Capital Markets and Portfolio Investment

The government has adopted policies to promote the free flow of financial resources and foreign investment in Albania. The Law on “Strategic Investments” is based on the principles of equal treatment, non-discrimination, and protection of foreign investments. Foreign investors have the right to expatriate all funds and contributions of their investment.  In accordance with IMF Article VIII, the government and Central Bank do not impose any restrictions on payments and transfers for international transactions. Despite Albania’s shallow foreign exchange market, banks enjoy enough liquidity to support sizeable positions.  Portfolio investments continue to be a challenge because they remain limited mostly to company shares, government bonds, and real estate.

In recent years, the high percentage of non-performing loans and the economic slowdown forced commercial banks to tighten lending standards.  However, following a continuing decrease in non-performing loans (NPL) which at the end of 2020 reached 8.1 percent, lending increased by 6.5 percent year-over-year in 2020.  The credit market is competitive, but interest rates in domestic currency can be high, ranging from 5 percent to 6.5 percent. Most mortgage and commercial loans are denominated in euros because rate differentials between local and foreign currency average 1.5 percent. Commercial banks operating in Albania have improved the quality and quantity of services they provide, including a large variety of credit instruments, traditional lines of credit, and bank drafts, etc.

Money and Banking System

In the absence of an effective stock market, the country’s banking sector is the main channel for business financing.  The sector is sound, profitable, and well capitalized. The Bank of Albania, the country’s Central Bank, is responsible for the licensing and supervision of the banking sector in Albania. The banking sector is 100 percent privately owned and its total assets have steadily increased over the years reaching $15 billion mostly based on customers deposits.   The banking sector has consolidated recently as the number of banks decreased from 16 in 2018 to 12 in 2020. As of December 2020, the Turkish owned National Commercial Bank (BKT) was the largest bank in the market with 26.4 percent market share, followed by Albanian Credins Bank with 15.5 percent, and Austrian Raiffeisen Bank third with 14.9 percent.  The American Investment Bank is the only bank with U.S. shareholders and ranks sixth with 5.5% percent of the banking sector’s total assets.

The number of bank outlets has also decreased over the recent years also due to the consolidation. In December 2020, Albania had 416 bank outlets, down from 446 from 2019 and the peak of 552 in 2016. Capital adequacy, at 18.23 percent, remains above Basel requirements and indicates sufficient assets.  At the end of 2020, the return on assets was just 1.2 percent. The share of NPLs continued to fall, reaching 8.1 percent at the end of the 2020, down from 11.1 percent in 2018, and significantly below the 2014 level when NPLs peaked at 25 percent. As part of its strategy to stimulate business activity, the Bank of Albania has adopted a plan to ease monetary policy by continuing to persistently keep low interest rates. The most recent reduction was in March 2020, when the interest rate was reduced to the historic low of 0.5 percent, down from a rate of 1 percent in place since June 2018.

Many of the banks operating in Albania are subsidiaries of foreign banks. Only three banks have an ownership structure whose majority shareholders are Albanian. However, the share of total assets of the banks with majority Albanian shareholders has increased because of the sector’s ongoing consolidation. There are no restrictions for foreigners who wish to establish a bank account. They are not required to prove residency status. However, U.S. citizens must complete a form allowing for the disclosure of their banking data to the IRS as required under the U.S. Foreign Account Tax Compliance Act.

Foreign Exchange and Remittances

Foreign Exchange

Bank of Albania (BoA) formulates, adopts, and implements foreign exchange policies and maintains a supervisory role in foreign exchange activities in accordance with the Law on the Bank of Albania No. 8269 and the Banking Law No. 9662.  Foreign exchange is regulated by the 2009 Regulation on Foreign Exchange Activities no. 70 (FX Regulation).

BoA maintains a free float exchange rate regime for the domestic currency, the Lek. Albanian authorities do not engage in currency arbitrage, nor do they view it as an efficient instrument to achieve competitive advantage.  BoA does not intervene to manipulate the exchange rate unless required to control domestic inflation, in accordance with the Bank’s official mandate of inflation targeting.

Foreign exchange is readily available at banks and exchange bureaus. Preliminary notification is necessary if the currency exchange is several million dollars or more – the law does not specify an amount but provides factors for determining the threshold for large exchanges – as the exchange market in Albania is shallow.  A 2018 campaign launched by the BoA to reduce the domestic use of the euro to improve the effectiveness of domestic economic policies has produced tangible results. The share of foreign currency loans in total loans fell from 60 percent in 2015 to 47 percent in 2020. Foreign currency deposits, which to some extent reflect relatively high remittances, reached to 53.4 percent of total deposits.

Remittance Policies

The Banking Law does not impose restrictions on the purchase, sale, holding, or transfer of monetary foreign exchange.  However, local law authorizes the BoA to temporarily restrict the purchase, sale, holding, or transfer of foreign exchange to preserve the foreign exchange rate or official reserves.  In practice, BoA rarely employs such measures. Faced with the unprecedented economic disruption following the COVID-19 pandemic, on July 1, 2020 Bank of Albania ordered banks to halt distribution of dividends and use dividends to cover potential losses and increase loans to the economy. The decision, initially in force till the end of 2020, was extended till the end of 2021.

The Law on Foreign Investment guarantees the right to transfer and repatriate funds associated with an investment in Albania into a freely usable currency at a market-clearing rate.  Only licensed entities (banks) may conduct foreign exchange transfers and waiting periods depend on office procedures adopted by the banks. Both Albanian and foreign citizens entering or leaving the country must declare assets in excess of 1,000,000 lek (USD 9,000) in hard currency and/or precious items.  Failure to declare such assets is considered a criminal act, punishable by confiscation of the assets and possible imprisonment.

Although the Foreign Exchange (FX) Regulation provides that residents and non-residents may transfer capital within and into Albania without restriction, capital transfers out of Albania are subject to certain documentation requirements.  Persons must submit a request indicating the reasons for the capital transfer, a certificate of registration from the National Registration Center, and the address to which the capital will be transferred. Such persons must also submit a declaration on the source of the funds to be transferred.  In January 2015, the FX Regulation was amended and the requirement to present the documentation showing the preliminary payment of taxes related to the transaction was removed.

Albania is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a Financial Action Task Force-style regional body.  In February 2020, Albania was included in the category of jurisdictions under increased monitoring, also referred to as the Grey List. Albania had previously been on this list and was taken off in 2015. The 2021 International Narcotics Control Strategy Report (INCSR) keeps Albania in the “Major Money Laundering Jurisdictions” category following its inclusion for the first time in 2017. The category implies that financial institutions of the country engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking.  Albania and the United States do not have a bilateral MLAT, but cooperation is possible through multilateral conventions.

Sovereign Wealth Funds

Parliament approved a law in October 2019 to establish the Albanian Investment Corporation (AIC). The law entered in force in January 2020. The AIC would develop, manage, and administer state-owned property and assets, invest across all sectors by mobilizing state owned and private domestic and foreign capital, and promote economic and social development by investing in line with government-approved development policies.

The GoA plans to transfer state-owned assets, including state-owned land, to the AIC and provide initial capital to launch the corporation. The IMF  Staff Concluding Statement   of November 26, 2019, warned that the law would allow the government to direct individual investment decisions, which could make the AIC an off-budget spending tool that risks eroding fiscal discipline and circumventing public investment management processes. There were no activities by the AIC in 2020.

Capital Markets and Portfolio Investment

The Algiers Stock Exchange has five stocks listed – each at no more than 35 percent equity. There is a small and medium enterprise exchange with one listed company. The exchange has a total market capitalization representing less than 0.1 percent of Algeria’s GDP. Daily trading volume on the exchange averages around USD 2,000. Despite its small size, the market is regulated by an independent oversight commission that enforces compliance requirements on listed companies and traders.

Government officials have expressed their desire to reach a capitalization of USD 7.8 billion and enlist up to 50 new companies. Attempts to list additional companies have been stymied by a lack both of public awareness and appetite for portfolio investment, as well as by private and public companies’ unpreparedness to satisfy due diligence requirements that would attract investors. Proposed privatizations of state-owned companies have also been opposed by the public. Algerian society generally prefers material investment vehicles for savings, namely cash. Public banks, which dominate the banking sector (see below), are required to purchase government securities when offered, meaning they have little leftover liquidity to make other investments. Foreign portfolio investment is prohibited – the purchase of any investment product in Algeria, whether a government or corporate bond or equity stock, is limited to Algerian residents only.

Money and Banking System

The banking sector is roughly 85 percent public and 15 percent private as measured by value of assets held and is regulated by an independent central bank. Publicly available data from private institutions and U.S. Federal Reserve Economic Data show estimated total assets in the commercial banking sector in 2017 were roughly 13.9 trillion dinars (USD 116.7 billion) against 9.2 trillion dinars (USD 77.2 billion) in liabilities. The central bank had mandated a 12 percent reserve requirement until mid-2016, when in response to a drop in liquidity the bank lowered the threshold to eight percent. In August 2017, the ratio was further reduced to 4 percent in an effort to inject further liquidity into the banking system. The decrease in liquidity was a result of all public banks buying government bonds in the first public bond issuance in more than 10 years; buying at least five percent of the offered bonds is required for banks to participate as primary dealers in the government securities market. The bond issuance essentially returned funds to the state that it had deposited at local banks during years of high hydrocarbons profits. In January 2018, the bank increased the retention ratio from 4 percent to 8 percent, followed by a further increase in February 2019 to a 12 percent ratio in anticipation of a rise in bank liquidity due to the government’s non-conventional financing policy, which allows the Treasury to borrow directly from the central bank to pay state debts. In response to liquidity concerns caused by the oil price decline and COVID-19 crisis, the bank progressively decreased the reserve requirement from 12 percent to 3 percent between March and September 2020.

The IMF and Bank of Algeria have noted moderate growth in non-performing assets since 2015, currently estimated between 12 and 13 percent of total assets. The quality of service in public banks is generally considered low as generations of public banking executives and workers trained to operate in a statist economy lack familiarity with modern banking practices. Most transactions are materialized (non-electronic). Many areas of the country suffer from a dearth of branches, leaving large amounts of the population without access to banking services. ATMs are not widespread, especially outside the major cities, and few accept foreign bankcards. Outside of major hotels with international clientele, hardly any retail establishments accept credit cards. Algerian banks do issue debit cards, but the system is distinct from any international payment system. The Minister of Commerce announced a plan to require businesses to use electronic payments for all commercial and service transactions, though a government deadline for all stores to deploy electronic payment terminals was delayed for the third time to the end of 2021. In addition, approximately 6.1 trillion dinars (USD 46 billion), or one-third, of the money supply is estimated to circulate in the informal economy.

Foreigners can open foreign currency accounts without restriction, but proof of a work permit or residency is required to open an account in Algerian dinars. Foreign banks are permitted to establish operations in the country, but they must be legally distinct entities from their overseas home offices.

In 2015, the Financial Action Task Force (FATF) removed Algeria from its Public Statement, and in 2016 it removed Algeria from the “gray list.” The FATF recognized Algeria’s significant progress and the improvement in its anti-money laundering/counter terrorist financing (AML/CFT) regime. The FATF also indicated Algeria has substantially addressed its action plan since strategic deficiencies were identified in 2011.

Foreign Exchange and Remittances

Foreign Exchange

There are few statutory restrictions on foreign investors converting, transferring, or repatriating funds, according to banking executives. Monies cannot be expatriated to pay royalties or to pay for services provided by resident foreign companies. The difficultly with conversions and transfers results mostly from the procedures of the transfers rather than the statutory limitations: the process is bureaucratic and requires almost 30 different steps from start to finish. Missteps at any stage can slow down or completely halt the process. Transfers should take roughly one month to complete, but often take three to six months. Also, the Algerian government has been known to delay the process as leverage in commercial and financial disputes with foreign companies.

Expatriated funds can be converted to any world currency. The IMF classifies the exchange rate regime as an “other managed arrangement,” with the central bank pegging the value of the Algerian dinar (DZD) to a “basket” composed of 64 percent of the value of the U.S. dollar and 36 percent of the value of the euro. The currency’s value is not controlled by any market mechanism and is set solely by the central bank. As the Central Bank controls the official exchange rate of the dinar, any change in its value could be considered currency manipulation. When dollar-denominated hydrocarbons profits fell starting in mid-2014, the central bank allowed a slow depreciation of the dinar against the dollar over 24 months, culminating in about a 30 percent fall in its value before stabilizing around 110 dinars to the U.S. dollar in late 2016. The 2020 Finance Law forecast a 10 percent depreciation of the dinar against the dollar over three years. However, the government allowed the dinar to depreciate eleven percent against the dollar in 2020 and has forecasted an 18 percent depreciation through 2023 in the 2021 Finance Law. Despite devaluation in the official rate, imbalances in foreign exchange supply and demand caused by the COVID-19 outbreak and travel restrictions beginning in March 2020 led to a steep decline in the value of the euro and dollar on the foreign exchange black market.

The 2021 Finance Law includes provisions to curb import activity, requiring importers of most products to make payment 30 days after the date of shipment of goods, with exceptions for strategic products, food items, or other items of “emergency character.”  As importers are required to request import approvals well in advance of the shipment of the goods, the new measure exposes importers to significant exchange rate uncertainty.

Remittance Policies

There have been no recent changes to remittance policies. Algerian exchange control law remains strict and complex. There are no specific time limitations, although the bureaucracy involved in remittances can often slow the process to as long as six months. Personal transfers of foreign currency into the country must be justified and declared as not for business purpose. There is no legal parallel market through which investors can remit; however, there is a substantial black market for foreign currency, where the dollar and euro trade at a significant premium above official rates, although economic disruptions related to the outbreak of COVID-19 in March 2020 led to interruptions in the functioning of the black market. With the more favorable informal rates, local sources report that most remittances occur via foreign currency hand-carried into the country. Under central bank regulations revised in September 2016, travelers to Algeria are permitted to enter the country with up to 1,000 euros or equivalent without declaring the funds to customs. However, any non-resident can only exchange dinars back to a foreign currency with proof of initial conversion from the foreign currency. The same regulations prohibit the transfer of more than 10,000 dinars (USD 75) outside Algeria.

Private citizens may convert up to 15,000 dinars (USD 118) per year for travel abroad, and must demonstrate proof of their intention to travel abroad through plane tickets or other official documents.

In April 2019, the Finance Ministry announced the creation of a vigilance committee to monitor and control financial transactions to foreign countries. It divided operations into three categories relating to 1) imports, 2) investments abroad, and 3) transfer abroad of profits.

Sovereign Wealth Funds

Algeria’s sovereign wealth fund (SWF) is the “Fonds de Regulation des Recettes (FRR).” The Finance Ministry’s website shows the fund decreased from 4408.2 billion dinars (USD 37.36 billion) in 2014 to 784.5 billion dinars (USD 6.65 billion) in 2016. The data has not been updated since 2016. Algerian media reported the FRR was spent down to zero as of February 2017. Algeria is not known to have participated in the IMF-hosted International Working Group on SWFs.

Capital Markets and Portfolio Investment

The Andorran financial sector is efficient and is one of the main pillars of the Andorran economy, representing 20 percent of the country’s GDP and over 5 percent of the workforce.

Created in 1989, and redefined with more responsibilities in 2003, the Andorran Financial Authority (AFA; www.afa.ad ) is the supervisory and regulatory body of the Andorran financial system and the insurance sector. The AFA is a public entity with its own legal status, functionally independent from the Government. AFA has the power to carry out all necessary actions to ensure the correct development of its supervision and control functions, disciplinary and punitive powers, treasury and public debt management services, financial agency, international relations, advice, and studies.

financial system and the insurance sector. The AFA is a public entity with its own legal status, functionally independent from the Government. AFA has the power to carry out all necessary actions to ensure the correct development of its supervision and control functions, disciplinary and punitive powers, treasury and public debt management services, financial agency, international relations, advice, and studies.

The Andorran Financial Intelligence Unit (UIFAND) was created in 2000 as an independent organ to deal with the tasks of promoting and coordinating measures to combat money laundering and terror financing ( www.uifand.ad ).

The State Agency for the Resolution of Banking Institutions (AREB); is a public-legal institution created by Law 8/2015 to take urgent measures to introduce mechanisms for the recovery and resolution of banking institutions ( www.areb.ad ).

Money and Banking System

Andorra adopted the use of the Euro in 2002 and in 2011 signed a Monetary Agreement with the European Union (EU) making the Euro the official currency. Since July 1, 2013, Andorra has had the right to coin Euros.

The Andorra banking system is sound and considered the most important part of the financial sector. The Andorran banks offer a variety of services at market rates. The country also has a sizeable and growing market for portfolio investments. The country does not have a central bank.

The U.S. Internal Revenue Service has certified all the Andorran banks as qualified intermediaries.

Founded in 1960, the Association of Andorran Banks (ABA; https://www.andorranbanking.ad/ ) represents all Andorran banks. Among its tasks are representing and defending interests of its members, watching over the development and competitiveness of Andorran banking at national and international levels, improving sector technical standards, co-operation with public administrations, and promoting professional training, particularly dealing with money laundering prevention. At present, all five Andorran banking groups are ABA members, totaling an estimated 49 billion Euros in combined assets for 2019.

Foreign Exchange and Remittances

Foreign Exchange

Andorra adopted the Euro in 2002 and in 2011 signed a Monetary Agreement with the EU making the Euro the official currency. Since 2013, Andorra has the right to coin Euros.

Remittance Policies

There are no limits or restrictions on remittances provided that they correspond to a company’s official earning records.

Sovereign Wealth Funds

Andorra has no Sovereign Wealth Fund (SWF).

Capital Markets and Portfolio Investment

There is a visible effort by the government to create more attractive conditions for foreign investment as reflected in the attempt to create a more favorable social and political climate, the new legislation on private investment and in a greater liberalization of capital movements. The dangers of absorption by the local partner or the impossibility of transferring profits are thus mitigated. The BNA abolished the licensing previously required on importing capital from foreign investors allocated to the private sector and exporting income associated with such investments. This measure compliments the need to improve the capture of FDI and portfolio investment and it is in line with the privatization program for public companies (PROPRIV) announced through Presidential Decree No. 250/19 of August 5, 2019 which encourages foreign companies to participate. In addition to the operations, BNA is also exempt from licensing, the export of capital resulting from the sale of investments in securities traded on a regulated market and the sale of any investment, in which the buyer is also not – foreign exchange resident, pursuant to Notice No. 15/2019.

BODIVA is Angola’s Debt and Securities Stock Exchange. The Stock Exchange (BODIVA) allows through a platform the trading of different types of financial instruments available to investors with rules (self-regulation), systems (platforms) and procedures that assure market fairness and integrity to facilitate portfolio investment. However, there is no effective regulatory system to encourage and facilitate portfolio investment which is poorly explored. At the moment, only local commercial banks have the ability to potentially list on the nascent stock exchange.

The central bank (BNA) partially observes IMF Article VIII on refraining from restrictions on payments and transfers for current international transactions. Foreign exchange crises and the loss of correspondent banking relationships since 2015 have prompted the BNA to adopt restrictive monetary policies that negatively affect Angola’s payment system, seen in the delay in foreign exchange denominated international transfers.

Credit is not allocated on market terms. Foreign investors do not normally access credit locally. For Angolan investors, credit access is very limited, and if available, comes with a collateral requirement of 125 percent, so most either self-finance, or seek financing from non-Angolan banks and investment funds such as the “Angola Invest” government-subsidized funding program for micro, small and medium private enterprises (SMEs). The fund, sourced from the Annual State Budget, ended on September 25, 2018, further reducing funding opportunities for many SMEs. Banks credit issue appetite also lies more on government than the private sector as credit to government is more profitable for these commercial banks.

Money and Banking System

Angola is over-banked. Although four banks have been closed since 2018, 26 banks still operate in Angola. The top seven banks control nearly 80% of sector deposits, but the rest of the sector includes a large number of banks with minimal scale and weak franchises. 47% of income-earners utilize banking services, with 80% being from the urban areas. Angolan banks focus on profit generating activities including transactional banking, short-term trade financing, foreign exchange, and investments in high-interest government bonds.

The banking sector largely depends on monetary policies established by Angola’s central bank, the Banco Nacional de Angola (BNA). Thanks to the ongoing IMF economic and financial reform agenda, the BNA is adopting international best practices and slowly becoming autonomous. On February 13, 2021 President Joao Lourenco issued an edict granting autonomy to the BNA, a decision taken after IMF recommendations. The reforms taken under the Lourenco administration have lessened the political influence over the BNA and allowed it to more freely adopt strategies to build resilience from external shocks on the economy. As Angola’s economy depends heavily on oil to fuel its economy, so does the banking sector. The BNA periodically monitors minimum capital requirements for all banks and orders the closure of non-compliant banks.

Although the RECREDIT Agency purchased non-performing loans (NPLs) of the state’s parastatal BPC bank, NPLs remain high at 32%, a decrease of 5% since 2016. Credit availability is minimal and often supports government-supported programs. The GRA obliged banks to grant credit more liberally in the economy, notably by implementing a Credit Support Program (PAC). For instance, the BNA has issued a notice obliging Angolan commercial banks to grant credit to national production in the minimum amount equivalent to 2.5% of their net assets until the end of 2020.

The country has not lost any additional correspondent banking relationships since 2015. The BNA is currently working on reforms to convince international banks to reestablish correspondent banking relationships. The majority of transactions go via third party correspondent banking services in Portugal banks, a costly option for all commercial banks. At the time of issuing this report no correspondent banking relationships were at jeopardy.

Foreign banking institutions are allowed to operate in Angola and are subject to BNA oversight.

The Monetary Policy Committee (MPC) of the BNA met in March 2020, to consider recent changes to the main economic indicators, and taking into account the COVID-19 pandemic and its impact on the domestic economy. The MPC paid particular attention to the external accounts, and their implications for the conduct of monetary and exchange rate policies. The MPC has accordingly decided to:

• Maintain the base interest rate, BNA rate, at 15.5%;
• Maintain the interest rate on the liquidity absorption facility with an overnight maturity, at 0%;
• Reduce the interest rate on the liquidity absorption facility with a seven-day maturity, from 10% to 7%;
• Maintain reserve requirement coefficients for national and foreign currencies at 22% and 15%, respectively;
• Establish a liquidity facility with a maximum value of Kz 100 billion for the acquisition of government securities held by non-financial corporations:
• Extend to the 54 products defined in PRODESI the credit granted with recourse to the reserve requirements, and establish a minimum number of loans to be granted per bank;
• Exempt from the limits established per type of payment instrument, the import of products included in the basic food basket, and of and these continue to cripple lending appetite of commercial banks to the private sector medicines;
• Set April 1 as the start date for the use of the Bloomberg platform by the oil companies and by the National Agency of Petroleum, Gas and Biofuels, for the sale of foreign currency to commercial banks.

Foreign Exchange and Remittances

Foreign Exchange

The Angolan National Bank (Banco Nacional de Angola –BNA) published Notice no. 15/2019, of December 30, 2019, which establishes the rules and procedures applicable to foreign exchange operations conducted by non-resident entities related to: (a) foreign direct investment; (b) investment in securities (portfolio investment); (c) divestment operations; and (d) income earned by non-residents from direct investment or portfolio investment (the “Notice”). The notice also applies to all foreign exchange transactions relating to “foreign investment projects that were registered with BNA prior to its publication.” Investments made by non-resident foreign exchange entities in the oil sector are excluded from the scope of the Notice.

The notice distinguishes foreign direct investment and portfolio investment. Direct investment is investment made in the “creation of new companies or other legal entities” or through the acquisition of shareholdings in non-listed Angolan companies or, if listed in a regulated market when the investment gives the external investor a right of control equal to 10% or more. In turn, portfolio investment represents the investment in securities. In the case of the purchase of securities representing the capital of a listed company, portfolio investment will be considered only when the voting rights associated with the investment are less than 10% of the listed company’s capital stock.

Since dropping the peg on the dollar in 2018, the local currency fluctuates freely. In October 2019, the BNA fully liberalized the foreign exchange regime, abandoning the trading band that had been in place since January 2018. Its previous policy of controlled exchange rate adjustment prevented the kwanza from depreciating by more than 2.0% at currency auctions. The BNA also has allowed oil companies to directly sell foreign currency to commercial banks. The BNA said the move is expected to normalize the foreign exchange market through the reduction of its direct intervention with oil firms, increase the number of foreign currency suppliers, and revive the country’s foreign exchange market. The exchange rate is determined by the rate on the day of sale of forex to commercial banks. On June 22, 2020, the BNA adopted Bloomberg’s foreign exchange electronic trading system (FXGO) and its electronic auction system to bring greater efficiency and transparency to Angola’s forex market.

Remittance Policies

Based on the notice issued on December 23, 2019 as per above, as long as adequate supporting documentation is submitted to the commercial bank, foreign investors can freely transfer within 5 days abroad:

1. dividends, interest and other income resulting from their investments;
2. shareholder loan repayments;
3. proceeds of the sale of securities listed on the stock exchange;
4. when the participated entity is not listed on the stock exchange, the proceeds of the sale, when the purchaser is also a foreign investor and the amount to be transferred abroad by the seller is equal to the amount to be transferred from abroad by the purchaser, in foreign currency;

The transfer abroad of capital, requiring the purchase of foreign currency, when the participated entity is not listed on the stock exchange, requires prior exchange control approval when it relates to the following:

1. The sale of the whole or a part of an investment;
2. The dissolution of the participated entity;
3. Any other corporate action that would reduce the capital of the participated entity.

There may be delays greater than 60 days if the documentation submitted to the BNA is not complete such as a tax due statement from the General Tax Agency and companies’ balance sheet statements.

The BNA has facilitated remittances of international supplies by introducing payment by letters of credit. Also, the 2018 NPIL grants foreign investors “the right and guarantee to transfer abroad” dividends or distributed profits, the proceeds of the liquidation of their investments, capital gains, the proceeds of indemnities and royalties, or other income from remuneration of indirect investments related to technology transfer after proof of implementation of the project and payment of all taxes due. The government continues to prioritize foreign exchange for essential goods and services including the food, health, defense, and petroleum industries.

Sovereign Wealth Funds

In October 2012, former President Eduardo dos Santos established a petroleum funded USD 5 billion sovereign wealth fund called the Fundo Soberano de Angola (FSDEA). The FSDEA was established in accordance with international governance standards and best practices as outlined in the Santiago Principles.

In February 2015, the FSDEA was recognized as transparent by the Sovereign Wealth Fund Institute (SWFI), receiving a score of 8 out of 10. The FSDEA has the express purpose of profit maximization with a special emphasis on investing in domestic projects that have a social component ( http://www.fundosoberano.ao/investments/  ). Jose Filomeno dos Santos (Zenu), son of former President Jose Eduardo dos Santos, was appointed chairman of FSDEA in June 2013, but was removed by President Lourenco in 2017, and is appealing a five-year jail term pronounced in August 2020, following his trial for money laundering, embezzlement and fraud. Former Minister Carlos Alberto Lopes was named new head of the FSDEA that same year.

Half of the initial endowment of FSDEA was invested in agriculture, mining, infrastructure, and real estate in Angola and other African markets, and the other half was supposedly allocated to cash and fixed-income instruments, global and emerging-market equities, and other alternative investments. The FSDEA is in possession of approximately USD 3.35 billion of its private equity assets previously under the control of QG and given to economic and financial hardship, the fund’s equity was reduced by USD 2 billion to finance the Program for Intervention in the Municipalities in 2019 and USD 1.5 billion for the fight against the Covid-19 pandemic in 2020. The FSDEA also announced that the government will use the remainder, USD 1.5 billion of the fund’s assets to support social programs on condition of future repayment through increased tax on the BNA’s rolling debts.

Capital Markets and Portfolio Investment

As a member of the ECCU, Antigua and Barbuda is also a member of the Eastern Caribbean Stock Exchange (ECSE) and the Regional Government Securities Market. The ECSE is a regional securities market established by the ECCB and licensed under the Securities Act of 2001, a uniform regional body of legislation governing securities market activities. As of March 31, 2020, there were 154 securities listed on the ECSE, comprising 134 sovereign debt instruments, 13 equities, and seven corporate bonds. Market capitalization stood at $666 million (1.8 billion Eastern Caribbean dollars), representing a 0.3 percent decrease from the previous year. Antigua and Barbuda is open to portfolio investment.

Antigua and Barbuda accepted the obligations of Article VIII of the International Monetary Fund Agreement Sections 2, 3, and 4, and maintains an exchange system free of restrictions on making international payments and transfers. The government normally does not grant foreign tax credits except in cases where taxes are paid in a Commonwealth country that grants similar relief for Antigua and Barbuda taxes, or where an applicable tax treaty provides a credit. The private sector has access to credit on the local market through loans, purchases of non-equity services, and trade credits, as well as other accounts receivable that establish a claim for repayment.

Money and Banking System

Antigua and Barbuda is a signatory to the 1983 agreement establishing the ECCB. The ECCB controls Antigua and Barbuda’s currency and regulates its domestic banks.

The Banking Act 2015 is a harmonized piece of legislation across the ECCU member states. The ECCB and the Ministers of Finance of member states jointly carry out banking supervision under the Act. The Minsters of Finance usually act in consultation with the ECCB with respect to those areas of responsibility within the Minister of Finance’s portfolio.

Domestic and foreign banks can establish operations in Antigua and Barbuda. The Banking Act requires all commercial banks and other institutions to be licensed. The ECCB regulates financial institutions. As part of supervision, licensed financial institutions are required to submit monthly, quarterly, and annual performance reports to the ECCB. In its latest annual report, the ECCB listed the commercial banking sector as stable. Assessments including effects of the pandemic are not yet available. Assets of commercial banks totaled $2.07 billion (5.6 billion Eastern Caribbean dollars) at the end of December 2019 and remained relatively consistent during the previous year. The reserve requirement for commercial banks was six percent of deposit liabilities.

Antigua and Barbuda is well-served by bank and non-bank financial institutions. There are minimal alternative financial services offered. Some people still participate in informal community group lending, but the practice is declining.

The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S., Canadian, and European banks due to risk management concerns. CARICOM remains committed to engaging with key stakeholders on the issue and appointed a Committee of Ministers of Finance on Correspondent Banking to continue to monitor the issue.

Antigua and Barbuda’s Digital Assets Business Bill 2020 created a comprehensive regulatory framework for digital asset businesses, clients, and customers. The bill states that all digital asset businesses in the country must obtain a license for issuing, selling, or redeeming virtual coins, operating as a payment service or electronic exchange, providing custodial wallet services, among other activities. The government aspires to develop Antigua and Barbuda into a regional center for blockchain and cryptocurrency. At the end of 2020, over 40 major businesses accepted bitcoin cash.

Bitt, a Barbadian company, developed digital currency DCash in partnership with the ECCB. The first successful DCash retail central bank digital currency (CDBC) consumer-to-merchant transaction took place in Grenada in February 2021 following a multi-year development process. The CBB and the FSC established a regulatory sandbox in 2018 where financial technology entities can do live testing of their products and services. This allowed regulators to gain a better understanding of the product or service and to determine what, if any, regulation is necessary to protect consumers. Bitt completed its participation and formally exited the sandbox in 2019. Bitt launched DCash in Antigua and Barbuda in March 2021.

Foreign Exchange and Remittances

Foreign Exchange

Antigua and Barbuda is a member of the ECCU and the ECCB. The currency of exchange is the Eastern Caribbean dollar (XCD). As a member of the OECS, Antigua and Barbuda has a foreign exchange system that is fully liberalized. The Eastern Caribbean dollar has been pegged to the U.S. dollar at a rate of XCD 2.70 to USD 1.00 since 1976. As a result, the Eastern Caribbean dollar does not fluctuate, creating a stable currency environment for trade and investment in Antigua and Barbuda.

Remittance Policies

Companies registered in Antigua and Barbuda have the right to repatriate all capital, royalties, dividends, and profits free of all taxes or any other charges on foreign exchange transactions. The government levies withholding taxes on non-resident corporations and individuals receiving income in the form of dividends, preferred share dividends, interest and rentals, management fees, and royalties, as well as on interest on bank deposits to non-resident corporations. A person must be present on the island for no less than four years without interruption to be considered a resident. Antigua and Barbuda is a member of the CFATF.

In 2017, the government of Antigua and Barbuda signed an intergovernmental agreement in observance of the FATCA, making it mandatory for banks in Antigua and Barbuda to report the banking information of U.S. citizens.

Sovereign Wealth Funds

Neither the government of Antigua and Barbuda nor the ECCB, of which Antigua and Barbuda is a member, maintains a sovereign wealth fund.

Capital Markets and Portfolio Investment

The Argentine Constitution sets as a general principle that foreign investors have the same status and the same rights as local investors. Foreign investors have free access to domestic and international financing.

Argentina’s economic recession began in 2018 and deepened further in 2019 after the presidential primary election. To slow the outflow of dollars from its reserves, in September 2019 the Argentine Central Bank introduced tight capital controls prohibiting transfers and payments that are likely in conflict with IMF Article VIII and tightened them thereafter. The Argentine government also implemented price controls and trade restrictions. In December 2019, the Fernandez administration passed an economic emergency law that created new taxes, increased export duties, and delegated broad powers to the Executive Branch, with the objectives of increasing social spending for the most vulnerable populations and negotiating revised terms for Argentina’s sovereign debt. These measures deteriorated the investment climate for local and foreign investors.

In April 2020, the government issued a decree postponing debt payments (both interest and principal) of dollar-denominated debt issued under local law until December 31, 2020. In May 2020, Argentina recorded its ninth sovereign default.

The government of Argentina restructured international law bonds for $65 billion and domestic law bonds for $42 billion in September 2020 bringing financial relief of $37.7 billion over the period 2020-2030. In August 2020, the government of Argentina formally notified the International Monetary Fund (IMF) of its intent to renegotiate $45 billion due to the Fund from the 2018 Stand-By Arrangement starting in 2021.

The Argentine Securities and Exchange Commission (CNV or Comisión Nacional de Valores) is the federal agency that regulates securities markets offerings. Securities and accounting standards are transparent and consistent with international norms. Foreign investors have access to a variety of options on the local market to obtain credit. Nevertheless, the domestic credit market is small – credit is 16 percent of GDP, according to the World Bank. To mitigate the recessionary impact of the COVID-19 crisis, the government introduced low-cost lending credit lines (carrying negative real interest rates), and the Central Bank reduced banks’ minimum reserve requirements to encourage banks to expand credit, particularly to SMEs. The Buenos Aires Stock Exchange is the organization responsible for the operation of Argentina’s primary stock exchange, located in Buenos Aires city. The most important index of the Buenos Aires Stock Exchange is the MERVAL (Mercado de Valores).

U.S. banks, securities firms, and investment funds are well-represented in Argentina and are dynamic players in local capital markets. In 2003, the government began requiring foreign banks to disclose to the public the nature and extent to which their foreign parent banks guarantee their branches or subsidiaries in Argentina.

Money and Banking System

Argentina has a relatively sound banking sector based on diversified revenues, well-contained operating costs, and a high liquidity level. Argentina’s banking sector has been resilient in the face of a multi-year economic contraction. Supported by government measures during the COVID-19 pandemic, credit to the private sector in local currency (for both corporations and individuals) increased 10 percent in real terms in 2020. Non-performing private sector loans constitute less than four percent of banks’ portfolios. However, the performance of the financial system has largely been driven by a series of temporary counter-cyclical measures, namely subsidized government-backed loans for small businesses. The banking sector is well positioned due to macro and micro-prudential policies introduced since 2002 that have helped to reduce asset-liability mismatches. The sector is highly liquid and its exposure to the public sector is modest, while its provisions for bad debts are adequate.

Private banks have total assets of approximately ARS 6.1 billion (USD $65 billion). Total financial system assets are approximately ARS 9.9 billion (USD $105 billion). The Central Bank of Argentina acts as the country’s financial agent and is the main regulatory body for the banking system.

Foreign banks and branches can establish operations in Argentina. They are subject to the same regulation as local banks. Argentina’s Central Bank has many correspondent banking relationships, none of which are known to have been lost in the past three years.

In November 2020, the Central Bank launched a new payment system, “Transfers 3.0,” seeking to reduce the use of cash. This system will boost digital payments and further financial inclusion in Argentina, expanding the reach of instant transfers to build an open and universal digital payment ecosystem.

The Central Bank has enacted a resolution recognizing cryptocurrencies and requiring that they comply with local banking and tax laws. No implementing regulations have been adopted. Block chain developers report that several companies in the financial services sector are exploring or considering using block chain-based programs externally and are using some such programs internally.

Foreign Exchange and Remittances

Foreign Exchange

Beginning in September 2019 and throughout 2020, the Argentine government and Central Bank issued a series of decrees and norms regulating and restricting access to foreign exchange markets.

As of October 2019, the Central Bank (Notice A6815) limits cash withdrawals made abroad with local debit cards to foreign currency bank accounts owned by the client in Argentina. Pursuant to Notice A6823, cash advances made abroad from local credit cards are limited to a maximum of USD $50 per transaction.

As of September 2020, and pursuant to Notice A7106, Argentine individuals can purchase no more than USD $200 per month on a rolling monthly basis. However, purchases abroad with credit and debit cards will be deducted from the USD $200 per month quota. While no limit on credit/debit card purchases is imposed, if the monthly expenses surpass the USD $200 limit, the deduction will be carried over to subsequent months until the amount acquired is completed. Also, the regulation prohibits individual recipients of government assistance programs and high-ranking federal government officials from purchasing foreign exchange. Purchases above the USD $200 limit require Central Bank approval. Pursuant to Public Emergency Law 27,541, issued December 23, 2019, all dollar purchases and individual expenses incurred abroad, in person or online, including international online purchases from Argentina, paid with credit or debit cards will be subject to a 30 percent tax. Pursuant to AFIP Resolution 4815 a 35 percent withholding tax in advance of the payment of income and/or wealth tax is also applied.

Non-Argentine residents are required to obtain prior Central Bank approval to purchase more than USD $100 per month, except for certain bilateral or international organizations, institutions and agencies, diplomatic representation, and foreign tribunals.

Companies and individuals need to obtain prior clearance from the Central Bank before transferring funds abroad. In the case of individuals, if transfers are made from their own foreign currency accounts in Argentina to their own accounts abroad, they do not need to obtain Central Bank approval.

Per Notice A6869 issued by the Central Bank in January 2020, companies will be able to repatriate dividends without Central Bank authorization equivalent to a maximum of 30 percent of new foreign direct investment made by the company in the country. To promote foreign direct investment the Central Bank announced in October 2020 (Notice A7123) that it will allow free access to the official foreign exchange market to repatriate investments as long as the capital contribution was transferred and sold in Argentine Pesos through the foreign exchange market as of October 2, 2020 and the repatriation takes place at least two years after the transfer and settlement of those funds.

