Financial services supervision report 2015 - Central Bank of … Report 201… · · 2016-11-09CHAPTER 3 - FINANCIAL ANALYSIS ... 3.1.2.3 NET TANGIBLE CAPITALISATION RATIO ... HBL

FINANCIAL SERVICES SUPERVISION REPORT 2015

CENTRAL BANK OF SEYCHELLES

TABLE OF CONTENTS

MESSAGE FROM THE GOVERNOR .................................................................................................... 1

ACRONYM ......................................................................................................................................... 4

OVERVIEW OF THE REPORT .............................................................................................................. 6

CHAPTER 1 – MACRO-ECONOMIC CONDITIONS OVERVIEW ................................................ 7

CHAPTER 2 - OVERVIEW OF THE INDUSTRY AND FSSD ...................................................... 10

2.1 OBJECTIVES ........................................................................................................................ 10

2.2 THE REGULATORY FRAMEWORK AND SUPERVISED INSTITUTIONS .................................. 11

2.3 SUPERVISORY STRUCTURE AND FUNCTION ...................................................................... 12

2.4 THE BANKING SECTOR ....................................................................................................... 14

2.4.1 OWNERSHIP OF BANKS ............................................................................................... 15

2.4.2 BRANCH NETWORKS ................................................................................................... 16

2.4.3 DEBIT CARDS, ATM NETWORKS, POS TERMINALS AND INTERNET BANKING ............. 16

2.4.4 EMPLOYEES ................................................................................................................. 19

2.4.5 COMPLAINTS STATISTICS ............................................................................................ 19

2.4.6 ABANDONED PROPERTY ............................................................................................. 20

2.5 BUREAUX DE CHANGE ....................................................................................................... 20

2.6 CREDIT INFORMATION SYSTEM ......................................................................................... 22

CHAPTER 3 - FINANCIAL ANALYSIS .................................................................................... 23

3.1 OVERVIEW OF THE BANKING SECTOR ...................................................................................... 23

3.1.1 ASSETS, LIABILITIES AND EQUITY .................................................................................... 23

3.1.1.1 TOTAL ASSETS ................................................................................................. 24

3.1.1.2 TOTAL LIABILITIES ........................................................................................... 29

3.1.1.3 EQUITY ............................................................................................................ 31

3.1.2 CAPITAL ADEQUACY ........................................................................................................ 31

3.1.2.1 CAPITAL BASE .................................................................................................. 32

3.1.2.2 TOTAL RISK-ADJUSTED ASSETS ....................................................................... 32

3.1.2.3 NET TANGIBLE CAPITALISATION RATIO .......................................................... 32

3.1.3 ASSET QUALITY ................................................................................................................ 33

3.1.4 EARNINGS ........................................................................................................................ 36

3.1.4.1 LEVELS AND TRENDS OF PROFITABILITY ......................................................... 36

3.1.4.2 COMPOSITION OF INCOME AND EXPENSES .................................................... 37

3.1.5 LIQUIDITY ........................................................................................................................ 39

3.1.6 SENSITIVITY TO MARKET RISK ......................................................................................... 40

3.2 OVERVIEW OF OTHER INSTITUTIONS ................................................................................ 42

3.2.1 SCU .............................................................................................................................. 42

3.2.2 DBS .............................................................................................................................. 43

3.2.3 HFC .............................................................................................................................. 44

CHAPTER 4 - DEVELOPMENTS IN THE SUPERVISORY FRAMEWORK AND THE FINANCIAL

SECTOR ................................................................................................................. 46

4.1 OVERVIEW OF DEVELOPMENTS ....................................................................................... 46

4.2 LEGISLATIVE DEVELOPMENTS .......................................................................................... 46

4.2.1 AMENDMENT TO CREDIT UNION ACT, 2009 .............................................................. 46

4.2.2 SECURED TRANSACTIONS ACT, 2015 .......................................................................... 49

4.2.3 APPROVAL/LICENSING FOR FINANCIAL INSTITUTIONS TO PROVIDE PAYMENT

SERVICES ..................................................................................................................... 49

4.3 DEVELOPMENTS RELATING TO THE SUPERVISORY FRAMEWORK AND THE FINANCIAL

SECTOR .............................................................................................................................. 50

4.3.1 FINANCIAL LEASING ........................................................................................................ 50

4.3.2 ADDITIONAL BANKING ACTIVITIES ................................................................................. 53

4.3.3 REVIEW OF RISKS RELATED TO OFFSHORE FINANCIAL ACTIVITIES ................................ 54

4.3.4 BASEL II & III ................................................................................................................... 57

4.3.5 RBS ................................................................................................................................. 59

4.3.6 FINANCIAL EDUCATION AND CONSUMER EMPOWERMENT ......................................... 59

4.3.7 CREDIT INFORMATION SYSTEM ..................................................................................... 62

4.3.8 LEGAL FRAMEWORK FOR NBFIS SUPERVISED BY CBS .................................................... 62

4.3.9 FSDIP .............................................................................................................................. 62

4.4 BMIO REORGANISATION PLAN .......................................................................................... 64

APPENDICES ………………………………………………………………………………………….……………………….67

APPENDIX 1: LOCATIONS AND CONTACT DETAILS OF BANKS’ BRANCHES, DBS, HFC AND SCU………...67

APPENDIX 2: LOCATION OF ATMS…………………………………………………………………………………………………...70

APPENDIX 3: LOCATION AND CONTACTS OF BDC…………………………………………………………………………….71

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MESSAGE FROM THE GOVERNOR

The mission of Central Bank of Seychelles (CBS) is to contribute towards the sustainable economic

growth and development of Seychelles through prudent monetary policy and maintenance of a sound

financial system. This report shows the endeavours towards the latter objective, principally through

the functions of the Financial Services Supervision Division (FSSD). It is an embodiment of CBS’ steps

to enhance transparency, educate the public and make information available to all stakeholders. On

this note, I would like to welcome you to this 2015 edition of the Financial Services Supervision report.

In Seychelles, our openness as a small island economy, creates an inherent disposition for the country

to be affected by global economic developments. For the year 2015, it was the reduction in

international commodity prices, particularly that of oil, which had noticeable influence on domestic

movements. Translating into lower costs in Seychelles, the value of imports fell, which reduced the

overall demand in the foreign currency market. Consequently, this was favourable for the country’s

balance of payment position, resulted in an appreciation of the domestic currency against the Euro

and Pound sterling and also allowed for accumulation of international reserves through CBS’ purchase

of foreign currency. At the end of 2015, international reserves stood at USD536 million representing

4.9 months of imports.

Additionally, the legacy of 2014’s record double digit credit growth, set the tone for tighter monetary

policy stance that CBS adopted for the most of 2015. In anticipation of inflationary pressures from

credit, which was expected to continue growing in the first half of 2016, the tighter policy transmitted

into higher interest rates during the year. Consequently, whilst growth in banks’ loans portfolio was

still observed, this was at a lower rate of 9.66 per cent in 2015.

Thus, interest earning investments held domestically drove the increase in banks’ as well as other

supervised institutions’ profits during the year under review. Banks’ profits increased by 22.93 per

cent to SCR428.60 million at the end of 2015. Whilst investments increased in the interest bearing

assets, total assets declined rather significantly (by SCR2.80 billion to SCR16.77 billion). This was driven

by lower external assets, further to a reduction in foreign currency denominated deposits liabilities,

from a bank’s closure of offshore clients’ accounts. With declines recorded in liquid assets, liquidity

ratios moved generally downwards, but remained at acceptable levels. On the other hand, net

capitalisation ratio improved.

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The above-mentioned move of that respective bank is reflective of the ‘de-risking’ phenomenon that

has been experienced by a number of developing countries across the world. In the same vein, it will

be recalled that BMI Offshore bank was taken over by CBS late in 2014 when its correspondent banking

relationship was discontinued. In the face of these events, the need to enhance risk management vis-

à-vis money laundering and financing of terrorism risks (ML/FT) has been high on the agenda in recent

years. Correspondingly, CBS received technical assistance that covered supervision of offshore banks,

which recommended an enhanced risk based approach to supervision, incorporating oversight of

ML/TF risks. Furthermore, the country’s commitment to conduct a National Risk Assessment (NRA) on

ML/TF risks represent nationwide effort to evaluate Seychelles’ position and hence identify the areas

for improvement. Formalities for World Bank to assist with the NRA exercise was concluded in 2015.

The preparations for its official launch scheduled for early 2016 were underway late in the year under

review and were led by the Financial Intelligence Unit.

Along this line, there was greater appreciation of the principles of risk based supervision for all risks

and the potential benefits of further integrating risk based elements in the overall supervisory

framework. This furthered CBS’ plans to enhance its risk based supervision framework as well as to

implement additional elements of Basel II which places emphasis on risk management practices

around the capital planning process.

The main regulatory development during the year was passing of amendments to the Credit Union

Act, 2009 in September 2015. The principal objectives of the amendments aims to strengthen the

supervisory power over prudential matters governing credit unions, include provisions for

enforcement action and aligning the Act with international best practices. The amendment allows for

setting of parameters and risk-management requirements that will assist with ensuring the soundness

of the institution.

In addition to the principal aim of promoting the soundness of the financial system, FSSD also

endeavoured to implement development initiatives within the Cabinet approved Financial Sector

Development implementation Plan. Its implementation received a boost towards the end of the third

quarter of 2015 with approval of financing received from two international organisations, namely

Investment Climate Facility for Africa (ICF) and African Development Bank (AfDP). World Bank also

approved to provide technical assistance under the Reimbursable Advisory Service (RAS). Capacity

building visits and procurement process for consultants to support the deliverables were initiated with

the ICF and AfDB funding in the latter part of the year. Under World Bank RAS, technical assistance

started on legal aspects, including on review of the Credit Information System, additional banking

products and on enhancement of consumer protection in the financial services sector.

Consumer protection is recognised in CBS’ strategic plan as important towards ensuring the soundness

of the financial system. Consumers need to expect that their interests will be protected and at the

same time need to know their rights and make sound financial decisions. Thus, financial education

deliverables are also included in the FSDIP. CBS’ membership in the Alliance for Financial Inclusion,

which is a global network of financial policymakers that promotes financial inclusion, is representation

of CBS’ involvement to advance in this area.

The RAS also included technical assistance for the afore-mentioned NRA, given its importance to the

financial sector. Saying this, the authorities remained committed to other engagements related to

international compliance, namely the United States Foreign Account Tax Compliance (FATCA) which

was in principle agreed to in 2014 and signing the Multilateral Convention on Mutual Administrative

Assistance in Tax Matters in February 2015.

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CBS acknowledges the need to remain abreast of international developments directly or indirectly

related to the financial services supervision space, to respond appropriately, aim for compliance and

for the ongoing drive to improve. By working towards promoting the soundness of the financial

system, CBS supports sustainable growth in Seychelles, remaining committed and true to the mission

of the institution.

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ACRONYM

AEOI Automatic Exchange of Information for Tax Purposes

AFI Alliance for Financial Inclusion

AFS Afritac South

AGM Annual General Meeting

AML/CFT Anti-Money Laundering and Counter-Financing of Terrorism

ATM Automated Teller Machine

BAHL Bank Al Habib Limited

BBS Barclays Bank (Seychelles) Limited

BCBS Basel Committee on Bank Supervision

BDC Bureaux de Change

BMIO BMI Offshore

BoB Bank of Baroda

BoC Bank of Ceylon

CBS Central Bank of Seychelles

CIS Credit Information System

CPI Consumer Price Index

CRS Common Reporting Standard

CSD Central Securities Depository

CUs Credit Unions

DAA Deposit Auction Arrangement

DBS Development Bank of Seychelles

DICT Department of Information Communications and Technology

FATCA Foreign Account Taxpayer Compliance Act

FATF Financial Action Task Force

FIA Financial Institutions Act 2004, as amended

FIU Financial Intelligence Unit

FSA Financial Services Authority

FSDIP Financial Sector Development Implementation Plan

FSSD Financial Services Supervision Division

GDP Gross Domestic Product

HBL Habib Bank Limited

HFC Housing Finance Company

ICAAP Internal Capital Adequacy Assessment Process

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ICF Investment Climate Facility for Africa

IFC International Finance Cooperation

IMF International Monetary Fund

MCAA Multilateral Competent Authority Agreement

MCB Mauritius Commercial Bank (Seychelles) Limited

MCM Monetary and Capital Markets

MFTBE Ministry of Finance, Trade and Blue Economy

ML/TF Money Laundering and Terrorist Financing

NBFIs Non-Bank Financial Institutions

NPLs Non-Performing Loans

NRA National Risk Assessment

NTCR Net Tangible Capitalisation Ratio

NVB Nouvobanq

OECD Organisation for Economic Co-operation and Development

PSD Payment Systems Division

RAS Reimbursable Advisory Service

RBS Risk Based Supervision

ROA Return on Asset

ROE Return on Equity

RWCR Risk-weighted Capital Adequacy ratio

SCB Seychelles Commercial Bank

SCU Seychelles Credit Union

SENPA Small Enterprise Promotional Agency

SMEs Small and Medium-sized Enterprises

SREP Supervisory Review Evaluation Process

SCB Seychelles Commercial Bank

TA Technical Assistance

T-bills Treasury Bills

T-bonds Treasury Bonds

TT Telegraphic Transfers

WOCCU World Council of Credit Unions

VAT Value Added Tax

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OVERVIEW OF THE REPORT

The Financial Services Supervision Report provides information on the structure of the financial

sector, the financial position and performance of supervised institutions as well as developments

in the supervisory framework. The report also provides an overview of the functions of FSSD

which is responsible for the supervision of institutions under CBS’ portfolio. The overall aim of

the report is to promote transparency and disclosure of information in the financial system.

The report is organised as follows:

Chapter 1 provides a summary of developments in the macro-economy during the year under review;

Chapter 2 describes the structure of the financial sector;

Chapter 3 provides an overview of the financial position and performance of banks, SCU, DBS and HFC in 2015;

Chapter 4 explains the main developments in the supervisory framework during the year under review.

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CHAPTER 1 – MACRO-ECONOMIC CONDITIONS OVERVIEW

The year 2015 remained a challenging one for the global economy. The shock of lower commodity

prices - particularly oil prices - resulted in some notable slowdown across major commodity

exporters. Across the globe, economic growth and activity continued to be sluggish; overall

productivity was on the low side whilst unemployment level was above historical trends.

Based on IMF projections, global output is estimated to have grown by 3.1 per cent in 2015, which

was 0.3 percentage points lower than 2014 and driven by marked slowdown in emerging market

and developing economies. Other notable challenges were associated with the slowdown in the

Chinese economy and therefore its implication on the rest of the world as well the prevailing

monetary policy stances in the United States and the European Union region and their impact on

global demand.

Nevertheless, having successfully emerged from the challenges experienced in 2014, further

evidence that the basic macro-economic fundamentals of the economy are well anchored to

withstand potential shocks compared to the 2008 pre-crisis period was again evident in 2015.

Given the openness of the country as a small island state, Seychelles also benefited from the

external developments of 2015 since their domestic effects were overall positive. Important of

which was the weak or falling international commodity prices including that of oil which has a

direct impact on other costs such as transportation and utilities. Consequently, the overall value

of imports declined in comparison to the previous year whilst the terms of trade improved in

view that the fall in import prices outweighed that for exports. Moreover, notwithstanding the

generally weak state of the global economy, Seychelles managed to attract a new record in the

annual number of visitors.

Overall, the Seychelles economy is estimated to have grown by 4.35 per cent which was at a

slower pace compared to 6.21 per cent growth in real GDP achieved in 2014. Services remained

the key drivers of growth and the overall outcome reflected the modest increase in the direct

value-added contribution from the tourism sector; an outcome that was consistent with the

concerns expressed over yield although positive growth in activity was recorded. Whilst the

stable domestic currency and depreciation of the Euro may suggest no threat to the country’s

external competitiveness, the weaker Euro had a direct impact on the country’s earnings which

are mostly denominated in Euro whilst most foreign payments continued to be in USD. Based on

preliminary estimates, the direct earnings from the tourism industry, which remained an

important source of the country’s foreign exchange inflows, are estimated at 1.40 per cent lower

than in 2014 in USD terms. This was despite the achieved record growth in visitor arrivals.

With regards to developments in the local foreign exchange market, weaker commodity prices

were insufficient to offset an increase in net outflows relative to 2014, despite weaker demand

for foreign exchange. As a result, the Seychelles’ Rupee depreciated by 56 cents or 4.37 per cent

against the USD on average compared to 2014. Also of note was the strengthening of 218 cents

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against the Euro, albeit with the movement influenced by global weakening of the Euro. Table 1.1

shows the average exchange rates in 2015 compared to the previous year.

