## 1sycea2022005 ## Source details **Canonical URL:** [1sycea2022005](https://www.imf.org/-/media/files/publications/cr/2022/english/1sycea2022005.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2022/english/1sycea2022005.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2022/english/1sycea2022005.pdf.json) --- ### Executive summary — key recommendations - Consolidate legal instruments in a unified section of the website and provide a plain-language explanation of the relation between the CBS’s statutory functions and its objectives. Publish charters of the Board and other key committees, selection criteria and procedure of board members, and remunerations of key officials. - Disclose in layman’s terms the concept and rationale for CBS financial autonomy, key related safeguards, and how they correspond to the CBS Act and operations. Disclose the process of adopting the annual budget and how it is realized. - Enhance transparency on risk management and accountability mechanisms (governance and oversight, external and internal audit) by revising the corporate section of the CBS annual report and supplementing with website disclosures. - Include additional information on human capital management in the annual report and/or website, including the staff salary scale, salaries of key officials, and (summary of) related key policies and governance arrangements. - Publicly disclose the Code of Conduct and Ethics, a Code of Ethical Businesses (for stakeholders), and information on enforcement activities, including statistics on sanctions imposed for ethical violations. - Enhance the confidentiality framework by issuing rules and regulations, voluntary policies or guidelines disclosed to the public; explain the confidentiality system including the data classification system. - Gradually enhance transparency of the monetary policy and FX operations framework during the transition to a full-fledged IT monetary regime. Suggested improvements include: - publication of a Monetary Policy Report (including disclosures on the components of the Forecasting and Policy Analysis System (FPAS)); - disclosure of an explicit numerical medium-term inflation objective and of a numerical operational target; - disclosure of activation of the standing facilities; - disclosure of aggregate bank balances at the CBS and of the realized autonomous factors; - disclosure of ex-post evaluations of the impact of foreign exchange interventions (FXI). - Improve transparency and accessibility of financial stability information by: (i) enhancing disclosure of Financial Stability Committee (FSC) activities; (ii) promoting CBS financial stability messages more broadly to the public; and (iii) enhancing transparency on financial stability data and ex-post evaluation. - Consider enhancing disclosure of the bilateral Emergency Liquidity Assistance (ELA) framework for financial institutions, including objectives, general rules, financial parameters, and terms and conditions. - Enhance transparency of AML/CFT regulations by disclosing quantitative and qualitative information on risk-based supervisory activities and internal AML/CFT activities (including statistical information on off-site and on-site supervisory activities and enforcement actions) and prioritize establishment of the appeals mechanism under the AML/CFT Act of 2020 to enable imposition of sanctions by the CBS. ### Scope, objective, and methodology - Review conducted at the request of the Central Bank of Seychelles (CBS) under the Central Bank Transparency Code (CBT) review program; seventh mission under the pilot CBT program. - Covered all CBT principles except those not performed by the CBS (i.e., FX administration) or outside CBT reviews due to established international standards (i.e., microprudential supervision and resolution, and Financial Markets Infrastructure) — these are denoted “Not Applicable”. - Because CBS has formal mandate on financial consumer protection, transparency practices in this area were reviewed (principles 2.11, 3.12 and 4.11), but no range of practices was assigned for these principles. - Approach: desk review and in-depth discussions with CBS and stakeholders; preliminary desk review used public information and Self-Review questionnaire. - Mission held around thirty meetings (hybrid and virtual) over two weeks with CBS management, staff and public/private stakeholders; stakeholder meetings planned in coordination with CBS and attended without CBS staff present. - Assessment principle-by-principle mapping CBS practices to CBT ranges (core, expanded, comprehensive) while considering CBS legal mandate and policy context. - Transparency dimensions considered: (i) timeliness; (ii) periodicity; and (iii) quality of disclosure (accessibility and ease of understanding). ### Economic rebound, outlook, and fiscal/support statistics - Economic rebound driven by swift recovery of tourism, narrowing fiscal deficits, and public debt ratios on a downward trajectory. - Authorities secured emergency financial assistance of SDR 22.9 million from the IMF under the Rapid Financing Instrument (RFI) in May 2020. - An Extended Fund Facility (EFF) arrangement for SDR 74 million was secured in July 2021. - Energy and food price spikes caused headwinds following Russia’s invasion of Ukraine. - Outlook conditional on authorities’ success in maintaining macroeconomic stability and implementing structural reforms agreed under the EFF. ### COVID-19 measures, unwind and related figures (Box 1) - Coordination: Measures taken in close collaboration with the Ministry of Finance and the Bankers Association; some measures required amendments to the CBS Act. - Monetary policy adjustments: - MPR cut by 400 basis points. - MPR set at 2.0 percent, SDF at 0.5 percent, SCF at 3.5 percent; structural shift in Interest Rate Corridor-IRC. - MRR on SCR lowered to 10 percent from 13 percent; MRR to be set back to 13 percent in mid-July 2022. - Unwinding stance: monetary policy to remain accommodative in the near-term subject to conditions. - Private sector relief schemes: - SCR500 million made available to lend to Small and Medium Enterprises (MSMEs) at annual fixed interest rate of 1.5 percent, moratorium up to 18 months, maximum repayment period eight years. - SCR750 million made available to lend to Large Enterprises at annual fixed interest rate of 4.5 percent, moratorium up to 18 months, maximum repayment period eight years. - Recommended re-opening: February 2022 until end-March 2022; effectively closed as of March 31, 2022. - Approved unwinding: credit granting institutions to consider moratorium and debt restructuring case-by-case; measure terminated as of July 1, 2022. - Exceptional advances and government securities purchases: - CBS Board approved advances up to SCR500 million at no cost for government following Act amendments; except January 2021, no advances provided. - Unwinding for 2022: limit of SCR250 million with interest equal to latest average tender rate for the 91-day Treasury bills plus a margin of 50 basis points. - Purchase limit of SCR750 million for 2022 (only SCR40 million used in 2021); unwinding limit of SCR50 million for 2022; measure terminated as of July 18, 2022. - FX interventions and reserves: - Secured support from international partners to bolster international reserves. - Adopted cautious currency allocation (maintaining share of the USD above prescribed benchmark). - FX interventions in 2022 to deal only with commercial banks. ### Banking system resilience and financial sector reform - At end-2021 banks were well capitalized and highly liquid despite declining interest income and loan quality. - Authorities phasing out regulatory forbearance measures; CBS does not expect significant negative impact of unwinding announced January 2022 on banks’ asset quality. - CBS committed to reforms to: strengthen financial sector resilience; enhance AML/CFT framework; improve transparency; promote financial inclusion. - Reform agenda includes enhancement of crisis management, resolution, and safety net frameworks; strengthening AML/CFT regulations; facilitating access to affordable and sustainable finance; building robust financial consumer protection. ### Monetary policy framework, transparency gaps, and communication - Transition history: - Post-2008 shift from fixed to floating exchange rate; January 2019 transition from reserve money targeting to an interest rate-based framework with: - Introduction of a Monetary Policy Rate (MPR) within an interest rate corridor. - Reliance on a Forecasting and Policy Analysis System (FPAS). - Short-term liquidity management framework. - Current operational features: - MPR lies within IRC with Standing Deposit Facility (floor) and Standing Credit Facility (ceiling); interbank rate expected to fluctuate within corridor. - No numerical medium-term inflation objective or numerical operational target disclosed. - Communications and transparency recommendations: - Publish a Monetary Policy Report; disclose key elements of FPAS. - Disclose an explicit numerical medium-term inflation objective and a numerical operational target. - Disclose activation of standing facilities, aggregate bank balances at the CBS, realized autonomous factors, and ex-post evaluations of FX interventions. - Status note: inaugural CBS Monetary Policy Report published on August 2, 2022 (outside scope of initial review). ### Governance, legal framework, and autonomy disclosures - Legal framework disclosures: - Legal framework (mandate and overall legal structure) is publicly available but scattered; missing clear descriptions of relation between objectives, functions, and powers. - Clarity lacking on judicial review and hierarchy of norms in event of conflicts between the Act and other laws. - CBS Act declares CBS shall act independently; specific autonomy provisions (institutional, personal, financial) need enhancement via legal amendments. - Personal autonomy and remuneration: - Act details composition, appointment, incompatibility, dismissal criteria, and term of service of Board members but selection criteria, procedures, and remuneration of key officials not published. - Recommendation: publish Board and committee charters, selection procedures, and remuneration policy. - Financial autonomy and budget transparency: - Financial autonomy provisions in Sections 14–16, 40, 40A, 41, 43, 44, 45 and 47 of the CBS Act (capital, reserves, advances, purchases of government securities, budget preparation). - Section 45: CBS prepares its own annual budget adopted by the Board by December 15 of the previous year; budget not published on the CBS website or reports. - Financial statements prepared in accordance with an internationally recognized framework (IFRS in practice) and published within three months after fiscal year; monthly balance sheet published. - Recommendation: explain financial autonomy in layman’s terms and publish annual budget with at least: (i) staff costs; (ii) remuneration of key management personnel; (iii) investments in fixed assets; (iv) administrative expenses; (v) other operating expenses. ### Risk management disclosures and recommended enhancements (Section 6 / Principle 1.5) - Legal requirement: Section 46 requires CBS to establish and maintain proper risk management procedures and to report at least quarterly to the Board on risk management. - Current disclosures: - Note 42 in FY 2021 Financial Statements quantifies exposures by carrying amounts, with breakdowns by instrument, maturity, currency, credit rating, accounting treatment, geographical sectors and basic Expected Credit Losses methodology. - Section 6 of the 2021 Annual Report provides an overview of key activities related to risks but lacks a consolidated institutional-level subsection. - Recommended annual report enhancements: - Include a dedicated risk management subsection providing: - (i) a high-level overview of CBS’s key risks (financial and non-financial); - (ii) mapping of risks against the CBS’s mandate/objectives; - (iii) a short risk statement; and - (iv) key developments during the year. - Consider calculating and disclosing Value at Risk and Expected Shortfall with a short note on methodology. - Disclose high-level risk governance, continuous identification and evaluation processes, risk strategies, and key operational risk controls. ### Internal audit, Audit and Risk Committee, and accountability framework - Internal audit (Section 46): - Internal Audit Division mandated to perform periodic audits, audit monthly financial statements, and report quarterly to the Board on accounts, budgetary and accounting procedures, risk management and other controls, and efficiency and effectiveness. - Internal Audit Charter governs function and reports functionally to the Audit and Risk Committee (ARC); charter not published. - Rules on appointment/dismissal and eligibility criteria for head of internal audit not mentioned in Act or publicly disclosed. - 2021 Annual Report states conformance with International Standards for the Professional Practice of Internal Audit and External Quality Assessment every five years (overall opinion not disclosed). - Audit and Risk Committee: - CBS Act does not explicitly provide for an audit committee but Board has established an Audit and Risk Committee comprising three non-executive Board members. - ARC charter and annual report not published. - Recommendation: publish Internal Audit Charter, ARC charter and ARC annual report; disclose arrangement between CBS and Auditor General on appointment of external audit firms assisting the Auditor General. - Independently audited financial statements: - FY 2021 financial statements prepared in accordance with IFRS, audited under International Standards on Auditing, finalized and published within three months statutory deadline. - Recommendation: continue improving management’s commentary and consider repositioning annexes when revising annual report concept. ### Financial stability, macroprudential policy, FSC activities, and stress testing - Financial Stability Committee (FSC): - FSC established March 2016 by Presidential Decree, chaired by CBS, membership includes Ministry of Finance, FSA and Financial Intelligence Unit; meets quarterly and issues public statements after meetings. - Public information on FSC activities is limited; statements describe items discussed at a high level without indicating whether policy actions/recommendations issued. - Recommendation: consider publishing non-market sensitive information on items discussed and outcomes (sanitized agendas/minutes) with consent of other authorities. - Financial Stability Report: - CBS publishes an annual Financial Stability Report assessing vulnerabilities, stress tests and methods to address systemic risk. - Recommendation: publish more detailed stress testing assumptions and more granular datasets where compatible with confidentiality; undertake and publish ex-post evaluations of implemented measures. - Macroprudential framework: - Work underway on drafting a Financial Stability Act and a Macroprudential Framework and Toolkit. - Recommendation: periodically publish key early warning indicators and explain how they relate to policy actions. ### Emergency Liquidity Assistance (ELA) and liquidity support disclosure - CBS publishes scope, objective, and tools for market-wide liquidity support and intention to maintain market functioning. - Bilateral ELA: basic features (Emergency Loan Facility — ELF) described but modality, eligibility, terms and conditions not detailed. - Market-wide support disclosures: - SCR1.250 billion made available as relief loans for private sector via banking sector; CBS updates monthly the size of relief loans utilized. - Recommendations: enhance transparency on bilateral ELA by disclosing objectives, general rules, parameters, institutional eligibility, applied interest rate, eligible collateral, and maturity. ### AML/CFT supervisory powers, Appeals Board, and disclosures - AML/CFT Act 2020 designated CBS as AML/CFT supervisor for entities under its remit; CBS assumed mandate in March 2020 for listed entity types. - CBS AMLCFTCPF Policy of 2020 assigns CBS responsibilities for internal control measures; Compliance Unit reports twice a year to the Audit and Review Committee on implementation. - Findings: - CBS discloses legislation, guidance and general supervisory powers on a dedicated website page. - Information about risk-based supervisory approach approved August 2021, and allocated human and technical resources are not publicly disclosed. - As of reporting, no sanctions have been imposed under the AML/CFT Act of 2020. - Recommendations: - Prioritize constitution of the Appeals Board to enable imposition of sanctions. - Disclose further information on implementation of the AMLCFTCPF Policy and publish key statistics on off-site and on-site supervisory activities and enforcement actions once procedural constraints resolved. ### Consumer protection, payments modernization, and disclosures (Part VII) - Institutional arrangements: - CBS partnered with the Financial Services Authority (FSA); Financial Consumer Protection Act (FCPA) enacted and commenced May 01, 2022 (with six-month transition). - CBS implements National Financial Education Strategy and operates Credit Information System (operational since 2012) and payment systems modernization. - Payments modernization objectives: - Enhance availability, affordability, reliability, effectiveness and soundness of payment infrastructure; promote financial inclusion. - Although 94 percent of the population are banked, most cash out income and rely on cash transactions. - Promote electronic and mobile payments and transparency of terms, pricing and speed. - Consumer protection and dispute resolution: - Financial institutions receive claims first; unresolved claims may be lodged at CBS. Decisions of the CBS are binding on banks. - FCPA will enhance consumer protection functions and regulatory standards. - Consumer-protection outcomes: - Annual Report 2021 reports: “Approximately 70 queries were recorded on average during a month, of which, at least 5 required interventions by the Bank, and were dealt with within 1-2 days.” - Annual Report 2021 reports MCS received on average 20 complaints per month, 4 of which were upheld by the Bank. - Recommendations: - Disseminate the claims system and consumer surveillance system broadly; continue disclosure of financial education measures and consider repeating the financial literacy baseline survey (conducted in 2016). ### Reserve management operations, governance and transparency (Part VI / Operational arrangements) - Reserve management governance: - Three-tier governance: Board of Directors (strategy); Investment Committee (operational decisions and Investment Guidelines); operational units (Financial Markets Division — front/middle/back office). - Three-tranche reserve structure: - Operational tranche: 3-month horizon. - Liquidity tranche: up to 1 year horizon (cover debt repayments due within one year and three months’ prospective imports). - Investment tranche: 3-year horizon for return generation. - Operational arrangements (Financial Markets Division sections): - Reserve Management Section (Front Office): day-to-day management, executes decisions, recommends strategies. - Financial and Risk Analysis Section (Middle Office): market research, benchmarks, models, measures and reports financial risks, monitors compliance. - Settlement and Accounting Section (Back Office): trade settlement and treasury accounting in line with IFRS. - Disclosures: - Annual Reserves Management Report and Annual Report provide asset allocation, currency composition, rationale for USD share, oversight responsibilities, and actions in 2021 (e.g., cautious USD allocation, monitoring counterparty credit ratings, discontinuation of certain investments). - Recommendations: - Periodic (annual) disclosures of fully-fledged quantitative analysis supporting policy decisions, disclosure of rules/procedures for selection of eligible counterparties, stress tests specific to liquidity risk, and disclosures of FX swap operational guidelines if activated. ### Communications, confidentiality, press conferences and outreach - Legal and institutional framework: - Article 48 establishes reporting obligations including publishing summaries of monetary policy decisions as soon as possible thereafter and annual reporting to National Assembly; Governor may appear before National Assembly. - Communications Unit under Governor’s office; Governor is primary spokesperson. - Channels and calendar: - Publications, press releases (English and Creole), presentations, interviews, seminars, social media; publications calendar lists frequencies for Strategic Plan, Annual Report, Financial Statements, Reserves Management Report, FSR, Statistical Bulletin, Key Economic Developments, Monetary Policy Decision (quarterly). - Access to Information page implemented July 2021; CBS has 21 days to respond under Section 11 of ATIA. - Press conferences: - Conducted in Creole with press releases in English and Creole; recommendation to publish presentations in English to widen accessibility. - Commitments: publish press conference presentations, post video recordings, gather stakeholder feedback surveys, centralize press conference materials on website. - Confidentiality: - Board proceedings confidential unless Board decides otherwise (Article 9(7)). Article 11 establishes staff and Board confidentiality with sanctions. - Operational measures include employee Confidentiality Agreement and a Data Classification Policy (2014) with classes: Public, Internal, Confidential, Restricted (policy not publicly disclosed). - Recommendation: develop and disclose confidentiality rules/policies and explain data classification to the public, clarifying exceptions under ATIA. ### International cooperation, MoUs, and relations with domestic agencies - Disclosure practices: - CBS Act article 36 empowers CBS to represent Government in international fora; interactions disclosed in Annual Report and press releases. - Financial transactions with international counterparts disclosed annually (e.g., EFF program, agreements with African Development Bank and World Bank). - MoUs and cooperation agreements are disclosed on a case-by-case basis; recommendation to publish more agreements where permissible. - Relations with domestic agencies: - Disclosures through MoUs, joint press releases, and collaborative forums (Bankers meetings, National Payments Council, National Payments Task Force, Steering Committee for Financial