Financial Services Supervision Report 2016

Financial Services Supervision Division CENTRAL BANK OF SEYCHELLES

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MESSAGE FROM THE GOVERNOR

Supervision of the Seychelles banking sector originated as far back as 1978, with the creation of

the then interim Seychelles Monetary Authority (SMA). The creation of CBS in 1983 led to the

dissolution of the SMA. Over the years, the supervisory role of CBS has evolved to new heights

from increased responsibilities over existing licencees to new responsibilities through delegation

of powers which led to widening of CBS’ supervisory purview. Furthermore, the international

regulatory landscape has changed over the years and continues to evolve in light of new

developments and ongoing innovation. Correspondingly, towards the attainment of an effective

supervisory framework, CBS has had to ensure that its supervisory function is allocated with

enough resources in order to develop and modernise its practices as relevant for Seychelles.

Adequacy of resources is by no means a straightforward achievement given its scarcity. In this

recognition, CBS is following the global supervisory trend in developing the risk based

supervision (RBS) framework of the Financial Services Supervision Division (FSSD), the ultimate

aim of which is to optimise supervisory resources whilst conducting effective supervision.

The year 2016 proved to be a challenging and busy year for the country as highlighted in the

macro-economic conditions overview and this reflected also on the work of CBS. With its

objective of ensuring a sound financial system, CBS felt the pressure of ensuring that

developments within its supervisory role were up to date with developments within the banking

sector. Additionally, in relation to the projects which CBS is currently working on, such as

implementation of Basel II and new banking activities, technical staff have the task of customising

such approaches to our local context in view of our economy and size.

Moreover, from a technical perspective, CBS observed the increased technicality of supervisory

tasks, in principle complex licensing applications. This intensified our efforts in ensuring that

work on amendments to our legal framework is completed in due course.

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Nevertheless, CBS continues to ensure that challenges faced do not impact on its quality of work.

Amidst such challenges, CBS managed to ensure that licencees complied with its directives and

within the parameters of existing law, that consumers are protected from any unfair practices or

those which affects rights of consumers. As elaborated within the report, some financial

institutions were fined during the year in question as a result of offences committed. As at year

end, some offences carried out by other institutions were still being processed and the applicable

fines will be imposed during the course of the following year; that is in 2017. In an attempt to

improve the level of protection accorded to consumers, CBS is working on a consumer protection

framework which when implemented will accord CBS with the power to enforce such protection.

This will help to ensure that consumer’s rights are respected above all and that they will be able

to seek redress under the right mechanism.

CBS recognises that much more needs to be done to increase the level of consumer satisfaction

within the banking sector. In order to achieve same, financial education is one of the important

factors although these projects will be implemented in the longer term. In the interim, we are

committed to ensuring that the banking sector remains prudent and sound towards the

betterment of Seychelles.

Fundamental to CBS’ operations, is the achievement of its objectives, which in relation to FSSD’s

functions is to promote the soundness of the financial system. Initiatives to remain abreast with

evolution in the industry and regulatory standards are consistent with this ultimate objective and

are guided by CBS’ strategic plan. Having said this, further development and modernisation of

the financial sector cannot be ignored and its pursuit is undertaken by keeping sight of the need

to preserve financial soundness. To exemplify, the ongoing discussions on Crypto currencies and

block chain technologies are followed by CBS and will be considered as relevant for the

jurisdiction. Given this state of flux within the financial industry, this emphasises the importance

of a strong regulatory and supervisory framework that remains relevant and responsive to

ongoing foreseen and unforeseen changes.

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ACRONYM

AFI Alliance for Financial Inclusion

AFS Afritac South

AGM Annual General Meeting

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

ASBS Al Salam Bank Seychelles

ATM Automated Teller Machine

BAHL Bank Al Habib Limited

BBS Barclays Bank (Seychelles) Limited

BCBS Basel Committee on Bank Supervision

BDC Bureaux de Change

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

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ICAAP Internal Capital Adequacy Assessment Process

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

NPS National Payment System

NRA National Risk Assessment

NTCR Net Tangible Capitalisation Ratio

NVB Nouvobanq

OECD Organisation for Economic Co-operation and Development

OPEC Organisation of Petroleum Exporting Countries

POS Point of Sale

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

SMA Seychelles Monetary Authority

SMEs Small and Medium-sized Enterprises

SREP Supervisory Review Evaluation Process

TA Technical Assistance

T-bills T-bills

T-bonds Treasury Bonds

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UHB United Helvetic Bank

TT Telegraphic Transfers

WOCCU World Council of Credit Unions

VAT Value Added Tax

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OVERVIEW OF THE REPORT

The prevailing aim of publishing a yearly Financial Services Supervision Report is to provide

information on developments within the financial sector for the year under review, so as to

promote transparency and disclosure of information in the financial system. This encompasses

information on the structure of the financial sector, the financial position and performance of

supervised institutions as well as developments in the supervisory and regulatory framework.

The report also provides an overview of the functions of FSSD, which is the division within the

CBS responsible for the supervision of institutions under its supervisory ambit.

The structure of the report is 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, HFC and BDCs in 2016, as well as the enforcement actions taken against the financial institutions;

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

1.0 External Developments

Despite recovery efforts in the world’s economy following the effects of the 2007/2008 financial

crisis, there was still a state of uncertainty in 2016. This was as a result of the political

development in Europe and the United States (US). From the US, uncertainty sprang from the

expectations that the newly elected anti-establishment Republican President would re-negotiate

existing trade deals which would put the trading partners at a disadvantage. In a surprising turn,

residents of the United Kingdom (UK) voted in favour of exiting the European Union (EU) in June,

an event referred to as Brexit. The widespread uncertainty in the global market especially in the

foreign exchange market where the UK pound sterling depreciated to an all-time low, has left

many analysts wondering whether the residents of the UK understood the implications of Brexit

prior to making the decision. However, a fair degree of uncertainty remained with regards to the

expected new trade arrangements between the UK and the EU.

It should be noted that despite this, the world economy has grown by an estimated 3.0 per cent

in 2016. However, the economic environment was generally low in advanced economies after

Brexit and the weaker growth in the US than expected.

With regards to the commodities market, the price of the oil remained weak for the better part of

the year. This raised concerns over revenue losses by oil exporters but was welcomed by oil

importing countries. The OPEC reached an agreement in November to cut oil production in view

of the past 2 consecutive years of weak falling oil prices. This decision stabilised oil prices which

had fallen sharply as a result of oversupply. The result was a recovery in headline inflation in

advanced economies although core inflation remained below the inflation targets. According to

the IMF, there were formidable policy challenges in order to adjust to weaker commodity prices

for a number or emerging markets as well as developing economies. As a result, there were urgent

calls for broad based policy in order to raise growth and manage vulnerabilities.

1.1 Domestic Economic Development

Although there was uncertainty in the global environment, the external developments in 2016

proved positive for the domestic economy. Given the country’s heavy reliance on imports, the

weak international commodity prices brought significant benefits to the country. Moreover, the

tourism industry continued to be strong with a new record for the total number of visitors to the

country. Nonetheless, international reserves remained adequate, implying a continued strong

external position with the ability to withstand a fair degree of external shocks.

Nonetheless, the uncertain political environment following the outcome of the presidential

election in December 2015, started 2016 with ambiguity for both businesses and consumers.

Moreover, in September the parliamentary election was won by the opposition which resulted in

a situation of cohabitation. This resulted in some concerns that the opposition would stop or

hinder important policies that require the approval of parliament whilst others viewed it as a

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positive outcome which would promote transparency and accountability in governmental affairs.

Further uncertainty in the political landscape was as a result of the resignation of the President

and the subsequent swearing in of the vice-president in office. Consistent with the new political

environment, the President Faure promised to put emphasis on working together for the

government to promote good governance, transparency and accountability.

The main economic developments of the year were the measures announced by the President in

his State of the Nation address that had the objective of addressing social issues in the country. In

order to do so, in April, the minimum salary was revised upward by 25 per cent to R5,050 per

month for employees who work for 35 hours per week. In addition, the statutory old age pension

was increased by 40 per cent to match the minimum monthly salary. Moreover, the government

announced amendments to the employment laws to make it mandatory for Seychellois employees

to be paid a 13th month salary in both the public and private sectors.

To address income inequality, the introduction of a progressive income tax (PIT) system was

announced. The first phase, effective April 2016, employees on minimum salary were exempted

from income tax. In the second phase that became effective July 01, employees earning a monthly

salary of or below R8,555.50 were not liable to income tax, above which the rate became

progressive up to 15 per cent. Above that amount, a progressive tax rate of up to a maximum 30

per cent would be applicable depending on the salary level. It should be noted that the third phase

is yet to be implemented. In order to attain fiscal discipline, measures had to be introduced in

order to counteract the estimated loss in government revenue as a result of the PIT

implementation. Detailed pronouncements of these measures are expected to be included in the

2017 budget statement.

Of note, the performance of the fiscal accounts remained positive in 2016 with a primary surplus

at 3.3 per cent of GDP. Consistently, the government remained on track to reducing overall public

debt. However, to allow for some fiscal space, the public debt target of 50 per cent of GDP was

extended to 2020 from 2018 and at the end of 2016, total public debt stood at 65 per cent of GDP.

Whilst this ratio was higher than 61 per cent of GDP for end-2015, a significant component of

domestic debt included T-bills issued for the mopping up of excess liquidity1 from the system

under the umbrella of monetary and fiscal policy coordination.

For most part of the year, monetary policy had remained tight, a stance which was adopted as

from the second quarter and was reflective of the CBS short-to-medium term view on inflation.

Whilst external factors did not threaten domestic price stability, the Bank’s assessments showed

inflationary impulses due to an expansion in domestic aggregate demand.

As safeguard against external shocks, the Bank’s policy of opportunistic purchases of foreign

exchange from the domestic market for reserves accumulation purposes was maintained.

However, during 2016, the strong demand left limited opportunities for the successful conduct of

foreign exchange auctions and consequently the country’s gross official reserves fell to US$524

million– equivalent to 4.1 months of projected imports of goods and services. By the end of the

year, the targeted level of net international reserves (NIR) had been exceeded by US$14 million.

1 The proceeds from Government securities issued for the purpose of absorbing excess liquidity are not used for the financing of government spending but are held as deposits until maturity. Therefore, whilst such instrument increases domestic debt on a gross basis, they have no net effect on overall public debt.

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Notwithstanding the overall contraction in official reserves, preliminary estimates showed a

slight improvement in the country’s current account deficit measured as a percentage of GDP at

18 per cent in 2016.

In consideration of the stable external value of the domestic currency coupled with the generally

weak international commodity prices as well as the monetary policy stance adopted by the CBS,

inflation was overall moderate during 2016. Based on statistics for the monthly CPI published by

the National Bureau of Statistics (NBS), the rate of inflation ended 2016 at close to zero per cent.

Of note, there was an overall growth in liquidity during the year which was supported by an

increase in domestic credit, attributed to growth of just above 10 per cent in credit to the private

sector. The majority of these loans went towards the financing of consumption rather than

investment. Moreover, an overall decline was observed in interest rate level with an average

return on fixed-term rupee deposits of 3.55per cent in 2016 and a stable savings rate at 2.92 per

cent on average. The interest rate spread2 declined slightly compared to the previous year but

remained relatively high at 9.50 per cent.

For another year, the Seychelles’ authorities remained committed to the successful

implementation of the 3-year Extended Fund Facility (EFF) programme with the IMF, which will

end in June 2017. The two key targets, namely the primary fiscal surplus and a minimum level of

NIR were successfully met. Moreover, there was further evidence that the government remained

on track to achieving its debt reduction strategy.

2 The interest rate spread refers to the difference between the lending and savings rates

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CHAPTER 2 – OVERVIEW OF THE INDUSTRY AND

SUPERVISION

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. Additionally, the role of

payment systems oversight and financial stability are explored with the aim of providing a holistic

view of the depth of supervision being carried out by CBS. The chapter 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

As per the Central Bank of Seychelles Act, 2004 as amended, the main objective of CBS is to

promote price stability. In addition to this, CBS is also tasked with other objectives, one of which

is promoting the soundness of the financial system. These objectives are articulated within the

CBS’ strategic plan for 2014 to 2018 which also establishes key performance indicators against

which to evaluate progress.

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

further defines specific objectives, goals and measures, for which those pertaining to FSSD are

outlined below:

Objective 1:

To ensure the stability of the financial sector by promoting the safety and soundness of

supervised institutions. In order to achieve this objective, the division is tasked with ensuring

that the following are carried out:

Conduct effective offsite monitoring of banks and other institutions under CBS’ regulatory

ambit;

Carry out effective onsite examinations;

Ensure effective licencing process is in place to allow only appropriate entities in the

financial sector; and

Improve the availability of information to assist credit granting decisions.

Objective 2

To strengthen the regulatory framework by reinforcing the relevant legislations to be at par with

international best practice. This is to be achieved by:

Ensuring that the regulatory and supervisory framework are at par with international

best practice; and

Promoting the development of leasing industry and formulating the respective regulatory

and supervisory framework.

Objective 3

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To enhance financial services consumer protection by enhancing protection of consumers and

reinforcing financial education. In order to achieve this objective CBS needs to;

Secure an appropriate degree of protection for consumers through the development and

implementation of recourse mechanisms;

Encourage fair treatment of consumers;

Contribute towards promoting financial literacy to increase public confidence; and

Periodically evaluate the situation in the banking industry with regards to competition

and take regulatory measures as deemed appropriate, with a view to protecting

consumers.

Objective 4

To meet statutory reporting requirements and disseminate economic information to the public

by ensuring the accurate preparation and timely release of all publications. To achieve this

objective, the division will:

Collect and analyse data and prepare reports; and

Comply with reporting requirements vis-à-vis international and regional bodies;

In addition to the above, the modernisation of the payment systems and implementation of an

effective oversight function were also important. Ultimately CBS has to ensure financial stability

such that the financial system can adequately support economic growth. These are addressed

through the functions of PSD and Financial Stability Unit (FSU) respectively within CBS. In January

2016, the FSU became operational in order to assess and address financial stability issues. As part

of its objective of ensuring financial stability, a crisis management framework is to be developed

to that accord.

2.2 THE REGULATORY FRAMEWORK AND SUPERVISED INSTITUTIONS

Chart 2.1 illustrates the different types of institutions which fall under the supervisory ambit of

FSSD. Of note, no financial leasing institution has been licensed yet.