Exporters of goods are required to transfer the proceeds from exports to Argentina and settle in pesos in the foreign currency market. Exporters must settle according to the following terms: exporters with affiliates (irrespective of the type of good exported) and exporters of certain goods (including cereals, seeds, minerals, and precious metals, among others) must convert their foreign currency proceeds to pesos within 15 days (or 30 days for some products) after the issuance of the permit for shipment; other exporters have 180 days to settle in pesos. Despite these deadlines, exporters must transfer the funds to Argentina and settle in pesos within five business days from the actual collection of funds. Argentine residents are required to transfer to Argentina and settle in pesos the proceeds from services exports rendered to non-Argentine residents that are paid in foreign currency either in Argentina or abroad, within five business days from collection of funds.

Payment of imports of goods and services from third parties and affiliates require Central Bank approval if the company needs to purchase foreign currency. Since May 2020, the Central Bank requires importers to submit an affidavit stating that the total amount of payments associated with the import of goods made during the year (including the payment that is being requested). The total amount of payments for importation of goods should also include the payments for amortizations of lines of credit and/or commercial guarantees.

In September 2020, the Central Bank limited companies’ ability to purchase foreign currency to cancel any external financial debt (including other intercompany debt) and dollar denominated local securities offerings. Companies were granted access to foreign currency for up to 40 percent of the principal amount coming due from October 15, 2020 to December 31, 2020. For the remaining 60 percent of the debt, companies had to file a refinancing plan with the Central Bank. In February 2021, the Central Bank extended the regulation to include debt maturing up to December 31, 2021. Indebtedness with international organizations or their associated agencies or guaranteed by them and indebtedness granted by official credit agencies or guaranteed by them are exempted from this restriction.

The Central Bank (Notice A7001) prohibited access to the foreign exchange market to pay for external indebtedness, imports of goods and services, and saving purposes for individuals and companies that have made sales of securities with settlement in foreign currency or transfers of these to foreign depositary entities within the last 90 days. They also should not make any of these transactions for the following 90 days.

Pre-cancellation of debt coming due abroad in more than three business days requires Central Bank approval to purchase dollars.

Per Resolution 36,162 of October 2011, locally registered insurance companies are mandated to maintain all investments and cash equivalents in the country. The Central Bank limits banks’ dollar-denominated asset holdings to 5 percent of their net worth.

In January 2020, the Central Bank presented its monetary policy framework showing that monetary and financial policies will be subject to the government’s objective of addressing current social and economic challenges. In particular, the Central Bank acknowledged that it would continue to provide direct financial support to the government (in foreign and domestic currency) as external credit markets remain closed. The Central Bank determined that a managed exchange rate is a valid instrument to avoid sharp fluctuations in relative prices, international competitiveness, and income distribution. The Central Bank also noted the exchange rate policy should also facilitate the preemptive accumulation of international reserves.

Remittance Policies

In response to the economic crisis in Argentina, the government introduced capital controls in September 2019 and tightened them in 2020.  Under these restrictions, companies in Argentina (including local affiliates of foreign parent companies) must obtain prior approval from the Central Bank to access the foreign exchange market to purchase foreign currency and to transfer funds abroad for the payment of dividends and profits.  In January 2020, the Central Bank amended the regime for the payment of dividends abroad to non-residents. The new regime allows companies to access the foreign exchange market to transfer profits and dividends abroad without prior authorization of the Central Bank, provided the following conditions are met:

1. Profits and dividends are be declared in closed and audited financial statements.
2. The dividends in foreign currency should not exceed the dividends determined by the shareholders’ meeting in local currency.
3. The total amount of dividends to be transferred cannot exceed 30 percent of the amount of new capital contributions made by non-residents into local companies since January 2020.
4. The resident entity must be in compliance with filing the Central Bank Survey of External Assets and Liabilities.

Sovereign Wealth Funds

The Argentine government does not maintain a Sovereign Wealth Fund.

Capital Markets and Portfolio Investment

The banking system in Armenia is sound and well-regulated, but the financial sector is not highly developed, according to investors. Banking sector assets account for over 80 percent of total financial sector assets. Financial intermediation tends to be poor. Nearly all banks require collateral located in Armenia, and large collateral requirements often prevent potential borrowers from entering the market. U.S. businesses have noted that this creates a significant barrier for small- and medium-sized enterprises and start-up companies.

The Armenian government welcomes foreign portfolio investment and there is a supporting system and legal framework in place. Armenia’s securities market is not well developed and has only minimal trading activity through the Armenia Securities Exchange, though efforts to grow capital markets are underway. Liquidity sufficient for the entry and exit of sizeable positions is often difficult to achieve due to the small size of the Armenian market. The Armenian government hopes that as a result of pension reforms in 2014, which brought two international asset managers to Armenia, capital markets will play a more prominent role in the country’s financial sector. Armenia adheres to its IMF Article VIII commitments by refraining from restrictions on payments and transfers for current international transactions. Credit is allocated on market terms and foreign investors are able to access credit locally.

Money and Banking System

Since 2020, the banking sector has withstood the twin shocks created by COVID-19 and the Nagorno-Karabakh conflict. Indicators of financial soundness, including capital adequacy and non-performing loan ratios, have remained broadly strong, though with some deterioration more recently. The sector is well capitalized and liquid. Non-performing loans have ticked upward slightly from rates of around five percent of all loans. Dollarization, historically high for deposits and lending, has been falling in recent years. There are 17 commercial banks in Armenia and 13 universal credit organizations. There are extensive branch networks throughout Armenia. At the end of 2020, the top three Armenian banks by estimated total assets were Ameriabank (909 billion Armenian drams (AMD), or $1.7 billion), Armbusinessbank (889 billion AMD, or $1.7 billion), and Ardshinbank (880 billion AMD, or $1.7 billion). The minimum capital requirement for banks is 30 billion AMD (around $58 million). There are no restrictions on foreigners to open bank accounts. Residents and foreign nationals can hold foreign currency accounts and import, export, and exchange foreign currency relatively freely in accordance with the Law on Currency Regulation and Currency Control. Foreign banks may establish a subsidiary, branch, or representative office, and subsidiaries of foreign banks are allowed to provide the same types of services as domestically-owned banks.

The Central Bank of Armenia (CBA) is responsible for the regulation and supervision of the financial sector. The authority and responsibilities of the CBA are established under the Law on the Central Bank of Armenia. Numerous other articles of legislation and supporting regulations provide for financial sector oversight and supervision.

Foreign Exchange and Remittances

Foreign Exchange

Armenia has no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, or management or technical service fees. Most banks can transfer funds internationally within two to four days. Armenia maintains the Armenian dram as a freely convertible currency under a managed float. The AMD/USD exchange rate has been generally stable in recent years, but the dram experienced a notable depreciation against the dollar following the fall 2020 intensive fighting in the Nagorno-Karabakh conflict. The depreciation was stemmed in part by sales of foreign exchange reserves by the CBA. The CBA maintains levels of reserves that are broadly seen as adequate.

According to the Law on Currency Regulation and Currency Control, prices for all goods and services, property, and wages must be set in AMD. There are exceptions in the law, however, for transactions between resident and non-resident businesses and for certain transactions involving goods traded at world market prices. The law requires that interest on foreign currency accounts be calculated in that currency, but paid in AMD.

Remittance Policies

Armenia imposes no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, lease payments, private foreign debt, or management or technical service fees.

Sovereign Wealth Funds

Armenia does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

The Australian Government takes a favorable stance towards foreign portfolio investment with no restrictions on inward flows of debt or equity. Indeed, access to foreign capital markets is crucial to the Australian economy given its relatively small domestic savings. Australian capital markets are generally efficient and able to provide financing options to businesses. While the Australian equity market is one of the largest and most liquid in the world, non-financial firms face a number of barriers in accessing the corporate bond market. Large firms are more likely to use public equity, and smaller firms are more likely to use retained earnings and debt from banks and intermediaries. Australia’s corporate bond market is relatively small, driving many Australian companies to issue debt instruments in the U.S. market. Foreign investors are able to obtain credit from domestic institutions on market terms. Australia’s stock market is the Australian Securities Exchange (ASX).

Money and Banking System

Australia’s banking system is robust, highly evolved, and international in focus. Bank profitability is strong and has been supported by further improvements in asset performance. Total assets of Australian banks at the end of 2020 was USD4.1 trillion and the sector has delivered an annual average return on equity of around 10 percent.

According to Australia’s central bank, the Reserve Bank of Australia (RBA), the ratio of non-performing assets to total loans was approximately one percent at the end of 2020, having remained at around that level for the last five years after falling from highs of nearly two percent following the Global Financial Crisis. The RBA is responsible for monitoring and reporting on the stability of the financial sector, while the Australian Prudential Regulatory Authority (APRA) monitors individual institutions. The RBA is also responsible for monitoring and regulating payments systems in Australia.

Further details on the size and performance of Australia’s banking sector are available on the websites of the Australian Prudential Regulatory Authority (APRA) and the RBA:  https://www.apra.gov.au/statistics  https://www.rba.gov.au/chart-pack/banking-indicators.html 

Foreign banks are allowed to operate as a branch or a subsidiary in Australia. Australia has generally taken an open approach to allowing foreign companies to operate in the financial sector, largely to ensure sufficient competition in an otherwise small domestic market.

Foreign Exchange and Remittances

Foreign Exchange

The Commonwealth Government formulates exchange control policies with the advice of the Reserve Bank of Australia (RBA) and the Treasury. The RBA, charged with protecting the national currency, has the authority to implement exchange controls, although there are currently none in place.

The Australian dollar is a fully convertible and floating currency. The Commonwealth Government does not maintain currency controls or limit remittances. Such payments are processed through standard commercial channels, without governmental interference or delay.

Remittance Policies

Australia does not limit investment remittances.

Sovereign Wealth Funds

Australia’s main sovereign wealth fund, the Future Fund, is a financial asset investment fund owned by the Australian Government. The Fund’s objective is to enhance the ability of future Australian Governments to discharge unfunded superannuation (pension) liabilities. As a founding member of the International Forum of Sovereign Wealth Funds (IFSWF), the Future Fund’s structure, governance, and investment approach is in full alignment with the Generally Accepted Principles and Practices for Sovereign Wealth Funds (the “Santiago principles”).

The Future Fund’s investment mandate is to achieve a long-term return of at least inflation plus 4-5 percent per annum. As of December 2020, the Fund’s portfolio consists of: 29 percent global equities, 7 percent Australian equities, 28 percent private equity (including 7 percent in infrastructure), and the remaining 36 percent in debt, cash, and alternative investments.

In addition to the Future Fund, the Australian Government manages five other specific-purpose funds: the DisabilityCare Australia Fund; the Medical Research Future Fund; the Emergency Response Fund; the Future Drought Fund; and the Aboriginal and Torres Strait Islander Land and Sea Future Fund. In total, these five funds have assets of AUD 47 billion (USD 37 billion), while the main Future Fund has assets of AUD 171 billion (USD 132 billion) as of December 31, 2020.

Further details of these funds are available at: https://www.futurefund.gov.au/ 

Capital Markets and Portfolio Investment

Austria has sophisticated financial markets that allow foreign investors access without restrictions. The government welcomes foreign portfolio investment. The Austrian National Bank (OeNB) regulates portfolio investments effectively.

Austria has a national stock exchange that currently includes 61 companies on its regulated market and several others on its multilateral trading facility (MTF). The Austrian Traded Index (ATX) is a price index consisting of the 20 largest stocks on the market and forms the most important index of Austria’s stock market. The size of the companies listed on the ATX is roughly equivalent to those listed on the MDAX in Germany. The market capitalization of Austrian listed companies is small compared to the country’s western European counterparts, accounting for 30% of Austria’s GDP, compared to 54% in Germany or 148% in the United States.

Unlike the other market segments in the stock exchange, the Direct Market and Direct Market Plus segments, targeted at SMEs and young, developing companies, are subject only to the Vienna Stock Exchange’s general terms of business, not more stringent EU regulations. These segments have lower reporting requirements but also greater risk for investors, as prices are more likely to fluctuate, due to the respective companies’ low level of market capitalization and lower trading volumes.

Austria has robust financing for product markets, but the free flow of resources into factor markets (capital, raw materials) could be improved. Overall, financing is primarily available through banks and government-sponsored funding organizations with relatively little private venture capital available. The Austrian government is aware of this but has taken few tangible steps to improve the availability of private venture capital.

Austria is fully compliant with IMF Article VIII, all financial instruments are available, and there are no restrictions on payments. Credit is available to foreign investors at market-determined rates. Austria’s financial system ranked 30th in the 2019 World Economic Forum’s Global Competitiveness Report, out of 141 countries examined, compared to 28th place in 2018 and 30th in 2017.

Money and Banking System

Austria has one of the most fragmented banking networks in Europe, with more than 3,500 branch offices registered in 2020, yet is considered to be one of the most stable in the world. The banking system is highly developed, with worldwide correspondent banks and representative offices and branches in the United States and other major financial centers. Large Austrian banks also have extensive networks in Central and Southeast European (CESEE) countries and the countries of the former Soviet Union. Total assets of the banking sector amounted to EUR 1.02 trillion (USD 1.1 trillion) in 2019 (approximately 2.5 times the country’s GDP). Approximately EUR 400 million of banking sector assets are held by Austria’s two largest banks, Erste Group and Raiffeisen Bank International (RBI). Austria’s banking sector is managed and overseen by the Austrian National Bank (OeNB) and the Financial Market Authority (FMA). Four Austrian banks with assets in excess of EUR 30 billion (USD 34 billion) are subject to the Eurozone’s Single Supervisory Mechanism (SSM), as is Sberbank Europe AG, a Russian bank subsidiary headquartered in Austria, and Addiko Bank AG due to their significant cross-border assets, as well as Volksbank Wien AG, due to its importance for the economy. All other Austrian banks continue to be subject to the country’s dual-oversight banking supervisory system with roles for the OeNB and the FMA, both of which are also responsible for policing irregularities on the stock exchange and for supervising insurance companies, securities markets, and pension funds. Foreign banks are allowed to establish operations in the country with no legal restrictions that place them at a disadvantage compared to local banks.

Due to U.S. financial reporting requirements, Austrian banks are very cautious in committing the time and expense required to accept U.S. clients and U.S. investors without clearly established U.S. corporate headquarters.

Foreign Exchange and Remittances

Foreign Exchange

Austria has no restrictions on cross-border capital transactions, including the repatriation of profits and proceeds from the sale of an investment, for non-residents and residents. The Euro, a freely convertible currency and the only legal tender in Austria and 18 other Euro-zone member states, shields investors from exchange rate risks within the Euro-zone.

Remittance Policies

Not applicable

Sovereign Wealth Funds

Austria has no sovereign wealth funds.

Capital Markets and Portfolio Investment

Access to capital is a critical impediment to business development in Azerbaijan. An effective regulatory system that encourages and facilitates portfolio investment, foreign or domestic, is not fully in place. Though the Baku Stock Exchange opened in 2000, there is insufficient liquidity in the market to enter or exit sizeable positions. The Central Bank assumed control over all financial regulation in January 2020, following disbandment of a formerly independent regulator. Non-bank financial sector staples such as capital markets, insurance, and private equity are in the early stages of development. The Capital Market Modernization Project is an attempt by the government to build the foundation for a modern financial capital market, including developing market infrastructure and automation systems, and strengthening the legal and market frameworks for capital transactions. One major hindrance to the stock market’s growth is the difficulty in encouraging established Azerbaijani businesses to adapt to standard investor-friendly disclosure practices, which are generally required for publicly listed companies.

Azerbaijan’s government and Central Bank do not restrict payments and transfers for international transactions. Foreign investors are permitted to obtain credit on the local market, but smaller companies and firms without an established credit history often struggle to obtain loans on reasonable commercial terms. Limited access to capital remains a barrier to development, particularly for small and medium enterprises.

Money and Banking System

The country’s financial services sector – of which banking comprises more than 90 percent – is underdeveloped, which constrains economic growth and diversification. The drop in world oil prices in 2014/2015 and the resulting strain on Azerbaijan’s foreign currency earnings and the state budget exacerbated existing problems in the country’s banking sector and led to rising non-performing loans (NPLs) and high dollarization. Subsequent reforms have improved overall sector stability. President Aliyev signed a decree in February 2019 to provide partial relief to retail borrowers on foreign-currency denominated loans that meet certain criteria.

As of January 1, 2021, 26 banks were registered in Azerbaijan, including 12 banks with foreign capital and two state-owned banks. These banks employ 18,708 people and have a combined 455 branches and 2,715 ATMs nationwide. Total banking sector assets stood at approximately USD 18.5 billion as of January 2021, with the top five banks holding almost 60 percent of this amount.

In December 2019, Azerbaijan carried out a banking management reform that gave the Central Bank of Azerbaijan control over banks and credit institutions, closing the Chamber for Control over Financial Markets, which had held regulatory powers following Azerbaijan’s 2014/2015 economic crisis and resulting currency devaluations. Concurrently, the Central Bank announced “recovery of the banking sector” would be one of the main challenges it would tackle in 2020. The Central Bank closed four insolvent banks (Attabank, AGBank, NBCBank, and Amrah Bank) in April/May 2020, bringing the number of banks in the country down from 30 to 26. Only a limited number of banks are able to conduct correspondent banking transactions with the United States.

Foreign banks are permitted in Azerbaijan and may take the form of representative offices, branches, joint ventures, and wholly owned subsidiaries. These banks are subject to the same regulations as domestic banks, with certain additional restrictions. Foreign individuals and entities are also permitted to open accounts with domestic or foreign banks in Azerbaijan.

Foreign Exchange and Remittances

Foreign Exchange

Azerbaijan’s Central Bank officially adopted a floating exchange rate in 2016 but continues to operate under an “interim regime” that effectively pegs the exchange rate at AZN 1.7 per USD. Azerbaijan’s foreign currency reserves are based on the reserves of the Central Bank, those of the State Oil Fund of Azerbaijan (SOFAZ), and the assets of the State Treasury Agency under the Finance Ministry. Foreign currency reserves of the Central Bank increased by 2 percent during 2020 and totaled USD 6.36 billion in January 2021. Between January 2020 and January 2021, SOFAZ assets increased by 0.5 percent to reach USD 43.5 billion.

Foreign exchange transactions are governed by the Law on Currency Regulation. The Central Bank administers the overall enforcement of currency regulation. Currency conversion is carried out through the Baku Interbank Currency Exchange Market and the Organized Interbank Currency Market.

There are no statutory restrictions on converting or transferring funds associated with an investment into freely usable currency at a legal, market-clearing rate. The average time for remitting investment returns is two to three business days. Some requirements on disclosure of the source of currency transfers have been imposed to reduce illicit transactions.

Remittance Policies

Corporate branches of foreign investors are subject to a remittance tax of 10 percent on all profits derived from its business activities in Azerbaijan. There have not been any recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances. There do not appear to be time limitations on remittances, including dividends, returns on investment, interest and principal on private foreign debt, lease payments, royalties, and management fees. Nor does there appear to be limits on the inflow or outflow of funds for remittances of profits or revenue.

Sovereign Wealth Funds

Azerbaijan’s sovereign wealth fund is the State Oil Fund of Azerbaijan (SOFAZ). Its mission is to transform hydrocarbon reserves into financial assets generating perpetual income for current and future generations and to finance strategically important infrastructure and social projects of national scale. While its main statutory focus is investing in assets outside of the country, since it was established in 1999 SOFAZ has financed several socially beneficial projects in Azerbaijan related to infrastructure, housing, energy, and education. The government’s newly adopted fiscal rule places limits on pro-cyclical spending, with the aim of increasing hydrocarbon revenue savings. SOFAZ publishes an annual report which it submits for independent audit. The fund’s assets totaled USD 43.5 billion as of January 1, 2021. More information is available at oilfund.az .

Capital Markets and Portfolio Investment

The government encourages the free flow of capital markets, and the Central Bank supports this flow through its regulatory functions. The Bahamas is an Article VIII member of the IMF and has agreed not to place restrictions on currency transactions, such as payments for imports. The Bahamas Securities Commission regulates the activities of investment funds, securities, and capital markets ( www.scb.gov.bs ). The fledgling local stock market, established in 1999, excludes foreign investors but is effectively regulated by the Securities Commission.

There are no legal limitations on foreigners’ access to the domestic credit market, and commercial banks make credit available at market rates. The government encourages Bahamian-foreign joint ventures, which are eligible for financing through both commercial banks and the Bahamas Development Bank ( http://www.bahamasdevelopmentbank.com/ ).

Customarily, the government does not prohibit its citizens from investing internationally. However, all outward direct investments by residents, including foreign portfolio investments, require the prior approval of the Exchange Control Department of the Central Bank of The Bahamas ( www.centralbankbahamas.com/exchange – controls). Applications are assessed by their probable impact on The Bahamas’ balance of payments, specifically business activities that promote the receipt of foreign currency.

In an effort to maintain adequate foreign reserves during the economic crisis brought on by COVID-19, the Central Bank suspended purchases of foreign currency on May 4, 2020 for specific transactions that could drain reserves and jeopardize the country’s ability to maintain a fixed, one-to-one exchange rate with the U.S. dollar. The Central Bank also suspended Bahamian investments in U.S.-dollar denominated investment funds created by local brokers seeking higher returns in overseas markets. The Central Bank warned it was prepared to act swiftly in imposing even harsher restrictions, if necessary, to maintain the country’s fixed exchange rate and to conserve foreign currency reserves. The suspension remained in place throughout 2020 and had not been lifted as of spring 2021.

Money and Banking System

The financial sector of The Bahamas is highly developed and consists of savings banks, trust companies, offshore banks, insurance companies, a development bank, a publicly controlled pension fund, a housing corporation, a public savings bank, private pension funds, cooperative societies, credit unions, commercial banks, and the state-owned Bank of The Bahamas. These institutions provide a wide array of services via several types of financial intermediaries. The financial sector is regulated by The Central Bank of The Bahamas, the Securities Commission, Insurance Commission, the Inspector of Financial and Corporate Service Providers, and the Compliance Commission.

According to the Central Bank’s Quarterly Economic Review of December 2020, the contraction in domestic credit outpaced the reduction in the deposit base during the fourth quarter of 2020. Consequently, both bank liquidity and external reserves expanded, bolstered by foreign currency inflows from the government’s external borrowings. However, banks’ credit indicators deteriorated during the fourth quarter due to the adverse impact of the COVID-19 pandemic. Further, data from the third quarter revealed a reduction in banks’ overall profitability, reflecting higher levels of provisioning for bad debt.

In the external sector, the estimated current account balance went from a surplus in 2019 to a deficit during the final quarter of 2020. The services account also moved from surplus to deficit, as travel restrictions associated with the COVID-19 pandemic led to a significant reduction in travel receipts. In contrast, the surplus on the capital and financial account increased considerably, owing primarily to an expansion in debt-financed government spending.

In the domestic banking sector, four of the eight commercial banks are subsidiaries of Canadian banks, three are locally owned, and one is a branch of a U.S.-based institution. Continued reorganization by the Canadian banks has severely limited banking services on some of the less populated islands.

The Central Bank’s strategic goals include responding to the loss of brick-and-mortar banks by implementing digital banking across the country. To this end, the Central Bank introduced the “Sand Dollar” in December 2019, the first central bank-backed digital currency in the world. The introduction of the new currency aims to provide individuals with efficient and non-discriminatory access to financial services. Since its launch, domestic financial and political elites have welcomed the financial inclusion of unbanked and underbanked residents. To date, nine firms (including clearing banks, money transfer services, credit unions and payment service providers) have successfully completed the cybersecurity assessment and been authorized to distribute Sand Dollars within their proprietary mobile wallets.

Although Sand Dollar accounts and transactions are theoretically subject to the same stringent anti-money laundering and Know Your Customer (KYC) safeguards as traditional commercial banks, the Central Bank’s capacity to enforce these safeguards, as well as account audit capabilities, may be limited. Additional information on the Sand Dollar can be accessed via www.sanddollar.bs/ .

Foreign Exchange and Remittances

Foreign Exchange Policies

The Bahamas maintains a fixed exchange rate policy, which pegs the Bahamian dollar one-to-one with the U.S. dollar. The legal basis for the policy is the Exchange Control Act of 1974 and Exchange Control Regulations. The controls ensure adequate foreign exchange flows are always available to support the fixed parity of the Bahamian dollar against the U.S. dollar. The peg removes issues of rate conversions and allows for unified pricing of goods and services for tourists and residents. To maintain this structure, individuals and corporations resident in The Bahamas are subject to restrictions on foreign exchange transactions, including currency purchases, payments, and investments. Similarly, Bahamians cannot make payments or investments in foreign currencies without Central Bank approval.

Exchange controls are not an impediment to foreign investment in the country. The government requires all non-resident investors in The Bahamas to register with the Central Bank, and the government allows non-resident investors who finance their projects substantially from foreign currency transferred into The Bahamas to convert and repatriate profits and capital gains freely. They do this with minimal bureaucratic formalities and without limitations on the inflows or outflows of funds.

In the administration of exchange controls, the Central Bank does not withhold or delay approval for legitimate foreign exchange purchases for currency transactions and, in the interest of facilitating international trade, it delegates this authority to major commercial banks and selected trust companies. International and local commercial banks, which are registered by the Central Bank as ‘Authorized Dealers,’ may administer and conduct foreign currency transactions with residents of The Bahamas. Similarly, private banks and trust companies which are designated as ‘Authorized Agents’ are permitted to act as depositories for foreign securities of residents and to conduct securities transactions for non-resident companies under their management.

The Central Bank directly approves foreign exchange transactions that fall outside of the delegated authority, including loans, dividends, issues and transfer of shares, travel facilities, and investment currency. The government has continued gradual liberalization of exchange controls over the years with the most recent measure implemented in April 2016. The most recent measures delegated increased authority to commercial banks for exchange control and seek to regularize nationals holding accounts in the United States by allowing nationals to open U.S. dollar denominated accounts within the jurisdiction.

Remittance Policies

There are no restrictions on investment remittances. Foreign investors who receive a Central Bank designation as a non-resident may open foreign currency-denominated bank accounts and repatriate those funds freely. In addition, with Central Bank approval, a foreign investor may open an account denominated in Bahamian currency to pay local expenses. As mentioned, increased authority has been delegated to commercial banks and money transfer businesses.

The Bahamas is one of 25 member countries that make up the Caribbean Financial Action Task Force (CFATF), an organization dedicated to address the problem of money laundering. The organization’s most recent peer review evaluation and follow-up reports can be found at ( https://www.cfatf-gafic.org/index.php/member-countries/the-bahamas ).

Sovereign Wealth Funds

The Bahamian government passed omnibus legislation for the effective management of the oil and gas sector in 2017, which included the creation of a sovereign wealth fund, but has not yet promulgated supporting regulations. Discussions of a possible sovereign wealth fund were reignited when the Bahamas Petroleum Company, an Isle of Man-registered company, began exploratory oil drilling in Bahamian waters. The company confirmed in February 2021 that its exploratory drilling did not produce commercially viable quantities of oil.

The government nevertheless announced plans in January 2021 to accelerate the establishment of a Sovereign Wealth Fund and an accompanying National Infrastructure Fund. The government stressed the funds would derive income from royalty payments from all the country’s natural resources (such as salt, sand, rock and aragonite exports), not just potential earnings from oil exploration. The government suggested both funds would mobilize public assets and private capital to generate hundreds of millions of dollars in infrastructure investments across the country. The government committed to embrace international best practices designed to address issues of transparency, accountability and the governance structure of such funds.

Capital Markets and Portfolio Investment

Consistent with the GOB’s liberal approach to foreign investment, government policies facilitate the free flow of financial transactions and portfolio investments. Expatriates and Bahraini nationals have ready access to credit on market terms. Generally, credit terms are variable, but often are limited to 10 years for loans under USD 50 million. For major infrastructure investments, banks often offer to assume a part of the risk, and Bahrain’s wholesale and retail banks have shown extensive cooperation in syndicating loans for larger risks. Commercial credit is available to private organizations in Bahrain but has been increasingly crowded out by the government’s local bond issuances.

In 2016, the GOB launched a new fund designed to inject greater liquidity in the Bahrain Bourse, worth USD 100 million. The Bahrain Liquidity Fund is supported by a number of market participants and acts as a market maker, providing two-way quotes on most of the listed stocks with a reasonable spread to allow investors to actively trade their stocks. Despite these efforts, the market remains relatively small compared to others in the region.

In October 2019, the GOB established a BD 130 million (USD 344 million) Liquidity Fund to assist distressed companies in restructuring financial obligations, which was expanded in March 2020 to BD 200 million (USD 530 million) in response to the Covid-19 pandemic.

The GOB and the CBB are members of the IMF and fully compliant with Article VIII.

Money and Banking System

The CBB is the single regulator of the entire financial sector, with an integrated regulatory framework covering all financial services provided by conventional and Islamic financial institutions. Bahrain’s banking sector remains quite healthy despite sustained lower global oil prices. Bahrain’s banks remain well capitalized, and there is sufficient liquidity to ensure a healthy rate of investment. Bahrain remains a financial center for the GCC region, though many financial firms have moved their regional headquarters to Dubai over the last decade. The GOB continues to be a driver of innovation and expansion in the Islamic finance sector. In 2020, Bahrain ranked as the GCC’s leading Islamic finance market and placed third globally, according to the ICD-Thomson Reuters Islamic Finance Development Indicator (IFDI).

Bahrain has an effective regulatory system that encourages portfolio investment, and the CBB has fully implemented Basel II standards, while attempting to bring Bahraini banks into compliance with Basel III standards. Bahrain’s banking sector includes 91 retail banks, of which 61 are wholesale banks, 17 are branches of foreign banks, and 13are locally incorporated. Of these, eight are representative offices, and 18 are Islamic banks.

There are no restrictions on foreigners opening bank accounts or corporate accounts. Bahrain is home to many prominent financial institutions, among them Citibank, American Express, and JP Morgan Chase. Ahli United Bank is Bahrain’s largest bank with total assets estimated at USD 40.1 billion as of December 2020.

Bahrain implemented the Real-Time Gross Settlement (RTGS) System and the Scripless Securities Settlement (SSS) System in 2007 to enable banks to carry out their payment and securities-related transactions securely on a real time basis.

In 2017, Bahrain became the first in the GCC to introduce fintech “sandbox” regulations that enabled the launch of cryptocurrency and blockchain startups. The same year, the CBB released additional regulations for conventional and Sharia-compliant financing-based crowdfunding businesses.  Any firm operating electronic financing/lending platforms must be licensed in Bahrain under the CBB Rulebook Volume 5 – Financing Based Crowdfunding Platform Operator.  In February 2019, the CBB issued cryptocurrency regulations.

Foreign Exchange and Remittances

Foreign Exchange

Bahrain has no restrictions on the repatriation of profits or capital and no exchange controls. Bahrain’s currency, the Bahraini Dinar (BD), is fully and freely convertible at the fixed rate of USD 1.00 = BD 0.377 (1 BD = USD 2.659). There is no black market or parallel exchange rate. There are no restrictions on converting or transferring funds, whether or not associated with an investment.

Remittance Policies

The CBB is responsible for regulating remittances, and its regulations are based on the Central Bank Law ratified in 2006. Foreign workers comprise the majority of the labor force in Bahrain, many of whom remit significant quantities of funds to their countries of origin. Commercial banks and currency exchange houses are licensed to provide remittances services.

Commercial banks and currency exchange houses require two forms of identification before processing a routine remittance request, and any transaction exceeding USD 10,000 must include a documented source of the income.

Bahrain enables foreign investors to remit funds through a legal parallel market, with no limitations on the inflow or outflow of funds for remittances of profits or revenue. The GOB does not engage in currency manipulation tactics.

The GCC is a member of the Financial Action Task Force (FATF). Bahrain is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), whose headquarters are located in Bahrain. Participating countries commit to combat the financing of terrorist groups and activities in all its forms and to implement FATF recommendations. The GOB hosted the MENAFATF’s 26th Plenary Meeting Manama in 2017.

Sovereign Wealth Funds

Bahrain established Mumtalakat, its sovereign wealth fund, in 2006. Mumtalakat, which maintains an investment portfolio valued at roughly BD 7.1 billion (USD 18.9 billion) as of 2019, issues an annual report online. The annual report follows international financial reporting standards and is audited by external auditing firms. By law, state-owned enterprises (SOEs) under Mumtalakat are audited and monitored by the National Audit Office. In 2019, Mumtalakat received the highest-possible ranking in the Linaburg-Maduell Transparency Index for the sixth consecutive year, which specializes in ranking the transparency of sovereign wealth funds. However, Bahrain’s sovereign wealth fund does not follow the Santiago Principles.

Mumtalakat holds majority stakes in several firms. Mumtalakat invests 63 percent of its funds in the Middle East, 29 percent in Europe, and eight percent in the United States. The fund is diversified across a variety of business sectors including real estate and tourism, financial services, food and agriculture, and industrial manufacturing.

Mumtalakat often acts more as an active asset management company than a sovereign wealth fund, including by taking an active role in managing SOEs. Most notably, Mumtalakat has been instrumental in helping Gulf Air, Bahrain’s state-owned airline, restructure and contain losses. A significant portion of Mumtalakat’s portfolio is invested in 31 Bahrain-based SOEs.

Through 2016, Mumtalakat had not been directly contributing to the State Budget. Beginning in September 2017, however, Mumtalakat annually contributed USD 53 million to the State Budget, which was increased to USD 106 million in the 2021-2022 State Budget.

Capital Markets and Portfolio Investment

Capital markets in Bangladesh are still developing, and the financial sector remains highly dependent on bank lending. Current regulatory infrastructure inhibits the development of a tradeable bond market.

Bangladesh is home to the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE), both of which are regulated by the Bangladesh Securities and Exchange Commission (BSEC), a statutory body formed in 1993 and attached to the Ministry of Finance. As of February 2021, the DSE market capitalization stood at $54.8 billion, rising 35.8 percent year-over-year bolstered by increased liquidity and some sizeable initial public offerings.

Although the Bangladeshi government has a positive attitude toward foreign portfolio investors, participation in the exchanges remains low due to what is still limited liquidity for shares and the lack of publicly available and reliable company information. The DSE has attracted some foreign portfolio investors to the country’s capital market. However, the volume of foreign investment in Bangladesh remains a small fraction of total market capitalization. As a result, foreign portfolio investment has had limited influence on market trends and Bangladesh’s capital markets have been largely insulated from the volatility of international financial markets. Bangladeshi markets continue to rely primarily on domestic investors.

In 2019, BSEC undertook a number of initiatives to launch derivatives products, allow short selling, and invigorate the bond market. To this end, BSEC introduced three rules: Exchange Traded Derivatives Rules 2019, Short-Sale Rules 2019, and Investment Sukuk Rules 2019. Other recent, notable BSEC initiatives include forming a central clearing and settlement company – the Central Counterparty Bangladesh Limited (CCBL) – and promoting private equity and venture capital firms under the 2015 Alternative Investment Rules. In 2013, BSEC became a full signatory of the International Organization of Securities Commissions (IOSCO) Memorandum of Understanding.

BSEC has taken steps to improve regulatory oversight, including installing a modern surveillance system, the “Instant Market Watch,” providing real time connectivity with exchanges and depository institutions. As a result, the market abuse detection capabilities of BSEC have improved significantly. A mandatory Corporate Governance Code for listed companies was introduced in 2012 but the overall quality of corporate governance remains substandard. Demutualization of both the DSE and CSE was completed in 2013 to separate ownership of the exchanges from trading rights. A majority of the members of the Demutualization Board, including the Chairman, are independent directors. Apart from this, a separate tribunal has been established to resolve capital market-related criminal cases expeditiously. However, both domestic and foreign investor confidence remains low.

The Demutualization Act 2013 also directed DSE to pursue a strategic investor who would acquire a 25 percent stake in the bourse. Through a bidding process DSE selected a consortium of the Shenzhen and Shanghai stock exchanges in China as its strategic partner, with the consortium buying the 25 percent share of DSE for taka 9.47 billion ($112.7 million).

According to the International Monetary Fund (IMF), Bangladesh is an Article VIII member and maintains restrictions on the unapproved exchange, conversion, and/or transfer of proceeds of international transactions into non-resident taka-denominated accounts. Since 2015, authorities have relaxed restrictions by allowing some debits of balances in such accounts for outward remittances, but there is currently no established timetable for the complete removal of the restrictions.

Money and Banking System

The Bangladesh Bank (BB) acts as the central bank of Bangladesh. It was established on December 16, 1971 through the enactment of the Bangladesh Bank Order of1972. General supervision and strategic direction of the BB has been entrusted to a nine–member Board of Directors, which is headed by the BB Governor. A list of the bank’s departments and branches is on its website: https://www.bb.org.bd/aboutus/dept/depts.php .

According to the BB, four types of banks operate in the formal financial system: State Owned Commercial Banks (SOCBs), Specialized Banks, Private Commercial Banks (PCBs), and Foreign Commercial Banks (FCBs). Some 61 “scheduled” banks in Bangladesh operate under the control and supervision of the central bank as per the Bangladesh Bank Order of 1972. The scheduled banks, include six SOCBs, three specialized government banks established for specific objectives such as agricultural or industrial development or expatriates’ welfare, 43 PCBs, and nine FCBs as of February 2021. The scheduled banks are licensed to operate under the Bank Company Act of 1991 (Amended 2013). There are also five non-scheduled banks in Bangladesh, including Nobel Prize recipient Grameen Bank, established for special and definite objectives and operating under legislation enacted to meet those objectives.

Currently, 34 non-bank financial institutions (FIs) are operating in Bangladesh. They are regulated under the Financial Institution Act, 1993 and controlled by the BB. Of these, two are fully government-owned, one is a subsidiary of a state-owned commercial bank, and the rest are private financial institutions. Major sources of funds for these financial institutions are term deposits (at least three months’ tenure), credit facilities from banks and other financial institutions, and call money, as well as bonds and securitization.

Unlike banks, FIs are prohibited from:

• Issuing checks, pay-orders, or demand drafts.
• Receiving demand deposits.
• Involvement in foreign exchange financing.

Microfinance institutions (MFIs) remain the dominant players in rural financial markets. According to the Bangladesh Microcredit Regulatory Authority, as of June 2019, there were 724 licensed micro-finance institutions operating a network of 18,977 branches with 32.3 million members. Additionally, Grameen Bank had nearly 9.3 million microfinance members at the end of 2019 of which 96.8 percent were women. A 2014 Institute of Microfinance survey study showed that approximately 40 percent of the adult population and 75 percent of households had access to financial services in Bangladesh.