Education, FSC). - Recommendation: more consistent publication of MoUs and clearer website presentation of legal framework, objectives, functions and their linkages. ### Implementation roadmap, commitments and timelines (selected) - Immediate and short-term classifications for actions; examples of CBS commitments and timelines: - Publish Board and subcommittee charters and remuneration policy in 2023. - Publish Internal Audit Charter by end of September 2022. - Complete and publish Anti-Bribery and Corruption policy and Code of Ethics by December 2022; Code of Ethical Business to follow in coming years. - Review Annual Report structure and implement enhanced disclosures in 2023 for publication by March 2024. - Implement selection procedure for Board members and publish Board Remuneration Policy by 2023. - Consider including risk disclosures (Value at Risk, Expected Shortfall) in Annual Report by 2024. - Publish communications policy and create staff awareness by end of 2022. - Establish Appeals Board for AML/CFT (timeline linked to collaboration with National AML/CFT Committee). _Italic: Source: 1sycea2022005 — IMF staff report excerpts provided._ ### EXECUTIVE SUMMARY __________________________________________________________________________ 4 ### EXECUTIVE SUMMARY ### Key Recommendations - 1. Consolidate legal instruments in a unified section of the website and provide a plain-language explanation of the relation between the CBS’s statutory functions and its objectives. Publish charters of the Board and other key committees, selection criteria and procedure of board members, and remunerations of key officials. - 2. Disclose in layman’s terms the concept and rationale for CBS financial autonomy, key related safeguards, and how they correspond to the CBS Act and operations. Disclose the process of adopting the annual budget and how it is realized. - 3. Enhance transparency on risk management and accountability mechanisms (governance and oversight, external and internal audit) by revising the corporate section of the CBS annual report and supplementing with website disclosures. - 4. Include additional information on human capital management in the annual report and/or website, including the staff salary scale, salaries of key officials, and (summary of) related key policies and governance arrangements. - 5. Publicly disclose the Code of Conduct and Ethics, a Code of Ethical Businesses (for stakeholders), and information on enforcement activities, including statistics on sanctions imposed for ethical violations. - 6. Enhance the confidentiality framework by issuing rules and regulations, voluntary policies or guidelines disclosed to the public; explain the confidentiality system including the data classification system. - 7. Gradually enhance transparency of the monetary policy and FX operations framework during the transition to a full-fledged IT monetary regime. Suggested improvements include: - publication of a Monetary Policy Report (including disclosures on the components of the Forecasting and Policy Analysis System (FPAS)); - disclosure of an explicit numerical medium-term inflation objective and of a numerical operational target; - disclosure of activation of the standing facilities; - disclosure of aggregate bank balances at the CBS and of the realized autonomous factors; - disclosure of ex-post evaluations of the impact of foreign exchange interventions (FXI). - 8. Improve transparency and accessibility of financial stability information by: (i) enhancing disclosure of Financial Stability Committee (FSC) activities; (ii) promoting CBS financial stability messages more broadly to the public; and (iii) enhancing transparency on financial stability data and ex-post evaluation. - 9. Consider enhancing disclosure of the bilateral Emergency Liquidity Assistance (ELA) framework for financial institutions, including objectives, general rules, financial parameters, and terms and conditions. - 10. Enhance transparency of AML/CFT regulations by disclosing quantitative and qualitative information on risk-based supervisory activities and internal AML/CFT activities (including statistical information on off-site and on-site supervisory activities and enforcement actions) and prioritize establishment of the appeals mechanism under the AML/CFT Act of 2020 to enable imposition of sanctions by the CBS. ### Scope and Objective - The review was conducted at the request of the Central Bank of Seychelles (CBS) under the Central Bank Transparency Code (CBT) review program. - It is the seventh mission conducted under the pilot CBT review program. - The review covered all CBT principles, excluding those not performed by the CBS (i.e., FX administration) or that fall outside CBT reviews due to established international standards (i.e., microprudential supervision and resolution, and Financial Markets Infrastructure). These are denoted as “Not Applicable” in the review. - Because the CBS has formal mandate on financial consumer protection, transparency practices in this area were reviewed (principles 2.11, 3.12 and 4.11), but no range of practices (core/expanded/comprehensive) was assigned for these principles. - Purpose: allow the CBS to evaluate its transparency practices, identify strengths and areas for improvement, map its choices against CBT ranges (core, expanded, comprehensive), and help strengthen dialogue with stakeholders while balancing independence and accountability. - The CBT review is explicitly not an assessment of central bank policies and is not intended as a tool for ranking central banks. ### Approach and Methodology - The mission’s review combined desk review and in-depth discussions with the CBS and key stakeholders. - Preliminary desk review used publicly available information and the Self-Review questionnaire provided by the CBS prior to the mission. - The mission held around thirty meetings (hybrid and virtual) over two weeks with CBS management and staff and with public and private sector stakeholders (including academia, think tanks and journalists). Meetings with stakeholders were planned in coordination with the CBS; CBS staff did not attend those stakeholder meetings. - The review was conducted principle-by-principle, mapping CBS practices to CBT best-practice ranges while considering CBS legal mandate and policy context. - Important transparency dimensions considered: (i) timeliness; (ii) periodicity; and (iii) quality of disclosure (accessibility and ease of understanding, especially for the general public). - Stakeholder views were incorporated into the assessment. ### Background and Context - The CBS sets a high benchmark for transparency given Seychelles’ economic, financial development and literacy circumstances; stakeholders recognize this, supporting a high level of trust and accountability. - Despite constrained human capital resources, CBS has actively facilitated open dialogue with stakeholders and led communications on extraordinary support programs during the COVID-19 pandemic, regularly engaging the public using plain language and varied communication tools. - CBS has pursued a broad agenda on financial education and enhanced consumer protection to promote financial inclusion in Seychelles. - CBS has an advanced transparency framework in: - foreign exchange (FX) management; - FX reserve management; - communications; - financial stability; and - institutional relations with domestic official stakeholders. - Comprehensive transparency practices are in place for most FX management and international reserves management actions. - CBS discloses objectives, strategy, instruments and risks for financial stability and publicly and timely announces financial stability policy decisions taken through a transparent decision-making process; however, activities of the Financial Stability Committee (FSC), chaired by the CBS, could be enhanced. - CBS has multiplied tools and channels of communication to reach different audiences. - CBS has solid, well-developed practices disclosing interactions with government and other public financial agencies. ### Main Findings (high-level) - Monetary policy: - CBS is suitably transparent about its monetary policy strategy for price stability and discloses operational framework, policy actions, and outcomes. - CBS has not yet introduced some key elements of its announced inflation targeting (IT) regime, notably a numerical medium-term inflation objective and an operational interest rate target. - As CBS transitions to a full-fledged IT regime, it is expected to gradually enhance monetary policy transparency to support transmission and stakeholder dialogue. - Governance and accountability: - Room for improved transparency in governance and accountability arrangements, confidentiality policy, AML/CFT supervisory policies, and internal AML/CFT controls. - CBS discloses legal structure, mandate, and some elements of risk and human resource management, accountability, and anti-corruption arrangements on its website. - To bolster public perception of good governance, CBS should consider highlighting these aspects in its annual report and/or provide additional website information, particularly on human capital management, anti-corruption policies and decision-making arrangements. - Accessibility of information on internal governance could be improved by overhauling the relevant Annual Report sections and website and publishing the Code of Conduct and Ethics. - Confidentiality and AML/CFT: - Legal mechanism for confidentiality exists, but dissemination and disclosure of the confidentiality framework could be enhanced. - CBS discloses basic information on AML/CFT supervisory powers and policies and on related internal control framework, but disclosures on processes and outcomes of AML/CFT external policies and internal controls are limited. - Legislative changes: - Recent and forthcoming legislative acts have substantially expanded CBS regulatory powers (AML/CFT Act and Financial Consumer Protection Act), and the forthcoming Financial Stability Act is expected to provide a transparent legal basis for CBS actions on financial stability. - These legislative changes will require expansion of CBS transparency practices so related activities continue to be appropriately disclosed to stakeholders. ### Central Bank Transparency Overview (summary observation) - Table 1 provides the CBT-based overview across five pillars: I. Governance; II. Policies; III. Operations; IV. Outcome; V. Official Relations, with principle-level sub-principles mapped to ranges of practices (core, expanded, comprehensive) or denoted “Not Applicable” or “Not Implemented” where relevant. *Source: EXECUTIVE SUMMARY (Central Bank Transparency Code review for Central Bank of Seychelles)* ### 15. The economy has rebounded strongly from the severe contraction caused by the ### 1sycea2022005 - 15. The economy has rebounded strongly from the severe contraction caused by the ### Economic rebound and outlook - Seychelles experienced an unprecedented economic contraction due to the COVID-19 pandemic driven by travel restrictions and the global downturn. - Authorities secured emergency financial assistance of SDR 22.9 million from the IMF under the Rapid Financing Instrument (RFI) in May 2020. - An Extended Fund Facility (EFF) arrangement for SDR 74 million was secured in July 2021. - Recent rebound has been driven by a swift recovery of tourism, narrowing fiscal deficits, and public debt ratios on a downward trajectory. - The economy faces headwinds from spikes in energy and food prices triggered by Russia’s invasion of Ukraine. - The economic outlook is conditional on authorities’ success in maintaining macroeconomic stability and implementing structural reforms agreed under the EFF arrangement with the IMF. ### COVID-19 measures taken by the CBS and their unwinding (Box 1) - General approach: - CBS measures were taken in close collaboration with the Ministry of Finance, National Planning and Trade (Ministry of Finance) and the Bankers Association. - Measures included adjustments to monetary policy and international reserves management; setting-up private sector relief schemes; moratorium and rescheduling of loan facilities; and adjustments to CBS funding of the government. - Some measures required amendments to CBS Act. - In January 2022, the CBS announced an unwinding of these measures. - Communications: - The Communications Unit coordinated external communications for CBS policy measures using press releases, live press conferences, digital platforms, awareness campaigns, and an expanded institutional website. - Monetary policy adjustments: - Cut the Monetary Policy Rate (MPR) by 400 basis points. - Set MPR at 2.0 percent, Standing Deposit Facility (SDF) at 0.5 percent, and Standing Credit Facility (SCF) at 3.5 percent, leading to a structural shift in the Interest Rate Corridor-IRC. - Lowered the Minimum Reserve Requirement (MRR) on SCR to 10 percent from 13 percent. - Approved Unwinding Measure: Monetary policy stance to remain accommodative in the near-term subject to alterations in economic conditions such as inflationary pressures remaining subdued. MRR is to be set back to 13 percent in mid-July 2022. - International reserves management and FX intervention adjustments: - CBS secured support from international partners to bolster international reserves. - Reviewed agreements, policies and guidelines underpinning reserves management; adopted cautious currency allocation (maintaining a share of the USD above the prescribed benchmark); monitored counterparty credit ratings and discontinued investments with counterparties that could not accommodate adequate liquidity requirements. - Took a conservative approach in appropriation of FX to the market through FX Auctions and bilateral sales, initially aiming to clear goods already imported but requiring final FX payments. - Committed to allocating FX reserves for fuel, essential goods, and medicine purchases. - Approved Unwinding Measure: CBS FX interventions in 2022 will only deal with commercial banks. - Private sector relief schemes: - Made available SCR500 million for participating credit-granting institutions to lend to Small and Medium Enterprises (MSMEs) as overdrafts or term loans with an annual fixed interest rate of 1.5 percent, a moratorium of up to 18 months, and a maximum repayment period of eight years. - Made available SCR750 million for participating credit granting institutions to lend to Large Enterprises as overdrafts or term loans with an annual fixed interest rate of 4.5 percent, a moratorium of up to 18 months, and a maximum repayment period of eight years. - Recommended Unwinding Measures: To re-open as of February 2022 until end-March 2022. Effectively closed as of March 31, 2022. - Banks, Seychelles Credit Union and the Development Bank of Seychelles provided moratoriums or deferment of repayment of loans; as activity picked up since re-opening of borders in March 2021, secured-income businesses opted out and some began repaying facilities. Financial institutions have progressively unwound these measures. - Approved Unwinding Measure: In January 2022 credit granting institutions shall still consider moratorium and debt restructuring on a case-by-case basis. CBS to ensure proper monitoring of NPL trends and implications of the system’s asset quality and capital positions, and is prepared to apply flexibility if needed. The measure was terminated as of July 1, 2022. - Exceptional advances and government securities purchases: - Following CBS Act amendments broadening Force Majeure Events to cater for COVID-related events, CBS Board approved advances up to a limit of SCR500 million at no cost for the government. Except for January 2021, no advances were provided due to lower government expenditures. - Approved Unwinding Measure: CBS set limit of SCR250 million for 2022, with an interest payable equal to the latest average tender rate for the 91-day Treasury bills plus a margin of 50 basis points. - CBS allowed greater flexibility for the purchase of government securities on the secondary market in Force Majeure Events; in consultation with the Ministry of Finance, CBS set a limit of SCR750 million for 2022. Only SCR40 million was utilized in 2021. - Approved Unwinding Measure: In January 2022 the CBS issued a limit of SCR50 million for 2022. The measure was terminated as of July 18, 2022. - Sources for Box 1: CBS Unwinding Strategy Covid-19 Policy and Relief Measures, January 2022, and June 2022 Update. ### Banking system resilience and financial sector reform - At end-2021, banks were well capitalized and highly liquid despite declining interest income and loan quality. - Authorities are phasing out regulatory forbearance measures introduced during the pandemic. - CBS does not expect a significant negative impact of unwinding the COVID-19 measures announced in January 2022 on banks’ asset quality. - CBS continues to closely monitor financial sector soundness and banks’ ability to support economic recovery. - CBS remains committed to reforms to: - strengthen financial sector resilience; - enhance the AML/CFT framework; - improve transparency; and - promote financial inclusion. - The authorities’ ambitious financial sector reform agenda also includes enhancement of crisis management, resolution, and safety net frameworks; strengthening of AML/CFT regulations; facilitating access to affordable and sustainable finance; and building a robust financial consumer protection system. ### Financial inclusion, payments modernization, and consumer protection (Box 2) - Institutional arrangements: - CBS partnered with the Financial Services Authority (FSA) to improve usage and quality of financial services. - Financial Consumer Protection Act (FCPA) recently enacted to fortify consumer trust. - CBS implements the National Financial Education Strategy and operates the Credit Information System (operational since 2012) and payment systems modernization. - Payment system modernization objectives: - Enhance availability, affordability, reliability, effectiveness, and soundness of payment infrastructure. - Promote greater financial inclusion; although 94 percent of the population are banked, most cash out income and rely on cash transactions. - Increase use of electronic and mobile payment services and promote public awareness of mobile digital payment means to reduce dominance of cash and checks. - Enhance transparency of terms and conditions of payment services including pricing, fee structure, and speed. - Consumer protection and dispute resolution: - Financial institutions are first receivers of claims; if unresolved an individual may lodge a claim at the CBS. Decisions of the CBS are binding on banks. - FCPA will enhance consumer protection functions, regulatory standards on fair treatment and business conduct, and monitoring systems for implementation by credit institutions. - Financial education initiatives: - CBS implemented youth programs in 2021 including launching the Youth 4 Youth financial education Ambassadors program. - Participated in Global Money Week, Youth Week, Global Entrepreneurship Week and Fraud Awareness Week. ### CBS mandate, monetary policy framework, and governance - Statutory objectives and mandates: - CBS established under CBS Act of 2004 as corporate body; primary objective is promotion of price stability. - Other responsibilities include advisory role to government on banking, monetary and financial matters, and promotion of a sound financial system. - CBS determines foreign exchange rate regime in consultation with the President. - Pursuant to the Foreign Exchange Act 2009, responsibility for cross-border flows and administration of foreign exchange rests with the Minister of Finance, who may delegate certain powers to the CBS Governor. - Current and capital accounts are fully liberalized as reflected in IMF AREAER and CBS publications. - Monetary policy framework developments: - Following shift from fixed to floating exchange rate in late 2008, CBS overhauled monetary policy design and implementation. - In January 2019, transitioned from reserve money targeting to an interest rate-based framework: - Introduction of a Monetary Policy Rate within a standard interest rate corridor as the key policy variable. - Reliance on FPAS to guide monetary policy decisions. - Short-term liquidity management framework to support calibration of open market operations. - Transition to a full-fledged IT regime is yet to be completed: CBS does not explicitly disclose an inflation target or an operational target for monetary policy implementation. - CBS aims to strengthen monetary transmission mechanism by improving interbank market functioning and enhancing policy communication; supported by IMF technical assistance. - CBS is enhancing foreign reserves management through capacity building and strengthening risk management practices. - Governance and autonomy: - 2021 IMF safeguards assessment found external audit arrangements robust and financial reporting practices broadly adhere to international standards. - Progress made enhancing governance framework, but legal amendments are needed to reinforce institutional, personal, and financial autonomy aspects. - Internal audit function improvements needed; oversight to be enhanced to ensure continued development of internal audit and risk management functions. - CBS’s legal framework needs amendment to enhance autonomy provisions. - Transparency and communication: - CBS Strategic Plan for 2019-2023 emphasizes building trust and confidence of external stakeholders and identifies stakeholder management and strategic communication as key pillars. - CBS seeks to communicate in a straightforward, clear, and engaging manner and is interested in undertaking a CBT review. ### Main findings — Pillar I. Transparency in Governance (Legal Structure, Mandate, and Decision-Making; Risk Management and Accountability) - Legal framework disclosures: - Legal framework (mandate and overall legal structure) is publicly available. - Disclosures missing on certain components: functions, personal autonomy, conflict of laws, and judicial review. - CBS website legal acts section contains key legislative documents and regulations, but some legal acts should be featured more prominently to improve accessibility. - Website lacks clear descriptions of relation between objectives, functions, and powers; disclosures on functions and powers are scattered across legislative documents while objectives are in the CBS Act. - Clarity on judicial review is lacking both in the Act and publicity material. - Transparency on personal autonomy lacks disclosure on remuneration of key officials. - Charters of CBS Board and some key internal committees are not disclosed. - Recommendations and disclosure enhancements: - CBS should consider explaining the rationale for its financial autonomy and how it is implemented in practice in layman’s terms to avoid perception of unjustified privilege. - Suggested placement of such explanations: CBS website and corporate section of CBS annual report. - Suggested accompanying disclosures: description of CBS’s budgeting process, approved and realized annual budgets, and accountability mechanisms ensuring oversight of use of central bank resources. - Risk management disclosures: - Disclosures on risks are detailed but scattered. - CBS annual report lacks a consolidated institutional overview of risk management. - To improve transparency, CBS could revisit the corporate section of its annual report and include high-level information on: - (i) key risks as they relate to CBS’s mandate and the bank’s risk tolerance; - (ii) main strategies to manage these risks; - (iii) CBS risk management process; and - (iv) key developments during the year. *Source: IMF staff report text as provided in the supplied content.