Seychelles Withdraws Earlier Warning on Financial Institutions

The Central Bank of Seychelles (CBS) has withdrawn its earlier warning to financial institutions to exercise caution when dealing with individuals and companies domiciled in the island nation. This move comes after a review of the country’s regulatory framework for offshore banks.

Reasons Behind the Withdrawal

According to sources, the CBS had initially warned that some offshore banking applications may not have met the required standards, citing concerns over capital requirements and reputation. However, following a closer examination of the applications, the bank has deemed them satisfactory.

Seychelles International Business Authority (SIBA)

The SIBA is responsible for licensing registered agents and trustees, as well as registering international business companies (IBCs), trusts, and companies within the Seychelles International Trade Zone. The agency has also been promoting the country as an offshore corporate and financial services center.

Challenges in the Offshore Sector

Despite efforts to attract foreign investment, the country’s offshore sector remains relatively small, with only a handful of offshore insurance companies and two banks operating in the country. Revenue from IBCs and SITZ companies generated less than $700,000 in 2001, prompting concerns over the industry’s viability.

Recommendations by the CBS

In its report, the CBS has recommended that:

• SIBA introduce a regulatory regime for registered agents by December 31, 2002
• Revise IBC law to meet international standards on disclosure and corporate governance by the same date

The mission also highlighted potential conflicts of interest between SIBA’s roles as regulator and promoter of offshore services, recommending the separation of these functions in the medium term.

Insurance Sector

Seychelles’ insurance sector is governed by the Insurance Act of 1994, but has not been subject to supervision in recent years. The Ministry of Finance and Communications is developing a plan to establish an independent Insurance Authority to regulate the industry.

Non-Bank Financial Sector

The country’s non-bank financial sector consists of five institutions, including two insurance companies, a development bank, a credit union, and a parastatal institution. The mission recommended that Seychelles’ insurance companies be given priority access to reinsurance from overseas companies to reduce their reliance on foreign currency premium payments.

By withdrawing its earlier warning, the CBS has demonstrated its confidence in the country’s offshore banking framework, paving the way for further growth and development in the sector.