Chart 2.1: FSSD’s Supervisory Portfolio 2016

Banks BDC

Class A

Class B

Other Financial

Institutions

SCU

DBS

HFC

Financial Leasing

Institutions

Deposit- taking Financial Leasing

Institutions

Non-Deposit-taking

Financial Leasing

Institutions

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As mentioned, the Central Bank of Seychelles Act, 2004 as amended, accords CBS its principal

powers which are explicitly related to functions pertaining to financial institutions. As per

interpretation of the FIA, the term financial institutions relate to banks and BDCs only. Moreover,

the Financial Leasing Act, 2013 also makes provision for institutions to be licensed by CBS to carry

out financial leasing activities. These institutions can be either deposit-taking or non-deposit

taking.

In addition to its oversight role over financial institutions, CBS has also been assigned the

following responsibilities:

The regulatory authority of SCU, by virtue of the Credit Union (Designation of Authority)

Notice, 2009.

Oversight responsibility over DBS through the Delegation of Statutory Functions (DBS

Decree) Order, 2009, whereby the statutory functions under the Development Bank of

Seychelles Decree was transferred to CBS.

Oversight responsibility over HFC. This was done by its responsible Ministry which

officially delegated the oversight of HFC’s credit granting function to CBS in 2009.

In furtherance to the assignment of oversight responsibilities over DBS and HFC, the regulatory

framework for same had to be established. In view that DBS and HFC do not constitute as financial

institutions, the application of the FIA in its entirety was limited in their supervision. As such, the

Financial Institutions (Application of Act) Regulations, 2010 was issued with the aim of

expressing clearly the provisions of the FIA which applies to the institutions. Following same,

through regulatory experience CBS has identified the need to increase its powers pertaining to

regulatory framework governing the scope and extent of supervision of these institutions. Thus,

CBS intends to strengthen its regulatory functions vis-à-vis the afore-mentioned non-bank

institutions through a consolidated regulatory framework. The latter would take into account

existing or any other non-bank institutions in the financial sector that may be assigned to the CBS’

supervisory portfolio in the future. Section 4.3.8 gives an overview on this endeavour.

Table 2.1 illustrates the enabling legislations for the supervised institutions. Apart from SCU and

DBS, these supervised institutions which are all companies, are incorporated under the

Companies Ordinance, 1972. Of note, as per Part III of the FIA, some sections of the Companies

Ordinance 1972 do not apply to financial institutions.

On the other hand, CUs may be established by Order which are published in the Gazette by the

Minister for Finance, whilst DBS is a body corporate established by statute. In regards to HFC, it

is worth noting that the Companies Ordinance, 1972 is its primary governing law.

By the end of 2016, there were 11 banks licensed with 9 in operation. During the year under

review CBS also processed one new banking licence application which was not approved.

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As at the end of 2016, there were 26 BDCs, which consist of 14 Class A3 and 12 Class B4. It is worth

noting that CBS processed 4 applications for BDC licence in 2016 of which 1 was rejected, 2 were

not processed for failure to submit documents and 1 was still being processed by the end of the

review period.

Table 2.1: Main enabling legislations for supervised institutions

Institutions Main Legislation5

Banks and

BDC

FIA and

National Payment System Act,

2014 (licence for Class A BDC

and approval for banks (in

relation to payment services))

Financial Leasing Institutions Financial Leasing Act, 2013

SCU Credit Union Act 2009, as

amended

DBS Development Bank of

Seychelles Decree, 1977

2.3 SUPERVISORY STRUCTURE AND FUNCTION

FSSD is sectioned into three Units, which although separate are linked in terms of objectives and

purpose. The Policy Unit is tasked of ensuring that only sound institutions are licensed to enter

the financial system. Additionally, this unit strives to ensure that the legislative framework

governing the financial system is up to date and in line with international best practice. Post-

licensing, institutions are subject to approvals for request they have to submit with respect to

appointments of administrators or auditors amongst others.

The Off-site Unit within the FSSD is the unit responsible for the analysis of financial information

submitted periodically by all financial institutions regulated by the CBS. The information

submitted is analysed on an individual and/or industry basis where weaknesses can be identified,

together with sudden and or adverse trends to which corrective actions can be taken to address

any potential risk. Monitoring of licensed institutions are carried out through desk-reviews in

order to ensure compliance with prudential requirements and other requirements such as capital

adequacy and credit provisioning amongst others. Information gathered from such analysis

further paves the way for work which is carried out by the Onsite Unit.

Furthermore, the unit also ensures that the information submitted is in compliance with all the

requirements provided under the FIA and other regulations or circulars issued by the CBS.

Additionally, it also performs stress tests on a periodic basis which is aimed at identifying

weaknesses in the financial industry on both micro and macro level. The unit also administers the

CIS which is a tool used by all banks as well as HFC, DBS and SCU in assessing the indebtedness

3 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. 4 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. 5 Legislations can be accessed on CBS website at www.cbs.sc

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and credit worthiness of clients prior to being granted credit facilities, hence contributing

towards credit risk management.

Onsite inspection of financial institutions remains a critical part of ongoing supervision as it

complements the work conducted by offsite team. Inspections are carried out on a pre-

determined schedule which is prepared annually and is either limited/focussed approach or on a

full scope basis. Of note, limited scope examination can be carried out as a result of a causal event

which warrants further investigation. Whilst the limited scope is focused on one specific area of

the bank, full scope examinations are more in depth and focuses on the whole functions and risks

associated with the bank. The examination schedule is determined on a risk based approach.

Information and statistics from the Policy and Off-Site units are used by the Onsite Supervision

team during their inspection to confirm the reliability of information submitted and evaluate

potential risk.

Table 2.2 provides a brief on the tasks performed by the three Units

Table 2.3 shows the number of inspections conducted by the onsite team during the year and that

of prior years.

Table 2.2

Summary of FSSD’s supervisory functions

Policy Unit Off-Site Unit Onsite Unit

Process licences and other 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

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 institutions and the financial system

Review audited financial statements

Maintain the Credit Information

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

Conduct focussed Onsite 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

Table 2.3: Number of examinations

2014 2015 2016

Limited scope 2 examinations -

focused on compliance

to Fees and charges

regulations

4 – Anti-Money

Laundering and

Counter Terrorism

Financing

1 - Fraud

Full scope 2 0 4

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

the risky areas in an institution or financial system. As part of this process it is essential to

understand the adequacy of supervised institutions’ risk management systems. The division

appreciates that there have been extensive developments in RBS. As such, whilst there are

elements of RBS in its CAMELS6 based approach, there is a need to conduct a gap analysis in order

to assess the requirements for full implementation of RBS within the supervisory model.

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

focus on non-compliance and hence 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 and

identifies risks with a forward looking approach. 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 is on identifying and managing risks.

The Onsite supervisory activities of FSSD in 2016 sought to address the prevailing concerns in

the financial sector. In addition to four full-scope examinations that were undertaken, a limited

scope examination was conducted.

Another dimension to the work undertaken by FSSD, which is largely institution oriented and

micro-prudential in nature, is promoting the macro-prudential supervision which progressed

further in 2016. 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 mitigating the macro-economic costs

of systemic financial distress and maintaining financial stability. Although the function of

Financial Stability Unit is separate from FSSD, interactions and engagements between the micro

and macro-prudential supervision functions contributes to more accurate assessments of risks

and appropriate responses towards the financial soundness and stability objectives.

2.3.1 PAYMENT SYSTEMS OVERSIGHT AND SUPERVISORY FUNCTION OF CBS

PSD is mandated with the oversight of the national payment systems through the National

Payment System Act, 2014. The enhancement of public confidence in payment systems is related

to 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 the development of

an appropriate regulatory framework in this regard.

Since 2008, CBS has made significant progress in actively reforming the country’s NPS through

reforms in the legal framework as well as through strategic modernisation of the payment,

clearing and settlement systems. As mandated by the NPSA 2014, CBS, through PSD, is the

designated authority in charge of regulating and overseeing the NPS for the purpose of ensuring

its safe, secure, efficient and effective operation. As part of its oversight functions, the division is

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

Liquidity and Sensitivity to market risk.

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responsible for identifying potential risks in the design and operation of the payment systems

and taking appropriate steps to minimise these risks. This is enabled through the continuous

monitoring of systems and participants, performing onsite examinations, conducting research

and assessing identified Financial Market Infrastructures against the adopted Principles issued

by the Committee on Payment and Settlement Systems and International Organization of

Securities Commission (CPSS-IOSCO).

National Payment Council and National Payment Task Force

The PSOD also acts as secretariat to the NPC and the NPTF in order to drive the modernisation

process of the NPS. The NPC was introduced in 2008 and its core objective is to advise CBS on

strategies for the modernisation of the payment system. The Council, which is chaired by the

Governor comprises of CBS’ representatives and chief executive officers of the commercial banks

and credit union. Established in that same year, the NPTF acts as an advisory body to the NPC and

is mainly involved with discussions on the implementation of payment system related projects

and other issues. The NPTF, is chaired by the Second Deputy Governor and comprises of CBS’

representatives, operational managers and appointed representatives of the commercial banks,

credit union as well as senior representatives of other non-bank financial institutions, as and

when necessary. Members of the Council and Task Force convene at least once every quarter to

discharge their duties in order to achieve the respective objectives set.

Regulatory Framework

With regards to the regulatory framework in place, the NPSA was enacted on August 18, 2014

following the repeal of the National Clearance and Settlement Systems Act of 2010. The principal

objectives of the NPSA are to provide for (i) a framework for the authorisation of Payment,

Clearing and Settlement Systems (PCSS) Operators; (ii) licensing of payment service providers

(PSPs) in order to ensure that such institutions operate within a regulated environment; and (iii)

CBS to have the necessary powers to effectively carry out its oversight functions.

The NPSA further aims to reduce any inefficiencies and potential risks in the payment

infrastructure, mainly by promoting soundness, safety, efficiency and competitiveness of the

country’s national payment system. The NPSA seeks to combat liquidity, credit, counter-party,

legal, systemic, operational and other risks affecting the reliability of the national payment

systems. Moreover, matters relating to the protection of users of payment systems are also

outlined in the NPSA.

Subsequent to the enactment of the NPSA, the Regulations for the Licensing of PSP and

authorisation of operators of payment, clearing and settlement systems were gazetted on

December 31, 2014. These regulations set out the requirements and conditions for the licensing

and authorisation of PSP and operators, as well as specify the procedures to follow when applying

for a license or authorisation.

Consistent with the ongoing practice of ensuring the effectiveness of the legal framework, some

areas of the NPSA have been identified for review in 2018. It is also intended for two new pieces

of regulations to be gazetted during the course of the next two years and this includes the

Electronic Money regulations and the Oversight regulation which will allow for CBS’ continuous

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oversight roles and responsibilities following the licensing/authorisation of PSPs and PCSS

Operators respectively.

Projects to be Implemented

During the year 2016, emphasis was put on the deliverables under the Financial Sector

Development and Implementation Plan (FSDIP) as approved by the Cabinet of Ministers in 2014.

In this regard numerous feasibility studies and research were undertaken of which key

recommendations that would further enhance the NPS in line with international best practices

have been highlighted. Based on the outcome, CBS is now looking into the implementation of a

Real-Time Gross Settlement System (RTGS) and a CSD. In addition, CBS in collaboration with the

Seychelles Bankers’ Association undertook a fact finding mission in two jurisdictions in order to

obtain detailed insight into the operational aspects of a SWITCH as well as regulatory and

supervisory framework in these jurisdictions. Procurement of consultancy services for the

conduct of a feasibility study for the establishment of a national payment switch is expected to be

undertaken in 2017.

Other Developments

During the second quarter of 2016, CBS initiated the process to on-board SIRESS, an electronic

payment system developed by the SADC member states to settle regional transactions among

banks in real-time. The Bank subsequently went live on the system in July 2016. In October 2016,

CBS along with the commercial banks and SCU adopted the International Bank Account Number

(IBAN) which is an international standard for identifying bank accounts across national borders.

As such, cross-border payment transactions are now automated with minimal risks of

propagating transcription errors and customers experiencing minimal or no delays in

transactions with other IBAN compliant banks. In that same month, a National Payment System

Vision and Strategy for 2016-2020 for the country was formulated and ratified. This document

provides strategic direction for the development of the country’s payment systems for the five

year period. Moreover, in November 2016 PSD initiated a PFMI assessment on the FMIs operated

by the Bank, namely the Electronic Cheque Clearing (ECC), Seychelles Electronic Funds Transfer

(SEFT) and Central Bank of Seychelles Immediate Transfer Service (CBSITS) systems. The main

aim of this assessment was to enhance compliance of the FMIs with international standards and

ensure increased safety and efficiency in such systems which in turn would limit systemic risks.

Payment Channels and Instruments

As pronounced in the NPS Vision and Strategy 2016-2020, CBS has put much emphasis on

promoting the increased use of electronic and innovative forms of payment during the year 2016.

As at the end of 2016, three local commercial banks offered internet banking facilities to their

customers. As regards to mobile banking, four banks offered SMS banking services of which only

one provided transaction-based SMS banking whilst the others used the SMS alert function. As

for mobile payments, the only institution offering this service was Airtel Mobile Commerce

(Seychelles) Ltd. By enlisting for such a service, customers have the option of paying for goods

and services at selected merchants, effect bill payment and transfer of e-money from mobile

wallets as well as purchasing of airtime.

18

Below is a breakdown of payment activities which took place during the year 2016.

Cheques7

Despite CBS’ efforts in promoting the use of electronic payments as opposed to paper-based

transactions, cheques were still predominantly used especially for high value transactions. An

increase of 5.3 per cent was observed in number of high-value8 cheques cleared in 2016

compared to the previous year. The total number of cheques issued during the year amounted to

1,484,6369 representing an increase of 1.1 per cent compared to 2015. Similarly, the total value

of cheque transactions increased by 0.3 per cent in 2016 from R40,963 million to R41,084 million.

It is to be noted that 293 non-standard cheques were presented for clearing during the year under

review which depicts a continued decline of presentment of such cheques. This is further to CBS’

initiative of having standardized cheques as enhanced measures of security and automation in

the clearing process. As regards to bounced cheques, a fall of 19 per cent was observed in the total

number of bounced cheques presented in the ECC compared to the previous year. However, in

terms of value, an 8.0 per cent increase was registered, with figures from R190 million in 2015 to

R205 million in 2016. Further to the directive issued in 2015, continued monitoring of

institutions under the Bank’s regulatory purview was undertaken to ensure safe, secure, efficient

and effective operation of the NPS.

CBSITS

The total number of Rupee denominated out-going SWIFT messages sent to participants

amounted to 100,863 in 2016 representing a decline of 0.26 per cent when compared to the

previous year. However, in terms of value of SWIFT instructions sent to participants, 14,170 was

recorded in 2016 which represented an increase of 32 per cent compared to 10,782 recorded in

2015. This increase in value further showed that SWIFT was mainly used for high value

transactions especially during the festive season in December and at the close of government

budget at the end of the year.