The banking sector has had a mixed record of performance over the past several years. Industry experts have reported a rise in risky assets. Total domestic credit stood at 46.8 percent of gross domestic product at end of June 2020. The state-owned Sonali Bank is the largest bank in the country while Islami Bank Bangladesh and Standard Chartered Bangladesh are the largest local private and foreign banks respectively as of December 2020. The gross non-performing loan (NPL) ratio was 7.7 percent at the end of December 2020, down from 9.32 percent in December 2019. However, the decline in the NPLs was primarily caused by regulatory forbearance rather than actual reduction of stressed loans. Following the outbreak of COVID-19 in 2020, the central bank directed all banks not to classify any new loans as non-performing till December 2020. Industry contacts have predicted reported NPLs will demonstrate a sharp rise after the exemption expires unless the central bank grants additional forbearance in alternate forms. At 22.5 percent SCBs had the highest NPL ratio, followed by 15.9 percent of Specialized Banks, 5.9 percent of FCBs, and 5.6 percent of PCBs as of September 2020.

In 2017, the BB issued a circular warning citizens and financial institutions about the risks associated with cryptocurrencies. The circular noted that using cryptocurrencies may violate existing money laundering and terrorist financing regulations and cautioned users may incur financial losses. The BB issued similar warnings against cryptocurrencies in 2014.

Foreign investors may open temporary bank accounts called Non-Resident Taka Accounts (NRTA) in the proposed company name without prior approval from the BB in order to receive incoming capital remittances and encashment certificates. Once the proposed company is registered, it can open a new account to transfer capital from the NRTA account. Branch, representative, or liaison offices of foreign companies can open bank accounts to receive initial suspense payments from headquarters without opening NRTA accounts. In 2019, the BB relaxed regulations on the types of bank branches foreigners could use to open NRTAs, removing a previous requirement limiting use of NRTA’s solely to Authorized Dealers (ADs).

Foreign Exchange and Remittances

Foreign Exchange

Free repatriation of profits is allowed for registered companies and profits are generally fully convertible. However, companies report the procedures for repatriating foreign currency are lengthy and cumbersome. The Foreign Investment Act guarantees the right of repatriation for invested capital, profits, capital gains, post-tax dividends, and approved royalties and fees for businesses. The central bank’s exchange control regulations and the U.S.-Bangladesh Bilateral Investment Treaty (in force since 1989) provide similar investment transfer guarantees. BIDA may need to approve repatriation of royalties and other fees.

Bangladesh maintains a de facto managed floating foreign exchange regime. Since 2013, Bangladesh has tried to manage its exchange rate vis-à-vis the U.S. dollar within a fairly narrow range. Until 2017, the Bangladesh currency – the taka – traded between 76 and 79 taka to the dollar. The taka has depreciated relative to the dollar since October 2017 reaching 84.95 taka per dollar as of March 2020, despite interventions from the Bangladesh Bank from time to time. The taka is approaching full convertibility for current account transactions, such as imports and travel, but not for financial and capital account transactions, such as investing, currency speculation, or e-commerce.

Remittance Policies

There are no set time limitations or waiting periods for remitting all types of investment returns. Remitting dividends, returns on investments, interest, and payments on private foreign debts do not usually require approval from the central bank and transfers are typically made within one to two weeks. Some central bank approval is required for repatriating lease payments, royalties and management fees, and this process can take between two and three weeks. If a company fails to submit all the proper documents for remitting, it may take up to 60 days. Foreign investors have reported difficulties transferring funds to overseas affiliates and making payments for certain technical fees without the government’s prior approval to do so. Additionally, some regulatory agencies have reportedly blocked the repatriation of profits due to sector-specific regulations. The U.S. Embassy also has received complaints from American citizens who were not able to transfer the proceeds of sales of their properties.

The central bank has recently made several small-scale reforms to ease the remittance process. In 2019, the BB simplified the profit repatriation process for foreign firms. Foreign companies and their branches, liaison, or representative offices no longer require prior approval from the central bank to remit funds to their parent offices outside Bangladesh. Banks, however, are required to submit applications for ex post facto approval within 30 days of profit remittance. In 2020, the Bangladesh Bank relaxed regulations for repatriating disinvestment proceeds, authorizing banks to remit up to 100 million taka (approximately $1.2 million) in equivalent foreign currency without the central bank’s prior approval. The central bank also eased profit repatriation and reinvestment by allowing banks to transfer foreign investors’ dividend income into their foreign currency bank accounts.

The Financial Action Task Force (FATF) notes Bangladesh has established the legal and regulatory framework to meet its Anti-Money Laundering/Counterterrorism Finance (AML/CTF) commitments. The Asia/Pacific Group on Money Laundering (APG), an independent and collaborative international organization based in Bangkok, evaluated Bangladesh’s AML/CTF regime in 2018 and found Bangladesh had made significant progress since the last Mutual Evaluation Report (MER) in 2009, but still faces significant money laundering and terrorism financing risks. The APG reports are available online:  http://www.fatf-gafi.org/countries/#Bangladesh  

Sovereign Wealth Funds

In 2015, the Bangladesh Finance Ministry announced it was exploring establishing a sovereign wealth fund in which to invest a portion of Bangladesh’s foreign currency reserves. In 2017, the Cabinet initially approved a $10 billion “Bangladesh Sovereign Wealth Fund,” (BSWF) to be created with funds from excess foreign exchange reserves but the plan was subsequently scrapped by the Finance Ministry.

Capital Markets and Portfolio Investment

Barbados has a small stock exchange, an active banking sector, and opportunities for portfolio investment. Local policies seek to facilitate the free flow of financial resources, although some restrictions may be imposed during exceptional periods of low liquidity. The CBB independently raises or lowers interest rates without government intervention. There are a variety of credit instruments in the commercial and public sectors that local and foreign investors may access.

Barbados continues to review legislation in the financial sector to strengthen and improve the regulatory regime and attract and facilitate retention of foreign portfolio investments. The government continues to improve its legal, regulatory, and supervisory frameworks to strengthen the banking system. The Anti-Money Laundering Authority and its operating arm, the government’s Financial Intelligence Unit, review anti-money laundering policy documents and analyze prudential returns.

The Securities Exchange Act of 1982 established the Securities Exchange of Barbados, which was reincorporated as the Barbados Stock Exchange (BSE) in 2001. The BSE operates a two-tier electronic trading system comprised of a regular market and an innovation and growth market (formerly the junior market). Companies applying for listing on the regular market must observe and comply with certain requirements. Specifically, they must have assets of at least 500,000 USD (1 million Barbados dollars) and adequate working capital, based on the last three years of their financial performance, as well as three-year performance projections. Companies must also demonstrate competent management and be incorporated under the laws of Barbados or another regulated jurisdiction approved by the Financial Services Commission. Applications for listing on the innovation and growth market are less onerous, requiring minimum equity of one million shares at a stated minimum value of 100,000 USD (200,000 Barbados dollars). Reporting and disclosure requirements for all listed companies include interim financial statements and an annual report and questionnaire. Non-nationals must obtain exchange control approval from the CBB to trade securities on the BSE.

The BSE has computerized clearance and settlement of share certificates through the Barbados Central Securities Depository Inc., a wholly owned subsidiary of the BSE. Under the Property Transfer Tax Act, the FSC can accommodate investors requiring a traditional certificate for a small fee. The FSC also regulates mutual funds in accordance with the Mutual Funds Act.

The BSE adheres to rules in accordance with International Organization of Securities Commissions guidelines designed to protect investors; ensure a fair, efficient, and transparent market; and reduce systemic risk. Public companies must file audited financial statements with the BSE no later than 90 days after the close of their financial year. The authorities may impose a fine not exceeding 5,000 USD (10,000 Barbados dollars) for any person under the jurisdiction of the BSE who contravenes or is not in compliance with any regulatory requirements.

The BSE launched the International Securities Market (ISM) in 2016. It is designed to operate as a separate market, allowing issuers from Barbados and other international markets. To date, the ISM has five listing sponsors.

The BSE collaborates with its regional partners, the Jamaica Stock Exchange and the Trinidad and Tobago Stock Exchange, through shared trading software. The capacity for this inter-exchange connectivity provides a wealth of potential investment opportunities for local and regional investors. The BSE obtained designated recognized stock exchange status from the UK in 2019. It is also a member of the World Federation of Exchanges.

Barbados has accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement and maintains an exchange system free of restrictions on current account transactions.

Money and Banking System

The government established the Central Bank of Barbados (CBB) in 1972. The CBB manages Barbados’ currency and regulates its domestic banks.

The Barbados Deposit Insurance Corporation (BDIC) provides protection for depositors. Oversight of the entire financial system is conducted by the Financial Oversight Management Committee, which consists of the CBB, the BDIC, and the FSC. The private sector has access to financing on the local market through short-term borrowing and credit, asset financing, project financing, and mortgage financing.

Commercial banks and other deposit-taking institutions set their own interest rates. The CBB requires banks to hold 17.5 percent of their domestic deposits in stipulated securities.

Bitt, a Barbadian company, developed digital currency DCash in partnership with the Eastern Caribbean Central Bank (ECCB). The first successful DCash retail central bank digital currency (CDBC) consumer-to-merchant transaction took place in Grenada in February following a multi-year development process. The CBB and the FSC established a regulatory sandbox in 2018 where financial technology entities can do live testing of their products and services. This allowed regulators to gain a better understanding of the product or service and to determine what, if any, regulation is necessary to protect consumers. Bitt completed its participation and formally exited the sandbox in 2019. Bitt has no immediate plans to launch DCash in Barbados, and will focus first on four of Barbados’ Eastern Caribbean neighbors. Bitt also offers a digital access exchange, remittance channel, and merchant-processing gateway available via mMoney, a mobile application.

The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S., Canadian, and European banks in recent years due to concerns that the region is high-risk.

Foreign Exchange and Remittances

Foreign Exchange

Barbados’ currency of exchange is the Barbadian dollar (BBD). It is issued by the CBB. Barbados’ foreign exchange operates under a liberal system. The Barbadian dollar has been pegged to the U.S. dollar at a rate of BBD 2.00: USD 1.00 since 1975. This creates a stable currency environment for trade and investment in Barbados.

Remittance Policies

Companies can freely repatriate profits and capital from foreign direct investment if they are registered with the CBB at the time of investment. The CBB has the right to stagger these conversions depending on the level of international reserves available to the CBB at the time capital repatriation is requested.

The Ministry of Finance, Economic Affairs and Investment controls the flow of foreign exchange and the Exchange Control Division of the CBB executes foreign exchange policy under the Exchange Control Act. Individuals may apply through a local bank to convert the equivalent of 10,000 USD (20,000 Barbados dollars) per year for personal travel and up to a maximum of 25,000 USD (50,000 Barbados dollars) for business travel. The CBB must approve conversion of any amount over these limits. International businesses, including insurance companies, are exempt from these exchange control regulations.

Barbados is a member of the CFATF. In 2014, the government of Barbados signed an Intergovernmental Agreement in observance of FATCA, making it mandatory for banks in Barbados to report the banking information of U.S. citizens.

Sovereign Wealth Funds

Currently, the CBB does not maintain a sovereign wealth fund. In the past, the government announced plans to create a sovereign wealth fund to ensure national wealth is available for present and future generations of Barbados. Barbadians 18 years and older are expected to gain a stake in the fund after it is established. It is envisioned that the fund will hold governmental assets, including on- and offshore real property, revenues from oil and gas products, and non-tangible assets such as trademarks, patents, and intellectual property.

Capital Markets and Portfolio Investment

The Belarusian government officially claims to welcome portfolio investment. There have been no reports in 2020 on any impediments regarding such investment or a free flow of any financial instruments. The Belarusian Currency and Stock Exchange is open to foreign investors, but it is still largely undeveloped because the government only allows companies to trade stocks if they meet certain but often burdensome criteria. Private companies must be profitable and have net assets of at least EUR 1 million. In addition, any income from resulting operations is taxed at 24 percent. Finally, the state owns more than 70 percent of all stocks in the country, and the government appears hesitant and unwilling to trade in them freely. Bonds are the predominant financial instrument on Belarus’ corporate securities market.

In 2001, Belarus joined Article VIII of the IMF’s Articles of Agreement, undertaking to refrain from restrictions on payments and transfers under current international transactions. Loans are allocated on market terms and foreign investors are able to get them. However, the discount rate of 7.75 percent (as of March 2020) makes credit too expensive for many private businesses, which, unlike many SOEs, do not receive subsidized or reduced-interest loans.

Businesses buy and sell foreign exchange at the Belarusian Currency and Stock Exchange through their banks. Belarus used to require businesses to sell 10-20 percent of foreign currency revenues through the Belarusian Currency and Stock Exchange, however in late 2018 the National Bank abolished the mandatory sale rule.

Resources for Rights Holders

U.S. Embassy MinskEconomic Sectiontel.+375 (17) 210-1283e-mail:  usembassyminsk@state.gov 

Money and Banking System

Belarus has a central banking system led by the National Bank of the Republic of Belarus, which represents the interest of the state and is the main regulator of the country’s banking system. The President of Belarus appoints the Chair and Members of the Board of the National Bank, designates auditing organizations to examine its activities, and approves its annual report. Although the National Bank officially operates independently from the government, there is a history of government interference in monetary and exchange rate policies.

As of March 2021, the banking system of Belarus included 24 commercial banks and three non-banking credit and finance organizations. According to the National Bank, the share of non-performing loans in the banking sector was 4.8 percent as of January 1, 2021. The country’s seven largest commercial banks of systemic importance, all of which have some government share, accounted for 85 percent of the approximately USD 90.5 billion in total assets across the country’s banking sector. There are five representative offices of foreign banks in Belarus, with China’s Development Bank opening most recently in 2018. Regular banking services are widely available to customers regardless of national origin.

Belarusian law does not allow foreign banks to establish operations of their branches in Belarus. The subsidiaries of foreign banks are allowed to operate in Belarus and are subject to prudential measures and other regulations like any Belarusian bank. The U.S. Embassy is not aware of Belarus losing any correspondent banking relationships in the past three years. Foreign nationals are allowed to establish a bank account in Belarus without establishing residency status.

According to the IMF, Belarus’s state-dominated financial sector faces deep domestic structural problems and external sector challenges. Domestic structural problems include heavy state involvement in the banking and corporate sector, the lack of hard budget constraints for SOEs given state support, and high dollarization. Externally, Belarus’s economy remains exposed to spillovers from the Russian economy and Belarus’s foreign currency reserves offer a limited buffer to potential external shocks. The banking sector remains vulnerable to external shocks, given the high level of dollarization and the exposure to government and SOE debt. The political unrest following the August 2020 election led to deposit outflows from the banks, exacerbating risks to the banks’ financial portfolios. In September 2020, S&P Global Ratings downgraded Belarus’s long-term sovereign rating from stable to negative, citing the growing risks for the financial stability of Belarus’s banking system.

Foreign Exchange and Remittances

Foreign Exchange

According to the GOB, Belarus’ foreign exchange regulations do not include any restrictions or limitations regarding converting, transferring, or repatriating funds associated with investment. Foreign exchange transactions related to FDI, portfolio investments, real estate purchasing, and opening bank accounts are carried out without any restrictions. Foreign exchange is freely traded in the domestic foreign exchange market. Foreign investors can purchase foreign exchange from their Belarusian accounts in Belarusian banks for repaying investments and transferring it outside Belarus without any restrictions.

Since 2015, the Belarusian Currency and Stock Exchange has traded the U.S. dollar, the euro, and the Russian ruble in a continuous double auction regime. Local banks submit bids for buying and selling foreign currency into the trading system during the entire trading session. The bids are honored if and when the specified exchange rates are met. The National Bank uses the average weighted exchange rate of the U.S. dollar, the euro, and the Russian ruble set during the trading session to set official exchange rates from the day on which the trades are made. The cross rates versus other foreign currencies are calculated based on the data provided by other countries’ central banks or information from Reuters and Bloomberg. The stated quote becomes effective on the next calendar day and is valid until the new official exchange rate come into force. The IMF lists Belarus’ exchange rate regime in the floating exchange rate category.

Remittance Policies

There were no reports of problems exchanging currency or remitting revenues earned abroad.

Sovereign Wealth Funds

Belarus does not have a Sovereign Wealth Fund. The GOB manages the State Budget Fund of National Development, which supports major economic and social projects in the country.

Capital Markets and Portfolio Investment

Belgium has policies in place to facilitate the free flow of financial resources. Credit is allocated at market rates and is available to foreign and domestic investors without discrimination. Belgium is fully served by the international banking community and is implementing all relevant EU financial directives. At the same time, in 2020 Belgium ranked 67th out of 190 for “getting credit” on the World Bank’s “Doing Business” rankings, and in the bottom quintile among OECD high income countries.

The Belgian city of Bruges established the world’s first stock market almost 600 years ago, and the Belgian bourse is well-established today. On Euronext, a company may increase its capital either by capitalizing reserves or by issuing new shares. An increase in capital requires a legal registration procedure, and new shares may be offered either to the public or to existing shareholders. A public notice is not required if the offer is to existing shareholders, who may subscribe to the new shares directly. An issue of bonds to the public is subject to the same requirements as a public issue of shares: the company’s capital must be entirely paid up, and existing shareholders must be given preferential subscription rights.  Details on the shareholders of the Bel20 (benchmark stock market index of Euronext Brussels) can be found on http://www.gresea.be/Qui-sont-les-actionnaires-du-BEL-20.

In 2016, the Belgian government passed legislation to improve entrepreneurial financing through crowdfunding and more flexible capital venture rules.

Money and Banking System

Because the Belgian economy is directed toward international trade, more than half of its banking activities involve foreign countries. Belgium’s major banks are represented in the financial and commercial centers of dozens of countries by subsidiaries, branch offices, and representative offices. The country does have a central bank, the National Bank of Belgium (NBB), whose governor is also a member of the Governing Council of the European Central Bank (ECB).  Being a Eurozone member state, the NBB is part of the Euro system, meaning that it has transferred the sovereignty over monetary policy to the ECB.

Belgium has one of highest number of banks per capita in the world. Following a review of the 2008 financial crisis, the Belgian government decided in 2012 to shift the authority of bank supervision from the Financial Market Supervision Authority (FMSA) to the NBB. In 2017, supervision of systemically important Belgian banks shifted to the ECB. The country has not lost any correspondent banking relationships in the past three years, nor are there any correspondent banking relationships currently in jeopardy.

Since the introduction of the Single Supervisory Mechanism (SSM), the vast majority of the Belgian banking sector’s assets are held by banks that come under SSM supervision, including the “significant institutions” KBC Bank, Belfius Bank, Argenta, AXA Bank Europe, Bank of New-York Mellon and Bank Degroof/Petercam. Other banks governed by Belgian law – such as BNP Paribas Fortis and ING Belgium – are also subject to SSM supervision as they are subsidiaries of non-Belgian “significant institutions.”

In 2018, the banking sector conducted its business in a context of gradual economic recovery and persistently low interest rates. That situation had two effects: it put pressure on the sector’s profitability and caused a credit default problem in some European banks. The National Bank of Belgium designated eight Belgian banks as domestic systemically important institutions, and divided them into two groups according to their level of importance. A 1.5% capital surcharge was imposed on the first group (BNP Paribas Fortis, KBC Group and Belfius Bank). The second group (AXA Bank Europe, Argenta, Euroclear and The Bank of New York Mellon) is required to hold a supplementary capital buffer of 0.75%. These surcharges are being phased in over a three-year period.

Under pressure from the European Union, bank debt has decreased in volume overall, from close to 1.6 trillion euros in 2007 to just over 1 trillion euros in 2018, according to the National Bank of Belgium, particularly in the risky derivative markets.

It remains to be seen how the economic fallout of the COVID-19 crisis will impact banks on a long-term basis in Belgium.

Belgian banks use modern, automated systems for domestic and international transactions. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is headquartered in Brussels. Euroclear, a clearing entity for transactions in stocks and other securities, is also located in Brussels.

Opening a bank account in the country is linked to residency status.  The U.S. FATCA (Foreign Account Tax Compliance Act) requires Belgian banks to report information on U.S. account holders directly to the Belgian tax authorities, who then release the information to the IRS.

With regard to cryptocurrencies, the National Bank of Belgium has no central authority overseeing the network.

Unlike most other EU countries, there are no cryptocurrency ATMs, and the NBB has repeatedly warned about potential adverse consequences of the use of cryptocurrencies for financial stability.

Foreign Exchange and Remittances

Foreign Exchange

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Remittance Policies

Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital. No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

Sovereign Wealth Funds

Belgium has a sovereign wealth fund (SWF) in the form of the Federal Holding and Investment Company (FPIM-SFPI), a quasi-independent entity created in 2004 and now mainly used as a vehicle to manage the banking assets which were taken on board during the 2008 banking crisis. The SWF has a board whose members reflect the composition of the governing coalition and are regularly audited by the “Cour des Comptes” or national auditor. At the end of 2019, its total assets amounted to € 2.35 billion.  The majority of the funds are invested domestically. Its role is to allow public entities to recoup their investments and support Belgian banks. The SWF is required by law to publish an annual report and is subject to the same domestic and international accounting standards and rules. The SWF routinely fulfills all legal obligations. However, it is not a member of the International Forum of Sovereign Wealth Funds.

Capital Markets and Portfolio Investment

Belize’s financial system is small with little to no foreign portfolio investment transactions.  It does not have a stock exchange and capital market operations are rudimentary.  The government securities market is underdeveloped and the market for corporate bonds is almost non-existent.

Temporary restrictions are currently in place for certain current international transactions that relate to the IMF’s Article VIII obligation not to restrict payments and transfers for current international transactions.

Additionally, credit is made available on market terms with interest rates largely set by local market conditions prevailing within the commercial banks.  The credit instruments accessible to the private sector include loans, overdrafts, lines of credit, credit cards, and bank guarantees.  Foreign investors can access credit on the local market.  Under the International Banking Act, foreign investors/nonresidents may access credit from international banks registered and licensed in Belize. However, permission to access credit from the domestic banks requires Central Bank approval.

The Belize Development Finance Corporation (DFC), a state-owned development bank, offers loan financing services in various sectors.  To qualify for a loan from DFC, an individual must be a Belizean resident or citizen, while a company must be majority 51 percent Belizean owned.  The National Bank of Belize is a state-owned bank that provides concessionary credit primarily to public officers, teachers, and low income Belizeans.

Money and Banking System

A financial inclusion survey undertaken by the Central Bank of Belize in 2019 showed that approximately 65.5 percent of adult Belizeans had access to a financial account.  Belize’s financial system remains underdeveloped with a banking sector that may be characterized as stable but fragile.  The Central Bank of Belize (CBB) ( https://www.centralbank.org.bz ) is responsible for formulating and implementing monetary policy focusing on the stability of the exchange rate and economic growth.

The Central Bank of Belize in November 2020 approved the sale of Scotia Bank Belize Limited by the Caribbean International Holdings Limited, the parent company Belize Bank Limited. The approval effectively makes the controversial Lord Ashcroft’s Belize Bank Limited the largest bank in the country. Concerns were initially raised on the possible effects on Belize’ correspondent banking situation and the potential withdraw of foreign exchange from the banking system.

To respond to the economic fallout caused by the COVID-19 pandemic, the Central Bank in April 2020 reduced the statutory liquid asset and cash reserve requirement by two percent points in an effort to expand liquidity and facilitate credit flow in the economy. In March 2021, the Government amended the Central Bank Act authorizing the Central Bank to provide emergency programs and facilities to a wide array of institutions including banks, financial institutions, statutory corporations and other similar bodies. These emergency programs and facilities will allow for wider array of financial support to businesses including the “purchase of financial assets including debt, equity and securities, credit facilities or discounting of notes, drafts or bills of exchange.” Through this measure the Government hopes to make available US $25 million in liquidity to invest in the productive sector, particularly in tourism businesses.

Additionally, this amendment increased the limit of direct advances that the Central Bank can make to Central Government from 8.5 percent to 12 percent of the previous year’s recurrent revenues.

Other measures which the Central Bank has put in place in the last year, to position the banking sector withstand shocks include several guidance to ease banking customers’ debt service payments like moratoria on interest and principal payments, consolidating and restructuring credit facilities, waiving loan, credit, and penalty fees. The Central Bank also issued guidance whereby forbearance measures to extend to December 2021.

Generally, there are no restrictions on foreigners opening bank accounts in Belize.  However, persons seeking to open a bank account must comply with Central Bank regulations. Regulations differ based on residency status and whether the individual is seeking to establish a local bank account or a foreign currency account.   Foreign banks and branches are allowed to operate in the country with all banks subject to Central Bank measures and regulations.  Since 2015, all banks have regained correspondent banking relations.  These relationships are still tenuous, with delays in transactions, and fewer services offered at higher costs.

In the last few years, Belize has enacted a number of reforms to strengthen the anti-money laundering and counterterrorism-financing regime, including amendments to the Money Laundering and Terrorism (Prevention) Amendment Act and the International Business Companies (Amendment) Act.  In addition, the National Anti-Money Laundering Committee (NAMLC) is headed by the Financial Intelligence Unit with inter-agency support from key financial and law enforcement authorities.

Foreign Exchange and Remittances

Foreign Exchange

Belize has a stable currency, with the Belize dollar pegged to the United States Dollar since May 1976 at a fixed exchange rate of BZ $2.00 to the US $1.00.

The Government of Belize has established currency controls, and foreign investors seeking to convert, transfer, or repatriate funds must comply with Central Bank regulations.  Foreign investments must be registered at the Central Bank to facilitate inflows and outflows of foreign currency.  Foreign investors must register their inflow of funds to obtain an “Approved Status” for their investment and generally are approved for repatriation of funds thereafter. Additionally, he Exchange Control Regulation Act was amended in 2020 to relax the requirement for non-residents to obtain prior permission from the Central Bank to conduct transaction in securities and real estate. The amendment now provides for prior written notice to the Central Bank with full particulars of the transaction.

Businesses complained that foreign exchange shortages in 2020 constrained both local and foreign operations as the Central Bank of Belize tighten measures to obtain approval for foreign exchange. As such domestic banks prioritized foreign exchange sales to ensure that payments for essential goods and services are covered.

Remittance Policies

As mentioned above, foreign investors must obtain an “Approved Status” for their investment and register their inflow and outflow of funds with the Central Bank. Additionally, the Exchange Control Regulation Act was amended in 2020 to relax the requirement for non-residents to obtain prior permission from the Central Bank to conduct transaction in securities and real estate. The amendment now provides for prior written notice to the Central Bank with full particulars of the transaction.

Generally, there are no time limitations on remittances.  Where there is a waiting period, it depends on the availability of foreign exchange, but does not generally exceed 60 days. The Central Bank however, placed a temporary suspension on all payments of cash dividends and repatriation of profits effective December 29, 2020 to June 30, 2021.

Sovereign Wealth Funds

Belize does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Government policy supports free financial markets, subject to oversight by the Ministry of Finance and the West African States Central Bank (BCEAO). Foreign investors may seek credit from Benin’s private financial institutions and the WAEMU Regional Stock Exchange (Bureau Regional des Valeurs Mobilieres – BRVM) headquartered in Abidjan, Cote d’Ivoire, with local branches in each WAEMU member country. There are no restrictions for foreign investors to establish a bank account in Benin and obtain loans on the local market. However, proof of residency or evidence of company registration is required to open a bank account.

Money and Banking System

The banking sector is generally reliable. Twelve private commercial banks operate in Benin in addition to the BCEAO and a planned subsidiary of the African Development Bank. Taking into account microfinance institutions, roughly 22.5 percent of the population had access to banking services in 2018, the latest year for which data is available. In recent years, non-performing loans have been growing; 15 percent of total banking sector assets are estimated to be non-performing. The BCEAO regulates Beninese banks. Foreign banks are required to obtain a banking license before operating branches in Benin. They are subject to the same prudential regulations as local or regional banks. Benin has lost no correspondent banking relationships during the last three years. There is no known current correspondent banking relationship in jeopardy. Foreigners are required to present proof of residency to open bank accounts.

Foreign Exchange and Remittances

Foreign Exchange

All funds entering the country from abroad for investment purposes require reporting and registration with the Ministry of Finance at the time of arrival of funds. Evidence of registration is required to justify remittances of investment capital, earnings, loan/lease repayments, or royalties. Such remittances are allowed without restrictions. Funds entering the country from abroad for investment purposes must be converted into local currency. For the purposes of repatriating such funds, either the invested funds or the interest/earnings or royalties can be converted into any world currency.

The currency of Benin is BCEAO-CFA Franc (international code: XOF). XOF has a fixed parity with the Euro and fluctuates against all other currencies based on this parity. This parity was established at the time of the Euro’s creation (January 1, 1999) and has not changed since then. The parity stands at XOF 655.957= EUR 1.00, guaranteed by the French government under an arrangement between the Treasury of France and the European Union.

Remittance Policies

There have been no recent changes to investment remittance policies. Banks require documents to justify remittances related to investments. The waiting time to remit investment returns does not exceed 60 days in practice.

Sovereign Wealth Funds

Benin does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment 

The Bermuda Stock Exchange (BSX) offers a variety of domestic and international listing options. Established in 1971, the BSX is globally recognized for commercially sensible listing requirements and partners with the Bermuda Monetary Authority (BMA) and Bermuda Business Development Agency (BBDA) to further develop Bermuda’s reputation.

Bermuda does not have a central bank, but the BMA issues and redeems notes and coins, supervises, regulates, and inspects financial institutions which operate in or from Bermuda, and generally promotes the financial stability and soundness of financial institutions.  The BMA does not, however, determine interest rates, which are set by the market, regulated by the Ministry of Finance, and usually follow the Federal Reserve System rates.

Bermuda does not have developed capital markets and does not control monetary policy.  Commercial credit lines are normally arranged through U.S. or other overseas institutions.  Credit is allocated on market terms, and foreign investors may get credit on the local and international markets.  The private sector has access to various credit instruments via local banks.  Many companies, particularly the larger ones, maintain external banking relationships.

Money and Banking System 

Bermuda is a highly successful offshore financial center. The Bermuda Monetary Authority (BMA) oversees financial services with a risk-based approach to the regulation and supervision of banks and deposit companies in Bermuda. The regulatory and supervisory framework is supported by principal legislation, The Banks and Deposit Companies Act 1999, which is regularly supplemented with updated statements of principles, policy and guidance.

There are four banks on the island – HSBC Bank Bermuda Ltd., Clarien Bank Ltd., Bank of Butterfield Ltd. and Bermuda Commercial Bank.

The BMA published the ‘Basel III for Bermuda Banks – Final Rule’ effective from 1 January 2015, which was updated in November 2017. The Authority’s final Basel III document outlines a range of new capital and liquidity standards as prescribed by the Basel Committee on Banking Supervision (BCBS). The Authority has adopted all three pillars as proposed by Basel III: i) Pillar I – minimum capital requirements; ii) Pillar II – supervisory review process; and iii) Pillar III – market discipline.

Whilst the final Basel III rules supersede Basel II, elements of Basel II and corresponding guidance will remain in force subject to future revisions, and as such relevant components of the Authority’s ‘Revised Framework for Regulatory Capital Assessment’ remain applicable.

Guidance for Basel III and Basel II can be found at, https://www.bma.bm/document-centre/policy-and-guidance-banking 

The BMA updated its regulatory framework in response to new international standards proposed by the Basel Committee. The following changes were introduced throughout 2018 and 2019:

• Net Stable Funding Ratio (NSFR) as a new component to our liquidity requirements
• Revisions to our stress testing guidance to include new standards around Interest Rate Risk in the Banking Book (IRRBB)
• New required forms and templates for the Pillar 3 Disclosure requirement
• Transitional arrangements for the regulatory treatment of new accounting standards around provisions

The BMA helped to establish a Banking Liaison Panel (BLP) in 2017 – a statutory body contemplated in the Banking (Special Resolution Regime) Act 2016. In addition, the Authority joined the IAIS Resolution Working Group with a view to commencing work on a special resolution regime for large international insurers.

The Banks and Deposit Companies Act 1999 implemented the Base Committee’s Core Principles for Effective Banking Supervision.  Bermuda banks are compliant with the Basel II Accord and have either implemented or are moving toward full implementation of Basel III.

Supervision is intended to assist the Authority with assessing the ongoing financial viability of a money service provider, the fitness and propriety of its management, the prudent conduct of its business and its compliance with the Money Service Business Act 2016 (the Act).

The BMA’s supervision of money service businesses involves regular meetings with senior management of licensed firms, together with scrutiny of financial and statistical information in connection with the institution’s business activities and periodic compliance visits to the institution’s premises. In addition to prudential assessments, a review of compliance in relation to the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 also forms part of the Authority’s visits.

The Authority expects licensed institutions to cooperate fully in providing all relevant information and documents without its having routine recourse to legal powers as provided under the Act.

Section 2 of the Act defines money service business as “the business of providing any or all of the following services to the public”, including:

• Money transmission services.
• Cashing checks which are made payable to customers and guaranteeing checks.
• Issuing, selling or redeeming drafts, money orders or traveler’s checks for cash.
• Payment services business.
• Operating a bureau de change whereby cash in one currency is exchanged for cash in another currency.”

Institutions licensed under the Banks and Deposit Companies Act 1999 are exempted from the Act. In addition, where a company provides any of the services listed above as an ancillary service to its clients and does not levy a separate charge, the Authority is not likely to treat such an activity as being within scope of the Act. For further details, please refer to section 7 of the Guidance Notes.

The Digital Asset Business Act 2018 (the Act) is the statutory basis for regulating Digital Asset Business (DAB) in Bermuda. The Act provides for a licensing regime for any person or undertaking (unless otherwise exempted) which carries out any of the following activities:

• Issuing, selling or redeeming virtual coins, tokens or any other form of digital assets.
• Operating as a payment service provider business utilizing digital assets which
• Includes the provision of services for the transfer of funds.
• Operating as an electronic exchange.
• Providing custodial wallet services.
• Operating as a digital asset’s services vendor.

According to the Act, “digital asset” means anything that exists in binary format and comes with the right to use it and includes a digital representation of value that—

• Is used as a medium of exchange, unit of account, or store of value and is
• Not legal tender, whether or not denominated in legal tender;
• Is intended to represent assets such as debt or equity in the promoter;
• Is otherwise intended to represent any assets or rights associated with such assets; but does not include—
• A transaction in which a person grants value as part of an affinity or rewards program, which value cannot be taken from or exchanged with the person for legal tender, bank credit or any digital asset, or a
• Digital representation of value issued by or on behalf of the publisher and used within an online game, game platform, or family of games sold by the same publisher or offered on the same game platform.

There have been notable employment changes at the Rosebank location of Butterfield Bank. Eleven positions were made redundant in April 2019 and over thirty employees accepted early retirement packages. It was reported that the closure was a result of increased use of electronic services, causing a fifty percent reduction in the volume of in-person transactions. Butterfield Bank has three other locations on the island that are still operating at full capacity.

Foreign Exchange and Remittances 

Foreign Exchange

The Bermuda Dollar (BMD) is interchangeable with U.S. currency with an exchange rate of 1:1. Both currencies are freely interchangeable and transferable without any restrictions.

The BMA issues Bermuda’s national currency and manages exchange control transactions. It administers the Exchange Control Act 1972 that states that no capital or exchange controls apply to non-residents or to the various forms of offshore entities, which are free to import and export funds in all currencies.

The Exchange Control Regulations 1973 and the Companies Act 1981 regulate the issue, transfer, redemption, and repurchase of securities.  For exchange control purposes, the BMA must give prior approval for issues to and transfers of securities in Bermuda companies involving non-residents, except where general permission has been granted pursuant to the Notice to the Public of June 2005.

The 2009 Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Amendment gave the BMA the authority to oversee all money transactions involving wire transfers.  The act requires financial institutions to verify the accuracy and completeness of the information on the payer before authorizing the transfer of funds. The institution must also retain all the records pertaining to the transaction for a period of no less than five years.  In 2013, amendments created an obligation to report suspicious money transactions which could possibly be linked to money laundering or to monies being used to fund terrorism. It established a civil proceeding before the Supreme Court for the purpose of recovering money obtained through unlawful conduct.

In 2009, Bermuda updated the 1898 Revenue Act to strengthen the requirements related to cross-border transporting of currency and negotiable instruments.  The threshold was set at USD 10,000, after a financial transaction surpasses that amount; the financial institution is automatically required to report the transaction.  Passengers arriving to Bermuda (regardless of point of embarkation) must complete a mandatory declaration form. This mandatory disclosure system applies to all outgoing passengers traveling to the U.S., Canada, and the UK.

The 2010 Foreign Currency Purchase Tax Amendment Act is applied to the purchase of all non-local currencies, including the USD.

Bermuda is a member of the Caribbean Financial Action Task Force (CFATF), an organization of states and territories of the Caribbean basin which have agreed to implement common countermeasures against money laundering, and it is listed under the 2014 International Narcotics Control Strategy Report (INCSR) as being a monitored country.

The Bermuda Financial Network (BFN) Limited is a local international financial services firm. Its main objective is to facilitate banking transactions for consumer and business including e-commerce and money service businesses. In May 2008, the BFN was granted a Money Service Business License from the Bermuda Monetary Authority (BMA) in conjunction with the launch of its Western Union agency in Bermuda which offers international money transfer services. The BFN provides guidance on compliance policies and procedures with local regulations. Money transfer services are popular among foreign workers looking to send funds to their families overseas. The Money Shop is another business providing financial services in Bermuda with money transfer options through MoneyGram or wire transfers.

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

Remittance Policies

The Bermuda Financial Network (BFN) Limited is a local international financial services firm. Their main objective is to facilitate banking transactions for consumer and business including e-commerce and money service businesses. The BFN provides guidance on compliance policies and procedures with local regulations. Money transfer services are popular among foreign workers looking to send funds to their families overseas through businesses including The Money Shop, MoneyGram and Western Union.

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

Sovereign Wealth Funds 

Not applicable/information unavailable.

Capital Markets and Portfolio Investment

The government’s general attitude toward foreign portfolio investment is neutral.  Established Bolivian firms may issue short or medium-term debt in local capital markets, which act primarily as secondary markets for fixed-return securities.  Bolivian capital markets have sought to expand their handling of local corporate bond issues and equity instruments.  Over the last few years, several Bolivian companies and some foreign firms have been able to raise funds through local capital markets.  However, the stock exchange is small and is highly concentrated in bonds and debt instruments (more than 95 percent of transactions).  The amount of total transactions in 2020 was around 35 percent of GDP.

From 2008-2019, the financial markets experienced high liquidity, which led to historically low interest rates.  However, liquidity has been more limited in recent years, and there are some pressures to increase interest rates.  The Bolivian financial system is not well integrated with the international system and there is only one foreign bank among the top ten banks of Bolivia.

In October 2012, Bolivia returned to global credit markets for the first time in nearly a century, selling USD 500 million worth of 10-year bonds at the New York Stock Exchange.  The sovereign bonds were offered with an interest rate of 4.875 percent and demand for the bonds well surpassed the offer, reaching USD 1.5 billion.  U.S. financial companies Bank of America, Merrill Lynch, and Goldman Sachs were the lead managers of the deal.  In 2013, Bolivia sold another USD 500 million at 5.95 percent for ten years.  HSBC, Bank of America, and Merrill Lynch were the lead managers of the deal.  In 2017, Bolivia sold another USD 1 billion at 4.5 percent for ten years, with Bank of America and JP Morgan managing the deal.  The resources gained from the sales were largely used to finance infrastructure projects.  A sovereign bond issuance of up to $3 billion was approved by the National Assembly for 2021 but had not yet occurred as of May 2021.