* ### 25. Featuring CBS accountability mechanisms more prominently in the corporate section of ### 25. Featuring CBS accountability mechanisms more prominently in the corporate section of ### Accountability and corporate reporting - Recommendation: Revisit the concept of the corporate section in CBS annual report to feature more prominently: - the oversight role of the Board and of the Audit and Risk Committee; - external and internal audit arrangements; and - risk management at the level of the institution. - Recommendation: Because the annual report will likely remain high-level, provide greater detail on the CBS website including: - (i) the oversight role of the Board and of the Audit and Risk Committee; - (ii) the arrangement between the CBS and the Auditor General on the appointment of external auditors and related eligibility requirements (independence, reputation, experience); and - (iii) the importance, role, and reporting lines of the internal audit function as well as criteria for the appointment of its head. - Recommendation: Publish internal regulations such as the Audit Committee Charter and Internal Audit Charter. - Recommendation: Publish the Audit and Risk Committee’s annual report on the CBS website or as part of the corporate section in the annual report. ### Governance and human capital transparency - Finding: CBS annual report includes a summary of key activities of the Human Resources Division during the year. - Staff-identified disclosures that could enhance perception of CBS as a well governed institution: - (i) enhanced statistics on CBS staff; - (ii) the staff salary scale and salaries of key officials; - (iii) other allowances and benefits such as the staff pensions scheme and loans provided to staff; - (iv) a description of the accountability mechanism; - (v) an explanation of governance related to human capital management (e.g., the role of the Human Resources Committee in this context); - (vi) recruitment policy; and - (vii) policies for attracting, promoting, and retaining staff, and on leadership and succession planning. ### Ethics, anti-corruption, and enforcement disclosure - Finding: Domestic anti-corruption laws apply to CBS decision-makers, staff, and agents but are not explicitly stated in publicly available CBS materials. - Finding: Core values (including integrity, transparency and accountability) are published; a Code of Conduct and Ethics exists but is not published on the CBS website. - Status: CBS staff are preparing an anti-bribery and corruption policy expected to be publicly available; public versions of the Code of Conduct and Ethics and a Code of Ethical Businesses are being drafted. - Recommendation: Authorities should consider disclosing enforcement activities and statistics on sanctions imposed for ethical violations. ### Communications and confidentiality - Finding: CBS Act and Access to Information Act provide a solid legal foundation to disclose information and implement transparency practices. - Recommendation: Progressively develop and disclose institutional communication policies, guidelines, measures, and practices as a system of institutional communications; consider fully incorporating a communications strategy into the transparency framework. - Finding: CBS has expanded communication tools and channels, including live press conferences in Creole to reach the public. - Recommendation: Continue expanding educational outreach programs for journalists, students, and citizens; continue active dissemination through mass and social media; enhance website search methods, allocate more tabs, and increase visibility of important subjects and outreach efforts. - Finding: Need to strengthen dissemination and disclosure of the confidentiality framework; Information Officer function established as required by ATIA to determine confidential information. - Recommendation: Disclose confidentiality policies and practices to enhance transparency and legal certainty, especially when information requests are denied for confidentiality reasons. ### Monetary policy and foreign exchange management - Finding: CBS is suitably transparent about its monetary and FX policy strategy and discloses its operational framework, policy actions, and outcomes; relies on a model-based forecast; fully discloses types and characteristics of monetary policy instruments, eligibility criteria, collateral framework, and decision-making process. - Finding: FX interventions have been activated in a transparent manner, including measures in response to the COVID-19 pandemic. - Assessment: Identified transparency gaps in monetary policy design and implementation do not call for urgent remedial actions in the short term. - Recommendation: As soon as feasible, consider additional disclosures to better align de facto framework with the de jure inflation targeting regime reported in the AREAER, including: - Publication of a Monetary Policy Report, including discussion of forecast of key economic variables and risks to the baseline scenario (first stage), and alternative scenarios and details of macroeconomic model (second phase); - Disclosure of an explicit numerical medium-term inflation objective and of a numerical operational target (different from CBS policy rates); - Frequent and timely disclosure of activation of the standing facilities, aggregate bank balances at the CBS, and the realized autonomous factors; - Disclosures of ex-post evaluations of the impact of FXI, and expanded discussion of FXI in the context of the quarterly press conference. - Note: The inaugural issue of CBS Monetary Policy Report was published on August 2, 2022, and, thus, was not included into the scope of the review. ### Foreign exchange reserve management - Finding: CBS discloses broad investment objectives of FX reserve management and allocation of oversight responsibilities (CBS Board of Directors, Investment Committee, CBS operational units including risk management) via the Annual Report and Annual Reserves Management Report. - Recommendation: Additional disclosures to further enhance transparency: - (i) periodic (i.e., annual) disclosures of fully-fledged analysis (quantitative illustration of changing risk-return expectations) supporting policy decisions and disclosures of risk exposures; - (ii) disclosures of rules and procedures for selection of eligible market counterparties and service providers and eligible markets; - (iii) disclosures of stress tests specific to liquidity risk. ### Financial stability and macroprudential policies - Finding: CBS has a defined framework for financial stability, publishes an annual Financial Stability Report (FSR), and chairs the Financial Stability Committee (FSC). - Finding: Public information on FSC activities is relatively limited; press releases are issued following FSC meetings. - Recommendation: Consider publishing non-market sensitive information on discussed items and outcomes after consulting other authorities involved. - Finding: CBS announces financial stability policy decisions timely and discloses the decision-making process through reports, press releases, and website notes; may consider broader promotion of financial stability messages to the general public using plain language. - Finding: CBS periodically discloses comprehensive assessments of risks to financial stability and methods to address systemic risk. - Recommendation: Consider publishing more detailed stress testing assumptions (macroeconomic full set of assumptions, estimation, plausibility, time horizon) and more granular datasets used for stress tests to the extent compatible with data confidentiality. - Recommendation: Consider undertaking and publishing ex-post evaluations of whether implemented measures achieved intended effects. ### Emergency Liquidity Assistance (ELA) - Finding: CBS publishes scope, objective, and tools for market-wide liquidity support and intention to maintain market functioning by providing liquidity to households and businesses. - Recommendation: Consider enhancing transparency of bilateral ELA by disclosing framework for bilateral financial institutions, including objectives, general rules, parameters, institutional eligibility, applied interest rate, eligible collateral, and maturity. ### Financial integrity (AML/CFT) - Finding: CBS was designated AML/CFT supervisor for entities under its regulatory ambit when the AML/CFT Act was enacted in 2020; related policies and powers are disclosed and relevant legislation and guidance are available on a dedicated page of the CBS website. - Finding: Information about CBS’s risk-approach to off-site and on-site AML/CFT supervision (approved by CBS Board in August 2021) and allocated human and technical resources are not disclosed. - Finding: As of now no sanctions have been imposed under the AML/CFT Act of 2020. - Recommendation: Prioritize constitution of the Appeals Board, since its absence prevents CBS from imposing the range of sanctions available for AML/CFT violations. - Finding: The AMLCFTCPF Policy of 2020 is publicly available and assigns CBS responsibilities for internal control measures; the Compliance Unit implements the Policy and reports to the Audit and Review Committee. - Recommendation: Authorities are encouraged to disclose further information on implementation of the AMLCFTCPF Policy covering relevant internal activities. ### Consumer protection - Finding: Consumer Protection function expanded with the Financial Consumer Protection Act, which came into effect in May 2022; implementation involved CBS and FSA. - Finding: CBS had a limited function monitoring fair treatment and business conduct prior to the new law; a claims system developed since 2016 has been consistently disclosed in financial surveillance reports and the annual report; a website tab provides access to the claims system. - Recommendation: Disseminate broadly the claims system and consumer surveillance system; continue disclosure of financial education measures and outcomes and consider repeating the financial literacy baseline survey (conducted in 2016) in the near future. ### Transparency in official relations with Government - Finding: Relations with the Government are disclosed and transparent; CBS Act contains mechanism for establishment of terms and conditions of CBS functions with respect to the government. - Finding: CBS discloses detailed terms and conditions in the Memorandum of Understanding (MoU) with the Ministry of Finance; disclosure is consistent on the website (tab dedicated to financial transactions with the government), annual reports, and press releases. - Finding: During the COVID-19 pandemic, live press conferences were used to explain remedial and urgent measures taken by the CBS regarding credit to the government. *Source: 1sycea2022005 - 25. Featuring CBS accountability mechanisms more prominently in the corporate section of* ### 43. There is room to disclose further international cooperation arrangements, mostly in ### 1sycea2022005 - 43. There is room to disclose further international cooperation arrangements, mostly in ### International cooperation disclosure - The CBS Act contains clear provisions regarding interaction and cooperation between the CBS and foreign institutions, including transactions with other central banks. - The CBS describes such interactions in the annual report and explains instruments used in financial transactions with foreign agencies. - Actions regarding international cooperation and exchange of information, engagements with international institutions and financial transactions with other central banks are also disclosed in press releases, as a regular transparency practice. - Not all the agreements with foreign entities are disclosed; disclosure of agreements is done on a case-by-case basis. - Recommendation: Further disclosure and publication of international agreements, if possible, and in accordance with their counterparts would improve transparency practices. ### Authorities’ response to the detailed review report - The Central Bank of Seychelles (CBS) expresses gratitude to the International Monetary Fund for the opportunity to participate in the pilot review of the Central Bank Transparency Code. - The CBS appreciates the Mission that occurred between the June 13 and July 5, 2022. - The CBS thanks stakeholders who willingly participated in the mission. - The CBS notes that the review compared CBS practices to best practices outlined in the CBTC and will aid the CBS in strengthening transparency and accountability practices. ### Transparency improvements and commitments (Mission observations and CBS intended actions) - Legal framework and governance: - Mission noted: “the transparency of the legal framework and governance arrangements could benefit from the consolidate of legal instruments in a unified section of the website as well as an explanation in plain language of the relation between the CBS’s statutory functions and its objectives”. - CBS intends to unify all legal instruments on the CBS website and provide a clear explanation of same. - Board and committee governance: - Mission noted: CBS transparency could be boosted by “public publication on the website of charters of the Board and other key committees, selection criteria and procedure of board members, as well as remunerations of key officials”. - CBS intends to publish the Board and Board subcommittee charters and the remuneration policy for Board members. - Financial autonomy: - Mission highlighted: “transparency on the CBS’s financial autonomy would benefit from disclosures in layman’s terms of the concept and rationale for its financial autonomy, key related safeguards observed by the CBS as well as how they correspond to the relevant provisions in the CBS Act and central bank’s operations.” - CBS will consider including a section on the website explaining legal provisions, governance, capital structure and profit distribution related to financial autonomy. - Oversight, risk management, and accountability: - Mission noted: “transparency on risk management and accountability mechanisms (governance and oversight, external and internal audit mechanism) could be enhanced by revising the concept of the corporate section in the CBS annual report to give more prominence to oversight and accountability, complemented by additional disclosures on the CBS website.” - CBS intends to revise its corporate section in the CBS annual report to include all the points raised by the Mission. - Human capital management: - Mission recommended consideration of including in the annual report and/or website additional information on human capital management, including the staff salary scale, salaries of key officials, etc. - CBS shall endeavor to disclose statistical information on its human capital management through the CBS website, intranet or CBS Annual Report. - Ethics and conduct: - Mission highlighted: “the CBS could consider to publicly disclose the Code of Conduct and Ethics, a Code of Ethical Businesses for stakeholders that engage with the CBS”. - CBS shall endeavor to publish its Code of Ethics within the coming year. - Confidentiality provisions: - Mission noted: “transparency of the rules and regulations, voluntary policies or guidelines could be enhanced with regards to the confidentiality provisions of the CBS” - CBS shall endeavor to develop a confidentiality policy taking into account the Data Classification policy and its obligations under the Access to Information Act 2018. - Monetary policy and FX operations: - Mission highlighted: “the CBS may gradually progress with enhancing further transparency of its monetary policy and FX operations framework to support monetary policy transmission strengthen dialogue with the stakeholders” - CBS will enhance the relevant documentations/publications to improve its transparency. - Financial stability disclosures: - Mission noted: CBS’s “transparency and accessibility of information on financial stability might be further improved” - CBS will revamp the relevant documents and discuss ways to facilitate the disclosure of Financial Stability Committee activities. - Emergency Lending Assistance (ELA): - Mission highlighted: “the CBS could consider enhancing disclosure of the bilateral Emergency Lending Assistance framework for the financial institutions”. - CBS shall make the ELA guidelines public. - Anti Money Laundering/Countering the Finance of Terrorism (AML/CFT): - Mission noted: “the transparency of AML/CFT regulations could be enhanced by encouraging disclosure of the risk-based supervisory activities and internal AML/CFT activities” - CBS shall publish and enhance its transparency by publication of the policies and statistical information on the examinations conducted. ### Implementation roadmap and classification - The Mission’s report provided recommendations on the pillars of the CBTC and a roadmap for each of the recommendations is in Annex II. - Actions are classified under: - (i) “Immediate implementation”: gathering and properly ordering existing information and including official documents and other publications to be published and disseminated through the website in the corresponding menu. - (ii) “Implementation in short-term period”: recommendations to be addressed in accordance with the necessary time to make analysis for the suggested improvements. ### Additional contextual details from the Detailed Review - Key legal instrument available: The Central Bank of Seychelles Act of 2004 is maintained in updated and consolidated form and can be freely accessed and downloaded. - The legal unit of CBS monitors amendments published in the official Gazette and incorporates those manually into the consolidated text following the publication. - The CBS has published an overview of its historic evolution describing significant improvements that enhanced CBS’s autonomy and provided clear definition of the CBS objectives. *Source: IMF staff report excerpt on the Central Bank of Seychelles transparency review.