SEFT System

During 2016, all participants of the SEFT system were directed to fully integrate their respective

core banking system with the system so as to allow for customers’ accounts to be credited

instantaneously by “Straight-Through Processing” of transactions. In addition, the integration

allows for participants’ smooth transition to SEFT Phase 2 whereby customers will be able to

effect payment transactions from the comfort of their own devices/home without having to send

payment instructions to their banks. Full implementation of SEFT Phase 2 which was initially

projected for completion during the third quarter of 2016 has been pushed to 2017. In terms of

statistics, a growth of 44 per cent in volume of SEFT transactions were recorded with figures from

58,529 in 2015 to 84,401 in 2016. Moreover, the value of SEFT transactions increased by 24 per

cent in 2016.

Payment Cards, ATMs and POS

7 Includes both cheques presented in the clearing house and on-us cheques which are cheques drawn

and presented for clearing at the same institution.

8 Transactions amounting to R100,000 and above. 9 Inclusive of 293 non-standard cheques

19

The use of cards as a means of payment have been on the continued uptake since their

introduction as members of the public are now becoming more receptive towards innovative

means of payment. As at the end of December 2016, the total number of debit and credit cards in

circulation stood at 80,544 and 4,091 respectively. With regards to ATMs, during 2016, 5 new

ATMs were installed, bringing the total number of ATMs countrywide to 53. When looking at

transactions conducted on ATMs, a total of 2.5 million transactions were effected for a total value

of R3,113 million. In order to promote efficiency and security for ATM usage and other payment

instruments commercial banks enhanced security features on their ATMs. These were installed

early 2016 so as to deter skimming attempts. As for POS terminals, a total of 321 new terminals

had been deployed during the year bringing the total number to 2,541. The total volume of

transactions amounted to 1.6 million in 2016 with the peak recorded during the month of March

2016. In value terms, a total of R2,044 million was recorded in 2016 with an average of R170

million per month.

In summary, the year 2016 saw increased usage of electronic payment services especially for

retail payments thus further supporting the continued effort of the Bank in promoting modern,

innovative means of payment. Nonetheless, it is to be noted that cheques are still the preferred

mode of making higher valued payments.

2.4 THE BANKING SECTOR

There were 11 licensed banks in Seychelles with 9 in operation as at the end of 2016. UHB was

licensed in 2015 but had not started it operations as at year end. Additionally, a new bank, SBM

Bank (Seychelles) Limited, was licensed during the year but had not started its operations as at

year end.

The licensed banks along with their commencement history are shown in Table 2.4.

Table 2.4: Banks and year in which operations started

Banks Year in which operations started

Barclays Bank of Seychelles 1959

Habib Bank Limited 1976

Bank of Baroda 1978

Mauritius Commercial Bank 2003 and took over assets of Banque Francaise

Commercial Ocean Indien which has started in

1978

Seychelles Commercial Bank 1981 as Seychelles Savings Bank, rebranded in

2013

Nouvobanq 1991

Al Salam Bank Seychelles 2008 as BMIO, rebranded to AL Salam Bank in

2016

Bank Al Habib Limited 2014

Bank of Ceylon 2014

United Helvetic Bank Limited Licenced 2015 but had not yet started

operations in 2016

20

SBM Bank (Seychelles) Limited Licenced 2016 but had not yet started

operations in 2016

In May 2016, CBS terminated the seizure of BMIO in accordance with paragraph 5(2)(b) of

schedule 3 of the FIA 2004. The bank was subsequently restructured and rebranded as Al Salam

Bank Seychelles.

Banks in Seychelles operate under a single licensing regime. 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.

2.4.2 OWNERSHIP OF BANKS

Chart 2.2 illustrates the ownership of banks in 2016. The two local banks, NVB and SCB were

majority owned by the Government.

Chart 2.2 Shareholdings of Banks

2.4.3 BRANCH NETWORKS

Table 2.5 shows the distribution of bank branches across Mahe, Praslin and La Digue. During the

year, an additional branch was opened on Mahe specifically at the Bois de Rose Complex.

Approval was given by CBS to open another branch towards the end of the year however, the

branch was not operational as at year end. 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 an even distribution in the locations of branches

across the islands. Given Seychelles’ size, access distance-wise is not expected to be a significant

issue in the country.

Table 2. 5: Number of Branches

21

2016 Mahe Praslin La Digue Total

BAH 1 0 0 1

BoC 1 0 0 1

BBS 6 2 1 9

BoB 1 0 0 1

ASBS 1 0 0 1

HBL 1 0 0 1

MCB 4 2 1 7

NVB 3 1 1 5

SCB 3 1 1 5

2.4.5 EMPLOYEES AND CAPACITY BUILDING

In 2016, the number of employees within the banking sector totalled to 698 compared to 664 in

2015. This change reflects a general increase in the number of local employees within most banks.

The majority of the employees in the banking sector are Seychellois (95.5 per cent) as illustrated

in Table 2.6

Table 2.6 Total number of staff employed by banks

As elaborated in the FSDIP, the significance of continuously providing training to employees

within the financial sector is an overarching objective. This needs to be formalised into a coherent

vision towards creating an educational programme to support long term development of

employees. Nonetheless, both banks and BDCs ensured that staff were given the opportunities to

develop their knowledge and understanding through a series of trainings during 2016. Trainings

attended pertained to the following areas:

Internal auditing

Banking software systems

Accounting- ACCA, foundations in accounting

Finance

Professional development programs

General Management

Local Expatriates Local Expatriate

s

Local Expatriate

s

BBS 192 7 196 9 212 11

MCB 170 6 161 5 164 4

NVB 123 4 127 4 126 4

SCB 96 0 103 0 108 1

ASBS 21 1 13 1 17 1

BoB 17 3 15 3 17 3

HBL 11 2 11 2 11 2

BoC 7 3 8 3 10 4

BAHL 0 4 0 3 0 3

Total 637 30 634 30 665 33

667 664 698

2014 2015 2016

22

Business Administration

Marketing

Self-development courses e.g. team building, CDD, IT Security, Fire & Safety

Overseas Official Missions e.g. SADC, AADFI

2.4.6 COMPLAINTS STATISTICS

As defined under the Financial Institutions (Complaints Handling) Regulations, 2008, “complaint

refers to any expression of dissatisfaction or concern about a service or product provided by a

financial institution”. This regulation 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.

CBS compiles statistics on complaints in two manners, that is; complaints which are lodged at

commercial banks directly and those which are lodged at CBS. This either for the first time or

following dissatisfaction of the complainant pertaining to response provided or in the event that

no response is provided at all. Commercial banks submit statistics on complaints received and

dealt with through the complaints return which is submitted on a semi-annual basis. This return

provides information on the nature of complaints relating to private or commercial clients as well

as the number of complaints closed during the reporting period. The return also lists outstanding

and complaints upheld by banks and those referred to CBS.

In 2016, 934 complaints were lodged at banks compared to 692 in 2015 and 559 in 2014. This

represents an increase of 31.97 per cent in 2016 compared to 2015 and an increase of 61.00 per

cent compared to 2014 figures. The three-year trend shows that complaints are increasing and

that the marginal rate of increase is widening. Table 2.7 shows the demographic of complaints

statistics recorded from banks.

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.

23

Table 2.7 Complaints lodged at Banks

2014 2015 2016

Complaints lodged at Banks

Current account 14 69 95

Deposit/Savings 30 52 36

Other liabilities 6 0 0

Credit Card 22 12 20

Debit Card/ ATM Card 100 225 393

Mortgages 0 4 3

Other lending 19 42 28

Foreign currency transaction 12 0 3

Issue and administering means of payment 39 5 0

Safekeeping and administration of valuables 2 0 0

Credit reference services 0 2 0

Statements 10 6 14

Money transmission services 101 164 262

Branch/ATM 42 33 56

Others 162 78 24

Total 559 692 934

Most complaints (655 out of 934) were in relation to payment matters that is issues with debit

card or ATM card and money transmission services. This meant that 70 per cent of complaints

lodged at banks for the year 2016 were due to payment systems issues. By taking a look at

statistics portrayed in table 2.7 above, it is noted that for both previous years the same

observation was made. That is, issues with debit cards/ATM Cards and also money transmission

services were the most common reasons as to why complaints were lodged. Complaints

pertaining to Debit/ATM cards were generated as a result of disputed transactions by one bank

in particular. This related to the bank not blocking accounts even after being informed that

unauthorised transactions were being processed. Complaints relating to money transmission

services were generated due to several issues but principally as a result of delays in effecting

money transfers.

Table 2.8 Complaints lodged at CBS

Complaints lodged directly at CBS

CIS 17

Procedure of bank 19 6

others 8 4 3

Payment 3 16 10

Total 11 39 36

As mentioned above, the other medium where complainants can try to seek redress after having

lodged their complaints at the institution is at CBS. Table 2.8 below portrays statistics recorded

to that regard for 2016 and for the two previous years for comparative analysis. Complaints

lodged at CBS pertains to those against banks and BDCs.

24

In 2016 the number of complaints lodged at CBS were 36 compared to 39 in 2015 and 11 in 2014.

The complaint statistics for 2016 shows a slight decrease of 7.69 per cent over 2015 and an

increase of 227.27 per cent over 2014 figures. The majority of complaint relates to CIS with most

complainants expressing frustrations over difficulties in accessing credits in view that their

names were still appearing within the CIS database even though they had already paid off their

facilities. The second most common nature of complaint during 2016 is payment issues. These

relate to various issues surrounding payment transactions such as delayed fund transfers and

unauthorised transactions on clients’ accounts amongst others.

CBS is working on a consumer protection framework for the financial services sector which will

incorporate enhanced mechanism for complaint handling.

2.4.7 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.

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.

Apart from a non-interest bearing SCR account for maintenance of abandoned property, CBS also

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

denominated in any other currencies apart from those listed above, are converted by banks into

one of these three currencies prior to transfer to CBS. Table 2.9 shows movements and year end

balances in the abandoned property accounts maintained by CBS for the year 2016.

Table 2.9: Balance of abandoned property accounts

Transfers to CBS show the amount of funds transferred to the respective CBS abandoned property

accounts in the eleventh year, following publications by banks. Essentially, this is the

corresponding funds of individuals or companies which have not come to the bank to claim their

abandoned funds within 12 months from the date that the bank published its list of abandoned

2016 opening

balance

Transferred to

CBS in 2016

Refunded to

banks in 2016

2016 closing

balance

SCR 20,438,615.33 1,320,626.93 5,640,121.04 16,119,121.22

USD 547,448.55 10,128.94 0.00 557,577.49

EUR 25,567.99 109.49 0.00 25,677.48

GBP 7,119.57 318.58 0.00 7,438.15

25

properties in its book at such time. On the contrary, refunds to banks show the amount of funds

which have been returned from the abandoned property accounts maintained by CBS to the

respective banks which forwarded such funds initially. These funds pertain to abandoned

properties which had previously been published by banks in newspapers or which had already

been transferred to CBS in the past. CBS releases these funds subject to the satisfaction of the CBS

that the process for establishing that the rightful ownership of funds has been followed.

26

CHAPTER 3 - FINANCIAL ANALYSIS OF THE BANKING SECTOR AND

NON-BANK FINANCIAL INSTITUTIONS

3.1 OVERVIEW OF THE BANKING SECTOR

This section of the report provides an overview of the banking sector and non-bank financial

institutions financial position and performance for the year 2016 versus that of 201511. Additionally,

a selection of Financial Soundness Indicators (FSIs), including prudential ratios, have been analysed

for the year under review, in comparison with that of 2015. Data and explanations used in this

chapter are based on unaudited figures submitted to FSSD, unless stated otherwise.

Out of the nine operating banks in 2016, four were branches of foreign banks12, three subsidiaries

of foreign banks13 and two majority owned local banks. The overall banking sector for the year

2016 was satisfactory, demonstrated through strong capital adequacy position and improvement

reflected in the industry’s asset quality indicators. Moreover, the banking sector generated

sufficient income to cover its expenses, which boosted banks’ equity capital through retained

earnings. A downward trend was observed in the industry’s prudential liquidity ratio from 2015

to 2016. This was triggered by an increase in the ratio’s denominator, i.e. total liabilities, which

was primarily driven by a rise in banks’ deposits base.

Banks are subject to prudential requirements, including limits and ratios, which are set out in the

following Regulations;

Financial Institutions (Capital Adequacy) Regulations 2010

Financial Institutions (Credit Classification and Provisioning) Regulations 2010, as

amended

Financial Institutions (Liquidity Risk Management) Regulations 2009, as amended

Financial Institutions (Foreign Currency Exposure) Regulations 2009, as amended

In essence, these Regulations aims to ensure banks’ credit risk, liquidity risk and foreign currency

risk are within prescribed limits. These requirements are explained further in the report.

Observations noted in the banking sector’ indicators in 2016 were driven by two key

developments in the domestic economy. The first one was the announcement made by the

President in the State of the Nation Address on measures to be taken to alleviate poverty level in

the country. One key focus was to increase the level of disposable income as well as its

distribution. The second one was the monetary policy stance taken by the CBS in the second

quarter of 2016, which was to withdraw liquidity from the system. To note that the position taken

11 Data for the year 2012 to 2014 has also been included for illustrative purposes. 12 These are branches of foreign banks and include BoB, BoC, BAH and HBL. 13 These are locally incorporated subsidiaries of foreign banks and include BBS, MCB and ASBS.

27

by CBS was influenced by the increase in disposable income as it was foreseen that this could lead

to short to medium term inflationary pressure, thus undermining price stability.

3.1.1 ASSETS, LIABILITIES AND EQUITY CAPITAL

Deposit liabilities denominated in both local and foreign currency remained the main source of

funding for the banking sector. With the extra disposable income available to employees and the

tax reform, this may have contributed to the increase in banks’ deposit base. To a lower extent,

equity capital also contributed to the growth in total assets, as there was issuance of fresh paid-

up capital effected by two banks in 2016.

As CBS tightened its monetary policy stance for the most part in 2016, interest rates on T-bills

and DAA was on the high side. Consequently, Government securities contributed significantly to

the growth in the banking sector’s total assets. Moreover, the industry’s total loans and advances

also grew considerably partly due to the high loan commitment of SCR527 million banks had at

the end of 2015.

In general, subsidiaries of foreign banks held the highest proportion of the banking sector’s total

assets, total liabilities and equity capital in 2016. Nonetheless, local banks observed the most

growth from 2015 to 2016 in the said indicators. Chart 3.1 illustrates the trend in the industry’s

total assets, total liabilities and equity capital from 2012 to 2016.

28

Chart 3.1: Total assets, total liabilities and equity capital

3.1.1.1 TOTAL ASSETS

A growth of SCR844 million was recorded in the industry’s total assets from 2015 to 2016. This

was driven primarily by local domestic banks (by SCR579 million) followed by subsidiaries of

foreign banks (SCR157 million) from 2015 to 2016. As noted in the Chart 3.2, local domestic banks

market share of the banking sector’s total assets has increased over the past five years.