The government and central bank respect their obligations under IMF Article VIII, as the exchange system is free of restrictions on payments and transfers for international transactions.

Foreign investors legally established in Bolivia are able to get credits on the local market.  However, due to the size of the market, large credits are rare and may require operations involving several banks.  Credit access through other financial instruments is limited to bond issuances in the capital market.  The 2013 Financial Services Law directs credit towards the productive sectors and caps interest rates.

Money and Banking System

The Bolivian banking system is small, composed of 16 banks, 6 banks specialized in mortgage lending, 3 private financial funds, 30 savings and credit cooperatives, and 8 institutions specialized in microcredit.  Of the total number of personal deposits made in Bolivia through December 2020 (USD 29 billion), the banking sector accounted for 80 percent of the total financial system.  Similarly, of the total loans and credits made to private individuals (USD 28 billion) through December 2020, 80 percent were made by the banking sector, while private financial funds and the savings and credit cooperatives accounted for the other 20 percent.

Bolivian banks have developed the capacity to adjudicate credit risk and evaluate expected rates of return in line with international norms.  The banking sector was stable and healthy with delinquency rates at less than 2.0 percent in 2020. In 2020, delinquency rates rose after the government permitted clients to defer bank loan payments until June 2021 without penalty as a mitigating measure for the COVID-19 pandemic.  While delinquency rates still remain relatively low, there are concerns this measure could potentially harm the banking sector’s stability.

In 2013, a new Financial Services Law entered into force.  This new law enacted major changes to the banking sector, including deposit rate floors and lending rate ceilings, mandatory lending allocations to certain sectors of the economy and an upgrade of banks’ solvency requirements in line with the international Basel standards.  The law also requires banks to spend more on improving consumer protection, as well as providing increased access to financing in rural parts of the country.

Credit is now allocated on government-established rates for productive activities, but foreign investors may find it difficult to qualify for loans from local banks due to the requirement that domestic loans be issued exclusively against domestic collateral.  Since commercial credit is generally extended on a short-term basis, most foreign investors prefer to obtain credit abroad.  Most Bolivian borrowers are small and medium-sized enterprises (SMEs).

In 2007, the government created a Productive Development Bank (Banco de Desarrollo Productivo) to boost the production of small, medium-sized and family-run businesses.  The bank was created to provide loans to credit institutions which meet specific development conditions and goals, for example by giving out loans to farmers, small businesses, and other development focused investors.  The loans are long term and have lower interest rates than private banks can offer in order to allow for growth of investments and poverty reduction.

In September 2010, the Bolivian Government bought the local private bank Banco Union as part of a plan to gain partial control of the financial sector.  Banco Union is one of the largest banks, with a share of 10.8 percent of total national credits and 12.7 percent of the total deposits; one of its principal activities is managing public sector accounts.  Bolivian government ownership of Banco Union was illegal until December 2012, when the government enacted the State Bank Law, allowing for state participation in the banking sector.

There is no strong evidence of “cross-shareholding” and “stable-shareholding” arrangements used by private firms to restrict foreign investment, and the 2009 Constitution forbids monopolies and supports antitrust measures.  In addition, there is no evidence of hostile takeovers (other than government nationalizations that took place from 2006-14).

The financial sector is regulated by ASFI (Supervising Authority of Financial Institutions), a decentralized institution that is under the Ministry of Economy.  The Central Bank of Bolivia (BCB) oversees all financial institutions, provides liquidity when necessary, and acts as lender of last resort.  The BCB is the only monetary authority and is in charge of managing the payment system, international reserves, and the exchange rate.

Foreigners are able to establish bank accounts only with residency status in Bolivia.

Blockchain technologies in Bolivia are still in the early stages.  Currently, the banking sector is analyzing blockchain technologies and the sector intends to propose a regulatory framework in coordination with ASFI in the future.

Three different settlement mechanisms are available in Bolivia: (1) the high-value payment system administered by the Central Bank for inter-bank operations; (2) a system of low value payments utilizing checks and credit and debit cards administered by the local association of private banks (ASOBAN); and (3) the deferred settlement payment system designed for small financial institutions such as credit cooperatives.  This mechanism is also administered by the Central Bank.

Foreign Exchange and Remittances

Foreign Exchange

The Banking Law (#393, 2013) establishes regulations for foreign currency hedging and authorizes banks to maintain accounts in foreign currencies.  A significant, but dropping, percentage of deposits are denominated in U.S. dollars (currently less than 14 percent of total deposits).  Bolivian law currently allows repatriation of profits, with a 12.5 percent withholding tax.  However, a provision of the 2009 Constitution (Article 351.2) requires reinvestment within Bolivia of private profits from natural resources.  Until specific implementing legislation is passed, it is unclear how this provision will be applied.  In addition, all bank transfers in U.S. dollars within the financial system and leaving the country must pay a Financial Transaction Tax (ITF) of 2 percent.  This tax applies to foreign transactions for U.S. dollars leaving Bolivia, not to money transferred internally.

Any banking transaction above USD 10,000 (in one operation or over three consecutive days) requires a form stating the source of funds.  In addition, any hard currency cash transfer from or to Bolivia equal to or greater than USD 10,000 must be registered with the customs office.  Amounts between USD 20,000 and USD 500,000 require authorization by the Central Bank and quantities above USD 500,000 require authorization by the Ministry of the Economy and Public Finance.  The fine for underreporting any cash transaction is equal to 30 percent of the difference between the declared amount and the quantity of money found.  The reporting standard is international, but many private companies in Bolivia find the application cumbersome due to the government requirement for detailed transaction breakdowns rather than allowing for blanket transaction reporting.

Administrative Resolution 398/10 approved in June 2010 forces Bolivian banks to reduce their investments and/or assets outside the country to an amount that does not exceed 50 percent of the value of their net equity.

The Central Bank charges a fee for different kinds of international transactions related to banking and trade.  The current list of fees and the details can be found at:

https://www.bcb.gob.bo/webdocs/01_resoluciones/RD%20152%202019.pdf

Law 843 on tax reform directly affects the transfer of all money to foreign countries.  All companies are charged 25 percent tax, except for banks which can be charged 37.5 percent, on profits under the Tax Reform Law, but when a company sends money abroad, the presumption of the Bolivian Tax Authority is that 50 percent of all money transmitted is profit.  Under this presumption, the 25 percent tax is applied to half of all money transferred abroad, whether actual or only presumed profit.  In practical terms, it means there is a payment of 12.5 percent as a transfer tax.

Currency is freely convertible at Bolivian banks and exchange houses.  The Bolivian Government describes its official exchange system as an “incomplete crawling peg.”  Under this system, the exchange rate is fixed, but undergoes micro-readjustments that are not pre-announced to the public.  There is a spread of 10 basis points between the exchange rate for buying and selling U.S. dollars.  The Peso Boliviano (Bs) has remained fixed at 6.96 Bs/USD  1 for selling and 6.86 Bs/USD  1 for buying since October 2011.  The parallel rate closely tracks the official rate, suggesting the market finds the Central Bank’s policy acceptable.  In order to avoid distortions in the exchange rate market, the Central Bank requires all currency exchange to occur at the official rate ±1 basis point.

Remittance Policies

Each remittance transaction from Bolivia to other countries has a USD 2,500 limit per transaction, but there is no limit to the number of transactions that an individual can remit.  The volume of remittances sent to and from Bolivia has increased considerably in the past five years, and the central bank and banking regulator are currently analyzing whether to impose more regulations sometime in the future.  Foreign investors are theoretically able to remit through a legal parallel market utilizing convertible, negotiable instruments, but, in practice, the availability of these financial instruments is limited in Bolivia.  For example, the Bolivian Government mainly issues bonds in Bolivianos and the majority of corporate bonds are also issued in Bolivianos.

The official exchange rate between Bolivianos and dollars is the same as the informal rate.  The government allows account holders to maintain bank accounts in Bolivianos or dollars and make transfers freely between them.  Business travelers may bring up to USD 10,000 in cash into the country.  For amounts greater than USD 10,000, government permission is needed through sworn declaration.

Sovereign Wealth Funds

Neither the Bolivian Government nor any government-affiliated entity maintains a sovereign wealth fund.

Capital Markets and Portfolio Investment

Capital markets remain underdeveloped in BiH.  Both entities have created their own modern stock market infrastructure with separate stock exchanges in Sarajevo (SASE) and Banja Luka (BLSE), both of which started trading in 2002.  The small size of the markets, lack of privatization, weak shareholder protection, and public mistrust of previous privatization programs has impeded the development of the capital market.

Both the RS and Federation issued government securities for the first time during 2011, as part of their plans to raise capital in support of their budget deficits during this period of economic stress.  Both entity governments continue to issue government securities in order to fill budget gaps.  These securities are also available for secondary market trading on the stock exchanges.

In August 2020,  the international rating agency Standard and Poor’s (S&P) affirmed the credit rating of Bosnia and Herzegovina as “B” with a stable outlook.  The agency stated that the stable outlook reflects the anticipation that the risks coming from the economic impact of the coronavirus pandemic will be balanced over the next 12 months by the potential implementation of structural reforms and S&P’s expectations for stronger economic growth beyond 2020.Prior to the COVID-19 pandemic, the Agency forecasts real GDP growth of 2.7 percent over the next four years. The ratings on BiH continue to be supported by the favorable structure of state debt. Even taking into account the impact of the pandemic, net general government debt should remain about 30% of GDP over the next four years. Almost all external debt (which accounts for more than 70% of gross general government debt) is due to official bilateral or multilateral lenders, and is characterized by long maturities and favorable interest rates. The quality of banking regulations was also positively evaluated.  Positive reforms, according to analysts’ expectations, could include reducing the labor cost burden on business and enhancing governance of the country’s state-owned enterprise sector.

Money and Banking System

The banking and financial system has been stable with the most significant investments coming from Austria.  As of March 2020, there are 23 commercial banks operating in BiH: 15 with headquarters in the Federation and eight in the Republika Srpska.  Twenty-two commercial banks are members of a deposit insurance program, which provides for deposit insurance of KM 50,000 (USD 28,000).  The banking sector is divided between the two entities, with entity banking agencies responsible for banking supervision.  The BiH Central Bank maintains monetary stability through its currency board arrangement, and supports and maintains payment and settlement systems.  It also coordinates the activities of the entity Banking Agencies, which are in charge of bank licensing and supervision. Reforms of the banking sector, mandated by the IMF and performed in conjunction with the IMF and World Bank, are in progress.

BiH passed a state-level framework law in 2010 mandating the use of international accounting standards, and both entities passed legislation that eliminated differences in standards between the entities and Brčko District.  All governments have implemented accounting practices that are fully in line with international norms.

Foreign Exchange and Remittances

Foreign Exchange

The Law on Foreign Direct Investment guarantees the immediate right to transfer and repatriate profits and remittances.  Local and foreign companies may hold accounts in one or more banks authorized to initiate or receive payments in foreign currency.  The implementing laws in both entities include transfer and repatriation rights.  The Central Bank’s adoption of a currency board in 1997 guarantees the local currency, the convertible mark or KM (aka BAM), is fully convertible to the euro with a fixed exchange rate of KM 1.95583 = €1.00.

Remittance Policies

BiH has no remittance policy, although remittances are generally high due to a large diaspora.  Remittances are estimated to range up to 15 percent of total GDP.  Based on the two entities’ Laws on Foreign Currency Exchange, all payments in the country must be in national currency.

Sovereign Wealth Funds

BiH does not have a government-affiliated Sovereign Wealth Fund.

Capital Markets and Portfolio Investment

The government encourages foreign portfolio investment, although there are limits on foreign ownership in certain sectors. It also embraces the establishment of new and diverse financial institutions to support increased foreign and domestic investment and to fill existing gaps where finance is not commercially available. There are nine commercial banks, one merchant bank, one offshore bank, two statutory deposit-taking institutions, and one credit union operating in Botswana. All have corresponding relationships with U.S. banks. Additional financial institutions include various pension funds, insurance companies, microfinance institutions, stock brokerage companies, asset management companies, statutory finance institutions, collective investment undertakings, and statutory funds. Historically, commercial banks have accounted for 92 percent of total deposits and 98 percent of total loans in Botswana. A large portion of the population does not participate in the formal banking sector.

Money and Banking System

The central bank, the Bank of Botswana, acts as banker and financial advisor to the GoB and is responsible for the management of the country’s foreign exchange reserves, the administration of monetary and exchange rate policies, and the regulation and supervision of financial institutions in the country. Monetary policy in Botswana is widely regarded as prudent, and the GoB has successfully managed to maintain a sensible exchange rate and a stable inflation rate, generally within the target of three to six percent.

Banks may lend to non-resident-controlled companies without seeking approval from the Bank of Botswana. Foreign investors usually enjoy better access to credit than local firms. In July 2014, USAID’s Development Credit Authority (now DFC – U.S. International Development Finance Corporation), in collaboration with ABSA (formerly Barclays Bank of Botswana), implemented a program to allow small and medium-sized enterprises (SME) to access up to USD 15 million in loans in an effort to diversify the economy.

At the end of 2019, there were 25 companies on the Domestic Board and eight companies on the Foreign Equities Board of the Botswana Stock Exchange (BSE). In addition, there were 46 listed bonds and three exchange traded funds listed on the Exchange. The total market capitalization for listed companies at year-end 2019 was USD 37 billion, though one company constitutes the majority of that figure, Anglo-American plc, which has a market capitalization of approximately USD 30 billion. The BSE is still highly illiquid compared to larger African markets and is dominated by mining companies which adds to index volatility. Laws prohibiting insider trading and securities fraud are clearly stipulated under Section 35 – 37 of the Securities Act, 2014 and charges for contravening these laws are listed under Section 54 of the same Act.

The government has legitimized offshore capital investments and allows foreign investors, individuals and corporate bodies, and companies incorporated in Botswana, to open foreign currency accounts in specified currencies. The designated currencies are U.S. Dollar, British Pound sterling, Euro, and the South African Rand. There are no known practices by private firms to restrict foreign investment participation or control in domestic enterprises. Private firms are not permitted to adopt articles of incorporation or association which limit or prohibit foreign investment, participation, or control.

In general, Botswana exercises careful control over credit expansion, the pula exchange rate, interest rates, and foreign and domestic borrowing. Banking legislation is largely in line with industry norms for regulation, supervision, and payments. However, Botswana failed to meet the compliance requirements of the Financial Action Task Force (FATF), resulting in a grey listing in October 2018. Botswana is implementing an action plan to remedy the situation. In February 2021, FATF listed Botswana among the countries that had made significant progress toward combating money laundering and terrorist financing despite the challenges posed by COVID-19. FATF encouraged the GoB to continue to address the strategic deficiencies. The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) was established in 2008 and provides regulatory oversight for the non-banking sector. It extends know-your-customer practices to non-banking financial institutions to help deter money laundering and terrorist financing. NBFIRA is also responsible for regulating the International Financial Services Centre, a hub charged with promoting the financial services industry in Botswana.

Foreign Exchange and Remittances

Foreign Exchange

There are no foreign exchange controls in Botswana or restrictions on capital outflows through financial institutions. Commercial banks are required to ensure customers complete basic forms indicating name, address, purpose, and other details prior to processing funds transfer requests or loan applications. The finance ministry monitors data collected on the forms for statistical information on capital flows, but the form does not require government approval prior to processing a transaction and does not delay capital transfers.

To encourage portfolio investment, develop domestic capital markets, and diversify investment instruments, non-residents can trade in and issue Botswana pula-denominated bonds with maturity periods of more than one year, provided such instruments are listed on the Botswana Stock Exchange (BSE). Only Botswana citizens can purchase Botswana’s Letlole National Savings Certificate (equivalent to a U.S. Treasury bond). Foreigners can hold shares in BSE-listed Botswana companies.

Travelers are not restricted to the amount of currency they may carry but are required to declare to customs at the port of departure any cash amount exceeding 10,000 pula (~USD 905). There are no quantitative limits on foreign currency access for current account transactions.

Bank accounts denominated in foreign currency are allowed in Botswana. Commercial banks offer accounts denominated in U.S. Dollars, British Pounds, Euros and South African Rand. Businesses and other bodies incorporated or registered domestically may open accounts without prior approval from the Bank of Botswana. The GoB also permits the issuance of foreign currency denominated loans.

Upon disinvestment by a non-resident, the non-resident is allowed immediate repatriation of all proceeds including profits, rents, and fees.

The Botswana Pula has a crawling peg exchange rate and is tied to a basket of currencies of major trading partner countries. In 2018 the weights of the pula basket currencies were maintained at 45 percent for the South African Rand and 55 percent for the Special Drawing Rights (consisting of the U.S. Dollar, the Euro, British Pound, Japanese Yen, and Chinese Renminbi) respectively. Government maintained these exchange rate parameters for 2021. However, the downward rate of crawl of the pula exchange was adjusted from 1.51 percent to 2.87 percent per annum in May 2020. Movements of the South African Rand against the U.S. Dollar heavily influence the Pula. There is no difficulty in obtaining foreign exchange. Shortages of foreign exchange that would lead banks to block transactions are highly unlikely.

Remittance Policies

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

Sovereign Wealth Funds

The Bank of Botswana maintains a long-term sovereign wealth fund, known as the Pula Fund, in addition to a regular foreign reserve account providing basic import cover. The Pula Fund was established under the Bank of Botswana Act and forms part of the country’s foreign exchange reserves, which are primarily funded by diamond revenues. The Pula Fund is wholly invested in foreign currency-denominated assets and is managed by the Bank of Botswana Board with input from recognized international financial management and investment firms. All realized market currency gains or losses are reported in the Bank of Botswana’s income statement. The Fund has been affected severely by the COVID-19 pandemic, with the GoB making withdrawals to address significant COVID-19-related revenue shortfalls. As a result, the Pula Fund, long a fiscal cushion against economic shocks, is significantly depleted from 20 percent of GDP in 2011 to 7 percent of GDP as of mid-2020 – from $1.69 billion to $510 million – a decline of more than 70 percent. Botswana is a founding member of the International Forum of Sovereign Wealth Fund and was one of the architects of the Santiago Principles in 2008. More information is available at: https://www.bankofbotswana.bw/sites/default/files/BOTSWANA-PULA-FUND-SANTIAGO-PRINCIPLES.pdf

Capital Markets and Portfolio Investment

The Brazil Central Bank (BCB) embarked in October 2016 on a sustained monetary easing cycle, lowering the Special Settlement and Custody System (Selic) baseline reference rate from a high of 14 percent in October 2016 to a record-low 2 percent by the end of 2020.  The downward trend was reversed by an increase to 2.75 percent in March 2021.  As of March 2021, Brazil’s banking sector projects the Selic will reach 5 percent by the end of 2021.  Inflation for 2020 was 4.52 percent, within the target of 4 percent plus/minus 1.5 percent.  The National Monetary Council (CMN) set the BCB’s inflation target at 3.75 percent for 2021, at 3.5 percent for 2022 and at 3.25 percent at 2023.  Because of a heavy public debt burden and other structural factors, most analysts expect the “neutral” policy rate will remain higher than target rates in Brazil’s emerging-market peers (around five percent) over the forecast period.

In 2020, the ratio of public debt to GDP reached 89.3 percent according to BCB, a new record for the country, although below original projections.  Analysts project that the debt/GDP ratio will be at or above92 percent by the end of 2021.

The role of the state in credit markets grew steadily beginning in 2008, with public banks now accounting for over 55 percent of total loans to the private sector (up from 35 percent).  Directed lending (that is, to meet mandated sectoral targets) also rose and accounts for almost half of total lending.  Brazil is paring back public bank lending and trying to expand a market for long-term private capital.

While local private sector banks are beginning to offer longer credit terms, state-owned development bank BNDES is a traditional source of long-term credit in Brazil.  BNDES also offers export financing.  Approvals of new financing by BNDES increased 40 percent in 2020 from 2019, with the infrastructure sector receiving the majority of new capital.

The São Paulo Stock Exchange (BOVESPA) is the sole stock market in Brazil, while trading of public securities takes place at the Rio de Janeiro market.  In 2008, the Brazilian Mercantile & Futures Exchange (BM&F) merged with the BOVESPA to form B3, the fourth largest exchange in the Western Hemisphere, after the NYSE, NASDAQ, and Canadian TSX Group exchanges.  In 2020, there were 407 companies traded on the B3 exchange.  The BOVESPA index increased only 2.92 percent in valuation during 2020, due to the economic impact of the COVID-19 pandemic.  Foreign investors, both institutional and individuals, can directly invest in equities, securities, and derivatives; however, they are limited to trading those investments on established markets.

Wholly owned subsidiaries of multinational accounting firms, including the major U.S. firms, are present in Brazil.  Auditors are personally liable for the accuracy of accounting statements prepared for banks.

Money and Banking System

The Brazilian financial sector is large and sophisticated. Banks lend at market rates that remain relatively high compared to other emerging economies.  Reasons cited by industry observers include high taxation, repayment risk, concern over inconsistent judicial enforcement of contracts, high mandatory reserve requirements, and administrative overhead, as well as persistently high real (net of inflation) interest rates.  According to BCB data collected for final quarter of 2019, the average rate offered by Brazilian banks to non-financial corporations was 13.87 percent.

The banking sector in Brazil is highly concentrated with BCB data indicating that the five largest commercial banks (excluding brokerages) account for approximately 80 percent of the commercial banking sector assets, totaling $1.58 trillion as of the final quarter of 2019.  Three of the five largest banks (by assets) in the country – Banco do Brasil, Caixa Econômica Federal, and BNDES – are partially or completely federally owned.  Large private banking institutions focus their lending on Brazil’s largest firms, while small- and medium-sized banks primarily serve small- and medium-sized companies.  Citibank sold its consumer business to Itaú Bank in 2016, but maintains its commercial banking interests in Brazil.  It is currently the sole U.S. bank operating in the country.  Increasing competitiveness in the financial sector, including in the emerging fintech space, is a vital part of the Brazilian government’s strategy to improve access to and the affordability of financial services in Brazil.

On November 16, 2020, Brazil’s Central Bank implemented a twenty-four hour per day instant payment and money transfer system called PIX.  The PIX system is supposed to deconcentrate the banking sector, increase financial inclusion, stimulate competitiveness, and improve efficiency in the payments market.

In recent years, the BCB has strengthened bank audits, implemented more stringent internal control requirements, and tightened capital adequacy rules to reflect risk more accurately.  It also established loan classification and provisioning requirements. These measures apply to private and publicly owned banks alike.  In December 2020, Moody’s upgraded a collection of 28 Brazilian banks and their affiliates to stable from negative after the agency had lowered the outlook on the Brazilian system in April 2020 due to the economic unrest.  The Brazilian Securities and Exchange Commission (CVM) independently regulates the stock exchanges, brokers, distributors, pension funds, mutual funds, and leasing companies with penalties against insider trading.

Foreigners may find it difficult to open an account with a Brazilian bank.  The individual must present a permanent or temporary resident visa, a national tax identification number (CPF) issued by the Brazilian government, either a valid passport or identity card for foreigners (CIE), proof of domicile, and proof of income.  On average, this process from application to account opening lasts more than three months.

Foreign Exchange and Remittances

Foreign Exchange

Brazil’s foreign exchange market remains small.  The latest Triennial Survey by the Bank for International Settlements, conducted in December 2019, showed that the net daily turnover on Brazil’s market for OTC foreign exchange transactions (spot transactions, outright forwards, foreign-exchange swaps, currency swaps, and currency options) was $18.8 billion, down from $19.7 billion in 2016.  This was equivalent to around 0.22 percent of the global market in 2019 versus 0.3 percent in 2016.

Brazil’s banking system has adequate capitalization and has traditionally been highly profitable, reflecting high interest rate spreads and fees.  Per an October 2020 Central Bank Financial Stability Report, despite the economic difficulties caused by the pandemic, all banks exceeded required solvency ratios, and stress testing demonstrated that the banking system has adequate loss-absorption capacity in all simulated scenarios.  Furthermore, the report noted 99.9 percent of banks already met Basel III requirements and possess a projected Common Equity Tier 1 (CET1) capital ratio above the minimum 7 percent required at the end of 2019.

There are few restrictions on converting or transferring funds associated with a foreign investment in Brazil.  Foreign investors may freely convert Brazilian currency in the unified foreign exchange market where buy-sell rates are determined by market forces.  All foreign exchange transactions, including identifying data, must be reported to the BCB.  Foreign exchange transactions on the current account are fully liberalized.

The BCB must approve all incoming foreign loans.  In most cases, loans are automatically approved unless loan costs are determined to be “incompatible with normal market conditions and practices.”  In such cases, the BCB may request additional information regarding the transaction.  Loans obtained abroad do not require advance approval by the BCB, provided the Brazilian recipient is not a government entity.  Loans to government entities require prior approval from the Brazilian Senate as well as from the Economic Ministry’s Treasury Secretariat and must be registered with the BCB.

Interest and amortization payments specified in a loan contract can be made without additional approval from the BCB.  Early payments can also be made without additional approvals if the contract includes a provision for them.  Otherwise, early payment requires notification to the BCB to ensure accurate records of Brazil’s stock of debt.

Remittance Policies

Brazilian Federal Revenue Service regulates withholding taxes (IRRF) applicable to earnings and capital gains realized by individuals and legal entities resident or domiciled outside Brazil.  Upon registering investments with the BCB, foreign investors are able to remit dividends, capital (including capital gains), and, if applicable, royalties.  Investors must register remittances with the BCB.  Dividends cannot exceed corporate profits.  Investors may carry out remittance transactions at any bank by documenting the source of the transaction (evidence of profit or sale of assets) and showing payment of applicable taxes.

Under Law 13259/2016 passed in March 2016, capital gain remittances are subject to a 15 to 22.5 percent income withholding tax, with the exception of capital gains and interest payments on tax-exempt domestically issued Brazilian bonds.  The capital gains marginal tax rates are: 15 percent up to $874,500 in gains; 17.5 percent for $874,500 to $1,749,000 in gains; 20 percent for $1,749,000 to $5,247,000 in gains; and 22.5 percent for more than $5,247,000 in gains.  (Note:  exchange rate used was 5.717 reais per dollar, based on March 30, 2021 values.)

Repatriation of a foreign investor’s initial investment is also exempt from income tax under Law 4131/1962.  Lease payments are assessed a 15 percent withholding tax.  Remittances related to technology transfers are not subject to the tax on credit, foreign exchange, and insurance, although they are subject to a 15 percent withholding tax and an extra 10 percent Contribution for Intervening in Economic Domain (CIDE) tax.

Sovereign Wealth Funds

Brazil had a sovereign fund from 2008 – 2018, when it was abolished, and the money was used to repay foreign debt.

Capital Markets and Portfolio Investment

In 2013, Brunei signed a Memorandum of Understanding (MOU) with the Securities

Commission Malaysia (SCM) designed to strengthen collaboration in the development of fair and efficient capital markets in the two countries. It also provided a framework to facilitate greater cross-border capital market activities and cooperation in the areas of regulation as well as capacity building and human capital development, particularly in the area of Islamic capital markets. In March 2021, the Minister of Finance and Economy II renewed its annual budget of USD292 million to fund infrastructure, technology, and socio-economic studies related to the implementation of Brunei’s own stock exchange.

Money and Banking System

Brunei has a small banking sector which includes both conventional and Islamic banking. The Monetary Authority of Brunei Darussalam (AMBD) is the sole central authority for the banking sector, in addition to its role as the country’s central bank. Banks have high levels of liquidity, good capital adequacy ratios, and well-managed levels of non-performing loans. Several foreign banks such as Standard Chartered Bank and Bank of China (Hong Kong) have established operations in Brunei. In March 2018, HSBC officially ended its operations in Brunei after announcing its planned departure from Brunei in late 2016. All banks fall under the supervision of AMBD, which has also established a credit bureau that centralizes information on applicants’ credit worthiness.

The Brunei dollar (BND) is pegged to the Singapore dollar, and each currency is accepted in both countries.

Foreign Exchange and Remittances

Foreign Exchange

In June 2013, the Financial Action Task Force (FATF) announced that Brunei would no longer be subject to FATF’s monitoring process under its global Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) compliance process. Brunei’s Mutual Evaluation Report cited Brunei’s significant progress in improving its AML/CFT regime and noted that Brunei had established the legal and regulatory framework to meet its commitments in its Action Plan regarding strategic deficiencies that the FATF identified in June 2011.

Remittance Policies

Any person or company providing services for the transmission of money must be licensed by the Brunei government. Only Brunei citizens may hold remittance licenses. Local financial institutions such as Bank Islam Brunei Darussalam (BIBD) and Standard Chartered Bank provide remittance services. Remittance companies require the customer’s full name, identification number, address, and purpose of the remittance. They are also required to file suspicious transaction reports with AMBD.

Sovereign Wealth Funds

The Brunei Investment Agency (BIA) manages Brunei’s General Reserve Fund and their external assets. Established in 1983, BIA’s assets are estimated to be USD60-75 billion. BIA’s activities are not publicly disclosed and are ranked the lowest in transparency ratings by the Sovereign Wealth Fund Institute.

Capital Markets and Portfolio Investment

The Bulgarian Stock Exchange (BSE), the only securities-trading venue in Bulgaria, operates under a license from the Financial Supervision Commission and is majority-owned by the Ministry of Finance. The 1999 Law on Public Offering of Securities regulates the issuance of securities, securities transactions, stock exchanges, and investment intermediaries.   The law is aimed at providing investor protection and at developing a transparent local capital market. In 2004 BSE performed its first IPO transaction. In 2018 BSE acquired 100 percent of the Independent Bulgarian Energy Exchange (IBEX), Bulgaria’s first independent electricity platform trader.

Since its 2007 entry in the EU, Bulgaria has aligned its regulation of securities markets with EU standards under the Markets in Financial Instruments Directive (MiFID).  The BSE is a full member of the Federation of European Stock Exchanges (FESE) and operates under the Deutsche Boerse’s trading platform Xetra.  The BSE’s total market capitalization comprised 25 percent of Bulgaria’s GDP in 2020, up slightly from 2019.

Bulgarian companies strongly prefer to obtain financing from local banks instead of drawing from the local financial markets. At the end of 2018, the Financial Supervision Commission approved the ‘SME beam market,’ a special market that provides small and medium-sized businesses the opportunity to more easily raise new capital.

Foreign investors can access credit on the local market.

Money and Banking System

The Bulgarian bank system is well capitalized and liquid. As of the end of September 2020, the total capital adequacy ratio was 22.9 percent, above the EU average and adequately shielding domestic banks against potential macroeconomic risks. In 2020 the Bulgarian National Bank imposed a temporary payment deferral of existing loans as an anti-COVID-19 measure. As of September 2020, there were 24 banks (including 6 branches), with total assets of BGN 119.2 billion (USD 73.9 billion), equivalent to 100.4 percent of GDP. The market share of EU-owned banks amounted to 74.9 percent, the share of local banks was 22.1 percent, and the share of non-EU banks was 3.1 percent. The top five banks’ weight in the banking system was 66.2 percent in September 2020. Non-performing loans were equal to 8.6 percent of the total loan portfolio of the banking system.

The Bulgarian government has raised funds by issuing both Euro-denominated and Leva- denominated bonds.  Commercial banks and private pension funds and insurance companies are the primary purchasers of these instruments. EU-based banks are eligible to be primary dealers of Bulgarian government bonds.

Foreign Exchange and Remittances

Foreign Exchange

Bulgaria operates a Currency Board Arrangement (CBA) whereby the lev (BGN) is fixed to Euro, exchanging EUR 1 for BGN 1.95583. This CBA prohibits the central bank from bailing out insolvent domestic banks or paying for the government’s deficit spending. Foreign exchange is freely accessible. The Foreign Currency Act stipulates that anyone may import or export up to EUR 10,000 or its foreign exchange equivalent without filling out a customs declaration. The import or export of over EUR 10,000 or its equivalent in Bulgarian leva or another currency across the border to or from a non-EU country must be declared to the customs authorities; in the case of an EU country, it must be declared if requested by the customs authorities. Exporting over BGN 30,000 (USD 18,750) in cash requires a declaration about the source of the funds, supported by documents certifying that the exporter does not owe taxes (unless the funds were earlier imported and declared).  When there is evidence for existing debt obligations of over BGN 5,000 (USD 3,125), customs authorities will prevent the transfer of funds.

In 2014, United States and Bulgaria signed an intergovernmental agreement that implements provisions of the Foreign Account Tax Compliant Act (FATCA), which targets tax non-compliance by U.S. persons who do business with Bulgarian financial institutions. Parliament ratified the agreement in 2015.

Bulgaria joined the Eurozone’s precursor mechanism ERM II in July 2020 and the EU Banking Union in October 2020.

Remittance Policies

There is no official policy regarding remittances. Remittances are an increasingly important source of funding for Bulgarian families with relatives overseas. Over the last several years, remittances have exceeded the new flow of FDI in the country. In 2020, due to COVID-19, that trend reversed, with Bulgarians working in other countries remitting only EUR 340 million, compared with EUR 2.1 billion in new FDI. According to Bulgarian National Bank data, this remittances sum marked a 72 percent decline compared to EUR 880 million in 2019.

Sovereign Wealth Funds

Bulgaria does not have a sovereign wealth fund.  The government maintains a multiannual fiscal savings reserve, a farmer subsidy fund, and an electricity price premium fund. Their annual budgeting is compliant with the government’s budget plans.

Capital Markets and Portfolio Investment

The military regime’s attitude towards foreign portfolio investment is unknown. Previously, the Burmese government had gradually opened up to foreign portfolio investment, but both the stock and bond markets are small and lack sufficient liquidity to enter and exit sizeable positions.

Myanmar has a small stock market with infrequent trading. In July 2019, the Securities and Exchange Commission announced that foreign individuals and entities are permitted to hold up to 35 percent of the equity in Burmese companies listed on the Yangon Stock Exchange.

Burma also has a very small publicly traded debt market. Banks have been the primary buyers of government bonds issued by the Central Bank of Myanmar, which has established a nascent bond market auction system. The Central Bank issues government treasury bonds with maturities of two, three, and five years.

The Central Bank of Myanmar (CBM) sets commercial loan interest rates and saving deposit rates that banks can offer, so banks cannot conduct risk-based pricing for credit. Consequently, credit is not strictly allocated on market terms. Foreign investors generally seek financing outside of Myanmar because of the lack of sophisticated credit instruments offered by Burmese financial institutions and lack of risk-based pricing.

Money and Banking System

There is limited penetration of banking services in the country, but the usage of mobile payments had grown rapidly prior to the coup. A government 2020 census found 14 percent of the population has access to a savings account through a traditional bank. The banking system is fragile with a high volume of non-performing loans (NPLs). Financial analysts estimate that NPLs at some local banks account for 40 to 50 percent of outstanding credit but accurate calculations are hard because of accounting inconsistencies about what constitutes a non-performing loan.

As of December 2019, total assets in Burma’s banking system were 72 trillion kyat (USD47 billion).

The Central Bank of Myanmar (CBM) is responsible for the country’s monetary and exchange rate policies as well as regulating and supervising the banking sector.

Prior to the coup, the government had gradually opened the banking sector to foreign investors. The government began awarding limited banking licenses to foreign banks in October 2014. In November 2018, the CBM published guidelines that permit foreign banks with local licenses to offer “any financing services and other banking services” to local corporations. Previously, foreign banks were only allowed to offer export financing and related banking services to foreign corporations.

Following the military coup and the imposition of U.S. sanctions on Burma, including on two large military holding companies, some international banks are considering whether to terminate their correspondent banking relationship with Myanmar banks. No U.S. banks have a correspondent relationship with Burmese banks.

Foreigners are allowed to open a bank account in Burma in either U.S. dollars or Burmese kyat. To open a bank account, foreigners must provide proof of a valid visa along with proof of income or a letter from their employer.

The Germany development agency GIZ published the fifth edition the GIZ Banking Report in January 2021 (https://2020.giz-banking-report-myanmar.com/).

5. Foreign Exchange and Remittances

Foreign Exchange

According to Chapter 15 of the Myanmar Investment Law, foreign investors are able to convert, transfer, and repatriate profits, dividends, royalties, patent fees, license fees, technical assistance and management fees, shares and other current income resulting from any investment made under this law. Nevertheless, in practice, the transfer of money in or out of Burma has been difficult, as many international banks have internal prohibitions on conducting business in Burma given the long history of sanctions and significant money-laundering risks. The closure of most banks following the coup, shortage of U.S. dollars, and low cash withdrawal limits have further limited investors’ ability to conduct foreign exchange transactions and other necessary business operations.

Under the Foreign Exchange Management Law, transfer of funds can be made only through licensed foreign exchange dealers, using freely usable currencies. The Central Bank of Myanmar (CBM) grants final approval on any new loans or loan transfers by foreign investors. According to a new regulation in the Foreign Exchange Management Law, foreign investors applying for an offshore loan must get approval from the CBM. Applications are submitted through the Myanmar Investment Commission by providing a company profile, audited financial statements, draft loan agreement, and a recent bank credit statement.

Since February 5, 2019, the Central Bank calculates a market-based reference exchange rate from the volume-weighted average exchange rate of interbank and bank-customer deals during the day. In April 2021, a parallel market exchange rate developed which diverges from the Central Bank rate. Remittance Policies

Remittance Policies

According to the Myanmar Investment Law, foreign investors can remit foreign currency through authorized banks. Nevertheless, in practice, the transfer of money in or out of Burma has been difficult, as many international banks have internal prohibitions on conducting business in Burma given the long history of sanctions and significant money-laundering risks. The military coup has further exacerbated these investment remittance challenges.

The challenge of repatriating remittances through the formal banking system are also reflected in the continued use of informal remittance services (such as the “hundi system”) by both the public and businesses. On November 15, 2019, the Central Bank of Myanmar adopted the Remittance Business Regulation in order to bring these informal networks into the official financial system. The regulations require remittance business licenses to conduct inward and outward remittance businesses from the Central Bank of Myanmar. It is unclear how the military regime will proceed with this regulation and the training of businesses to grant them a license to conduct remittances.

Sovereign Wealth Funds

Burma does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Although there are no regulatory restrictions on foreign portfolio investment, Burundi does not have capital markets that would enable it. Capital allocation within Burundi is entirely dependent on commercial banks.

The country does not have its own stock market. There is no regulatory system to encourage and facilitate portfolio investment. Existing policies do not actively facilitate nor impede the free flow of financial resources into product and factor markets.

There is no regulation restricting international transactions. In practice, however, the government restricts payments and transfers for international transactions due to a shortage of foreign currency.

In theory, foreign investors have access to all existing credit instruments and on market terms. In practice, available credit is extremely limited.