* ### Section 4 of the Act sets out the objectives of the CBS, whereas Section 4A refers to ### 1sycea2022005 - Section 4 of the Act sets out the objectives of the CBS, whereas Section 4A refers to ### Legal Nature - The CBS is the “body corporate” (sec. 3.1) and the shareholder of 100 percent of stock is the Government of Seychelles (sec. 14.2). - The stock of the CBS is protected from transfer to third parties or any encumbrance. - The Act stipulates that the CBS shall have a perpetual succession and provides transitional provisions which ensure continuity in all aspects of operations from the predecessor of the current CBS. - The CBS has the power to act independently, however, no list of specific powers is contained in the law; the Act attributes general power to act in performance of its functions deriving from the mandate of the CBS. - Specific chapters of the Act are more detailed in relation to powers. - The Act empowers the Governor to “act, contract and sign instruments and documents on behalf of the Bank and to delegate such powers to other employees of the Bank” subject to the regulations, rules or decisions issued by the Board. ### Legal Protection - The Act does not contain any reference to hierarchy of norms within the remit of the CBS activities, neither a general reference to the scope of judicial review of its decisions. - A specific clause related to the certificate on validity of notes and coins (sec. 22) specifies that even the courts cannot overturn such a certificate issued by the CBS employee. - The Financial Institutions Act, section 68 states that the CBS “acts, directions, orders, determinations or decisions” under the mentioned act shall be subject to judicial review. - Certain decisions envisaged by the Financial Institutions Act retain supremacy over other laws. - Review conclusions: - The legal framework governing the CBS and its legal nature is disclosed; laws and several pieces of secondary legislation are accessible via the CBS website. - The legal framework disclosed by the CBS is not clear on which law prevails in the event that the provisions of the Act conflict with other laws. - The Act is published and accessible, but it is not clear on the extent of judicial review of CBS activities or the enforceability of pre-judgment attachment in relation to the CBS. ### Comments and Recommendations on Legal Framework and Transparency - Various sections of the website, Board Secretary’s Report, and the overview of the Role of Central Bank of Seychelles refer to components of the legal framework, but do not provide detailed description or rationale. - Publication of binding legal documents and non-binding guidelines is not centralized; various structural divisions publish guidelines or regulations in relevant sections of the CBS website without legal unit being aware. - Drafts of new regulations and guidelines are occasionally communicated to the market but are not disclosed publicly or easily accessible; feedback mechanism is not clear. - The CBS clarified that lex specialist derogate legi generalis would apply to conflicts between the Act and other Laws, however, this is not clearly communicated to the public. - Suggested enhancements: - Provide detailed explanation on CBS legal framework, legal nature and legal protection on the CBS website. - Introduce provisions to the Act to eliminate lack of transparency on conflict of laws, judicial review and pre-judgement attachment. - Ensure relevant laws, secondary legislation, regulations and guidelines are available under a unified section of the website, with links from other relevant sections; ensure consistency and accessibility of texts. - Publish new draft regulations and guidelines on the website, along with a mechanism to receive and transparently respond to stakeholder input. ### Principle 1.2 Mandate: Disclosure of Objectives, Functions, and Powers - Description: - The Mandate of the CBS is set out in the Act, which lists the objectives, functions—to certain extent—and the legal powers available to the CBS to implement its objectives. - The Mission statement, along with the vision and the objective of the CBS is available on the CBS webpage, under the “About us” section. A two-page overview—“The Role of the Central Bank of Seychelles”—is published in the consumer education section. - Objectives: - Disclosed in the Act and in a separate website section; the primary objective is identified and clearly understandable. - Functions: - High-level statement on functions is laid out in section 4A and in specific chapters of the Act. - There is no list of functions in the CBS law; the reference to functions that “may be given...by any other written law” establishes an open-ended possibility to add further areas of activity. - Powers: - The Board is the body in which “all the powers of the Bank shall be vested.” - The CBS may carry out actions incidental to or consequential to its duties under the Act; prohibitions on certain activities are disclosed in the Act. - Specific powers are scattered around provisions of the Act and other relevant laws. - Private and public law powers are briefly mentioned in the Board Secretary Report of 2019. - Review (Core): - Objectives and functions are disclosed and discussed on the website, but neither the law nor the website provide clear mapping of functions and powers in relation to objectives. - The Act contains the set of CBS objectives along with establishing hierarchy between those; no legal foundations of the objectives are disclosed on the website. - The Act does not detail how various functions are derived from the objectives; additional functions attributed by separate laws are set out without reference to CBS objectives. - Powers and prohibitions are publicly disclosed but scattered across legal instruments. - Comments: - Laws and website fail to provide clear linkages between objectives and functions; additional powers assigned by the executive branch lack clear connection to objectives. - To enhance transparency, disclose clear explanations of the relation between objectives, functions and powers; link mission and vision to mandate and Act on the website. ### Principle 1.3 Autonomy (Overview) - The Act clearly declares CBS autonomy: the CBS “shall, in discharging its functions, act independently.” - The Board and employees are prohibited from seeking or receiving instructions from or being influenced by any person other than the Bank; third parties are prohibited from trying to influence the CBS. - The Attorney General serves as ex-officio member of the Board but does not possess voting rights. ### Principle 1.3.1 Institutional/Operational Autonomy - Description: - The Act states the obligation to act independently and prohibits officials and staff from seeking instructions from outside the CBS. - The Act sets out which Board members are prohibited from voting. - The role and scope of the Auditor General in relation to CBS accounts and financial statements is clearly disclosed in the law. - Review (Expanded): - The Act published on the webpage states the obligation to act independently and transparently. - Comments: - The Act is not clear on limitations of the scope of review by the Auditor General, nor is such information available on the website; disclosing such limitations could improve transparency. ### Principle 1.3.2 Functional Autonomy - Description: - The Board of Directors is responsible “for the policy and affairs” of the CBS. - The Act requires the CBS and the Government to consult each other on all matters that may affect discharge of respective functions. - The Act states that the foreign exchange rate regime to be adopted by the CBS is decided in consultation with the President, indicating dependence on external stakeholders for certain aspects. - Review (Expanded): - Requirement to act independently and not be influenced by third parties is disclosed. - High-level mechanism for establishment of the foreign exchange regime is disclosed in the law; procedure for determination of the monetary policy goal is disclosed on the CBS website. - Comments: - The procedure of consultation and mechanism for resolution of differences, if any, should be clearly disclosed. - Legislation and website are silent on scope/limitations attached to power of the executive branch to delegate functions and powers to the CBS. ### Principle 1.3.3 Personal Autonomy - Description: - The Act is clear on composition, appointment (distinguished from selection criteria and procedure), incompatibility, dismissal criteria, and term of service of Board members. - Terms and conditions of appointment are not published on the CBS website. - The Act is silent on decreasing the remuneration of the Governor, Deputy Governor, and the Board Members. - The law includes provision protecting Board members and employees from financial liability for acts or omissions done in good faith; the Act is silent on recovery of indemnified costs, losses and/or expenses. - Only the Supreme Court may order CBS or its employees to disclose confidential information obtained while exercising supervisory functions. - Review (Core): - Duration of the term of office, procedure of appointment, responsible bodies, eligibility and dismissal criteria are spelled out in the Act. - Comments: - Transparency could be enhanced by disclosing selection procedure, eligible professional experience (e.g., number of years, level of position), and by approving and publishing the Board Remuneration Policy. - Disclosure of protection from decreasing remuneration and treatment of former Board members/employees could benefit transparency. ### Principle 1.3.4 Financial Autonomy - Description: - Financial autonomy is enshrined in the CBS Act: - Section 3: CBS established as a body corporate that shall discharge its duties free from outside interference. - Sections 14-16 and 45: provisions on capital, general and revaluation reserves, profit calculation and distribution, and recapitalization. - Section 40: Monetary financing of the government is allowed and limited to a percentage of the government’s previous year’s ordinary revenue set by the Ministry for Finance and published in the Gazette; CBS may, subject to approval by the President, grant a temporary waiver to this limit. - Advances not repaid within six months shall be converted into government securities at market rates as determined by CBS. - Section 40A: CBS may grant temporary advances in event of force majeure at lower interest rates and for a longer period. - Sections 41, 43, and 44 regulate purchases of government securities and securities guaranteed by the Government; Section 44 includes a general prohibition of other means of credit to government not explicitly allowed under the CBS Act. - Section 45: CBS prepares its own annual budget, adopted by the Board by December 15 of the previous year; the budget is not published on the CBS website or in its reports. - Sections 45 and 47: Financial statements prepared in accordance with an internationally recognized financial reporting framework, audited by the Auditor General, submitted to the president, and published withing three months after the end of the fiscal year. - In practice, the financial reporting framework applied by the CBS are the International Financial Reporting Standards, as clarified in Note 3.1 of the CBS financial statements. - The CBS publishes in the Gazette and on its website its monthly balance sheet, as stipulated in Section 45 of the CBS Act (https://www.cbs.sc/Publications/CBSBalanceSheet.html). - Review (Expanded): - CBS financial arrangements are regulated in the CBS Act and disclosed in notes to the financial statements which are published on the CBS’s website and include the opinion of the Auditor General (https://www.cbs.sc/Publications/FinancialStatements.html). - The CBS website and other publications do not explain the rationale for the central bank’s financial autonomy, key provisions in the CBS Act that underpin this autonomy, and related Board decisions (e.g., on credit to government). - The CBS administrative and operating budget is not published; no information on budgetary allocations is publicly available. - Comments and Suggested Enhancements: - Explain to the public the concept of the CBS’s financial autonomy, related legal provisions, and how autonomy is implemented in practice; reference related resolutions (e.g., links to resolutions on provision of credit to the government). - Publish the CBS annual budget with at least: (i) staff costs; (ii) remuneration of key management personnel; (iii) investments in fixed assets; (iv) administrative expenses; and (v) other operating expenses. - Incorporate such information at a high level on the CBS website and in the annual report; revisit the concept and structure of the annual report to include corporate-level information and address observations under Principle 1.5 (Risk Management) and Principle 1.6 (Accountability Framework). ### Principle 1.4 Decision-making Arrangement - Description: - The Board is the main decision-making structure; responsible for policy and affairs of the CBS. - The law is not clear on the oversight function though the Governance chapter of the website underlines the oversight role of the Board. - The Act devotes a separate section to Board authority to establish committees with terms of reference as the Board may see fit. - Procedures for convening meetings, quorum, voting rights and casting vote are set out in the Act; Attorney General ex-officio on Board does not have voting powers. - Organizational structure is disclosed on the website via an Organizational Chart, listing structural units, divisions, reporting lines and key committees. - High-level descriptions of structural divisions and units are on the website, but no links to legal instruments establishing them are provided. - The Governor is designated as CEO and responsible for execution of Board-approved policies and day-to-day management; Governor’s power to delegate is stipulated, though instrument establishing such delegation is not disclosed. - CVs/biographies of Board members are published on the CBS website. - Review (Core): - Organizational structure and descriptions of structural sub-divisions are published. - Composition of the Board of Directors and the Monetary Policy Technical Committee (MPTC) is disclosed; high-level description of MPTC composition, functions and decision-making procedure is available. - Charters of decision-making bodies and by-laws establishing functions and responsibilities of structural sub-divisions are not publicized. - Comments: - Allocation of responsibilities between the Governor and the Board is not clearly spelled out in the Act nor on the website. - Transparency would benefit from publication of charters of the Board and respective Committees, clarifying advisory vs decision-making roles. - The board charter (not published) requires the board to approve board recruitment procedures to ensure consistency and transparency in appointment of independent members; no such document is published. ### Principle 1.5 Risk Management - Principle 1.5.1 Risk Exposure — Description: - The CBS Act sets out the main financial operations driving CBS’s exposure to financial risks: - Sections 25 and 27 mandate the CBS to: (i) hold official foreign reserves at a level it considers necessary for the fulfillment of its objectives; (ii) invest them in internationally recognized foreign reserve assets taking into account risk levels it considers acceptable and consistent with objectives on security, liquidity, and return; and (iii) conduct other related operations. - Section 29 mandates the CBS to: (i) open accounts for and accept deposits from banks and other financial institutions; (ii) provide loans, advances, and rediscounts to resident banks and other financial institutions for periods up to 180 days; and (iii) provide, in case of force majeure, loans, advances, and rediscounts to resident banks and other financial institutions for periods of up to eight years. - Sections 40 and 40A allow the CBS to provide temporary advances to the government, subject to certain restrictions and circumstances (i.e., force majeure). - Sections 34, 36, and 44 mandate the CBS to: (i) open accounts for and accept deposits from the government, official aid agencies, and international organizations; (ii) undertake, on behalf of the government, issuance of government securities; (iii) undertake transactions and other such responsibilities related to the government’s participation in international organizations; and (iv) provide banking services for the benefit of foreign governments, central banks and monetary authorities, and international organizations. - Section 46 requires the CBS to establish and maintain proper risk management procedures and practices, and to report at least quarterly to the CBS Board on risk management. - Note 42 of the CBS FY 2021 Financial Statements provides disclosures on CBS’s exposures to: - Financial risks from foreign reserves as well as domestic market operations, such as the Private Sector Relief Credit Loan Facility. Exposures are quantified (by carrying amounts) and broken down by type of instrument, maturity, currency of denomination, credit rating, accounting treatment, geographical sectors etc. There is a basic description of calculation of Expected Credit Losses and risk strategies for managing risks from specific operations. - Operational risks: exposure to operational risks is not elaborate in detail, nor quantified. - Review / Observations: - The Act identifies the principal activities that generate financial and operational risk exposures and requires risk management procedures and reporting to the Board at least quarterly. - Financial-risk disclosures in Note 42 of the FY 2021 Financial Statements quantify exposures by carrying amounts and provide breakdowns and basic risk-management descriptions. - Operational risk disclosure is limited in detail and is not quantified. _Italic: Source: Section 4 and related sections of the Act and CBS publications as summarized in the provided IMF document._ ### Section 6 of the CBS 2021 Annual Report: ### Section 6 of the CBS 2021 Annual Report ### Overview of disclosures on risks - The CBS FY 2021 financial statements contain comprehensive disclosures on financial risks from foreign reserves and domestic market operations. - Section 6 of the CBS 2021 Annual Report provides an overview of key activities related to risks in the CBS’s organizational units, but information on risks is scattered among several subsections rather than presented in a consolidated institutional-level subsection. - The annual report does not provide: - (i) clear high-level overview of the CBS’s key risks; - (ii) explanation or mapping of risks against the CBS’s mandate or objectives; - (iii) a brief risk statement; and - (iv) developments related to key risks. - The CBS discloses financial risk exposures quantified in terms of carrying values and Expected Credit Losses. ### Gaps identified and recommended enhancements - Transparency could be enhanced by revisiting the concept and structure of the annual report and including a dedicated subsection on risk management that should provide: - (i) a high-level overview of the CBS’s key risks (financial and non-financial); - (ii) an explanation or mapping of these against the CBS’s mandate or objectives; - (iii) a short risks statement; and - (iv) key developments in these risks. - Presenting risk information in a dedicated subsection would allow a clearer picture of the relative importance of sources of CBS’s risks and force prioritization and consistency in the level of detail provided. - The CBS could consider calculating and disclosing Value at Risk and Expected Shortfall figures in the annual report and/or financial statements; a short note on the methodology would need to be included in the annual report or the financial statements. This disclosure would help stakeholders understand the importance of CBS’s financial buffers (capital, general reserves, retained earnings, revaluation accounts etc.). ### Risk framework and governance (Principle 1.5.2) - Legal requirement: Section 46 of the CBS Act requires the CBS to establish and maintain proper risk management procedures and practices, and to report at least quarterly to the CBS Board on risk management. - Section 6 describes a decentralized risk management function performed across several organizational units (e.g., the Risk Management Unit and the Financial and Risk Analysis Section in the Financial Markets Department) and committees (e.g., Audit and Risk Committee, Risk Management Committee, Investment Committee, and Monetary Policy Technical Committee). - The CBS website provides further details on risk governance and the risk management process, including: - a description of the role of the CBS’s risk management function; - the CBS Risk Management Framework, Policy, and Guidelines Document; - the CBS Risk Management Policy; and - the CBS Risk Appetite and Tolerance Statement. - Recommended additional disclosures for the annual report’s dedicated risk subsection: - (i) a high-level overview of risk governance; - (ii) the process of continuous identification and evaluation of risks (financial, operational, and legal); - (iii) risk strategies (risk avoidance, mitigation, and transfer) in key areas; and - (iv) key tools and internal controls for managing operational risks. ### Accountability framework (Principle 1.6 and 1.6.1) - Statutory and reporting requirements: - The CBS Act requires publication of the annual report and audited financial statements within three months after the fiscal year-end and requires the financial statements to be prepared in accordance with an internationally recognized financial reporting framework (Section 45). - In practice, CBS has chosen International Financial Reporting Standards as its financial reporting framework, as clarified in Note 3.1 to the CBS financial statements. - The CBS Act assigns responsibility to audit the CBS financial statements to the Auditor General (Section 47). In practice, the Auditor General appoints an external audit firm to assist him with auditing CBS in accordance with International Standards on Auditing, as explained in the Auditor General’s audit opinion. - Disclosure gap: The Auditor General and the CBS do not publish information with respect to their arrangement on the appointment of the external audit firm. *Source: Section 6 of the CBS 2021 Annual Report (excerpts provided).* ### Section 46 of the CBS Act provides for an internal audit division charged with periodic ### 1sycea2022005 - Section 46 of the CBS Act provides for an internal audit division charged with periodic ### Internal audit (Section 46) - Findings: - Section 46 of the CBS Act provides for an internal audit division charged with periodic audit of the CBS, audits of monthly financial statements, and quarterly reporting to the Board on observations related to the CBS’s accounts and records, budgetary and accounting procedures, risk management and other controls, and efficiency and effectiveness of the CBS’s operations. - The CBS website and the 2021 annual report state the function is governed by an Internal Audit Charter and reports functionally to the Audit and Risk Committee. - The rules on the appointment and dismissal, term of appointment, and eligibility criteria for the head of internal audit are not mentioned in the CBS Act and the Internal Audit Charter is not published. - The 2021 annual report states conformance with International Standards for the Professional Practice of Internal Audit and that an External Quality Assessment is undertaken every five years (without disclosing the overall opinion of the last such assessment). - Transparency gaps and recommendations: - Transparency could be improved by disclosing on the CBS website a short summary of rules on the appointment and dismissal of the head of internal audit; and/or publishing the Internal Audit Charter. - Transparency could be enhanced by including in the annual report the basis for the audit methodology and the result of the last External Quality Assessment. ### Audit and Risk Committee - Findings: - The CBS Act does not explicitly assign the Board responsibility for overseeing internal and external audit, internal controls and risk management, or the CBS’s system of financial reporting; nor does it provide for an audit committee. - Despite the above, the 2021 annual report clarifies that the Board performs this role and has established an Audit and Risk Committee comprising three non-executive Board members. - The existence of the Audit and Risk Committee is acknowledged in the CBS organizational chart and in short bios of non-executive Board members on the CBS website. - The Audit and Risk Committee’s charter is not published, and there is no dedicated section on the CBS website for the Committee as a Board subcommittee. The committee’s annual report is not published. - The 2021 annual report includes: (i) a short summary of the committee’s role; (ii) its composition; (iii) key activities related to internal and external audit, financial reporting, risk management and other internal controls; and (iii) number of meetings held during the year. - Transparency gaps and recommendations: - Transparency could be improved by: (i) explaining the role of the Audit and Risk Committee on the CBS website; and (ii) publishing the Audit and Risk Committee charter. - The Board’s oversight role and the Audit and Risk Committee’s role could feature more prominently in the CBS annual report; CBS could consider including the committee’s annual report on its work (signed by the chair). ### Independently audited financial statements and annual report - Findings: - The CBS Act contains provisions for preparation and publication of the CBS annual report and financial statements. - The arrangement on the appointment of audit firms that assist the Auditor