Subsidiaries of foreign owned banks contributed to the largest share of the banking sectors total

assets followed by local banks. As at the end of December 2016, subsidiaries of foreign banks and

local banks held 50 per cent and 40 per cent respectively of the banking sectors total assets whilst

branches of foreign banks accounted for 10 per cent. This is fairly similar to that of 2015 whereby

subsidiaries and local banks held 52 per cent and 39 per cent accordingly of the industry’s total

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2012 2013 2014 2015 2016

SCR

milli

on

Total Assets Total Liabilities Total Equity

0

2,000

4,000

6,000

8,000

10,000

12,000

Bran

ches

Subs

idia

ries

Loca

l ban

ks

Bran

ches

Subs

idia

ries

Loca

l ban

ks

Bran

ches

Subs

idia

ries

Loca

l ban

ks

Bran

ches

Subs

idia

ries

Loca

l ban

ks

Bran

ches

Subs

idia

ries

Loca

l ban

ks2012 2013 2014 2015 2016

SCR

milli

on

Total Assets Total Liabilities Total Equity

29

assets. To note that the remaining 9 per cent market share relates to branches of foreign banks.

This is illustrated in Chart 3.2

Chart 3.2: Banking Sectors Total Assets

Year-on-year, the banking sector’s assets increased by 5.0 percent in 2016 compared to a decline

of 14 per cent in the previous year. To recall, that the decline observed in the industry’s asset base

in 2015 did not reflect a poor performance of the banking sector or banks’ inability to grow its

asset base. Instead, the decrease in asset base was triggered by the move of one major bank to

close its offshore portfolio. This one-off event overshadowed the positive performance of the

remaining banks.

Out of the SCR844 million increase during the year, this was primarily recorded in banks’

investments in Government securities. It rose by SCR646 million in 2016, following increased

issuances of T-bills for both fiscal needs and monetary policy purposes. In effect, the sum of T-

bills allotted for the afore-mentioned purposes amounted to SCR6,663 million and SCR4,935

respectively million in 2016.

A rise was also recorded in the banking sectors total loans and advances, whereby it grew by

SCR483 million. To some extent, the rise in this asset was due to the loan commitments banks had

at the end of 2015 and the additional disposable income in 2016. On the other hand, external

assets, ‘Balances with CBS and amounts due from financial institutions’ declined by SCR359

million and SCR114 million, respectively from 2015 to 2016. The movement in the banking

sectors asset components are discussed further in subsequent sections.

Chart 3.3 illustrates the breakdown of banks’ total assets from 2012 to 2016.

0

5

10

15

20

25

0

2,000

4,000

6,000

8,000

10,000

12,000

2012 2013 2014 2015 2016SC

R bi

llion

SCR

milli

on

Branches Subsidiaries

Local banks Total Assets (RHS)

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015 2016

Branches Subsidiaries Local banks

30

Chart 3.3: Composition of total assets

3.1.1.1.1 EXTERNAL ASSETS14

External assets declined further in the year under review by SCR359 million (equivalent to 7.7

per cent), representing a lower decline than that in 2015 (equivalent to 47 per cent) to settle at

SCR4,294 million. As mentioned earlier, a bank’s closure of its offshore portfolio resulted external

assets to decline in 2015. In 2016, three factors which influenced the drop in external assets were

non-renewal of deposits denominated in foreign currency (the source of fund for external assets),

the continued remediation process of a bank which resulted in the outflow of significant funds,

and an appreciation of 11 per cent of the Rupee against the Pound Sterling (GBP). To note that

the 2016 development of the Seychelles Rupee against the GBP was to a large extent influenced

by the weakening of the GBP in international markets. This was a result of the referendum in June

2016, in favour of the United Kingdom exiting the European Union, referred to as Brexit. In view

of the closing of one bank’s offshore portfolio during 2015, this further reduced the proportion of

external assets to subsidiaries of foreign banks in 2016 and as such, local banks proportion of

external assets shifted upward by the end of the year.

In terms of riskiness, external assets are normally assigned a 20 per cent risk weight as per the

capital adequacy computation which is submitted to the FSSD. As at the end of 2016, external

asset stood at SCR4,294 million and was the second largest component of the sectors total assets.

14 Figures are based on audited figures.

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2012 2013 2014 2015 2016

SCR

milli

on

External assets

Loans & advances

Balances with CBS & amounts duefrom financial institutions

Investments in Governmentsecurities

Other assets

31

Chart 3.4: Breakdown of external assets

3.1.1.1.2 LOANS AND ADVANCES15

As mentioned in section 3.1, the minimum salary was revised upward as a study conducted by

the National Bureau of Statistic and the World Bank revealed that the poverty level in Seychelles

was on the high side. Consequently, the minimum salary increased by 25 per cent to SCR5,050

per employees working for 35 hours per week. Moreover, the statutory old age pension increased

by 40 per cent to match the minimum monthly salary. To note that both event took effect in April

2016.

In order to address income inequality, the Government introduced a progressive income tax

system to be implemented in three phases. As of April 01, 2016, employees earning the new

minimum monthly salary of SCR5,050 were exempted from income tax. Effective July 01, 2016,

employees earning a monthly salary of or below SCR8,555.50 were not liable to income tax. The

15 Figures are based on audited figures.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2012 2013 2014 2015 2016

SCR

mill

ion

Branches Subsidiaries Local banks

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016

Branches Subsidiaries Local banks

-

2,000

4,000

6,000

8,000

10,000

-

2,000

4,000

6,000

2012 2013 2014 2015 2016

SCR

milli

on

SCR

milli

on

Balances due from financial institutions abroadSecurities and other investmentsOther external assets

32

third stage which was planned to take effect on January 01, 2017, involved a threshold of

SCR8,555.50 which is exempted from income tax and the amount above that is taxed up to a

maximum of 30 per cent, depending on the salary level.

As certain factors in determining clients’ borrowing capacity had changed, possibly to become

more favourable, some customers tend to borrow. Another element attributing to the growth in

banks’ loan portfolio in 2016 was the loan commitments of facilities approved, but not yet

disbursed, by the end of 2015 which materialised in 2016. At the end of 2015, these commitments

aggregated to SCR527 million. Loans and advances grew by SCR446 million to reach SCR6,332

million at the end of 2016, which represented an increase of 7.6 per cent compared to 9.7 per cent

in 2015. To note that subsidiaries and branches of foreign banks contributed to SCR493 million

and SCR23 million of the total increase in loans and advances.

As at the end of 2016, loans and advances stood at SCR6,332 million and was the main component

of the sector’s total assets. For capital adequacy computation, this asset is assigned a risk weight

of 100 per cent, being the most risky assets of banks. Chart 3.5 shows the trend and breakdown

of loans and advances.

33

Chart 3.5: Breakdown of loans and advances

Similar to 2015, term loans continued to remain the largest component of the industry’s loan

portfolio and accounted for 57 per cent of the industry’s loans portfolio by the end of 2016. From

2015 to 2016, it grew by SCR403 million and settled at SCR3,616 million by the end of the review

period. This represented a growth of 13 per cent from 2015 to 2016.

‘Other loans’16 represented the second largest component of the industry’s loan portfolio, with a

25 per cent share of total loans and advances by the end of 2016. This category of loan declined

by 34 per cent, equivalent to SCR95 million and stood at SCR1,582 million by the end of the review

period. In terms of foreign currency, loans decreased from USD128 million in 2015 to USD118

million by the end of 2016.

Overdrafts and mortgage loans, also contributed to the growth in the industry’s total loans and

advances whereby overdrafts grew by SCR84 million and mortgage loans by SCR73 million. The

16 Consist primarily of loans denominated in foreign currency.

0500

1,0001,5002,0002,5003,0003,5004,000

2012 2013 2014 2015 2016

SCR

milli

on

Branches Subsidiaries Local banks

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015 2016

Branches Subsidiaries Local banks

- 1,000 2,000 3,000 4,000 5,000 6,000 7,000

2012 2013 2014 2015 2016

SCR

milli

on

Overdrafts Term loans

Mortgage loans Other loans

Total loans and advances

34

said credit facilities represented 8.8 per cent and 9.1 per cent of total loans and advances

respectively, by the end of 2016.

3.1.1.1.3 BALANCES WITH CBS AND AMOUNTS DUE FROM FINANCIAL INSTITUTIONS

A significant component of balances with CBS comprise of the Minimum Reserve Requirement

(MRR). This is a monetary policy instrument used by CBS to directly influence money supply and

therefore manage liquidity in the banking system. To note that the MRR is required at 13 per cent

on both foreign and local deposits from residents only. With an increase in deposit liabilities from

2015 to 2016, this resulted in a higher MRR outstanding by the end of year under review.

Essentially, this resulted in an increase in balances with CBS by the end of the year 2016. At the

year end, the MRR on deposits liabilities denominated in SCR stood at SCR1,060 million, whilst

that on USD17 and EUR deposit liabilities equalled to USD35 million and EUR16 million,

respectively.

Additionally, DAA is a component of balances with CBS, which is also liquidity management tool

introduced by CBS in 2008 as part of the reform in the monetary policy framework. CBS uses this

instrument to mop up excess liquidity in the system whilst the banks use it to maximise interest

earnings on any excess liquidity. To note that banks continued to invest in the said instrument in

2016 although to a lower extent than that in 2015. Maturities of DAA offered in 2016 were

different with that of 2015, hence cannot be used for comparability purposes. Nonetheless, Table

3.1 shows the weighted average DAA rates offered for the year 2015 and 2016.

Table 3.1: Weighted average DAA rates for 2015 to 2016 2016 2016 2016 2016 Maturity Q1 Q2 Q3 Q4 7 days 3.06% 4.29% 4.36% 4.70% 14 days 3.19% 4.52% 4.41% 4.92% 2015 2015 2015 2015 Maturity Q1 Q2 Q3 Q4 7 days 4.50% 5.99% 5.66% 4.02% 28 days 4.60% 6.50% 6.50% 6.50%

‘Balances with CBS and amounts due from financial institutions’ was the fourth largest

component of the banking sector’s total assets. The said asset accounted for 15 per cent of the

industry total assets by the end of 2016. It declined by SCR114 million from the previous year,

driven by balances with CBS, due to banks’ lower investment in DAA. By the end of the year the

stock of DAA stood at SCR610 million compared to SCR1,180 million in 2015.

For capital adequacy computation, these assets are assigned a risk weight of 0 per cent,

representing the lowest level of risk assets of banks. Chart 3.6 shows the trend in balances with

CBS and amounts due from financial institutions.

17 Foreign currency liabilities denoted in other currencies other than the Euro are converted and classified as USD deposits.

35

Chart 3.6: Balances with CBS and Amounts due from financial institutions

3.1.1.1.4 INVESTMENT IN GOVERNMENT SECURITIES

In 2016, an overall increase of SCR646 million was observed in Government securities compared

to SCR281 million in 2015. The increase was mostly attributed to the issuance of T-bills, for both

fiscal needs and monetary policy purposes, which increased by SCR930 million. On average, the

yield on the 91-day, 182-day and 365-day T-bills ended the year at 6.05 per cent, 7.11 per cent

and 7.33 per cent, respectively. This was slightly higher than that for the end of 2015 which stood

at 5.70 per cent, 6.39 per cent and 7.15 per cent on the same maturities.

On the other hand, holdings of T-bonds saw a decline of SCR283 million during the year 2016.

This was in view that there were maturities of a two-year T-Bonds during the year and no new

Government bonds issued in 2016.

As at the end of the review period, Government securities stood at SCR3,423 million and was the

third largest component of the sector’s total assets. In terms of riskiness, these assets are assigned

a risk weight of 0 per cent, representing the lowest risk assets as per the Financial Institutions

(Capital Adequacy) Regulations 2010. From a credit perspective, these assets are readily available

or can be easily converted into cash.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016

Branches Subsidiaries Local banks

36

Chart 3.7: Breakdown in Government securities

3.1.1.2 TOTAL LIABILITIES

The industry’s total liabilities represented 89 per cent of its total assets by the end of 2016, which

remained almost similar to 2015. The proportion of deposit liabilities to total liabilities declined

slightly from 95 per cent in 2015 to 94 percent in 2016. Deposit liabilities remained the primary

source of funding for the banking sector, amounting to 84 per cent of total assets by the end of

2016.

0

500

1,000

1,500

2,000

2012 2013 2014 2015 2016

SCR

milli

on

Branches Subsidiaries Local banks

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015 2016

Branches Subsidiaries Local banks

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

-

500

1,000

1,500

2,000

2,500

3,000

3,500

2012 2013 2014 2015 2016SC

R m

illion

SCR

milli

on

Treasury bills Treasury bonds Government stock Total GS

37

Chart 3.8: Banking sectors Total liabilities

The industry’s total liabilities grew by SCR742 million representing a growth of 4.9 per cent,

compared to the drop of SCR2,927 million recorded in 2015. The growth in total liabilities was as

a result of an increase of SCR549 million recorded in deposit liabilities, with the said liability

settling at SCR14,756 million at the end of the year 2016.

Savings deposits observed the highest increase of SCR499 million followed by current deposits

by SCR356 million. To note that this was driven by new funds from customers which may have

been due to the increase in disposable income and tax reform, amongst other things.

Nonetheless, the increase noted in the banking sector’s deposit base was mitigated by the decline

of SCR296 million in time deposits, which in turn was attributed to maturity of deposits and

repatriation of some funds whose accounts had been closed during the year. For the year 2016,

current, time and savings deposits stood at SCR9,066 million, SCR2,024 million and SCR3,118

million respectively.

0

5,000

10,000

15,000

20,000

0

2,000

4,000

6,000

8,000

10,000

12,000

2012 2013 2014 2015 2016

SCR

mill

ion

SCR

mill

ion

Total liabilities

Branches Subsidiaries

Local banks Total liabilities

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015 2016

Total liabilities

Branches Subsidiaries Local banks

-

5,000

10,000

15,000

20,000

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2012 2013 2014 2015 2016

SCR

milli

on

SCR

milli

on

Current deposits Time deposits Savings deposits

Other deposits Total deposits

38

3.1 EQUITY CAPITAL

Similar to the previous year, equity capital increased to settle at SCR1,852 million at the end of

the year 2016. The increase of SCR102 million in this item was principally attributed to the net

profit after tax of the banking sector amounting to SCR450 million. To note that the remittance of

dividend effected by banks attenuated the amount transmitted to retained earnings. A significant

increase was observed in the industry’s share capital to stand at SCR398 million by the end of

2016, which was attributed to the injection of capital effected by two banks.