Table 1.1: Average Exchange rates

2014 2015 % change

SCR/EUR 16.94 14.76 -12.89%

SCR/USD 12.75 13.31 4.37%

SCR/GBP 20.89 20.28 -2.91%

The reduced domestic demand for foreign exchange created opportunities for the CBS to

accumulate international reserves through purchases from the market. At the end of December,

gross official reserves had grown from USD464 million (3.8 months of imports) in the previous

year to USD536 million (4.9 months of imports). As a result, the country’s external resilience

strengthened further with previous assessments in 2013 by the IMF which concluded that the

level of official reserves were already at “a desirable range”.

Other key indicators in the external sector indicate that preliminary estimates show a reduction

in the current account deficit from 22 per cent of GDP in 2014 to 17 per cent of GDP in 2015. Such

outcome was attributed to the afore-mentioned reduction in the value of imported commodities

which led to an improvement in the trade balance. Moreover, gross inflows of foreign direct

investment remained strong at 19 per cent of GDP, noting that its import-related components are

self-financed.

The weakening of the domestic currency was expected to have a direct correlation with changes

in the general price level. However, based on the annual rate of inflation as measured by the CPI

produced by the National Bureau of Statistics (NBS), the increase in the general price level in 2015

was by 4.04 per cent compared to 1.39 per cent in 2014. It should be noted that the inflation

figures for 2015 were calculated based on a revised CPI basket which incorporated the outcome

of the most recent household budget survey. In addition to the re-basing effect, data coverage

also improved in 2015. To note, the fact that Seychelles relies heavily on foreign goods, the weak

global commodity prices have helped to contain domestic inflationary pressures during 2015.

CBS’ assessment also showed some risks of inflationary pressures at the start of the year. Such

impulses were predicted to originate from the second round effects of the depreciated local

currency experienced towards the end of 2014, and from the high, double digit expansion in

credit to the private sector which reached an annual rate of 25 per cent at the end of 2014. The

strong growth in credit was expected to prolong through 2015 before eventually slowing down

towards the end of the year. Such development followed an increase in disposable income

subsequent to the revision in the salary grid of the public sector coupled with a 20 per cent

increase in minimum wage introduced at the start of 2014. The potential inflationary risk of such

growth in credit was related to the fact that a significant proportion of these facilities were going

towards the financing of consumer goods rather than to the productive sectors.

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Against the above backdrop, the CBS maintained a tight monetary policy up to September in order

not to compromise its primary objective of promoting domestic price stability. Having evaluated

the market conditions in the third quarter, a cautious loosening of monetary policy was effected

as of October. This was after the projected inflation was expected to reach its peak at the end of

the year; a result that took into consideration the stability of the domestic currency whilst no

price pressure was anticipated from imported commodities. Consistently, the annual growth in

credit to the private sector fell to 6.86 per cent in December.

Under the current monetary targeting framework, the tightening of monetary policy involves the

withdrawal of liquidity from the system, which limits the ability of lending institutions to extend

credit and therefore address demand pressures in the foreign exchange market. Through

sustained policy coordination with the MFTBE, securities continued to be issued in support of

monetary policy coupled with the CBS’ interventions in the money market to withdraw liquidity.

This impacted market interest rates whereby, an overall increase was observed. The average

savings rate rose from 2.31 per cent at end-2014 to 2.91 per cent in 2015; its highest level since

August 2013. As for the effective lending rate, the increase over the corresponding period was

from 12.05 per cent to 12.56 per cent which resulted in a slight narrowing of the interest rate

spread. Nevertheless, the spread between the effective lending and savings rate remained close

to 10 per cent and is considered as being on the high side.

On the fiscal front, policies mainly concentrated on the broadening of the tax base, with some key

measures introduced in January including upward revisions in excise and road taxes. There was

also an increase in excise tax on all alcoholic drinks with an alcohol content that exceeds 16 per

cent and that on all tobacco products. This was aimed at discouraging excessive consumption of

these products and reduce the associated adverse effects that these can have on society. In

addition, the mandatory registration threshold of VAT was lowered to a turnover of R2.0 million

which resulted in an increase in the number of VAT registered businesses. As for the budget

outcome, this remained positive in consideration that a surplus was once again achieved and that

was also consistent with the medium-term debt strategy. The primary surplus for 2015 stood at

3.94 per cent of GDP which was a better outcome compared to the targeted 3.50 per cent of GDP.

Additionally, a further reduction in public debt was recorded; from 65 per cent of GDP in 2014 to

60 per cent of GDP in 2015. The other notable policy action during the year was the continuation

of the country’s engagement with the IMF as formalised in the 3-year programme under the

Extended Fund Facility agreed in 2014. The policy focus under the latter was to “reduce the high

debt levels, improve external buffers and sustainability in the face of emergent balance of

payments pressures, and strengthen the economy through sustained and inclusive growth”.

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CHAPTER 2 – OVERVIEW OF THE INDUSTRY AND FSSD

This chapter sets the context of FSSD’s functions, providing an insight of the objectives that influence

and shape the planning and implementation of the division’s activities. It also depicts developments

in the structure of the financial system under CBS’ purview and provides some broad indications of

developments in the financial sector, including in the infrastructure and resources.

2.1 OBJECTIVES

The Central Bank of Seychelles Act, 2004 as amended stipulates that the CBS’ main objective is to

promote price stability. The Act also states other objectives, which include promoting the

soundness of the financial system. CBS has been entrusted with upholding this latter objective,

which it endeavours to achieve through implementation of its strategic objectives.

These objectives are articulated within CBS’ strategic plan for 2014 to 2018. The plan documents

the institution’s vision for these 5 years and establishes key performance indicators to evaluate

progress towards CBS’ vision.

Within the overarching objective of maintaining the soundness of the financial system, the plan

further defines specific objectives, for which those pertaining to FSSD are outlined below:

Ensuring the stability of the financial sector within CBS’ supervisory ambit to be achieved

through effective licensing, Off-Site and On-Site supervision;

Strengthening the regulatory framework by ensuring that the framework is at par with

international best practice. Formulation of the regulatory framework for financial leasing

and promoting its development also contribute towards achievement of this objective;

Enhancing financial services consumer protection through periodic evaluation of the

status quo and establishing the appropriate framework to uphold consumer protection.

Achieving progress in the payment systems and ensuring financial system stability are also

important components towards the overall soundness objective. These are addressed through

the functions of the PSD and the Financial Stability Unit1 respectively within CBS.

1 The Financial Stability Unit was formally established in 2016.

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2.2 THE REGULATORY FRAMEWORK AND SUPERVISED INSTITUTIONS

The constituents of FSSD’s regulatory and supervisory portfolio are illustrated in Chart 2.1.

Chart 2.1: FSSD’s Supervisory Portfolio 2015

As afore-stated, CBS derives its principal powers from the Central Bank of Seychelles Act, 2004 as

amended, which explicitly states its functions related to financial institutions, being banks and

BDC, as defined by the FIA. As was the case in the previous year, there were 9 licensed banks in

operation as at the end of 2015. Although one additional bank had been licensed, its operations

had not commenced by the end of the year. CBS’ supervisory portfolio also entailed 26 BDC of

which, 14 were Class A2 and the other 12 were Class B3.

In addition to these financial institutions, CBS has also been designated as the regulatory

authority of SCU4 and assigned oversight responsibility over DBS5 and HFC6. DBS and HFC are

supervised in line with certain relevant provisions of the FIA. CBS has the intention of

strengthening its regulatory functions vis-à-vis the afore-mentioned non-bank institutions

through a consolidated regulatory framework that would cover the existing or any other non-

bank institutions in the financial sector that may be brought within CBS’ ambit in the future. Refer

to section 4.3.8 for an overview on this endeavour.

2 A class A bureau de change is licensed to buy and sell foreign currency in the form of notes, coins,

traveller’s cheques and also engage in money transmission. 3 A class B bureau de change is licensed to buy and sell foreign currency in the form of notes, coins and

traveller’s cheques only. 4 Through the Credit Union (Designation of Authority) Notice, 2009. 5 Through the Delegation of Statutory Functions (DBS Decree) Order, 2009. 6 Its responsible Ministry officially delegated the oversight of HFC’s credit granting function to CBS in 2009.

Banks BDC

Class A

Class B

Other Financial Institutions

SCU

DBS

HFC

Financial Leasing

Institutions

Non-deposit taking Financial

Leasing Institutions

Deposit-taking Financial Leasing

Institutions

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The enabling legislations for the supervised institutions are outlined in Table 2.1. Apart from SCU

and DBS, the supervised institutions are incorporated under the Companies Ordinance, 1972 and

hence also need to comply with the said law (unless explicitly exempted from certain provisions

by law). Of note, CUs may be established by Order published in the Gazette by the Minister for

Finance and DBS is a body corporate established by statute. The Companies Ordinance, 1972 is

HFC’s primary governing law.

Table 2.1: Main enabling legislations for supervised institutions

Institutions Main Legislation7

Banks FIA

National Payment System Act,

2014 (licence for Class A BDC

and approval for banks (in

relation to payment services))

BDC

Financial Leasing Institutions Financial Leasing Act, 2013

SCU Credit Union Act 2009, as

amended

DBS Development Bank of

Seychelles Decree, 1977

As for financial leasing institutions, whilst the relevant Act was promulgated in November 2013,

work was ongoing during 2015 on the necessary regulations and processes that would render the

regulatory and supervisory framework for financial leasing complete. In view of this, CBS had not

started to process licence applications from prospective financial leasing institutions as at year

end. Section 4.3.1 elaborates on work that was undertaken during the year in this regard.

The main regulatory development that occurred in 2015 pertained to the amendment of the

Credit Union Act, 2009 which materialised in September 2015. This is discussed at section 4.2.1

of the report. Furthermore, the requirements of the National Payment System (Licensing and

Authorisation) Regulations, 2014 in relation to Class A BDC and banks were operationalised

during the year under review and is discussed at section 4.2.3 of the report.

2.3 SUPERVISORY STRUCTURE AND FUNCTION

FSSD is organised into three Units, namely Policy, On-Site and Off-Site, whose functions are

distinct but intertwined towards the common objective of promoting the soundness of the

financial system.

The main functions of the 3 units are summarised in Table 2.2:

7 Legislations can be accessed on CBS website at www.cbs.sc

http://www.cbs.sc/

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Table 2.2: Summary of FSSD’s supervisory functions

Policy Unit Off-Site Unit On-Site Unit

Process licence applications in line with the relevant laws

Conduct research and make recommendations to amend or review legislations and other pronouncements

Administer complaints on supervised institutions

Process applications as required by the law, including for appointment of administrators, shareholders, auditors, etc.

Attend to other policy and regulatory issues

Compile financial soundness indicators

Conduct analysis based on periodic returns and annual business plans

Perform stress tests on supervised institutions on a regular basis aimed at identifying weaknesses in the financial system

Review audited statements

Conduct regular full-scope On-Site examinations of supervised institutions in line with the supervisory plan

Conduct focussed On-Site examination in response to a supervisory issue of concern

Monitor adherence to recommendations of examination reports and take appropriate actions

Monitor and enforce compliance to the regulatory framework

Identify risks and take measures to ensure that risks are appropriately managed or mitigated

FSSD seeks to adopt a risk based approach to supervision, which identifies and concentrates on

the risky areas in an institution and on understanding the adequacy of supervised institutions’

risk management systems. The division appreciates that there has been a world-wide evolution

of RBS and recognises that, whilst there are RBS elements in its CAMELS8 based approach, this

requires further enhancement in order to derive the full benefits of RBS.

RBS breaks away from the traditional compliance-based approach, which may lead to too much

focus on non-compliance and inadequate understanding of the institution and its risk

management practices. Rather than adopting a common supervisory approach for all banks, RBS

allows for prioritisation of resources to institutions and areas with higher risk profiles. RBS is

also more forward looking by identifying risks that may emerge in the future. Compliance remains

important in order to ensure adherence with minimum requirements, and whilst it still needs to

be incorporated within the supervisory regime, the ultimate objective of RBS should be on

identifying and managing risks. Section 4.3.5 discusses the RBS concept further.

During the year under review, FSSD intensified work in the area. Specifically, two technical

assistance missions from AFS in 2015 covered RBS and made recommendations for FSSD to move

further in this direction as discussed at section 4.3.3.1.

The afore-mentioned missions also addressed ML/TF risks, on which there has been heightened

attention. This has in part resulted from increased scrutiny and regulatory requirements by

international organisations in the area and the de-risking phenomenon, whereby financial

8 A uniform bank rating system that assesses Capital Adequacy, Asset quality, Management, Earnings,

Liquidity and Sensitivity to market risk.

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institutions have been exiting relationships with clients perceived to be “high-risk”. In Seychelles,

this was manifested in BMIO’s loss of correspondent banking relationship in late 2014, further to

which it was taken over by CBS. In the second half of 2015, a bank also closed accounts of its

offshore clients further to a remediation exercise which led the bank to determine that the said

clients did not fit within its risk profile.

The On-Site supervisory activities of FSSD in 2015 sought to address the prevailing concerns in

the financial sector. In addition to one full-scope examination that was undertaken, limited scope

examinations were conducted on four banks. These limited scope inspections were aimed at

assessing banks’ risk management practices with respect to ML/TF activities. The relevant

development in this area, both at CBS and national levels are discussed at section 4.3.3 of the

report.

Furthermore, in order to add another dimension to the work undertaken by FSSD, which is largely

institutional oriented and micro-prudential in nature, work on promoting macro-prudential

supervision was underway in 2015. Macro-prudential supervision allows for assessment of the

interconnections amongst financial institutions and the macro-economy, and adds to the forward

looking aspect of supervision. Macro-prudential supervision contributes to preventing the

macro-economic costs of systemic financial distress and maintaining financial stability. FSSD

conducted research work that made recommendations with regards to formulation of a financial

stability framework at CBS during the year under review. Although the function would be

separate from FSSD, interactions and engagements between the micro and macro-prudential

supervision functions are anticipated in order to contribute to more accurate assessments of risks

and appropriate responses towards the financial soundness and stability objectives.

2.4 THE BANKING SECTOR

There were 9 banks operating in Seychelles as at the end of 2015. A new bank, United Helvetic

Bank, was licensed during the year but had not started its operations as at year end. Two banking

licence applications were still pending by year end.

The licensed banks along with their commencement history are shown in Table 2.3.

15 | P a g e

Table 2.3: Banks and year in which operations started

Banks Year in which operations started

BAHL 2014

BoB 1978

BoC 2014

BMIO9 2008

BBS 1959

HBL 1976

MCB 2003 and took over assets of Banque

Francaise Commercial Ocean Indien which

has started in 1978

NVB 1991

SCB 1981 as Seychelles Savings Bank, rebranded

in 2013

UHB Had not yet started operations in 2015

Since November 2014, BMIO had been taken over by CBS, further to its inability to restore

correspondent banking services when this was discontinued. The bank remained under CBS’

control throughout 2015 while it was undergoing reorganisation by an agent that was appointed

by CBS during the year. Section 4.4 provides more details on BMIO’s reorganisation plan.

Banks in Seychelles operate under a single licensing regime, whereby they can conduct both

onshore and international banking services. The banks may segment the activities, whereby those

activities that give rise to ‘foreign sourced income’ are termed Segment 1 and all other banking

activities are Segment 2. The regime became effective with amendments to the FIA promulgated

in 2011, which eliminated the requirement for a separate banking licence to conduct solely

offshore banking business.

2.4.1 OWNERSHIP OF BANKS

Chart 2.2 illustrates the ownership of banks in 2015. The two local banks, NVB and SCB were

majority owned by the Government. The Government plans to pursue its targeted 40 per cent sale

of total shares of SCB to account holders in 2016, a process which began in 2011 when 23.45 per

cent shares were subscribed.

9 BMIO’s ownership structure changed in 2016 and has been rebranded to Al Salam Bank (Seychelles) Ltd.

16 | P a g e

Chart 2.2 Shareholdings of Banks

2.4.2 BRANCH NETWORKS

Table 2.4 shows the distribution of banks’ branches across the three main islands of the country.

An additional branch was opened on Mahe at the Eden Plaza during the year. Appendix 1 provides

a list of the location of banks’ branches and contact details. Branch networks contribute to the

access dimension of financial inclusion. As shown in Appendix 1, there is quite an even

distribution in the locations of branches across the islands. Given Seychelles’ smallness, access

distance-wise is not expected to be a significant issue in the country.

Table 2.4: Number of Branches

2015 Mahe Praslin La Digue Total

BAH 1 0 0 1

BoC 1 0 0 1

BBS 5 2 1 8

BoB 1 0 0 1

BMIO 1 0 0 1

HBL 1 0 0 1

MCB 4 2 1 7

NVB 3 1 1 5

SCB 3 1 1 5

2.4.3 DEBIT CARDS, ATM NETWORKS, POS TERMINALS AND INTERNET BANKING

The national payment systems is regulated in line with the National Payment System Act, 2014

by the PSD within CBS. The enhancement of public confidence in payment systems is related to

17 | P a g e

CBS’ strategic objective of promoting financial soundness, including consumer protection. In

addition to the PSD’s endeavours to modernise the payment systems, it is also engaged in work

to uphold the consumer protection aspect of payment systems, including in developing the

appropriate regulatory framework in this regard. As explained at section 4.2.3, the approval

requirement for payment services (applicable to banks), implemented in 2015, is also a key

development aimed at promoting the soundness of the payment system.

