The Banking industry in Seychelles |09 June 2017
Seychelles is organising its first Financial Services Industry Day today Friday June 9.
The Financial Services Industry Day (FSID) is being organised to raise awareness and educate the public on the financial services sectors in Seychelles, and it is bringing together all financial services in the country.
As part of its effort to inform and educate the general public on the importance of financial services as well as encourage participation, the Seychelles Investment Board, and its partners present their last feature write-up.
Today’s topic is the banking industry in Seychelles.
Central banking in the Seychelles started as far back as 1936, with the establishment of the Seychelles Currency Board, similar to other British colonies of the time.
In 1974, there was the enactment of the Seychelles Currency Ordinance of 1974, which gave the joint responsibility of the issuance, re-issuance and redemption of currency to the Financial Secretary and the Accountant General (the Board). The colonial government granted the Board the authority to hold and manage all the domestic and foreign assets of the country. The Board, however, did not have the power to undertake monetary policy. The issuance of domestic currency was constrained by the requirement that each issue be backed by foreign currency. Similar to other colonies, the Seychelles rupee was pegged at a fixed rate of R13.333 to the Pound Sterling.
In December 1978, the Seychelles Monetary Authority was established under the Seychelles Monetary Decree, 1978. The decree repealed the Currency Ordinance of 1974 and abolished the currency commission. The Seychelles Monetary Authority was responsible for monetary policy, issue of currency, the management of external reserves, banker and lender of last resort to government and commercial banks along with the inspection of banks and other financial institutions.
In December 29, 1982, the People’s Assembly approved adjustments made to the Seychelles Monetary Authority Decree 1978, turning it into the Central Bank of Seychelles Act 1982.
On January 1, 1983, the Central Bank of Seychelles (CBS) was officially inaugurated, with the simultaneous dissolution of its precursor, the Seychelles Monetary Authority. This development saw a change in the name of all legal tender notes of Seychelles from the Seychelles Monetary Authority to CBS. However, the colour and the design remained the same.
During the thirty four years of its existence, with growing experience and an increased number of qualified manpower, the CBS has greatly evolved whilst maintaining its critical role in the economy.
The Central Bank of Seychelles Act, 2004 as amended stipulates that the CBS’ main objective is to promote domestic price stability. The Act also states other objectives, which include advising the government on banking, monetary and financial matters, including the monetary implications of proposed fiscal, credit policies or operations of the government and promoting the soundness of the financial system.
The CBS is the mandated supervisor of financial institutions in Seychelles. The Financial Institutions Act, 2004 as amended (FIA) is the main legislation governing financial institutions, defined as banks and bureaux de change. As at December 31, 2016, there were nine licenced banks in operation and 24 licenced bureaux de change.
Banks in Seychelles
The name of these banks and the year in which they started their operations in Seychelles are listed below in chronological order.
1959 - Barclays Banks (Seychelles) Limited
1976 - Habib Bank Limited
1978 - Bank of Baroda
1978 - Banque Française Commerciale Océan Indien (BFCOI)
1981 - Seychelles Savings Bank (SSB)
1991 - Seychelles International Mercantile Banking Corporation (SIMBC) trading under the name ‘Nouvobanq’
2003 - Mauritius Commercial Bank (Seychelles) Ltd (Rebranding of BFCOI)
2013 - Seychelles Commercial Bank (Rebranding of SSB)
2008 - BMI Offshore Bank Limited (BMIO)
2014 - Bank of Ceylon
2014 - Bank Al Habib Limited
2016 - Al Salam Bank Seychelles Ltd (Rebranding of BMIO)
In addition to these financial institutions, the CBS has also been designated as the regulatory authority of the Seychelles Credit Union (SCU) and has been assigned oversight responsibility over the Development Bank of Seychelles (DBS) and the Housing Finance Company Ltd (HFC). Moreover, the CBS also administers the Financial Leasing Act, 2013 and regulates and supervises Financial Leasing Institutions (FLIs). Of note, no FLIs have been licenced thus far.
Banks in Seychelles are engaged in the intermediation process which involves accepting deposits from the public and extending credit to individuals and businesses. The full list of permissible activities of banks is listed in section 4(1) of the FIA.
With regards to bureau de change, two types are licenced by the CBS, which include Class A and Class B.
A Class A bureau de change is licenced to buy and sell foreign currency in the form of notes, coins, traveller’s cheques and also engage in money transmission, while Class B, is only allowed to buy and sell foreign currency in the form of notes, coins and traveller’s cheques.
DBS is a non-deposit taking institution established in 1977 under Decree No.21 with a specific mandate to assist in the economic development of the Seychelles. The Decree entrusted DBS the power of local and external borrowings for financing financially and economically viable projects in the sectors of the economy, mainly agriculture, fisheries, industry and tourism.
HFC is a government owned non-deposit taking institution that specialises in providing finance to Seychellois for the purchase of land, the construction of houses and financing home improvements. It has provided lending services from the low to middle income population for the past 10 years and it aims to continue providing affordable loans to the low income earners while operating a proficient company.
SCU is and has been the sole credit union in Seychelles, since its inception in 1970. The SCU is governed by the Companies Ordinance, 1972 and the Credit Union Act, 2009.
As the only community-based savings and credit cooperative society in Seychelles, SCU has the mission of promoting thrift amongst its members to enable it to provide quality and fairly priced financial services.
The CBS in its endeavour to modernise the banking system is exploring avenues and intends to introduce a framework for Islamic Finance, Investment and Private Banking in Seychelles in the future.
Islamic finance
Islamic finance is an alternative means of financing based on Shariah Principles, which has been growing rapidly, globally over the years. CBS, Financial Services Authority (FSA) and the Ministry of Finance, Trade and Economic Planning have received several interests in the past for the introduction of Islamic finance in Seychelles and work is being undertaken to have such a framework in the long term.
With regard to investment banking, it refers to the segment of banking operations that help individuals, corporations and governments raise financial capital and provide financial consultancy services to them. The raising of capital is done by underwriting or acting as the client's agent in the issuance of securities. As part of preparatory work to have such framework in Seychelles, in 2016, CBS in partnership with FSA undertook a fact-finding mission in Hong Kong to meet with the banks undertaking investment banking activities as well as the regulators and supervisors of investment banking activities in order to learn from their experiences and to facilitate implementation of such a framework for Seychelles.
Private banking refers to personalised financial and banking services that are traditionally offered to a bank's wealthy high net worth individual clients. In 2016, a fact-finding mission to Guernsey was undertaken with the aim to learn from the experience of the jurisdiction, specifically to obtain a comprehensive insight into its legislative and supervisory framework and the challenges that the authorities are facing. From the findings of the mission and based on ongoing research, the necessary work is being undertaken to ensure successful development of a framework for private banking in Seychelles.
For further information on CBS and its activities, kindly visit its website at: www.cbs.sc
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