Money and Banking System

Burundi has very limited banking services penetration according to the most recent national survey on financial inclusion conducted by the central bank. In this 2016 survey, the Bank of the Republic of Burundi (BRB) found a penetration level of approximately 22 percent.  Several local commercial banks have branches in urban centers. Micro-finance institutions mostly serve rural areas. The Burundian government is a minority shareholder in three banks.The banking sector’s soundness has improved with capitalization and liquidity ratios above regulatory standards and profitability indicators on the rise. However, bank portfolio quality remains a concern, with the level of non-performing loans (NPLs) reaching six percent when five percent is the benchmark rate among East African Community states. The sector also suffered from shortages of foreign currency following the Central Bank’s establishment of de facto capital controls in 2019.

The financial sector includes 14 credit institutions (Banks) including a new youth investment bank and an agricultural bank, 40 microfinance institutions, 16 insurance companies, three social security institutions and three payment institutions. A bank for women is also under development. All these institutions aim at reducing unemployment by creating job opportunities, particularly small and medium-scale entrepreneurship. The banking market is dominated by the three largest and systemically important banks: Credit Bank of Bujumbura (BCB), Burundi Commercial Bank (BANCOBU), and Interbank Burundi (IBB).Foreign banks can establish operations in the country.  Foreign banks operating in the country include ECOBANK (Pan African Bank-West Africa), CRDB (Tanzanian Bank), DTB and KCB (both Kenyan Banks).  The central bank directs banking regulatory policy, including prudential measures for the banking system.  Foreigners and locals are subject to the same conditions when opening a bank account; the only requirement is the presentation of identification.

Foreign Exchange and Remittances

Foreign Exchange

According to the law, after paying taxes, there are no restrictions on expatriating funds associated with an investment. In practice, foreign investors have encountered difficulties in converting funds associated with investments into foreign currency due to de facto capital controls implemented by the BRB in 2019.

According to the GoB, funds associated with an investment can be converted into a freely usable currency at a legal market rate, pending their availability. Due to a shortage of foreign currency, the central bank prioritizes companies in specific strategic industries for access to foreign exchange accommodation. In practice, the Burundian franc (BIF) is not freely convertible at the official government rate.

The BRB publishes the daily exchange rate on its website each morning. In practice, the BIF fluctuates, and the government has imposed de facto capital controls to prevent abrupt exchange rate movements; there is a significant gap between the official rate and a floating parallel unofficial market rate.

Remittance Policies

The government has not passed any new laws regarding a change to investment remittances policies. The average delay for remitting investment returns (once all taxes have been paid) is three months due to general inefficiency in the banking sector and the rarity of such transactions in an environment with very little foreign direct investment.

Sovereign Wealth Funds

Burundi does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Limited capital market and portfolio investment opportunities exist in Cabo Verde.  The Cabo Verdean stock market, Bolsa de Valores de Cabo Verde (BVC), is fully operational.  It has been most active in the issuance of bonds.  Foreign investors must open an account with a bank in Cabo Verde before buying stocks or bonds from BVC.

Foreign interests may access credit under the same market conditions as Cabo Verdeans.

Money and Banking System

Cabo Verde has a small financial sector supervised and regulated by the Central Bank of Cabo Verde (BCV).  According to data from BCV, more than 90 percent of the Cabo Verdean population is served by banks.  Internet-based tools and services in the banking sector continue to grow in Cabo Verde, particularly during the COVID-19 pandemic, changing the model of the client-bank relationship.  New ICT products allow customers alternatives to in-person support as well as making certain decisions outside of working hours and through the internet.

Banking represents more than 80 percent of the assets of the entire Cabo Verdean financial system.  Two banks – Banco Comercial do Atlantico (BCA) and Caixa Economica de Cabo Verde (CECV) – together held 67.3 percent of the market share in credit and 71.8 percent in deposits pre-pandemic.

Legislation approved by the National Assembly in January 2020 terminated the issuance of restricted licenses for offshore banking operations, calling for generic licenses and operations with resident clients.  BCV subsequently informed that banks with a restricted license (offshore), serving non-residents would have to adjust to the new requirements.  Otherwise, BCV would revoke their authorization and enforce administrative liquidation.  Offshore banks operating in Cabo Verde have until December 2021 to complete the transition.    

To establish a bank account, the client must provide proper identification and obtain a taxpayer number from the Commercial Registry Department (Casa do Cidadao), a process that takes approximately 10 minutes.  Bank credit is available to foreign investors under the same conditions as for domestic investors.  The private sector has access to credit instruments such as loans, letters of credit, and lines of credit.

Foreign Exchange and Remittances

Foreign Exchange

Foreign investors have the right to convert their investment to any other freely convertible currency and transfer all their income.  The government gives foreign investors important guarantees, such as privately managed foreign currency accounts, which can be credited from abroad or from other foreign accounts in Cabo Verde.  In addition, it allows undisputed repatriation of dividends, profits, and capital from foreign investment operations.  To receive these benefits, the investor has to qualify for foreign investor status through the government’s investment promotion agency, CVTI.

Regulatory legislation specifies that for a company’s first five years of operation, its dividends may be freely expatriated without tax and that for the next 15 years dividends may be expatriated with a flat tax rate of 10 percent.  Incentives for outward investment in developing countries are not included in the legislation, but they have been provided on an ad hoc basis.

Cabo Verde’s exchange-rate fluctuation risk is low as the country’s currency, the escudo, is pegged at the rate of 110.27 to the Euro.  This fixed exchange rate arrangement is under the Credit Facility Contract, granted to Cabo Verde by Portugal and managed by a joint Cabo Verdean and Portuguese body named the Commission on the Agreement for Exchange Cooperation (Comissao do Acordo de Cooperaçao Cambial – COMACC).  In 2018, the government liberalized foreign exchange operations in Cabo Verde, allowing the free movement of money overseas.

Remittance Policies

Current law permits a foreign investor to request transfer, loan repayment, revenue/profits, and capital gains overseas from the BCV within 30, 60, and 90 days, respectively.

Sovereign Wealth Funds

The government created a Sovereign Private Investment Guarantee Fund in 2019.  The fund aims to guarantee the issuance of securities, in particular debt securities, by private commercial companies to fund large private investments.  BCV will oversee the fund, which is to maintain a rating of at least “A” from financial rating agencies.  The initial share capital of approximately USD 120 million is guaranteed by the state.

Capital Markets and Portfolio Investment

In a move designed to address the need for capital markets in Cambodia, the Cambodia Securities Exchange (CSX) was founded in 2011 and started trading in 2012. Though the CSX is one of the world’s smallest securities markets, it has taken steps to increase the number of listed companies, including attracting SMEs. At the end of 2020, market capitalization stood at USD2.5 billion and the average daily trading value averages USD150,000. The CSX currently has seven listed companies: the Phnom Penh Water Supply Authority; Taiwanese garment manufacturer Grand Twins International; the Phnom Penh Autonomous Port; the Sihanoukville Autonomous Port; Phnom Penh SEZ Plc; ACLEDA Bank; and Pestech Plc.

In September 2017, the National Bank of Cambodia (NBC) adopted a regulation on Conditions for Banking and Financial Institutions to be listed on the Cambodia Securities Exchange. The regulation sets additional requirements for banks and financial institutions that intend to issue securities to the public. This includes prior approval from the NBC and minimum equity of KHR 60 billion (approximately USD15 million).

Cambodia’s bond market is at the beginning stages of development. The regulatory framework for corporate bonds was bolstered in 2017 through the publication of several regulations covering public offering of debt securities, the accreditation of bondholders’ representatives, and the accreditation of credit rating agencies. The country’s first corporate bond was issued in 2018 by Hattha Kaksekar Limited. Four additional companies have since been added to the bond market: LOLC (Cambodia) Plc.; Advanced Bank of Asia Limited; Phnom Penh Commercial Bank Plc; and RMA (Cambodia) Plc. RMA, which issued its bonds in early 2020, was the first non-bank financial institution to be listed.  There is currently no sovereign bond market, but the government has stated its intention of making government securities available to investors by 2022.

Money and Banking System

The NBC regulates the operations of banking systems in Cambodia. Foreign banks and branches are freely allowed to register and operate in the country. There are 44 commercial banks, 14 specialized banks (set up to finance specific turn-key projects such as real estate development), 74 licensed microfinance institutions (MFIs), and seven licensed microfinance deposit taking institutions in Cambodia. The NBC has also granted licenses to 12 financial leasing companies and one credit bureau company to improve transparency and credit risk management and encourage lending to small- and medium-sized enterprise customers.

Prior to the COVID-19 pandemic, Cambodia’s banking sector experienced strong growth. The banking sector’s assets, including those of MFIs, rose 21.4 percent year-over-year in 2018 to 139.7 trillion riel (USD34.9 billion), while credit grew 24.3 percent to 81.7 trillion riel (USD20.4 billion). Loans and deposits grew 18.3 percent and 24.5 percent respectively, which resulted in a decrease of the loan-to-deposit ration from 114 percent to 110 percent. The ratio of non-performing loans was measured at 1.6 percent in 2019.

The government does not use the regulation of capital markets to restrict foreign investment. Banks have been free to set their own interest rates since 1995, and increased competition  between local institutions has led to a gradual lowering of interest rates from year to year.  However, in April 2017, at the direction of Prime Minister Hun Sen, the NBC capped interest rates on loans offered by MFIs at 18 percent per annum. The move was designed to protect borrowers, many of whom are poor and uneducated, from excessive interest rates.

In March 2016, the NBC doubled the minimum capital reserve requirement for banks to USD75 million for commercial banks and USD15 million for specialized banks. Based on the new regulations, deposit-taking microfinance institutions now have a USD30 million reserve requirement, while traditional microfinance institutions have a USD1.5 million reserve requirement.

In March 2020, the NBC issued several regulations to ensure liquidity and promote lending amid the COVID-19 pandemic. They include: (1) delaying the implementation of Conservation Capital Buffer (CCB) for financial institutions; (2) reducing the minimum interest rate of Liquidity-Providing Collateralized Operations (LPCO); (3) reducing the interest rates of Negotiable Certificate of Deposit (NCD); (4) reducing the reserve requirement rate (RRR) from 8 percent (KHR) and 12.5 percent (USD) to 7 percent (KHR and USD) for 6 months starting from April 2020; and (5) reducing the liquidity coverage ratio.  The NBC also requested financial institutions to delay dividend payouts in order to preserve financial sector liquidity. The government has also encouraged banks to continue restructuring loans to help avoid defaults. In late 2020, the government announced that businesses in the garment and footwear, tourism, and aviation sectors would continue to receive tax incentives in 2021. In addition, financial institutions’ borrowings from both local and foreign sources will benefit from reduced tax withholdings in 2021.

Financial technology (Fintech) in Cambodia is still at early stage of development. Available technologies include mobile payments, QR codes, and e-wallet accounts for domestic and cross-border payments and transfers. In 2012, the NBC launched retail payments for cheques and credit remittances. A “Fast and Secure Transfer” (FAST) payment system was introduced in 2016 to facilitate instant fund transfers. The Cambodian Shared Switch (CSS) system was launched in October 2017 to facilitate the access to network automated teller machines (ATMs) and point of sale (POS) machines.

In February 2019, the Financial Action Task Force (FATF), an international intergovernmental organization whose purpose is to develop policies to combat money laundering, cited Cambodia for being “deficient” with regard to its anti-money laundering and countering financing of terrorism (AML/CFT) controls and policies and included Cambodia on its “grey list.”  The government committed to working with FATF to address these deficiencies through a jointly developed action plan, although progress to date has not been sufficient and Cambodia remains on the grey list in 2021. Should Cambodia not take appropriate action, FATF could move it to the “black list,” which could negatively impact the cost of capital as well as the banking sector’s ability to access international capital markets.

Foreign Exchange and Remittances

Foreign Exchange

Though Cambodia has its own currency, the riel (denoted as KHR), U.S. dollars are in wide circulation in Cambodia and remain the primary currency for most large transactions. There are no restrictions on the conversion of capital for investors.

Cambodia’s 1997 Law on Foreign Exchange states that there shall be no restrictions on foreign exchange operations through authorized banks. Authorized banks are required, however, to report the amount of any transfer equaling or exceeding USD100,000 to the NBC on a regular basis.

Loans and borrowings, including trade credits, are freely contracted between residents and nonresidents, provided that loan disbursements and repayments are made through an authorized intermediary. There are no restrictions on the establishment of foreign currency bank accounts in Cambodia for residents.

The exchange rate between the riel and the U.S. dollar is governed by a managed float and has been stable at around one U.S. dollar to KHR 4,000 for the past several years.  Daily fluctuations of the exchange rate are low, typically under three percent.  The Cambodian government has taken steps to increase general usage of the riel, including phasing out in June 2020 the circulation of small-denominated U.S. dollar bills; however, the country’s economy remains largely dollarized.

Remittance Policies

Article 11 of Cambodia’s 2003 Amended Law on Investment states that QIPs can freely remit abroad foreign currencies purchased through authorized banks for the discharge of financial obligations incurred in connection with investments. These financial obligations include payment for imports and repayment of principal and interest on international loans; payment of royalties and management fees; remittance of profits; and repatriation of invested capital in case of dissolution.

Sovereign Wealth Funds

Cambodia does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

The Cameroonian government is open to portfolio investment. With the encouragement of IMF and BEAC, Cameroon and other members of the CEMAC region have designed policies that facilitate the free flow of financial resources into the product and factor markets.

The Financial Markets Commission (CMF) of Cameroon physically merged with the Libreville-based Central African Financial Market Supervisory Board (CONSUMAF) in February 2019.  The merger has led to the establishment of a unique regional stock exchange called the Central African Stock Exchange (CASE). Cameroon’s financial sector is underdeveloped, and government policies have limited bearing on the free flow of financial resources into the product and factor markets. Foreign investors can get credit on the local market and the private sector has access to a variety of credit instruments. In 2016, Cameroon sought to encourage the development of capital markets through Law No 2016/010 of 12 July 2016, governing undertakings for collective investment in transferable securities in Cameroon.

Cameroon is connected to the international banking payment system. The country is a CEMAC member, which maintains a central bank, BEAC.  The current governor of BEAC is Abbas Mahamat Tolli (from Chad). CEMAC’s central bank works with the IMF on monetary policies and public finance reform.  BEAC respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.  Despite generally respecting Article VIII, BEAC has instituted several restrictions on payments to boost foreign exchange reserves. Throughout much of 2019-2020, financial institutions and importers complained of a backlog of requests for foreign exchange. BEAC is currently negotiating with several international oil companies on repatriation of revenues before external payments. While the situation has improved over the last six months, investors should be aware that timely repatriation of profits may be a stumbling block.

In 2020, with the support of the IMF, BEAC took steps to address the economic impact of COVID-19 in the region. The central bank eased monetary policy and introduced accommodative measures to ensure adequate liquidity in the banking system to supporting internal and external stability. Concomitantly, the regional banking sector controller (Commission Bancaire de l’Afrique Centrale or COBAC) eased prudential regulations to help banks delay pandemic-related losses.

Money and Banking System

Less than 15 percent of Cameroonians have access to formal banking services. The Cameroonian government has often spoken of increasing access, but no coherent policy or action has been taken to alleviate the problem. Mobile money, introduced by local and international telecom providers, is the closest tool to banking services that most Cameroonians can access.

The banking sector is generally healthy.  Large, international commercial banks do most of the lending.  One local bank, Afriland, operates in multiple other countries. Most smaller banks deal in small loans of short duration. Retail banking is not common. According to the World Bank, non-performing loans were 10.31 percent of total bank loans in 2016. The Cameroonian government does not keep statistics on non-performing assets. Cameroon’s largest banks are:

1.  Afriland First Bank ($3 billion)
2.  Société Générale Cameroon ($2.5 billion)
3.  Banque Internationale Du Cameroun Pour L’Epargne Et Le Crédit-BICEC ($2.1 billion)
4.  EcoBank ($1.4 billion)
5.  BGFI Bank Cameroon ($918 million)
6.  Union Bank of Africa Cameroon ($ 811 million)

(Source: Jeune Afrique, October 2020)

Foreign banks can establish operations in Cameroon.  Most notably, Citibank and Standard Chartered Bank have operated in Cameroon for more than 20 years. They are subject to the same regulations as locally developed banks. Post is unaware of any lost correspondent banking relationships within the past three years. There are no restrictions on foreigners establishing bank accounts, credit instruments, business financing, or other such transactions.

The country has 412 registered microfinance institutions, 19 insurance companies, 4 electronic money institutions, and one Post Office bank. Two major money transfer operators are also present, essentially offering over-the-counter services. The Cameroon market is at the startup stage for its digital financial system. This emerging market segment is currently provided by banks in partnership with telecom operators. According to the World Bank (June 2020), in Cameroon, mobile money accounts are held by 15.1 percent of the adult population, which falls right after Gabon (43.6 percent). The specific market for e-payments is also less developed when compared to peer countries in the region such as Côte d’Ivoire (38.9 percent) and Senegal (31.8 percent).

Financial inclusion is low despite some progress brought about by mobile telephony. There were 21 million mobile telephony subscriptions at the end of 2019 in Cameroon (Agence de Regulation des Telecommunications – ART, 2018). Putting aside the multi-SIM effect, the penetration rate in terms of unique subscribers was about 50 percent at the end of 2019, which puts Cameroon in the lower end in the Central African region.

Foreign Exchange and Remittances

Foreign Exchange

In May 2020, the BEAC reported that foreign reserves had increased by 30 percent compared to 2019. According to the central bank, this is the result of the tightening of regulations after foreign exchange reserves plummeted in the aftermath of the 2014 oil shock. At the time, the IMF estimated that the volume of foreign exchange assets illegally held outside the CEMAC zone by local firms and institutions was five trillion CFA ($8.3 billion).

On March 1, 2019, CEMAC members states through BEAC adopted a new foreign exchange currency regulation, which restricts payments in foreign currency by individuals and businesses. All sectors of the economy without exception will be subject to the new regulations. Given the importance of the oil sector in the economy of the region and the challenges in the implementation, BEAC allowed for an implementation period until December 31, 2020. In November 2020, this moratorium on implementing the foreign exchange regulations was extended until December 31, 2021. In addition, the bank has tightened administrative procedures. Each request for a foreign exchange transaction requires a “dossier” that would include various documents. The documents required vary based on the type of transaction to demonstrate the “legitimacy” of the planned purchase in foreign exchange that BEAC would approve. The formal list of required documents from BEAC includes a significant number of required supporting documents.

The IMF has stated that forex transactions of less than one million U.S. dollars only require approval by local BEAC representatives in each country and should take place in a matter of days. Forex transactions exceeding one million U.S. dollars require approval from BEAC headquarters in Yaoundé and should occur in less than 48 hours. Banks and other financial institutions complain that requests are often rejected on minor technical grounds. In practice, approved requests often take more than two weeks to process.

As of May 2020, BEAC is requiring international oil companies to repatriate 70 percent of proceeds from the sale of oil and gas and then apply to receive dollars or euros. Several Ministers of Finance and/or Energy in CEMAC countries have assured oil companies that they do not need to comply with the regulation, creating uncertainty for the operators.  In theory, funds associated with any form of investment can be freely converted into any world currency, but the current BEAC restrictions are causing currency conversion concerns at financial institutions and oil companies.

The Central African CFA Franc is the currency of six independent states in Central Africa: Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea, and Gabon. It is administered by BEAC and is currently pegged at roughly 657.02 CFA to one Euro (April 08, 2021).

Remittance Policies and Sovereign Wealth Funds

According to the United Nations High Commissioner for Refugees, officially recorded inbounded remittances to Cameroon are estimated at $242 million and outbound remittances at $2.55 billion in 2017. Therefore, Cameroon is a net sender of remittances. Also according to UNHCR, ninety percent of the outbound remittances from Cameroon are sent to Nigeria.

Apart from the tightening of foreign exchange and remittance rules in 2019, Post is unaware of any recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances. There are no time limitations on transactions beyond the classic banking transactions timeline. BEAC regulates remittance policies and banking transactions. Foreign investors can remit through convertible and negotiable instruments through legal channels recognized by BEAC, subject to the recent issues mentioned above. Cameroon does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Canada’s capital markets are open, accessible, and regulated. Credit is allocated on market terms, the private sector has access to a variety of credit instruments, and foreign investors can get credit on the local market. Canada has several securities markets, the largest of which is the Toronto Stock Exchange, and there is sufficient liquidity in the markets to enter and exit sizeable positions. The Canadian government and Bank of Canada do not place restrictions on payments and transfers for current international transactions.

Money and Banking System

The Canadian banking system is composed of 36 domestic banks and18 foreign bank subsidiaries. Six major domestic banks are dominant players in the market and manage close to USD 5.2 trillion in assets. Many large international banks have a presence in Canada through a subsidiary, representative office, or branch. Ninety-nine percent of Canadians have an account with a financial institution. The Canadian banking system is viewed as very stable due to high capitalization rates that are well above the norms set by the Bank for International Settlements. The OSFI, Canada’s primary banking regulator, is working on implementing the Basel III Framework to strengthen Canadian banks and improve their ability to handle financial shocks. The OSFI is consulting with industry on proposed regulatory changes and plans to introduce final guidance in late 2021.

Foreign financial firms interested in investing submit their applications to the OSFI for approval by the Minister of Finance. U.S. and other foreign banks can establish banking subsidiaries in Canada. Several U.S. financial institutions maintain commercially focused operations, principally in the areas of lending, investment banking, and credit card issuance. Foreigners can open bank accounts in Canada with proper identification and residency information.

The Bank of Canada is the nation’s central bank. Its principal role is “to promote the economic and financial welfare of Canada,” as defined in the Bank of Canada Act. The Bank’s four main areas of responsibility are: monetary policy; promoting a safe, sound, and efficient financial system; issuing and distributing currency; and being the fiscal agent for Canada.

Foreign Exchange and Remittances

Foreign Exchange

The Canadian dollar is a free-floating currency with no restrictions on its transfer or conversion.

Remittance Policies

The Canadian dollar is fully convertible, and the central bank does not place time restrictions on remittances.

Sovereign Wealth Funds

Canada does not have a federal sovereign wealth fund. The province of Alberta maintains the Heritage Savings Trust Fund to manage the province’s share of non-renewable resource revenue. The fund’s net financial assets were valued at USD 13 billion as of December 31, 2020. The Fund invests in a globally diversified portfolio of public and private equity, fixed income, and real assets. The Fund follows the voluntary code of good practices known as the “Santiago Principles” and participates in the IMF-hosted International Working Group of SWFs. The Heritage Fund holds approximately 45 percent of its value in equity investments, seven percent of which are domestic.

Capital Markets and Portfolio Investment

Chad’s financial system is underdeveloped. There are no capital markets or money markets in Chad. A limited number of financial instruments are available to the private sector, including letters of credit, short- and medium-term loans, foreign exchange services, and long-term savings instruments.

Commercial banks offer credit on market terms, often at rates of 12 to 25 percent for short-term loans. Access to credit is available but is prohibitively expensive for most Chadians in the private sector. Medium-term loans are difficult to obtain, as lending criteria are rigid. Most large businesses maintain accounts with foreign banks and borrow money outside of Chad. There are ATMs in some major hotels, N’Djamena airport, and in most neighborhoods of N’Djamena, and in major cities.

Chad does not have a stock market and has no effective regulatory system to encourage or facilitate portfolio investments. A small regional stock exchange, known as the Central African Stock Exchange, in Libreville, Gabon, was established by CEMAC countries in 2006. Cameroon, a CEMAC member, launched its own market in 2005. Both exchanges are poorly capitalized.

Money and Banking System

Chad’s banking sector is small and continues to streamline lending practices and reduce the volume of bad debt accumulated before and during the 2016-2017 economic crisis. While Chad’s banking rate remains low due to low aggregate savings and limited exposure to and trust in banks, according to the World Bank it increased from 9 to 22 percent between 2009 and 2017.

Chad’s four largest banks have been privatized. The former Banque Internationale pour l’Afrique au Tchad (BIAT) became a part of Togo-based Ecobank; the former Banque Tchadienne de Credit et de Depôt was re-organized as the Societe Generale Tchad; the former Financial Bank became part of Togo-based Orabank; and the former Banque de Developpement du Tchad (BDT) was reorganized as Commercial Bank Tchad (CBT), in partnership with Cameroon-based Commercial Bank of Cameroon. There are two Libyan banks in Chad, BCC (formerly Banque Libyenne) and BSCIC (Banque Sahelo-Saharienne pour l’Investissement et le Commerce), along with one Nigerian bank — United Bank for Africa (UBA). In 2018, the GOC funded a new bank Banque de l’Habitat du Tchad (BHT) with the GOC as majority shareholder with 50 percent of the shares and two public companies, the National Social Insurance Fund (Caisse Nationale de Prevoyance Sociale, CNPS) and the Chadian Petroleum Company (Societe des Hydrocarbures du Tchad, SHT), each holding 25 percent.

Chad, as a CEMAC member, shares a central bank with Cameroon, Central African Republic, Republic of Congo, Equatorial Guinea, and Gabon – the Central African Economic Bank (BEAC, Banque des Etats de l’Afrique Centrale), headquartered in Yaounde, Cameroon.

Foreigners must establish legal residency in order to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

The BEAC implemented foreign exchange regulation in 2019 that required full repatriation of export earnings and centralizing foreign currency holdings with the BEAC, though extractive industry companies received an exemption through December 2021.

The government does not restrict converting funds associated with an investment (including remittances of investment capital, earnings, loan repayments, lease payments, royalties) into a freely usable currency at legal market-clearing rates. There are currently no restrictions on repatriating these funds, although there are some limits associated with transferring funds. Individuals transferring funds exceeding 1,000 USD must document the source and purpose of the transfer with the local sending bank. Transactions of 10,000 USD or more for individuals and 50,000 USD or more for companies are automatically notified to the COBAC. Companies and individuals transferring more than 800,000 USD out of Chad need BEAC authorization to do so. Authorization may take up to three working days. To request authorization for a transfer, companies and individuals must submit contact information for the sender and recipient, a delivery timetable, and proof of the sender’s identity. Approvals are routine, although the Central Bank has occasionally temporarily restricted capital outflows. Businesses can obtain advance approval for regular money transfers.

Chad is a member of the African Financial Community (CFA) and uses the Central African CFA Franc (FCFA) as its currency. The FCFA is pegged to the Euro at a fixed rate of one Euro to 655.957 FCFA exactly (100 FCFA = 0.152449 Euro). There are no official restrictions on obtaining foreign exchange, but in practice foreign exchange can be difficult to acquire.

Remittance Policies

There are no recent changes to or plans to change investment remittance policies. There are no time limitations on remittances, dividends, returns on investment, interest, and principal on private foreign debt, lease payments, royalties, or management fees.

Chad does not engage in currency manipulation.

Chad is a member state of the Action Group against Money Laundering in Central Africa (GABAC), which is in the process of becoming a Financial Action Task Force (FATF)-style regional body. On the national level, the National Financial Investigation Agency (ANIF) has implemented GABAC recommendations to prevent money laundering and terrorist financing.

Sovereign Wealth Funds

The GOC does not currently maintain a Sovereign Wealth Fund.

Capital Markets and Portfolio Investment

Chile’s authorities are committed to developing capital markets and keeping them open to foreign portfolio investors. Foreign firms offer services in Chile in areas such as financial information, data processing, financial advisory services, portfolio management, voluntary saving plans and pension funds. Under the U.S.-Chile FTA, Chile opened up significantly its insurance sector, with very limited exceptions. The Santiago Stock Exchange is Chile’s dominant stock exchange, and the third largest in Latin America. However, when compared to other OECD countries, it has lower market liquidity.

Existing policies facilitate the free flow of financial resources into Chile’s product and factor markets and adjustment to external shocks in a commodity export-dependent economy. Chile accepted the obligations of Article VIII (sections 2, 3 and 4) and maintains a free-floating exchange rate system, free of restrictions on payments and transfers for current international transactions. Credit is allocated on market terms and its various instruments are available to foreigners. The Central Bank reserves the right to restrict foreign investors’ access to internal credit if a credit shortage exists. To date, this authority has not been exercised.

Money and Banking System

Nearly one fourth of Chileans have a credit card from a bank and nearly one third have a non-bank credit card, but less than 20 percent have a checking account. However, financial inclusion is higher than banking penetration: a large number of lower-income Chilean residents have a CuentaRut, which is a commission-free card with an electronic account available for all, launched by the state-owned Banco Estado, also the largest provider of microcredit in Chile.

The Chilean banking system is healthy and competitive, and many Chilean banks already meet Basel III standards. The new General Banking Act (LGB), published in January 2019, defined general guidelines for establishing a capital adequacy system in line with Basel standards, and gave the CMF the authority to establish the capital framework. All Basel III regulations were published by December 2020. Due to the pandemic, the CMF decided on March 2020 to postpone the implementation of Basel III requirements for one year. The system’s liquidity position (Liquidity Coverage Ratio) remains above regulatory limits (70 percent). Capital adequacy ratio of the system equaled 14.3 percent as of October 2020 and remains robust even when including discounts due to market and/or operational risks. Non-performing loans decreased after August 2020 due to government relief measures for households, including legislation authorizing two rounds of withdrawals from pension accounts. As of December 2020, non-performing loans equaled 1.58 percent compared to 2 percent at the end of 2019) when measured by the standard 90 days past due criterion.

As of December 2020, the total assets of the Chilean banking system amounted to USD 454.3 billion, according to the Superintendence of Banks and Financial Institutions. The largest six banks (Banco de Crédito e Inversiones, Banco Santander-Chile, Banco Estado, Banco de Chile, Scotiabank Chile and Itaú-Corpbanca) accounted for 88 percent of the system’s assets. Chile’s Central Bank conducts the country’s monetary policy, is constitutionally autonomous from the government, and is not subject to regulation by the Superintendence of Banks.

Foreign banks have an important presence in Chile, comprising three out of the six largest banks of the system. Out of 18 banks currently in Chile, five are foreign-owned but legally established banks in Chile and four are branches of foreign banks. Both categories are subject to the requirements set out under the Chilean banking law. There are also 21 representative offices of foreign banks in Chile. There are no reports of correspondent banking relationships withdrawal in Chile.

In order to open a bank account in Chile, a foreigner must present his/her Chilean ID Card or passport, Chilean tax ID number, proof of address, proof of income/solvency, photo, and fingerprints.

Foreign Exchange and Remittances

Foreign Exchange

Law 20.848, which regulates FDI (described in section 1), prohibits arbitrary discrimination against foreign investors and guarantees access to the formal foreign exchange market, as well as the free remittance of capital and profits generated by investments. There are no other restrictions or limitations placed on foreign investors for the conversion, transfer or remittance of funds associated with an investment.

Investors, importers, and others are guaranteed access to foreign exchange in the official inter-bank currency market without restriction. The Central Bank of Chile (CBC) reserves the right to deny access to the inter-bank currency market for royalty payments in excess of five percent of sales. The same restriction applies to payments for the use of patents that exceed five percent of sales. In such cases, firms would have access to the informal market. The Chilean tax service reserves the right to prevent royalties of over five percent of sales from being counted as expenses for domestic tax purposes.

Chile has a free floating (flexible) exchange rate system. Exchange rates of foreign currencies are fully determined by the market. The CBC reserves the right to intervene under exceptional circumstances to correct significant deviations of the currency from its fundamentals. This authority was used in 2019 following an unusual 20.5 percent depreciation of the Chilean peso (CLP) after six weeks of civil unrest, an unprecedented circumstance that triggered a similarly unusual USD 20 billion intervention (half of the CBC foreign currency reserves) that successfully arrested the currency slide.

Remittance Policies

Remittances of profits generated by investments are allowed at any time after tax obligations are fulfilled; remittances of capital can be made after one year following the date of entry into the country. In practice, this permanency requirement does not constitute a restriction for productive investment, because projects normally need more than one year to mature. Under the investment chapter of the U.S.–Chile FTA, the parties must allow free transfer and without delay of covered investments into and out of its territory. These include transfers of profits, royalties, sales proceeds, and other remittances related to the investment. However, for certain types of short-term capital flows this chapter allows Chile to impose transfer restrictions for up to 12 months as long as those restrictions do not substantially impede transfers. If restrictions are found to impede transfers substantially, damages accrue from the date of the initiation of the measure. In practice, these restrictions have not been applied in the last two decades.

Sovereign Wealth Funds

The Government of Chile maintains two sovereign wealth funds (SWFs) built with savings from years with fiscal surpluses. The Economic and Social Stabilization Fund (FEES) was established in 2007 and was valued at USD 8.7 billion as of February 2021. The purpose of the FEES is to fund public debt payments and temporary deficit spending, in order to keep a countercyclical fiscal policy. The Pensions Reserve Fund (FRP) was built up in 2006 and amounted to USD 10.1 billion as of February 2021. The purpose of the FRP is to anticipate future needs of payments to those eligible to receive pensions, but whose contributions to the private pension system fall below a minimum threshold.

Chile is a member of the International Working Group of Sovereign Wealth Funds (IWG) and adheres to the Santiago Principles.

Chile’s government policy is to invest SWFs entirely abroad into instruments denominated in foreign currencies, including sovereign bonds and related instruments, corporate and high-yield bonds, mortgage-backed securities from U.S. agencies, and stocks.

Capital Markets and Portfolio Investment

China’s leadership has stated that it seeks to build a modern, highly developed, and multi-tiered capital market.  Since their founding over three decades ago, the Shanghai and Shenzhen Exchanges, combined, are ranked the third largest stock market in the world with over USD11 trillion in assets, according to statistics from World Federation of Exchanges.  China’s bond market has similarly expanded significantly to become the second largest worldwide, totaling approximately USD17 trillion.  In 2020, China fulfilled its promises to open certain financial sectors such as securities, asset management, and life insurance. Direct investment by private equity and venture capital firms has increased but has also faced setbacks due to China’s capital controls, which obfuscate the repatriation of returns. As of 2020, 54 sovereign entities and private sector firms, including BMW and Xiaomi Corporation, have since issued roughly USD41 billion in “Panda Bonds,” Chinese renminbi (RMB)-denominated debt issued by foreign entities in China.  China’s private sector can also access credit via bank loans, bond issuance, trust products, and wealth management. However, the vast majority of bank credit is disbursed to state-owned firms, largely due to distortions in China’s banking sector that have incentivized lending to state-affiliated entities over their private sector counterparts.  China has been an IMF Article VIII member since 1996 and generally refrains from restrictions on payments and transfers for current international transactions.  However, the government has used administrative and preferential policies to encourage credit allocation towards national priorities, such as infrastructure investments.

Money and Banking System

China’s monetary policy is run by the People’s Bank of China (PBOC), China’s central bank.  The PBOC has traditionally deployed various policy tools, such as open market operations, reserve requirement ratios, benchmark rates and medium-term lending facilities, to control credit growth.  The PBOC had previously also set quotas on how much banks could lend but ended the practice in 1998.  As part of its efforts to shift towards a more market-based system, the PBOC announced in 2019 that it will reform its one-year loan prime rate (LPR), which would serve as an anchor reference for other loans.  The one-year LPR is based on the interest rate that 18 banks offer to their best customers and serves as the benchmark for rates provided for other loans.  In 2020, the PBOC requested financial institutions to shift towards use of the one-year LPR for their outstanding floating-rate loan contracts from March to August. Despite these measures to move towards more market-based lending, China’s financial regulators still influence the volume and destination of Chinese bank loans through “window guidance” – unofficial directives delivered verbally – as well as through mandated lending targets for key economic groups, such as small and medium sized enterprises. In 2020, the China Banking and Insurance Regulatory Commission (CBIRC) also began issuing laws to regulate online lending by banks including internet companies such as Ant Financial and Tencent, which had previously not been subject to banking regulations.

The CBIRC oversees China’s 4,607 lending institutions, about USD49 trillion in total assets.  China’s “Big Five” – Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China – dominate the sector and are largely stable, but over the past year, China has experienced regional pockets of banking stress, especially among smaller lenders.  Reflecting the level of weakness among these banks, in November 2020, the PBOC announced in “China Financial Stability Report 2020” that 12.4 percent of the 4400 banking financial institutions received a “fail” rating (high risk) following an industry-wide review in 2019.  The assessment deemed 378 firms, all small and medium sized rural financial institutions, “extremely risky.”  The official rate of non-performing loans among China’s banks is relatively low: 1.92 percent as of the end of 2020.  However, analysts believed the actual figure may be significantly higher.  Bank loans continue to provide the majority of credit options (reportedly around 60.2 percent in 2020) for Chinese companies, although other sources of capital, such as corporate bonds, equity financing, and private equity are quickly expanding in scope, reach, and sophistication in China.

As part of a broad campaign to reduce debt and financial risk, Chinese regulators have implemented measures to rein in the rapid growth of China’s “shadow banking” sector, which includes wealth management and trust products.  These measures have achieved positive results. In December 2020, CBIRC published the first “Shadow Banking Report,” and claimed that the size of China’s shadow banking had shrunk sharply since 2017 when China started tightening the sector. By the end of 2019, the size of China’s shadow banking by broad measurement dropped to 84.8 trillion yuan from the peak of 100.4 trillion yuan in early 2017. Shadow banking to GDP ratio had also dropped to 86 percent at the end of 2019, yet the report did not provide statistics beyond 2019. Foreign owned banks can now establish wholly-owned banks and branches in China, however, onerous licensing requirements and an industry dominated by local players, have limited foreign banks market penetration. Foreigners are eligible to open a bank account in China but are required to present a passport and/or Chinese government issued identification.

Foreign Exchange and Remittances

Foreign Exchange

While the central bank’s official position is that companies with proper documentation should be able to freely conduct business, in practice, companies have reported challenges and delays in obtaining approvals for foreign currency transactions by sub-national regulatory branches. Chinese authorities instituted strict capital control measures in 2016, when China recorded a surge in capital flight.  China has since announced that it would gradually reduce those controls, but market analysts expect they would be re-imposed if capital outflows accelerate again. Chinese foreign exchange rules cap the maximum amount of RMB individuals are allowed to convert into other currencies at approximately USD50,000 each year and restrict them from directly transferring RMB abroad without prior approval from the State Administration of Foreign Exchange (SAFE).  SAFE has not reduced the USD50,000 quota, but during periods of higher-than-normal capital outflows, banks are reportedly instructed by SAFE to increase scrutiny over individuals’ requests for foreign currency and to require additional paperwork clarifying the intended use of the funds, with the intent of slowing capital outflows. China’s exchange rate regime is managed within a band that allows the currency to rise or fall by 2 percent per day from the “reference rate” set each morning.

