FINANCIAL INSTITUTIONS ACT, 2004

PART III - CAPITAL AND PRUDENTIAL REQUIREMENTS

22. Notwithstanding any other written law, every financial institution shall comply with the requirements of this Part, provided that for Bureaux de Change section 74 applies.

23. (1) Every bank shall at all times maintain in Seychelles unimpaired paid-up capital or assigned capital, as the case may be, of not less than R10,000,000:

Provided that banks licensed to solely conduct offshore banking business shall at all times maintain in Seychelles paid-up capital or assigned capital, as the case may be, of 2,000,000 United States dollars or its equivalent in any freely convertible currency:

Provided also that the Central Bank may make regulations requiring a higher amount as paid-up capital or assigned capital.

(2) Every Bureau de Change shall at all times maintain in Seychelles unimpaired paid-up capital or assigned capital, as the case may be, of not less than R500,000 or such higher amount as prescribed by regulations, and its authorised capital shall not be less than R1,000,000.

(3) A financial institution shall not reduce its paid-up capital or its assigned capital, as the case may be, without the prior written approval of the Central Bank.

(4) Every bank shall at all times maintain capital, including its capital funds, in Seychelles of not less than 12 percent, or such higher percentage as may be prescribed by regulations, of the total value of its assets determined on a risk-adjusted basis, whereby not less than one-half of such capital shall consist of core capital. The definitions of capital, core capital and categories of risk assets shall also be prescribed by regulation.

(5) Where the capital funds of a bank have become deficient in terms of subsection (4) but remain above 8 percent of the total value of its assets determined on a risk-adjusted basis, the Central Bank may grant the institution such period of time of up to one year as, in the circumstances, it considers reasonable to enable the institution to make good the deficiency.

24. (1) Every financial institution shall maintain a reserve fund and shall, out of the net profits of each year, before any dividend is declared or any profits are transferred to the head office or elsewhere, transfer to that reserve fund a sum equivalent to not less than 20 percent of those profits until the amount of the reserve fund is equal to the paid-up or assigned capital, as the case may be.

(2) The Central Bank shall from time to time determine the method of computing the amount and form of the reserve fund.

(3) The reserve fund shall neither be reduced nor impaired, except that the Central Bank may, by regulations, specify circumstances in which it may be reduced.

25. (1) Every financial institution shall maintain liquid assets of an amount which shall not, as a daily average each month, be less than such percentage of the total of its liabilities as may from time to time be prescribed by the Central Bank.

(2) The Central Bank may, by notice in writing, require of any financial institution such reports as the Central Bank considers necessary for the purpose of ensuring compliance with subsection (1).

(3) Any financial institution which contravenes subsection (1) shall, within such time as may be determined by the Central Bank, pay to the Central Bank a charge at an annual rate determined by the Central Bank not exceeding twice the rate which the Central Bank considers to be the highest effective rate of interest charged by that financial institution to any of its customers during the period of the deficiency.

(4) A charge under subsection (3) shall be imposed for each day on which the deficiency occurs.

26. (1) Every financial institution shall maintain assets consisting of claims payable in Seychelles rupees and other assets situated in Seychelles in such minimum proportion of its deposits and similar liabilities payable in Seychelles as the Central Bank may prescribe by regulation.

(2) The Central Bank may impose a charge on any financial institution which fails to comply with the requirements of subsection (1) within such reasonable time as the Central Bank may determine, not exceeding twice the highest effective annual rate of interest charged by that financial institution to any of its customers during the period of the deficiency.

(3) The charge mentioned in subsection (2) shall be imposed for each day on which the deficiency occurs.

27. The Central Bank may prescribe by regulation the maximum net open position which financial institutions may hold in any specified foreign currency or currencies.

28. The Central Bank may prescribe by regulation the requirements concerning the classification and evaluation of assets and provisions to be made on the basis of such classification and evaluation against doubtful and non-performing loans, and the time when earnings on non-performing loans may no longer be accounted for as income except as received in cash.

29. (1) No financial institution shall without the prior written approval of the Central Bank extend one or more credits to any one customer or group of closely-related customers for amounts aggregating more than 25 percent of such financial institution’s capital funds, or such lower percentage as the Central Bank may prescribe.

(2) The aggregate amount of such large exposures under subsection (1) may not exceed 600 percent of the financial institution’s capital funds, or such lower percentage as the Central Bank may determine.

(3) The Central Bank may issue guidelines to financial institutions clarifying who is deemed a customer and group of closely-related customers for the purposes of this section.

(4) This section does not apply to –

(a) a transaction with, or guaranteed by, the Government or a foreign Government;

(b) a transaction with a public authority;

(c) a transaction between financial institutions with a maturity of one year or less;

(d) the purchase of telegraphic transfers or accommodation granted against telegraphic transfers;

(e) the purchase of bills of exchange or documents of title to goods where the holder of those bills or documents is entitled to payment outside Seychelles for exports from Seychelles with a maturity of one year or less bearing the signature of another financial institution, or an accommodation granted against those bills or documents.

30. (1) No financial institution shall extend credits to –

(a) an administrator of such institution or its close relation; or

(b) any company or undertaking in which an administrator of the financial institution [or its close relation] has a substantial interest, unless such credit is granted on market terms, adequately secured and approved at a meeting of the directors of the financial institution with not less than two-thirds of the total number of directors, other than a director concerned, voting in favour.

(2) The aggregate of all credits made pursuant to subsection (1) shall not exceed 10 percent of the financial institution’s capital funds, subject to the limit specified in subsection (5).

(3) No financial institution shall extend credits to –

(a) a person holding a substantial interest in such institution or that person’s close relation; or

(b) any company or undertaking in which a person referred to in paragraph (a) or that person’s close relation has a substantial interest,

unless such credit is granted on market terms, adequately secured and approved at a meeting of the directors of the financial institution with not less than two-thirds of the total number of directors, other than a director concerned, voting in favour.

(4) The aggregate of all credits made pursuant to subsection (3) shall not exceed 20 percent of the financial institution’s capital funds, subject to the limit specified in subsection (5).

(5) The aggregate of all credits made pursuant to subsections (1) and (3) shall not exceed 25 percent of the financial institution’s capital funds.

(6) The financial institution shall regularly submit to the Central Bank a statement detailing the credits made pursuant to subsections (1) and (3).

(7) This section does not apply to –

(a) a transaction guaranteed by the Government or a foreign Government;

(b) a transaction with a public authority;

(c) a transaction between financial institutions with a maturity of one year or less.

31. Until all its capitalised expenses, including preliminary expenses and other items of expenditure not represented by tangible assets, have been completely written off —

(a) no local financial institution shall pay any dividend on its shares; and

(b) no foreign financial institution shall transfer abroad any profit earned in Seychelles.

32. The Central Bank may prescribe by regulation other prudential requirements regarding credits, investments, matching as to maturity and interest, maximum ratios and exposures concerning the assets, risk-weighted assets and off-balance sheet items and various categories of capital and reserves to be maintained by financial institutions.

33. The Central Bank may prescribe by regulation the rules for the application of the prudential requirements set out in this Part to a financial institution and its subsidiaries on a consolidated basis.

34. It shall be the duty of every financial institution to ensure that –

(a) the systems of loan classification and provisioning as prescribed by the Central Bank are applied properly;

(b) adequate measures to prevent money laundering and terrorist financing are adopted and implemented according to the law.