Seychelles: Technical Assistance Report-Emergency Liquidity Assistance and Collateral Frameworks

Technical Assistance Reports, March 27, 2026

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Seychelles: Technical Assistance Report-Emergency Liquidity Assistance and Collateral Frameworks

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Bibliographic details

• Published: March 27, 2026
• Series: Technical Assistance Reports
• DOI: https://doi.org/10.5089/9781484335901.019

Overview and objective

• IMF technical assistance (TA) supported the Central Bank of Seychelles (CBS) in strengthening its emergency liquidity assistance (ELA) framework and collateral policies.
• Objective: enhance the CBS’s liquidity backstop while safeguarding its balance sheet.
• Characterization: ELA is described as a targeted, bilateral liquidity instrument distinct from standard liquidity operations, aimed at preserving or restoring financial stability while mitigating moral hazard.
• Legal and institutional basis: the framework is built on solid legal foundations, public regulation, internal procedures, and a clarified role for the fiscal authority in the provision of ELA.

Findings on ELA framework

• Importance of a coherent and clearly articulated framework encompassing:
  • Eligibility criteria.
  • Forward looking solvency and viability assessments.
  • Well defined decision making processes.
• Guidance emphasized communicating the ELA framework to key stakeholders—including financial institutions, government entities, and the broader public—to support effectiveness, promote sound market practices, and manage expectations.
• The TA reviewed existing ELA arrangements and highlighted the need to distinguish ELA from standard liquidity operations to limit moral hazard.

Internal preparedness, governance, and operational readiness

• Key components addressed by the TA:
  • Clearly documented procedures for assessing ELA requests.
  • Procedures for calibrating financial terms.
  • Procedures for evaluating funding plans.
  • Designing appropriate ELA-related conditionality.
• Internal responsibilities:
  • Guidance on internal responsibilities and the need for effective interdepartmental coordination in conducting ELA operations.
  • Emphasis on clearly defined decision-making processes and coordination with the fiscal authority.

Collateral policy and risk management

• The TA underscored the need to strengthen readiness for stress scenarios by enhancing operational capacity to accept, value, and manage a broader range of collateral.
• Concrete case studies highlighted operational and methodological priorities:
  • Systematic collateral scanning.
  • Pre-positioning arrangements.
  • Robust valuation methodologies.
  • Risk based haircut calibration to contain the financial risks associated with emergency lending.

Policy recommendations (implied by TA guidance)

• Establish and publish a coherent ELA framework with:
  • Clear eligibility criteria.
  • Forward-looking solvency and viability assessment procedures.
  • Defined decision-making and coordination protocols with fiscal authorities.
• Strengthen internal preparedness by documenting procedures to:
  • Assess requests, calibrate terms, evaluate funding plans, and design conditionality.
  • Assign internal responsibilities and ensure interdepartmental coordination.
• Enhance collateral readiness by:
  • Expanding operational capacity to accept and manage a broader collateral set.
  • Implementing systematic collateral scanning and pre-positioning.
  • Applying robust valuation methods and risk based haircuts.

Content in this bundle

• IMF Technical Assistance Report — Preface, Executive Summary, Introduction, and Selected Sections
  • IMF Technical Assistance Report — Preface, Executive Summary, Introduction, and Selected Sections (Markdown version)
  • IMF Technical Assistance Report — Preface, Executive Summary, Introduction, and Selected Sections (PDF)