San Marino’s Financial Sector Under Scrutiny Amidst Global Concerns

Rome - San Marino’s financial sector has been under intense scrutiny in recent years due to concerns over money laundering (ML) and tax evasion. The tiny European nation’s banking system, which accounts for about 10% of the country’s total government revenues, is heavily reliant on foreign intermediation and has faced criticism for its lack of transparency.

Financial Sector Assessment Program Report Highlights Concerns

In a report released earlier this week, the Financial Sector Assessment Program (FSAP) highlighted several issues plaguing San Marino’s financial sector. The report noted that:

• The country’s banking system relies heavily on foreign deposits, with many banks holding significant amounts of assets in Italian banks or foreign securities.
• There is a lack of transparency and regulatory oversight in San Marino’s financial sector.

Recommendations for Improvement

The FSAP recommended that San Marino strengthen its anti-money laundering (AML) regime and improve its cooperation with international organizations to combat financial crimes. Additionally, the report urged the country to:

• Enhance its banking supervision and regulation.
• Improve its risk management practices.
• Increase transparency in its financial sector.

San Marino’s Banking Sector Under Pressure

San Marino’s banking sector has been under pressure due to its exposure to troubled Italian bank, Delta. The bank’s loan portfolio is primarily consumer lending, which has led to concerns over its risk profile. In January 2010, the shareholders of CRSM unveiled a plan to strengthen its financial position, which included a capital injection and the issuance of medium-term bonds.

Nonbank Financial Sector Underdeveloped

San Marino’s nonbank financial sector is also underdeveloped, consisting mainly of asset management companies, life insurance companies, and small consumer lending firms.

Government Commitment to Reform

San Marino’s government has acknowledged the need for reform and has pledged to address the concerns raised by the FSAP report. The country’s banking regulator has also been working to strengthen its oversight of the financial sector and improve its cooperation with international organizations.

Conclusion

The FSAP report is a timely reminder of the importance of regulatory transparency and effective oversight in preventing financial crises. San Marino’s government must take swift action to address these concerns and restore confidence in the country’s financial sector.