3.1.2 CAPITAL ADEQUACY18

The Financial Institutions (Capital Adequacy) Regulations, 2010, requires banks to adhere to the

prescribed prudential capital ratios, namely the capital adequacy ratio and the core capital ratio.

At a minimum, banks in Seychelles are required to maintain the said ratios at 12 per cent and 6

per cent respectively. During the review period, all banks met the statutory capital requirements.

Chart 3.9 shows the capital ratios maintained by the banking sector from December 2012 to

December 2016.

Chart 3.9: Capital adequacy indicators

Overall, the banking sector maintained adequate capital levels during the period under review.

The rise in the capital adequacy ratio in 2016 was mainly attributed to a growth of 12 per cent in

banks capital base. This rise in capital was in turn due to an increase in retained earnings as

opposed to the year to date net profit after tax (a component of tier 2 capital) for 2016. Similarly,

the rise in the core capital ratio was brought about by a growth in capital base. The components

of the capital adequacy ratio are discussed further in sub-section 3.1.2.1 and 3.1.2.2.

18 Figures for this section are based on unaudited figures.

0%

5%

10%

15%

20%

25%

30%

0

2,000

4,000

6,000

8,000

10,000

2012 2013 2014 2015 2016

SCR

milli

on

Capital base (RHS) Risk adjusted assets (RHS)

Tier 1 capital (RHS) Capital adequacy ratio (LHS)

Core capital ratio (LHS)

39

Branches of foreign-owned banks maintained the highest capital adequacy ratio with an average

of 70 per cent in 2016. This was followed by the subsidiaries of foreign-owned banks which

recorded an average of 26 per cent, while local banks had the lower capital adequacy ratio

average of 21 per cent. To some extent, the higher the ratio, the more conservative the bank is in

terms of its investments. Low risk assets such as T-bills and Treasury Bonds issued by the CBS

bear 0 per cent risk weight whilst high risk assets such as loans bear 100 per cent risk weight.

The higher average ratio for branches indicates that these banks are more conservative and tend

to invest in more liquid assets which bear lower risk weight as opposed to extension of credits

which is assigned a higher risk weight.

3.1.2.1 CAPITAL BASE19

Capital base 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, provided it is

eligible for inclusion.

The capital base of the banking sector rose from SCR1,868 million in 2015 to SCR2,094 million in

2016, representing an increase of SCR227 million. The majority of the banking sector’s regulatory

capital consisted of regulatory tier 1 capital, the highest level of loss-absorbing capital. Regulatory

tier 1 capital accounted for 77 percent of the industry’s capital base at the end of December 2016

and was responsible for the rise in the capital base during the review period. An increase of

SCR284 million was recorded in the regulatory tier 1 capital in 2016, driven by the growth in

retained earnings.

Tier 2 capital, which represented 23 per cent of the banking sector’s regulatory capital at the end

of December 2016, declined by SCR58 million to stand at SCR4,878 million. This decline is largely

attributed to dividend payment paid out by a bank.

3.1.2.2 TOTAL RISK-ADJUSTED ASSETS

Total risk-adjusted assets increased by SCR540 million to settle at SCR7,876 million in December

2016, due to increases in credit risk risk-weighted assets. Growth in this item was driven by an

increase of SCR435 million in on-balance sheet risk-weighted assets, as opposed to off-balance

sheet risk-weighted assets which increased by SCR17 million. Further review of the on-balance

sheet risk weighted assets of banks revealed that the rise in the said item was attributed to the

growth in assets held in the 100 per cent risk-weight bucket amounting to SCR431 million, mainly

on account of the increase in the industry’s loan portfolio.

Risk-weighted assets for credit risk remained the largest component of the banking sector’s total

risk-weighted assets and accounted for 83 per cent of total risk-weighted assets as at the end of

19 Also known as regulatory capital.

40

December 2016. To note that increases were also recorded in the operational risk risk-weighted

assets by SCR88 million, brought about by higher gross income reported by the banks in 2016. At

the end of December 2016, operational risk-weighted assets constituted 17 per cent of total risk-

weighted, similar to that of December 2015.

Table 3.2 shows the different components of the capital adequacy ratio from December 2014 to

December 2016.

Table 3.2 Capital Adequacy Ratio Figures are in SCR’000 2014 2015 2016

Tier 1 capital 1,268,810 1,328,030 1,612,524

Tier 2 capital 406,718 539,536 481,584

Total regulatory capital (capital base) (A)

1,675,528 1,867,566 2,094,108

Total risk-adjusted assets (B) 8,587,422 7,335,935 7,875,753

Risk-weighted assets on balance sheet assets

7,299,837 5,963,503 6,398,415

Risk-weighted assets off balance sheet assets

114,220 142,075 158,914

Risk-weighted assets for operational risks

1,173,365 1,230,357 1,318,424

Capital adequacy ratio (A/B) 20% 25% 27%

Chart 3.7: Trend in capital ratios and component

0%

5%

10%

15%

20%

25%

30%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2012 2013 2014 2015 2016

SCR

mill

ion

Capital base Risk adjusted assets Tier 1 capital

Capital adequacy ratio Core capital ratio

41

3.1.3 ASSET QUALITY20

Good asset quality ensures that the credit risk, amongst other risks, is mitigated and as a result,

the financial health and profitability of financial institutions are maximised. The Financial

Institutions (Credit Classification and Provisioning) Regulations 2010, as amended sets out the

requirements for provisioning of credits according to the categories in which they have been

classified based on performance. The Regulations require that credit be classified into five

categories with higher provisioning requirements for lower performing credits as follows; Pass:

1 per cent, Special mention: 5 per cent, Substandard: 25 per cent , Doubtful: 50 per cent and Loss:

100 per cent . Chart 3.8 illustrates some asset quality indicators of the banking sector from 2012

to 2016.

Chart 3.8: Asset quality indicators

Contrary to the previous year, the industry’s Non-Performing Loans (NPLs) recorded a decrease

of SCR18 million to stand at SCR427 million by the end of December 2016. The drop in NPLs were

mainly due to a major facility being written off and some facilities that were paid off during the

year 2016. To note that this was driven by two banks. As at the end of 2016, loans in the

substandard, doubtful and loss category represented 15 per cent, 20 per cent and 65 per cent

respectively of total NPLs21. The sector-wise distribution of NPLs is shown in Table 3.

Total provisions22 followed the same trend of NPLs, attributed to the facilities that had been

written off and paid off during the year. By the end of 2016, the industry’s total provisions stood

at SCR211 million, portraying a decline of SCR18 million since 2015. To note that SCR160 million

out of the SCR211 million related to loans classified as NPLs. By the end of 2016, all banks were

adhering to the minimum provisioning requirements set out in the Financial Institutions (Credit

20 Figures for this section are based on unaudited figures. 21 Compared to 16 per cent, 5.2 per cent and 78 per cent in 2015 for loans in the substandard, doubtful and loss category respectively. 22 Include general provision and specific provision.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

0

100

200

300

400

500

2012 2013 2014 2015 2016

SCR

mill

ion

Total provisions (LHS)

Total non-performing loans (LHS)

Total provisions to loans and advances (RHS)

Total non-performing loans to total loans and advances (RHS)

42

Classification and Provisioning) Regulations 2010, as amended. In short, the actual provisions

made were similar or more than the required provisions.

The ratio of NPLs to total advances and total provision to advances decreased slightly to settle at

6.8 per cent and 3.3 per cent respectively by the end of 2016. The decline observed in the ratios

were primarily attributed to the growth recorded in total loans and advances from 2015 to 2016.

Table 3.3: Sectoral Distribution of NPLs23

Figures are in

SCR'000 2014 2015 2016

Y-o-Y

Change

(2015 to

2016)

Y-o-Y

% change

(2015 to

2016)

Government 0 0 57,105 57,105 100%

Agriculture &

horticulture 3,370 834 4,798 3,964 475%

Art & Entertainment 248 0 10,194 10,194 100%

Building and

Construction 37,346 9,948 1,027 -8,921 -90%

Education 64 59 49 -10 -17%

Fishing 0 0 321 321 100%

Health 137,315 144,787 148,838 4,051 2.8%

Manufacturing 7,226 326 149 -177 -54 %

Professional,

Scientific & Technical

Services

116 548 360 -188 -34%

Real estate 73,153 62,996 35,460 -27,536 -44%

Telecommunications,

Computer &

Information

0 0 113 113 100%

Tourism 98,703 117,726 101,069 -16,657 -14%

Trade 13,208 23,379 17,685 -5,694 -24 %

Transport 5,686 3,038 3,985 947 31%

Community, Social &

Personal 13 25 1,208 1,183 2.1%

23 Data for 2012 were not available

43

Others 14,696 13,488 9,369 -4,119 -31%

Private household 26,614 45,406 34,795 -10,611 -23%

Mortgage loans 7,184 22,645 801 -21,844 -96%

Total NPLs 424,943 445,205 427,326 -17,879 -4.0%

Declines were observed mainly in the real estate, tourism, mortgage loans and private

households’ sectors aggregating to SCR77 million. This was due to customers settling their

arrears and writing off of some facilities by banks. However, increases were noted mainly in the

Government and Art and Entertainment sector totalling to SCR67 million.

Table 3.4: Sectoral distribution of loans24

2014 2015 2016

Government 13% 12% 9.8%

Financial institutions 3.4% 4.4% 6.9%

Agriculture & horticulture 0.6% 0.8% 1.0%

Art & Entertainment 0.9% 0.5% 0.3%

Building and Construction 8.1% 8.6% 8.4%

Education 0.5% 0.4% 0.3%

Fishing 0.7% 0.7% 0.7%

Health 3.0% 2.6% 2.4%

Manufacturing 1.1% 1.8% 2.9%

Professional, Scientific & Technical Services

0.5% 0.5% 0.4%

Real estate 12% 12% 11%

Telecommunications, Computer & Information

0.5% 0.3% 0.6%

Tourism 17% 17% 15%

Trade 6.3% 6.9% 7.8%

Transport 3.0% 2.8% 2.5%

Community, Social & Personal 0.6% 0.5% 0.8%

Others 1.9% 3.9% 3.7%

Non Profit Institutions 1.0% 0.7% 0.1%

Private household 16% 16% 16%

Mortgage loans 8.7% 8.6% 9.1%

A review of the industry’s sectoral loan portfolio shows that the distribution of credit remained

fairly unchanged compared to the previous year, with the exception of Government and Financial

institution sector. The private household sector accounted for the largest proportion whilst the

tourism sector and the real estate sector accounted for the second and third largest portion of

total loans and advances respectively in 2016. In terms of value the highest growth was recorded

in the financial institutions sector (by SCR177 million to settle at SCR434 million) as a result of

24 In 2014 a new classification for the sectoral distribution of loans was introduced.

44

one major facility disbursed in the second half of the year 2016. This was followed by the trade

sector (by SCR94 million) and manufacturing sector (by SCR82 million).

3.1.4 EARNINGS25

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

its performance. Retained earnings allows the financial institution to absorb losses, allow

provisions to be made for possible future losses and support future growth.

3.1.4.1 LEVELS AND TRENDS OF PROFITABILITY

The banking industry recorded a net profit before tax of SCR678 million in 2016 compared to

SCR665 million in 2015. This represented an increase of 2.0 per cent from what was recorded in

2015, contrary to a rise of 39 per cent from 2014 to 2015. On the other hand, a net profit after tax

of SCR450 million was recorded in 2016 representing an increase of SCR17 million compared to

that in 2015. As illustrated in Chart 3.9, the proportion of net profit after tax to local banks

continued to increase in 2016 whilst that of subsidiaries shrunk during the year.

Chart 3.9: Trend in profit

25 Figures for this section are based on audited figures unless otherwise stated.

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016

SCR

mill

ion

Profit before tax

Profit after tax

45

3.1.4.2 COMPOSITION OF INCOME AND EXPENSES

The industry’s total income grew by SCR62 million to settle at SCR1,418 million in 2016,

compared to SCR1,356 million recorded in 2015. The growth was accredited mainly to an

increase of SCR63 million in total interest income, more specifically in income on loans and

advances and investments in Government securities. Income on the aforesaid items increased by

SCR44 million and SCR18 million respectively from that in 2015.

Based on unaudited financial statements26, the rise in interest income on loans and advances was

driven by higher income earned on term loans. This was driven by an increase in the volume of

the loan disbursed rather than interest rate driven. To recall that the industry had loan

commitment of SCR527 million outstanding at the end of 2015 to be disbursed in 2016. Moreover,

the revision in salary and progressive income tax may have also influenced the higher demand in

loan during the year. As regards to the increase in interest income earned on local investments,

notably T-bills, this was due to the interest rates on these securities in 2016. With CBS tightening

its monetary policy stance for the most part in 2015 and 2016, the interest rates on these

investments remained competitive than that of prior years. Hence, better income on these

investments during the year.

A rise of SCR45 million was recorded in total expenses for the period under review compared to

SCR105 million recorded in 2015. The main contributor was driven by increases in interest

expenses and ‘other non-interest expense’. Based on the unaudited statements, increases were

seen largely in interest paid on savings deposits and checkable deposits.

In regards to the growth in non-interest expenses, this item saw an increase by SCR24 million.

Based on banks’ unaudited statements, the rise was brought about by the increase in salaries and

allowances followed by occupancy expenses during the year. Payments of bonus and 13th month

salary effected by one bank led to the rise in the former expense.

26 This part of the report uses the unaudited statements in view that the audited statements does not capture granular data.

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015 2016

Profit before tax

Branches Subsidiaries Local banks

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015 2016

Profit after tax

Branches Subsidiaries Local banks

46

Table 3.5: Breakdown in profitability

Figures are in

SCR'000

2014

2015

2016

%

Growth

or

decline

2015

%

Growth

or

decline

2016

Interest Income 626,226 876,956 939,570 40% 7.1%

Interest

Expenses

103,715 136,684 157,766 32% 15%

Net Interest

Income

522,510 740,272 781,803 42% 5.6%

Non-Interest

Income

461,209 478,844 478,280 3.8% -0.1%

Non-interest

Expenses

485,818 557,958 581,730 15% 4.3%

Total Income 1,087,435 1,355,800 1,417,850 25% 4.6%

Total Expenses 589,533 694,642 739,496 18% 6.5%

Profit Before

Tax

476,864 661,663 659,389 39% -0.3%

Profit After Tax 348,644 433,305 449,839 24% 3.8%

Table 3.5 shows the banking sector’s earnings ratios from 2012 to 2016. Generally, all ratios

remained fairly stable from 2015 to 2016 with exceptions noted in average yield on T-bills and

average yield on CBS instruments. This is line with CBS’ monetary policy stance taken in 2016,

which was aimed at mopping up liquidity in the system by providing competitive rates on T-bills

and DAA.