In enhancing public confidence, PSD seeks to encourage the use of payment systems. The

statistics for 2015 continued to indicate progress in relation to access and usage of payment

systems.

Table 2.5 illustrates the number of banks’ ATMs across the three main islands, whereby one

additional ATM was installed by MCB during the year under review. Appendix 2 provides the

locations of the ATMs.

Table 2.5: Number of ATMs in 2015

2015

Mahe Praslin La Digue Total

BBS 12 3 1 16

MCB 11 3 1 15

NVB 8 1 1 10

SCB 5 1 1 7

Total 36 8 4 48

Table 2.6 also shows an increase in the number of debit cards and POS terminals during the year

under review.

Table 2.6: Number of debit cards and POS terminals

2013 2014 2015

Number of debit

cards

60,965 64,303 66,209

Number of POS

terminals

1,890 2,057 2,220

As regards usage, the number of ATM transactions that were conducted in 2015 rose by 17.46

per cent (to 2.30 million) and the value of transactions at ATMs amounted to SCR2.73 billion

having increased by 22 per cent.

Usage of POS increased by 26.34 per cent (to 1.62 million) with transaction value augmenting by

15 per cent (to SCR2.84 billion). This is illustrated in Chart 2.3.

18 | P a g e

Chart 2.3: Number of POS transactions and ATMs and Value of POS and ATM transactions

Credit cards, although still in low penetration, have gained popularity in recent years and are

offered by BBS, MCB and NVB. In 2015, payment cards were principally of international brands,

mainly VISA and MasterCard and partial interoperability existed on the ATM and POS networks.

Whilst all Visa debit cards were accepted at every ATM and POS terminals, other debit cards such

as maestro and cirrus, were only accepted at some ATMs.

With regards to internet banking, during 2015, 5 banks were offering these services, notably BBS,

BoB, BMIO, MCB and NVB. Out of these, BBS, MCB and NVB were offering both transaction-based

and view-based internet banking service to their clients as at the end of the year.

Another innovation in payment systems which is still relatively new in Seychelles is mobile

banking, which is offered by BBS and MCB. This is a system whereby customers of a financial

institution are able to conduct a number of financial transactions through a mobile device for

example, smartphones, tablets etc. using a dedicated software or SMS.

As regards mobile payments, this officially commenced in 2015, whereby Airtel Mobile

Commerce (Seychelles) was issued with a payment service provider licence under the National

Payment System Act, 2014 to provide mobile payment services. Airtel Money is essentially a

mobile application through which customers undertake financial transactions using their mobile

phone, subject to cash being deposited in their accounts. Payment through the medium can be

used to pay utility bills at the Public Utilities Corporation, and some retail shops.

0

500

1,000

1,500

2,000

2,500

0

500

1,000

1,500

2,000

2,500

3,000

2013 2014 2015

Th

ou

san

ds

SCR

mil

lio

ns

Value of Transactions (LHS) POS Value of Transactions (LHS) ATM

Number of Transactions (RHS) POS Number of Transactions (RHS) ATM

19 | P a g e

2.4.4 EMPLOYEES

There was a slight decrease in the number of employees in the banking sector, from 667 in 2014 to 664 in 2015. The majority of the employees in the banking sector are Seychellois (95.5 per cent) as illustrated in Table 2.7.

Table 2.7: Employees in the banking sector

2013 2014 2015

Locals Expatriates Locals Expatriates Locals Expatriates

BBS 216 4 192 7 196 9

MCB 162 6 170 6 161 5

NVB 125 4 123 4 127 4

SCB 98 0 96 0 103 0

BoB 16 3 17 3 15 3

BMIO 24 1 21 1 13 1

HBL 10 2 11 2 11 2

BOC 0 0 7 3 8 3

BAHL 0 0 0 4 0 3

Total 651 20 637 30 634 30

The FSDIP recognises the importance of ongoing training of financial sector professionals to the

development of the financial sector. Towards this, there is a plan to conduct a survey to identify

the key gaps in training and overall capacity of individuals working in the financial sector, with

the aim of informing an education program to groom individuals working or envisaging to work

in the financial sector.

2.4.5 COMPLAINTS STATISTICS

CBS’ strategic plan recognises the importance of consumer protection to financial soundness and

CBS is resolute to enhance this area in the financial sector. The initiatives relating to consumer

protection in the financial sector is addressed at length at section 4.3.6 of the report.

A measure in relation to consumer protection is the Financial Institutions (Complaints Handling)

Regulations, 2008. This requires banks to have in place effective and transparent procedures for

complaints resolution. The Regulations state that complainants may require that the complaints

be escalated to CBS10, if he/she is not satisfied with the response provided by the institution.

The statistics on complaints that were escalated to CBS during 2015 showed an increase

compared to 201611. Whilst 11 complaints related to FSSD were escalated to CBS in 2014, the year

under review registered 22 complaints. The nature of complaints varied, but some were related

10 The institution has 21 days to attempt to resolve the complaint. Where this is not possible, they are

required to inform the client of the reason why they have been unable to offer a final response and when they can expect to do so.

11 The report for 2014 did not report complaints received by PSD compared to this year.

20 | P a g e

to certain banks’ remediation process as well as other general customer service issues.

Additionally, PSD received 20 complaints which were mainly related to fraudulent or

unauthorised transactions.

In addition to the findings of the baseline survey on financial literacy12, the information on

complaints will assist in the formulation of a national strategy on financial education, on which

work is expected to start in the third quarter of 2016.

2.4.6 ABANDONED PROPERTY

The FIA provides for the administration of abandoned property, which are clients’ funds or other

property with banks for which there have been no transaction or written correspondence by or

from the client for a period of at least 10 years.

Banks are required to notify clients of abandoned property in writing and through publication in

a local newspaper. All unclaimed property needs to be transferred to CBS in the eleventh year

where the funds are kept in non-interest bearing accounts and contents of safe deposit boxes are

maintained in the vault. Rightful claims for the transferred property are entertained.

Banks may have their own internal policies for accounts for which there have been no transaction

or correspondence for a period of less than 10 years whereby these are classified as dormant. In

Seychelles this ranges between 6 months to 2 years. The Financial Institutions (Bank Charges and

Fees) Regulations, 2013 state that there shall be no charges and fees payable by a person to a

bank for the maintenance of dormant account.

CBS maintains accounts denominated in USD, EUR and GBP for abandoned funds denominated in

foreign currencies. Abandoned funds denominated in any other currencies have to be converted

by the banks into one of these three currencies prior to the transfer to CBS. Table 2.8 shows the

movements in the abandoned property accounts and the balance as at the end of 2015.

Table 2.8: Balance of abandoned property accounts

2.5 BUREAUX DE CHANGE

Two new Class A licences were issued in 2015, such that the number of BDC stood at 26 at the

end of the year. The branches and contact details of BDC are shown in Appendix 3. In view that

12 The survey was conducted in the first half of 2016 and the findings are expected in August 2016.

2015 opening

balance

Transferred to

CBS in 2015

Refunded to

banks in 2015

2015 closing

balance

SCR 17,239,306.29 3,323,719.25 124,410.21 20,438,615.33

USD 172,915.05 376,513.50 1,980.00 547,448.55

EUR 11,084.86 14,483.13 0 25,567.99

GBP 2,575.04 4,544.53 0 7,119.57

21 | P a g e

Class A BDC undertake remittances, it is classified as a payment service provider under the

National Payment System Act, 2014. In 2015, the associated Licensing and Authorisation

Regulations, 2014 were implemented in relation to Class A BDC. Essentially, the licensing

requirements therein, in addition to those within the FIA, needed to be adhered to as part of the

licensing process. Existing Class A BDC were required to submit documentation to PSD in line

with the afore-stated Regulations and satisfy requirements for a payment services provider

licence to engage in money remittance activities to be issued. This is further discussed at section

4.2.3.

Chart 2.4 illustrates the volume of foreign currency transactions handled by BDC vis-à-vis those

that went through banks between 2013 and 2015. On the aggregate, the volume of transactions

handled by BDC increased by 5.53 per cent in 2015, although at a lower rate compared to the 9.92

per cent increase in 2014. As shown in Chart 2.5, TT transfers remained the bulk of BDC’

transactions in terms of volume, which influenced the increase in volume since transactions in

notes declined by 5.08 per cent between 2014 and 2015. At the market level, however, most notes

transactions continued to be handled by BDC representing 77.22 per cent of the total notes

transactions reported by the market in 2015.

Whilst BDC transactions increased, it is noted that the opposite happened in the banking sector,

such that there was an overall decline in foreign currency transactions of 7.46 per cent during the

year under review. This was due to relatively lower demand for foreign currency during the year

under review. This was attributed largely to lower international commodity prices in 2015, which

translated into a reduced overall value of imports.

Chart 2.4: Volume of Foreign Currency Transactions

-

2

4

6

8

10

12

2013 2014 2015 2013 2014 2015

BDCs Banks

Notes 1,140,802.18 1,225,797.80 1,163,531.11 334,298.25 334,628.40 343,191.08

TT 2,914,607.50 3,232,006.50 3,540,771.82 9,157,262.77 10,429,813.2 9,038,758.55

SCR

Mill

ion

s

22 | P a g e

2.6 CREDIT INFORMATION SYSTEM

The CIS is enabled by the Credit Information Systems, Regulations which were issued in 2012 and

amended in 2014. It collects information on credit of clients of participating institutions, being

banks, DBS, HFC and SCU and provides an indication of the indebtedness and creditworthiness of

clients. The participating institutions are required to consult the CIS when processing any

applications for credit. CIS supports banks’ credit risk management and promotes financial

discipline, which assists in ascertaining the soundness of the financial system.

There has been an increase in total enquiries in the CIS between 2013 and 2015 as shown in Table

2.9. It is noted that the 2014 amendments, amongst other things, provided for inquiries to be

prompted by clients through their banks. Prior to this, banks could only check the CIS if the clients

were applying for a credit or to guarantee a credit. Other amendments in 2014 included the

provisions for same day updates to be made in the CIS to improve accuracy and extension of the

retention period of both positive and negative information to five years on the CIS.

Table 2.9: Inquiries in the CIS

Inquiries 2013 17,106 2014 22,638 2015 26,970

In 2015, there has been initiatives to continue improving the effectiveness and efficiency of the

CIS. This has been in conjunction with the DICT for the technological aspect. On the legal side,

World Bank under the RAS, has been assisting with work to formulate a new Credit Reporting Act.

More details are provided at section 4.3.7 of the report.

Chart 2.5: Notes and TT market share

23 | P a g e

CHAPTER 3 - FINANCIAL ANALYSIS

An important component of supervision is financial analysis of supervised institutions’ positions and

performance. This provides an indication of the health of the financial sector and assists in

understanding the implications of economic developments on the institutions’ books. The

performance of the banking sector is explored substantively, followed by an overview of the

financials for SCU, DBS and HFC.

3.1 OVERVIEW OF THE BANKING SECTOR

This section gives a comprehensive overview of the banking sector’s financial position and

performance for the year 2015 with a comparative analysis from the year 201413. The data and

explanations provided in this chapter are principally based on audited figures submitted to FSSD.

Nonetheless, unaudited figures have been used on a consolidated basis in instances where

audited figures are not reported.

3.1.1 ASSETS, LIABILITIES AND EQUITY

For the year under review, the industry’s asset base recorded a significant drop of SCR2.80 billion

or 14.31 per cent. Conversely the banking sector’s equity capital grew by SCR123.43 million. The

industry’s total assets, total liabilities and equity capital settled at SCR16.77 billion, SCR15.02

billion and SCR1.75 billion respectively at the end of 2015. These balance sheet items are

illustrated in Chart 3.1.

13 Data for the year 2013 have also been included for illustrative purposes.

24 | P a g e

Chart 3.1: Assets, liabilities and equity

3.1.1.1 TOTAL ASSETS

The drop of SCR2.80 billion observed in the industry’s asset base in 2015 was attributed to a

decrease of SCR4.14 billion in external assets14, with the latter recording the lowest balance

during the past five years. However, all the other components of total assets recorded growth

during the year 2015, with the most significant increase observed in loans and advances

amounting to SCR515.41 million. This was followed by balances with CBS and amounts due from

financial institutions then investments in Government securities, which rose by SCR392.14

million and SCR281.21 million respectively.

14 Includes balances due from financial institutions abroad, securities, foreign currency (notes and coins),

foreign bills purchased and discounted and other investments in foreign currency.

-

5

10

15

20

25

2013 2014 2015

SC

R b

illi

on

s

Total Assets Total Liabilities Total Equity

25 | P a g e

Chart 3.2: Composition of total assets

EXTERNAL ASSETS

External assets declined considerably by SCR4.14 billion (equivalent to 47.06 per cent), from

SCR8.789 billion in 2014 to rest at SCR4.65 billion in the year under review. This compared to a

growth of SCR596.15 million in 2014. The development was primarily driven by a bank’s move

to close accounts in its offshore banking segment, prompted by the results of a remediation

exercise which the bank had undertaken on the clients. From the outcome, the bank had

determined that the level of risk in this business segment was inconsistent with its risk appetite.

Consequently, there was a significant decline in the bank’s deposits denominated in foreign

currency, reducing the funding available for investment in foreign currency denominated assets.

The appreciation of the domestic currency against the Euro and Pound sterling, especially relative

to the former foreign currency also contributed to the fall in external assets. Consequently, unlike

the previous years where external assets had been the dominant constituent of total assets, it

became the second largest component of total assets in 2015. The item represented 27.74 per

cent of total assets in the year under review, compared to 44.90 per cent in 2014. Chart 3.3 shows

the breakdown of external assets.

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2013 2014 2015

SC

R m

llio

ns

External assets

Loans & advances

Balances with CBS &amounts due from financialinstitutions

Investments in Governmentsecurities

Other assets

26 | P a g e

Chart 3.3: Breakdown of external assets

As observed in Chart 3.3, the most remarkable decline in external assets was seen in balances due

from financial institutions abroad, which fell by SCR2.74 million between 2014 and 2015. As for

securities and other investments, this declined by SCR1.43 million to settle at SCR1.87 million at

the end of the year 2015.

LOANS AND ADVANCES15

Loans and advances grew by SCR515.41 million to reach SCR5.85 billion at the end of 2015. This

represented an increase of 9.66 per cent, which is a slower growth rate compared to 18.03 per

cent in 2014. To recall, the double digit growth in 2014 had been attributed to an increase in

disposable income following a revision in the salary structure coupled with the 20 per cent rise

in minimum wages at the start of 2014. Owing to the consumption oriented nature of many of the

loan facilities, CBS was cautious of the potential inflationary risk associated with such credit in

2015. CBS expected that credit would grow for the first half of 2015, which is corroborated by the

significant amount of commitment outstanding (SCR674.37 million worth of undrawn overdraft

and loan facilities16) as at the end 2014. This expectation contributed to the tight monetary policy

stance that was adopted by CBS for the most part of 2015 and this had a bearing on the afore-

mentioned slowdown in credit. At the end of the year under review, loans and advances

accounted for 34.87 per cent of the banking industry’s asset base, and by virtue of the significant

fall in external assets, represented the largest component.

The growth in the industry’s loan portfolio was observed in all of the loan categories, as illustrated

in Chart 3.4.

15 Figures and explanations relating to the composition of loans and advances are based on unaudited

figures. 16 Facilities that have been approved by the banks but are yet to be disbursed.

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2013 2014 2015

SC

R m

illi

on

s Balances due from financialinstitutions abroad

Securities and otherinvestments

Other external assets

External assets

27 | P a g e

Chart 3.4: Breakdown of loans and advances

Term loans remained the largest constituent of the industry’s loan portfolio, representing 54.77

per cent of total loans and advances by the end of 2015. A growth of SCR99.63 million was

recorded in these loans from 2014 to 2015, causing the item to settle at SCR3.21 billion by the

end of the review period. This increase is much lower compared to the previous year, whereby a

rise of SCR352.46 million was observed. As regards to the average yield on term loans in 2015,

this was reported at 12.17 per cent compared to 10.15 per cent by the end of 2014. To note that

both outcomes are consistent with the monetary policy stance that had been taken by CBS.

