The Mozambican branch of the defunct Portuguese National Overseas Bank was nationalized without compensation. By a decree of 23 May 1975, it was reconstituted as the Bank of Mozambique (Banco de Moçambique-BM). Functioning as a central bank, it served as the government's banker and financial adviser, and as controller of monetary and credit policies. It was also an issuing bank, a commercial bank, and the state treasury; the bank managed Mozambique's external assets and acted as an intermediary in all international monetary transactions.
In 1978, the government nationalized four of the five remaining commercial banks (the Banco Standard Totta de Moçambique remained private). In that year, a second state bank, the People's Investment Bank, was created and given responsibility for supervising a building society, the Mozambique Credit Institute (the industrial bank), and the National Development Bank.
After 1992, the government's economic reform program began to tackle the financial sector. Foreign banks were allowed to invest in Mozambican financial institutions, in 1994 interest rates were deregulated, and in 1995 the commercial activities of the central bank were assumed by a newly created institution, the Banco Comercial de Moçambique (BCM). By 1997, the government had privatized the BCM and the BPD (Banco Popular de Desenvolvimento). These banks were joined by Banco Português do Atlántico (BPA), Banco de Fomento e Exterior (BFE), and Banco Internacional de Moçambique (BIM), whose main shareholder is the Banco Comercial Português (BCP).
In 2001, along with the central Bank of Mozambique, there were eight banks operating in Mozambique, including the dominant BCM (owned by Banco Portugues Mello), BIM (owned by Banco Commercial Portugues), BPD (renamed Banco Austral after its sale to Southern Berhad Bank of Malaysia), Banco Standard Totta (55% owned by Banco Totta and Acores of Portugal, and 40% owned by Standard Bank of South Africa), Equator Bank (owned by Hong Kong and Shanghai Bank), Banco de Fomento do Exterior (branch of a Portuguese bank), Uniao Comercial de Bancos (a Mauritian bank), and Nedbank (South African).
The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $486.2 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $1.1 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 33.64%. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 9.95%.