Table 3.6: Earnings ratios

2014 2015 2016

Return on assets 2.6% 3.9% 3.9%

Return on equity 30% 36% 33%

Average yield on loans and advances 8.1% 9.4% 9.9%

Average cost of deposits 0.6% 0.9% 1.0%

Average yield on T-bills 2.8% 8.0% 6.5%

Average yield on CBS instruments 1.0% 2.3% 4.6%

3.1.5 LIQUIDITY27

Liquid assets held by commercial banks depicts their ability to fund assets and meet obligations

as they fall due. Banks in Seychelles are guided by the Financial Institutions (Liquidity Risk

27 Figures in this section are based on unaudited figures.

47

Management) Regulations, 2009 as amended, to ensure that banks manage their liquidity risk

effectively and establish a robust liquidity risk management framework. The Regulations also

prescribe a minimum liquidity ratio, whereby banks have to maintain liquid assets, which shall

not, as a daily average each month, be less than 20 per cent of their total liabilities. This ratio is

displayed in Chart 3.10.

Chart 3.10: Trend in liquidity ratios

3.1.5.1 COMPOSITION OF LIQUID ASSETS AND LIQUIDITY RATIOS

Liquid assets of banks in Seychelles comprise of cash on hand, balances held with the CBS

excluding MRR, deposits held with other financial institutions (local and abroad) and investment

in local and foreign securities such as T-bills. The latter is considered as liquid if its issuance is by

the Government of Seychelles or Government of a member country of the Organisation for

Economic Co-operation and Development. Moreover, the said investment should have a maturity

period within 365 days.

At the end of December 2016, the banking sector’s broad liquid assets stood at SCR8,524 million,

after recording a growth of SCR180 million from December 2015. The increase in broad liquid

assets was driven by the growth in Government securities, which climbed by SCR675 million, to

stand at SCR3,417 million. The rise in the item was partly influenced by the banks re-directing

funds from other liquid assets to invest in Government securities. Consequently, a decline was

observed in the industry’s core liquid assets, consisting of cash, deposits with CBS and other

banks.

Further declines were noted in the liquidity ratio as per the afore-mentioned Regulations. Despite

the drop in this ratio, it should be pointed out that none of the banks failed to comply with the 20

per cent liquidity requirement. On average branches of foreign-owned banks held the highest

statutory liquidity ratio aggregating to 60 per cent as at December 2016. This was followed by

0%

10%

20%

30%

40%

50%

60%

70%

80%

-

5,000

10,000

15,000

20,000

2012 2013 2014 2015 2016

SCR

mill

ion

Deposit liabilities (RHS)

Broad liquid assets (RHS)

Total liabilities (RHS)

Liquid assets to total liabilities (As per Regulations) (LHS)

Bank run (Liquid assets to deposit liabilities) (LHS)

48

subsidiaries of foreign-owned banks and domestic-owned banks at 50 per cent and 49 per cent,

respectively.

3.1.5.2 CONCENTRATION OF TEN LARGEST DEPOSITS

Chart 3.11 indicate the proportion of the industry’s top ten largest deposits as a percentage of

total deposit from 2012 to 2016. A decline of SCR165 million was noted in banks’ ten largest

deposits in 2016 to settle at SCR1,457 million. This represented 9.9 per cent of the industry’s total

deposit liabilities compared to 12 per cent by the end of 2015. Due to maturity of a major deposit

during the year, this led to the drop in top ten largest deposits in 2016.

Chart 3.11 Concentration of largest depositors

3.1.6 SENSITIVITY TO MARKET RISK28

The nature of banking activities in Seychelles implies that banks are exposed to exchange rate

risk and interest rate risks which are two key risk components of market risk. In order to mitigate

bank’s exposure to exchange rate risks, the Financial Institutions (Foreign Currency Exposure)

Regulations, 2009 as amended, requires banks to maintain a total long position and total short

position to capital ratio of 30 per cent respectively. In 2016, one foreign owned bank was in

contravention of the foreign currency exposure limits. Subsequently, corrective actions were

taken up with the bank in respect of this breach.

As at the end of 2016, the industry’s total long position and total short position to capital ratio

stood at 2.5 per cent and 0.8 per cent respectively. The difference between the two ratios

represents a Net Open Position (NOP) of 1.7 per cent. The positive NOP indicates an overbought

28 Figures used for this section are based on unaudited figures.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-

2,000

4,000

6,000

8,000

10,000

12,000

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position, meaning that the banks’ total foreign currency assets exceeded total foreign currency

liabilities by 1.7 per cent.

The banking sector maintained fairly similar total long position and total short position in 2016

to that of 2015. The industry’s total long position and total short position observed an increase of

SCR44 million and SCR50 million respectively from 2015 to 2016.

Chart 3.12 further illustrates the trend in the afore-mentioned ratios. Essentially, the NOP in USD

was the driving factor for the movement in NOP of the banking sector.

Chart 3.12: Total long position and total short position to capital ratio

3.2 OVERVIEW OF NON-BANK FINANCIAL INSTITUTIONS

Non-bank financial institutions under the supervision of CBS, comprise of SCU, DBS, HFC and BDC.

Amongst the many objectives that SCU, DBS and HFC have, their core objective remained granting

of loans but to different target markets. SCU aims to create a pool of funds to provide credits to

members; DBS has a mandate to assist in providing credit to sectors that will contribute towards

economic development; and HFC provides financing to Seychellois for the purchase of lands,

construction of houses and financing home improvements. On the other hand, BDC engage in the

buying and selling of foreign currency and also in money transmission.

Over the review period, the non-deposit taking financial intermediaries (DBS, SCU and HFC)

observed steady growths in their asset base, loan portfolio and capital. However, a lower net

profit was recorded in 2016 which on aggregate amounted to SCR24 million. This represents

SCR11 million lower than that reported in 2015. Similarly, BDC recorded a lower net profit in

2016, by SCR4.6 million, compared to that in 2015.

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Total long position to capital Total short position to capital

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3.2.1 SCU

SCU’s asset base recorded a year on year growth of SCR59 million to stand at SCR306 million by

the end of 2016. The rise was primarily attributed to the growth recorded in SCU’s loan portfolio

aided by an increase noted in investment in T-bills. The loan portfolio of SCU rose by SCR35

million from the previous year to settle at SCR199 million as at the end of the year 2016,

representing a growth of 21 per cent.

SCU’s deposit base observed a noteworthy increase amounting to SCR46 million for the year

under review to stand at SCR215 million. The increase in total deposit was mainly attributed to

the rise in savings deposits from SCR163 million in 2015 to SCR210 million in 2016.

An increase of SCR11 million was noted in SCU’s capital to settle at SCR75 million in the year

under review. The increase in this item was primarily driven by an increment in ownership shares

followed by general reserves amounting to SCR9.1 million and SCR1.4 million respectively.

For the year 2016, the institution reported a net profit after tax of SCR4.6 million. The increase of

SCR1.4 million observed in the net profit was driven by increases observed in interest income,

specifically on loans and T-bills.

Chart 3.12: SCU’s indicators

3.2.2 DBS

DBS’s total assets recorded a growth of SCR217 million in 2016, representing an increase of 31

per cent from the previous year. The rise in the item reflects an upsurge in the institution’s loan

portfolio, which grew by SCR220 million in the year under review. Of relatively less significance

was an increase in cash and fixed assets, which collectively rose by SCR10 million in 2016. To note

that there was a decline in the institution’s investments in T-bills and other assets. At the end of

December 2016, DBS’ total assets stood at SCR929 million.

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The total loans of DBS’ grew by 41 per cent, rising from SCR541 million to stand at SCR761 million

at the end of December 2016. This expansion in DBS’ loan portfolio was principally as a result of

credit extended under the Small and Medium Enterprises loan scheme, which registered the

largest growth in the review period by SCR185 million. To note that this sector also accounts for

the largest proportion of DBS’ loans and advances as it represents 49 per cent of the loan portfolio.

As a non-deposit taking institution, DBS relies mostly on borrowings from other financial

institutions or issuance of bonds to fund its activities. In 2016, three bonds were issued by the

institution namely; a two year bond with 6.0 per cent interest rate, a three year bond with 6.5 per

cent interest rate and a five year bond with 7.5 per cent interest rate, aggregating to SCR150

million. In terms of the borrowings by the institution, this climbed by SCR184 million from 2015

to reach SCR443 million by the end of 2016. The rapid rise in borrowings was attributable to,

among other things, an upsurge in demand for loans due to positive economic conditions.

DBS’ equity capital recorded an increase in 2016, albeit at a smaller growth rate than in the

previous year. The said item climbed by 2.2 per cent, (compared to 5.2 per cent in 2015)

equivalent to SCR6.3 million in absolute terms, to settle at SCR300 million at the end of the review

period. The lower growth in DBS’ equity capital was underpinned by a lower profit in 2016. On

the other hand, an increase of SCR1.8 million was recorded in the institution’s reserves, following

a gain upon revaluation of assets.

The growth in DBS’ total loans resulted in a significant rise in interest income. In fact, an increase

of SCR16 million (or 33 per cent) was recorded in DBS’ total income from 2015 to 2016. This

increase was however offset by the substantial growth in the institution’s interest expense on

borrowings, which observed a rise of SCR15 million (or 105 per cent) in 2016. This transpired as

a result of the growth in the amount of borrowings. The higher net profit in 2015 was due to an

allowance for credit impairment credited to profit and loss and bad debt recovered in 2015 which

aggregated to SCR7.0 million29. In view of such, this was recorded as an income in DBS financial

statements for the said period, hence a higher net profit compared to 2016.

29 As per DBS’ audited statement for the year 2016.

52

Chart 3.13: DBS’s indicators

3.2.3 HFC

HFC’s total assets grew by 17 per cent from SCR538 million in 2015 to SCR627 million in 2016.

This was a higher growth than in 2015, whereby the institution’s asset base grew by 5.9 per cent.

This growth was contributed primarily to loans and advances, which saw an increase by SCR119

million to SCR571 million.

Loans and advances, which remained the main component of HFC’s total assets, increased by 26

per cent in 2016 with the increase in volume of new loans and newly introduced pensioner loans.

The total loans disbursed by HFC in 2015 was SCR452 million compared to SCR571 million for

the period under review.

A growth of 89 per cent was observed in HFC’s cash and bank balances as the item increased from

SCR23 million in 2015 to reach SCR43 million in 2016. Increase in this item relates mainly due to

cash collection in terms of client repayment and controlled disbursement during the review

period.

Borrowings from financial institutions which is the main contributor to institutions liabilities,

increased by SCR39 million representing a 37 per cent compared to the drop of SCR33 million in

2015. The growth observed in this item during the review period was mainly due to borrowings

to fund its activities effected during the year.

HFC’s capital grew from SCR338 million in 2015 to SCR361 million in 2016, representing a growth

of 6.7 per cent. This growth was driven by the institution’s capital reserved which increased by

SCR13 million to settle at SCR270 million at the end of 2016. Increase in this reserve came from

cash received from the Government in relation to the housing finance subsidy scheme. To note

that the new housing finance subsidy scheme was implemented in 2014. This scheme allows first

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time home buyers earning under SCR30,000 per month, to qualify for a Government subsidy in

the form of a cash grant between SCR50,000 to SCR20,000 as a down payment.

The institutions net profit in the year 2016 was recorded at SCR15 million, which represented a

fall of 11 per cent compared to the significant increase of 106 percent growth observed in the net

profit in 2015. The reduction in profit was mainly attributed to the institution’s expenses, mainly

from interest expense (due to HFC borrowing with the banks in Seychelles), salaries and

allowances and occupancy expenses, during the year under review.

Chart 3.14: HFC’s indicators

3.2.4 BUREAUX DE CHANGE

The financial position and financial performance of BDC remained fairly similar to that in 2015.

Total assets increased by SCR3.5 million in 2016 compared to SCR51 million in 2015. Equity

capital grew by SCR10 million whilst net profit after tax was lower by SCR4.9 million in 2016. For

the year 2016, class A and class B BDC recorded net profit after tax of SCR15 million and SCR1.7

million respectively, aggregating to SCR17 million. Chart 3.15 shows BDC indicators from 2012

to 2016.

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Chart 3.15: BDC indicators

3.3 ENFORCEMENT ACTIONS

This chapter introduces the different instances when CBS can impose enforcement actions on a

licensee and elaborates on the enforcement action tools available under the FIA for such purpose.

A brief summary of enforcement actions imposed during the year 2016 is also included.

3.3.1 OVERVIEW OF ENFORCEMENT ACTION TOOLS

Section 53(1) of the FIA accords CBS the power to determine whether actions should be undertaken to any financial institutions, its owners or to any of its administrators (ie. any director or managing director). These instances pertains to the following:

If CBS is of the opinion that a provision of the FIA or any accompanying regulation, direction or order has been violated;

If CBS believes that a provision of any agreement which has been entered into between CBS and the financial institution in regards to any remedial measures to be taken by the financial institution has been violated;

Instances whereby any term or condition of a licence or authorisation issued by CBS to a licensee has been violated or in respect of any unsafe or unsound operation of the financial institution has been conducted.

Under the same section, CBS has at its disposition, several remedial tools which supervisors may apply. The applicable tool to be used is determined based on the peculiarity of the case. As a matter of principle, the seriousness of the infraction and the impact of the infraction on the financial institution’s assets is considered. Accordingly, CBS can:

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(a) issue written warnings to the licensee to address the infraction which has been

committed and to advise of consequence of such infraction. This usually implies that a

warning is being given and it also specifies action which shall follow if the same offence is

repeated in the future. Additionally, CBS can also request for submission of any relevant

information or document in instances whereby the licensee has failed to submit such

information within a specified timeframe.

(b) call a meeting of the shareholders or other owners and the administrators of the financial

institution to discuss and to agree on remedial measures to be taken. In this instance CBS

meets with the relevant persons to discuss on the infraction committed. This tool is best

employed in cases where written warnings have already been issued to the licensee on

similar offence in the past. This is either in cases where the licensee has been advised

previously that should a similar offence be repeated a meeting will be called up or in cases

where the offence has been committed for the first time but CBS opines that it needs to

meet with the relevant persons to explain or discuss technical details before any remedial

measure is agreed upon;

(c) issue written orders to cease and desist from such infractions and to undertake

remedial action, or written orders to impose special prudential requirements that differ

from those normally applicable to such financial institution;

(d) issue written orders concerning the rate of interest, maturity or other conditions

applicable to any financing extended or received (including deposits) by a bank, or to

contingent liabilities of the bank;

(e) issue written orders to the financial institution to suspend the payment of dividends or

the distribution of profits in any other form;

(f) appoint an adviser for the financial institution;

(g) appoint an external auditor at the expense of the financial institution to perform a

financial or operational audit under terms of reference determined by the Central Bank;

(h) suspend temporarily or permanently one or more administrators from performing duties

in the financial institution;

(i) issue written orders that one or more persons holding a substantial interest in the financial

institution sell or otherwise dispose of such interest in accordance with the law and

within 30 days immediately following the receipt of the order;

(j) attach conditions to the licence of the financial institution to the extent required to remedy

such infraction;

(k) appoint a reorganising agent in accordance with the provisions of section 66 of the FIA;

(l) revoke the licence of the financial institution in accordance with the provisions of section

13 of the FIA.

