Banking Sector in San Marino: Key Findings and Recommendations

Banking Concentration and Foreign Ownership

The banking sector in San Marino is characterized by high concentration among the top three banks, which hold almost three-quarters of total assets and deposits. Additionally, six out of eight commercial banks are majority foreign-owned, with four of them owned by holding companies partly owned by Sammarinese individuals.

Assets Placement and Liabilities Composition

A significant share of banks’ assets is placed with Italian banks or foreign securities, while liabilities consist mostly of retail deposits and securities.

Business Model Challenges

The business model, which relies heavily on foreign intermediation and a strict bank secrecy regime, is facing challenges from international pressures for transparency in cross-border financial transactions.

Nonbank Financial Sector

The nonbank financial sector in San Marino is still developing, comprising asset management companies, life insurance companies, fiduciary, leasing, factoring, and small consumer lending companies.

Key Issues and Recommendations

Capital Adequacy Ratio (CAR)

• The risk-weighted average CAR of the banking system was 15.4 percent as of end-June 2009, but adjustments for revaluations of untraded equity holdings bring this figure to 11 percent.
• Two banks with over a third of total banking sector assets may have CARs below the required transitional capital adequacy ratio of 7 percent.

Recapitalization

Banks that do not meet the current prudential minimum CAR ratio should be immediately recapitalized.

Financial Position Strengthening

The shareholders of CRSM unveiled a plan to strengthen its financial position, which had suffered from its exposure to Delta.