Remittance Policies

According to China’s FIL, as of January 1, 2020, funds associated with any forms of investment, including profits, capital gains, returns from asset disposal, IPR loyalties, compensation, and liquidation proceeds, may be freely converted into any world currency for remittance. Based on the “2020 Guidance for Foreign Exchange Business under the Current Account” released by SAFE in August, firms do not need any supportive documents or proof that it is under USD50,000. For remittances over USD50,000, firms need to submit supportive documents and taxation records.  Under Chinese law, FIEs do not need pre-approval to open foreign exchange accounts and are allowed to retain income as foreign exchange or convert it into RMB without quota requirements. The remittance of profits and dividends by FIEs is not subject to time limitations, but FIEs need to submit a series of documents to designated banks for review and approval.  The review period is not fixed and is frequently completed within one or two working days of the submission of complete documents.  For remittance of interest and principal on private foreign debt, firms must submit an application, a foreign debt agreement, and the notice on repayment of the principal and interest.  Banks will then check if the repayment volume is within the repayable principal.  There are no specific rules on the remittance of royalties and management fees. Based on guidance for remittance of royalties and management fees, firms shall submit relevant contracts and invoice.  In October 2020, SAFE cut the reserve requirement for foreign currency transactions from 20 percent to zero, reducing the cost of foreign currency transactions as well as easing Renminbi appreciation pressure.

Sovereign Wealth Funds

China officially has only one sovereign wealth fund (SWF), the China Investment Corporation (CIC), which was launched in 2007 to help diversify China’s foreign exchange reserves. CIC is ranked the second largest SWF by total assets by Sovereign Wealth Fund Institute (SWFI). With USD200 billion in initial registered capital, CIC manages over USD1.04 trillion in assets as of 2020 and invests on a 10-year time horizon.  CIC has since evolved into three subsidiaries:

• CIC International was established in September 2011 with a mandate to invest in and manage overseas assets.  It conducts public market equity and bond investments, hedge fund, real estate, private equity, and minority investments as a financial investor.
• CIC Capital was incorporated in January 2015 with a mandate to specialize in making direct investments to enhance CIC’s investments in long-term assets.
• Central Huijin makes equity investments in Chinese state-owned financial institutions.

China also operates other funds that function in part like sovereign wealth funds, including: China’s National Social Security Fund, with an estimated USD372 billion in assets; the China-Africa Development Fund (solely funded by the China Development Bank), with an estimated USD10 billion in assets; the SAFE Investment Company, with an estimated USD417.8 billion in assets; and China’s state-owned Silk Road Fund, established in December 2014 with USD40 billion in assets to foster investment in BRI partner countries.  Chinese state-run funds do not report the percentage of their assets that are invested domestically.  However, Chinese state-run funds follow the voluntary code of good practices known as the Santiago Principles and participate in the IMF-hosted International Working Group on SWFs. While CIC affirms that they do not have any formal government guidance to invest funds consistent with industrial policies or designated projects, CIC is still expected to pursue government objectives.

Capital Markets and Portfolio Investment

The Colombian Securities Exchange (BVC after its acronym in Spanish) is the main forum for trading and securities transactions in Colombia. The BVC is a private company listed on the stock market. The BVC, as a multi-product and multi-market exchange, offers trading platforms for the stock market, along with fixed income and standard derivatives. The BVC also provides listing services for issuers.

Foreign investors can participate in capital markets by negotiating and acquiring shares, bonds, and other securities listed by the Foreign Investment Statute. These activities must be conducted by a local administrator, such as trust companies or Financial Superintendence-authorized stock brokerage firms. Direct and portfolio foreign investments must be registered with the Central Bank. Foreigners can establish a bank account in Colombia as long as they have a valid visa and Colombian government identification.

The market has sufficient liquidity for investors to enter and exit sizeable positions. The central bank respects IMF Article VIII and does not restrict payments and transfers for current international transactions. The financial sector in Colombia offers credit to nationals and foreigners that comply with the requisite legal requirements.

Money and Banking System

In 2005, Colombia consolidated supervision of all aspects of the banking, financial, securities, and insurance sectors under the Financial Superintendence. Colombia has an effective regulatory system that encourages portfolio investment, and the country’s financial system is strong by regional standards. Commercial banks are the principal source of long-term corporate and project finance in Colombia. Loans rarely have a maturity in excess of five years. Unofficial private lenders play a major role in meeting the working capital needs of small and medium-sized companies. Only the largest of Colombia’s companies participate in the local stock or bond markets, with the majority meeting their financing needs either through the banking system, by reinvesting their profits, or through credit from suppliers.

Colombia’s central bank is charged with managing inflation and unemployment through monetary policy. Foreign banks are allowed to establish operations in the country, and must set up a Colombian subsidiary in order to do so. The Colombian central bank has a variety of correspondent banks abroad.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on transferring funds associated with FDI. Foreign investment into Colombia must be registered with the central bank in order to secure the right to repatriate capital and profits. Direct and portfolio investments are considered registered when the exchange declaration for operations channeled through the official exchange market is presented, with few exceptions. The official exchange rate is determined by the central bank. The rate is based on the free market flow of the previous day. Colombia does not manipulate its currency to gain competitive advantages.

Remittance Policies

The government permits full remittance of all net profits regardless of the type or amount of investment. Foreign investments must be channeled through the foreign exchange market and registered with the central bank’s foreign exchange office within one year in order for those investments to be repatriated or reinvested. There are no restrictions on the repatriation of revenues generated from the sale or closure of a business, reduction of investment, or transfer of a portfolio. Colombian law authorizes the government to restrict remittances in the event that international reserves fall below three months’ worth of imports. International reserves have remained well above this threshold for decades.

Sovereign Wealth Funds

In 2012, Colombia began operating a sovereign wealth fund called the Savings and Stabilization Fund (FAE), which is administered by the central bank with the objective of promoting savings and economic stability in the country. Colombia is not a member of the International Forum of Sovereign Wealth Funds. The fund can administer up to 30 percent of annual royalties from the extractives industry. Its primary investments are in fixed securities, sovereign and quasi-sovereign debt (both domestic and international), and corporate securities, with just eight percent invested in stocks. The government transfers royalties not dedicated to the fund to other internal funds to boost national economic productivity through strategic projects, technological investments, and innovation. In 2020, the government authorized up to 80 percent of the FAE’s USD 3.9 billion in assets to be lent to the Fund for the Mitigation of Emergencies (FOME) created in response to the pandemic.

Capital Markets and Portfolio Investment

The Costa Rican government’s general attitude towards foreign portfolio investment is cautiously welcoming, seeking to facilitate the free flow of financial resources into the economy while minimizing the instability that might be caused by the sudden entry or exit of funds. The securities exchange (Bolsa Nacional de Valores) is small and is dominated by trading in bonds. Stock trading is of limited significance and involves less than 10 of the country’s larger companies, resulting in an illiquid secondary market. There is a small secondary market in commercial paper and repurchase agreements. The Costa Rican government has in recent years explicitly welcomed foreign institutional investors purchasing significant volumes of Costa Rican dollar-denominated government debt in the local market. The securities exchange regulator (SUGEVAL) is generally perceived to be effective.

Costa Rica accepted the obligations of IMF Article VIII, agreeing not to impose restrictions on payments and transfers for current international transactions or engage in discriminatory currency arrangements, except with IMF approval. There are no controls on capital flows in or out of Costa Rica or on portfolio investment in publicly traded companies. Some capital flows are subject to a withholding tax (see section on Foreign Exchange and Remittances). Within Costa Rica, credit is largely allocated on market terms, although long-term capital is scarce. Favorable lending terms for USD-denominated loans compared to colon-denominated loans have made USD-denominated mortgage financing popular and common. Foreign investors are able to borrow in the local market; they are also free to borrow from abroad, although withholding tax may apply.

Money and Banking System

Costa Rica’s financial system boasts a relatively high financial inclusion rate, estimated by the Central Bank by August 2020 at 81.5 percent (the percentage of adults over the age of 15 holding a bank account). Non-resident foreigners may open what are termed “simplified accounts” in Costa Rican financial institutions, while resident foreigners have full access to all banking services.

The banking sector is healthy, although the 2020 non-performing loan ratio of 2.46 percent of total loans as of December 2020 would be significantly higher if not for Covid-19 temporary regulatory measures allowing banks to readjust loans. The state-owned commercial banks had a higher 3.24 percent average. The country hosts a large number of smaller private banks, credit unions, and factoring houses, although the four state-owned banks are still dominant, accounting for just under 50 percent of the country’s financial system assets. Consolidated total assets of those state-owned banks were approximately USD 29.5 billion in December 2020, while consolidated total assets of the eleven private commercial and cooperative banks were about USD 21.5 billion. Combined assets of all bank groups (public banks, private banks and others) were approximately USD 63.1 billion as of December 2020. As of February 2020, Costa Rica adopted a deposit guarantee fund and bank resolution regime for the financial system, ending the previous much-criticized situation in which only publicly owned banks benefitted from de-facto state guarantees.

Costa Rica’s Central Bank performs the functions of a central bank while also providing support to the four autonomous financial superintendencies (Banking, Securities, Pensions and Insurance) under the supervision of the national council for the supervision of the financial system (CONASSIF). The Central Bank developed and operates the financial system’s transaction settlement and direct transfer mechanism “SINPE” through which clients transfer money to and from accounts with any other account in the financial system. The Central Bank’s governance structure is strong, having benefitted in 2019 from reforms that increase the Bank’s autonomy from the Executive Branch.

Foreign banks may establish both full operations and branch operations in the country under the supervision of the banking regulator SUGEF. The Central Bank has a good reputation and has had no problem maintaining sufficient correspondent relationships. Costa Rica is steadily improving its ability to ensure the efficacy of anti-money laundering and anti-terrorism finance. The Costa Rican financial sector in broad terms appears to be satisfied to date with the available correspondent banking services.

The OECD 2020 report “review of the financial system” for Costa Rica is an excellent resource for those seeking more detail on the current state of Costa Rica’s financial system: https://www.oecd.org/countries/costarica/Costa-Rica-Review-of-Financial-System-2020.pdf .

Foreign Exchange and Remittances

Foreign Exchange

No restrictions are imposed on expatriation of royalties or capital except when these rights are otherwise stipulated in contractual agreements with the government of Costa Rica. However, Costa Rican sourced rents and benefits remitted overseas, including royalties, are subject to a withholding tax (see below). When such remittances are paid to a parent company or related legal entity, transfer pricing rules and certain limitations apply.

There are no restrictions on receiving, holding, or transferring foreign exchange. There are no delays for foreign exchange, which is readily available at market clearing rates and readily transferable through the banking system. Dollar bonds and other dollar instruments may be traded legally. Euros are increasingly available in the market. Costa Rica has a floating exchange rate regime in which the Central Bank is ready to intervene, if necessary, to smooth any exchange rate volatility.

Remittance Policies

Costa Rica does not have restrictions on remittances of funds to any foreign country; however, all funds remitted are subject to applicable withholding taxes that are paid to the country’s tax administration.  The default level of withholding tax is 30 percent with royalties capped at 25 percent, dividends at 15 percent, professional services at 25 percent, transportation and communication services at 8.5 percent, and reinsurance at 5.5 percent (different withholding taxes also apply for other types of services).  By Costa Rican law, in order to pay dividends, procedures need to be followed that include being in business in the corresponding fiscal year and paying all applicable local taxes.  Those procedures for declaring dividends in effect put a timing restriction on them.  Withholding tax does not apply to payment of interest to multilateral and bilateral banks that promote economic and social growth, and companies located in free trade zones pay no dividend withholding tax.  Spain, Germany, and Mexico have double-taxation tax treaties with Costa Rica, lowering the withholding tax on dividends paid by companies from those countries.

Sovereign Wealth Funds

Costa Rica does not have a Sovereign Wealth Fund.

Capital Markets and Portfolio Investment

Government policies generally encourage foreign portfolio investment.

The Regional Stock Exchange (BRVM) is located in Abidjan and the BRVM lists companies from the eight countries of the WAEMU. The existing regulatory system effectively facilitates portfolio investment through the West African Central Bank (BCEAO) and the Regional Council for Savings Investments (CREPMF). There is sufficient liquidity in the markets to enter and exit sizeable positions.

Government policies allow the free flow of financial resources into the product and factor markets.

The BCEAO respects IMF Article VIII on payment and transfers for current international transactions.

Credit allocation is based on market terms and has increased to support the private sector and economic growth, specifically for large businesses. Foreign investors can acquire credit on the local market.

Money and Banking System

As of December 2020, there were 29 commercial banks and two credit institutions in Côte d’Ivoire. Banks are expanding their national networks, especially in the secondary cities outside Abidjan, as domestic investment has increased up-country. The total number of bank branches has more than doubled from 324 in 2010 to 725 branches in 2019 (latest data available). According to the World Bank, in 2017 (latest data available) 41 percent of the population over the age of 15 have a bank account. Alternative financial services available include mobile money and microfinance for bill payments and transfers. Many Ivoirians prefer mobile money over banking, but mobile money does not yet offer the same breadth of financial services as banks.

Most Ivoirian banks are compliant with the BCEAO’s minimum capital requirements. Some public banks have large numbers of nonperforming loans. The government has been restructuring and privatizing the commercial banking sector over the past decade in order to remove low performers from government accounts.

The estimated total assets of the five largest banks are around USD 14 billion and account for more than half of total bank assets in the country.

The BCEAO is common to the eight member states of the WAEMU and manages banking regulations.

Foreign banks are allowed to operate in Côte d’Ivoire; at least one has been in Côte d’Ivoire for decades. They are subject to the WAEMU Banking Commission’s prudential measures and regulations. There have been no reports of Côte d’Ivoire losing any correspondent banking relationships in the past three years. No correspondent banking relationships are known to be in jeopardy.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on the transfer or repatriation of capital and income earned, or on investments financed with convertible foreign currency. Once an investment is established and documented, the government regularly approves the remittances of dividends and/or repatriation of capital. The same holds true for requests for other sorts of transactions (e.g. imports, licenses, and royalty fees).

Funds associated with investments funded with convertible currency are freely convertible into any world currency.

Côte d’Ivoire is a member of WAEMU, which uses the West African CFA Franc (XOF). The French Treasury holds the foreign exchange reserves of WAEMU member states and supports the fixed exchange rate of 655.956 CFA to the Euro. In December 2019, the Ivoirian President, concurrently serving as chairman of WAEMU, announced in the presence of the French President the forthcoming transition from the CFA to a new common regional currency to be called the Eco; details about the timeline or modalities of the change have not yet been published.

Remittance Policies

There are no recent changes or plans to change investment remittance policies.

There are no time limitations on remittances. Total personal remittances received by Ivoirians were about USD 338 million in 2019 or 0.6 percent of GDP.

Sovereign Wealth Funds

Côte d’Ivoire does not have a sovereign wealth fund, although there are reports as of late 2020 that the government is in the process of creating one.

Capital Markets and Portfolio Investment

Croatia’s securities and financial markets are open equally to domestic and foreign investment. Foreign residents may open non-resident accounts and may do business both domestically and abroad.  Specifically, Article 24 of the Foreign Currency Act states that non-residents may subscribe, pay in, purchase, or sell securities in Croatia in accordance with regulations governing securities transactions.  Non-residents and residents are afforded the same treatment in spending and borrowing.  These and other non-resident financial activities regarding securities are covered by the Foreign Currency Act, available on the central bank website ( https://www.hnb.hr/en/ ).

Securities are traded on the Zagreb Stock Exchange (ZSE), established in 1991.  Regulations that govern activity and participation in the ZSE can be found (in English) at:  https://zse.hr/en/legal-regulations/234 .  There are three tiers of securities traded on the ZSE.  The Capital Markets Act regulates all aspects of securities and investment services and defines the responsibilities of the Croatian Financial Services Supervisory Agency (HANFA). The Capital Market Act was amended in 2019 and went into force on February 22, 2020.  The amendments include the increase from USD 5.4 million to USD 8.7 million for mandatory publication of share prospectus, changes to administrative obligations, and a decrease in fees for issuing securities.  These amendments also give HANFA more authority over corporate management of those companies listed on the capital market.  All legislation associated with the Capital Market act can be found (in English) at:  http://www.hanfa.hr/regulations/capital-market/ .

There is sufficient liquidity in the markets to enter and exit sizeable positions.  There are no policies that hinder the free flow of financial resources.  There are no restrictions on international payments or transfers.  As such, Croatia is in accordance with IMF Article VIII.  The private sector, both domestic and foreign owned, enjoys open access to credit and a variety of credit instruments on the local market, on market terms.

Money and Banking System

The banking sector is mostly privatized and is highly developed, competitive, and increasingly offering diverse products to businesses (foreign and domestic) and consumers.  French, German, Italian, and Austrian companies own over 90 percent of Croatia’s banks. In 2016, Addiko Bank became the first U.S. bank registered in Croatia by taking over all of Hypo Bank’s holdings in Croatia.  The banking sector suffered no long-term consequences during the 2008 global banking crisis. According to conclusions from an IMF Virtual Visit with Croatia in November 2020, the banking sector is generally considered to be one of the strongest sectors of the Croatian economy, “comparable to other Central and Eastern European Countries.”   As of September 2020, there were 20 commercial banks and three savings banks, with assets totaling USD 68.24 billion.

The largest bank in Croatia is Italian-owned Zagrebacka Banka, with assets of USD 18.4 billion and a market share of 27.01 percent. The second largest bank is Italian-owned Privredna Banka Zagreb, with assets totaling USD 14.02 billion and 20.54 percent market share.  The third largest is Austrian Erste Bank, with assets totaling USD 10.9 billion and a 15.96 percent market share.  According to a December 2020 European Commission report, the non-performing loans (NPL) ratio for Croatia was 5.5 percent in the second quarter of 2020, putting Croatia among the top ten of EU countries for NPL in 2020. The country has a central bank system and all information regarding the Croatian National Bank can be found at  https://www.hnb.hr/en/ . Non-residents are able to open bank accounts without restrictions or delays.  The Croatian government has not introduced or announced any current intention to introduce block chain technologies in banking transactions.

Foreign Exchange and Remittances

Foreign Exchange

The Croatian Constitution guarantees the free transfer, conversion, and repatriation of profits and invested capital for foreign investments. Article VI of the U.S.-Croatia Bilateral Investment Treaty (BIT) additionally establishes protection for American investors from government exchange controls. The BIT obliges both countries to permit all transfers relating to a covered investment to be made freely and without delay into and out of each other’s territory.  Transfers of currency are additionally protected by Article VII of the International Monetary Fund (IMF) Articles of Agreement ( http://www.imf.org/External/Pubs/FT/AA/index.htm#art7  ).

The Croatian Foreign Exchange Act permits foreigners to maintain foreign currency accounts and to make external payments.  The Foreign Exchange Act also defines foreign direct investment (FDI) in a manner that includes use of retained earnings for new investments/acquisitions, but excludes financial investments made by institutional investors such as insurance, pension and investment funds.  The law also allows Croatian entities and individuals to invest abroad.  Funds associated with any form of investment can be freely converted into any world currency.

The exchange rate is determined by the Croatian National Bank through “managed floating.”  The National Bank intervenes in the foreign exchange market to ensure the Euro-Croatian kuna rate remains stable as an explicit and longstanding policy.  On July 10, 2020 the European Central Bank and European Commission announced that Croatia had fulfilled its commitments and the Croatian kuna (HRK) was admitted into the Banking Union and European Exchange Rate Mechanism (ERM II), with the exchange rate between the kuna and the euro (EUR) pegged at EUR 1 to 7.53450 HRK. Any risk of currency devaluation or significant depreciation is generally low.

Remittance Policies

No limitations exist, either temporal or by volume, on remittances.  The U.S. Embassy in Zagreb has not received any complaints from American companies regarding transfers and remittances.

Sovereign Wealth Funds

Croatia does not own any sovereign wealth funds.

Capital Markets and Portfolio Investment

REPUBLIC OF CYPRUS

The Cyprus Stock Exchange (CSE), launched in 1996, is one of the EU’s smallest stock exchanges, with a capitalization of USD 4.2 billion (EUR 3.5 billion) as of March 2021.  The CSE and the Athens Stock Exchange (ASE) have operated from a joint trading platform since 2006, allowing capital to move more freely from one exchange to the other, even though both exchanges retain their autonomy and independence.  The joint platform has increased capital available to Cypriot firms and improved the CSE’s liquidity, although its small size remains a constraint.  The private sector has access to a variety of credit instruments, which has been enhanced through the operation of private venture capital firms.  Credit is allocated on market terms to foreign and local investors alike.  Foreign investors may acquire up to 100 percent of the share capital of Cypriot companies listed on the CSE with the notable exception of companies in the banking sector.

AREA ADMINISTERED BY TURKISH CYPRIOTS

There is no stock exchange in the area administrated by Turkish Cypriots and no foreign portfolio investment.  Foreign investors are able to get credit from the local market, provided they have established domestic legal presence, majority-owned (at least 51 percent) by domestic companies or persons.

Money and Banking System

REPUBLIC OF CYPRUS

At the end of November 2020, the value of total deposits in ROC banks was USD 54.7 billion (EUR 48.0 billion), and the value of total loans was USD 35.7 billion (EUR 31.3 billion).  More details on local monetary and financial statistics are available at: https://www.centralbank.cy/en/publications/monetary-and-financial-statistics/year-2020.  Currently, there are seven local banks in Cyprus offering a full range of retail and corporate banking services – the largest two of which are the Bank of Cyprus and Hellenic Bank – plus another two dozen or so subsidiaries or branches of foreign banks offering more specialized services.  The full list of authorized credit institutions in Cyprus is available on the Central bank of Cyprus website: https://www.centralbank.cy/en/licensing-supervision/banks/register-of-credit-institutions-operating-in-cyprus.

The banking sector has made significant progress since the 2013 financial crisis resulted in a “haircut” of uninsured deposits, followed by numerous bankruptcies and consolidation.  The island’s two largest banks – Bank of Cyprus and Hellenic – are now adequately capitalized and have returned to profitability.  However, the profitability of the banking sector as a whole is challenged by low interest margins, a high level of liquidity, and a still elevated volume of NPLs.  NPLs in Cyprus are the second highest in the EU at 19.1 percent of total loans at the end of November 2020, compared to 28.6 percent a year earlier, albeit considerably lower than in 2014, when they reached 47.8 percent.  Banks continue striving to reduce NPLs further, either by selling off portfolios of NPLs or using recently amended insolvency and foreclosure frameworks.  The economic impacts of the COVID-19 pandemic and political pressure to protect citizens under current extraordinary circumstances makes reducing NPLs difficult at this time.

Cyprus has a central bank – the Central Bank of Cyprus – which forms part of the European Central Bank.  Foreign banks or branches are allowed to establish operations in Cyprus.  They are subject to Central Bank of Cyprus supervision, just like domestic banks.  JPMorgan, Citibank, Bank of New York Mellon, and HSBC currently provide U.S. dollar correspondent banking services to ROC banks.

Opening a personal or corporate bank account in Cyprus is straightforward, requiring routine documents.  But because of a history of money-laundering concerns, banks now carefully scrutinize these documents and can conduct extensive due diligence checks on sources of wealth and income.  A local bank account is not necessary for personal household expenses.  Opening a corporate bank account is mandatory when registering a company in Cyprus.

Cyprus has taken steps since 2018 to address recognized regulatory shortcomings in combatting illicit finance in its international banking and financial services sector, tightening controls over non-resident shell companies and bank accounts.  Cyprus’ first National Risk Assessment (NRA) of money laundering and terrorist financing, released in November 2018, is available at: http://mof.gov.cy/en/press-office/announcements/national-risk-assessment-of-money-laundering-and-terrorist-financing-risks-cyprus.  Cyprus is a member of the Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body.  Its most recent mutual evaluation report of the Cypriot banking sector, released February 2, 2020, can be found at: https://www.coe.int/en/web/moneyval/-/cyprus-should-pursue-money-laundering-from-criminal-proceeds-generated-outside-of-the-country-more-aggressively.

AREA ADMINISTERED BY TURKISH CYPRIOTS

The “Central Bank” oversees and regulates local, foreign, and private banks.  In addition to the “Central Bank” and the “Development Bank”, there are 21 banks in the area administrated by Turkish Cypriots, of which 16 are Turkish Cypriot-owned banks, and five are branch banks from Turkey.  Banks are required to follow “know-your-customer” (KYC) and AML “laws,” which are regulated by the “Ministry of Economy and Energy,” and supervised by the “Central Bank,” but AML practices do not meet international standards.  Due to non-recognition issues, Turkish Cypriot banks do not qualify for a SWIFT number to facilitate international transactions.  All international transfers depend on routing through Turkish banks.  According to a September 2020 “Central Bank” report, the total number of deposits increased by 32.74 percent in one year and amounted to 40 billion Turkish Lira (USD 5.2 billion) at the end of September 2020. The “Central Bank” claimed 96.7 percent liquidity, assessing this as sufficient to withstand a crisis.  As of the end of the third quarter of 2020, NPLs increased by 34.3 percent, reaching 1.4 billion Turkish Lira (USD 20 million) compared to the same period the previous year.

More information is available at the “Central Bank” website: http://www.kktcmerkezbankasi.org/.

Foreign Exchange and Remittances

Foreign Exchange

REPUBLIC OF CYPRUS

The ROC is a member of the Eurozone.  The Eurozone has no restrictions on the transfer or conversion of its currency, and the exchange rate is freely determined in the foreign exchange market.  There is no difficulty in obtaining foreign exchange.  Since the 2008 global financial crisis, the European Commission has pursued several initiatives aimed at creating a safer and sounder financial sector, known as the Banking Union.  These initiatives, which include stronger prudential requirements for banks, improved depositor protection and rules for managing failing banks, form a single rulebook for all financial actors in the member states of the EU.  For more info, please refer to: http://ec.europa.eu/finance/general-policy/banking-union/index_en.htm.

AREA ADMINISTERED BY TURKISH CYPRIOTS

The “TRNC” has a separate financial system from the ROC, linked closely with that of Turkey.  The Turkish Lira is the main currency in use, although the Euro, U.S. dollar, and British pound are commonly accepted.  The vast majority of business borrowing is derived from domestic and Turkish sources.

A devaluation of the Turkish Lira against foreign exchange rates (or the opposite) has a strong effect on the economy of the area administered by Turkish Cypriots.  Wages across sectors are generally paid in Turkish Lira, but almost all real estate, rents, electronic goods, vehicles, and other expensive products are valued in foreign currency.  Banks in the Turkish Cypriot administered areas provide lower interest rates for Euro or British pound loans than for Turkish Lira loans.  Foreign investors are authorized to repatriate all proceeds from their investments and business.

Banks are free to keep foreign currency, act as intermediary in import and export transactions, accept foreign currency savings, engage in purchase and sale of foreign currency, and give foreign currency loans.  All international correspondent banking services must route through Turkish banks.

Remittance Policies

REPUBLIC OF CYPRUS

There are no restrictions or delays on investment remittances or the inflow or outflow of profits.  Remittances may be moved through the regular banking system or through licensed Payment Institutions (PIs) or Electronic Money Institutions (EMIs), also regulated by the Central Bank of Cyprus.

The Central Bank of Cyprus maintains two public registers, listing both PIs and EMIs, whether authorized by the Central Bank of Cyprus or authorized in other EU Member States with the right of freedom to provide services in the ROC.

The two relevant CBC registers are:

Register of Licensed Payment Institutions: https://www.centralbank.cy/en/licensing-supervision/payment-institutions/licensing-and-supervision-of-payment-institutions

Register of Electronic Money Institutions: https://www.centralbank.cy/en/licensing-supervision/electronic-money-institutions/licensing-and-supervision-of-electronic-money-institutions

Sovereign Wealth Funds

REPUBLIC OF CYPRUS

The Parliament passed legislation March 1, 2019 providing for the establishment of a National Investment Fund (NIF) to manage future offshore hydrocarbons and other natural resources revenue.  Section 29 of the NIF Law specifies that the Corporation to be set up shall invest the Fund in a diversified manner with a view to maximizing risk-adjusted financial returns and in a manner consistent with the portfolio management by a prudent institutional investor.  The Fund is precluded from investing in securities issued by a Cypriot issuer (including the state) or in real estate located in Cyprus.  This provision safeguards against the possibility of speculative development catering to the Fund and political interference favoring domestic investments for purposes other than the best interests of the Fund and the Cypriot people as a whole.  Additionally, Section 30 of the law provides that the fund cannot invest, directly or indirectly, to acquire more than five percent of any one company or legal entity. The fund is not yet operational.  Regulations for the NIF are being drafted and will require legislative approval, and it will be several years before there are any revenues generated from the ROC’s hydrocarbon assets.

AREA ADMINISTERED BY TURKISH CYPRIOTS

There is no established sovereign wealth fund.

Capital Markets and Portfolio Investment

The Czech Republic is open to portfolio investment.  There are 55 companies listed on the Prague Stock Exchange (PSE).  The overall trade volume of stocks decreased from CZK142.55 billion (USD6.5 billion) in 2018 to CZK108.78 billion (USD5 billion) in 2019, with an average daily trading volume of CZK435.12 million (USD19.9 million).

In March 2007, the PSE created the Prague Energy Exchange (PXE), which was later re-named to Power Exchange Central Europe, to trade electricity in the Czech Republic and Slovakia and, later, Hungary, Poland, and Romania.  PXE’s goal is to increase liquidity in the electricity market and create a standardized platform for trading energy.  In 2016, the German power exchange EEX acquired two thirds of PXE shares.  Following the acquisition, the PXE benefited from both an increased number of traders and increased trade volume.

The Czech National Bank, as the financial market supervisory authority, sets rules to safeguard the stability of the banking sector, capital markets, and insurance and pension scheme industries, and systematically regulates, supervises and, where appropriate, issues penalties for non-compliance with these rules.

The Central Credit Register (CCR) is an information system that pools information on the credit commitments of individual entrepreneurs and legal entities, facilitating the efficient exchange of information between CCR participants.  CCR participants consist of all banks and branches of foreign banks operating in the Czech Republic, as well as other individuals included in a special law.

As an EU member country, the local market provides credits and credit instruments on market terms that are available to foreign investors.

The Czech Republic respects IMF Article VIII.

Money and Banking System

Large domestic banks belong to European banking groups.  Most operate conservatively and concentrate almost exclusively on the domestic Czech market.  Despite the COVID-19 crisis, Czech banks remain healthy.  Results of regular banking sector stress tests, as conducted by the Czech National Bank, repeatedly confirm the strong state of the Czech banking sector which is deemed resistant to potential shocks.  Results of the most recent stress test conducted by the Czech National Bank are available at https://www.cnb.cz/en/financial-stability/stress-testing/banking-sector/.  As of January 31, 2021, the total assets of commercial banks stood at CZK8,661 billion (approximately USD395 billion), according to the Czech National Bank.  Foreign investors have access to bank credit on the local market, and credit is generally allocated on market terms.

The Czech National Bank has 10 correspondent banking relationships, including JP Morgan Chase Bank in New York and the Royal Bank of Canada in Toronto.  The Czech Republic has not lost any correspondent banking relationships in the past three years, and there are no relationships in jeopardy.

The Czech Republic does not currently regulate cryptocurrencies.

Foreign Exchange and Remittances

Foreign Exchange Policies

The COVID-19 outbreak caused the Czech crown to significantly depreciate, primarily in Q1 – Q2 2020.  Between February and May 2020, the Crown depreciated from CZK25 to CZK27.3 per EUR and from CZK22.9 to CZK25 per USD.  However, the crown recovered to CZK25.8 per EUR and CZK21.4 per USD by February 2021.

The CZK is fully convertible and floats freely.  The Czech National Bank supervises the foreign exchange market and its compliance with foreign exchange regulations.  The law permits conversion into any currency.

Remittance Policies

All international transfers of investment-related profits and royalties can be carried out freely.  The U.S.-Czech Bilateral Investment Treaty guarantees repatriation of earnings from U.S. investments in the Czech Republic.  However, a 15 percent withholding tax is charged on the repatriation of profits from the Czech Republic.  This tax is reduced under the terms of applicable double taxation treaties.  There are no administrative obstacles to removing capital.  The average delay for remitting investment returns meets the international standard of three working days.

Sovereign Wealth Funds

The Czech government does not operate a sovereign wealth fund.

Capital Markets and Portfolio Investment

Portfolio investment is nonexistent in the DRC and there is no domestic stock market.  A small number of private equity firms are actively investing in the mining industry.  The institutional investor base is not well developed, with only an insurance company and a state pension fund as participants.  There is no market for derivatives in the country.  Cross-shareholding and stable shareholding arrangements are also not common.  Credit is allocated on market terms, but there are occasional complaints about unfair privileges extended to certain investors in profitable sectors such as mining and telecommunications.

Although reforms have been initiated, the Congolese financial system remains small, heavily dollarized, characterized by fragile balance sheets, and cumbersome to use.  Further reforms are needed to strengthen the financial system, support its expansion, and spur economic growth.  Inadequate risk-based controls, weak enforcement of regulations, low profitability, and excessive reliance on demand deposit undermine the shock resilience of the financial system.

The Central Bank of Congo (BCC) refrains from payments and transfers on current international transactions.  The DRC’s capital market remains underdeveloped and consists mainly of the issuance of treasury bonds.  In 2019, the BCC issued its first domestic bond in 24 years, which was oversubscribed.  Most of the buyers were local Congolese banks.

It is possible for foreign firms to borrow from local banks, but their options are limited.  Maturities for loans are usually limited to 3-6 months, and interest rates are typically around 16-21 percent.  The inconsistency of the legal system, the often-cumbersome business climate, and the difficulty in obtaining inter-bank financing discourages banks from providing long-term loans.  There are limited possibilities to finance major projects in the domestic currency, the Congolese franc (CDF).

Money and Banking System

The Congolese financial system is improving but remains fragile.  The BCC controls monetary policy and regulates the banking system.  Banks are concentrated primarily in Kinshasa, Kongo Central, North and South Kivu, and Haut Katanga provinces. Banking rate penetration is roughly 7 percent or about 4.1 million accounts, which places the country among the most under-banked nations in the world.  Mobile banking has the potential to greatly increase banking customers as an estimated 35 million Congolese use mobile phones.

There is no debt market. The financial health of DRC banks is fragile, reflecting high operating costs and exchange rates. The situation improved in a weak economic environment in 2019 as deposits have increased, which could point to a better year in 2020 considering the asset quality measures taken by the BCC, allowing banks to absorb the economic impact of the covid-19 pandemic.  Fees charged by banks are a major source of revenue.

The financial system is mostly banking-based with aggregate asset holdings estimated at USD 5.1 billion.  Among the five largest banks, four are local and one is controlled by foreign holdings.  The five largest banks hold almost 65 percent of bank deposits and more than 60 percent of total banks assets, about $3.1 billion.  There are no statistics on non-performing loans, as many banks only record the balance due instead of the total amount of their non-performing loans.

Citigroup is the only correspondent bank. All foreign banks accredited by the BCC are considered Congolese banks with foreign capital and fall under the provisions and regulations covering the credit institutions’ activities in the DRC.  There are no restrictions on foreigners establishing an account in a DRC bank.

Foreign Exchange and Remittances

Foreign Exchange

The international transfer of funds is permitted when channeled through local commercial banks.  On average, bank declaration requirements and payments for international transfers take less than one week to complete.  The Central Bank is responsible for regulating foreign exchange and trade.  The only currency restriction imposed on travelers is a $10,000 limit on the amount an individual can carry when entering or leaving the DRC.

The GDRC requires the BCC to license exporters and importers.  The DRC’s informal foreign exchange market is large and unregulated and offers exchange rates slightly more favorable than the official rate.  BCC regulations set the Congolese franc (CDF) as the main currency in all transactions within the DRC, required for the payment of fees in education, medical care, water and electricity consumption, residential rents, and national taxes.  Exceptions to this rule occur where both parties involved, and the appropriate monetary officials, agree to use another currency.  The CDF exchange rate floats freely, but the BCC carefully monitors the rate and intervenes to shore up the exchange rate.

Remittance Policies

There are no legal restrictions on converting or transferring funds.  Exchange regulations require a 60-day waiting period for in-country foreigners to remit income.  Foreign investors may remit through parallel markets when they are legally established and recognized by the Central Bank.

Sovereign Wealth Funds

The DRC does not have any reported Sovereign Wealth Funds, though the 2018 Mining Code discusses a Future Fund to be capitalized by a percentage of mining revenues.

Capital Markets and Portfolio Investment

Denmark has fully liberalized foreign exchange flows, including those for direct and portfolio investment purposes. Credit is allocated on market terms and is freely available. Denmark adheres to its IMF Article VIII obligations. The Danish banking system is under the regulatory oversight of the Financial Supervisory Authority. Differentiated voting rights – A and B stocks – are used to some extent, and several Danish companies are controlled by foundations, which can restrict potential hostile takeovers, including foreign takeovers.

The Danish stock market functions efficiently. In 2005, the Copenhagen Stock Exchange became part of the integrated Nordic and Baltic marketplace, OMX Exchanges, which is headquartered in Stockholm. Besides Stockholm and Copenhagen, OMX also includes the stock exchanges in Helsinki, Tallinn, Riga, and Vilnius. To increase the access to capital for primarily small companies, the OMX in December 2005 opened a Nordic alternative marketplace – “First North” – in Denmark. In February 2008, the exchanges were acquired by the NASDAQ-OMX Group. In the World Economic Forum 2019 report, Denmark ranks 11th out of 141 on the metric “Financial System”.

The Danish stock market is divided into four different branches/indexes. The C25 index contains the 25 most valuable companies in Denmark. Other large companies with a market value exceeding EUR 1 billion (USD 1.1 billion) are in the group of “Large Cap,” companies with a market value between EU 150 million (USD 171) and 1 billion Euro (USD 1.14 billion) belong to the “Mid Cap” segment, while companies with a market value smaller than EU 150 million belong to “Small Cap” group.

Money and Banking System

The major Danish banks are rated by international agencies, and their creditworthiness is rated as high by international standards. The European Central Bank and the Danish National Bank reported that Denmark’s major banks have passed stress tests by considerable margins.

Denmark’s banking sector is relatively large; based on the ratio of consolidated banking assets to GDP, the sector is three times bigger than the national economy. By January 2021, the total of Danish shares valued DKK 3.82 trillion (USD 584 billion) and were owned 52.5 percent by foreign owners and 47.5 percent by Danish owners, including 13 percent held by households and 7 percent by the government. The three largest Danish banks – Danske Bank, Nordea Bank Danmark, and Jyske Bank – hold approximately 75 percent of the total assets in the Danish banking sector.

The primary goal of the Central Bank (Nationalbanken) is to maintain the peg of the Danish currency to the Euro – with allowed fluctuations of 2.25 percent. It also functions as the general lender to Danish commercial banks and controls the money supply in the economy.

As occurred in many countries, Danish banks experienced significant turbulence in 2008 – 2009. The Danish Parliament subsequently passed a series of measures to establish a “safety net” program, provide government lending to financial institutions in need of capital to uphold their solvency requirements, and ensure the orderly winding down of failed banks. The Parliament passed an additional measure, the fourth Bank Package, in August 2011, which sought to identify systemically important financial institutions, ensure the liquidity of banks which assume control of a troubled bank, support banks acquiring troubled banks by allowing them to write off obligations of the troubled bank to the government, and change the funding mechanism for the sector-funded guarantee fund to a premiums-based, pay-as-you-go system. According to the Danish Government, Bank Package 4 provides mechanisms for a sector solution to troubled banks without senior debt holder losses but does not supersede earlier legislation. As such, senior debt holder losses are still a possibility in the event of a bank failure.

