozambique.

The provisions of this Regulation shall apply still and mutatis mutandis, to credit institutions that do not submit their financial statements pursuant to the International Financial Reporting Standards (IFRS).

This notice comes to lay down the limits to be taken into account in the provision of shareholders’ equity of the above institutions.

This notice comes also to differentiate the elements that may form part of shareholders’ equity, and to govern the various matters involved in the formation of these funds, such as those that will be excluded from shareholders’ equity, tier 1 capital and tier 2 capital, elements to be deducted from shareholders’ equity, exceptions in the treatment of the value of the deductions from shareholders’ equity, the treatment of the results of shareholders’ equity, the treatment of amounts from issuance of securities and loans non-securitized, other balance sheet items eligible to incorporate shareholders’ equity of subordinated loans in the shareholders’ equity and the restriction on preference shares in shareholders’ equity.

The notice also sets a deadline for the reduction of other securities, redeemable preference shares and subordinated loans in shareholders’ equity, the method of determining shareholders’ equity on a consolidated basis, the deduction of the insufficient provision for shareholders’ equity on a consolidated basis, the limit for the recognition of provisions for general credit risks in shareholders’ equity on a consolidated basis, the strengthening of shareholders’ equity and the terms and formalities that should be followed in the relationship with the Bank of Mozambique.

NOTICE No. 9/GBM/2017 OF 5 JUNE 2017

Passes the Regulations on Prudential Ratios and Limits of Credit Institutions, and repeals Notice no. 15/GBM/2013 of 31 December

This notice addresses the need to update the banks’ prudential ratios and limits in order to adapt them to the increasing risks inherent to their activity and to the dynamics of the national economy.

This Regulation applies to all credit institutions under the supervision of the Bank of Mozambique.

This notice comes to update the regulation of Shareholders’ Equity, Solvency Ratio, Risk Concentration, Participation in the Capital of Other Companies, Underwriting of Issuance of Securities, Indirect Subscription of Shares and Acquisition of Bonds, Fixed Assets, Exchange Positions and Risk Coverage, setting out new boundaries which shall be complied with by the institutions at issue.

Currently, the Notice encompasses a limit for the total Shareholders’ Equity applicable to the Banks, which shall not be less than the minimum amount of the share capital set out by the Bank of Mozambique. The total Shareholders’ Equity of other credit institutions shall not be less than the amount of the same type of credit institution established by the Bank of Mozambique.

The notice introduces a new issue on the Solvency Ratio, as it sets out two limits: (i) one of 12% for the banks, whereas the solvency ratio base shall not be less that 10%; (ii) one which kept in 8% for other credit institutions, whereas the solvency ratio base shall not be less that 4%.

For the Banks already incorporated on the publication date of this notice, the legal act provides a term for them so as to them adjust its total shareholders’ equity to the minimum share capital under the terms that follows:

Adaptation term Tier 1 capital Tier 1 core capital Total shareholders’ equity  
Up to 1 year after the entry into force of this Regulation The tier 1 capital shall not be less than 60% of shareholders’ equity and shall ensure a solvency ratio base not less than 6%. The tier 1 core capital shall not be less than 50% of shareholders’ equity (total). The shareholders’ equity (total) shall not be less than the minimum share capital and shall ensure an overall solvency ratio not less than 9%.
Up to 2 years after the entry into force of this Regulation The tier 1 capital shall not be less than 70% of shareholders’ equity (total) and shall ensure a solvency ratio base not less than 8%. The tier 1 core capital shall not be less than 50% of shareholders’ equity (total). The shareholders’ equity (total) shall not be less than the minimum share capital and shall ensure an overall solvency ratio not less than 11%.
Up to 3 years after the entry into force of this Regulation The tier 1 capital shall not be less than 80% of shareholders’ equity (total) and shall ensure a solvency ratio base not less than 10%. The tier 1 core capital shall not be less than 50% of shareholders’ equity (total). The shareholders’ equity (total) shall not be less than the minimum share capital and shall ensure an overall solvency ratio not less than 12%.

The other limits have remained the same to the set out in the former law.

Content provided by LEX Africa Mozambique member CGA