‘Other’ loans, which comprised mostly of credits denominated in foreign currency, was the second

largest component of the industry’s total loans and advances as at the end of 2015. The proportion

of foreign currency denominated loans to total loans and advances increased by 3.09 percentage

points from 25.48 per cent to 28.57 per cent in 2015. In absolute terms, this item grew by

SCR316.36 million, to settle at SCR1.68 billion by the end of the review period. It is noted that the

highest growth was recorded in this type of credit which was attributed to disbursement of new

facilities during the period. In effect, loans denominated in foreign currency increased from

USD97.05 million (equivalent to SCR1.36 billion17) in 2014 to USD127.72 million (equivalent to

SCR1.68 billion18) by the end of 2015. Another underlying factor for the increase in this asset

could be associated with depreciation of the Seychelles Rupee against the Euro observed in 2015,

which may have also driven increases in loans denominated in the said foreign currency. To note

that a significant amount of loans denominated in Euro was granted to public entities, during the

year under review. Moreover, it is cheaper to borrow in foreign currency rather than in local

currency (provided borrowers are earning income in foreign currency), to which might have

resulted in increase in ‘other’ loans.

As regards to overdraft and mortgage loans, these items increased by SCR91.24 million (to

SCR474.73 million) and SCR22.30 million (to SCR502.99 million) respectively, from 2014 to

2015. As a percentage of total loans and advances, overdrafts represented 8.09 per cent and

mortgage loans accounted for 8.57 per cent by the end of 2015.

17 Reference mid-rate as at December 31, 2014 1USD = SCR14.0147 18 Reference mid-rate as at December 31, 2015 1USD = SCR13.1258

-

500

1,000

1,500

2,000

2,500

3,000

3,500

2013 2014 2015

SC

R m

illi

on

s

Overdrafts Term loans Mortgage loans Other loans

28 | P a g e

BALANCES WITH CBS AND AMOUNTS DUE FROM FINANCIAL INSTITUTIONS

At SCR2.67 billion, balances with CBS and amounts due from financial institutions constituted

15.94 per cent of total assets as at the end of 2015. This component of total assets observed a

growth of SCR392.14 million equivalent to 17.19 per cent, driven largely by increases in balances

with CBS, which in turn was due to banks’ increased investment in DAA. DAA remained the main

open market operations instrument used during the year to absorb liquidity from the financial

system consistent with the tightening stance that prevailed for the most part of 2015. Of note,

banks earned relatively higher interest on DAA during the year under review19.

Another component of balances with CBS comprise of statutory reserve with CBS, a reserve

maintained in accordance with section 31(1) of the CBS Act. The minimum required reserve

under this section of the said Act to maintain is based on a percentage (13 per cent in 2015) of

residents’ deposit liabilities, irrespective of the currency. Although a decline was noted in the

industry’s deposit liabilities during the review period, such observation was in non-residents

deposits as opposed to residents deposits. From 2014 to 2015, balances with CBS recorded an

upward trend, albeit at a lower scale compared to investment in DAA.

INVESTMENT IN GOVERNMENT SECURITIES

Investment in Government securities increased by 11.27 per cent in 2015, to settle at SCR2.78

billion at the end of the year. The item represented 16.56 per cent of the industry’s total assets,

compared to 12.75 per cent in 2014. Growth in Government securities was mainly attributed to

the issuance of T-bills during the year, with banks’ holdings of T-bills increasing by SCR282.15

million or 15.65 per cent from the previous year. It is noted that CBS and the MFTBE, maintained

policy co-ordination in 2015 such that government securities continued to be issued in support

of monetary policy. In the year, short term Government securities were issued to absorb liquidity

from the system20. The yield on Government securities was also higher across all three maturities,

as elaborated at section 3.1.4.2.

During the year the Government did not issue new T-bonds. In effect, the outstanding balance of

T-bonds declined by 0.14 per cent, reflecting the maturities in these securities during the year

under review. As for Government stocks, a marginal increase of SCR0.02 million was observed

from 2014 to 2015, which was due to interest accrued on these assets.

19 At the end of 2015 interest rate on 7 day DAA was 4.02 per cent compared to 3.50 per cent end 2014. At

the end of 2015, 28 day DAA earned interest of 6.50 per cent whilst 14 day DAA was at 3.55 per cent at end 2014.

20 The stock of T- Bills that had been issued for monetary policy purposes by MFTBE as at December 2015 stood at SCR1.56 billion vis-à-vis total stock of outstanding T-Bills of SCR2.86 billion.

29 | P a g e

Chart 3.5: Breakdown of investments in Government securities

3.1.1.2 TOTAL LIABILITIES

Total liabilities as a percentage of total assets declined by 2.12 percentage points to 89.57 per

cent between 2014 and 2015. Similarly, deposit liabilities to total liabilities dropped by 2.40

percentage points at 93.32 per cent during that period. Given developments in the afore-

mentioned indicators, whilst deposits clearly remained the main source of funding, the allotment

of total deposits to total assets stood at 83.58 per cent as at the end of the review period compared

to 87.76 per cent in 2014.

-

500

1,000

1,500

2,000

2,500

2013 2014 2015

SC

R m

illi

on

s

Treasury bills Treasury bonds Government stock

30 | P a g e

Chart 3.6: Total liabilities and total deposits

Total liabilities recorded a decline of SCR2.92 billion or 16.29 per cent to stand at SCR15.02 billion

by the end of 2015. The decline in this item was due to a drop in the industry’s total deposits

(from SCR17.18 billion to SCR14.02 billion) following a decline observed in checkable deposits,

primarily those denominated in foreign currency. This drop in the industry’s deposit base was

mainly associated with the closure of foreign currency denominated accounts by one bank during

the year 2015.

At the end of the year under review, checkable deposits had declined by SCR2.47 billion to stand

at SCR9.07 billion. Time deposits declined by SCR1.05 billion to settle at SCR2.32 billion, which

was primarily driven by the maturity of deposits at one bank. As regards to savings deposits, this

item increased by SCR378.96 million and stood at SCR2.62 billion by the end of 2015.

Based on unaudited figures, average cost of time deposits was more favourable in 2015 than that

in 2014. This item grew by 1.43 percentage points to settle at 3.34 per cent by the review period.

Similarly, average cost of savings deposits recorded an increase of 0.47 per cent to stand at 2.08

per cent by the end of 2015. As at the end of 2015, average cost of ‘other’ deposits and average

cost of checkable deposits stood at 0.82 per cent and 0.04 per cent respectively.

As at the end of the review period, current, time and savings deposits denoted 64.66 per cent,

16.55 per cent and 18.68 per cent respectively of total deposits. ‘Other’ deposits accounted for

only 0.11 per cent of the industry’s total deposits as at the end of 2015.

16,941 17,948

15,025 16,039

17,179

14,020

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2013 2014 2015

SC

R m

illi

on

s

Current deposits

Time deposits

Savings deposits

Other deposits

Total liabilities

Total deposits

31 | P a g e

3.1.1.3 EQUITY

Equity capital21 grew by SCR123.43 million from 2014 to 2015 to settle at SCR1.75 billion,

representing a growth of 7.59 per cent. This was largely attributed to the industry’s net profit

after tax of SCR428.60 million recorded for 2015. It should be noted that the dividend payments

which were effected at year end, reduced the amount transferred to retained earnings. Other

components of equity capital which comprised of statutory reserve fund and ‘other reserves22’,

observed increases of SCR3.01 million and SCR0.75 million, respectively. As at the end of 2015,

equity capital represented 10.43 per cent of the industry’s total assets.

3.1.2 CAPITAL ADEQUACY23

The main regulatory metrics for capital adequacy, which gauge the extent of capital coverage over

assets and indicate banks’ ability to buffer against losses, are shown in Table 3.1. Banks are also

required to maintain minimum unimpaired paid-up capital of SCR20 million.

Table 3.1: Main regulatory requirements relating to capital

Legislation Requirement/Ratio Limit Minimum capital adequacy

ratio (capital base to risk-adjusted assets)

12 per cent

Minimum core capital ratio (tier 1 capital to risk-adjusted assets)

6 per cent

During the year 2015, all banks were in compliance with the above requirements. Chart 3.7

illustrates the notable increases observed in the main capital adequacy indicators monitored by

FSSD between 2014 and 2015. The rise observed in the ratios was driven by the significant drop

in risk-weighted assets combined with the increase reported in the industry’s regulatory capital.

Specifically, the capital adequacy ratio increased by 5.95 percentage points from the previous

year to settle at 25.46 per cent at the end of December 2015. As for the minimum core capital

ratio, this increased by 3.33 percentage points and stood at 18.10 per cent at the end of the review

period.

The performance of both components of the capital adequacy ratios during the year 2015 are

discussed further in sub-sections 3.1.2.1 and 3.1.2.2.

21 Comprises of paid-up capital, statutory reserve fund (in accordance with section 24 of the FIA), other

reserves and retained profit or loss. 22 Other reserves include fair value reserves, revaluation reserves, translation reserves and equity settled

employee benefits reserves. 23 Figures for this section are based on unaudited figures.

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3.1.2.1 CAPITAL BASE24

The industry’s regulatory capital increased from SCR1.68 billion as at December 2014 to SCR1.87

billion as at same period in 2015, representing an increase of 11.46 per cent which amounted to

SCR192.04 million. Similar to previous years, the main component of capital base continued to be

tier 1 capital which accounted for 71.11 per cent of the item, indicating a robust capital base.

However, the increase in regulatory capital was driven primarily by tier 2 capital25 (by SCR132.82

million), namely in year-to-date net profit after tax (by SCR126.48 million). To note that the

regulatory capital is made up of tier 1 capital and tier 2 capital, of which the former is of a more

permanent nature compared to tier 2 capital. Tier 1 capital comprise primarily of unimpaired

ordinary paid-up share capital (or assigned capital in the case of a foreign bank), statutory

Reserve Fund established and maintained pursuant to section 24 of the FIA and retained profits

or loss brought forward from the previous financial year. Tier 2 capital consists of year to date

net profit after tax, hybrid capital instruments, subordinated debt and general provisions.

3.1.2.2 TOTAL RISK-ADJUSTED ASSETS

The industry’s risk-adjusted assets was driven by high decreases in the 20 per cent and 100 per

cent risk buckets amounting to SCR642.32 million and SCR677.24 million respectively. The drop

in the latter was mainly driven by the maturity of one bank’s investment. Banks’ placements

denominated in foreign currency represented the bulk of assets in the 20 per cent risk bucket. It

is worth noting that the drop in the 20 per cent risk bucket was driven by the strategic move of a

bank to close accounts in its offshore banking business portfolio.

3.1.2.3 NET TANGIBLE CAPITALISATION RATIO

For a more prudent assessment, FSSD also assesses banks’ net tangible capitalisation ratio26,

which essentially weights all banks’ assets in the 100 per cent risk bucket. A growth of 2.65

percentage points was noted, to settle at 11.19 per cent for the month ending December 2015.

This trend was due primarily to a drop in net asset base27 followed by an increase in equity capital

amounting to SCR2.86 billion and SCR196.98 million respectively. As previously mentioned,

increases in equity capital was driven largely by the industry recording net profit after tax for the

year under review.

24 Also known as regulatory capital. 25 Includes general provisions and year to date net profit after tax. 26 Net Tangible Capitalisation Ratio (NTCR) is the ratio of capital to tangible assets on an un-weighted basis.

It is a more prudent approach as assets are not risk weighted. The recommended ratio is 6 per cent. The FIA states that a ratio of 1.50 per cent or less indicates insolvency and is a condition for revocation or variation of terms and conditions of a bank’s licence.

NTCR = Equity Capital

(Assets − Interest in Suspense − Provisions)

27 Computed by deducting specific and general provisions and interest in suspense from total assets.

33 | P a g e

Chart 3.7: Trend in capital ratios

3.1.3 ASSET QUALITY28

Good asset quality is one factor that determines the financial soundness of a financial institution

since a deterioration in such, affects the financial condition and performance of the institution. As

such, effective evaluation, monitoring and assessment of asset is an essential part of a financial

institution’s management in order to minimise the credit risk of the institution. Chart 3.8

illustrates some asset quality indicators of the banking sector from 2013 to 2015.

28 Figures for this section are based on unaudited figures.

0%

5%

10%

15%

20%

25%

30%

2013 2014 2015

Capitaladequacy ratio

Minimumcapitaladequacy ratio

Core capitalratio

Minimum corecapital ratio

Net tangiblecapitalisationratio

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Chart 3.8: Asset quality indicators

An increase of SCR20.26 million was noted in the industry’s Non-Performing Loans (NPLs) from

2014 to 2015, to settle at SCR445.26 million by end of the review period. This represented a

growth of 4.77 per cent in NPLs compared to a rise of 2.17 per cent recorded in 2014. This

movement in NPLs was mainly due to reporting issues which required reclassification of the

facilities at two banks during 2015. Thus, it can be said that the development in NPLs was not

reflective of a deterioration in the asset quality across the industry.

Total provisions29 recorded an increase of SCR0.89 million to SCR228.15 million (equivalent to

0.39 per cent) from 2014 to 2015. This rise was fairly low in comparison to the growth of 18.07

per cent for the year 2014. The lower increase in provisions is due to the value of eligible

collateral being held against the downgraded facilities.

The ratio of NPLs to total advances and total provision to advances decreased slightly by 0.37

percentage points to settle at 7.59 per cent and 3.89 per cent respectively by the end of 2015. The

slight downward movement in the said ratios, was attributed to the growth of 15.50 per cent

recorded in the industry’s total advances, from 2014 to 2015.

The rise in total NPLs from 2014 to 2015 was driven primarily by the tourism sector, followed by

the private household sector, mortgage sector and trade sector. The increase in these sectors

aggregated to SCR63.45 million but this rise was mitigated by declines recorded in the building

and construction sector and real estate sector. Similar to the previous year, the health sector and

tourism sector maintained the largest share of NPLs for the year 2015.

29 Include general provision and specific provision.

0%

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2013 2014 2015

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Total provisions(LHS)

Total non-performingloans (LHS)

Total provisionsto total loansand advances(RHS)

Total non-performingloans to totalloans andadvances (RHS)

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Table 3.2: Sectoral Distribution of NPLs

Figures are in SCR ’000 2013 2014 2015 Change % Change

Agriculture & horticulture

15,272 3,370 834 -2,536 -75.25%

Art & Entertainment - 248 0 -248 100.00%

Building and Construction

16,656 37,346 9,948 -27,398 -73.36%

Education - 64 59 -5 -7.86%

Health 126,931 137,315 144,787 7,472 5.44%

Manufacturing 5,049 7,226 326 -6,900 -95.49%

Professional, Scientific & Technical Services

- 116 548 432 372.11%

Real estate 57,520 73,153 62,996 -10,157 -13.89%

Tourism 98,813 98,703 117,726 19,023 19.27%

Trade 14,490 13,208 23,379 10,171 77.01%

Transport 8,353 5,686 3,038 -2,648 -46.57%

Community, Social & Personal

- 13 25 12 89.06%

Private household 37,530 26,614 45,406 18,792 70.61%

Mortgage loans 7,018 7,184 22,645 15,461 215.21%

Others 28,284 14,696 13,488 -1,208 -8.22%

Total NPLs 415,916 424,943 445,205 20,262 4.77%

As regards the industry’s loan portfolio, in 2015 this was concentrated primarily in the tourism

sector whilst the private household sector and real estate sector accounted for the second and

third largest portion of total loans and advances. The highest growth was recorded in the

‘others’30 sectors (by SCR123.07 million to SCR226.30 million) as a result of two major facilities

denominated in foreign currency disbursed in the second half of the year 2015. Other significant

increases in total credits was observed in the financial institutions sector (by SCR77.16 million to

settle at SCR257.27 million) and the building and construction sector (by SCR67.00 million to

settle at SCR498.96 million). Table 3.2 shows the sectoral distribution of the banking sector’s loan

portfolio.

30 Sectors not being captured in the sectors identified in Table 3.2

36 | P a g e

Table 3.3: Sectoral distribution of loans and advances31

% of total loans and

advances

2013 2014 2015

Government 16.87% 13.39% 11.55%

Financial institutions 5.00% 3.39% 4.43%

Agriculture & horticulture

0.39% 0.60% 0.75%

Art & Entertainment 0.93% 0.48%

Building and Construction

10.27% 8.12% 8.59%

Education 0.46% 0.38%

Fishing 0.33% 0.70% 0.65%

Health 3.00% 2.55%

Manufacturing 0.75% 1.07% 1.76%

Professional, Scientific & Technical Services

0.54% 0.47%

Real estate 10.32% 11.74% 12.02%

Telecommunications, Computer & Information

0.55% 0.33%

Tourism 12.17% 17.49% 16.83%

Trade 4.43% 6.29% 6.91%

Transport 3.88% 3.04% 2.78%

Community, Social & Personal

0.56% 0.54%

Non Profit Institutions

0.58% 1.03% 0.68%

Private household 15.86% 16.45% 15.78%

Mortgage loans 10.04% 8.72% 8.61%

Others 9.12% 1.94% 3.90%

3.1.4 EARNINGS32

Earnings are returns on a bank’s investment in assets and capital as well as a primary measure of

its performance.

3.1.4.1 LEVELS AND TRENDS OF PROFITABILITY

The industry’s net profit before tax for the year ending 2015 was recorded at SCR656.82 million

compared to SCR476.11 million in 2014. To note that this represented a growth of 37.95 per cent

31 In 2014 a new classification for the sectoral distribution of loans was introduced. 32 Figures for this section are based on audited figures unless otherwise stated.