General with audits of the CBS financial statements is not published. - The CBS FY 2021 financial statements: - were prepared in accordance with International Financial Reporting Standards; - audited in accordance with International Standards on Auditing; - finalized and published within the three months statutory deadline specified in Section 47 of the CBS Act; and - provide broadly adequate disclosures on key core and non-core financial operations of the CBS. - The 2021 annual report provides additional information on operations conducted by the CBS during 2021, such as operations performed with and on behalf of the government and other key third parties and stakeholders. - Annex I to the 2021 annual report provides a high-level overview of the use of the CBS’s financial resources and key activities. - Transparency gaps and recommendations: - Disclose on the CBS website the arrangement between the CBS and the Auditor General on the appointment of audit firms that conduct audits of the CBS financial statements on the Auditor General’s behalf. - Continue improving management’s commentary on the audited financial statements in Annex I (e.g., additional tabular information or infographics) and consider repositioning the commentary when revising the concept of the annual report. ### Anti-corruption measures and internal Code of Conduct - Legal framework and findings: - The Anti-Corruption Act of 2016 establishes the Anti-Corruption Commission, tasked with investigating corruption committed by public officers (including CBS staff). The Act provides whistleblower protection (Section 69.1): “The Commission shall ensure that a person or public servant who has made a disclosure under this Act is not victimized on the ground that such person or public servant has made a disclosure or rendered assistance in inquiry under this Act.” - The Public Officers’ Ethics Act of 2008 sets out the general Code of Conduct and Ethics for public officers and created the Public Officers’ Ethics Commission; it requires certain public officers to annually submit accurate declarations of their income, assets and liabilities (Part IV – Declaration of Income, Assets and Liabilities). - The Access to Information Act of 2018 requires all public bodies (including CBS) to create, keep, organize and maintain information to facilitate access to information; it requires proactive disclosure within 30 days of information being generated or received (Section 5). - The Central Bank of Seychelles Act of 2004 includes specific provisions on avoidance of conflict of interest by members of the CBS Board of Directors (Section 10.3). - The CBS has a Code of Conduct and Ethics specifying standards of behavior, but the Code is not published on the CBS website. - Core values including integrity and transparency and accountability are published on the CBS website. - Senior CBS management are ordinarily subject to “cooling off” periods in their contracts: senior management when taking a new position in a supervised institution enters into a three-month cool off period from the time of resignation from CBS to taking on new functions, pending regulatory approval. - Transparency gaps and recommendations: - Relevant domestic anti-corruption laws should be explicitly referred to in the CBS’s legal framework and website. - CBS staff is currently working on an anti-bribery and corruption policy expected to be made publicly available; consider transparent procedures for whistleblowing within CBS. - Publish a publicly available version of the Code of Conduct and Ethics and consider disclosing enforcement statistics and methodology for reporting sanctions imposed for violations. - Review and publish Procurement Policy (including a Code of Ethical Business when dealing with contract bidders). ### Human capital management - Findings: - The 2021 annual report includes high-level Human Resources Division information and key activities: (i) basic statistics such as staff levels, number of new recruitments, retirements, and breakdown of CBS by gender (but not by age, nationality, or education); (ii) initiatives addressing challenges experienced by staff during the year (e.g., due to Covid-19 pandemic); and (iii) training plans, scholarships, and similar initiatives. - The 2021 annual report provides basic information on the Human Resources Committee. - Transparency gaps and recommendations: - Transparency could be significantly improved by including in the annual report and/or website: - (i) enhanced statistics on CBS staff; - (ii) staff salary scale and salaries of key officials; - (iii) allowances and other benefits such as the staff pensions scheme and loans provided to staff; - (iv) a description of the accountability mechanism; - (v) an explanation of governance related to human capital management (e.g., the role of the Human Resources Committee); - (vi) recruitment policy; and - (vii) policies for attracting, promoting, and retaining staff, and on leadership and succession planning. - Where appropriate, provide the rationale for these policies and measures (for example, explaining that loans to staff minimize risk of actual or perceived conflict of interest). ### Communication: objectives, channels, and institutional arrangements - Findings: - The CBS Act (Article 48) establishes reporting obligations including: (1) publish a summary of decisions taken by the Bank on Monetary Policy as soon as possible thereafter; (2) publish regular reports on issues related to monetary policy, financial stability, or any other matter within its competence and annually report to the National Assembly; (3) Governor may appear before the National Assembly to explain and answer questions on monetary policy and any other activity of the Bank. - The CBS website discloses the organizational structure showing the placement of the communications function under the Governor’s office. - The CBS Annual Report discloses and explains responsibilities and institutional functions of the Communications Unit, including receiving, documenting and responding to requests for information in accordance with the Access to Information Act, 2018 (Pages 128 and 129 of the 2021 annual Report). - The Governor is the primary spokesperson; two deputy governors can communicate regarding their spheres; technical staff can communicate with delegated authority from the Governor. - Communications tools include: - Publications on the CBS website; - Press releases (English and Creole when necessary); - Presentations to special audiences; - Interviews of Board members/Division Managers and participation in seminars, conferences, and round tables. - The CBS website is the main source of information and is in English. - Press conferences during the pandemic were implemented using Creole for wider reach; a press release is produced immediately after in English and Creole; power point presentations for live press conferences are posted on the web. - A publications calendar exists for main central bank reports and other outputs. Publication frequencies noted include: - CBS Strategic Plan: Every 5 years - Central Bank of Seychelles Annual Report: Annually, by end of March - Central Bank of Seychelles Financial Statements: Annually, by end of March - International Reserves Management Report: Annually, by end of March - Financial Surveillance Report: Annually - Financial Stability Report: Annually - In Vision Newsletter: Annually - Board Secretary Report: Annually - Central Bank of Seychelles Procurement Plan (Abridged Version): Annually - Monetary Policy Decision: Quarterly (last week March, June, September and December) - Comparative Bank Charges: Quarterly - Key Economic Developments: Monthly - Statistical Bulletin: Monthly - CBS Balance Sheet (Statement of Financial Position): Monthly - Applicable Bank Interest Rates: Weekly - Research and Working Papers: Ad hoc - The CBS implemented an Access to Information page in July 2021 with an Access to Information Request form; the CBS has 21 days to respond to an information request under Section 11 of the ATIA. - The Communications Unit does not publish evaluations of its communications policy (e.g., surveys). - Transparency gaps and recommendations: - Publish the communications policy or guidelines on the CBS website to facilitate institutional processes and make the communication arrangement clearer. - Disclose evaluations of communications policy (surveys or other evaluation methods) and results of such evaluations. - Improve website accessibility (search engine usability) and further disseminate information in English complementing Creole press conferences. - Reinforce use of social media to target specific groups and expand educational workshops for journalists, academics, parliamentarians, and the public. - Consider publishing details of presentations to the National Assembly or dissemination of the annual report presentation to Parliament. ### Confidentiality - Findings: - The CBS Act Article 9(7) determines that “the proceedings of the Board shall be confidential unless the Board decides to publish all or any part of its deliberations or decisions” with the exception under Article 48 to publish a summary of monetary policy decisions as soon as possible thereafter. - Board Secretary Report 2019 states Board members and employees are restricted from disclosing confidential information acquired in the performance of duties; publication or reporting of confidential market-sensitive information may be controlled or delayed; exceptions exist for performance of duties or when required by law or court order. - Article 11 of the CBS Act establishes confidentiality for CBS staff and Board members and prescribes sanctions or imprisonment for disclosure in breach (Art 11(2)). - Operational measures: - New employees sign a Confidentiality Agreement. - A Data Classification Policy (2014) guides handling information by classification: Public, Internal, Confidential and Restricted. The policy defines examples but is not publicly disclosed. - Access to Information Act Section 26 establishes exceptions for disclosure that would cause serious prejudice to the economy (e.g., premature disclosure of decisions on exchange rates, banking regulation, stability and control of prices, wages and incomes). - Transparency gaps and recommendations: - Develop rules, regulations, voluntary policies or guidelines to implement the confidentiality provisions of the CBS Act and explain the confidentiality system to the public, including the data classification system. - With ATIA implementation, clarify which types of information are classified as sensitive and publish explanatory materials to reinforce transparency. ### Cross-cutting recommendations (summary) - Publish the Internal Audit Charter and/or a short summary of appointment/dismissal/eligibility rules for the head of internal audit. - Publish the Audit and Risk Committee charter and an annual report of the committee’s work. - Disclose the arrangement between the CBS and the Auditor General on appointment of audit firms assisting audits. - Publish the basis for internal audit methodology and the result/opinion of the last External Quality Assessment. - Explicitly reference domestic anti-corruption laws on the CBS website and publish the anti-bribery and corruption policy, whistleblowing procedures, and a public Code of Conduct and Ethics. - Enhance human capital disclosures: staff statistics, salary scales, allowances, pensions, recruitment and succession policies. - Publish communications policy/guidelines, evaluations of communication effectiveness, and improve website accessibility and targeted use of social media. - Publish confidentiality implementation policies (Data Classification Policy) and clarify exceptions under the Access to Information Act. *Source: 1sycea2022005 - Section 46 of the CBS Act provides for an internal audit division charged with periodic* ### introduction of: (i) a Monetary Policy Rate as the key policy variable used for signaling ### 1sycea2022005 - introduction of: (i) a Monetary Policy Rate as the key policy variable used for signaling ### Monetary Policy Framework: Monetary Policy Rate (MPR), Interest Rate Corridor (IRC), and Operations - Introduction of: (i) a Monetary Policy Rate as the key policy variable used for signaling the monetary policy stance; (ii) a Forecasting and Policy Analysis System; and (iii) a short-term liquidity management framework. - The MPR is complemented by open market operations, and a symmetrical interest rate corridor (IRC), which is adjusted following changes in the MPR. - The MPR lies within the IRC, with the Standing Deposit Facility and the Standing Credit Facility serving as the floor and ceiling respectively. - The interbank market rate is expected to fluctuate between the floor and ceiling of the IRC. No operational target for the interbank market rate has been set. - The MPR is set at a level consistent with the desirable general price level deemed stable for the Seychelles economy in the medium term. - The MPR is formulated based on analyses and projections of inflation and other key macroeconomic variables, determined by the CBS's macroeconomic modeling and forecasting framework. - Press Release publication: The Press Release published following the meetings of the CBS’s Board convened to decide on monetary policy clearly explains the rationale for the decision, in line with the monetary policy strategy in place (see Principle 2.1.2 for a description of the decision-making process). - Communication practices: CBS maintains a dialogue with stakeholders mainly through quarterly press communiqués and press conferences subsequent to CBS’s decisions on monetary policy. - Status of inflation targeting: Some publications label the monetary policy framework as an inflation targeting framework (for instance the 2020 AREAER for Seychelles). Yet, so far, the CBS has not disclosed an explicit numerical medium-term inflation objective (distinct from the short-term inflation forecast) that would serve as the cornerstone for its monetary policy actions and communications. ### Review and Recommendations on Monetary Policy Framework and Transparency - Review Expanded: The MPF document provides detailed information on the current monetary policy framework, rationale for the shift from a fixed to a floating exchange rate regime, role of CBS FX interventions, and transition from reserve money targeting to an interest rate-based operational framework. - Key gaps noted: - CBS has not disclosed an actual explicit numerical medium-term inflation objective to serve as the cornerstone for monetary policy actions and communications. - Lack of disclosure of a numerical operational target within the corridor (different from the CBS policy rates). - Comments / Recommendations: - Greater clarity in CBS communications regarding transition to a fully-fledged inflation targeting framework would enhance transparency. - Disclosure of an explicit numerical medium-term inflation objective in the MPF document (different from the near-term inflation forecast) would enhance transparency. - Disclosure of a numerical operational target within the corridor would facilitate communication of the policy stance. ### Policy Decisions: Institutional Roles, Committees, Meetings, and Communications (Principle 2.1.2) - Legal and institutional responsibilities: - As stipulated in Article 5 of the CBS Act, the Board of Directors is responsible for monetary policy, while oversight for operational implementation is delegated to the Monetary Policy Technical Committee (MPTC). - MPTC Terms of Reference include: - (i) consider matters pertaining to the formulation and implementation of monetary policy; - (ii) advise on the operational aspect; - (iii) recommend policy proposals for the Board’s consideration, consistent with the Bank’s objectives; and - (iv) decide on parameters relating to the implementation of monetary policy. - MPTC reporting and composition: - The MPTC reports on its activities to the Board of Directors at least on a quarterly basis. - Composition disclosed: (i) First Deputy Governor (Chairperson); (ii) Second Deputy Governor; and (iii) the Head or a designated representative from the following CBS Divisions: Banking Services Division (BSD), Financial Inclusion and Market Conduct Division (FIMCD), Financial Markets Division (FMD), Financial Surveillance Division (FSD), Research and Statistics Division (RSD). FMD shall act as Secretariat to the MPTC. - Meeting norms and procedures: - FMD sets up the meetings, subject to the approval of the Chairperson. Any member may request non-scheduled MPTC meetings if approved by the Chairperson. - The MPTC shall meet at least once a month to coincide with the start of a new MRR maintenance period. - Minutes of MPTC meetings shall be taken and forwarded via email to all members within 10 working days following the meeting. - Chairing contingencies: If the First Deputy Governor is not present or acting as CBS Chief Executive Officer, the Second Deputy Governor shall chair; if Second Deputy Governor is unable, a designated Head of Division shall act as Chairperson. The Head of FMD cannot be Chairperson. - Decision rules: - Deliberations require a quorum of majority of members in office; decisions are taken by majority vote. In the event of equality of votes, the Chairperson has a casting vote in addition to his/her deliberative vote. - Governor’s approval: MPTC decisions are communicated to the Governor for his/her views. All policy recommendations submitted to the Board are to be supported by the Governor. - Board-level provisions: - Article 5: “...the Board of Directors is responsible for the policy and affairs of the Bank and in which all powers of the Bank shall be vested.” - Article 6: sets composition of the Board. - Article 9: sets minimum frequency of Board meetings; process for convening meetings; confidentiality rules. - Article 48: “The Bank shall publish a summary of the decisions taken by the Bank with respect to monetary policy as soon as possible thereafter.” - Communication timeline and content: - Board meets at pre-set quarterly meetings to discuss monetary policy issues. Following meetings, the Governor holds a press conference to convey decisions taken at the latest by two days following the meeting, supported by a media presentation highlighting: - (i) the decision of the Board regarding the stance of monetary policy; - (ii) a summary of recent developments; - (iii) external and domestic economic developments and assumptions supporting the decision; - (iv) price dynamics for headline and core inflation; - (v) developments regarding exchange rates, interest rates and credit growth. - The Press communiqué issued on that day also provides an analysis of the key factors supporting the decision. - The calendar of media engagements is disclosed on the website and includes planned quarterly monetary policy press conferences. ### Review of Decision-Making Transparency and Suggested Enhancements - Review Expanded: CBS has a well-defined and transparent monetary policy decision making process and uses model-based forecasts as inputs. - Noted transparency constraint: Absence of a published Monetary Policy Report that elaborates on the detailed presentation discussed at the quarterly press conference constrains the scope for monetary policy transparency. - Planned action: Preparations for the publication of a Monetary Policy Report by the end of the current calendar year are being made. - Additional recommendations: - Publication of a Monetary Policy Report would enhance transparency. - CBS may consider systematically publishing the Governor’s speech given at the monetary policy briefing. - CBS may regularly post video recordings of the press conference which have been sporadic in the past. ### Supporting Analysis and Research Publication (Principle 2.1.3) - CBS research capacity building: - CBS has been building internal research capacity to better understand the broader economic environment to contribute to policy formulation. - CBS will publish findings of undertakings as part of commitments to greater transparency under the IMF Central Bank Transparency Code. - Current publications and dissemination: - The first paper published is an analysis of domestic and external factors influencing prices in Seychelles. - CBS will publish other relevant research papers on the Research and Working Papers section of the website. - Existing data disclosure in practices: - The detailed presentation at the quarterly press conference provides relevant economic data and analysis underlying monetary policy decisions, including review of recent developments and forecast of macroeconomic indicators relevant for Seychelles. - The Governor holds monthly media briefings on economic developments. - Review Core: CBS provides economic data and analysis in quarterly press conferences and has started publishing outcomes of internal research projects. - Recommendations to enhance transparency in supporting analysis: - Disclosure of key elements of macroeconomic forecasts (i.e., scenario analysis, risks to the outlook, and models used for the forecast and scenario analysis). - In the first stage, CBS may consider publishing the forecast of key economic variables for the medium-term and risks to the baseline scenario. - At a later stage, CBS may consider disclosing alternative scenarios and details of its macroeconomic model. - Such publications could enable greater stakeholder involvement, including collaborative projects with academia on macroeconomic management and monetary policy conduct. ### Foreign Exchange Policy and Interventions (Principles 2.2 and 2.3) - Legal framework and exchange rate regime: - As stipulated in Article 25 (5) of the CBS Act, “The Board, in consultation with the President, shall decide the foreign exchange regime to be adopted by the Bank. The foreign exchange rate regime so adopted shall be published by notice in the Gazette”. - Seychelles’ de jure floating exchange rate regime in place since November 2008 is clearly disclosed on the website. - The Foreign Exchange Act assigns policy responsibility to the Minister of Finance, who “may delegate to the governor of the Central Bank any power or duty imposed on the Minister by this Act other than the power to make regulations and this power of delegation”. - By an Act of the Minister of Finance dated August 12, 2009, the exercise of the powers and duties conferred on the Minister of Finance under the Foreign Exchange Act – other than the power to make regulations – have been delegated to the CBS Governor. - As