Seychelles’ banking sector unaffected by global bank crisis, CBS says |28 March 2023

Governor Abel and Mr Rose during the press conference

Banks in Seychelles remain stable, despite recent global developments which has seen the collapse of bank institutions in the U.S. and Europe.

As the regulator, the CBS is satisfied that commercial banks in Seychelles are sound, with no indication that deposits at banks are in danger.

In a press conference yesterday afternoon, Governor Caroline Abel noted that CBS remains confident that Seychelles’ banking system, “individually and globally, is functioning well”, although it is closely monitoring these developments to identify any possible implications on the local banking sector and economy, and to ensure that necessary actions are taken.

CBS analyses and monitors banks’ soundness on an ongoing basis based on information submitted to CBS periodically, coupled with onsite examinations and inspections, senior financial surveillance analyst Edouard Rose explained.

“In terms of liquidity, the ratio which we use to measure banks’ liquidity was 47.16 percent in February, above the minimum of 20 percent required by the law. Banks remain profitable and the average profit for 2022 was R492 million for the sector,” Mr Rose said.

“Nonetheless, these international developments signal the importance of having a good surveillance system. Proper functioning of the banks depends on public confidence and therefore, it is important that banks remain stable and that they are able to maintain this level of confidence,” Mr Rose added.

Information held by the CBS indicates that banking institutions in Seychelles do not have any direct affiliations with the banks that have been affected, namely, the Silicon Valley Bank (SVB), Signature Bank and First Republic Bank in the U.S.

The banking crisis started unfolding earlier this month as a decline in the stock price of SVB bank caused a run on the bank’s deposits. The following day, March 10, Federal Regulators assumed control of SVB.

By March 12, Federal Regulators took control of Signature Bank and assured depositors that they were guaranteed all their money back.

The crisis has been attributed to a hike in interest rates by the Federal Reserve Bank, loss in value of significant investments in government securities, lack of diversification in the case of SVB, as well as loss of confidence resulting in large scale withdrawal of deposits.

Credit Suisse was also forced to tap into central bank funding on March 15, in a bid to shore up liquidity. Switzerland's biggest bank, UBS, agreed to buy its ailing rival in an emergency rescue deal on March 19.

In the event of a bank failure domestically, CBS may take possession and reorganise the bank, through restructuring the bank to address deficiencies, or measures to recapitalise the bank.

It was in November 2014 that the institution took control of BMI Offshore bank (BMIO), in line with Schedule 3 of the Financial Institutions Act 2004 which empowers CBS to take such action where it is of the opinion that the continuation of a bank’s activities is detrimental to the interests of its depositors.

CBS is continuously working to strengthen the supervisory framework, and is in the process of strengthening the framework to deal with problem banks.

Laura Pillay