37 | P a g e

compared to 0.16 per cent in 2014. A net profit after tax of SCR428.60 million was recorded in

2015, a remarkable increase from SCR348.15 million in 2014. This represented a rise of 23.11

per cent, compared to the increase of 4.28 per cent in 2014. Chart 3.9 shows the trend in the

banking sector’s profits between 2013 and 2015.

Chart 3.9: Tend in level of Profit

In Table 3.4, it can be seen that the higher profit recorded in 2015 was primarily driven by higher

interest income earned in the year under review. The trend in income and expenses is explained

under the next section.

3.1.4.2 COMPOSITION OF INCOME AND EXPENSES

By the end of the review period, the banking industry’s total income was recorded at SCR1.36

billion, which is SCR268.37 million greater than what was recorded in 2014. This was attributed

mainly to an increase of SCR250.73 million in interest income, more specifically in income from

investments, which rose by SCR128.41 million and income on loans and advances which

expanded by SCR122.32 million.

Based on unaudited statements, the increase in interest income was driven mainly by higher

interest income earned on local investments notably T-Bills, following higher yields on these

securities in 2015. This is connected to the tight monetary policy stance which was implemented

by CBS during the year 2015 as previously explained. The average yields on T- Bills at the end of

2015 stood at 5.70 per cent (91 days), 6.39 per cent (182 days) and 7.15 per cent (365 days).

These represented increases of 0.31 percentage points, 1.52 percentage points and 1.55

percentage points on the 91-day, 182 day and 365 day bills, correspondingly.

In regards to the rise in interest income on loans and advances, the most noteworthy increase

was observed in income earned on term loans by SCR75.18 million33. Of note, all the loan

categories registered an increase in income, a result that was attributed to the increased volume

of the loan portfolio and the rise in lending rate.

33 This figure is based on unaudited statements.

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2013 2014 2015

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Net profitbefore tax

Net profitafter tax

38 | P a g e

Total expenses also climbed by SCR105.11 million in the year under review, driven by increases

in interest expense and other operating expenses. As per the unaudited statements, increases

were observed primarily in interest paid on savings deposits and time deposits. As stated at

section 3.1.1.2, savings was the only type of deposit that increased in volume during the year

having increased by SCR378.96 million to stand at SCR2.62 billion by the end of 2015.

Furthermore, the average return on savings deposits increased from 1.61 per cent to 2.08 per

cent between 2014 and 2015. Although time deposits recorded a decline during the review

period, the average return on this type of deposit by the end of 2015 (3.34 per cent) was more

favourable than that of 2014 (1.92 per cent). To note that the average cost was based on

unaudited figures.

Other operating expense rose by SCR55.66 million to stand at SCR251.16 million by the end of

2015. To note that this trend was driven primarily by two banks.

Table 3.4: Earnings’ data

2013 2014 2015 % Growth

or decline

2014

% Growth

or decline

2015

Figures are in SCR '000

Interest Income 708,625 626,226 876,956 -11.63% 40.04%

Interest Expenses 139,290 103,715 136,684 -25.54% 31.79%

Net Interest Income 569,335 522,510 740,272 -8.22% 41.68%

Non-Interest Income 365,449 461,209 478,844 26.20% 3.82%

Non-interest Expenses 451,714 485,818 557,958 7.55% 14.85%

Total Income 1,074,074 1,087,435 1,355,800 1.24% 24.68%

Total Expenses 591,004 589,533 694,642 -0.25% 17.83%

Net Profit Before Tax 475,339 476,110 656,816 0.16% 37.95%

Net Profit After Tax 333,853 348,150 428,604 4.28% 23.11%

The industry’s ROA and ROE rose by 1.34 percentage points and 5.74 percentage points,

respectively in 2015. Increase in both ratios was driven by the higher profit observed during the

year, which is explained above.

Table 3.5: Trend in earnings ’ ratios

2013 2014 2015

Return on assets (ROA) 2.60% 2.55% 3.88%

Return on equity (ROE) 28.18% 30.20% 35.94%

Average yield on loans and advances 9.49% 8.07% 9.35%

Average cost of deposits 0.87% 0.59% 0.94%

Average yield on treasury bills 7.10% 2.83% 7.97%

Average yield on CBS instruments 0.76% 0.96% 2.28%

39 | P a g e

3.1.5 LIQUIDITY34

Liquidity describes the capability of an institution in funding increases in its assets and meeting

its commitments as they fall due. Good liquidity management is vital for an institution, in view

that liquidity deficit can have severe consequences both on a micro and macro level. Chart 3.10

highlights some ratios used by FSSD to monitor banks’ liquidity positions.

Chart 3.10: Trend in liquidity ratios

Most of the banking sector’s liquidity indicators observed decrease for the year 2015. This was

caused by the fall in liquid assets, specifically placements with other banks which declined by

SCR2.97 billion to stand at SCR2.67 billion at the end of 2015. Driving this development was the

decrease in customer deposits, as mentioned at section 3.1.1.2, which is a source of funding for

the afore-mentioned component of liquid assets.

Correspondingly, the industry’s core liquid assets35 amounted to SCR5.60 billion at the end of the

year 2015, after observing a decline of SCR2.48 billion from the preceding year. The core liquid

34 Figures in this section are based on unaudited figures. 35 Includes cash, balances with CBS and deposits with other banks.

0%

10%

20%

30%

40%

50%

60%

70%

80%

2013 2014 2015

Liquid assets to totalliabilities (As per FinancialInstitutions ( LiquidityRisk Management)Regulations, 2009)Core liquid assets to totalassets

Broad liquid assets to totalassets

Broad liquid assets toshort term liabilities

Loans to deposit ratio

Bank run (Liquid assets todeposit liabilities)

40 | P a g e

assets to total assets ratio dropped by 780 basis points from 2014 to 33.02 per cent at the end of

the review period.

Broad liquid assets36 also decreased during the review period given lower core liquid assets. The

drop was slightly mitigated with the increase in Government securities, such that broad liquid

assets reduced by SCR2.21 billion and stood at SCR8.34 billion at end 2015.

Broad liquid assets represented a lower proportion of total assets in 2015 (falling by 4.14

percentage points to 49.18 per cent) and of short term liabilities (falling by 3.11 percentage points

to 55.92 per cent.)

Conversely, the liquid assets37 to total liabilities ratio observed a growth of 4.40 percentage points

to settle at 59.31 per cent at the end of the year 2015. A limit of 20 per cent for this ratio is

prescribed in the Financial Institutions (Liquidity Risk Management) Regulations, 2009. All banks

remained above the prudential limit during the year under review.

Another liquidity indicator assessed by FSSD is the bank run ratio, which represents the capability

of a bank to match its deposits with liquid assets in the event of a bank run. For the year ending

2015 the industry’s bank run ratio stood at 59.54 per cent after observing a drop of 215 basis

points.

As regards the industry’s loans to deposit ratio, this climbed from 31.19 per cent in 2014 to 41.87

per cent in 2015, representing a considerable growth of 10.68 percentage points. This was driven

by the drop of 18.13 percentage points in the industry’s deposit base, vis-à-vis the relatively lower

increase of 9.92 percentage points in the loan portfolio.

3.1.6 SENSITIVITY TO MARKET RISK38

Exchange rate risk and interest rate risk are the two main components of market risk to which

banks in Seychelles are exposed to, given the nature of their main business activities. In order to

manage exchange rate risk in Seychelles, the Financial Institutions (Foreign Currency Exposure)

Regulations, 2009 stipulate a total long and total short position to capital limit of 30 per cent

respectively. During the year 2015, two banks were in violation of this foreign currency exposure

limit, nonetheless, this breach was promptly rectified. These are further illustrated in Chart 3.11.

Total long position declined from SCR154.81 million in 2014 to SCR85.37 million in 2015, with

the drop driven by two banks. As regards to total short position, it increased from SCR12.89

million in 2014 to SCR50.22 million as at reference date, whereby one bank was the main driver

of this drop.

Variable interest rates enabled by most banks’ agreements with their clients assist with banks’

management of interest rate risk.

36 Includes core liquid assets and Government securities. 37 Liquid assets used for the statutory ratio includes a component that is not part of broad liquid assets,

namely securities and other investments. 38 Figures used for this section are based on unaudited figures.

41 | P a g e

Chart 3.11: Total long and total short positions

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2013 2014 2015

Total long position to capital Total short position to capital

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3.2 OVERVIEW OF OTHER INSTITUTIONS

3.2.1 SCU

In 2015, SCU recorded a growth of SCR25.85 million in its asset base, driven primarily by

increases in its loan portfolio. Growths were also observed in the institution’s short term

investments, which consist of SCU’s investment in T-bills and T-bonds. At the end of the year

under review, its total assets stood at SCR246.84 million.

The institution’s loan portfolio increased from SCR140.73 million in 2014 to SCR163.75 million

in 2015. This represented a growth of 16.36 per cent.

As at the end of the year 2015, SCU’s total deposit stood at SCR169.08 million after observing an

increase of SCR17.43 million. The trend in deposit base was attributed to the rise of SCR18.56

million in the institution’s savings deposit. This represented a growth of 12.87 per cent. As

regards to time deposits, this item observed further decline of SCR1.14 million in the year 2015.

It should be noted that for the past five years this item has observed consecutive declines.

SCU’s capital increased by SCR6.82 million to settle at SCR63.71 million in the year under review.

This was as a result of a growth of SCR5.82 million in ownership shares. Increases were also noted

in the general reserves amounting to SCR0.97 million.

The net profit recorded in 2015 was the highest SCU has observed during the past ten years. This

item rose by SCR1.37 million, representing a significant increase of 73.21 per cent. The trend was

driven by increases in interest earned on loans and Government securities amounting to SCR1.22

million and SCR1.51 million respectively. At the end of 2015 SCU’s net profit stood at SCR3.23

million.

43 | P a g e

Chart 3.12: SCU’s indicators

3.2.2 DBS

As depicted in Table 3.6, the shareholdings of DBS in 2015 remained similar to that of the previous

year. The Government of Seychelles remain the main shareholder of DBS, with the remaining

shareholders belonging to 2 international banks and 1 local bank.

Table 3.6: DBS ownership

DBS shareholders Share

Government of Seychelles 60.51%

Agence Francaise de Development 20.00%

European Investment Bank 15.90%

Nouvobanq 1.59%

DBS’ asset base grew by SCR132.13 million to settle at SCR698.16 million at the end of 2015. This

represented a growth rate of 23.34 per cent, which is significantly higher compared to 9.39 per

cent recorded in the previous year. This rise in total assets was mainly attributed to the expansion

of 28.31 per cent in DBS’ loan portfolio. The latter increased by SCR119.27 million to stand at

SCR540.56 million at the end of 2015. The growth in the institution’s loan portfolio reflected an

increase of SCR129.62 million in loans extended under SME loan scheme. It should be noted that

other than the rise observed in loans to SMEs, notable increases were also recorded in loans to

the building and construction sector by SCR29.33 million. These increases were however

lessened by declines in other sectors namely in the services sector and industry sector by SR32.09

million and SCR13.86 million, respectively.

0.0

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2013 2014 2015

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In view that DBS is a non-deposit taking institution, the institution mainly funds its growth by

borrowing from other financial institutions and through the issuance of bonds. In 2015, no new

bonds were issued although DBS expects to make new issuance in 2016. In regards to the

institution’s borrowings, this increased by SCR114.24 million to reach SCR258.90 million at the

end of 2015. The increase in borrowings was noted in local borrowings as opposed to overseas

borrowings, which decreased from representing 13.95 per cent of total borrowings in 2014 to

6.56 per cent in 2015.

An increase of SCR14.50 million (5.18 per cent) was observed in DBS’ equity capital from 2014,

causing the item to settle at SCR294.14 million in 2015. This increase reflected the net profit

generated by the institution for the year in question. To note that there were no changes in the

value of DBS’ share capital and reserves from 2014 to 2015.

As mentioned above, a net profit of SCR14.50 million was recorded by DBS for the year 2015,

which is slightly lower (by SCR1.11 million) than the profit of SCR15.61 million made by the

institution in the preceding year. This reduction in revenue was brought about by higher

operating expenses39 having increased by SCR5.85 million, which consequently mitigated the

effect of the net income which increased by SCR6.14 million during the year.

Chart 3.13: DBS’ indicators

3.2.3 HFC

Total assets increased from SCR507.79 million in 2014 to SCR537.70 million in the year 2015,

representing a growth of 5.89 per cent compared to the previous year where there was a decline

of 12.14 per cent. The main component that caused the rise in the institution’s asset base was

39 Consists of administration costs and staff costs, of which the latter was the main reason for the fall in

revenue.

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800

2013 2014 2015

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45 | P a g e

primarily loans and advances to customers, which saw an increase by SCR67.24 million to

SCR451.66 million.

Cash and bank balances, reported a decline of SCR46.85 million in the year under review. The

decrease in this item was due to disbursement of new loans made during the year as well as

repayment of borrowings effected by HFC.

HFC’s capital grew by 12.95 per cent from SCR299.62 million in 2014 to SCR338.42 million in

2015. This growth was mainly observed in the institution’s capital reserve which increased by

SCR17.78 million to settle at SCR256.97 million in 2015. Increase in this item was entirely from

cash received from the Government in relation to the housing finance subsidy scheme, which was

implemented in 2014. This scheme allows first time home buyers earning under SCR20,000 a

month to qualify for a Government subsidy in the form of a cash grant between SCR50,000 to

SCR200,000 as a down payment. The other noteworthy increase in HFC’s capital was noted in the

institution’s retained earnings, following a rise in net profit.

HFC’s net profit of SCR16.92 million in the year 2015, represented a rise of 105.57 per cent from

the previous year. This was a significant increase in HFC’s performance compared to 18.69 per

cent increment in the net profit in 2014.The higher profit in 2015 was mainly due to an increase

in the institution’s interest income, which is linked primarily to new loans disbursed during the

year under review.

Chart 3.14: HFC’s indicators

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SC

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Total assets Loans Capital Net profit

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CHAPTER 4 – DEVELOPMENTS IN THE SUPERVISORY

FRAMEWORK AND THE FINANCIAL SECTOR

This chapter provides an overview of developments in the regulatory and supervisory framework

relating to the supervised institutions during 2015. The initiatives undertaken to achieve further

development within the financial sector are also presented.

4.1 OVERVIEW OF DEVELOPMENTS

In terms of development in the regulatory and supervisory framework, FSSD’s work is guided by approaches and principles set by standard setting bodies such as BCBS in respect of banks and WOCCU for the credit union. In as much as the standards are relevant and can be adapted to the local context, FSSD seeks to pay heed to international best practices towards the objective of bolstering the regulatory and supervisory framework and ensuring the soundness of the financial system. As regards actions related to development in the financial sector, this is blueprinted by the FSDIP which was approved by the Cabinet of Ministers in November 2014. The FSDIP addresses certain areas in the financial sector identified as having potentially high impact on individuals, businesses and Government agencies as well as on the safety and soundness of the financial system. It provides an impetus for the completion of actions that had been initiated and also sets the pace for new initiatives in the financial sector. Further details on the FSDIP are contained in section 4.3.9.

4.2 LEGISLATIVE DEVELOPMENTS

The main legislative developments in 2015 pertained to the amendment of the Credit Union Act,

2009. This is summarised at section 4.2.1.

FSSD was also involved in work that led to the enactment of the Secured Transactions Act during

the year under review in collaboration with the Office of the Registrar General, as summarised in

section 4.2.2.

Section 4.2.3 also provides an overview of the changes implemented in the licensing process of

banks (whereby approval for providing payment services is required) and Class A BDC (whereby

a payment service provider licence for money remittance services is required) in relation to the

requirements of the Licensing and Authorisations Regulations issued under the National Payment

System Act in 2014.

4.2.1 AMENDMENT TO CREDIT UNION ACT, 2009

The Credit Union Act, 2009 was amended in September 2015 with the following objectives:

Ensure that the legislation and supervision are at par with international standards and

are effective in relation to CUs’ operations;

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Strengthen the supervisory power of the regulatory authority over prudential matters

governing CUs;

Strengthen enforcement action against unsafe conducts and operations of CUs; and

Provide the regulatory authority with power to issue rules in regards to the operations of

CUs.

The salient amendments of the said Act are summarised below in Table 4.1.

Table 4.1: Summary of amendments to the Credit Union Act, 2009

Area

Summary

Other activities of a CU

The amendment allows for a CU to provide other activities that are consistent with the activities of a financial institution, as may be prescribed by Regulations. This addresses the previous restriction whereby the only permissible activities were listed in the Act.