disclosed, the current and capital accounts are fully liberalized. - FX intervention objectives and instruments (from MPF): - FX interventions are for external reserves management purposes or to smooth out excessive volatility in the domestic exchange rate and ensure orderly market conditions. Purchases add liquidity and increase official reserves; sales have the opposite effect. - With the shift to a flexible exchange rate regime since late 2008, FX interventions have a more limited role and aim at smoothing volatility and increasing official reserves. - Instruments detailed: - Foreign exchange auctions (FEA) for purchase and sale of foreign exchange (EURO, USD and GBP only). - Foreign exchange swaps, backed by a Foreign Exchange Swap Agreement for both legs; managed and initiated by the Bank. - Article VII considerations: MPF discloses CBS is guided by Article VIII of Fund`s Articles of Agreement with respect to the MCP rule when conducting FX transactions. - Operations on behalf of government: For such transactions, the Bank shall use the previous day’s mid-rate based on the average traded exchange rates of authorized dealers. - Eligibility and penalties for FX interventions: - Eligible counterparties: Any participant subject to reserve requirements; in a ”generally sound financial condition” and not having any existing arrangement under the Emergency Loan Facility (ELF); any additional criteria as set out in the “Operational Guidelines for Foreign Exchange Auctions”. Participation is voluntary. - Clause on penalties: Financial and non-financial penalties applied in the event of late payment in an FX transaction are described in detail. - Disclosure and communication: - “Operational Guidelines for Foreign Exchange Auctions” provide a detailed description of auction processes (terms, procedural instructions). - MPTC approves use of all instruments under the Bank’s control in line with Board decisions. - Quarterly Press Conference presentations include charts on CBS FX sales and purchases and net inflows, illustrating role of FX interventions. - The Central Bank holds regular press conferences about FX market developments. - Monthly publication “Key Economic Developments” discusses exchange rate movements, FX flows (gross purchases and sales), year-on-year comparisons, and changes in the international reserve position; Reserves Management Annual Report also covers these developments. - Reviews and comments: - Review Comprehensive: CBS discloses objectives, instruments, and processes for FX interventions; role of internal committee is clearly disclosed. - Comment: Disclosure of ex-post evaluations of the economic impact of FX interventions would enhance transparency. - Since 2020, the Governor conducts regular live press conferences on FX market developments; rationale and outcomes are explained to the media. Calendar of media engagements for 2022 is posted on the website. ### Foreign Exchange Reserves Management: Objectives, Governance, and Tranches (Principle 2.4) - Legal mandate and statutory provisions (Part VI of the CBS Act): - CBS is entrusted to hold and manage the official foreign reserves of Seychelles. - Provisions include: - The list of eligible assets, “on such terms and conditions as the Board may determine.” - Duty to “maintain the official foreign reserves at a level that would, in the opinion of the Board, enable the Bank to fulfill its functions under various foreign exchange rate regimes. The Bank shall determine, within limits set out by the Board and taking into account the risk levels it considers acceptable, the composition of the official foreign reserve assets so as to achieve the goals determined by the Board on security, liquidity and return, in that order.” - Ability for the CBS to “purchase, sell and conduct any other financial transaction with assets that may be included in the official foreign reserves...” - Ability for the CBS to “open and maintain accounts abroad with such banks, financial institutions or other depositories and appoint such correspondents or agents outside Seychelles as may be determined by the Board.” - Governance structure (three-tier): - Board of Directors: strategic direction setting body. - Investment Committee (IC): operational decisions; translates Board strategy into Investment Guidelines. IC Terms of Reference: six members including the Second Deputy Governor as Chairperson, the First Deputy Governor, and Heads of BSD, FMD, FSD and RSD. RMU, CU and IAD attend IC meetings. - Operational units (Financial Markets Division, FMD): responsible for FX reserve management with separation of front, middle and back office duties; FMD and BSD report on reserves management income and expenditures. - Investment Policy and Guidelines: - Board approves broad criteria via Investment Policy of International Reserves Management (the Investment Policy or the Policy) — the Policy document is not disclosed. - The Policy outlines rationale for holding reserves, objectives, and risk constraints. Objectives derived from the Act: provide FX for daily operational needs, maintain confidence in exchange rate policy, support credibility with international counterparties, and safeguard against balance of payment shocks and emergencies. - Investment objectives prioritized: security or capital preservation, liquidity and return generation. - Investment Committee translates into Investment Guidelines (the Guidelines) defining eligible asset classes, counterparties, currency composition and reserve tranche sizes. - Three-tranche reserve structure and horizons: - Operational tranche: maintained to fund short-term payment obligations and potential FX market interventions; investment horizon is three months; invested in most liquid and low risk investments. - Liquidity tranche: funded to cover debt repayments due within one year as well as three months’ worth of prospective imports; used to replenish the operational tranche as needed; invested in low-risk liquid assets with investment horizon of not more than one year. The operational and liquidity tranches make up the core reserves. - Investment tranche: funded to meet return generation objective; investment horizon of three years. Excess reserves are managed in the investment tranche. - Risk governance and three lines of defense: - First line: operational units (FMD and BSD) own day-to-day risk management; in 2021 CBS implemented an ORM framework supporting daily risk management within FMD. - Second line: Risk Management Unit (RMU) and Compliance Unit (CU) monitor and report enterprise-wide and compliance risks. - Third line: Internal Audit Division (IAD) conducts regular audits in line with International Standards on Auditing (ISA) and IMF standards. - RMU, CU and IAD report to the Audit and Risk Committee (ARC), a sub-committee of the Board. - Oversight and reporting: - Board and IC receive regular oversight via performance, risks and compliance reports prepared by FMD; BSD provides daily reports on reserves management income and expenditures to inform strategic and operational decisions. *Source: CBS, Monetary Policy Framework document* ### 1. Operational arrangements. The Financial Markets Division is divided into three ### 1. Operational arrangements ### Structure of the Financial Markets Division - The Financial Markets Division is divided into three sections dealing with FX reserve management: - The Reserve Management Section (Front Office) - Handles day-to-day FX reserve management in compliance with the Board’s approved Investment Policy and the Investment Guidelines set by the Investment Committee (IC). - FX reserves are managed considering the investment policy objectives of capital preservation, liquidity management and maximizing returns in that order of priority. - Makes recommendations to IC with regards to investment strategies and executes investment decisions on behalf of the CBS. - The Financial and Risk Analysis Section (Middle Office) - Responsible for market research and in-depth analysis on the domestic/international financial markets and FX reserves management to provide analytical support to the front office and IC. - Constructs appropriate benchmarks, develops models and/or tools for use by the front office and designs strategies to meet set targets/objectives. - Measures and reports financial risks involved in FX reserves management activities and monitors compliance of these activities against set limits, guidelines, policies and approved strategies. - The Settlement and Accounting Section (Back Office) - Responsible for back-office functions of FX reserve management. - Divided into two units: - Trade Settlement unit: confirmation and settlement of investment management operations, and management of custodian account(s). - Treasury Accounting unit: accurate recording and reconciliations of transactions, in line with IFRS. ### Disclosures and transparency of reserve management - CBS disclosures in the Annual Report and the Annual Reserves Management Report allow stakeholders to understand the rationale for CBS policy actions and decisions. - 2021 Annual Report: - Explains actions taken during 2021 in the context of the economic uncertainties ensuing from the pandemic (pages 93-94). - 2021 Annual Reserves Management Report elaborations: - Support from international partners to bolster international reserves (page 1). - Comprehensive reviews of agreements, policies and guidelines underpinning reserves management activities given economic uncertainties (page 1). - Adoption of a cautious stance in the currency allocation for 2021: maintaining a share of the USD above the prescribed benchmark in view of the safe haven status of the currency during times of crisis (page 10). - Continued diligent monitoring of counterparty credit rating given concerns related to potential downgrades due to effects of the COVID-19 pandemic (page 18). - Discontinuation of investments with counterparties that could not accommodate the liquidity requirement for the investment of the international reserves (page 20). - CBS disclosures include: - Broad investment objectives of its FX reserve management: fund short-term payment obligations and potential FX interventions, cover debt repayments due within one year as well as three months’ worth of prospective imports, return generation and longer-term contingencies. - Allocation of oversight responsibilities among involved bodies (Board, Investment Committee, CBS operational Units including those involved in risk management). - Transparent description of objectives and frameworks in place for CBS actions related to FX reserve management and explanations backing critical policy decisions taken over the course of the year. ### Policy decisions, supporting analysis, and recommendations - Principle 2.4.2. Policy Decisions — disclosure status: - The Annual Reserves Management Report (accompanied by a Press Communique) includes details on key decisions and explains strategic asset allocation principles and risk management approach. - 2021 Report discussed challenges posed by the Covid 19 crisis and actions to mitigate them (entering into an EFF program with the IMF, increase in Seychelles’ SDR allocation, support from other budget support funds). - 2021 Report and 2021 CBS Annual Report discussed IC decision related to the SSA: IC endorsed recommendations to increase the Chinese Yuan Renminbi (CNY) exposure following simulation and optimization of asset composition. - Board approved the CNY exposure proposal and requested a review in six months given strategic position and uncertainty. - The Annual Reserves Management Report provides information on: - Asset allocation and currency composition of FX reserves, including benchmark for strategic currency composition per tranche (operational, liquidity, and investment tranches). - Currency composition of gross international reserves (ideal composition and actual composition by year end). - Rationale for maintaining majority of reserves in USD given haven status and CBS FX interventions in USD. - Adjustments made during the year to currency composition of tranches and rationale by the Board. - Trends in overall currency composition over the last five years. - The Report details oversight arrangements and segregation of duties related to FX reserve management. - Review and comments on disclosures: - Review: Expanded — CBS discloses key elements of policy formulation, related risk exposures, instruments, decision-making hierarchy, and oversight allocation process. - Comment: Disclosures regarding Investment Committee deliberations related to substantial changes in the Investment Policy would enhance further transparency. - Principle 2.4.3. Supporting Analysis — disclosure status: - Description: Annual Reserve Management Report provides details of key decisions; topics are also addressed in press conferences. - Example: 2021 Report discusses rationale for reviewing the Strategic Assets Allocation (SAA) decided by the Board. - Review: Expanded — annual publications disclose the rationale for critical policy decisions. - Comment: Periodic (i.e., annual) disclosures of fully-fledged analysis (i.e., a quantitative illustration of the changing risk-return expectations) supporting policy decisions would enhance transparency. ### Macroprudential framework, financial stability arrangements, and crisis responses - Principle 2.5. Macroprudential — overview: - The CBS is in the process of establishing a macroprudential policy framework. - Central Bank of Seychelles Act (Part II, art. 4) gives CBS objective to promote a sound financial system. - A Financial Stability Committee (FSC) was established in March 2016 by Presidential Decree as an advisory body to identify vulnerabilities and risks related to individual financial institutions and potential spillovers. - FSC mandate: maintain financial stability; chaired by CBS; composition includes CBS, Ministry of Finance, Financial Services Authority and Financial Intelligence Unit. - FSC meets quarterly and issues a public statement after each meeting; statements describe at a very high level items discussed without indicating whether policy actions or recommendations are issued. - CBS established the Financial Stability Section (FSS) within the Financial Surveillance Division: - Collects and analyses data from financial institutions to produce comprehensive overview of financial situation. - Proposes tools or policy changes to maintain financial stability. - Conducts market surveillance, systemic risk management, stress tests, and manages risks to payment and settlement systems. - CBS publishes the Financial Stability Report (FSR) under FSC auspices describing underlying analysis and assessment used to formulate financial sector policy; FSR assesses vulnerabilities including debt sustainability and resilience of banking and non-bank financial sectors. - Review and comments on financial stability disclosures: - Review: Comprehensive — while no full macroprudential policy exists, the CBS has a defined financial stability framework and discloses objectives, instruments, and strategy; publishes the FSR and related press communications. - Comments and recommended enhancements: - Disclosure of FSC activities and outcomes could be further improved; CBS may discuss publishing agendas and sanitized minutes or summary outcomes with other FSC authorities. - The FSC lacks appropriate legal basis to effectively discharge its mandate; groundwork undertaken to draft a Financial Stability Act aimed at addressing shortcomings. - Work began on drafting a Macroprudential Framework and Toolkit which will set objectives and outline macroprudential tools. - CBS should consider increased transparency on the process of strengthening the macroprudential and financial stability framework to involve relevant stakeholders. ### Macroprudential-related policy decisions and measures during the pandemic - Description of CBS actions communicated via reports, press releases and statements: - The Monetary Policy Rate was reduced by 100 basis points in Q2 2020 to 4.0% and further cut to 3.0% in Q3 2020. - Introduction of two credit line facilities to assist COVID-19 impacted businesses: - The Private Sector (MSMEs) Relief Scheme became operational in May 2020. - The Private Sector (Large Enterprises) Relief Scheme became operational in June 2020. - Foreign exchange support to the market, as from April 2020, through: - Direct sale of foreign exchange to specific entities for the purchase of essential commodities, namely food and fuel. - Sale of foreign reserves through FEA to banks. - In June 2020, the Board approved the reduction in the MRR from 13 per cent to 10 per cent of applicable deposit liabilities should conditions warrant the change. - Provision of financial support to the Government through short-term advances up to a limit of SCR500 million at zero interest rate. - Regulatory measures disclosed to provide relief: - Provision of moratorium and rescheduling of loan facilities by credit-granting institutions to their customers; changes made to the Financial Institutions (Credit Classification and Provisioning) Regulations 2010 to prevent worsening classification and provisioning of performing restructured loans at the time of restructuring. - Relaxation of foreign currency exposure limit via revision of the Financial Institutions (Foreign Currency Exposure) Regulations 2009 in June 2020 to allow the total short position to capital ratio limit to vary up to 50 per cent, as opposed to the set limit of 30 percent. - Prohibition of declaration and payment of dividends by commercial banks, Development Bank of Seychelles (DBS) and the Seychelles Credit Union (SCU), applicable to the financial years ending December 31, 2019, and December 31, 2020. *IMF staff report excerpt: 1. Operational arrangements (Financial Markets Division and FX reserve management); disclosures, policy decisions, macroprudential framework, and COVID-19 related measures.* ### 2020. The aim is to enhance the capital buffers and strengthen the resilience of ### 1sycea2022005 - 2020. The aim is to enhance the capital buffers and strengthen the resilience of ### Macroprudential analysis, disclosure, and Financial Stability Reporting - The CBS undertakes analysis to mitigate systemic risk, including models to stress test the banking system and analyses of structural changes that could increase vulnerabilities. - The CBS prepares macrofinancial analyses relying on supervisory data and analytical tools and monitors the financial situation and decisions of financial sector agents and components. - The assessment of the financial system is published annually in its Financial Stability Report (FSR). - The CBS uses indicators such as growth of credit to GDP as measurements of risks to the financial sector. It disclosed that the credit-to-GDP ratio maintained an upward trend in 2020, owing to the growth in total domestic credit compared to 2019, mainly reflected in valuation effects of foreign currency denominated private sector loans and issuance of government bonds for additional financing needs. - A more in-depth analysis of the evolution of domestic credit in 2020 is provided in the Annual Report of the CBS published in March 2021. - Review assessment: Expanded — the CBS publishes FSR analyzing financial stability issues and discloses how macroprudential tools are expected to mitigate risk; it publishes some indicators as stress testing results and explains their relation to the need for policy action. - Comment/recommendation: The CBS should periodically publish key indicators, such as early warning indicators, and explain how they relate to the need for financial stability policy action. ### Emergency Liquidity Assistance (ELA) and market-wide liquidity support - Description of bilateral ELA: CBS briefly describes the scope and objectives of the Emergency Loan Facility (ELF) without providing details on modality, requirements, terms and conditions, procedures, eligibility, coordination, etc. - CBS disclosure on ELF: Provided to prevent severe and persistent liquidity problems at any deposit taking institution and to minimize bank runs; contrasted with the Standing Credit Facility which aims at end-of-day settlement; ELF primarily addresses severe short-term liquidity shocks not met from alternative sources; provided at a penalty rate and tailored to circumstances. - Market-wide liquidity support measures disclosed (to respond to severe system-wide liquidity stress): - Introduction of two credit line facilities to assist COVID-19 impacted businesses: the Private Sector (MSMEs) Relief Scheme and the Private Sector (Large Enterprises) Relief Scheme became operational in May 2020 and June 2020, respectively. - Foreign exchange support to the market, as from April 2020, through: (i) direct sale of foreign exchange to specific entities for the purchase of essential commodities, namely food and fuel; and (ii) sale of foreign reserves through FEAs to banks. - Provision of financial support to the Government through short-term advances up to a limit of SCR500 million at zero interest rate to facilitate government’s financing requirements. - Review assessment: Core — CBS discloses very basic features of its bilateral ELA mechanism and provides detailed information on market-wide emergency liquidity support. - Comment/recommendation: CBS may consider disclosing general rules, parameters, terms and conditions for bilateral liquidity support, including: - institutional eligibility (set of entities or markets generally eligible); - conditionality (ability to collect, monitor, and assess information on consistency of liquidity use with objectives); - supervisory intrusion (legal power for enhanced supervisory oversight and early intervention measures); - financial parameters (applied interest rate, eligible collateral, maturity, and currency of liquidity support). ### AML/CFT supervisory powers and internal control framework - Legal designation: The AML/CFT Act of 2020 designates the CBS as the AML/CFT supervisor of all reporting Institutions under its regulatory ambit and licensed under Part A of the Act’s First Schedule (Section 55.1). CBS assumed its mandate as AML/CFT supervisor in March 2020 over: - (1) a licensee under the Financial Institutions Act; - (2) any entity to which the Financial Institutions (Application of Act) Regulations, 2010 apply; - (3) a licensee under the Credit Union Act; - (4) a licensee under the Financial Leasing Act; - (5) a payment services provider and operator of a payment, clearing or settlement system under the National Payment System Act. - Powers: