FOREIGN EXCHANGE NORMS AND PROCEDURES MAJOR CHANGES AND IMPACT ON - - PowerPoint PPT Presentation

FOREIGN EXCHANGE

NORMS AND PROCEDURES

MAJOR CHANGES AND IMPACT ON YOUR BUSINESS

MAPUTO, 31st May 2018

GLOBAL MARKERTS & TREASURY DEPARTMENT

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CONTENTS

• CHAPTER 01 _ SOCIÉTÉ GÉNÉRALE GROUP
• THE GROUP AT A GLANCE
• A LONG STANDING COMMITMENT TO AFRICA
• CONNECTING MOZAMBIQUE TO THE MAJOR ECONOMIES
• SOCIÉTÉ GÉNÉRALE IN MOZAMBIQUE
• CHAPTER 02 _ FOREIGN EXCHANGE LAW
• BACKGROUND & PRINCIPLES
• CENTRAL BANK’S NOTICE 20/GBM/2017, FROM 11TH DECEMBER 2017
• CENTRAL BANK’S NOTICE 04/GBM/2018, FROM 22ND MARCH 2018
• CHAPTER 03 _ FREQUENTLY ASKED QUESTIONS

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CHAPTER _ 01

SOCIÉTÉ GÉNÉRALE’S GROUP

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• French Retail Banking
• International Retail Banking & Financial Services
• Global Banking and Investor Solutions

To be THE relationship-focused bank, a reference in its markets, close to its clients and chosen for the quality and commitment

• f its teams.

THE GROUP AT A GLANCE

• Team spirit
• Innovation
• Responsibility
• Commitment

SOCIÉTÉ GÉNÉRALE’S AMBITION OUR VALUES A STRONG UNIVERSAL BANK, SERVING OUR CUSTOMERS AND THE ECONOMY, BUILT ON 3 COMPLEMENTARY CORE BUSINESSES

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31 million*

individual clients, businesses and institutional investors

€5 billion

Group Net Income

* Excluding insurance policyholders. ** Rounded figure. Headcount at end-2017 excluding temporary staff

145,000 **

members of staff

€25.1 billion

in Net Banking Income

65 countries

worldwide

11.4%

Common Equity Tier 1 ratio

Financial rating

A Standard & Poor’s A2 Moody’s A Fitch AA (low) DBRS

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Leading Positions:

• SGBCI, #1 Bank in Ivory Coast and nº1 Bank of the UEMOA zone
• Société Générale Cameroun, #1 Bank in Cameroon
• SGBS, #2 in Senegal and #1 in Investment Banking
• Société Générale Algérie, #1 privately-owned Bank in Algeria
• Société Générale Maroc, #1 privately-owned banking group in Morocco
• SGBG, #2 Bank in Gunea

A LONG STANDING COMMITMENT TO AFRICA

• Algeria
• Burkina Faso
• Cameroon
• Chad
• Congo
• Equatorial

Guinea

• Ghana
• Guinea
• Ivory Coast
• Madagascar
• Mauritania
• Mozambique
• Senegal
• Togo
• Morocco
• Tunisia
• South Africa

In the Top 3 of the major banking groups

• n the continent

Presence in

17

countries

11,500

employees

950

branches

3,3 million

customers

Deeply rooted presence

• n the continent

100 years in Morocco, 50 years in Cameroon, Senegal and Ivory Coast, 30 years in Guinea

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CONNECTING MOZAMBIQUE TO THE MAJOR ECONOMIES

Société Générale is incorporated as a Bank in all G20, except Argentina, Mexico and Indonesia (rep. office).

CHINA INDIA JAPAN SOUTH KOREA BRASIL USA GERMANY ITALY RUSSIA SOUTH AFRICA TURKEY FRANCE UK CANADA SAUDI ARABIA AUSTRALIA

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MOZAMBIQUE

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SOCIÉTÉ GÉNÉRALE IN MOZAMBIQUE

WITH A STRONG AMBITION SOON EXPANDING ITS PRESENCE

• Implementing an ambitious expansion plan, opening branches throughout the Country.
• This local presence will allow to provide a wide range of service, closer to the customers.

