Mozambique’s Capital Requirements: A Step Towards a Stronger Banking System
The Bank of Mozambique (BM) has recently introduced new capital requirements for banks operating in the country, aimed at ensuring the sustainability and stability of the banking system. This move is seen as a significant step towards increasing transparency, improving loss-absorption capacity, and reducing risk assumption.
Basel II Core Principles
The new regulations are based on the Basel II core principles, which were adopted by Mozambique in 2014. The BM’s Notice no. 04/GBM/2013 requires banks to establish and disclose risk-mitigation policies, standards, and procedures to define responsibilities and lines of authority and control exposure to various risks.
Risk Management
- Banks must implement an information and management system that effectively monitors risk levels and facilitates timely adjustments to risk positions and exceptions.
- This is aimed at ensuring that banks are better equipped to manage their risk profiles and maintain adequate capital buffers.
Increased Minimum Share Capital Requirement
The BM has increased the minimum share capital requirement from 70 million meticais (MT) to 1.7 billion MT, in line with international best practices. This increase is expected to improve the quality and quantity of capital, reduce leverage and pro-cyclicality, and enhance liquidity management.
Risk Categories
The new regulations introduce a set of guidelines on 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
Customer Relationships
Banks are required to provide high levels of technical competence and adhere to principles of diligence, independence, loyalty, discretion, and respect for the interests of clients and the bank itself.
Code of Conduct
The BM has enacted a Code of Conduct for Credit Institutions and Financial Companies, which sets out specific duties related to:
- Information disclosure
- Data protection
- Abusive contractual clauses
Impact on the Banking Sector
The Mozambican banking sector is comprised of various credit institutions, each with its own scope of activity. The new regulations are expected to strengthen the sector’s resilience and stability, promoting sustainable economic growth in the country.
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