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WT/TPR/S/322/Rev.1 • Cabo Verde
- 63 remain well-capitalized, according to the IMF.70 However, asset quality has deteriorated. The share
of non-performing loans is relatively high (18.7% of total bank loans in December 2014 71), in part
due to the economic downturn, and this has hurt bank profitability. A feature of Cabo Verde's
financial system is its relatively big off-shore sector, with eight entities in 2013 licensed to operate
as international financial institutions ("instituições de crédito de autorização restrita").72 The
off-shore banks take deposits only from non-residents and invest mainly overseas – the risks for
the stability of the domestic financial system are limited, according to the IMF. 73 Since 2009, the
BCV has performed periodic stress tests for the four largest domestic banks.74
4.41. Cabo Verde has reformed its regime for financial services with the passage of the "Financial
System Framework Law"75 and the "Activities and Financial Institutions Law". 76 The laws entered
into force on 28 March 2014 and the BCV is in the process of issuing implementing notices
("avisos").
4.42. The hitherto separate legal frameworks for domestic financial institutions77 and offshore
financial institutions78 were brought under one single regime. The objectives of the Financial
System Framework Law include preservation of the stability of the financial system and prevention
of systemic risks, to promote competition in the financial services market, and to prevent money
laundering and the financing of terrorism. The law provides for the establishment of a deposit
insurance scheme, which would also cover the expatriate Cabo Verdean community.
4.43. The Activities and Financial Institutions Law provides a new legal framework for the
establishment, operation and supervision of financial institutions, including a liquidation regime.
The new law extends BCV oversight to also cover "auxiliary" financial institutions, such as
credit-rating institutions or auditors, while insurance and securities markets are subject to special
legislation. Commercial banks are permitted to engage in insurance activities. The establishment
by a foreign bank of a subsidiary ("filial") or branch ("sucursal") in Cabo Verde banks requires,
inter alia, the approval by the home country's supervisory authority (Article 6). The minimum
capital requirements are established in Ordinance No. 19/2005.79 The minimum capital buffer is
set at 10% (Article 42).80 The BCV is in the process of moving to a risk-based supervision based
on the Basel II framework. Bank fees and charges are subject to annual approval by the BCV.81
Mergers of financial institutions, including insurance companies82, are subject to authorization by
the BCV.83 The merger procedure follows the rules of Articles 195 et seq. of the Commercial
Code.84 Financial services providers benefit from fiscal incentives, including exemption from stamp
duties and customs duties on imports of materials and capital goods that are used exclusively for
their establishment (section 3.2.4).85
4.44. By law, remittance services must be provided by a bank or para-bank. Five institutions
currently offer remittance services under arrangements with Western Union (Banco Comercial do
Atlântico; Caixa Económica de Cabo Verde; Ecobank; Banco Caboverdiano de Negócios; and
70
71
loans.
IMF (2014), pp. 9 and 32.
The tourism, transport, business and construction sector account for most of the non-performing
72
Banco Fiduciário Internacional, Banco Sul Atlântico, Banco Português de Negócios, Banco Montepio
Geral, Banco Espírito Santo, Banco Privado Internacional, Caixa de Crédito Agrícola Mútua, and Atlantic
International Bank. In addition, there is one licensed off-shore fund manager (CA Finance, SA).
73
IMF (2013), p. 42.
74
For the financial stability reports, see BCV online information. Viewed at:
http://www.bcv.cv/vEN/supervision/financialstabilityreport/Paginas/RelatóriodeEstabilidadeFinanceira2009.asp
x.
75
Law No. 61/VIII/2014.
76
Law No. 62/VIII/2014.
77
Previous onshore regime: Law No. 3/V/96; Decree-Law No. 29/2005 (both abrogated).
78
Previous offshore regime: Law No. 43/III/88; Decree-Law No. 12/2005 (both abrogated).
79
Ordinance No. 19/2005 of 14 March 2005, as amended by Ordinance No. 14/2013 of
22 February 2013.
80
Ratio of capital (tier 1) to risk-weighted assets.
81
The table with the fees and charges has to be sent to the BCV by 15 November of the previous year
(Notice No 1/2013 of 12 April 2013). The same notice also defines services that are free of charge (Article 15).
82
Article 51, Legislative-Decree No. 3/2010 of 17 May 2010.
83
Article 26, Activities and Financial Institutions Law (Law No. 62/VIII/2014).
84
Legislative Decree No. 3/99 of 29 March 1999.
85
Law No. 26/VIII/2013, Article 28 and Law No. 61/VIII/2014, Article 69.