Approval of members by the regulatory authority prior to election to Board and Supervisory Committee in the AGM

The amendment provides for the regulatory authority to approve a member of a CU, before the person is elected to the Board or Supervisory Committee in the AGM. This is consistent with ensuring that persons involved in strategic leadership and decision-making are fit and proper, that is, they meet qualities of integrity, competency and credibility. The amendment also prescribes the conditions for non-eligibility to be appointed on the Board and Supervisory Committee.

Appointment of Chief Executive Officer The amendment provides for the Chief Executive Officer to be approved at the AGM and to have experience and expertise in finance, banking, accounting, management, cooperation or any other field related to the operation of a credit union.

Loans The amendment provides for limit on large exposure, which is 10 per cent for all members or such other amount as may be prescribed by the regulatory authority. This provision aims at preventing excessive risk being concentrated with a single borrower. The amendment also allows for the employees of CUs to benefit from employee credit schemes.

Prudential requirements The amendment provides the regulatory authority with the power to issue Regulations or rules for prudential requirements. These set parameters within which CUs should operate in the interest of ensuring their soundness and the protection of their members’ interest:

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Minimum required capital and capital adequacy: The amendment requires that a CU maintains in Seychelles unimpaired capital as prescribed by rules by the regulatory authority. It also provides for the regulatory authority to prescribe rules on the capital to risk-weighted assets to be maintained by CUs. Foreign currency exposure limits: The amendment provides for the regulatory authority to issue rules with regards to maximum open positions in foreign currencies held by CUs. This is a prudential measure to mitigate against foreign currency risk, whereby movements in the value of foreign currency may potentially result in losses for an institution. Credit classification and provisioning: The amendment provides for rules to be issued on asset classification and provisioning. This encourages financial institutions to manage credit risk by monitoring their credit portfolio and providing for credit risk.

Periodic Statements The existing practice whereby the CU was already submitting certain periodic returns to CBS has been enforced with inclusion of the requirement to submit periodic statements in the form required by Regulations in the Act. Such information allows the regulatory authority to monitor the status of the institution as well as compliance to prudential requirements.

Penalties and Compounding of Offences

A specific section on penalties for offences has been included with the amendment. This section makes provision for offences and applicable penalties. In addition to offences, which were originally covered, the section also includes other offences to ensure that the Act is enforced in its entirety. Additionally, in order to facilitate enforcement, a provision for offences to be compounded has been included. Essentially, where a CU or any other person agrees in writing to the compounding of a contravention of the Credit Union Act, 2009 which is an offence punishable on conviction by a fine, the regulatory authority, in consultation with the Attorney General, may compound the offence as prescribed by regulations.

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4.2.2 SECURED TRANSACTIONS ACT, 2015

The Secured Transactions Act was enacted by the President in September 2015. Work on the Act

was initiated late in 2013 with the assistance of the World Bank.

Secured transactions are transactions between parties that have assets as security for the

transaction. In secured lending, the lender will have interest in the asset and as such will have

recourse to the asset if the borrower defaults. It is important that the framework for secured

lending in any country is efficient in order to safeguard the interest of the lender and support

effective access to credit.

The aim of the afore-mentioned legislation is thus to modernise the legal and institutional

framework for secured transactions in Seychelles guided by international best practices. It seeks

to increase access to credit to the private sector in Seychelles by introducing a simplified,

streamlined legal and institutional framework for secured lending that strengthens the rights of

all creditors in movable collaterals to secure all types of obligations.

The Act introduces a centralised, comprehensive, all-electronic and web-based secured transactions registry in the Office of the Registrar General. The Registry aims to provide efficient self-service by the public, reducing costs to lenders by eliminating need for lawyers and other intermediaries and reducing costs and burden on Government administrators. By the end of 2015, work on the Registry had been initiated.

4.2.3 APPROVAL/LICENSING FOR FINANCIAL INSTITUTIONS TO PROVIDE PAYMENT

SERVICES

The National Payment System Act which in August 2014, replaced the National Clearance and

Settlements System Act 2010, stipulates that CBS shall regulate and oversee the national payment

systems for the purpose of ensuring its safe, secure, efficient and effective operation. Payment

service providers are part of the national payment system and payment services include the

following:

Services enabling cash deposits and withdrawals

Execution of payment transactions

Issuing and/or acquisition of payment instruments

Money remittances; and

Any other services functional to the transfer of money. This also includes the issuance of

electronic money and electronic money instruments. The term does not include the

provision of solely online and telecommunication services or network access.

The National Payment System (Licensing and Authorisation) Regulations issued in December

2014, specifies the requirements that need to be met to offer payment services. Overall, CBS needs

to be satisfied with various aspects relating specifically to payment services, including inter-alia,

the governance arrangement, risk-management and controls, resources, IT system and adequacy

of procedures for complaints handling. These requirements were applied in 2015 whereby

applicants for Class A BDC licence and for banking licence were also subject to the afore-

mentioned Regulations, in addition to the licensing provisions under the FIA.

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In 2015, CBS considered potential revisions to certain existing laws, including the Financial

Institutions (Bureau de Change) Regulations, 2008 and the Foreign Exchange Act, 2009 in order

to support the afore-mentioned developments in the payment system regulatory framework.

4.3 DEVELOPMENTS RELATING TO THE SUPERVISORY FRAMEWORK AND

THE FINANCIAL SECTOR

4. 3.1 FINANCIAL LEASING

The year under review continued with previous years’ initiatives on creating an enabling

environment for financial leasing in the country. In April 2014, CBS entered into a co-operation

agreement with the IFC, a member of the World Bank Group whose mission is to promote

sustainable private sector investment in developing countries. The agreement involves co-

operation to improve the legal and regulatory financial leasing frameworks and facilitate the

development of the leasing sector in Seychelles. This also includes the implementation of market

awareness and education efforts to support the expansion of the financial leasing industry in the

country.

As regards the regulatory framework, the Financial Leasing Act was enacted in October 2013 and

the following regulations were promulgated in 2014; the Licensing Regulations, the Capital

Adequacy and Reserve Fund Regulations and the Lease Classification and Provisioning

Regulations.

During the year under review, research was undertaken on international best practices for the

liquidity and gearing management framework for financial leasing which would be incorporated

in regulations.

The regulations on liquidity risk management will seek to ensure that financial leasing

institutions are able to efficiently meet their obligations as they fall due, without affecting their

daily operations or financial condition. It will set a prudential ratio that these institutions will

need to comply with and report periodically to the CBS. Additionally, it will include requirements

on the governance framework regarding liquidity risk management, for example the formulation

of policies and strategies and the setting up of liquidity risk management committee.

The gearing management framework is also important for financial leasing institutions. Gearing

is a measure of financial leverage demonstrating the degree to which the companies’ operations

are funded by owners’ funds and various creditors’ funds. The regulations will set gearing ratios

as appropriate for deposit taking and non-deposit taking financial leasing institutions with the

aim of ensuring that they are not excessively exposed to debt. The regulations regarding liquidity

and gearing management are expected to be promulgated in 2016.

As regards capacity building, training for CBS staff in relation to financial leasing, was undertaken

during the year under review with the assistance of IFC. In collaboration with the latter as well as

the SEnPA a training session for SMEs was also facilitated during the third quarter of 2015.

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During this same quarter, work was initiated on a market study, which involved discussion with

various stakeholders to assess the market potentials for financial leasing and to identify where

improvements can be made. The second phase of this review is due at the start of 2016 to assess

the areas for potential benefit under prevailing conditions. The findings of this exercise will be

published into a market study report that will serve to educate the general public who could

benefit from such a product, as well as for potential investors’ information.

Box 4.1 explains the concept of financial leasing.

Box 4.1: Financial Leasing

Financial leasing is used all over the world and is an alternative means for financing moveable assets. A financial lease agreement is of a tri-partite nature, meaning that this is an agreement entered into by three parties. More details are provided in respect of these three parties below. Party Legal definition Explanation

Lessor

A person licensed or approved, to conduct financial leasing business and who transfers the right to possession and use of an asset under lease to a lessee.

This will be the company licensed by the CBS in order to offer such a financing option. This could include banks which are granted approval in this regard, as well as other non-banks. Accordingly, persons will have to apply to these companies in order to request funding for equipment via a financial lease agreement. One would be able to go to the banks, but also to other companies which are licensed specifically for the purpose of engaging in this business in Seychelles.

Lessee

A person who acquires a right to possession and use of an asset under the lease for an agreed period of time in exchange for agreed lease payments.

This will be the person applying for financing for the purchase of the asset. These assets can generally be used by the person in order to generate a revenue for and to allow for the scheduled repayments to be effected.

Supplier

A person who supplies an asset for the purpose of a financial lease, and transfers title to the asset to the lessor for delivery to the lessee.

This will be the supplier of the asset. The supplier will be paid directly by the lessor and typically will transfer the title of ownership to the asset over to the lessor, but can deliver the asset over to the lessee if so agreed.

Currently, when funding is required to purchase an asset, one would generally go to a bank to acquire a loan in the absence of available funds to purchase the asset outright. With the development of the financial leasing sector, persons will have a greater choice. Rather than only having the banks to go to, one will be able to shop around and compare the offerings from both banks and financial leasing institutions.

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When one applies for a loan, the banks mostly require the applicant to provide a collateral as security for the loan or to provide guarantors, unless it is an unsecured loan, in which case the borrower is typically subjected to higher interest rates to account for the increased risk of such exposures. The collateral or guarantor requirement serves as a form of security and provides the bank with a sense of guarantee that the person will repay the borrowed amount and interest, as agreed. Once the loan request is approved, the funds are disbursed to the borrower, who then directly effects payment for the purchase of such asset from the supplier. This asset is owned by the borrower, with the bank having a lien on the asset. Accordingly, the borrower cannot sell the asset without the bank’s approval. Therein lies one of the key distinguishing element between a loan and a financial lease and this is illustrated diagrammatically in Figures 1 and 2.

In a financial lease, the lessor retains legal ownership of the asset, whilst the lessee is granted the right to possess and use the asset during the tenor, in return for agreed monetary repayments. This is illustrated in Figure 2. Accordingly, even if one has the asset in their possession, it is legally registered and owned by the lessor. As such, the asset itself serves as the collateral/security for the financing, as the lessee does not own the asset during the tenor. In some cases however, particularly involving the financing of specialised assets, the lessor may require a partial contribution towards the cost of the asset, although this will seldom be the case for standard assets (which have a readily available domestic second hand market). For clarity, equipment that will have to be tailor-made or customised for the lessee would be deemed as specialised assets. These will likely not be easily re-saleable locally without taking

Asset Asset

Lessor absolute legal owner of the asset

under a financial lease agreement

Lessee granted the right to possess

and use the asset by the lessor, in

return for agreed repayments

Figure 2 (ABOVE): diagramatic illustration of an FL agreement

Loan

Borrower

Asset

Bank

Borrower is the legal owner of the asset in the case of a loan

Bank has a lien on the

asset in the case of a

loan

Figure 1 (Above): DiagramMatical illustration of ownership and lien in the case of a loan

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a significant hair-cut in value, i.e. a reduction in its re-sale price. This contrasts to standardised assets. The right to possess and use the asset by the lessee, subject to the terms and conditions of the financial lease agreement, allows for the generation of an income where the lessee is a business, whilst allowing more flexibility in regards to working capital. Optimally, the asset’s use will generate an income in excess of the agreed repayments, thereby allowing the periodic repayments to be effected to the lessor. It also allows a business to better manage its finances and free up their cash-flow, allowing such to be more efficiently allocated. Financial leasing is generally more targeted towards large value moveable asset acquisition, principally being acquired for commercial ventures. Thus, for illustrative purposes, assets that could be financed by a financial lease include earth moving equipment (such as dump trucks and excavators), cranes, fishing boats. Tourism establishments wishing to also invest in a large volume of a certain type of asset could also acquire such through a financial lease, and this could include things such as television units for each room, hairdryers, kitchen equipment and mini-fridges, etc. It is also common around the globe for farmers and fishermen to acquire equipment via a financial lease.

4.3.2 ADDITIONAL BANKING ACTIVITIES

The FSDIP states that policy decisions need to be taken on the financial activities and services to

be developed in Seychelles. This includes the introduction of financial services not currently

available in the country, including Islamic banking, investment banking and private banking.

A number of initiatives has been undertaken in order to prepare for the introduction of the new

activities in the country. A grant from the ICF was approved during the third quarter of 2015

which has, in addition to other areas, been put towards capacity building and consultancies in

relation to the additional activities. Capacity building missions were initiated during the fourth

quarter of 2015 and will continue until August 2016. This also ties in with legal assistance from

World Bank under the RAS program in this regard. Section 4.10 discusses TA from international

organisations predominantly for the FSDIP implementation in further detail.

During the year under review, CBS received an inception mission from a legal expert on

amendments to the legal framework to cater for additional banking activities, amongst other

aspects. TA in this area is expected to continue in the coming year. The amendments will follow

from policy decisions on the new banking activities that will be introduced in the country.

4.3.2.1 ISLAMIC BANKING AND FINANCE

The Government, in partnership with CBS and FSA commissioned a feasibility study on Islamic

banking and finance, which was initiated in September 2014. The findings of the feasibility study

were delivered in May 2015.

The outcome of the feasibility report was positive, and outlined several opportunities which could

be exploited and gaps to be addressed by the main stakeholders. Towards the end of 2015, the

procurement formalities in respect of a consultancy for the formulation of a policy and strategy

on Islamic banking and finance, were undertaken by CBS and FSA. The consultancy was expected

to be initiated in the first quarter of 2016. Additionally, the above-mentioned study visits in

jurisdictions experienced in Islamic banking and finance seek to enhance staff’s understanding of

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the concepts, including the regulatory and supervisory challenges, which will feed into work on

the appropriate framework for the regulation and oversight of Islamic banking and finance.

4.3.2.2 INVESTMENT BANKING AND PRIVATE BANKING

Procedures for procuring a consultant to deliver a workshop on investment banking and private

banking in the country to CBS and FSA staff were also undertaken late in 2015. The objective of

the workshop, scheduled for the first half of 2016, is to enhance the capacity of the staff from

these two regulatory bodies in relation to these banking activities. This will assist the authorities

in developing appropriate policy that will promote the development of the financial sector whilst

safeguarding its soundness through adoption of internationally recognised standards. As at the

end of 2015, connections were being established with foreign regulatory authorities in order to

organise study tours on the subject matter.

4.3.3 REVIEW OF RISKS RELATED TO OFFSHORE FINANCIAL ACTIVITIES

4.3.3.1 IMF MISSIONS

In view of international developments whereby offshore financial services have been under

increasing scrutiny, CBS has found it important to obtain TA with regards to supervision of these

activities and enhancing its risk mitigation framework.

In March 2015, CBS received assistance from the MCM Division of the IMF with respect to the

supervision of offshore banks. The aim of the mission was to better understand the risks of

offshore banks, to make appropriate risk assessment and create the framework for supervisory

risk mitigation for offshore banks. This covered broadly recommendations in relation to licensing,

On-Site and Off-Site supervision of these banks, as well as enhanced collaboration with other

regulatory authorities, namely, the FSA and the FIU.

In September 2015, AFS and MCM provided TA on RBS, with specific focus on ML/TF risk. The

mission followed up and built on the recommendations made in the March mission. It provided

comprehensive training and TA on the Off-Site reporting and risk rating of banks and on the use

of supervisory tools to ensure compliance with AML/CFT measures and ML/TF risk. Whilst the

mission addressed the risks of offshore banking, recommendations relevant to the overall

supervisory approach of the CBS including on the supervisory tools were made. Specifically, the

mission recommended that FSSD leverages on the existing CAMELS approach to supervision,

making it more risk based with more focus on risk management architecture, governance,

controls and systems. It also sought to make the assessment of banks more granular, introduce

transparent quantitative parameters and cover assessment of all material risks.

Additionally, the mission provided guidance on self-assessment of Seychelles’ compliance to the

relevant Basel Core Principles and provided advice on the preparation for the forthcoming NRA

and mutual evaluation review of the FATF standards, scheduled for 2016.

4.3.3.2 NRA AND MUTUAL EVALUATION

In preparation for the official launch of the NRA, scheduled in January 2016, work was initiated

on the exercise in the latter part of the year under review. The rationale for the NRA is embedded

in FATF recommendation 1 which is reproduced in Box 4.2 below:

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Box 4.2: FATF recommendation 1

‘Countries should identify, assess, and understand the ML/TF risks for the country, and should take action, including designating an authority or mechanism to coordinate actions to assess risks, and apply resources, aimed at ensuring the risks are mitigated effectively. Based on that assessment, countries should apply a risk based approach to ensure that measures to prevent or mitigate ML/TF are commensurate with the risks identified.’