On October 10, 2013, the Danish Minister for Business and Growth concluded a political agreement with broad political support which, based on the most recent financial statements, identified specific financial institutions as “systemically important” (SIFI). The SIFI in Denmark at the end of 2019 were Danske Bank A/S, Nykredit Realkredit A/S, Jyske Bank A/S, Nordea Kredit Realkredit A/S, Sydbank A/S, Spar Nord Bank A/S and DLR Kredit A/S. These were identified based on three quantitative measures: 1) a balance sheet to GDP ratio above 6.5 percent; 2) market share of lending in Denmark above 5 percent; or 3) market share of deposits in Denmark above three percent. If an institution is above the requirement of any one of the three measures, it will be considered systemically important and must adhere to the stricter requirements on capitalization, liquidity, and resolution. The Faroese SIFI are P/F BankNordik, Betri Banki P/F and Norðoya Sparikassi, while Grønlandsbanken is the only SIFI in Greenland.

Experts expect a revision of the Danish system of troubled financial institution resolution mechanisms in connection with a decision to join the EU Banking Union. The national payment system, “Nets” was sold to a consortium consisting of Advent International Corp., Bain Capital LLC, and Danish pension fund ATP in March 2014 for DKK 17 billion (USD 2.60 billion). Nets went public with an IPO late 2016.

Foreign Exchange and Remittances

Foreign Exchange

Exchange rate conversions throughout this document are based on the 2020 average exchange rate where Danish Kroner (DKK) 6.5343703 = 1 USD.

There are no restrictions on converting or transferring funds associated with an investment into or out of Denmark. Policies in place are intended to facilitate the free flow of capital and to support the flow of resources in the product and services markets. Foreign investors can obtain credit in the local market at normal market terms, and a wide range of credit instruments is available.

Denmark has not adopted the Euro currency. The country meets the EU’s economic convergence criteria for membership and can join if it wishes to do so. Denmark conducts a fixed exchange rate policy with the Danish Krone linked closely to the Euro within the ERM II framework. The Danish Krone (DKK; plural: Kroner, in English, “the Crown”) has a fluctuation band of +/- 2.25 percent of the central rate of DKK 746.038 per 100 Euro. The Danish Government supports inclusion in a European Banking Union, if it can be harmonized with the Danish Euro opt-out and there is a guarantee that the Danish mortgage finance system will be allowed to continue in its present form.

The Danish political reservation concerning Euro participation can only be abolished by national referendum, and Danish voters have twice (in 1992 and 2000) voted it down. The government has stated that it supports adopting the Euro in principle, but no referendum is expected for the foreseeable future. Regular polling on this issue shows a majority of public opinion remains in favor of keeping the Krone. According to the Stability and Growth Pact, a Euro country’s debt to GDP ratio cannot exceed 60 percent and budget deficit to GDP ratio cannot exceed three percent.

Denmark’s debt to GDP ratio is projected to have increased from 33.3 percent in 2019 to 43.5 percent in 2020 (final statistics for 2020 were pending when this report was published). Denmark is also projected to have run a 3.5 percent budget deficit in 2020, after running a 3.8 percent budget surplus in 2019 and a 0.7 percent surplus in 2018.

Remittance Policies

N/A

Sovereign Wealth Funds

Denmark maintains no sovereign wealth funds.

Capital Markets and Portfolio Investment

In recent years, Djibouti has relied heavily on foreign investment, and the government is open and receptive to foreign investors. Portfolio investment in Djibouti is primarily done through private equity. Some multinational companies with investments in Djibouti are publicly traded. Investments in Djibouti are inherently illiquid for that reason, and the purchase or sale of any sizeable investment in Djibouti affects the market accordingly. Djibouti does not have its own stock market. Existing policies facilitate the free flow of financial resources into the product and factor markets.

Credit is allocated on market terms, and foreign companies do not face discrimination in obtaining it. Generally, however, only well-established businesses obtain bank credit, as the cost of credit is high. Credit is available to the private sector, whether foreign or domestic. Where credit is not available, it is primarily due to the associated risk and not structural factors.

Money and Banking System

Three large banks, Bank of Africa, Bank for Commerce and Industry – Mer Rouge, and CAC bank dominate Djibouti’s banking sector. While these 3 banks account for the majority share of deposits in-country, there are 13 total banks, all established in the last 14 years. In 2011 a new banking law went into effect, fixing the minimum capital requirement for financial institutions at DJF 1 billion (USD 5,651,250) and extended the scope of the law to include financial auxiliaries, such as money transfer agencies and Islamic financial institutions. In addition to the three names banks above, foreign banks include Silkroad Bank, Bank of China the Burkina Faso-based International Business Bank.

The banking sector suffers from a lack of consistent supervision, but it has been improving. Non-performing loans decreased from 16.26% in 2019 to 13.31% in 2020. The total assets of all the banks were estimated to be USD 3.1 billion in 2020, of which 80% were held by the 4 largest banks. The country has a Central Bank, which is in charge of delivering licenses to banks and supervising them. Foreign banks or branches are allowed to establish operations in the country. They are subject to the same regulations as local banks. Djibouti has not announced that it intends to implement or allow the implementation of blockchain technologies in its banking transactions. Some banks have begun to provide mobile and e-banking services. In June 2020, Djibouti Telecom launched D-Money, a new Digital Mobile Money service which allows users to make digital money transfers and payments directly from mobile phones.

Foreign Exchange and Remittances

Foreign Exchange

Djibouti has no foreign exchange restrictions. Businesses are free to repatriate profits. There are no limitations on converting or transferring funds, or on the inflow and outflow of cash. The Djiboutian franc, which has been pegged to the U.S. dollar since 1949, is stable. The fixed exchange rate is 177.71 Djiboutian francs to the U.S. dollar. Funds can be transferred by using banks or international money transfer companies such as Western Union, all monitored by the Central Bank.

Remittance Policies

There are no recent changes or plans to change investment remittance policies. There are no time limitations on remittances. The government does not issue bonds on the open market, and cash-like instruments are not in common use in Djibouti, so direct currency transfers are the only practical method of remitting profits.

Sovereign Wealth Funds

In mid-2020 the Djiboutian government announced the creation of a Sovereign Wealth Fund. According to a government statement, the state-owned fund will target investments locally and in neighboring countries in the Horn of Africa. It will focus on industries including telecommunications, technology, energy, and logistics. The fund will act as a long-term investor and is required to reinvest the entire net profits of its activity. The government aims to fund it to $1.5 billion within ten years. Article 12 of Law N° 75/AN/20/8th L creating the Sovereign Fund of Djibouti states the fund adopts and implements best practice in terms of transparency and performance reporting in accordance with the Santiago Principles. As of mid-2021, the fund was not yet operational.

• Law No. 75/AN/20/8th L establishing the Sovereign Fund of Djibouti – https://www.presidence.dj/texte.php?ID=75&ID2=2020-03-29&ID3=Loi&ID4=6&ID5=2020-03-31&ID6=n
• Decree No. 2020-127/PRE approving the statutes and determining certain initial resources of the Sovereign Fund of Djibouti – https://www.presidence.dj/texte.php?ID=2020-127&ID2=2020-06-30&ID3=D%E9cret&ID4=12&ID5=2020-06-30&ID6=n
• Decree No. 2020-111/PRE appointing the members of the Board of Directors and the Director General of the Sovereign Fund of Djibouti – https://www.presidence.dj/texte.php?ID=2020-111&ID2=2020-06-24&ID3=D%E9cret&ID4=12&ID5=2020-06-30&ID6=n

Capital Markets and Portfolio Investment

Dominica is a member of the ECCU.  As such, it is a member of the Eastern Caribbean Securities Exchange (ECSE) and the Regional Government Securities Market.  The ECSE is a regional securities market established by the ECCB and licensed under the Securities Act of 2001, a uniform regional body of legislation governing the buying and selling of financial products for the eight member territories.  In 2020, the ECSE listed 155 securities, comprising 135 sovereign debt instruments, 13 equities, and seven corporate debt securities.  Market capitalization stood at $1.8 billion. Dominica is open to portfolio investment.

Dominica has accepted the obligations of Article VIII of the International Monetary Fund (IMF) Agreement, Sections 2, 3, and 4 and maintains an exchange system free of restrictions on making payments and transfers for current international transactions.  Dominica does not normally grant foreign tax credits except in the case of taxes paid in a British Commonwealth country that grants similar relief for Dominica taxes or where an applicable tax treaty provides a credit.  The private sector has access to credit on the local market through loans, purchases of non-equity securities, and trade credits and other accounts receivable that establish a claim for repayment.

Money and Banking System

The eight participating governments of the ECCU have passed the Eastern Caribbean Central Bank Agreement Act.  The Act provides for the establishment of the ECCB, its management and administration, its currency, relations with financial institutions, relations with the participating governments, foreign exchange operations, external reserves, and other related matters. Dominica is a signatory to this agreement and the ECCB controls Dominica’s currency and regulates its domestic banks.

The Banking Act is a harmonized piece of legislation across the ECCU.  The Minister of Finance usually acts in consultation with, and on the recommendation of, the ECCB with respect to those areas of responsibility within the Minister of Finance’s portfolio.

Domestic and foreign banks can establish operations in Dominica.  The Banking Act requires all commercial banks and other institutions to be licensed in order to conduct any banking business.  The ECCB regulates financial institutions.  As part of ongoing supervision, licensed financial institutions are required to submit monthly, quarterly, and annual performance reports to the ECCB.  In its latest annual report, the ECCB listed the commercial banking sector in Dominica as stable.  Assets of commercial banks totaled $781.8 million (2.1 billion Eastern Caribbean dollars) at the end of 2019. Dominica is well served by bank and non-financial institutions.  There are minimal alternative financial services.

The Caribbean region has witnessed a withdrawal of correspondent banking services by the U.S. and European banks.  CARICOM remains committed to engaging with key stakeholders on the issue and appointed a Committee of Ministers of Finance on Correspondent Banking to monitor the issue.

In 2019, the ECCB launched an 18-month financial technology pilot to launch a Digital Eastern Caribbean dollar (DXCD) with its partner, Barbados-based Bitt Inc.  An accompanying mobile application, DCash was officially launched on March 31, 2021 in four pilot countries.  The DCash pilot phase will run for 12 months.  The pilot program is expected to become operational in Dominica later in the year.  The digital Eastern Caribbean currency will operate alongside physical Eastern Caribbean currency.  Dominica does not have any specific legislation to regulate cryptocurrencies.

Foreign Exchange and Remittances

Foreign Exchange

Dominica is a member of the ECCU and the ECCB.  The currency of exchange is the Eastern Caribbean dollar (denoted as XCD).  As a member of the OECS, Dominica has a fully liberalized foreign exchange system.  The XCD has been pegged to the United States dollar at a rate of 2.7 to $1.00 since 1976.  As a result, the XCD does not fluctuate, creating a stable currency environment for trade and investment in Dominica.

Remittance Policies

Companies registered in Dominica have the right to repatriate all capital, royalties, dividends, and profits free of all taxes or any other charges on foreign exchange transactions.  There are no restrictions on the repatriation of dividends for totally foreign-owned firms.  However, a mixed foreign-domestic company may repatriate profits to the extent of its foreign participation.

As a member of the OECS, there are no exchange controls in Dominica and the invoicing of foreign trade transactions are allowed in any currency.  Importers are not required to make prior deposits in local funds and export proceedings do not have to be surrendered to government authorities or to authorized banks.  There are no controls on transfers of funds.  Dominica is a member of the Caribbean Financial Action Task Force (CFATF).

Sovereign Wealth Funds

Neither the Government of Dominica, nor the ECCB, of which Dominica is a member, maintains a sovereign wealth fund.

Capital Markets and Portfolio Investment

The Dominican Stock Market (BVRD by its Spanish acronym) is the only stock exchange in the Dominican Republic. It began operations in 1991 and is viewed as a cornerstone of the country’s integration into the global economy and domestic development. It is regulated by the Securities Market Law No. 249-17 and supervised by the Superintendency of Securities, which approves all public securities offerings. Since many companies do not wish to sell shares to the public (a common theme among family-owned companies in Latin America), the majority of activity has been in the capital and fixed income markets.

The private sector has access to a variety of credit instruments. Foreign investors are able to obtain credit on the local market but tend to prefer less expensive offshore sources. The Central Bank regularly issues certificates of deposit using an auction process to determine interest rates and maturities.

In recent years, the local stock market has continued to expand, in terms of the securities traded on the BVRD. There are very few publicly traded companies on the exchange, as credit from financial institutions is widely available and many of the large Dominican companies are family-owned enterprises. Most of the securities traded in the BVRD are fixed-income securities issued by the Dominican State.

Money and Banking System

Dominican Republic’s financial sector is relatively stable, and the IMF declared the financial system largely satisfactory during 2019 Article IV consultations, citing a strengthened banking system as a driver of solid economic performance over the past decade. According to a Global Partnership for Financial Inclusion report from 2017, approximately 56 percent of Dominican adults have bank accounts. However, financial depth is relatively constrained. Private lending to GDP (around 27 percent, according to the IMF) is low by international and regional standards, representing around half the average for Latin America. Real interest rates, driven in part by large interest rate spreads, are also relatively high. The country’s relatively shallow financial markets can be attributed to a number of factors, including high fiscal deficits crowding out private investment; complicated and lengthy regulatory procedures for issuing securities in primary markets; and high levels of consolidation in the banking sector.

Dominican banking consists of 113 entities, as follows: 48 financial intermediation entities (including large commercial banks, savings and loans associations, financial intermediation public entities, credit corporations), 40 foreign exchange and remittance agents (specifically, 36 exchange brokers and 6 remittances and foreign exchange agents), and 24 trustees. According to the latest available information (January 2021), total bank assets were $40.8 billion. The three largest banks hold 69.5 percent of the total assets – Banreservas 30.0 percent, Banco Popular 23.1 percent, and BHD Leon 16.4 percent. While full-service bank branches tend to be in urban areas, several banks employ sub-agents to extend services in more rural areas. Technology has also helped extend banking services throughout the country.

The Dominican Monetary and Banking system is regulated by the Monetary and Financial Law No. 183-02, and is overseen by the Monetary Board, the Central Bank, and the Superintendency of Banks. The mission of the Dominican Central Bank is to maintain the stability of prices, promote the strength and stability of the financial system, and ensure the proper functioning of payment systems. The Superintendency of Banks carries out the supervision of financial intermediation entities, in order to verify compliance by said entities with the provisions of the law.

Foreign banks may establish operations in the Dominican Republic, although it may require a special decree for the foreign financial institution to establish domicile in the country. Foreign banks not domiciled in the Dominican Republic may establish representative offices in accordance with current regulations. To operate, both local and foreign banks must obtain the prior authorization of the Monetary Board and the Superintendency of Banks. Major U.S. banks have a commercial presence in the country, but most focus on corporate banking services as opposed to retail banking. Some other foreign banks offer retail banking. There are no restrictions on foreigners opening bank accounts, although identification requirements do apply.

Foreign Exchange and Remittances

Foreign Exchange

The Dominican exchange system is a market with free convertibility of the peso. Economic agents perform their transactions of foreign currencies under free market conditions. There are generally no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

The Central Bank sets the exchange rates and practices a managed float policy. Some firms have had repeated difficulties obtaining dollars during periods of high demand. Importers may obtain foreign currency directly from commercial banks and exchange agents. The Central Bank participates in this market in pursuit of monetary policy objectives, buying or selling currencies and performing any other operation in the market to minimize volatility.

Remittance Policies

Law No. 16-95 on Foreign Investment in the Dominican Republic grants special allowances to foreign investors and national individuals residing abroad who make contributions to a company operating in the Dominican Republic. It regulates the types of investments, the areas of investment, and the rights and obligations of investors, among others. Decree No. 214-04 on the Registration of Foreign Investment in the Dominican Republic establishes the requirements for the registration of foreign investments, the remittance of profits, the repatriation of capital, and the requirements for the sale of foreign currency, among other issues related with investments.

Foreign investors can repatriate or remit both the profits obtained and the entire capital of the investment without prior authorization of the Central Bank. Article 5 of the aforementioned decree states that “the foreign investor, whose capital is registered with the CEI-RD, shall have the right to remit or repatriate it…”

Sovereign Wealth Funds

The Dominican government does not maintain a sovereign wealth fund.

Capital Markets and Portfolio Investment

The 2014 Law to Strengthen and Optimize Business Partnerships and Stock Markets created the Securities Market Regulation Board to oversee the stock markets. Investment options on the Quito and Guayaquil stock exchanges are very limited. Sufficient liquidity to enter and exit sizeable positions does not exist in the local markets. The five percent currency exit tax also inhibits free flow of financial resources into the product and factor markets. Foreigners are able to access credit on the local market, but interest rates are high and the number of credit instruments is limited.

Money and Banking System

Ecuador is a dollarized economy, and its banking sector is healthy. According to the Ecuadorian Central Bank’s Access to the Financial System Report, approximately 59 percent of the adult (over 15 years old) population (6.9 million people) has access to a bank account. Ecuador’s banks hold in total USD 47.9 billion in assets, with the largest banks being Banco Pichincha with about USD 12.2 billion in assets, Banco del Pacifico with about USD 6.9 billion, Banco de Guayaquil with about USD 5.7 billion, and Produbanco with about USD 5.4 billion. The Banking Association (ASOBANCA) estimates 2.7 percent of loans are non-performing. Foreigners require residency to open checking accounts in Ecuador.

Ecuador’s Superintendence of Banks regulates the financial sector. Between 2012 and 2013, the financial sector was the target of numerous new restrictions. By 2012, most banks had sold off their brokerage firms, mutual funds, and insurance companies to comply with Constitutional changes following a May 2010 referendum. The amendment to Article 312 of the Constitution required banks and their senior managers and shareholders with more than six percent equity in financial entities to divest entirely from any interest in all non-financial companies by July 2012. These provisions were incorporated into the Anti-Monopoly Law passed in September 2011.

The Organic Monetary and Financial Code, published in the Official Registry September 12, 2014, created a five-person Monetary and Financial Policy and Regulation Board of presidential appointees to regulate the banking sector. The law gives the Monetary and Financial Policy and Regulation Board the ability to prioritize certain sectors for lending from private banks. The Code also established that finance companies had to become banks, merge, or close their operations by 2017. Of the 10 finance companies in Ecuador, two became banks, six closed their operations or are in the process of closing, and two were absorbed by other financial institutions. There are 24 private banks in Ecuador as of December 2020.

Electronic currency appeared in 2014 with the approval of the Organic Monetary and Financial Code, which established the exclusive management of the system by Ecuador’s Central Bank. In 2017, with the approval of the Law for the Reactivation of the Economy, Strengthening of Dollarization and Modernization of Financial Management, electronic currency management was transferred to private banks. The Central Bank issued Regulation 29 in July 2012 requiring all financial transfers (inflows and outflows) to be channeled through the Central Bank’s accounts. In principle, the regulation increases monetary authorities’ oversight and prevents banks from netting their inflows and outflows to avoid paying the five percent currency exit tax.

Foreign Exchange and Remittances

Foreign Exchange

Ecuador adopted the U.S. dollar as the official currency in 2000. Foreign investors may remit 100 percent of net profits and capital, subject to a five percent currency exit tax. There are no restrictions placed on foreign investors in transferring or repatriating funds associated with an investment.

Remittance Policies

Resolution 107-2015-F from Ecuador’s Monetary and Finance Board issued in July 2015 exempted some payments to foreign lenders from the capital exit tax. Among other requirements, the duration of the loan must be more than 360 days, the loan must be registered with the Central Bank, and the resources must be destined for specific purposes, such as to fund small businesses or social housing.

The Financial Action Task Force (FATF) announced October 23, 2015 that it had removed Ecuador from the list of countries with strategic deficiencies in anti-money laundering and countering the financing of terrorism (AML/CFT) regimes. Ecuador will undergo its next FATF mutual evaluation in 2021.

Sovereign Wealth Funds

The Government of Ecuador does not maintain a Sovereign Wealth Fund (SWF). Approved in July 2020, Ecuador’s Public Finance Law (COPLAFIP) established a Fiscal Stabilization Fund to invest excess revenues from extractive industries and hedge against oil and metal price fluctuations.

Capital Markets and Portfolio Investment

To date, high returns on Egyptian government debt have crowded out Egyptian investment in productive capacity.  Consistently positive and relatively high real interest rates have attracted large foreign capital inflows since 2017, most of which has been volatile portfolio capital.  Returns on Egyptian government debt have begun to come down, which could presage investment by Egyptian capital in the real economy.

The Egyptian Stock Exchange (EGX) is Egypt’s registered securities exchange. Some 240 companies were listed on the EGX, including Nilex, as of February 2021. There were more than 500,000 investors registered to trade on the exchange in 2019, and the Egyptian market attracted 28,240 new investors in 2020.  Stock ownership is open to foreign and domestic individuals and entities.  The Government of Egypt issues dollar-denominated and Egyptian Pound-denominated debt instruments, for which ownership is open to foreign and domestic individuals and entities. The government has developed a positive outlook toward foreign portfolio investment, recognizing the need to attract foreign capital to help develop the Egyptian economy.  Foreign investors conducted 16 percent of sales on the EGX in 2020.

The Capital Market Law 95/1992, along with Banking Law 94 that President Sisi ratified in September 2020, constitute the primary regulatory frameworks for the financial sector.  The law grants foreigners full access to capital markets, and authorizes establishment of Egyptian and foreign companies to provide underwriting of subscriptions, brokerage services, securities and mutual funds management, clearance and settlement of security transactions, and venture capital activities.  The law specifies mechanisms for arbitration and legal dispute resolution and prohibits unfair market practices.  Law 10/2009 created the Egyptian Financial Supervisory Authority (EFSA) and brought the regulation of all non-banking financial services under its authority.  In 2017, EFSA became the Financial Regulatory Authority (FRA).

Settlement of transactions takes one day for treasury bonds and two days for stocks.  Although Egyptian law and regulations allow companies to adopt bylaws limiting or prohibiting foreign ownership of shares, virtually no listed stocks have such restrictions.  A significant number of the companies listed on the exchange are family-owned or -dominated conglomerates, and free trading of shares in many of these ventures, while increasing, remains limited.  Companies are de-listed from the exchange if not traded for six months.

Prior to November 2020, foreign companies enlisting on the EGX had to possess minimum capital of $100 million. With the FRA’s passage of new rules, foreign companies joining the EGX must now meet lesser requirements matching those for Egyptian companies: $6.4 million (100 million EGP) for large companies and between $63,000 and $6.4 million (1-100 million EGP) for smaller companies, depending on their size. Foreign businesses are only eligible for these lower minimum capital requirements if the EGX is their first exchange and if they attribute more than 50 percent of their shareholders’ equites, revenues, and assets to Egyptian subsidiary companies.

The Finance Ministry announced in May 2020 the suspension of stock market capital gains taxes for Egyptian tax residents until December 31, 2021, and made stock market capital gains permanently tax-exempt for non-tax residents and foreigners. The government also set the stamp tax on stock market transactions by non-tax residents at 0.125 percent and at 0.05 percent for tax residents.

Foreign investors can access Egypt’s banking system by opening accounts with local banks and buying and selling all marketable securities with brokerages.  The government has repeatedly emphasized its commitment to maintaining the profit repatriation system to encourage foreign investment in Egypt, especially since the pound flotation and implementation of the IMF loan program in November 2016.  The current system for profit repatriation by foreign firms requires sub-custodian banks to open foreign and local currency accounts for foreign investors (global custodians), which are exclusively maintained for stock exchange transactions.  The two accounts serve as a channel through which foreign investors process their sales, purchases, dividend collections, and profit repatriation transactions using the bank’s posted daily exchange rates.  The system is designed to allow for settlement of transactions in fewer than two days, though in practice some firms have reported significant delays in repatriating profits due to problems with availability.  Foreign firms and individuals continue to report delays in repatriating funds and problems accessing hard currency for the purpose of repatriating profits.

The Egyptian credit market, open to foreigners, is vibrant and active. Repatriation of investment profits has become much easier, as there is enough available hard currency to execute foreign exchange (FX) trades. Since the flotation of the Egyptian Pound in November 2016, FX trading is considered straightforward, given the re-establishment of the interbank foreign currency trading system.

Money and Banking System

Benefitting from the nation’s increasing economic stability over the past two years, Egypt’s banks have enjoyed both ratings upgrades and continued profitability. Thanks to economic reforms, a new floating exchange system, and a new Investment Law (Law 72/2017) passed in 2017, the project finance pipeline is increasing after a period of lower activity. Banking competition is serving a largely untapped retail segment and the nation’s challenging, but potentially rewarding, small and medium-sized enterprise (SME) segment.

The Central Bank of Egypt (CBE) requires that banks direct 25 percent of their lending to SMEs.  In December 2019, the Central Bank launched a $6.4 billion (100 billion EGP) initiative to spur domestic manufacturing through subsidized loans. Also, with only about a quarter of Egypt’s adult population owning or sharing an account at a formal financial institution (according press and comments from contacts), the banking sector has potential for growth and higher inclusion, which the government and banks discuss frequently. A low median income plays a part in modest banking penetration.

The CBE has taken steps to work with banks and technology companies to expand financial inclusion.  The employees of the government, one of the largest employers, must now have bank accounts because salary payment is through direct deposit. The CBE approved new procedures in October 2020 to allow deposits and the opening of new bank accounts with only a government-issued ID, rather than additional documents. The maximum limits for withdrawals and account balances also increased. In July 2020, President Sisi ratified a new Micro, Small and Medium Enterprises (MSMEs) Development Law (Law 152 of 2020) that will provide incentives, tax breaks, and discounts for small, informal businesses willing to register their businesses and begin paying taxes.

As an attempt to keep pace with best practice and international norms, President Sisi ratified a new Banking Law, Law 94 of 2020, in September 2020. The law establishes a National Payment Council headed by the President to move Egypt away from cash and toward electronic payments; establishes a committee headed by the Prime Minister to resolve disputes between the CBE and the Ministry of Finance; establishes a CBE unit to handle complaints of monopolistic behaviors; requires banks to increase their cash holdings to $320 million (5 billion EGP), up from the prior minimum of $32 million (500 million EGP); and requires banks to report deficiencies in their own audits to the CBE.

Egypt’s banking sector is generally regarded as healthy and well-capitalized, due in part to its deposit-based funding structure and ample liquidity, especially since the flotation and restoration of the interbank market.  The CBE declared that 3.6 percent of the banking sector’s loans were non-performing by December 2020. However, since 2011, a high level of exposure to government debt, accounting for over 40 percent of banking system assets, at the expense of private-sector lending, has reduced the diversity of bank balance sheets and crowded out domestic investment. Given the flotation of the Egyptian Pound and restart of the interbank trading system, Moody’s and S&P have upgraded the outlook of Egypt’s banking system to stable from negative to reflect improving macroeconomic conditions and ongoing commitment to reform. In December 2020, Moody’s affirmed Egypt’s government issuer rating of B2 stable due to the government’s relatively low issuance of foreign currency loans and relatively low external government debt.

Thirty-eight banks operate in Egypt, including several foreign banks. The CBE has not issued a new commercial banking license since 1979. The only way for a new commercial bank, whether foreign or domestic, to enter the market (except as a representative office) is to purchase an existing bank. To this end, in 2013, QNB Group acquired National Société Générale Bank Egypt (NSGB). That same year, Emirates NBD, Dubai’s largest bank, bought the Egypt unit of BNP Paribas. In 2015, Citibank sold its retail banking division to CIB Bank. In 2017, Barclays Bank PLC transferred its entire shareholding to Attijariwafa Bank Group.  In January 2021, Bahrain’s bank ABC completed its purchase of the Egypt-based, Lebanon-owned BLOM bank, while First Abu Dhabi Bank (FAB) signed an agreement to acquire Bank Audi in Egypt. In 2016 and 2017, Egypt indicated a desire to partially (less than 35 percent) privatize at least one state-owned bank and a total of 23 firms through either expanded or new listings on the Egypt Stock Exchange. As of April 2020 the only step towards implementing this privatization program was the offering of 4.5 percent of the shares of state-owned Eastern Tobacco Company on the stock market. The state-owned Banque du Caire postponed plans to offer some of its shares on the EGX due to the novel coronavirus.

According to the CBE, banks operating in Egypt held nearly $446 billion (7 trillion EGP) in total assets as of December 2020, with the five largest banks holding more than 69 percent, or $309 billion (4.86 trillion EGP), of holdings by the end of 2020.

The chairman of the EGX recently stated that Egypt is exploring the use of block chain technologies across the banking community. The FRA will review the development and most likely regulate how the banking system adopts the fast-developing block chain systems into banks’ back-end and customer-facing processing and transactions. Seminars and discussions are beginning around Cairo, including visitors from Silicon Valley. While not outright banning cryptocurrencies, authorities caution against speculation in unknown asset classes.

Alternative financial services in Egypt are extensive, given the large informal economy, estimated to account for between 30 and 50 percent of GDP. Informal lending is prevalent, but the total capitalization, number of loans, and types of terms in private finance is less well known.

Foreign Exchange and Remittances

Foreign Exchange

There had been significant progress in accessing hard currency since the flotation of the pound and re-establishment of the interbank currency trading system in November 2016. While the immediate aftermath saw some lingering difficulty of accessing currency, as of 2017 most businesses operating in Egypt reported having little difficulty obtaining hard currency for business purposes, such as importing inputs and repatriating profits. There are no dollar deposit limits on households and firms importing priority goods such as food products, pharmaceuticals, and basic raw materials. With net foreign reserves of $40.2 billion as of February 2021, Egypt’s foreign reserves appear to be well capitalized, although recent inflows are in part due to assistance payments by international financial institutions such as the IMF.

Funds associated with investment can be freely converted into any world currency available on the local market. Some firms and individuals report the process is slow. But the interbank trading system works in general, and currency is available as the foreign-exchange markets continue to react positively to the government’s commitment to macroeconomic and structural reform.

The value of the EGP generally fluctuates depending on market conditions, without direct market intervention by authorities. In general, the EGP has stabilized within an acceptable exchange rate range, which has increased the foreign exchange market’s liquidity. Since the early days following the flotation, there has been very low exchange-rate volatility.

Remittance Policies

The 1992 U.S.-Egypt Bilateral Investment Treaty provides for free transfer of dividends, royalties, compensation for expropriation, payments arising out of an investment dispute, contract payments, and proceeds from sales. Prior to reform implementation throughout 2016 and 2017, large corporations had been unable to repatriate local earnings for months at a time, but repatriation of funds is no longer restricted.     The Investment Incentives Law (Law 72 of 2017) (IIL) stipulates that non-Egyptian employees hired by projects established under the law are entitled to transfer their earnings abroad. Conversion and transfer of royalty payments are permitted when a patent, trademark, or other licensing agreement has been approved under the IIL.

The Investment Incentives Law (Law 72 of 2017) (IIL) stipulates that non-Egyptian employees hired by projects established under the law are entitled to transfer their earnings abroad. Conversion and transfer of royalty payments are permitted when a patent, trademark, or other licensing agreement has been approved under the IIL.   Banking Law 94 of 2020 regulates the repatriation of profits and capital. The current system for profit repatriation by foreign firms requires sub-custodian banks to open foreign and local currency accounts for foreign investors (global custodians), which are exclusively maintained for stock-exchange transactions. The two accounts serve as a channel through which foreign investors process their sales, purchases, dividend collections, and profit-repatriation transactions using the bank’s posted daily exchange rates. The system is designed to allow for settlement of transactions in less than two days, though in practice some firms have reported short delays in repatriating profits due to the steps involved in processing.

Banking Law 94 of 2020 regulates the repatriation of profits and capital. The current system for profit repatriation by foreign firms requires sub-custodian banks to open foreign and local currency accounts for foreign investors (global custodians), which are exclusively maintained for stock-exchange transactions. The two accounts serve as a channel through which foreign investors process their sales, purchases, dividend collections, and profit-repatriation transactions using the bank’s posted daily exchange rates. The system is designed to allow for settlement of transactions in less than two days, though in practice some firms have reported short delays in repatriating profits due to the steps involved in processing.

Sovereign Wealth Funds

Egypt’s sovereign wealth fund (SWF), approved by the Cabinet and launched in late 2018, holds 200 billion EGP ($12.5 billion) in authorized capital as of December 2020.  The SWF aims to invest state funds locally and abroad across asset classes and manage underutilized government assets.  The sovereign wealth fund focuses on sectors considered vital to the Egyptian economy, particularly industry, energy, and tourism, and has established four new sub-funds covering healthcare, financial services, tourism, real estate, and infrastructure. The SWF participates in the International Forum of Sovereign Wealth Funds. The government is currently in talks with regional and European institutions to take part in forming the fund’s sector-specific units.

Capital Markets and Portfolio Investment

The Superintendent of the Financial System ( https://www.ssf.gob.sv/ ) supervises individual and consolidated activities of banks and non-bank financial intermediaries, financial conglomerates, stock market participants, insurance companies, and pension fund administrators. Foreign investors may obtain credit in the local financial market under the same conditions as local investors. Interest rates are determined by market forces, with the interest rate for credit cards and loans capped at 1.6 times the weighted average effective rate established by the Central Bank. The maximum interest rate varies according to the loan amount and type of loan (consumption, credit cards, mortgages, home repair/remodeling, business, and microcredits).

In January 2019, El Salvador eliminated a Financial Transactions Tax (FTT), which was enacted in 2014 and greatly opposed by banks.

The 1994 Securities Market Law established the present framework for the Salvadoran securities exchange. Stocks, government and private bonds, and other financial instruments are traded on the exchange, which is regulated by the Superintendent of the Financial System.

Foreigners may buy stocks, bonds, and other instruments sold on the exchange and may have their own securities listed, once approved by the Superintendent. Companies interested in listing must first register with the National Registry Center’s Registry of Commerce. In 2020, the exchange traded $5.8 billon, with average daily volumes between $10 million and $24 million. Government-regulated private pension funds, Salvadoran insurance companies, and local banks are the largest buyers on the Salvadoran securities exchange. For more information, visit: https://www.bolsadevalores.com.sv/ 

Money and Banking System

All but two of the major banks operating in El Salvador are regional banks owned by foreign financial institutions. Given the high level of informality, measuring the penetration of financial services is difficult; however, it remains relatively low between 30 percent- according to the Salvadoran Banking Association (ABANSA) – and 35 percent- reported by the Superintendence of the Financial System (SSF). The banking system is sound and generally well-managed and supervised. El Salvador’s Central Bank is responsible for regulating the banking system, monitoring compliance of liquidity reserve requirements, and managing the payment systems. No bank has lost its correspondent banking relationship in recent years. There are no correspondent banking relationships known to be in jeopardy.

The banking system’s total assets as of December 2020 were $20.4 billion. Under Salvadoran banking law, there is no difference in regulations between foreign and domestic banks and foreign banks can offer all the same services as domestic banks.

The Cooperative Banks and Savings and Credit Associations Law regulates the organization, operation, and activities of financial institutions such as cooperative banks, credit unions, savings and credit associations, , and other microfinance institutions. The Money Laundering Law requires financial institutions to report suspicious transactions to the Attorney General. Despite having regulatory scheme in place to supervise the filing of reports by cooperative banks and savings and credit associations, these entities rarely file suspicious activity reports.

The Insurance Companies Law regulates the operation of both local and foreign insurance firms. Foreign firms, including U.S., Colombian, Dominican, Honduran, Panamanian, Mexican, and Spanish companies, have invested in Salvadoran insurers.

Foreign Exchange and Remittances

Foreign Exchange Policies

There are no restrictions on transferring investment-related funds out of the country. Foreign businesses can freely remit or reinvest profits, repatriate capital, and bring in capital for additional investment. The 1999 Investment Law allows unrestricted remittance of royalties and fees from the use of foreign patents, trademarks, technical assistance, and other services. Tax reforms introduced in 2011, however, levy a five percent tax on national or foreign shareholders’ profits. Moreover, shareholders domiciled in a state, country or territory that is considered a tax haven or has low or no taxes, are subject to a tax of twenty-five percent.

The Monetary Integration Law dollarized El Salvador in 2001. The U.S. dollar accounts for nearly all currency in circulation and can be used in all transactions. Salvadoran banks, in accordance with the law, must keep all accounts in U.S. dollars. Dollarization is supported by remittances – almost all from workers in the United States – that totaled $5.91 billion in 2020.

Remittance Policies

There are no restrictions placed on investment remittances. The Caribbean Financial Action Task Force’s Ninth Follow-Up report on El Salvador ( https://www.cfatf-gafic.org/index.php/member-countries/el-salvador ) noted that El Salvador has strengthened its remittances regimen, prohibiting anonymous accounts and limiting suspicious transactions. In 2015, the Legislature approved reforms to the Law of Supervision and Regulation of the Financial System so that any entity sending or receiving systematic or substantial amounts of money by any means, at the national and international level, falls under the jurisdiction of the Superintendence of the Financial System.

Sovereign Wealth Funds

El Salvador does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

The banking sector provides limited financing to businesses. The government claims two microfinance institutions operating in country, with a government-backed microcredit program for small- and medium-sized enterprises (SMEs). The country does not have its own stock market. According to investors, capital markets are non-existent. Credit is available but interest rates are high, ranging from 12 to 18 percent for mortgages and about 15 percent for personal loans. Business loans generally require significant collateral, limiting opportunities for entrepreneurs, and may have rates of 20 percent or greater. It is unclear if foreigners could obtain credit on the local market. The Single Window office assumes investors have already secured all financing.

Equatorial Guinea is a member of CEMAC, which has a stock market common to all member states. The Central Africa Banking Commission (COBAC) regulates the region’s banking system. The BEAC and the COBAC regulate transfer limits. Commercial banks follow BEAC requirements. To attract investment and promote economic diversification, the government offers facilities for granting loans, including through the National Institute of Promotion and Development (INPYDE), which has an investment fund for entrepreneurs.

The National Bank of EG (BANGE), in which the government has a 51% stake, plans to launch the country’s first brokerage business to facilitate foreign investment, negotiating equity and even debt for major companies operating in Equatorial Guinea. BANGE falls under the Central African Financial Market Surveilling Committee and includes such customers as supermarket chains Martinez Hermanos and EGTC. Additionally, BANGE inaugurated the BANGE Business School in 2020 to train students to work in the banking sector and facilitate underwriting, syndication, and funding. In November 2020, BANGE announced it first capital increase through an initial public officering directly through its offices. In April 2021, the institution announced the second capital increase of $75 million, which was open to individual investor (nationals and foreigners).

