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Mozambique’s Banking Regulation: A Step Towards Strengthening the Financial System

Maputo, Mozambique - The Mozambican government has taken significant steps to strengthen the country’s financial system by implementing a set of regulatory measures aimed at ensuring the stability and sustainability of banking activities.

Regulatory Measures for Risk Management

According to Notice no. 04/GBM/2013, the Bank of Mozambique (BM) has established guidelines for risk management, requiring banks to establish and disclose risk-mitigation policies, standards, and procedures. This is part of a broader effort to implement the Basel II core principles, which were incorporated into Mozambican legislation in 2012.

Prudential Rules and Capital Requirements

The BM’s Notice no. 04/GBM/2013 also introduced a set of prudential rules aligned with the Basel II principles, establishing guidelines for categories of risk inherent to banking activities in Mozambique, including:

  • Credit
  • Liquidity
  • Interest rate
  • Foreign exchange rate
  • Operational
  • Strategic
  • Reputational
  • Compliance
  • IT risks

One of the key reforms implemented by the BM is the increase in minimum share capital requirements from 70 million meticais (MT) to 1.7 billion MT. This move aims to:

  • Increase the quantity and quality of capital
  • Reduce leverage and pro-cyclicality
  • Improve liquidity management

Regulatory Framework

The regulatory framework in Mozambique is based on three pillars:

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

The Basel II principles define the scope of this new regulatory framework, which aims to strengthen capital, risk assessment, and market discipline.

Code of Conduct for Credit Institutions and Financial Companies

In addition to these reforms, the BM has also introduced a Code of Conduct for Credit Institutions and Financial Companies, which sets out specific duties for financial entities related to:

  • Information disclosure
  • Data protection
  • Good banking practices

The code is legally binding and applies to all credit institutions and financial companies operating in Mozambique.

Key Takeaways

  • The Bank of Mozambique has implemented a set of regulatory measures aimed at strengthening the country’s financial system.
  • Banks are required to establish and disclose risk-mitigation policies, standards, and procedures.
  • The minimum share capital requirement has been increased from 70 million meticais (MT) to 1.7 billion MT.
  • The Basel II principles define the scope of Mozambique’s regulatory framework, which aims to strengthen capital, risk assessment, and market discipline.
  • A Code of Conduct for Credit Institutions and Financial Companies sets out specific duties for financial entities related to information disclosure, data protection, and good banking practices.

Contact

For more information on Mozambique’s banking regulation, please contact the Bank of Mozambique or a licensed bank operating in the country.