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Angola’s Economic Majorities: A New Era for Financial Institutions

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In a move aimed at revamping the country’s financial sector, the Angolan State has issued public debt worth €200 million to purchase the assets and credits of ex-BESA, a troubled bank. This initiative is part of the state-owned insurer ENSA’s restructuring plan, which includes converting senior interbank loans into share capital, common loan, subordinated loan, and additional subordinated instruments.

Recapitalization and Restructuring Plan

The decision follows the Angolan State’s earlier intervention in the financial sector, including the recapitalization and restructuring of Banco de Poupança e Crédito, the largest commercial bank in Angola. The state issued debt worth approximately €1.2 million to purchase the bank’s non-performing loans (NPLs) portfolio, which was then sold to Recredit, a distressed bank created by the State.

Key Highlights

Recapitalization and restructuring plan approved by Government in March 2017
Increase in share capital through new ordinary shares and sale of NPLs portfolio
Subordinated debt instruments issued to support the plan

Central Bank Intervention

In another development, the Central Bank detected large registrations of non-performing loans and issued a sovereign guarantee to protect the financial system. As a result:

Measures Taken

Provisional directors appointed
Temporary waivers of prudential rules adopted
Withdrawal of sovereign guarantees
Restrictions on commercial activities
Detailed assessment of loan portfolios and assets

Impact and Future Directions

The extraordinary measures applied by the Central Bank have led to significant changes in the banking sector, including:

Key Takeaways

Adjustment of bank equity and reinforcement of existing provisions
Mandate for shareholders to approve share capital increase and loan restructuring
Transformation of BESA into Banco Económico, S.A. with Sonangol as majority shareholder

Conclusion

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Angola’s recent economic slowdown has highlighted the need for a sound restructuring regime for financial institutions. The state’s recent interventions demonstrate a commitment to revitalizing the banking sector, but practical obstacles remain.

Future Directions

Resolution of regulatory issues regarding the Resolution Fund and Deposit Guarantee Fund
Clear framework on who should bear losses resulting from restructuring measures

About the Authors

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Rui Mayer is a Partner at Cuatrecasas, Gonçalves Pereira & Associados, Sociedade de Advogados, focusing on oil, gas, and mining industries. Elsa Barradas is an associate lawyer at the same firm, representing the firm in Angola since 2011.