PRODUCTS & SERVICES

• Development of tailor made solutions.
• Committed to innovation.
• The only Global Bank in the Country, striving to be a reference.
• Drive for excellence in customer satisfaction.
• Quality services and products, innovative solutions and professional advisory.
• Customer-centric organization through the values of Société Générale: Team Spirit,

Innovation, Responsibility and Commitment.

A SAFE BANK

• SGMOZ is a direct subsidiary of Société Générale group, an A rated (S&P) entity, listed in

the Paris Stock Exchange.

• Subject to strict controls, governance standards and best practices, giving an extra

assurance to the depositors of the safety of their funds.

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CHAPTER _ 02

FOREIGN EXCHANGE

NORMS AND PROCEDURES

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FOREIGN EXCHANGE | NORMS & PROCEDURES

Background

• The Mozambican Government approved on

the 11th September 2017, the Decree No. 49/2017, which entailed the revocation of Decree 83/2010,

• f

December 31/12 – Regulation of the Foreign Exchange Law. This deliberated Banco de Moçambique (Central Bank), acting as the foreign exchange authority, the competence to approve the rules and procedures referent to the implementation

• f

the commands contained in the Foreign Exchange Law, from 11/2009, of March 11.

• In view of the alterations made, the Notice

20/GBM/2017 of 11 December - Standards and Procedures Exchange - entered into force.

• Moreover, the revocation of the Circular No.

1/2015 from 18th November, which prohibits Interbank’s transfers, between the same account holder, in foreign currency.

Principles

• Liberalization of current transactions.
• Prior authorization of capital operations.
• Repatriation of export earnings from goods

and services, in addition to income from Banking System abroad.

• Obligatory utilization of the National Banking

System (SBN - Sistema Bancário Nacional).

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Fundamentals

• 1. Adjust the legislation according to the

market dynamics.

• 2. Maintain the principle of liberalization of

current transactions.

• 3. Authorize

automatically, some

• f

the capital transactions.

• 4. Responsibility
• f

perform regular registration (real time), in addition to adequate classification of the statistical data

• n

the foreign exchange transactions.

• 5. Reinforce the monitoring on the foreign

exchange operations.

Structure and Content

The notice is composed by 148 articles, distributed in 7 chapters: Chapter I - General Provisions; Chapter II - Foreign Exchange Trade; Chapter III – Current Transactions; Chapter IV - Financial Operations; Chapter V - Other Foreign Exchange transactions; Chapter VI - Special Foreign Exchange regimes; Chapter VII - Final Provisions.

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FOREIGN EXCHANGE | NORMS & PROCEDURES

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CENTRAL BANK’S

NOTICE 20/GBM/2017

11 DECEMBER 2017

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NOTICE 20/GBM/2017 | THE ALTERATIONS MADE

Regime of export revenue repatriation, for goods and services, and income from foreign investments (Art.8)

• Exclusion of the mandatory immediate conversion of 50%.
• Opening of a specific current account, dedicated solely for the receipt of export

revenues.

• Mandatory and precedent utilization of amounts held at the special accounts

above mentioned, for the remittance of payments abroad.

• From the above mentioned specific current account, can only be processed

transfers to accounts of the same nature, in foreign currency, within the SBN (National Banking System). Hence, it is no longer allowed to remit payments, in foreign currency, to residents that are not exporters.

• Export revenues and foreign investment income can be converted to metical per

customer's request, at any time, whatever the purpose of value. Commitment Agreement on Export and Import Operations of Goods (art.30 and art.49)

• Introduction of the Commitment Agreement on import of Goods.

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• Similar process, when compared to the to the Export

Commitment Agreement, yet to the opposite direction.

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NOTICE 20/GBM/2017 | THE ALTERATIONS MADE | CONT…

• Increase of the limit’s amount, which is exempted from presentation of

security, from USD 50,000.00 to USD 250,000.00.