The AML/CFT Act empowers CBS (as AML/CFT supervisor) to issue direction, directives or guidelines in relation to requirements under the Act (Section 57.2) and requires development and implementation of a risk-based approach to supervision (Section 58.2). - Internal control framework: The CBS’s AMLCFTCPF Policy of 2020 establishes CBS responsibilities for AML/CFT/PF control measures, applicable to the Board, all divisions, units and staff, and to activities presenting ML, TF, and PF risk (including procurement, transactions processed by CBS, and issuance/management of securities by CBS). It provides procedures and methodologies for assessing risks, performing due diligence, record keeping, and reporting suspicious/unusual transactions. - Reporting: Under the AMLCFTCPF Policy of 2020, the CBS’s Compliance Unit is tasked to report twice a year to the CBS’s Audit and Review Committee on implementation status and progress (including risk assessments, RFIs and related AML/CFT issues) (Section XXIII, Reporting to the ARC). - Review assessment: Core — CBS discloses information on AML/CFT supervisory powers and general supervisory policies and guidance; the CBS website explains its responsibility for risk-based AML/CFT supervision and lists entity types subject to supervision (commercial banks, bureaux de change, non-bank credit institutions, financial leasing institutions, payment service providers/operators, and non-bank deposit taking institutions). Relevant legislations, regulations, guidelines, notices/circulars and directives on AML/CFT are publicly disclosed on the CBS website. - Comment/recommendation: CBS can further disclose procedures for revising supervisory policies and guidance and how it ensures consideration of private sector feedback. Reporting on implementation of the AMLCFTCPF Policy by the CBS Compliance Unit and its audit could be disclosed, including timely remediation of identified weaknesses. ### Consumer protection and market conduct supervision - Institutional arrangement: Consumer Protection function is undertaken by the Market Conduct Section (MCS) of the Financial Inclusion and Market Conduct Division (FIMCD); CBS organizational structure is published on its website. - Strategy and legal framework: - Consumer Protection was identified in the 2014 Financial Sector Development Implementation Plan. - CBS Strategic Plan 2019-2023 mentions Financial Consumer Protection as one of the strategic pillars. - With the enactment of the Financial Consumer Protection Act (FCPA), CBS along with the FSA have the mandate for financial consumer protection. The Financial Consumer Protection Act commenced on May 01, 2022, with a transitional period of 6 months. The function will continue to be discharged by the Market Conduct Section of CBS. The scope of financial institutions supervised by CBS regarding consumer protection is determined within Schedule 4 (Part A) of the FCPA. - Areas of disclosure and supervisory development: - Disclosure of measures and transparency of financial institutions and legal framework relating to fair treatment and business conduct. - The new FCPA gives authority to CBS to regulate supervised FSPs and to monitor disclosure and transparency of financial products and services. CBS currently performs a limited regulatory function supervising behaviour of regulated entities; frameworks are still being developed to meet FCPA requirements. - Data protection: Data Protection is included as a consumer protection issue in the newly enacted FCPA. *Document: 1sycea2022005 - 2020. The aim is to enhance the capital buffers and strengthen the resilience of (PDF).* ### part VII that covers protection of consumer data and confidentiality. ### Part VII — Protection of consumer data and confidentiality ### Legislative and regulatory developments - The newly enacted Financial Consumer Protection Act grants the CBS more authority to act where necessary against Financial Services Providers (FSPs) where any infringements have been identified. - The law sets out the minimum standards by which these FSPs should be abiding, which did not exist previously. - CBS is in an undergoing process of developing secondary regulations to modify the complaints procedure in accordance with the new law and to secure the implementation of fair treatment and business conduct measures. - The complaints mechanism will be also enhanced in accordance with the new legislation and efforts on this regard are work in progress. - Comment: The regulatory process on consumer protection must follow a public consultation process with stakeholders, ensuring good participation of the banking sector and acknowledging feedback and comments from all parties involved in a transparent and inclusive manner. ### CBS consumer-protection activities and disclosures - Disclosure of Measures and Transparency: - Financial Institutions (Bank Charges and Fees) Regulations require banks to publish their list of fees and charges on a quarterly basis. - Financial Institutions must submit information on fees and charges to the CBS; the consolidated fees and charges gives an overview of the information received and is published on the CBS website. - CBS has a consumer awareness tab, a consumer alerts/updates tab to prevent fraud and convey urgent messages, and a Financial Education page on the CBS website. - Dispute resolution mechanism: - Complaints should first be lodged with the financial services provider concerned; if unsatisfied, the claim could be presented to the Central Bank of Seychelles by telephone or in person contacting the Financial Inclusion and Market Conduct (MCS). - A 24-hour hotline was created as medium through which complaints and queries relating to the financial sector were received. - Financial education and outreach: - Grievance procedure has been explained via radio shows, short videos on television, articles in newspapers, and CBS social media platforms (Instagram, YouTube, Facebook). - Financial Education actions effectiveness are measured through surveys; the CBS uses public transportation as a channel to conduct direct surveys with the population. - Comment: Financial education actions go beyond consumer protection and form part of a broader agenda; continuous disclosure regarding financial education surveys could be beneficial to enhance transparency. ### Reported consumer-protection outcomes and statistics - Dispute resolution outcomes reported in Annual Reports: - Annual Report 2021 (page 111) reports: “Approximately 70 queries were recorded on average during a month, of which, at least 5 required interventions by the Bank, and were dealt with within 1-2 days. Other queries mainly sought clarifications on certain matters relating to financial institutions, namely, commercial banks.” - The Annual Report 2021 (page 111) reports MCS received on average 20 complaints per month, 4 of which were upheld by the Bank; others were minor issues resolved immediately. - The Financial Surveillance Report also discloses outcomes of complaints handling by the CBS (page 37 of FSR 2019). - Review rating for consumer protection disclosures: *** (three stars in the source). ### Confidentiality and disclosure practices related to liquidity support and ELA - Emergency Liquidity Assistance (ELA): - According to the CBS, no emergency liquidity assistance has ever been provided for individual banks; therefore no ELA to individual banks is disclosed. - Market-wide liquidity support disclosures: - CBS disclosed it made available SCR1.250 billion as relief loans for the private sector channeled via the banking sector. - CBS updates monthly the public on the size of the relief loans that have been utilized. - For market-wide liquidity support, CBS reports the forms and size of support, maturity, amounts of liquidity support, and financial parameters on an aggregate basis. - Review rating for ELA/market-wide liquidity support disclosures: Expanded. - Comment: The CBS may consider disclosing information on how and to what extent liquidity support measures contributed to restoring/maintaining financial stability or market functioning, and provide more information on the central bank’s risk taking in connection with the support. ### Consumer data confidentiality considerations and transparency trade-offs - The CBS publishes consumer-protection outcomes and operational details while noting confidentiality constraints: - On AML/CFT supervision, CBS does not publish outcomes of its supervisory activities under the AML/CFT Act of 2020 because the Appeals Board is not yet constituted; the CBS is constrained from issuing administrative sanctions until Appeals Board procedures are established. - Review rating for AML/CFT outcomes disclosure: Not Implemented. - Comment: CBS should publish outcomes of its AML/CFT supervisory activities and internal AML/CFT control effectiveness (for example, statistical information on filing of suspicious transaction reports) once procedural constraints are resolved. - CBS publishes aggregate operational data and outcomes (for example, complaints outcomes, consolidated fees and charges), but individual-level or case-level confidentiality is maintained where appropriate. ### Key recommendations and suggested enhancements (from source comments) - Enhance the complaints mechanism implementation through the secondary regulations under the Financial Consumer Protection Act (work in progress). - Ensure public consultation in the regulatory process on consumer protection to secure transparent and inclusive stakeholder participation, including banking sector feedback. - Continue and expand disclosure of financial education measures and surveys to assess effectiveness. - Consider disclosing how aggregate liquidity support measures contributed to restoring/maintaining financial stability and the CBS’s associated risk exposure. - Publish outcomes of AML/CFT supervisory actions and internal AML/CFT control activities once the Appeals Board and procedural elements are in place; publish key elements of the risk-based AML/CFT supervisory policy to guide supervised entities and statistical information on completion rates of off-site and on-site AML/CFT assessments. - Where confidentiality constraints apply, consider disclosing methods and underlying data for financial-stability and stress-testing assessments to the extent compatible with CBS access-to-data protection rules. *Source: 1sycea2022005 - part VII that covers protection of consumer data and confidentiality.* ### Part VI of the CBS Act 2004, as amended, (the CBS Act or the Act) confers powers on the ### 1sycea2022005 - Part VI of the CBS Act 2004, as amended, (the CBS Act or the Act) confers powers on the ### Reserve management and financial transactions - Part VI of the CBS Act 2004, as amended, confers powers on the Bank to hold and manage the official international reserves on behalf of the country. - The Annual Reserves Management Report discloses in detail reserve management functions, including: - exposure sizes and risk-return information. - Financial transactions with international counterparts are disclosed annually: - EFF programs with the IMF (32-month arrangement) are disclosed in Section Four of the Annual Report on Government Finance. - Agreement with the African Development Bank and the World Bank is disclosed under page 45 of the Annual Report. - Interactions and transactions are accessible in both the CBS Annual Report and the Annual Reserves Management Report. ### Relations with domestic financial agencies (Principles 5.2, 5.2.1, 5.2.2) - The CBS publicly discloses outcomes of its interactions, including financial operations with the government, in the Financial Statements. - Relationships with domestic financial agencies: - Disclosed through Memoranda of Understanding (MoU) and joint press releases; MoU text is not always published. - Example disclosed MoU: Public Enterprise Monitoring Commission (PEMC) 2017; press release notes the “exchange of information will address issues of transparency.” - Not all relationships are formalized and published. - Interaction channels and communication: - Ongoing press conferences usually held fortnightly. - Consultations via Banker’s meetings, National Payments Council (NPC), National Payments Task Force (NPTF), Steering Committee for Financial Education, Financial Stability Committee. - Joint press releases are a regular practice; MoU disclosure is inconsistent. - Review and comments: - Practice of disclosure is consistent through press releases but terms/conditions of MoUs are not always disclosed. - Recommendation: more consistent disclosure and detailed explanation of bilateral agreements on reports and the CBS website. ### Financial Services Authority and financial inclusion - CBS collaboration with Financial Services Authority (FSA): - Joint Financial Literacy Baseline Survey in 2016. - Survey result: Seychelles prospers from a highly banked population of 94%, the highest reported in Sub-Saharan Africa. - Focus shifted from access (high) to improving usage and quality of financial services. - Policy tools: Financial Consumer Protection Act and relevant by-laws; National Financial Education Strategy. - Review: - Active bilateral exchange with FSA on FCPA drafting, consumer protection, financial literacy. - Disclosure via press releases, conferences, publications. - Comment: MoUs with other domestic institutions exist but are disclosed mainly by press release; more sustained disclosure of MoUs or explanations on the website would increase transparency. ### Financial Stability Committee (FSC) and macroprudential policy (Principles 5.2.3, 5.2.4) - FSC establishment and membership: - Established March 2016 by presidential decree. - Members: Central Bank of Seychelles (Chairmanship), Ministry of Finance, Trade, Investment and National Planning, Financial Services Authority, Financial Intelligence Unit. - Role, activities, and disclosure: - Committee is advisory: inform one another of emerging risks, determine combined responses, and collectively ascertain financial stability. - CBS collects and analyses data from each FSC member to produce a comprehensive overview and propose tools/policy changes. - FSC convenes quarterly to discuss risks; CBS issues press releases after each meeting. - Financial Stability Report published annually by the FSC and made available on the CBS website; press releases disseminate findings. - Review and comments: - FSC mandate and CBS role are published on the CBS website; press releases and annual Financial Stability Report provide transparency. - Suggested enhancements: formalize arrangement in legislation and consider additional disclosure (e.g., meeting agendas) with consent of parties. ### Foreign agencies and international cooperation (Principle 5.3) - Legal basis and representation: - CBS Act, article 36: Central Bank represents the Government in international meetings, councils, and organizations; may provide banking services for foreign governments, central banks, monetary authorities, and international organizations in which the Government participates. - Disclosure practices: - CBS interactions with foreign agencies are included in the Annual Report (pages 65 to page 74) and through specific press releases on the CBS website. - Cooperation agreements with international counterparts are not routinely published but are accessible upon request under access to information regulations. - Annual Reserves Management Report publishes account of investment activities with foreign counterparts, including exposure sizes and risk-return information; agreements themselves are not published but general information is disclosed. - Other international engagement: - CBS became a member of the Alliance for Financial Inclusion (AFI) network in 2014; disclosed under pages 104 and 108 of the Annual Report. - Review and comments: - CBS actively participates and leads in international fora; most relations and actions are disclosed in the Annual Report. - Recommendation: enhance transparency by highlighting international cooperation on the CBS website, explaining terms and conditions of agreements, and improving accessibility of press releases (e.g., a specific tab for international relations). ### Transparency practices and disclosure (general observations) - Disclosure channels: - Financial Statements, Annual Report, Annual Reserves Management Report, Financial Stability Report, press releases, and media publications. - Inconsistencies and gaps: - MoU texts and cooperation agreements (domestic and international) are disclosed on a case-by-case basis; not consistently posted on the CBS website. - Some functions, legal rationales, and linkages between objectives and functions are not sufficiently explained on the website. - Suggested transparency improvements: - More consistent publication of MoUs and agreements where permissible. - Clearer presentation of CBS legal framework, objectives, functions, and the relation between them on the website. - Enhanced website navigation for international relations and press releases. ### Appendix I — Central Bank of Seychelles: Selected proposed action plan items (recommendations 1–8) - Recommendation 1: - Issue: website sections, Board Secretary’s Report, and overview of the Role of Central Bank of Seychelles refer to legal framework components without detailed description or rationale. - Immediate action: CBS will review relevant website parts; recommendations to CBS website committee for consideration. - Short-term: enhancements to feature in the 2022 Board Secretariat Report. - Recommendation 2: - Issue: binding and non-binding documents are not centralized; drafts are not publicly or easily accessible; feedback mechanism unclear. - Action: CBS will reconsider displaying binding and non-binding instruments on one page and consider a disclosure/transparency policy to cover disclosure of drafts and stakeholder feedback. - Recommendation 3: - Issue: prevalence of CBS Act over other laws not clearly communicated. - Action: CBS will propose a conflict of laws provision as part of the CBS Act amendment. - Recommendation 4: - Issue: need for detailed explanation on CBS legal framework, conflict of laws, judicial review, pre-judgement attachment. - Action: CBS will update its website and consult with the Attorney General’s Office on inclusion of matters from other laws in the CBS Act. - Recommendation 5: - Issue: laws and website lack unified, consistent, and accessible presentation of laws, secondary legislation, regulations, and guidelines; drafts and feedback mechanisms not available. - Action: CBS will reconsider how instruments are displayed and implement a disclosure/transparency policy. - Recommendation 6: - Issue: lack of clear linkages between objectives and functions; additional powers assigned by the executive without clear connection to objectives. - Action: CBS Act to be amended to link functions and objectives; website to emphasize connections. - Recommendation 7: - Issue: mission statement and relation to mandate and Act not clearly disclosed; unclear limitations on Auditor General’s scope of review. - Action: CBS will review the mission statement and suggest amendments where necessary. - Recommendation 8: - Issue: Central Bank Act unclear on limitations of Auditor General’s scope of review; not disclosed on website. - Action: CBS to expand CBS Act provisions on audit to clarify the scope of the audit by the Auditor General. *SEYCHELLES INTERNATIONAL MONETARY FUND* ### 9. In relation to consultations ### 9. In relation to consultations ### Foreign exchange regime and consultation mechanism - Finding: Procedure of consultation and mechanism for resolution of differences, if any, should be clearly disclosed in relation to consultations and foreign exchange regime. - Legal provision: In accordance with the amended CBS Act 2004, section 25 (5), the Board in consultation with the President, decides on the foreign exchange rate regime to be adopted by the Bank and the adopted regime has to be published in the Official Gazette. - Action: The Bank will explore the modalities to formalize its procedure of consultation and mechanism for resolution and once approved by the Board will publish same. ### Delegation of functions by executive authorities - Finding: Several functions of the CBS are delegated to it by the decisions of the President and the Minister of Finance. Legislation and the website are silent on the scope and/or limitations attached to the power of the executive branch to delegate functions and powers to the CBS. - Action: The CBS will amend the CBS Act to provide that functions delegated by the executive are aligned with statutory objectives. ### Personal autonomy, selection and remuneration transparency - Finding: Transparency on personal autonomy could be enhanced by disclosing on the website the selection procedure, eligible professional experience (e.g., number of years, level of position), along with approval and publication of the Board Remuneration Policy. Disclosure of protection from decreasing the remuneration could also serve transparency objectives. Disclosure on application of legal protection of former Board members and former employees may also benefit overall transparency. - Actions and timeline: - The CBS shall endeavor to complete its selection procedure by 2023. - The Board Remuneration Policy will be published in 2023. ### Financial autonomy: public explanation and website content - Recommendation: Explain to the public the concept of the CBS’s financial autonomy, including rationale, related legal provisions, and implementation in practice; include explanations of CBS’s actions to safeguard its autonomy and references to related resolutions (e.g., links to resolutions on provision of credit to the government). - Actions: - The CBS to consider including a section on the website focusing on its financial autonomy, explaining aspects such as legal provisions, governance, capital structure and profit distribution, with links to relevant documents. - The CBS to draft documentation that contributes towards the accounting and financial reporting aspect of this exercise whilst other Divisions/units to provide their contributions based on their respective roles and responsibilities. - Implementation by Q4 2023. ### Publishing the CBS annual budget and revisiting annual report concept - Recommendation: Publish the CBS annual budget (e.g., in the annual report) explaining the budget process, the approved and executed budgets, and key determinants. The budget should include: (i) staff costs; (ii) remuneration of key management