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Mozambican Banks Face Stricter Capital Requirements and Risk Management Obligations

The Bank of Mozambique (BM) has introduced new regulations aimed at strengthening the country’s banking sector by increasing capital requirements and implementing more sophisticated risk management practices.

Increased Capital Requirements

Banks in Mozambique are now required to maintain a minimum share capital of 1.7 billion meticais (approximately $25 million), up from 70 million meticais previously. This increase is designed to:

  • Reduce leverage
  • Improve liquidity management
  • Increase transparency in the financial system

Risk Management Obligations

The new regulations require banks to establish and disclose risk-mitigation policies, standards, and procedures that define responsibilities and lines of authority. Banks must also implement an information and management system to monitor risk levels and facilitate timely adjustments to risk positions and exceptions.

Basel II Core Principles

The BM’s notice outlines the implementation of Basel II core principles, which are internationally recognized standards for banking regulation. The new framework consists of three pillars:

  • Pillar 1: Capital Requirements
  • Pillar 2: Risk Management and Supervision
  • Pillar 3: Market Discipline

Code of Conduct

In addition to capital requirements, banks in Mozambique must also comply with rules governing their relationships with customers and other third parties. A recent code of conduct for credit institutions and financial companies sets out principles such as:

  • Assistance to clients
  • Clarity
  • Competence
  • Integrity
  • Respect for good banking practices

Goals and Expectations

The new regulations are designed to promote a stronger, more resilient banking sector that can withstand adverse conditions and support sustainable economic growth in Mozambique. The Bank of Mozambique is expected to continue monitoring the implementation of these regulations and making adjustments as necessary to ensure the stability and soundness of the country’s financial system.