On 19 May, Law 14/21 - General Regime of Financial Institutions - came into force. This new law regulates financial institutions and revokes Law 12/15 of 17 June - the Financial System Framework Law
LAW 14/21, OF 19 MAY - GENERAL REGIME OF FINANCIAL INSTITUTIONS
The new law aims to regulate the principles that guide financial activity, including banking, financial intermediation in financial instruments and insurance activities with headquarters, a permanent establishment or representation in Angola, also including within its scope financial contracts with entities residing in Angolan territory.
Law 14/21 comes into being to guarantee more stability, solidity and trust in order to promote and favour the attraction of savings in an efficient way, allowing a fair competition among financial institutions.
The definition of financial institutions between banking and non-banking remains, however, the concept is broader:
i) Financial Institutions, this category is limited to commercial, investment, development and mutual agricultural credit banks, contrary to the previous law which only defined the activities of these institutions;
ii) Non-banking financial institutions include, in addition to the existing ones, electronic money institutions, microfinance financial institutions and companies mediating the money or foreign exchange markets.
Banking Financial Institutions are supervised by the National Bank of Angola ("BNA"), and Non-Banking Financial Institutions linked to the Capital Market, which include Collective Investment and Investment Management Companies, and those of Insurance and Social Welfare Activity are supervised by the same bodies, respectively the Supervisory Body for the Securities Market and the Supervisory Body for Insurance Activity.
The BNA will determine the minimum share capital of financial institutions.
Bank Financial Institutions are exclusive to the activity of receiving from the public, deposits or other repayable funds for their own account and to act as payment transaction settlement intermediaries.
The following are Financial System Auxiliary Institutions: financial intermediaries, certified auditors and accountants and external auditors, risk notion companies, investment consultants and investment advisory companies - regulated and subject to authorisation by the Securities Market Supervisory Body, and private credit information centres - by BNA.
The new Law 14/21 extinguishes the National Council of Financial Stability (CNEF) and creates the Council of Financial System Supervisors (CSSF), in which the Minister of Finance is no longer part of this body and keeps the remaining members, including the Governor of the BNA, the Chairmen of the Boards of Directors of the Securities Market Supervisory Body and the Insurance Supervisory Body, and 1 Member of the Board of Directors of each of these 3 bodies.
Law 14/21 brings the innovation of the possibility of the resolution of conflicts between Financial Institutions or between these and their clients being submitted to voluntary arbitration, under the terms of the Voluntary Arbitration Law, notwithstanding the supervisory bodies also having the power to organise a voluntary mediation service for conflicts, without excluding the possibility of recourse to the court. In these cases, the legal order of the Angolan financial system may also accept recommendations issued by international bodies for the purpose of strengthening the security and stability of the international financial system.
For the establishment, validity and supervision of financial institutions, the procedures requiring general requirements, application, registration, refusal of authorisation, expiry and withdrawal of authorisation, appointment of board members and their evaluation by supervisory bodies, etc. subject to decisions and authorisation by the respective supervisory bodies are maintained.
Both banking financial institutions headquartered in Angola that want to establish a subsidiary or branch abroad, and foreign institutions that want to establish themselves in Angola, need authorisation from the BNA to carry out their business.
This Law 14/21 strengthens policies on conflict of interest, defence of competition, principles of liquidity and solvency, own funds and reserves and risk management of financial institutions.
A Resolution Fund ("Fund") is created, a legal person under public law, headquartered in Luanda and with administrative and financial autonomy, whose purpose is to provide financial support for the application of resolution measures adopted by the BNA. The banking financial institutions headquartered in Luanda and their branches and subsidiaries headquartered abroad, as well as companies relevant to the payment system, will become part of the Fund.
The supervisory bodies must also monitor compliance with the laws in their areas of competence and if necessary prosecute and punish for infractions. Misdemeanours and fines are applied by the BNA.
Financial concept in daily life, both business and citizen
The major difference between business and citizen financial management only differs in the dimension of financial capacity, as both manage resources, with the citizen managing his finances on a daily basis according to the resources received/forecast, a business must do the same with its finances, therefore, it should keep its financial planning and organisation up to date in order to achieve its goals and maximise its earnings. A proper financial decision makes it possible to monetize and control the business and reach other scales.
The Angolan financial system
From my experience of around 14 years in Angola, mostly connected to the financial area, the Angolan financial system allows for good management and functionality of the company. In 2008, financial operations were carried out without much control. Today the various institutions have adapted and developed fraud control mechanisms closely monitored by the regulator, BNA. The options made available to the institutions allow daily analysis and monitoring of finances.
Possibility of company growth
In order for a company to grow, it is necessary that it evaluates if it is prepared to do so and if it knows its real market value, its financial health and its capacity to innovate. Companies that seek only survival end up stagnating, that is why the growth process is so fundamental for companies and, as a consequence, the innovation process is fundamental. Innovation plays a fundamental role in becoming competitive in the market and means that the company has the ability to diversify, differentiate and add value.
With the pandemic, the company felt a need to reinvent itself in other types of market even if within our area, in order to cover a wider public taking into account the emerging needs in society.
Opinion by Dra. Isabel Marques
Finance and Administration Director at Etosha Grupo - Gestão de Participações Financeiras, Lda.