personnel; (iii) investments in fixed assets; (iv) administrative expenses; and (v) other operating expenses. - Observations: Current annual report focuses primarily on past year’s economic developments and provides an overview of CBS’s key activities at the level of organizational units and committees—not at the level expected from a corporate annual report. - Actions and timeline: - The CBS will review the Annual Report layout and structure and recommend changes required. - The CBS will conduct research and recommend template of information to be disclosed to Management for approval by Q4, 2023 for implementation in the 2023 Annual Report. - It is anticipated that same will be published on the website by March 2024. ### Allocation of responsibilities between Governor and Board; charters publication - Finding: The allocation of responsibilities between the Governor and the Board is not clearly spelled out in the Act, nor explained on the CBS website. Publication of such information would improve transparency. - Recommendations: - Amend the CBS Act to provide more clarity on the allocation of responsibilities between the Governor and the Board. - Publish the charters of the Board and respective Committees, highlighting their respective roles as advisory or decision-making. - Actions and timeline: - The Board Charter and that of the Sub-Committees will be published on the CBS website in 2023. ### Risk management disclosures and annual report structure - Finding: CBS discloses a lot of information on its risk exposures (foreign reserves, domestic market operations) but could enhance transparency by revisiting the concept and structure of the annual report and including a dedicated subsection on risk management. - Recommended content for the dedicated risk subsection: - (i) a high-level overview of the CBS’s key risks (financial and non-financial); - (ii) an explanation or mapping of these against the CBS’s mandate or objectives; - (iii) a short risks statement; and - (iv) key developments in these risks. - Actions and timeline: - The CBS will discuss this recommendation and consider it in the Annual Report for 2023. ### Quantifying market risks: Value at Risk and Expected Shortfall - Recommendation: In addition to carrying values and Expected Credit Losses, consider calculating and disclosing Value at Risk and Expected Shortfall figures in the annual report and/or financial statements, with a short note on the methodology. - Rationale: Would help stakeholders understand the importance of CBS’s financial buffers (capital, general reserves, retained earnings, revaluation accounts etc.). - Action and timeline: - The CBS will discuss this recommendation and consider it in the Annual Report for 2024. ### Expanded risk framework disclosure (governance, processes, strategies, controls) - Recommendation: Include in the annual report a subsection that provides: - (i) a high-level overview of risk governance; - (ii) the process of continuous identification and evaluation of risks (financial, operational, and legal); - (iii) risk strategies (risk avoidance, mitigation, and transfer) in key areas; and - (iv) key tools and internal controls for managing operational risks. - Action: - The CBS will review this recommendation and consider its inclusion in the Annual Report for 2023. ### Audit arrangements and internal audit transparency - Recommendations: - Disclose on the CBS website the arrangement between the CBS and the Auditor General on the appointment of audit firms that conduct audits of the CBS financial statements on the Auditor General’s behalf. - Disclose a short summary of rules on the appointment and dismissal of the head of internal audit and/or publish the Internal Audit Charter. - Explain the role of the Audit and Risk Committee on the CBS website and publish the Audit and Risk Committee charter. - Feature the Board’s oversight role and the role of the Audit and Risk Committee more prominently in the CBS annual report; consider publishing committee annual reports (signed by the chair). - Actions and timeline: - The CBS will liaise with the Office of Auditor General for consensus on the disclosure of the agreement on the CBS website. - The CBS will publish the Audit Charter by end of September 2022. - The CBS will revise its Annual Report to feature the changes recommended. - The CBS will evaluate its current section in the annual report relating to the Audit and Risk Committee for improvement and will discuss the possibility of implementing an annual ARC Report. ### Management commentary and audit methodology disclosure - Recommendations: - Continue improving Management’s commentary on the audited financial statements (Annex I to the 2021 annual report), e.g., by including additional tabular information or infographics, and consider repositioning the commentary once the annual report concept is revised. - Include in the relevant section of the CBS annual report the basis for the audit methodology and the result of the last External Quality Assessment. - Actions and timeline: - The recommendation on Management’s commentary will be evaluated and possible improvements will be made by 2024. - The CBS will amend the Annual Report to feature the changes recommended by 2023. ### Anti-corruption, code of conduct, procurement and whistleblowing - Findings and recommendations: - Relevant domestic anticorruption laws should be explicitly referred to in the CBS’s legal framework and website. - Transparent procedures for whistleblowing within CBS should be considered, in compliance with the Anti-Corruption Act of 2016. - A publicly available version of the Code of Conduct and Ethics is being drafted; consider methodology for disclosing enforcement activities and statistics on sanctions for violations. - CBS’s Procurement Policy is undergoing review and will cover a Code of Ethical Business for dealings with contract bidders. - Actions and timeline: - The CBS will complete and publish its Anti-Bribery and Corruption policy. - The CBS will complete its Code of Ethics by December 2022. - The Code of Ethical Business will be finalized within the coming years. ### Human capital management transparency - Recommendation: Include in the CBS’s annual report and/or website information on human capital management such as: (i) enhanced statistics on CBS staff; (ii) staff salary scale and salaries of key officials; (iii) allowances and other benefits such as the staff pensions scheme and loans provided to staff; (iv) a description of the accountability mechanism; (v) an explanation of governance related to human capital management (e.g., the role of the Human Resources Committee); (vi) recruitment policy; and (vii) policies for attracting, promoting, and retaining staff, and on leadership and succession planning. Where appropriate, provide rationale for these policies and measures. - Action and timeline: - The CBS will consider publishing statistical information related to human capital by 2023. ### Communications policy and dissemination of annual report - Finding: The communications policy is work in progress; a communications policy or guideline will facilitate institutional communication processes and transparency. - Recommendation: Publish CBS institutional communications policies and guidelines on the CBS website; improve disclosure, dissemination, or explanation to the public of the annual report while being presented to National Assembly. - Action and timeline: - The CBS will complete and approve the new Communications policy and create awareness to staff by end of 2022. *Source: 1sycea2022005 - 9. In relation to consultations* ### 28. The press conference is ### 28. The press conference is ### Press conferences, language, and dissemination - Press conferences are done in Creole and are a direct message in plain language from the CBS (Governor) to the public. - Further disseminated through press releases in English and Creole. - Recommendation: facilitate access to information in English (Governor’s presentation and complementary information prepared by CBS staff) to disseminate across the English-speaking community and the written press. - CBS actions/commitments: - Publish press conference presentations from pre-recorded press conferences under relevant existing tabs on the CBS website. - Continue using the Financial Education for Seychelles social media pages to disseminate financial education-related materials. - Gather stakeholder feedback surveys after interactions/trainings/seminars to evaluate impact. - Review the website to accommodate a centralized location for press conference presentations. - Build capacity of the Communications Unit to maintain social media accounts through relevant training and establish guidelines for interaction on the official CBS social media page(s). - Complete and approve the Communications Policy and identify suitable evaluation methods for relevant stakeholders/target audiences. ### Social media, targeted outreach, and financial education - Finding: Use of social media could be reinforced, especially to target specific groups; CBS already uses Facebook and Instagram. - Need: further disseminate to specific audiences the availability of information under digital platforms. - Finding: Communications policy or specific communications strategy are not disclosed to the public, making it difficult to follow outcomes of communications actions. - Recommendation: active evaluation (surveys, focus groups, workshops) to improve efficiency and transparency of communications. - Need for more workshops and educational activities targeted to journalists, academics, parliamentarians, and the public to accelerate understanding of the CBS role and broaden financial literacy. - Engagement interest: different institutions and stakeholders show interest in knowledge sharing on economic and financial matters. - Implementation: recommendation to be included in the financial education plan for 2023 with targeted activities for recommended segments. ### Confidentiality, ATIA, and data classification - Recommendation: develop rules, voluntary policies or guidelines to implement confidentiality provisions of the CBS Act and explain the confidentiality system to the public including the data classification system. - Finding: Implementation of the ATIA reinforces the confidentiality legal framework and clarifies which information could be classified as sensitive. - CBS action: develop a confidentiality policy taking into account the Data Classification policy and obligations under the ATIA; the Policy will be disclosed to the public. ### Monetary policy framework, transparency, and communication - Finding: Monetary policy framework is qualified as an inflation targeting framework in some publications, but monetary policy is in a transition phase with the goal to introduce a fully-fledged inflation targeting framework at a later stage. - Recommendation: greater clarity in CBS communications on the de jure vs de facto framework would enhance transparency. - Recommendation: disclose an explicit numerical medium-term inflation objective (different from the near-term inflation forecast) to provide a cornerstone for policy actions and communications. - Recommendation: disclose a numerical operational target within the corridor (different from CBS policy rates) to facilitate communication of policy stance. - Recommendation: publish a Monetary Policy Report and systematically publish the Governor’s speech given at the monetary policy briefing; regularly post video recordings of press conferences. - Status: The CBS has published the Monetary Policy Report on August 2, 2022. - CBS action/commitment: - Publish relevant indicators in line with the prevailing framework and provide necessary explanations to ensure clarity. - Publish relevant indicators in line with the prevailing framework; taking into account the requirements of the market. ### Macroeconomic forecasts, scenario analysis, and policy transparency - Recommendation: disclose key elements of macroeconomic forecasts (scenario analysis, risks to the outlook, models used). - Short-term suggestion: publish forecasts of key economic variables for the medium-term and risks to the baseline scenario. - Longer-term suggestion: disclose alternative scenarios and details of the macroeconomic model to foster stakeholder involvement and collaboration with academia. - Recommendation: disclose ex-post evaluations of economic impact of FX interventions to enhance transparency of foreign exchange management. - CBS action/commitments: - Discuss publication of the current Investment Policy on the CBS website. - Discuss communication of substantial changes in the Investment Policy. - Include periodic (i.e., annual) fully-fledged analysis (quantitative illustration of changing risk-return expectations) supporting policy decisions in the Annual Report for Reserves Management for 2022. ### Financial stability, FSC, macroprudential framework, and risk mapping - Finding: The FSC is considered the forum in Seychelles to discuss financial stability issues, but disclosure of its activities and outcomes could be improved. - Recommendation: discuss with other authorities in the FSC the possibility to publish agendas and sanitized minutes or summaries of outcomes. - Finding: The FSC lacks an appropriate legal basis to effectively discharge its mandate. - Ongoing work: draft a Financial Stability Act to address shortcomings; draft a Macroprudential Framework and Toolkit to set objectives and outline macroprudential tools. - Recommendation: be more transparent on the process of strengthening the macroprudential and financial stability framework and involve stakeholders in deliberations. - Recommendation: periodically publish key indicators, such as early warning indicators, and explain how they relate to the need for financial stability policy action. - CBS action: with relevant technical assistance undertake a risk mapping exercise to identify risks to financial stability to update the risk dashboard and accompanying indicators. ### Liquidity support, supervisory transparency, and AML/CFT - Recommendation: consider disclosing general rules, parameters, terms and conditions for bilateral liquidity support including: - (i) institutional eligibility; - (ii) conditionality; - (iii) supervisory intrusion; and - (iv) financial parameters (interest rate, eligible collateral, maturity, currency). - CBS action: upload the guidelines on the CBS website after relevant approvals have been received. - Recommendation: disclose procedures for revising supervisory policies and guidance and how private sector feedback is considered. - CBS action: discuss internally on best way to implement the recommendation and formulate necessary measures in 2023-2024. - Recommendation: report on implementation of the AMLCFTCPF Policy by the CBS Compliance Unit and its audit, including timely remediation of identified weaknesses. - CBS action: evaluate this recommendation and commence implementation in 2023. - Recommendation: disclose key elements of the approved risk-based AML/CFT supervisory policy and publish key statistics on completion rates of off-site and on-site AML/CFT assessments of supervised entities. - CBS action: publish the approved supervisory policy and disclose the number and types of examinations conducted; discuss modality for disclosure. ### Reserves management, FX swaps, counterparties, and stress testing - Recommendation: if FX swaps are activated for international reserves management, disclose operational guidelines to ensure full transparency. - CBS action: upload the Operational Guidelines for FX swaps on the CBS website. - Recommendation: publish risk exposures and consider including them in the annual report for reserves management. - CBS action: recommendation will be considered internally for inclusion in the annual report for reserves management for 2022. - Recommendation: disclose rules and procedures for selection of eligible market counterparties and service providers, and methodology for assessing performance of the RAMP. - CBS action: discuss internally for publication on the CBS website. - Recommendation: disclose stress tests specific to liquidity risk (for instance in Note 42 to the audited financial statements). - CBS action: discuss internally to evaluate enhancement of disclosure. - Recommendation: consider disclosing methods and underlying data used for financial stability assessments, including stress testing data, compatible with data protection. - CBS action: evaluate incorporation of recommendation in planned work to develop a stress testing framework in 2023; initiate the discussion in 2023. - Recommendation: disclose the number and type of banks covered by stress testing and clarify how stress testing results have benefited financial stability policy decisions. - CBS action: implement recommendation in the next stress test and discuss implementation modalities. ### Consumer protection, complaints, and market conduct under FCPA - Finding: Newly enacted Financial Consumer Protection Act (FCPA) grants CBS more authority against Financial Services Providers (FSPs); secondary regulations are being developed to modify complaints procedures and implement fair treatment and business conduct measures. - CBS action: enactment of the Complaints Handling Regulations will be completed by the end of 2022. - Finding: Market Conduct Division published a few regulations to ensure fair treatment of consumers; role to be enhanced under the new FCPA. - Recommendation: regulatory process on consumer protection should follow a public consultation process with stakeholders, ensure participation of the banking sector, and acknowledge feedback in a transparent and inclusive manner. - CBS action: - Ensure direct feedback is provided to stakeholders after they have provided comments on complaints handling regulations; meetings can be set to discuss further to ensure practicality. - Continue stakeholder consultation practice for all regulations issued under the FCPA. - Set out in a transparent manner how it will implement market conduct and consumer protection functions. - Consider formulation of a disclosure/transparency policy. ### Monetary policy implementation transparency and liquidity publication - Recommendation: additional disclosures of methods and data underlying quarterly monetary policy evaluations would enhance transparency of actions taken to achieve monetary policy objectives. - CBS action: amend relevant documentation/publications, such as the MP press communiqué, media presentation, and Monetary Policy Report to reflect enhanced analytical coverage. - Recommendation: publish the level of the operational target achieved (once disclosed) and frequently disclose activation of standing credit/deposit facilities, aggregated bank balances at the CBS, and realized autonomous factors of liquidity. - CBS action: discuss the recommendation internally for publication on the CBS website. - Status: The aggregated liquidity condition is currently being published on the CBS website on a weekly basis. ### FX interventions, inter-agency cooperation, and ex-post evaluations - Recommendation: discuss/disclose CBS FX interventions in quarterly press conferences to allow evaluation against expected benefits and support CBS accountability. - Recommendation: disclose modalities governing interaction and exchange of information between CBS and other financial market authorities (for example, publication of existing MoU between CBS and authorities participating in the FSC). - CBS action: - Finalize the MOU for approval by the FSC by 2023 once the new legislation comes into force. - Discuss how analytical studies covering ex-post evaluations of implemented financial stability measures will be undertaken and published. - Consider disclosing how liquidity support measures contributed to restoring/maintaining financial stability or market functioning and provide information on central bank risk taking; consider for enhanced disclosures in the Annual Report of 2022. ### AML/CFT supervisory outcomes, Appeals Board, and sanctions - Recommendation: prioritize establishment of the Appeals Board and publication of its procedures to ensure CBS is fully empowered to impose administrative sanctions under the AML/CFT Act. - Recommendation: publish outcomes of internal AML/CFT controls annually, including effectiveness statistics (e.g., filing of suspicious transaction reports to the financial intelligence unit) and disclosures on sanctions applied. - CBS action: - Collaborating with the National AML/CFT Committee to establish the Appeals Board; once established, there will be disclosures on the sanctions applied. - Discuss disclosure modalities and publish related information where appropriate. ### Institutional relations, MoU disclosure, and international cooperation - Finding: Bilateral agreements with public institutions are disclosed in reports and the CBS website, but MoU are not always disclosed. - Recommendation: adopt a more sustained practice of disclosing MoU or explaining relationships on the website to increase transparency. - Finding: CBS is very active internationally; most international relations/interactions/agreements are disclosed in the Annual Report. - Recommendation: enhance transparency and dissemination of CBS interaction with international counterparts by highlighting international cooperation and actions on the CBS website with explanations of terms and conditions of agreements and create a specific tab for international relations and cooperation. ### Appendix II — List of CBS Units and External Stakeholders (as provided) - CBS Senior Management and Staff: - Governor - Second Deputy Governor - Members of the Board of Directors - Banking Services Division - Communications Unit - Compliance Unit - Financial Inclusion and Market Conduct Division - Financial Markets Division - Financial Surveillance Division - Human Resources Division - Internal Audit Division - Research & Statistics Division - Risk Management Unit - External Stakeholders: - Academia (University of Seychelles) - Commercial Banks (ABSA Bank, Mauritius Commercial Bank) - Fair Trading Commission - Financial Intelligence Unit - Financial Services Authority - Information Commission - Media Commission - Ministry of Finance, National Planning and Trade - Media Representatives (Seychelles Broadcasting Corporation, Seychelles Nation, Today in Seychelles) - National Assembly - Seychelles Chamber of Commerce *Source: 28. The press conference is (chapter/section text).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1sycea2022005.pdf_