• For amounts above USD 250,000.00, a performance bank guarantee shall be
• required. This guarantee must be issued from a foreign bank, and duly

recognized by the importer’s bank

• Still within the anticipate payments arena, it was introduced the obligation to

present a commercial contract between the supplier and the buyer.

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Anticipated payments (art. 28) Submission of application request for authorization of Capital Transactions (art. 65)

• The

submission is made by the interested party, through the intermediary bank, which in turn, shall check the documentation and perform the proper characterization and contextualize the foreign exchange transaction.

• For the non-applicable cases, remit the duly instructed dossier to Central

Bank (Banco de Moçambique), within a period of time of 5 days.

Opening of account in Foreign Currency (art. 105)

• Authorized the opening of accounts in foreign currency to residents who have

a proven relationship abroad, or with a non-resident entity.

• To be carried out by Central Bank (Banco de Moçambique) for all other

situations not covered by the Article105.

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Foreign Direct Investment (art.72)

• Automatically authorized, requiring only the registration of the funds, at the

intermediary bank.

• Registration at the intermediary bank, in real time and properly classified, in the

case of inflows in foreign currency.

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• Registration at Central bank is required, within a

period of 90 days, when the investment is realized in the form of machinery, equipment or other assets (art.73).

Investment through Parent’s company loan, or Loans from Other Related Companies (art.75)

• Automatically authorized in the following situations:
• Interest rate of 0%, maturity equal or superior to 3 years, and free of

charges and commissions.

• Interest rate greater than 0%, but lower than the reference rate of the credit

currency’s denomination, maturity equal or superior than 3 years, no commissions and charges, up to the amount of USD 5,000,000.00.

Créditos Financeiros recebidos do Estrangeiro (art.87)

• It is authorized up to USD 5,000,000.00 and maturity of 3 years or more,

provided that:

• Interest rate does not exceed the reference rate 4bp +;
• Reference Rate + margin is lower than the interest rate used by the

SBN.

NOTICE 20/GBM/2017 | THE ALTERATIONS MADE | CONT…

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Investment from residents abroad (be it in portfolio, participation in company’s social capital, real estate investment) - (art. 70)

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• Authorized up to the amount of USD 250,000.00 / year, as long as it has

fulfilled with the tax obligations, and prove that the investment is made through the utilization of own funds.

• Interdiction from future operations of the same nature, if the investor does

not submit proof of the intended investments, within 90 days.

• Monthly submission to Central Bank (Banco de Moçambique) of the

relative documentation referent to the realization of the investments abroad.

• Raising the awareness of the investor to declare together with World Bank

the assets held abroad (art. 7) and to repatriate the income from these investments (art.8).

Guarantees (art.90) Special Schemes (art.110) Oil and Gas

• Liberalization of all warranties relating to current transactions, regardless of

maturity.

• In the production phase, all payments must be made by the

intermediary banks authorized to operate in Mozambique.

NOTICE 20/GBM/2017 | THE ALTERATIONS MADE | CONT…

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CENTRAL BANK’S

NOTICE 04/GBM/2018

22 MARCH 2018

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NOTICE 04/GBM/2018 | THE ALTERATIONS MADE

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The Clients that already hold Bank accounts in FCY, can convert these existing accounts, into the Specific Export Accounts. 1. 2. Once these Current Accounts have been converted to the FCY Specific Accounts, the reverse process can not be performed, ie, you can not revert to Normal Accounts in FCY. 3. The Specific Account can be moved to:

• Amortization of Credit facilities in FCY, held by the Client in the national

financial system;

• Feed another specific account held in another bank, with the intention of remit

international payments, pendant the presentation of due evidence - which means that it can no longer transfer FCY to another bank for shopping around effects, and therefore means that the FCY will be converted only to the Bank receiving the funds.

• Constitution of fixed deposits; and
• Account closure.

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In case of importation of funds, referent to investment or acquisition of credit facilities from abroad (financial and non financial), the funds can only be converted by the receiving bank.

