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Mozambique’s Banking Sector Ensures Solid Financial Stability with Stringent Regulations
Maputo, Mozambique - In a bid to ensure the stability and resilience of Mozambique’s banking sector, the country’s financial authorities have implemented a robust regulatory framework that governs the activities of banks and other credit institutions.
Risk Management Strategy
According to a recent notice by the Bank of Mozambique (BM), banks operating in Mozambique are required to adopt a risk management strategy that identifies, assesses, and mitigates various risks inherent to their activities. These risks include:
- Credit risk
- Market risk
- Operational risk
- Strategic risk
- Reputational risk
- Compliance risk
- IT risk
To achieve this, institutions must establish and disclose risk-mitigation policies, standards, and procedures that define responsibilities and lines of authority. They must also implement an information and management system that effectively monitors risk levels and facilitates timely adjustments to risk positions and exceptions.
Capital Requirements and Liquidity Rules
In addition, Mozambican banks are required to comply with capital requirements and liquidity rules that ensure their sustainability. The country has adopted the Basel II core principles, which aim to implement more sophisticated risk-assessment techniques, particularly in relation to credit, market, and operational risk.
Guidelines for Risk Categories
The BM has established a set of guidelines for the categories of risk inherent to banking activities in Mozambique, including:
- Credit risk
- Liquidity risk
- Interest rate risk
- Foreign exchange rate risk
- Operational risk
- Strategic risk
- Reputational risk
- Compliance risk
- IT risk
Code of Conduct for Credit Institutions and Financial Companies
In terms of rules governing banks’ relationships with their customers and other third parties, Mozambique has enacted a Code of Conduct for Credit Institutions and Financial Companies. The code sets out principles such as:
- Assistance to clients
- Celerity
- Clarity
- Competence
- Credibility
- Integrity
- Legality
- Non-discrimination
- Respect for good banking practices
Disclosure Requirements
Mozambican banks are also required to comply with disclosure requirements relating to rates applicable to lending and borrowing transactions, as well as the cost of services rendered. The Mozambican Association of Banks (AMB) has published a Banking Code of Conduct that seeks to govern the relationship between AMB credit institutions and their customers.
Conclusion
Overall, Mozambique’s banking sector is subject to a robust regulatory framework that ensures the stability and resilience of the financial system, protects the interests of customers, and promotes good banking practices.