In addition, section 63 of the FIA lays down a series of actions which are classified as offences and each offence carries with it the relevant penalty applicable. Additionally, the FIA further categorises offences by those carried out by a natural person. Offences within the first category pertains to the following instances which are non-exhaustive; e.g.-if banking business or foreign exchange business is conducted without a valid banking license and if the person who conducts banking business without the valid licence fails to repay the funds obtained by doing such business, if a person furnishes any information which is materially false or misleading in connection with an application for a licence etc. Offences committed by a financial institution which can be penalised consists mainly of breaches of requirements under the FIA such as submission of periodical statements such as audited financial statements, contraventions or

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failures to comply with accounts, audit and information requirements pursuant to different sections under the FIA to name a few. Under section 63, the above offences are penalised either by fines upon conviction or by imprisonment terms. This ranges from R40,000 to R400,000. In addition, under section 72 of the FIA, CBS is accorded the power to compound some of these offences which results in out of court settlements. This pertains only to offences which are punishable by a fine upon conviction. In such cases, CBS in consultation with the Attorney General may compound offences as prescribed by regulations. However, in order for this option to be considered, the financial institution or any other person who have committed an offence must have agreed in writing to the compounding of the offence. The Financial Institutions (Compounding of Offences) Regulations, 2013 was issued in order to prescribe the manner in which compounding of offences shall be effected. This set of regulations outlines the following:

the procedure to be followed after identification of the offence which can be considered under this route, CBS notifies the person or financial institution in writing by stating the offence, the amount of monetary penalty that may be agreed to. The financial institution or person is given a timeframe of 14 days to notify the CBS of its agreement or refusal to compounding. In the affirmative, the offender is advised that payment is to be effected within 5 days of the acceptance of the written notification. Other information such as the manner in which payment is to be effected to the CBS is also communicated as well as any other relevant information which CBS deems necessary to communicate.

Ceilings and floor limitations on the monetary penalty to be compounded –monetary penalty shall not be less than R1,000 for a BDC and not less than R5,000 for a bank. Moreover, the penalty to be imposed under compounding should not exceed the maximum fine prescribed under the FIA in relation to the breaches.

Finality of decision-acceptance to compound an offence is final and conclusive. Breach of agreement- if the terms of an agreement to compound an offence is breached, CBS may institute legal proceedings The intention of introducing compounding of offences was to assist CBS in enforcing compliance to the FIA by allowing for penalties to be applied without having to go through lengthy court procedures for conviction. Thus it is opined that this process contributes significantly in promoting the soundness of the financial system. Similar for the FIA, there are also provisions under the NPSA to fine in circumstances where provisions of the said law are not followed and also provisions to compound offences. For the year 2016, CBS has fined financial institutions who had committed offences in relation to section 63 of the FIA, a total of R435, 000. An additional sum of R126,655 was collected under the NPSA for the same year. All fees owed for such breaches were collected during the same year. Sums under the FIA relate to penalties imposed on banks and BDCs for non-compliance to regulatory requirements such as late payment of licence fee, continuous failure to request approval for credit concentration and for failure to submit draft audited statements for the year ending 2015 by March 2016. In addition, FSSD also issued 28 warning letters and 3 written orders as enforcement actions. Under the NPSA, breaches were observed in relation to failure to

57

integrate the core banking system to the SEFT system by the given date and in relation to breaches to the bounced cheque directive.

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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 2016. 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 heeds 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 DEVELOPMENTS RELATING TO THE SUPERVISORY FRAMEWORK AND

THE FINANCIAL SECTOR

Legislative Development

In 2016, the only legislation issued by CBS pertained to a guideline in respect of communication

between CBS and the internal audit function of banks and other financial institutions. The

guideline was issued following mutual agreement by both CBS and the banking community for

closer collaboration in that regard. This move is also in line with guidelines issued by the Basel

Committee in relation to core principles to be followed by regulators when supervising banks.

Such collaboration aims to provide insight as to the internal audit function of banks are in

reference to their risk management systems, internal control systems and also their corporate

governance. Accordingly, the guideline covers areas such as the frequency of meetings between

CBS and the respective financial institutions, areas for discussion and the scope of information

sharing.

Developments of the Supervisory framework

Work was also undertaken on different areas within the supervisory framework as detailed

below:

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FIA Amendment

Research and administrative work was initiated in respect of proposals to amend the FIA. It is

expected that these amendments will be taken through the steps towards legislature in 2018. The

FIA is expected to be revamped to include a more robust licensing framework, fit and proper

requirements for administrators and key management positions, and administrative penalties.

The amendments will also take into account new product such as investment and private banking

and will provide for a resolution framework for problematic institutions. It will also serve to

update existing sections so as to reflect changes in the supervisory environment. The need to

tailor proposals to reflect the Seychelles banking context is at the forefront of such initiative.

Financial Leasing

In relation to financial leasing, further research and administrative work was carried out in 2016

in regards to additional regulations which will set requirements for liquidity risk and gearing

(leverage) management for companies engaging in the leasing business. These new regulations

will accompany the Financial Leasing Act which was promulgated in 2013. 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. To enable this, a prudential ratio will be set, to which these institutions will

need to comply with and report periodically to the CBS. The regulations, will also include

requirements on the governance framework regarding liquidity risk management, such as the

formulation of policies and strategies and the setting up of liquidity risk management committee.

Likewise, the gearing management framework will show the depth of financial leverage, by

showing the degree to which the companies’ operations are funded by owners’ funds and various

creditors’ funds. Prescription of the gearing management regulations will set gearing ratios as

applicable for deposit taking and non-deposit taking financial leasing institutions with the aim of

ensuring that they are not excessively exposed to debt.

It is also anticipated that further work on the development of the regulatory and supervisory

framework for financial leasing is anticipated as the industry develops and grows. To date, three

regulations have been issued for licensing of financial leasing companies, capital adequacy and

reserve fund and lease classification and provisioning. It is noted that CBS had not started to

process licence applications from prospective financial leasing institutions as at year end.

During the year under review, work on the market study report was finalised. Work on this report

was initiated in 2015 and involved discussions with different stakeholders to assess the market

potentials for financial leasing, to identify where improvements can be made and assess the areas

for potential benefit under prevailing conditions. The aim of the market study report is to provide

sufficient knowledge education to the general public who could benefit from such a product, as

well as for potential investors’ information.

4.3.2 ADDITIONAL BANKING ACTIVITIES

The FSDIP recognises the need for greater diversification of financial services on offer through

the introduction of additional financial services not currently available in the country, including

Islamic banking, investment banking and private banking.

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Throughout the year 2016, work which had already started in the previous year continued to be

followed through in this regard. Most of the work revolved around capacity building and

formulating a policy strategy for implementation of the new banking activities as detailed below.

4.3.2.1 ISLAMIC BANKING AND FINANCE

The local Authorities has in the past received several interests for the introduction of Islamic

finance in Seychelles. Islamic banking, also known as Sharia-compliant finance is an alternative

means of financing based on Shariah Principles. It is delivered in several modes some of which

includes Mudarabah (profit and loss sharing), Ijara (leasing) and Wadiah (safekeeping) amongst

others.

Based on the positive outcome of the feasibility study conducted in late 2014, the Authorities

sought the assistance of a consultancy group for the development of a national strategy for the

implementation of Islamic finance in Seychelles. The strategy paper was finalised in August 2016

and presented to stakeholders in October 2016. The proposed action plan is yet to be endorsed

and implemented.

4.3.2.2 INVESTMENT BANKING AND PRIVATE BANKING

Investment banking is a specific division of banking related to the creation of capital for other

entities. In essence, such institutions underwrite new debt and equity securities, help to facilitate

mergers and acquisitions as well as providing guidance to issuers vis-à-vis the issue and

placement of stock. During the first quarter of 2016, the Authorities undertook a fact-finding

mission to Hong Kong in order to have an overview of the regulatory and supervisory framework

for investment banking which was already established in that country. Based on findings, a policy

paper is being drafted whereby gaps will be identified and recommendations put forth. These

recommendations will provide sound guidance to Authorities in undertaking policy decisions on

the introduction of investment banking in Seychelles.

Private banking on the other hand relates to the provision of banking and other financial services

to high-net-worth individuals with high level of income or assets. A fact finding mission was also

undertaken in Guernsey in July 2016 to obtain insight into the legislative and supervisory

framework for private banking as well as the various challenges faced by the Guernsey

Authorities. Similarly, a policy paper is being drafted to share the findings along with identifying

all the necessary work which will need to be done so to as to ensure successful development of a

framework for private banking in Seychelles.

4.3.3.1 IMF MISSIONS

One of the important aspects of supervision is the need to have in place an adequate bank

resolution framework. Such infrastructure is vital to provide guidance on the steps to be taken

when dealing with a problem financial institution such as a problem bank. Currently, there is no

such framework in place. However, some aspects of bank resolution such as resolution tools are

found in the FIA. For example, schedule 3 of the FIA accords CBS the power to seize/possess a

financial institution for several reasons such as for impairment of its capital. Accordingly, CBS has

the power to manage this institution. Consequently, following the seizure of a financial institution,

CBS has the power to reorganise this financial institution in accordance with schedule 4 of the

FIA. There is a need to have a robust framework in place, containing all the essential elements of

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an effective bank resolution framework. As such, CBS requested Technical Assistance on bank

resolution and restructuring from IMF which was received in October 2016.

The aim of the mission was to identify gaps and assess the current resolution framework.

Additionally, it made recommendations to strengthen these gaps. The draft report has been

discussed at length between CBS and the IMF consultants. It is anticipated that the final report

will be issued to CBS in 2017.

4.3.3.2 NRA AND MUTUAL EVALUATION

The NRA was officially launched in January 2016 with the objective of assisting the Seychelles

authorities in its self-assessment of ML/TF risks with broad participation from various

stakeholders. The project was funded by CBS and the FIU under the World Bank’s Reimbursable

Advisory Services (RAS). A workshop was organised in January, 2016 to that regard. whereby

working groups consisting of members from CBS, SCB, FIU, Public Utility Company, SLA and the

Immigration office were assigned preliminary data variables (listed below) to summarise their

findings. Discussions were held on the variables and how to provide a preliminary rating for each

of the variables and furthermore an assessment was made of the product variables in Seychelles.

The work groups met frequently and collected data through working papers during the year in

preparation of the NRA report.

The following indicates the list of variables;

i. Comparative review of the AML practices in accordance with Basel guidelines.

ii. The effectiveness of supervision procedures and practices.

iii. The enforcement of administrative sanctions (with statistics from the regulatory and

supervisory authorities).

iv. The enforcement of criminal sanctions (with statistics from the regulatory and

supervisory authorities).

v. The availability of entry controls (with statistics from the regulatory and supervisory

authorities).

vi. The integrity of Bank staff- Certain factors need to be considered to assist with the

determination of this variable such as Whistleblowing, tipping off procedures and laws,

Protection afforded to parties involved in whistleblowing, enforcement of any prevalent

measures, Human resources statistics and reports from financial institutions and any

national scandals involving Banks and Bank staff.

vii. The AML knowledge of Bank staff.

viii. The effectiveness of compliance function variable

ix. The effectiveness of STR variable.

x. The level of market pressure to meet AML standards variable. These must be prepared

to ensure the consistency and reliability of the data received.

xi. The availability of Ultimate Beneficial Owner (UBO) information variable. These must be

prepared to ensure the consistency and reliability of the data received.

xii. The availability of reliable ID infrastructure variable.

xiii. The availability of independent information source variable.

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The NRA report was drafted in the course of 2016 whereby the deficiencies and proposed actions

for the variables were determined.

4.3.3.3 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. In

line with this initiative, Seychelles is expected to sign an Inter-Governmental Agreement with the

US Authorities. Consequently, following the signing of the Inter-Governmental, there will be the

requirement for financial institutions in Seychelles to report information on financial accounts of

customers originating from the United States to the Seychelles Revenue Commission (SRC). This

information will then be provided to the Internal Revenue Service on an automatic basis.

During the year under review, meetings were conducted between the MOF, SRC, CBS and bank

representatives to advise on the progress of the agreement and to address other concerns raised

by our bankers. It is expected that future negotiations between Seychelles and the US Authorities

will continue in 2017.

4.3.3.4 DE-RISKING

When a financial institution goes through the process of de-risking, it seeks to avoid perceived

regulatory risks, by terminating, restricting, or denying services to broad classes of clients. Such

measures are taken without the normal case-by-case analysis of risks or consideration of

mitigation options. De-risking is a global phenomenon that has come to the forefront of the policy

makers’ agenda during the last few years to which Seychelles has not been immune.

In our local context, it has been noted that banks have faced considerable pressures in terms of

maintaining their global correspondent banking relationships. Initially, issues of concern were

more on the USD clearing side. Many of the correspondent banks offering USD clearing decided

to withdraw their services to banks in Seychelles. However, during the last quarter of 2016, the

problem escalated to the Euro clearing side as well. It was observed that an increasing number of

European banks which are involved at some point in the processing of transactions originating

from and terminating in Seychelles, are being refused clearance of such transactions.

Seychelles is being affected by de-risking as a result of several factors. One factor is the size of the

jurisdiction which means a low volume of transactions. Additionally, Seychelles is also considered

high risk following the perception that the jurisdiction is an offshore tax haven.

During the year 2016, discussions were held with different authorities to address the risk of de-

risking. In addition, other actions undertaken so far to address the issue of de-risking include an

increased cooperation with other authorities. To that regard a Tripartite MoU was signed

between CBS, FSA and FIU in 2015. The specific purpose of such MoU was to address any risks or

corporate activities which may affect the international standing and good repute of Seychelles

Financial Services Sector through cooperation of regulators. Additionally, there has been an

increased joint supervision of banks carried out by FIU and CBS to evaluate their Money

Laundering/Counter Financing of Terrorism (ML/CTF) risk management frameworks.

Additionally, as mentioned, the NRA was undertaken. CBS has also set the requirement for banks

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to have a minimum two correspondent banking relationships in each of the three major

currencies (USD, GDP, and EURO). CBS is also involved in international forums dealing with de-

risking such as those carried out by AFI, IMF and World Bank. Inclusively, there has been technical

assistance from IMF to review the regulatory framework for offshore banks and also to

incorporate ML/CFT risks in the operational risk framework of banks. Seychelles also seeks

engagement with other overseas regulators and correspondent banks.