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4. In case of fixed deposits, once it has reached its maturity, the funds shall be returned to the Specific Exporter Account, and be subject to the same restrictive regime. 5. 6. The limitations imposed over the FCY funds received, referent to Export Revenue (conditions of movement and consequences of the fixed deposit constitution), also apply to FCY funds imported as foreign direct investment or external credit (financial and non-financial).

NOTICE 04/GBM/2018 | THE ALTERATIONS MADE | CONT…

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CHAPTER _ 03

FREQUENTLY ASKED QUESTIONS

FOREIGN EXCHANGE LAW

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FREQUENTLY ASKED QUESTIONS

• From our analysis, there is no reservation that Transit Agents, can perform local payments in

FCY, when remitting payments to local entities and in representation of an non-resident entity (this shall be duly supported by an invoice issued to a non-resident entity).

• The main point of doubt lies in whether the non-resident entity should (A) transfer the total

amount (invoice value + commission) to the Transit Agent’s Specific Account, or (B) make two separate transfers, (1) one for the Specific Account, referent to the payment of the Commission / Logistic Agent’s fees, (2) another one referent to the normal Transit Agent’s FCY Account.

• We are of the opinion that option (A) suits better to the current regimen, because will allow the

non-resident to perform a single wire transfer, based on an invoice that evidences what is the Transit Agent’s fee, and what should be paid to the other local service provider (port authorities or similar).

Income Repatriation and Logistics & Shipping Activity Anticipated Direct Payments and the need to present both the Contract and the Invoice

• It is of public understanding, coupled with the public pronouncement from the top Management
• f the Central Bank (Banco of Moçambique), that it suffices to present the invoice or the

contract, and not of both.

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FREQUENTLY ASKED QUESTIONS | CONT …

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• It is of our opinion, that it shall be allowed to make cash withdrawals from the specific

account, with the purpose of traveling abroad. This taking into account the points made under paragraphs 3 and 5 of the art. Nº 105 from the Notice 20/GBM/2017, dated 27th December, which states that exporters can open accounts in FCY (the Specific Accounts) and that cash withdrawals from these accounts are limited to the value of USD 5.000, per traveler and only for the purposes of overseas travels.

• Thus, if an exporter’s staff member intends to travel abroad, it shall have the normal

procedure, allowing the traveler to perform cash withdraw up to the above mentioned limit.

Cash withdrawals (in FCY) from the Specific Accounts referent to overseas travels Application of the Foreign Exchange Principles and Procedures to Entities operating in the Special Economic Zones

• The essentiality of the questions made round this topic, is whether there is a distinctive

foreign exchange regime applicable to these entities, and what are its implications. Unfortunately, this remains an unreturned question since we are waiting for the Central Bank’s clarification.

Creation of Fixed Deposits in Other Financial Institutions

• This is an outdated question. Since, it is strictly prohibited to transfer FCY to another Bank only

to constitute Fixed Deposit, as this is to be done solely at the Bank that received the funds.

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• This issue was surpassed by Notice No. 4/GBM/2018, of 13th April, which establishes that the

amounts received in the Specific Account may only be utilized for the purposes clearly indicated, amongst the same, it is not included the commitment of settling other internal responsibilities than the settlement of credit facilities within the market. Moreover, if these payments were allowed, then it remove the utility of the restrictive regime of the exporter’s Specific Account.

Payment of Internal Commitments (Salaries, Rents and Local Suppliers), in FCY Foreign Credit Facility and the Index Rate

• The main question is related around the index lending rate to be taken into account, when

referring to foreign credit facility (which will most probably be in FCY), taking into consideration that Central Bank (Banco the Moçambique) only publishes reference rates in LCY (i.e. MZN). Our understanding, which is of common agreement with the market, is that in case of external credit the benchmark rate to consider shall be LIBOR.

FREQUENTLY ASKED QUESTIONS | CONT …

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Q&A SESSION

QUESTIONS?? PERGUNTAS?? PREGUNTAS?? MASWALI?? VRAE?? PYETJE?? DES QUESTIONS?? DES QUESTIONS?? ВЪПРОСИ?? PERGUNTAS?? 質詢??

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Obrigado !!

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