The objective of the NRA is to assist the Seychelles authorities in its self-assessment of ML/TF

risks with broad participation from various stakeholders. In addition, the project aims to improve

the skills and knowledge of the Government agencies in assessing these risks and applying a risk

based approach in this area. The project is co-ordinated by the FIU and includes the following

stakeholders, the MFTBE, CBS, FSA, the Seychelles Police, the Attorney General’s Office, the

banking industry, Corporate Services Providers, Nation Drugs Enforcement Agency, insurance

companies and designated non-financial businesses and professions. The assessment will

prepare the authorities for the Mutual Evaluation against the FATF principles which is expected

to be undertaken later in 2016. The FATF is an international standard-setter in the fight against

ML/TF and proliferation of weapons of mass destruction. The assessment will determine the

country’s compliance with the FATF Standards and whether the AML/CFT system is working

effectively.

This project is funded by CBS under the World Bank’s RAS, on which further details can be found

at section 4.10.

4.3.3.3 TRIPARTITE MOU

The CBS, FSA and FIU entered into a Memorandum of Understanding in October 2015 with the

aim of improving the regulatory framework and addressing risks or corporate activities which

may affect the international standing and good repute of Seychelles’ financial sector. It seeks to

implement a system of co-operation between the regulators and to establish an overall joint

policy taking into account international best practice.

4.3.3.4 OECD AEOI

During 2015 Seychelles asserted its commitment to implement the new global standard for

automatically exchanging information for tax purposes, termed as AEOI. Box 4.3 provides a

summary of the concept of AEOI.

Box 4.3: AEOI the basics: what, how and why?

What? How? Why?

Systematic and periodic transmission of bulk taxpayer information by the source country to the residence country

Information on various potential categories obtained by a tax authority (e.g. dividends, interest, royalties, salaries,

The taxpayer’s country of residence can check its tax records to verify offshore income/assets have

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A core form of tax co-operation provided for by Double taxation Agreements/the MCAA

pensions, changes in residence, valued added tax refunds etc.)

Exchanged with tax authorities of treaty partners

been accurately reported

Deterrence impact and voluntary compliance

Source: OECD Global Forum on Transparency and Exchange of Information for Tax Purposes

In February 2015, Seychelles became a signatory to the Multilateral Convention on Mutual

Administrative Assistance in Tax Matters. The Convention, which was originally developed by the

OECD and the Council of Europe in 1988 and amended in 2010, provides for all forms of

administrative co-operation including automatic exchange of information and contains strict

rules on confidentiality and proper use of information. One of the main advantages of the

Convention is its global reach. Automatic exchange under the Convention requires a separate

agreement between the competent authorities of the parties (with actual automatic exchange

always taking place on a bilateral basis). As such the Convention provides the legal basis for the

Multilateral Competent Authority Agreement or the MCAA which was signed by Seychelles in May

2015. The MCAA implements the Standard for Automatic Exchange of Financial Information also

known as the CRS, specifying the details of what information will be exchanged and when.

Seychelles is a member of the Early Adopters’ Group and has committed to early exchange of

financial information. The first exchange of information in relation to new accounts and pre-

existing individual high value accounts is expected to take place by the end of September 2017.

During 2015, the MFTBE steered work towards implementation of the AEOI, which included the

organisation of a workshop in July 2015 facilitated by OECD to train Government officials on

implementing the CRS as well as consultation with the reporting entities, which also included the

banks.

The CRS contains the reporting and due diligence standard that underpins the AEOI. The CRS

standardises the AEOI process whilst recognising that a local approach needs to be adopted in

certain areas. Standardisation allows for process simplification, higher effectiveness and lower

costs for the stakeholders. Implementation of the CRS requires translating the standard into local

law. By the end of 2015, the Regulations on CRS to be issued under the Revenue Administration

Act was near finalisation40.

4.3.3.5 UNITED STATES FATCA

The United States FATCA was enacted in March 2010 as part of the Hiring Incentives to Restore

Employment Act. FATCA seeks to ensure that all foreign owned assets by United States taxpayers

are taxed by the United States Government. In 2014, Seychelles announced its intention to enter

into the Model 1B Inter-Governmental Agreement for FATCA with the United States of America. It

requires financial institutions in Seychelles to report information on financial accounts of

customers from the United States to the Seychelles Revenue Commission (SRC) which is then

provided to the Internal Revenue Service on an automatic basis. Although this had not yet been

40 The Common Reporting Standards Regulation was issued under the Revenue Administration Act, 2009 on January 04, 2016.

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signed by the end of 2015, the Seychelles Revenue Commission had engaged in communication

with the banks with regards to reporting for its purpose. The AEOI, described above, has drawn

extensively from the FATCA model.

4.3.4 BASEL II & III

CBS maintains its plans to implement relevant elements of Basel II and III. TA was expected for

quarter 1 2016 from AFS of IMF in this regard. By the end of 2015 a draft internal paper on

standardised approach to credit risk had been prepared by FSSD for review by the afore-

mentioned mission team.

4.3.4.1 BASEL II

Basel II is a regulatory capital framework built on a risk management platform. It goes beyond

prescribing capital adequacy ratios, and places emphasis on linking capital to risk. The philosophy

of Basel II is banks’ self-management, supervisory review and market discipline with a view

towards enhanced risk management. Basel II consists of 3 pillars. Whilst Pillar 1 outlines the

approaches to calculate the minimum level of capital, Pillar 2 is more qualitative in nature and

Pillar 3 relates to market disclosure.

A consultative process will be adopted for implementation of the standards. FSSD plans to issue

a discussion paper on Pillar 1 of Basel II, which will include the standardised approaches to credit

risk and also seek to apply a capital charge for market risk relevant for Seychelles.

Pillar 2 seeks to ensure that banks assess their capital positions vis-à-vis their overall risk (the

ICAAP) and that supervisors review this process, implement appropriate actions and is able to

intervene to restore capital levels if required (the SREP). FSSD plans to obtain consultancy to

assist with the technical and practical aspects for implementation of Pillar 2.

Pillar 2 ties in closely with work to enhance the RBS framework, which is discussed at section

4.3.5. Pillar 3 includes quantitative and qualitative disclosures on capital adequacy and risk

management aspects. It encourages market discipline by which market participants can assess

the capital adequacy of a bank in relation to risk exposures and risk management systems and

thus contribute to the soundness of the financial system.

4.3.4.2 BASEL III

Basel III was brought forth by BCBS in response to the 2008 global financial crisis with the aim of

improving the banking sector's ability to absorb shocks arising from financial and economic

stress. The Basel III pronouncements seek to increase the resilience of banks during times of

stress. It has a macro-prudential overlay, and seeks to address system-wide risks that can build

up across the banking sector. Basel III is currently being phased in with full adoption anticipated

in 2019. At the initial stage, in Seychelles the plan is to implement the capital definition in line

with Basel III. Further TA is anticipated on the other elements of Basel III, with a view to augment

to skills base and assist the CBS in analysing and planning its adequate introduction. A summary

of the main components of Basel III is shown in Box 4.4.

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Box 4.4: Summary of main aspects of Basel III

CAPITAL Basel III places emphasis on the quality of capital, namely Core Equity Tier 1 capital that

can fully, unconditionally and immediately absorb losses. It introduces capital buffers, including:

(i) The capital conservation above Core Equity Tier 1 (up to 2.5% of risk weighted assets (RWA)) which obliges banks to conserve a growing proportion of earnings as their Core Equity Tier 1 capital approaches a minimum level.

(ii) The counter-cyclical buffer allows the supervisory authority to require banks to retain capital up to 2.5% of RWA during an upturn in the business cycle and release this capital as the cycle changes.

A leverage ratio which is a regulatory capital to un-weighted gross exposure is also introduced. This seeks to constrain the build-up of leverage in the banking sector and reinforce the risk based requirements with a simple, non-risk based measure that establishes a floor.

LIQUIDITY

Two liquidity standards have been designed with the aim of limiting a bank’s exposure to liquidity risk, as follows: (i) The Liquidity Coverage Ratio determines the size and composition of a reserve

of highly liquid assets, which can be sold should a liquidity event occur. The stock of high quality liquid assets should cover a bank’s forecasted net cash outflows over a stress period of 30 days.

(ii) The Net Stable Funding Ratio aims to ensure that the illiquid portion of a bank’s assets is backed by stable funding, such as equity, long term debt and stable customer deposits. It compares the amount of stable funding that is available to the bank with its required amount of stable funding. Available stable funding (ASF) is the portion of the bank’s equity and funding liabilities that can be relied upon over a year. The category of funding is multiplied by a percentage termed the ASF factor, for which the percentage increases with the availability of the funding over a one-year horizon. In determining the appropriate amount of stable funding required for the various assets of a bank, a percentage or a RSF factor is applied to the asset, whereby a higher percentage is applicable to assets that have longer maturity and are less easy to monetise. As such, no stable funding is required for claims that are either immediately available or that mature within a shorter time period.

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4.3.5 RBS

As highlighted in section 2.3 of the report, in 2015 increased importance was placed on research

work to enhance the RBS framework within which the work of FSSD is undertaken taking into

account international best practices. RBS is a comprehensive structured process that assesses key

risks to which individual financial institutions and the financial system are exposed, the risk

management policies and practices that are used to mitigate risk; and focus supervisory

resources based on the risk characteristics of the institutions.

Its fundamental principles are as follows:

Efficient allocation of scarce supervisory resources towards individual banks;

• Structured process to identify the most critical risks facing supervised entities, the

larger economy and the operating environment;

• Understanding supervised entities, their strategies and business models;

• Identifying any build-up of risk in individual entities and the sector as a whole,

including emerging risks which could impact entities and the sector in future;

• Determine the systemic relevance of individual banks.

RBS is embedded in the Basel Core Principles for Effective Banking Supervision, and it moves

away from the traditional compliance approach (i.e. rules based supervisory system) to a more

forward looking, principles based approach to assessing and dealing with risks. The two TA

referred to at section 4.3.3.1 received from IMF during 2015 is relevant to the initiative to

enhance the RBS framework.

As aforementioned, Pillar 2 is highly relevant to the RBS initiatives. Supervisors’ assessment of

banks’ ICAAP through the SREP is a key input into the RBS process and provides insight into

capital and liquidity planning and management. The SREP entails qualitative and quantitative

assessment of a bank’s ICAAP.

The qualitative assessment essentially covers Board governance, management, controls and

systems, which are covered by RBS. The quantitative assessment involves banks’ identification of

material risks, risk measurement and risk mitigation. ICAAP submission in terms of RBS provides

supervisors with a new tool that allows supervisors to assess banks’ own capital and liquidity

management processes. This enables supervisors to make informed decisions about adequate

levels of capital and liquidity.

In order to successfully implement the above, building the relevant capacity is a key factor for

both the supervisor and the industry. All these elements will be considered in a policy paper on

RBS, which will be formulated by FSSD.

4.3.6 FINANCIAL EDUCATION AND CONSUMER EMPOWERMENT

One of CBS’ strategic objectives, as outlined in its strategic plan for 2014 to 2018 is to effectively

promote a sound financial system, including the payment system. The strategic plan recognises

the importance of consumer protection to financial stability. Upholding the principles of

consumer protection, such as fair treatment, recourse mechanism and financial education

contributes towards the achievement of the afore-mentioned strategic objective. During 2015 a

number of initiatives were undertaken towards this end as highlighted below.

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4.3.6.1 ALLIANCE FOR FINANCIAL INCLUSION

Seychelles became a member of the AFI network in August 2014. AFI is a global network of

financial policymakers from emerging and developing countries which promotes and develops

evidence based policy in regards to financial inclusion. AFI provides platforms for peer-to-peer

learning that encourages and enables financial policymakers to interact and exchange knowledge.

AFI initiatives include the following:

Working Groups, which bring members together to discuss and develop policy ideas on

specific themes. Working Groups provide a space for members to participate equally,

share knowledge, formulate policy and develop guidelines. CBS nominated

representatives on 3 Working Groups in 2015, the Consumer Empowerment and Market

Conduct, Digital Financial Services and SME Financing. This was done on the basis of what

was felt to be most relevant for CBS at this point in time. CBS was first represented in the

Working Group meetings which were held in Mozambique in 2015;

The Global Policy Forum was also attended in Mozambique during the year under review.

This is held on an annual basis, hosted by a member country and is the key event for its

members. It brings together senior representatives of its members and discusses

collaborative approaches to promoting global financial inclusion agenda;

AFI also facilitates the formation of regional initiatives that are effectively regional groups

to discuss specific issues, for example the African Mobile Phone Financial Services Policy

Initiative;

AFI members may also benefit from knowledge exchange and policy grants that support

learning, research, development or implementation of financial inclusion related policy

solutions;

Another initiative facilitated by AFI is the online member zone, which is an exclusive

online platform for AFI members to exchange ideas;

AFI encourages members to make what is termed as Maya Declaration Commitments.

This helps members determine their own objectives for financial inclusion, draft a plan

for achieving them and co-ordinate with others as they work toward a common goal. It

also allows members to follow others’ progress in relation to the Commitments. CBS plans

to make its Maya Commitments in future Global Policy Forum.

4.3.6.2 REVIEW OF THE LEGAL FRAMEWORK FOR CONSUMER PROTECTION IN THE

FINANCIAL SECTOR

The FSDIP includes initiatives aimed at promoting consumer protection in the financial sector.

Consumers’ expectation that they will receive fair treatment and quality services from financial

institutions contributes to increasing confidence in the country’s financial sector and is an

important element for its development. In 2015, work was initiated on the regulatory framework

in this regard, with the assistance of a legal expert from the World Bank under the RAS program.

The mission that was undertaken towards the last quarter of 2015 aimed to assist with achieving

a clear position as to the type of legal framework for financial consumer protection that is

warranted and suitable for Seychelles. It also gave consideration to the institutional arrangement

for handling of consumer protection matters that would result in more efficiency and

effectiveness in this area.

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4.3.6.3 BASELINE SURVEY ON FINANCIAL EDUCATION

The FSDIP recommends the conduct of a baseline survey on financial literacy.

The ultimate aim of financial education is to achieve financial literacy. Financial education is

defined by OECD/International Network on Financial Education as ‘the process by which financial

consumers/investors improve their understanding of financial products, concepts and risks and,

through information, instruction and/or objective advice develop the skills and confidence to

become more aware of financial risks and opportunities to make informed choices, to know

where to go for help, and take other effective actions to improve their financial wellbeing’

The baseline survey will provide an initial measure of financial literacy to identify national levels

of financial literacy, provide a baseline and set benchmarks for a national strategy on financial

education.

The objectives of conducting the financial literacy baseline survey in Seychelles are as follows:

• Understand and assess the gaps and main needs regarding financial literacy and policy

areas that need particular attention by employing survey technique that is internationally

recognised;

• Serve as a tool to define specific target groups;

• Provide evidence on the population’s needs and at securing public and non-public

stakeholders’ support for the initiatives;

• Allow for comparison with other countries and identification of practices that may be

replicated;

• Inform the development of a national strategy on financial literacy that reaches to all

Seychellois, especially the most in need, develop knowledge and empowerment and seek

to improve outcomes in order to address the gaps that have been identified;

• Provide a baseline against which to measure future progress in the area of financial

literacy.

The procurement process for consultancy for the survey started in the last quarter of 2015. The

baseline survey is expected to be concluded in the first half of 2016. Further to this, work will

start on the national strategy on financial education.

4.3.6.4 SURVEY ON CONSUMER PROTECTION FRAMEWORK

In order to assist with the formulation of appropriate policies to address and strengthen

consumer protection in the country, the CBS plans to conduct a survey with consumers of

financial and payment services and products. This survey will be aimed at assessing the level of

consumer satisfaction in relation to the services and products provided by banks and SCU. This

will assist CBS in identifying areas of concern from the customers’ perspective and design

measures where appropriate to address same. The information gathered will also inform and

guide CBS in the development of the financial consumer protection framework.

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4.3.7 CREDIT INFORMATION SYSTEM

During the last quarter of 2015, there was an inception mission on credit reporting, which is a

component of the World Bank RAS program. The aim of the mission was to review the framework

under which the Credit Information System is operating, taking into account the World Bank

General Principles for Credit Reporting. The project seeks to enhance the CIS’ effectiveness and

its contribution to the credit management environment in Seychelles. Aspects that are being

considered include the following: increasing the coverage of institutions covered by the CIS;

enhancing the information contained on the credit reports; synchronising provisions of the CIS

law with other relevant laws, for example with respect to sharing of information and detailing

consumer rights. Operational aspects are also being reviewed in collaboration with the DICT. The

latter is assisting with enhancing the technological aspect of the CIS. The aim is to design and

implement a new CIS which will include improved security, comprehensive credit reporting and

more efficient administration. In sum, the objective is to secure the robustness of the

infrastructure to maximise the CIS functions in order to support its objective to assist in credit

risk management and promote credit discipline.

4.3.8 LEGAL FRAMEWORK FOR NBFIS SUPERVISED BY CBS

Non-bank institutions supervised by CBS include SCU, DBS and HFC. The FSDIP includes a

deliverable to formulate a single law which would provide clear and adequate powers to regulate

and supervise these institutions and any other non-bank institutions that may be brought within

CBS’ supervisory umbrella. The law will have consideration to existing laws that include specific

provisions related to the institution, e.g. the CU Act. It is also expected to consider prudential

requirements that are appropriate to the functions of these institutions. The project is a

component of the World Bank RAS program.