4.3.4 BASEL II AND III

4.3.4.1 BASEL II AND III

During the year 2016, CBS continued with its project to implement the relevant components of

Basel II and III, notably Pillar 1 of Basel II and to incorporate part of the capital definition under

Basel III. As envisaged in 2015, a consultation paper on the implementation of the first pillar of

Basel II as well as the quantitative impact study was circulated to the banks for discussion and

for their input. As such, the banks will model the impact of the proposed implementation of Basel

II and Basel III capital definition on their prudential ratios such as the capital ratios and will

complete and submit the report to CBS. Continuous engagement with the banks will be an

important aspect to this project as it will allow for any challenges with the proposed

implementation to be identified and for solutions to be accordingly identified.

4.3.5 RISK-BASED SUPERVISION

It is noted that much emphasis has been placed on enhancement of the RBS framework within

which the work of FSSD is undertaken taking into account international best practices. It is

regarded as the ideal approach at supervising in view of its forward-looking principles based

approach in assessing and handling risks. In order to adopt such a supervisory approach, the need

to build the relevant capacity for both the supervisor and the industry is essential. During 2016,

supervisory staff attended a seminar in Mauritius on RBS and Basel II pillar 2.

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 2016, a

number of initiatives were undertaken towards this end as highlighted below.

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:

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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 and the country 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 Fiji 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

As illustrated in the previous report, the protection of consumers was identified as one of the

cross-cutting issues within the FSDIP. It is believed that the more consumers feel that they are

receiving fair treatment and services of high quality, the higher the level of confidence in the

country’s financial sector. The latter is regarded as an essential aspect for a country’s

development. With this in mind, CBS started work on the regulatory framework in 2015, with the

aim of identifying and selecting the best type of consumer protection framework 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. This was

with the assistance of a legal expert from the World Bank.

In 2016, the Bank started drafting the proposed Act, which is aimed at protecting the interests of

financial consumers, and to fairly, reasonably, and effectively handle disputes, thereby

reinforcing the confidence in financial markets and promoting their sound development. As such,

this will complement the development of the national strategy on financial education. Policy

decision was taken earlier in 2016 for the CBS and the FSA, each in relation to entities it

supervises, to be the competent authorities for the Financial Consumer Protection Act.

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4.3.6.3 BASELINE SURVEY ON FINANCIAL EDUCATION

In line with the aspect of consumer protection within the FSDIP, there was a recommendation to

conduct a baseline survey on financial literacy. The latter is achieved by having in place an

effective means of disseminating financial education within a country. Financial education is

deemed as the process by which financial consumers and 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. This is as defined by OECD/ International Network

on Financial Education.

A baseline survey aims to 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. Following the selection of FinMark Trust in 2015, as the consultant to carry out this

project, the survey was conducted on Mahé, Praslin and La Digue during the first half of 2016. The

results which were officially presented in a stakeholders’ workshop in November of the same

year is available on CBS’ website and also on FSA’s website. Below is a brief summary of the

observations highlighted which will need to be taken into account in designing a national financial

education strategy:

Seychelles has a high level of financial inclusion-however, this does not mean that there

is a high level of financial capability since a high level of financial inclusion does not

necessarily translate into a high level of financial capability. Financial capability is seen as

having the ability to make more informed decisions, ability to withstand financial shocks

and can better plan for the future in the financial sense. Thus, the national financial

education strategy should focus more on improving the financial capability of the

population.

Seychellois have high access to banking (e.g. most adults have a bank account) and

awareness to financial products and services is high.

Need to change attitude and behaviour in Seychelles to reach high financial capability and

to increase quality of financial inclusion. The following need to be targeted accordingly;

monthly budgeting by adults to improve planning, increased saving behaviour, increasing

insurance uptake by addressing knowledge of products and services and sensitising

people on the use of risk mitigants such as insurance.

Need to use strategies aimed at target market identification effectively so as to increase

assess financial capability. It is important to ensure that the savings culture in Seychelles

is not just focused on consumption smoothing but rather on individual developmental

projects along with planning and investing for the future.

Due consideration must be given to youth who are still at school rather than targeting

only low income earners when planning for future financial education programmes.

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The need to educate the population on consumer protection aspects such as how to better

understand their rights and responsibilities when purchasing products or services and

when they are entering into a contract.

The need to embed monitoring and evaluation within the national strategy.

The above observations will assist the relevant authorities and stakeholders in understanding the

levels of financial literacy of the adult population and assist in the development of the national

strategy on financial education. CBS and FSA will be working in conjunction with the public and

private stakeholders in the development of such a strategy. In the last quarter of 2016, the Bank

initiated procurement of consulting services to assist in the development of the national strategy

for financial education.

4.3.7 CREDIT INFORMATION SYSTEM

The CIS, set up in 2012, has been proven over the years to be a very useful tool for all participating

financial institutions such as banks HFC, DBS and SCU. The system assists lending institutions in

assessing the indebtedness and credit worthiness of clients prior to being granted credit facilities.

In order to ensure efficacy of the system, an inception mission on credit reporting was undertaken

in 2015. Following the mission, a report was issued in 2016 by the consultant who is working on

this project. As at year end, CBS was awaiting the finalised report to be issued. The intention of

this project is to have in place a proper framework for the CIS, including its legislative framework.

In addition, during the year under review, the Central Bank in conjunction with the DICT were

still in the process of designing the new CIS where the aim is to make the system more effective

and efficient as the participating institutions will be given more accessibility and flexibility in

comparison to the current system.

As illustrated in the table below, an increase was recorded in the total number of inquiries made

in the CIS when compared to previous years showing the usefulness of the system.

Table 4.1 Inquiries in the CIS

Year ending Inquiries

2014 22,638

2015 26,970

2016 32,666

4.3.8 LEGAL FRAMEWORK FOR NBFIS SUPERVISED BY CBS

One of the recommendation from the FSDIP was the introduction of a NBFI Act which will act as

an umbrella legislation over all the non-bank financial institutions supervised by CBS such as SCU,

DBS and HFC. The proposed law aims to cover other such institutions which will fall under the

supervisory ambit of CBS in the future to provide clear and adequate powers to CBS in the

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regulation and supervision of these institutions. 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.

4.4 BMIO30 REORGANISATION PLAN

Following the takeover of BMIO by the CBS in 2014and its reorganisation throughout 2015 by Mr

Huns Biltoo of KPMG (Mauritius) under the direction of CBS, the seizure of BMIO was terminated

and CBS returned full management, control and possession to the local financial institution on

May 20, 2016.

To consolidate the restructuring of BMIO, a change in its shareholding was effected whereby BMI

Bank B.S.C sold its 50 per cent shareholdings to Al Salam Bank Bahrain. Similarly, Nouvobanq

sold its 50 per cent shareholdings to the Seychelles Pension Fund. In addition, a new Board of

Directors was appointed comprising of representatives from both shareholders. Following the

above change in its shareholding, in May 2016 BMIO changed its name to Al Salam Bank

Seychelles Ltd (“ASBS”) in line with the rebranding of the bank. Further injection of capital in the

bank by the Al Salam Bank Bahrain in the second half of 2016 resulted in an increase of its

shareholdings in ASBS to 70 per cent.

30 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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Appendix 1: Locations and contact details of banks’ branches, DBS, HFC and SCU

BANKS NAME ADDRESS PHYSICAL ADDRESS OTHER DETAILS

Barclays Bank (Seychelles) Ltd

Main Branch P.O. Box 167

Independence Avenue Tel: 4383838

Victoria, Mahe E-mail: sez.customerservices@barclays.com

Barclays Commercial Centre

Albert Street Tel: 4383838

Victoria, Mahe

Barclays Providence Branch

Providence Industrial Estate, Mahe

Tel: 4383838

Barclays Bois de Rose Branch

P.O Box 167

Bois De Rose, Shop No5. Bois de Rose Shopping Complex Bois de Rose Avenue Victoria, Mahe ,

Tel: 4385948

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 Centre Capital City Building Tel: 4383838

Independence Avenue

Victoria, Mahe

Website: www.barclays.sc

Nouvobanq

Main Branch P.O. Box 241

Victoria House Tel: 4293000

Victoria, Mahe E-mail: nvb@nouvobanq.sc

Praslin Branch P.O. Box 4041

Horizon Complex Tel: 4232600

Baie Ste. Anne, Praslin E-mail: simbcpr@seychelles.sc

La Digue Branch Saffron Building Tel: 4235032

La Passe, La Digue E-mail: simbcld@seychelles.sc

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Eden Island Branch Ground Floor Eden Plaza

Tel: 4346200

Eden Island, Mahe E-mail: eden@nouvobanq.sc

MCB (Seychelles) Ltd

Head Office P.O. Box 122

Caravelle House Tel: 4284555

Victoria, Mahe Fax: 4322676

E-mail: contact@mcbseychelles.com

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

Victoria, Mahe E-mail: info@scb.sc

Anse Aux Pins Branch Anse Aux Pins, Mahe Tel: 4294124

E-mail: virginia.laval@scb.sc

Grand Anse Praslin Branch

Grand Anse, Praslin Tel: 4233810

E-mail: lubna.barbe@scb.sc

La Digue Branch La Passe, La Digue Tel: 4234135

E-mail: cindy.ernesta@scb.sc

Victoria Branch Kingsgate House Tel: 4294083

Victoria, Mahe E-mail: doretha.belle@scb.sc

Corporate Branch Orion Mall Tel: 4294077

Victoria, Mahe E-mail: sheila.ahkong@scb.sc

Habib Bank Ltd

P.O. Box 702

Sound & Vision House Tel: 4224371/4224372

Francis Rachel Street E-mail: habibsez@seychelles.net

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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) Presently www.alsalamseychelles.com

E-mail: Formerly (seychelles.enquiries@bmibank.com )

Bank of Baroda

P.O. Box 124

Trinity House Tel: 4618000/4610333

Victoria, Mahe Tel: 4618001-10

Fax: 4324057

E-mail: baroda@seychelles.net

seyche@bankofbaroda.com

ce.seychelles@bankofbaroda.com

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: agmseychelles@boc.lk

Victoria, Mahe dmseychelles@boc.lk

eoseychelles@boc.lk

boc807@boc.lk

Bank Al Habib Ltd

P.O. Box 1010

Suite 2-07 Tel: 4410040 -2

Victoria, Mahe

Capital City Building Fax: 4410044

Victoria, Mahe Email: seychelles@bankalhabib.com Website: https://www.bankalhabib.com

Development Bank of Seychelles

P.O Box 217

Independence Avenue Tel: 4224471

Victoria, Mahe E-mail: dbs.md@seychelles.net

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

Victoria, Mahe E-mail: scu@seychelles.sc

Website: www.scu.sc

Appendix 2: Location of ATMs

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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

Appendix 3: Location and contacts of BDC

CLASS A BDC

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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: rramani@seychelles.net

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: cashplus@pillayrgroup.com / rose@pillayrgroup.com

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

Email: muditha@doubleclickexchange.com

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

Email: gccseychelles@gccexchange.com

Website: www.gccexchange.com

Jamboo Money Changer Ltd

Storey House Building, Revolution Avenue, Victoria, Mahé Email: jme@intelvision.net / luckmetrading@gmail.com

Tel: 278 1399 / Fax: 441 5252

JPL Exchange (Sey) Co. Ltd

Eden Plaza, Eden Island, Mahé

Pirates Arms building, Independence Avenue, Victoria, Mahé

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Beau Vallon, Mahe

Email: jplxeden@seychelles.net / jpl@seychelles.net

Tel: 434 6615 / 251 1105 / 251 5153

Le Relax Bureau de Change Ltd

Allied Builders Head Office, Le Rocher, Mahé Email: allied@seychelles.net 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: nlabrosse@masonstravel.com 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

Email: royalegrowth@seychelles.net / sviji0107@gmail.com

Travel Change (Seychelles) Ltd (trading as Creole Exchange)

Mahé Trading Building, Victoria, Mahé Email: david.nicole@creoletravelservices.com / Colin.Adrienne@creoleexchange.com

Tel: 429 7183 / 429 7183 / 429 7072 / 429 7125 / 271 1234

Fax: 422 5075

UAE Exchange (Sey) Ltd

Capital City Building, Victoria, Mahé Email: bhavesh.goswami@sc.uaeexchange.com / victoria.branch@sc.uaeexchange.com

Tel: 442 3000/Fax: 442 3002

Vision Money Transfer Ltd

Sound and Vision House, Ground Floor, Francis Rachel Street, Victoria, Mahé Email: svision@seychelles.net / svision@email.sc

Tel: 422 4207 / Fax: 422 4995

Global Exchange (Pty) Ltd

Lulu Exchange Ltd

Providence, Mahe Tel: 44343223 / 2814000 Fax: 4373848 Email: bdm@avgroup.sc Website: www.avgroup.sc

G-03 Ground Floor

Capital City Building

Victoria, Mahe Tel: 4610812 / 4610813 / 4610814 / 2864343 Email: prabhu.rathinam@luluexchange.com

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Web: www.luluexchange.com

CLASS B BDCs

Anthrium Foreign Exchange (Pty) Ltd Best Exchange (Pty) Ltd

Kot Damoo Building, Anse Royale, Mahé Email: brigittamonthy@yahoo.com

Tel: 441 1638 / 259 0592

Kannus store, Baie Ste Anne Praslin, Praslin Email: kannus@intelvision.net /

kannusfc@intelvision.net

Tel: 442 4445 / 272 5511 / 272 5555

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Exotic Exchange (Pty) Ltd

C/o Maki Shop, Cote D’Or, Praslin

C/o Maki Shop, La Passe La Digue

Email: exoticexchangepty@ymail.com / cyril.andre@ymail.com

Tel: 277 7111

Ideal Money Changer (Pty) Ltd Mohan’s X’ Change Ltd

Pension Fund Complex, Grand Anse, Praslin Email: gardette6@hotmail.com Tel: 278 3165/ 251 3025

Fax: 423 7062

C/o Mohan’s Shopping Centre, Plaisance, Mahé Email: mohanxchange@yahoo.com Tel: 434 4290

Fax: 434 4610

Money Stretcher (Pty) Ltd Saymore (Pty) Ltd

Camion Hall Building, Victoria, Mahé

Tel: 251 6513

Email: moneystretcher@live.com /

vicky@seychelles.net

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: gritj@hotmail.com

Tel/Fax: 424 8125

Mahé Trading Building, State House Avenue, Victoria, Mahé

Email: thompson@seychelles.net

Tel/Fax: 432 4779

Victoria Money Changer Ltd

Kandimathy Building, Market Street, Victoria, Mahé

Email: preshela@seychelles.net

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

Email: universalmoneychanger@gmail.com

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

Email: vimsexchange@gmail.com

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