Depreciation of Angolan kwanza should not trigger a deterioration of capital adequacy.
London: Fitch Ratings said the depreciation of the Angolan kwanza should not trigger a significant immediate deterioration of capital adequacy in the country's banking sector assuming banks' foreign-exchange positions are largely unchanged from end-November 2017, when the sector had a net long open foreign-currency (FC) position.
FC revaluation gains stemming from long open FC positions may well outweigh the negative impact on capital adequacy ratios.
Fitch Ratings is a nationally recognized statistical rating organization (NRSRO) designated by the U.S. Securities and Exchange Commission. Banking sector data published by the Banco Nacional de Angola (BNA) are generally timely but disclosure on banks' FC assets and liabilities is limited. Data on cash positions and loans are available, but the currency split of securities investments, which were 31% of sector assets in November, is not. There are also no data on off-balance-sheet FC positions.
The BNA discloses periodic financial sector indicators, including the net foreign-exchange position ratio. This measures the sector's net open on-balance-sheet FC position plus 30% of FC contingent liabilities, such as guarantees and amounts owed on customers' credit cards, as a percentage of sector regulatory capital. The latest available data from end-November 2017 showed a 39% long position, well above the 20% prudential limit that had been in force in 2016. The limit was scrapped last year.