4.3.9 FSDIP

The FSDIP, as approved by Cabinet in November 2014, consolidates the endeavours to further

develop specific areas within the financial sector into a central plan which guides the work of

relevant authorities. These areas include review of the legal and regulatory framework in the

financial sector (including additional banking activities, payment systems and credit reporting),

financial market infrastructure, the capital market, access to finance, supervision of non-bank

financial institutions, consumer protection and human capacity in the financial sector. The

implementation of the FSDIP gained momentum during the year under review with the

finalisation of agreements with funding organisations towards many of the deliverables

contained within the FSDIP, for which TA is required. Co-financing from the organisation towards

the project is summarised in Table 4.2 hereunder.

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Table 4.2: Summary of Funded Projects

Date of Signing of Agreement

Amount Area Funded Responsible entities

World Bank RAS

October 2015 USD537,103 Review of legal framework for the CIS

CBS

Legal framework for additional banking activities

CBS

Legal framework for Non-Bank Financial Institutions

CBS

Legal framework for financial consumer protection

CBS and FSA

ICF August 2015 USD775,500 Consultancy for conduct of a baseline survey on financial literacy

CBS and FSA

Consultancy for formulation of a policy and strategy on Islamic banking and finance

CBS and FSA

Consultancy on investment banking and private banking

CBS and FSA

Consultancy for assessment of the remittances market

CBS

Consultancy for diagnostic study on Government payment

CBS and MFTBE

Consultancy for review of supervisory framework for collective investment scheme

FSA

Consultancy for review of the supervisory framework for capital market

FSA

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Capacity building for new banking activities, central securities depository, real time gross settlement system, financial sector consumer protection and repurchase agreement.

CSB and FSA

AfDB October 2015 USD706,587 Consultancy for feasibility study for Central Securities Depository

CBS and FSA

Consultancy for Real Time Gross Settlement system

CBS

Consultancy for repurchase agreement

CBS

Consultancy for National Strategy on Financial Education

CBS and FSA

Consultancy for Pension Supervisory Framework

FSA

Consultancy for Insurance Supervisory Framework

FSA

The FSDIP also entails a number of initiatives for which TA is not required and on which work is

being or will be undertaken. It also includes deliverables for which other entities are responsible

for, for example the Ministry of Finance, Trade and the Blue Economy as well as the Ministry of

Entrepreneurship Development and Business Innovation, which have oversight mainly over

deliverables related to access to finance.

Implementation of the project has added a new dimension to the co-operation amongst

stakeholders. The experience has been positive and has substantiated the FSDIP’s

recommendation for enhanced co-operation mechanism amongst the authorities towards further

efficiency and effectiveness in achieving the authorities’ objectives, and collaboratively, their

contribution to the country’s economic growth.

4.4 BMIO41 REORGANISATION PLAN

BMIO which was taken control of by CBS in November 2014, remained under CBS’ possession

during the year under review. In mid-February 2015 CBS pronounced the appointment of Mr

Huns Biltoo, a partner of KPMG Mauritius, as the reorganising agent of BMIO. Consistent with the

provisions of the FIA, the reorganising agent formulated a reorganisation plan, which was

circulated to all stakeholders, including the depositors. As per the law, having not been objected

by the stakeholders, this was submitted for the Supreme Court’s approval which was obtained in

June 2015. The reorganisation plan included the definition of a new risk appetite for BMIO,

41 There was a change in BMIO’s ownership structure in 2016 and the bank has been rebranded to Al Salam Bank Seychelles.

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implementation of new policies and procedures, staffing and capacity building, implementation

of new IT system, amongst others, the bulk of which had been implemented by the end of the year

under review. In December 2015, the Supreme Court extended the reorganisation plan to March

2016 in order to allow more time for the operating model to be aligned to the medium and long

term strategic priorities. It is noted that BMIO was able to re-establish correspondent banking

relationship after CBS’ take-over late in 2014.

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Appendix 1: Locations and contact details of banks’ branches, DBS, HFC and SCU

BANKS NAME ADDRES

S PHYSICAL ADDRESS OTHER DETAILS

Barclays Bank (Seychelles) Ltd

Main Branch P.O. Box 167

Independence Avenue Tel: 4383838

Victoria, Mahe E-mail: [email protected]

Barclays Commercial Centre

Albert Street Tel: 4383838

Victoria, Mahe

Barclays Providence Branch

Providence Industrial Estate, Mahe

Tel: 4383838

Barclays Airport Agency Seychelles International Airport

Tel: 4383838

Pointe Larue, Mahe

Barclays Retail Branch Baie Ste. Anne, Praslin Tel: 4232218

Barclays Retail Branch Pension Complex Tel: 4233344

Grand Anse, Praslin

Barclays La Digue Agency Gregoire's Complex Tel: 4234148

Anse Reunion, La Digue

Premier Center Capital City Building Tel: 4383838

Independence Avenue

Victoria, Mahe

Website: www.barclays.sc

Nouvobanq

Main Branch P.O. Box 241

Victoria House Tel: 4293000


Praslin Branch P.O. Box 4041

Horizon Complex Tel: 4232600

Baie Ste. Anne, Praslin E-mail: [email protected]

La Digue Branch Saffron Building Tel: 4235032

La Passe, La Digue E-mail: [email protected]

Eden Island Branch Ground Floor Eden Plaza

Tel: 4346200

Eden Island, Mahe E-mail: [email protected]

MCB (Seychelles) Ltd

Head Office P.O. Box 122

Caravelle House Tel: 4284555

http://www.barclays.sc/

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Victoria, Mahe Fax: 4322676

E-mail: [email protected]

Providence Office Providence Industrial Estate, Mahe

Tel: 4373829

Anse Royale Office Anse Royale, Mahe Tel: 4385800

Grand Anse Praslin Office

Grand Anse, Praslin Tel: 4233940

Cote D’or Office, Praslin Cote D'or, Praslin Tel: 4232605

La Passe, La Digue La Digue, La Digue Tel: 4234560

Eden Island Eden Plaza, Mahe Tel: 4346860

Website: www.mcbseychelles.com

Seychelles Commercial Bank

Head Office P.O. Box 531

Orion Mall Tel: 4294000


Anse Aux Pins Branch Anse Aux Pins, Mahe Tel: 4294124


Grand Anse Praslin Branch

Grand Anse, Praslin Tel: 4233810


La Digue Branch La Passe, La Digue Tel: 4234135


Victoria Branch Kingsgate House Tel: 4294083


Corporate Branch Orion Mall Tel: 4294077


Habib Bank Ltd

P.O. Box 702

Sound & Vision House Tel: 4224371/4224372

Francis Rachel Street E-mail: [email protected]

Victoria, Mahe

BMI Offshore Bank

P.O. Box 672

Suite G-04 & G-07 & G-08

Tel: 4385600

Capital City Building Fax: 4385631

Victoria, Mahe Website: Formerly (www.bmi.com.sc)

http://www.mcbseychelles.com/

mailto:[email protected]

http://www.bmi.com.sc/

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Presently www.alsalamseychelles.com

E-mail: Formerly ([email protected] )

Bank of Baroda

P.O. Box 124

Trinity House Tel: 4618000/4610333

Victoria, Mahe Tel: 4618001-10

Fax: 4324057


[email protected]

[email protected]

Bank of Ceylon

P.O. Box 1599

Ground Floor Tel: 4611880/4611888/4611889

Oliaji Trade Centre Website: www.boc.lk

Francis Rachel Street E-mail: [email protected]

Victoria, Mahe [email protected]

[email protected]

[email protected]

Bank Al Habib Ltd

P.O. Box 1010

Suite 2-07 Tel: 4410040 -2

Victoria, Mahe

Capital City Building Fax: 4410044

Victoria, Mahe Email: [email protected] Website: https://www.bankalhabib.com

Development Bank of Seychelles

P.O Box 217

Independence Avenue Tel: 4224471


Housing Finance Company Limited

P.O Box 1112

1st Floor, Victoria House Tel: 4298400

Victoria, Mahe Fax: 4298463

Seychelles Credit Union P.O Box 342

Co-operative House Tel: 4610190


Website: www.scu.sc

http://www.alsalamseychelles.com/


http://www.boc.lk/


http://www.scu.sc/

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Appendix 2: Location of ATMs

Barclays Bank (Seychelles) Ltd MCB Seychelles

2 Independence Avenue, Victoria, Mahe 2 Head Office, Caravelle House, Victoria, Mahe

1 Albert Street, Victoria, Mahe 2 Mahe Trading Building, Victoria, Mahe

1 Deepam House Beau Vallon, Mahe 1 Providence Office, Mahe

1 Cable and Wireless, Victoria, Mahe 1 Seychelles International Airport, Pointe-Larue, Mahe

1 Providence Branch, Mahe 1 Anse Royale Office, Mahe

1 Seychelles International Airport, Pointe Larue, Mahe

1 IOT, Victoria, Mahe

1 Shopping complex, Anse Royale, Mahe 1 Eden Island, Mahe

1 Grand Anse Praslin Branch 1 Ephelia Resort, Port Launay, Mahe

1 Baie Ste Anne Praslin Branch 1 Beau-Vallon, Mahe

1 La Digue Branch 1 Grand Anse Praslin Office

1 Dockland's building, Victoria, Mahe 1 Cote D’or Office, Praslin

1 Cote D'or, Praslin 1 Airport, Grand Anse Praslin

1 Mont Fleuri, Mahe 1 La Passe, La Digue

1 Victoria Bus Station, Mahe

1 Sekaar's Shopping Centre, Takamaka, Mahe

Nouvobanq Seychelles Commercial Bank

1 Head Office, Victoria House, Mahe 1 Head Office, Orion Mall, Victoria, Mahe

1 Pirates Arms Building, Victoria, Mahe 1 Kingsgate House, Victoria, Mahe

1 Seychelles International Airport, Pointe Larue, Mahe

1 La Passe, La Digue

1 La Passe, La Digue 1 Airport, Grand Anse Praslin

1 Cote D'or, Praslin 1 Anse Aux Pins, Mahe

1 Beau-Vallon, Mahe 1 Unity House, Victoria, Mahe

1 Baie-Lazare, Mahe 1 Sun Properties & Resort, Beau Vallon, Mahe

1 Grand Anse, Mahe

1 IOT , Victoria, Mahe

1 Eden Plaza, Mahe

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Appendix 3: Location and contacts of BDC

CLASS A BDC

ARC Exchange (Pty) Ltd

1st floor Orion Mall, Victoria, Mahé Tel: 428 9553 / 271 7481

Fax: 432 3089

Paradise Computer Services, Victoria House, Victoria, Mahé

Tel: 428 9565

Email: [email protected]

Cash Plus Co. (Pty) Ltd

Olivier Maradan Building, Olivier Maradan Street, Victoria, Mahé Tel: 278 3660 / 278 3661 / 443 3333

Fax: 461 0666

Docklands Supermarket New Port Victoria

Jivan’s Building, Albert Street, Victoria, Mahé Tel: 278 3661

Van Hoi Building, 1st Floor, Providence Industrial Estate, Mahé

Coral Strand Hotel, Beau Vallon, Mahé

Tel: 423 7263

Ocean Plaza Building, Grand Anse, Praslin

Tel: 423 6272

Aarti Investment Building, Baie Ste Anne, Praslin Tel: 250 1021

Côte D’Or, Praslin

La Passe La Digue

Email: [email protected] / [email protected]

Doubleclick Exchange (Pty) Ltd

Doubleclick Internet Cafe, Maison La Rosiere, Palm Street, Victoria, Mahé

Hypermarket

Bois de Rose Avenue, Mahe

Block A, Room 1 Unity House

Victoria, Mahé

Breeze Garden,

Grand Anse Praslin, Praslin

Anse-Aux-Pins, Mahe Baie Ste Anne, Praslin

Providence, Mahe


Tel: 432 5540 / 253 8123

GCC Exchange

Suite G-06 A , Ground Floor, Capital City Building, Independence Avenue, Victoria, Mahé Tel: 442 1000 / Fax: 442 1001


Website: www.gccexchange.com

Jamboo Money Changer Ltd

Storey House Building, Revolution Avenue, Victoria, Mahé Email: [email protected] / [email protected]

Tel: 278 1399 / Fax: 441 5252

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JPL Exchange (Sey) Co. Ltd

Eden Plaza, Eden Island, Mahé

Pirates Arms building, Independence Avenue, Victoria, Mahé

Beau Vallon, Mahe


Tel: 434 6615 / 251 1105 / 251 5153

Le Relax Bureau de Change Ltd

Allied Builders Head Office, Le Rocher, Mahé Email: [email protected] Tel: 438 0700/Fax: 434 4560

Mason’s Money (Pty) Ltd (trading as Mason’s Xchange)

Michel Building, Benezette Street, Victoria, Mahé

Eden Plaza, Eden Island, Mahé

Email: [email protected] Tel: 428 8801/Fax: 428 8810

Royale Growth (Pty) Ltd

Printec Press Holdings Building, Mont Fleuri, Mahé Tel: 461 1524 / Fax: 461 0429

Royale Florist Shop, Pirates Arms Building, Victoria, Mahé

Tel: 422 5680

Coco d’Or Hotel, Beau Vallon, Mahé Tel: 424 7331

Quincy Mall, Quincy Street, Victoria, Mahé

Tel: 461 1532


Travel Change (Seychelles) Ltd (trading as Creole Exchange)

Mahé Trading Building, Victoria, Mahé Email: [email protected] / [email protected]

Tel: 429 7183 / 429 7183 / 429 7072 / 429 7125 / 271 1234

Fax: 422 5075

UAE Exchange (Sey) Ltd

Capital City Building, Victoria, Mahé Email: [email protected] / [email protected]

Tel: 442 3000/Fax: 442 3002

Vision Money Transfer Ltd

Sound and Vision House, Ground Floor, Francis Rachel Street, Victoria, Mahé Email: [email protected] / [email protected]

Tel: 422 4207 / Fax: 422 4995

Global Exchange (Pty) Ltd Lulu Exchange Ltd

Providence, Mahe Tel: 44343223 / 2814000 Fax: 4373848 Email: [email protected] Website: www.avgroup.sc

G-03 Ground Floor

Capital City Building

Victoria, Mahe Tel: 4610812 / 4610813 / 4610814 / 2864343




http://www.avgroup.sc/

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Email: [email protected] Web: www.luluexchange.com

CLASS B BDCs

Anthrium Foreign Exchange (Pty) Ltd Best Exchange (Pty) Ltd

Kot Damoo Building, Anse Royale, Mahé Email: [email protected]

Tel: 441 1638 / 259 0592

Kannus store, Baie Ste Anne Praslin, Praslin Email: [email protected] /

[email protected]

Tel: 442 4445 / 272 5511 / 272 5555

Exotic Exchange (Pty) Ltd

C/o Maki Shop, Cote D’Or, Praslin

C/o Maki Shop, La Passe La Digue


Tel: 277 7111

Ideal Money Changer (Pty) Ltd Mohan’s X’ Change Ltd

Pension Fund Complex, Grand Anse, Praslin Email: [email protected] Tel: 278 3165/ 251 3025

Fax: 423 7062

C/o Mohan’s Shopping Centre, Plaisance, Mahé Email: [email protected] Tel: 434 4290

Fax: 434 4610

Money Stretcher (Pty) Ltd Saymore (Pty) Ltd

Camion Hall Building, Victoria, Mahé

Tel: 251 6513

Email: [email protected] /

[email protected]

Seychelles International Airport, Pointe Larue, Mahé Tel: 437 3434 / 254 2500

Fax: 437 3695

Sylvie's Exchange (Pty) Ltd Thompson (Seychelles) Ltd

Mangroo’s Building, Beau Vallon, Mahé Email: [email protected]

Tel/Fax: 424 8125

Mahé Trading Building, State House Avenue, Victoria, Mahé


Tel/Fax: 432 4779

Victoria Money Changer Ltd

Kandimathy Building, Market Street, Victoria, Mahé


Tel: 432 1612 / 251 6945

Universal Money Changer (Pty) Ltd

Chez Deenu Supermarket, Quincy Street, Victoria, Mahé

Tel: 432 2639 / Fax: 432 4028

Deenu’s Mini Market, Premier Building, Victoria, Mahé

Tel: 4322059

Adam Moosa Building, Victoria, Mahé

Tel: 4325474



http://www.luluexchange.com/

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Vims Exchange Ltd

Baie Ste Anne Jetty, Baie Ste Anne, Praslin

Tel: 258 1110 / 258 4404

Fax: 423 6152

Praslin Airport, Grand Anse, Praslin

Tel: 276 2110


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Financial services supervision report 2015 - Central Bank of … Report 201… · · 2016-11-09CHAPTER 3 - FINANCIAL ANALYSIS ... 3.1.2.3 NET TANGIBLE CAPITALISATION RATIO ... HBL