Money and Banking System

BANGE has the most branches of any bank in EG and estimated that 60% of the population used formal financial services. BANGE estimates that its clients are 26% of the population.

Banking revenues have been deteriorating over the last five years as the government gradually reduced or stopped infrastructure projects due to the economic recession. The government established the Partial Guarantee Fund to insure non-performing loans through the National Institute for Businesses Promotion (INPYDE). Demand for loans was supported by specific budget allocations each fiscal year, mostly from BANGE. In 2020, INPYDE negotiated an agreement to include other banks and to enlarge the Guarantee Fund.

While banks have branches throughout the country, they are concentrated in urban centers. There is little information available about the assets and health of the banking system. BANGE leads with 29 branches throughout the country. CCEI/CCIW Bank de Guinea Ecuatorial, a subsidiary of First Bank Afriland (Cameroon), has four branches in the largest cities. BGFI Bank Guinée Equatoriale operates as a subsidiary of BGFI Holding Corporation (Gabon). Pan-African EcoBank (Togo) and Societe Générale (France) also operate in Equatorial Guinea. If a bank does not have a branch in the location where an individual wants to do business, they would not have access to their funds there. ATMs are in limited locations.

The Government of the Republic of Equatorial Guinea is a member of the Economic and Monetary Community of Central African States (CEMAC) and shares a regional Central Bank with other CEMAC members. Members have ceded regulatory authority over their banks to CEMAC, but also are entitled to national BEAC branches. Ebibeyin, Bata and Malabo each have a branch. The government of the Republic of Equatorial Guinea is also a member of the Banking Commission of Central African States (COBAC) within CEMAC.

Foreigners must provide proof of residency to establish a bank account.

The country’s economy is an almost entirely cash based, with credit cards available but not widely used by the general population, confined to foreigner or wealthy citizens using at international hotels, international airlines, and major supermarkets. In April 2020, partly in response to the COVID-19 pandemic’s social distancing measures, the government encouraged banks to increase electronic payment mechanisms. The Ministry of Finance, the Economy, and Planning also continued to expand electronic payments for government employees. In May 2020, the Government of the Republic of Equatorial Guinea endorsed the guiding principles of the United Nations’ “Better than Cash” Alliance, a partnership of governments, companies, and international organizations to accelerate the transition from cash to digital payments as part of the United Nation’s Sustainable Development Goals. The Alliance has 75 member countries committed to digitizing payments to boost efficiency, transparency, and women’s economic participation and financial inclusion.

The banking sector is affected by relatively lengthy bureaucratic procedures and a lack of computerized record keeping. Customers have reported that currency is not always available on demand, and delays for transfers or exchanges of local currency into foreign denominations have increased since the BEAC instituted new banking and foreign currency regulations in 2019.

The National Economic and Financial Committee publishes a semi-annual report on the evolution of banks in the country. The CEMAC establishes the requirements for any bank that wants to operate in a member country, which COBAC can grant. COBAC also publishes information on the banking system of each member country. There are no restrictions, but there are requirements that applicants must meet to open an account, whether or not they are a resident. The country is currently starting the use of mobile banking; financial services are mainly limited to banking and microfinance.

The government’s failure to repay loans has increased interest rates and reduced access to credit for the private sector, especially households. Banks in EG have the lowest ratio of loans to savings within the subregion. During the economic expansion (2009-2014), the government developed a line of credit with CCEI Bank to finance infrastructure development projects with construction companies. Loan defaults rose rapidly as the government failed to meet its legal obligations with CCEI Bank, prompting the government to nationalize the bank in January 2021 by acquiring Afriland First Group’s shares.

Foreign Exchange and Remittances

Foreign Exchange

Decree No. 54/1994 provides the right to freely transfer convertible currency abroad at the end of each fiscal year, but in practice many businesses report that limited financial services create barriers to successfully executing international transfers. On April 1, 2019, the Bank of Central African States (BEAC) published a regulation to enforce an existing requirement to maintain bank accounts in Central African francs (CFA) rather than foreign currency, with a six-month grace period until October 1, 2019. Account holders are theoretically able to convert funds to foreign exchange through an administrative process, but it is unclear if this applies to all accounts in the region. Following pushback from the extractive industry, which accounts for over 80% of EG government revenues, CEMAC exempted gas and oil companies from the regulation through December 31, 2021. Many other businesses and individuals have reported lengthy delays to convert currency and make international bank transfers under the new rules. The BEAC announced that regulations were intended to usher in reforms that redefine BEAC’s role, and the role of the Bank’s control bodies, to ensure compliance with IMF guidance and currency stabilization, including a 30-day waiting period to withdraw foreign currency. Other reforms included: reinforcement of the regulatory framework for manual exchanges; assuring the flexibility of certain operational arrangements as instructed by the BEAC governor; adapting foreign exchange regulations to new methods of payment and transfer institutions; and simplifying procedures to increase compliance. In September 2020, the BEAC instituted an online “e-transfer” application to ensure credit establishments comply with the new regulation. The online application automates the entire process of transfer requests and monitors in real time the progress of each request through an e-tracking site. Foreign currency is not widely available in the Central African Franc zone but can be obtained in the Republic of Equatorial Guinea in small quantities.

Equatorial Guinea does not engage in currency manipulation as the CFA franc currently has a fixed exchange rate to the euro: 100 CFA francs = 1 former French (nouveau) franc = 0.152449 euro or 1 euro = 655.957 CFA francs exactly. The exchange rate fluctuates with the value of the euro.

Remittance Policies

On April 1, 2019, the CEMAC Central Bank published a regulation to enforce an existing requirement to maintain bank accounts in CFA rather than foreign exchange, with a six-month moratorium until October 1, 2019. Account holders are theoretically able to convert funds to foreign exchange through an administrative process. It is unclear if this applies to all accounts in the region. Companies in the hydrocarbons and mining sectors received an exemption on implementation through 2021.

Sovereign Wealth Funds

The Government of the Republic of Equatorial Guinea established a sovereign wealth fund, the Fund for Future Generations, in 2002. The fund receives 0.5% of all oil revenues and is governed and managed by the Bank of Central African States (BEAC). The Sovereign Wealth Fund Institute (SWFI) estimates assets under management of USD 165.5 million ( https://www.swfinstitute.org/profile/598cdaa50124e9fd2d05b002 ). There is no publicly available information on its allocations.

Capital Markets and Portfolio Investment

There is no functioning public market for capital in Eritrea, nor is there an established stock market.

The GSE fully controls the banking and financial sectors; there are no transparent mechanisms to facilitate the free flow of financial resources into portfolio investments.  There is no transparency in decisions regarding credit allocation.  Transfers of foreign currency are heavily restricted due, in part, to government concerns about foreign terrorist financing.

The GSE does not respect the International Monetary Fund’s (IMP) Article VIII, regarding restrictions on payments and transfers for international transactions.

Money and Banking System

Due to restrictions on the use and hoarding of cash, most Eritreans now have bank accounts and use banking services.  However, there are excessive regulation on banking accounts (including low monthly limits on withdrawals and restrictions on sending foreign currency abroad) and obsolete technology at the banks.  There are no automated teller machines in Eritrea and there is no infrastructure to allow the use of credit or debit cards.

It is unclear what the estimated total assets of the country’s largest banks are.  The Bank of Eritrea is the country’s central bank.  Foreign banks are not allowed to open branches or establish operations in Eritrea.  Foreigners are able to establish bank accounts, but are subject to the same monthly Nakfa withdrawal limits as Eritreans.

Eritrea does not currently have any correspondent banking relationships.  Per a 1994 regulation, locally-based entities are forbidden from maintaining foreign bank accounts.

Foreign Exchange and Remittances

Foreign Exchange

Organizations in Eritrea have often found it difficult to move foreign currency into or out of Eritrea, even to pay essential bills abroad.  All fund transfers into and out of Eritrea must go through the National Bank of Eritrea.  Some international organizations have resorted to bringing money by courier.  Local funds are not freely convertible to any world currency.  The exchange rate is determined by the government, and the rate does not fluctuate.

Remittance Policies

As the major large investments in Eritrea are non-transparent collaborations with the GSE, the companies running them may be able to remit investment income in ways not available to the general public.  Small- and medium-sized enterprises often have difficulties moving investment income abroad due to strict withdrawal limitations (for cash) and the requirement that all electronic fund transfers be executed through the National Bank of Eritrea, which can arbitrarily deny fund transfers.

Sovereign Wealth Funds

Eritrea has no sovereign wealth fund.

Capital Markets and Portfolio Investment

Estonia is a member of the Euro zone. Estonia’s financial sector is modern and efficient. Credit is allocated on market terms and foreign investors are able to obtain credit on the local market. The private sector has access to an expanding range of credit instruments similar in variety to those offered by banks in Estonia’s Nordic neighbors, Finland, and Sweden.

Legal, regulatory, and accounting systems are transparent and consistent with international norms.

The Security Market Law complies with EU requirements and enables EU securities brokerage firms to deal in the market without establishing a local subsidiary. The NASDAQ OMX stock exchanges in Tallinn, Riga, and Vilnius form the Baltic Market, which facilitates cross-border trading and attracting more investments to the region. This includes sharing the same trading system and harmonizing rules and market practices, all with the aim of reducing the costs of cross-border trading in the Baltic region.

Certain investment services and products may be limited to U.S. persons in Estonia due to financial institutions’ response to the U.S. Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

Estonian financial services market overview:  https://www.fi.ee/en?id=12737

IMF report on Estonia: https://www.imf.org/en/Publications/CR/Issues/2020/01/21/Republic-of-Estonia-2019-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-48963

Money and Banking System

Estonia’s banking system has consolidated rapidly. The banking sector is dominated by two major commercial banks, Swedbank and SEB, both owned by Swedish banking groups. These two banks control approximately 65 percent of the financial services market. The third largest bank is Luminor Bank. There are no state-owned commercial banks or other credit institutions.

More information on banks’ assets is available at: http://statistika.eestipank.ee/#/en/p/FINANTSSEKTOR/147/645

The Scandinavian-dominated Estonian banking system is modern and efficient. Local and international banks in Estonia provide both domestic and international services (including internet and mobile banking) at competitive rates, as well as a full range of financial, insurance, accounting, and legal services. Estonia has a highly advanced internet banking system: currently 98 percent of banking transactions are conducted via the internet.

The Bank of Estonia (Eesti Pank) is Estonia’s independent central bank. As Estonia is part of the Euro zone, the core tasks of the Bank are to help to define the monetary policy of the European Community and to implement the monetary policy of the European Central Bank, including the circulation of cash in Estonia. Eesti Pank is also responsible for holding and managing Estonian official foreign exchange reserves as well as supervising overall financial stability and maintaining reliable and well-functioning payment systems. Neither the Central Bank nor the government hold shares in the banking sector.

EU legislation requires Estonia to make its AML regime compliant with EU directives. Estonia has passed legislation that makes its AML regime compliant with EU legislation. After large-scale money laundering cases through Estonian branches of Nordic banks came to light in Estonia, regulatory and government officials are taking steps to improve the AML oversight regime. The recent changes included transformation of supervisory structures and roles as well as amendment of laws governing them. Due to strict anti-money laundering (AML) regulations and bank compliance practices, it can be difficult for non-residents to open a bank account.

More info on opening a bank account for non-resident investors:

https://transferwise.com/gb/blog/opening-a-bank-account-in-estonia

https://www.lhv.ee/en/non-residents

Foreign Exchange and Remittances

Foreign Exchange Policies

Estonia has been a member of the euro currency area since 2011. There are no restrictions on currency transfers or conversion.

Remittance Policies

There are no restrictions, limitations or delays involved in converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, or lease payments) into other currencies at market rates. There is no limit on dividend distributions as long as they correspond to a company’s official earnings records. If a foreign company ceases to operate in Estonia, all its assets may be repatriated without restriction. These policies are long-standing; there is no indication that they will be altered in the future. Foreign exchange is readily available for any purpose.

Sovereign Wealth Funds

There are no sovereign wealth funds or state-owned investment funds in Estonia.

Capital Markets and Portfolio Investment

Eswatini’s capital markets are closely tied to those of South Africa and operate under conditions generally similar to the conditions in that market. In 2010, the GKoE passed the Securities Act to strengthen the regulation of portfolio investments. The Act was primarily intended to facilitate and develop an orderly, fair, and efficient capital market in the country.

Eswatini has a small stock exchange with only a handful of companies currently trading. In 2010, the Financial Services Regulatory Authority (FSRA) was established. This institution governs non-bank financial institutions including capital markets, insurance firms, retirement funds, building societies, micro-finance institutions, and savings and credit cooperatives. The royal wealth fund and national pension fund invest in the private equity market, but otherwise there are few professional investors.

Existing policies neither inhibit nor facilitate the free flow of financial resources. The Central Bank respects International Monetary Fund (IMF) Article VIII. Credit is allocated on market terms. Foreign investors are able to get credit and equity from the local market. A variety of credit instruments are available to the private sector including Central Bank of Eswatini loan guarantees for the export markets and for small businesses.

Money and Banking System

The majority of the Swati adult population utilizes the banking system. Despite a slow rate of economic growth, the Swati banking sector remains stable and financially sound. Asset quality improved as the ratio of non-performing loans (NPLs) to gross loans, moved from 8.2 percent in 2017 to 7.7 percent in 2018.

The estimated total assets for the country’s banks is estimated at E19.4 billion (USD 1.4 billion) as of June 2018, up from E17.9 billion (USD 1.3 billion) in March 2017. Eswatini has a central bank system. Eswatini’s banks are primarily subsidiaries of South African banks. Standard Bank is the largest bank by capital assets and employs about 400 workers.

Eswatini’s financial sector is liberalized and allows foreign banks or branches to operate under the supervision of the Central Bank’s laws and regulations ( http://www.centralbank.org.sz/financialregulation/banksupervision/index.php ). Foreigners may establish a bank account in Eswatini if they have residency in one of the CMA countries (Eswatini, South Africa, Lesotho, Namibia).

There have been no bank closures or banks in jeopardy in the last three years. Hostile takeovers are uncommon.

Foreign Exchange and Remittances

Foreign Exchange

There are no limitations on the inflow or outflow of funds for remittances. Dividends derived from current trading profits are freely transferable on submission of appropriate documentation to the Central Bank, subject to provision for the non-resident shareholder tax of 15 percent. Local credit facilities may not be utilized for paying dividends. Eswatini is part of the Common Monetary Area (CMA), which also includes South Africa, Namibia, and Lesotho. All capital transfers into Eswatini from outside the CMA require prior approval of the Central Bank to avoid problems in the subsequent repatriation of interest, dividends, profits, and other income accrued. Otherwise, there are no restrictions placed on the transfers.

Eswatini mainly deals with three international currencies: the U.S. Dollar, the Euro, and the British Pound. The Swati Lilangeni is pegged 1:1 to the South African Rand, which is accepted as legal tender throughout Eswatini. To obtain foreign currency other than Rand, one must apply through an authorized dealer, and a resident who acquires foreign currency must sell it to an authorized dealer for the local currency within ninety days. No person is permitted to hold or deal in foreign currency other than authorized dealers, namely, First National Bank (FNB), Nedbank, Standard Bank, or Swazi Bank.

Because the Lilangeni is pegged to the Rand, its value is determined by the monetary policy of the CMA, which is heavily influenced by the South African Reserve Bank.

Remittance Policies

There have been no recent changes to investment remittance policies. There are no specified time limitations on remittances. Once documentation is complete (e.g., latest company financial statements) and relevant taxes paid, SWIFT transfers require an average of one week, and other electronic transfers can take less than a week (SWIPPS offers real-time transactions).

SWIPSS, Eswatini’s Real Time Gross Settlement System, is an advanced interbank electronic payment system that facilitates the efficient, safe, secure and real-time transmission of high-value funds in the banking sector. Direct access to SWIPSS is limited to only the four commercial banks, and these banks act as intermediaries for other financial institutions.

As part of the government policy to attract foreign investment, dividends derived from current trading profits are freely transferable on submission of documentation (including latest annual financial statements of the company concerned) subject to provision for non-resident shareholders tax. The Eswatini government does not issue dollar-denominated bonds. Otherwise, there are no limitations on the inflow and outflow of funds for remittances of profits or revenue.

Sovereign Wealth Funds

In 1968, the late King Sobhuza II created a Royal Charter that governs the Sovereign Wealth Fund (SWF) in Eswatini, Tibiyo TakaNgwane. This fund is not subject to government or parliamentary oversight and does not provide information on assets or financial performance to the public. Tibiyo TakaNgwane publishes an annual report with financials, but it is not required by law to do so as it is not registered under the Companies Act of 1912. The annual reports are not made public or submitted to any other state organ for debate or review. The SWF obtains independent audits at the discretion of its Board of Directors.

Tibiyo TakaNgwane states in its objectives that it supports the government in fostering economic independence and self-sufficiency. It widely invests in the economy and holds shares in most major industries, e.g., sugar, real estate, beverages, dairy, hotels, and transportation. For its social responsibility practices, it provides some scholarships to students. The SWF and the government co-invest to exercise majority control in many instances. Tibiyo TakaNgwane invests entirely in the local economy and local subsidiaries of foreign companies. It has shares in a number of private companies. Sometimes foreign companies can form partnerships with Tibiyo, especially if the foreign company wants to raise capital and can manage the project on its own.

Capital Markets and Portfolio Investment

Ethiopia has a limited and undeveloped financial sector, and investment is largely closed off to foreign firms. Liquidity at many banks is limited, and commercial banks often require 100 percent collateral, making access to credit one of the greatest hindrances to growth in the country. Ethiopia has the largest economy in Africa without a securities market, and sales/purchases of debt are heavily regulated.

The IMF, as part of its Extended Credit Facility and Extended Fund Facility, in December of 2019 approved a three-year, 2.9 billion U.S. dollar program to support Ethiopia’s economic reform agenda. The program seeks to reduce public sector borrowing, rein in inflation, reform the exchange rate regime, and ensure external debt sustainability.

The Ethiopian government has announced, as part of its overall economic reform effort, its intention to liberalize the financial sector. The government has already made good progress by allowing non-financial Ethiopian firms to participate in mobile money activities, introducing Treasury-bill auctions with market pricing, and reducing forced lending to the government on the part of the commercial banks. The government is also planning to create a stock market, with a draft proclamation currently under review by the parliament. Work to create the regulatory body necessary to adequately oversee bond and equity markets is also ongoing.

The National Bank of Ethiopia (NBE, the central bank) began offering, in December of 2019, a limited number of 28-day and 91-day Treasury bills at market-determined interest rates. Since then, more bond offerings of longer tenures have been included in the auctions. The move was part of an effort to expand the NBE’s monetary policy tools and finance the government in a more sustainable way. Previously, the NBE had only sold Treasury bills at below-market interest rates, and the only buyers were public sector enterprises, primarily the Public Social Security Agency and the Development Bank of Ethiopia.

Ethiopia issued its first Eurobond in December of 2014, raising 1 billion U.S. dollars at a rate of 6.625 percent. The 10-year bond was oversubscribed, indicating continued market interest in high-growth sub-Saharan African markets. According to the Ministry of Finance, the bond proceeds are being used to finance industrial parks, the sugar industry, and power transmission infrastructure. Due to its increasing external debt load and the terms of its IMF program, the Ethiopian government has committed to refrain from non-concessional financing for new projects and to shift ongoing projects to concessional financing when possible. As Ethiopia’s ability to service its external debts declined in the wake of the COVID-19 pandemic, Ethiopia participated in the World Bank’s Debt Service Suspension Initiative, which suspended external debt payments from May 2020 through June of 2021. Ethiopia is seeking further debt treatment under the G20 Common Framework for Debt Treatments Beyond the DSSI. Details concerning Ethiopia’s participation in the framework are currently being finalized.

Money and Banking System

Ethiopia has 19 commercial banks, two of which are state-owned banks, and 17 of which are privately owned banks. The Development Bank of Ethiopia, a state-owned bank, provides loans to investors in priority sectors, notably agriculture and manufacturing. By regional standards, the 17 private commercial banks are not large (either by total assets or total lending), and their service offerings are not sophisticated. Mobile money and digital finance, for instance, remain limited in Ethiopia. Foreign banks are not permitted to provide financial services in Ethiopia; however, since April 2007, Ethiopia has allowed some foreign banks to open liaison offices in Addis Ababa to facilitate credit to companies from their countries of origins. Chinese, German, Kenyan, Turkish, and South African banks have opened liaison offices in Ethiopia, but the market remains completely closed to foreign retail banks. Foreigners of Ethiopian origin are now allowed to both establish their own banks and hold shares in financial institutions.

Based on recently made available data, the state-owned Commercial Bank of Ethiopia mobilizes more than 60 percent of total bank deposits, bank loans, and foreign exchange. The NBE controls banks’ minimum deposit rate, which now stands at 7 percent, while loan interest rates are allowed to float. Real deposit interest rates have been negative in recent years, mainly due to double digit annual inflation. The Government of Ethiopia in November of 2019 rescinded the so-called “27% Rule,” which mandated forced, below inflation rate lending by the commercial banks to the NBE.

Foreign Exchange and Remittances

Foreign Exchange

All foreign currency transactions must be approved by the NBE. Ethiopia’s national currency (the Ethiopian birr) is not freely convertible. The GOE removed in September 2018 the limit on holding foreign currency accounts faced by non-resident Ethiopians and non-resident foreign nationals of Ethiopian origin.

Foreign exchange reserves started to become depleted in 2012 and have remained at critically low levels since then. At present, gross reserves stand at about 4 billion U.S. dollars, covering approximately 2 months of imports. According to the IMF, heavy government infrastructure investment, along with debt servicing and a large trade imbalance, have all fueled the intense demand for foreign exchange. In addition, the decrease in foreign exchange reserves has been exacerbated by weaker-than-expected earnings from coffee exports and low international commodity prices for other important exports such as oil seeds. Businesses encounter delays of six months to two years in obtaining foreign exchange, and they must deposit the full equivalent in Ethiopian birr in their accounts to begin the process to obtain foreign exchange. Slowdowns in manufacturing due to foreign exchange shortages are common, and high-profile local businesses have closed their doors altogether due to the inability to import required goods in a timely fashion.

Due to the foreign exchange shortage, companies have experienced delays of up to two years in the repatriation of larger volumes of profits. Local sourcing of inputs and partnering with export-oriented partners are strategies employed by the private sector to address the foreign exchange shortage, but access to foreign exchange remains a problem that limits growth, interferes with maintenance and spare parts replacement, and inhibits imports of adequate raw materials.

The foreign exchange shortage distorts the economy in a number of other ways: it fuels the contraband trade through Somaliland because the Ethiopian birr is an unofficial currency there and can be used for the purchase of products from around the world. Exporters, who have priority access to foreign exchange, sometimes sell their allocations of hard currency to importers at inflated rates, creating a black-market for dollars that is roughly 30 to 40 percent over the official rate. Other exporters use their foreign exchange earnings to import consumer goods or industrial inputs with high margins, rather than re-investing profits in their core businesses. Meanwhile, the lack of access to foreign exchange impacts the ability of American citizens living in Ethiopia to pay their taxes, or for students to pay school fees abroad.

The Ethiopian birr has depreciated significantly against the U.S. dollar over the past ten years, primarily through a series of controlled steps, including a 20 percent devaluation in September 2010 and a 15 percent devaluation in October 2017. The NBE increased the devaluation rate of the Ethiopian birr starting in November of 2019, and it has continued to be devalued at a more rapid rate since that time, as per the terms of the IMF program. The official exchange rate was approximately 40.81 Ethiopian birr to the U.S. dollar as of March 2021, while the illegal parallel market exchange rate for the same time was approximately 52 Ethiopian birr to the U.S. dollar.

In late 2017, the NBE increased the minimum savings interest rate from five percent to seven percent and limited the outstanding loan growth rate in commercial banks to 16.5 percent, which limits their loan provision for businesses other than those in the export and manufacturing sectors. Moreover, commercial banks were instructed to transfer 30 percent of their foreign exchange earnings to the account of NBE so the regulator can use the foreign exchange to meet the strategic needs of the country, including payments to procure petroleum, wheat, pharmaceuticals, and sugar.

Ethiopia’s Financial Intelligence Unit monitors suspicious currency transfers, including large transactions exceeding 200,000 Ethiopian birr (roughly equivalent to U.S. reporting requirements for currency transfers exceeding 10,000 U.S. dollars). Ethiopia citizens are not allowed to hold or open an account in foreign exchange. Ethiopian residents entering the country from abroad should declare foreign currency in excess of 1,000 U.S. dollars, and non-residents in excess of 3,000 U.S. dollars. Residents are not allowed to hold foreign currency for more than 30 days after acquisition. A maximum of 1,000 Ethiopian birr in cash can be carried out of the country.

Remittance Policies

Ethiopia’s Investment Proclamation allows all registered foreign investors, whether or not they receive incentives, to remit profits and dividends, principal and interest on foreign loans, and fees related to technology transfer. Foreign investors may remit proceeds from the sale or liquidation of assets, from the transfer of shares or of partial ownership of an enterprise, and funds required for debt servicing or other international payments. The right of expatriate employees to remit their salaries is granted by NBE foreign exchange regulations. In practice, however, foreign companies and individuals have experienced difficulties obtaining foreign currency to remit dividends, profits, or salaries due to the critical shortage of foreign currency the country currently faces.

Sovereign Wealth Funds

Ethiopia has no sovereign wealth funds.

Capital Markets and Portfolio Investment

The capital market is regulated and supervised by the Reserve Bank of Fiji (RBF).  Twenty companies were listed on the Suva-based South Pacific Stock Exchange (SPSE).  At the end of September 2020, market capitalization was USD 1.7 billion (FJD 3.4 billion), an annual increase of 0.6 percent compared to September 2019.  To promote greater activity in the capital market, the government lowered corporate tax rates for listed companies to ten percent and exempted income earned from the trading of shares in the SPSE from income tax and capital gains tax.  The RBF issued the Companies (Wholesale Corporate Bonds) Regulations 2021 to develop the domestic corporate bond market by providing a simplified process for the issuance of corporate bonds to eligible wholesale investors only.

Foreign investors are permitted to obtain credit from authorized banks and other lending institutions without the approval of the RBF for loans up to USD 4.9 million (FJD 10 million), provided the debt-to-equity ratio of 3:1 is satisfied.

Money and Banking System

Fiji has a well-developed banking system supervised by the Reserve Bank of Fiji.  The RBF regulates the Fiji monetary and banking systems, manages the issuance of currency notes, administers exchange controls, and provides banking and other services to the government.  In addition, it provides lender-of-last-resort facilities and regulates trading bank liquidity.

There are six commercial banks with established operations in Fiji:  ANZ Bank, Bank of Baroda, Bank of South Pacific, Bred Bank, Home Finance Corporation (HFC), and Westpac Banking Corporation, with the HFC the only locally owned bank.  Non-banking financial institutions also provide financial assistance and borrowing facilities to the commercial community and to consumers.  These institutions include the Fiji Development Bank, Credit Corporation, Kontiki Finance, Merchant Finance, and insurance companies.  As of December 2020, total assets of commercial banks amounted to USD 5.2 billion (FJD 10.7 billion).  The RBF reported that liquidity reached USD 410.4 million (FJD 836.8 million) in December 2020 and that reserves were sufficient and did not pose a risk to bank solvency.  However, the RBF also noted that existing levels of non-performing loans could rise, with the ending of moratoriums offered by financial institutions to COVID-19 affected customers.  To open a bank account, foreign investors need to provide a copy of the Foreign Investment Registration Certificate (FIRC) issued by Investment Fiji.

Foreign Exchange and Remittances

Foreign Exchange

The Reserve Bank of Fiji (RBF) tightened foreign exchange controls to safeguard foreign reserves and prevent capital flight to mitigate the impact of COVID-19.  The Fiji dollar remains fully convertible.  The Fiji dollar is pegged to a basket of currencies of Fiji’s principal trading partners, chiefly Australia, New Zealand, the United States, the European Union, and Japan.

Although no limits were placed on non-residents borrowing locally for some specified investment activities, the RBF placed a credit ceiling on lending by commercial banks to non-resident controlled business entities.

Remittance Policies

The Reserve Bank of Fiji (RBF) tightened foreign exchange controls, requiring RBF approval for any investment profit remittances.  Prior clearance of withholding tax payments on profit and dividend remittances is required from the Fiji Revenue and Customs Service.  Tax compliance may restrict foreign investors’ repatriation of investment profits and capital.  A tax clearance certificate is required for remittances above USD9,808 (FJD 20,000) and audited accounts for amounts above USD 245,200 (FJD 500,000).  The processing time for remittance applications is approximately three working days, is contingent on all the required documentation submitted to the RBF.

Sovereign Wealth Funds

The Fiji government does not maintain a sovereign wealth fund or asset management bureau in Fiji.  The country’s pension fund scheme, the Fiji National Provident Fund, which manages and invests members’ retirement savings, accounts for a third of Fiji’s financial sector assets.  The fund invests in equities, bonds, commercial paper, mortgages, real estate and various offshore investments.

Capital Markets and Portfolio Investment

Finland is open to foreign portfolio investment and has an effective regulatory system. According to the Bank of Finland, in end December 2020 Finland had USD 126 billion worth of official reserve assets, mainly in foreign currency reserves and securities. Credit is allocated on market terms and is made available to foreign investors in a non-discriminatory manner, and private sector companies have access to a variety of credit instruments. Legal, regulatory, and accounting systems are transparent and consistent with international norms.

The Helsinki Stock Exchange is part of OMX, referred to as NASDAQ OMX Helsinki (OMXH). NASDAQ OMX Helsinki is part of the NASDAQ OMX Nordic division, together with the Stockholm, Copenhagen, Iceland, and Baltic (Tallinn, Riga, and Vilnius) stock exchanges.

Finland accepts the obligations under IMF Article VIII, Sections 2(a), 3, and 4 of the Fund’s Articles of Agreement. It maintains an exchange system free of restrictions on payments and transfers for current international transactions, except for those measures imposed for security reasons in accordance with Regulations of the Council of the European Union.

Money and Banking System

Banking is open to foreign competition. At the end of 2019, there were 246 credit institutions operating in Finland and total assets of the domestic banking groups and branches of foreign banks operating in Finland amounted to USD 859 billion. For more information see: https://www.finanssiala.fi/en/publications/finnish-banking-in-2019/ 

Foreign nationals can in principle open bank accounts in the same manner as Finns. However, banks must identify customers and this may prove more difficult for foreign nationals. In addition to personal and address data, the bank often needs to know the person’s identifier code (i.e. social security number), and a number of banks require a work permit, a certificate of studies, or a letter of recommendation from a trustworthy bank, and details regarding the nature of transactions to be made with the account. All authorized deposit-taking banks are members of the Deposit Guarantee Fund, which guarantees customers’ deposits to a maximum of EUR 100,000 per depositor.

In 2019 the capital adequacy ratio of the Finnish banking sector was 21.3 percent, above the EU average. Measured in Core Tier 1 Capital, the ratio was 17.6 percent. The capital adequacy of the Finnish banking sector remains well above the EU average. The Finnish banking sector’s return on equity (ROE) was 4.9 percent, slightly below the average ROE for all EU banking sectors (5.4 percent). Standard & Poor’s in March 2021 reaffirmed Finland’s AA+ long term credit rating and stable outlook while Fitch kept Finland’s credit rating at AA+ in November 2020. Moody’s kept Finland’s credit rating unchanged at Aa1 in July 2020. The Finnish banking sector is dominated by four major banks (OP Pohjola, Nordea, Municipality Finance and Danske Bank), which together hold 81 percent of the market.

Nordea, which relocated its headquarters from Sweden to Finland in 2018, has the leading market position among household and corporate customers in Finland. The relocation increased the Finnish banking sector to over three times the size of Finland’s GDP. Nordea is Europe’s 21st largest bank (2020) in terms of balance sheet. Consequently, Finland’s banking sector is one of Europe’s largest relative to the size of the national economy.

Nordea became a member of the “we.trade” consortium in November 2017, a blockchain based trade platform for customers of the European wide consortium of banks signed up for the platform. “we.trade” makes domestic and cross-border commerce easier for European companies by harnessing the power of distributed ledger and block chain technology. Commercially launched in January 2019, the we.trade’s technology is currently licensed by 16 banks across 15 countries.

The Act on Virtual Currency providers (572/2019) entered into force in May, 2019. The Financial Supervisory Authority (FIN-FSA) acts as the registration authority for virtual currency providers. The primary objective of the Act is to introduce virtual currency providers into the scope of anti-money laundering regulation. Only virtual currency providers meeting statutory requirements are able to carry on their activities in Finland.

The Finnish Tax Administration released guidelines on the taxation of cryptocurrency in May 2018, updates were made in October 2019, and new guidelines were released in January 2020 : https://www.vero.fi/en/detailed-guidance/guidance/48411/taxation-of-virtual-currencies3/ 

Foreign Exchange and Remittances

Foreign Exchange

Finland adopted the Euro as its official currency in January 1999. Finland maintains an exchange system free of restrictions on the making of payments and transfers for international transactions, except for those measures imposed for security reasons.

Remittance Policies

There are no legal obstacles to direct foreign investment in Finnish securities or exchange controls regarding payments into and out of Finland. Banks must identify their customers and report suspected cases of money laundering or the financing of terrorism. Banks and credit institutions must also report single payments or transfers of EUR 15,000 or more. If the origin of funds is suspect, banks must immediately inform the National Bureau of Investigation. There are no restrictions on current transfers or repatriation of profits. Residents and non-residents may hold foreign exchange accounts. There is no limit on dividend distributions as long as they correspond to a company’s official earnings records.

Travelers carrying more than EUR 10,000 must make a declaration upon entering or leaving the EU. As a Financial Action Task Force (FATF) member, Finland observes most of FATF’s 40 recommendations. In its Mutual Evaluation Report of Finland, released April 16, 2019, FATF concluded that Finland’s measures to combat money laundering and terrorist financing are delivering good results, but that Finland needs to improve supervision to ensure that financial and non-financial institutions are properly implementing effective AML/CFT controls. To improve supervision, a money laundering supervision register of the State Administrative Agency (AVI) and a register of beneficial owners controlled by the Finnish Patent and Registration Office were set up on July 1, 2019. In addition, the responsibility of preparing amendments to the Act on Preventing Money Laundering and Terrorist Financing was transferred to the Ministry of Finance (in charge of national FATF coordination) on January 1, 2019. FATF’s Mutual Evaluation Report of Finland, April 2019: http://www.fatf-gafi.org/countries/d-i/finland/documents/mer-finland-2019.html .

In Finland, the Fifth Anti-Money Laundering Directive was implemented, among other things, by means of the Act on the Bank and Payment Accounts Control System, which entered into force on May 1, 2019. In accordance with the Act, Customs has established a bank and payment accounts register and issue a regulation on a data retrieval system, which entered into force on September 1, 2020. The Ministry of the Interior has set up a legislative project to implement the EU directive on access to financial information at national level. The directive contains rules to facilitate the use of information held in bank account registries by the authorities for the purpose of preventing, detecting, investigating or prosecuting certain offences.

Sovereign Wealth Funds

Solidium is a holding company that is fully owned by the State of Finland. Although it is not explicitly a sovereign wealth fund, Solidium’s mission is to manage and increase the long-term value of the listed shareholdings of the Finnish State. Solidium is a minority owner in 12 listed companies; the market value of Solidium’s equity holdings is approximately USD 10.46 billion (March 2021), https://www.solidium.fi/en/holdings/holdings/ 

Capital Markets and Portfolio Investment

There are no administrative restrictions on portfolio investment in France, and there is an effective regulatory system in place to facilitate portfolio investment. France’s open financial market allows foreign firms easy access to a variety of financial products, both in France and internationally. France continues to modernize its marketplace; as markets expand, foreign and domestic portfolio investment has become increasingly important. As in most EU countries, France’s listed companies are required to meet international accounting standards. Some aspects of French legal, regulatory, and accounting regimes are less transparent than U.S. systems, but they are consistent with international norms. Foreign banks are allowed to establish branches and operations in France and are subject to international prudential measures. Under IMF Article VIII, France may not impose restrictions on the making of payments and transfers for current international transactions without the (prior) approval of the Fund.

Foreign investors have access to all classic financing instruments, including short-, medium-, and long-term loans, short- and medium-term credit facilities, and secured and non-secured overdrafts offered by commercial banks. These assist in public offerings of shares and corporate debt, as well as mergers, acquisitions and takeovers, and offer hedging services against interest rate and currency fluctuations. Foreign companies have access to all banking services. Most loans are provided at market rates, although subsidies are available for home mortgages and small business financing.

Euronext Paris (also known as Paris Bourse) is part of a regulated cross-border stock exchange located in six European countries. Euronext Growth is an alternative exchange for medium-sized companies to list on a less regulated market (based on the legal definition of the European investment services directive), with more consumer protection than the Marché Libre still used by a couple hundred small businesses for their first stock listing. A company seeking a listing on Euronext Growth must have a sponsor with status granted by Euronext and prepare a French language prospectus for a permit from the Financial Markets Authority (Autorité des Marchés Financiers or AMF), the French equivalent of the U.S. Securities and Exchange Commission. Small and medium-size enterprises (SMEs) may also list on Enternext, a subsidiary of the Euronext Group created in 2013. The bourse in Paris also offers Euronext Access, an unregulated exchange for Start-ups.

Money and Banking System

France’s banking system recovered gradually from the 2008-2009 global financial crises and passed the 2018 stress tests conducted by the European Banking Authority. In the context of the COVID-19 outbreak, the European Banking Authority (EBA) postponed the EU-wide stress test to 2021 as a measure to temporarily alleviate the acute operational burden for banks. The EBA launched the EU-wide stress test exercise in January 2021 and its results will be published at the end of July 2021.

Four French banks were ranked among the world’s 20 largest as of January 2021 (BNP Paribas SA; Crédit Agricole Group, Société Générale SA, Groupe BPCE). The assets of France’s top five banks totaled $9.5 trillion in 2020. Acting on a proposal from France’s central bank, Banque de France, in March 2020, the High Council for Financial Stability (HCSF) instructed the country’s largest banks to decrease the “countercyclical capital buffer” from 0.25 percent to zero percent of their bank’s risk-weighted assets, thereby increasing liquidity to help mitigate the impact of the pandemic-induced recession. As of March 2021, banks maintained the zero percent countercyclical capital buffer with no intention to increase it before the end of 2022, at the earliest. The HCSF considered the risks to financial stability remain high, due to the impact of the crisis on the accounts of financial and non-financial actors. Firms increased their debt significantly in 2020, even if this was accompanied by an almost equivalent increase in their cash position. HCSF data highlighted the heterogeneity of the impact, as some companies were significantly weakened by the crisis, while others remain unaffected.   Banque de France is a member of the Eurosystem, which groups together the European Central Bank (ECB) and the national central banks of all countries that have adopted the euro. Banque de France is a public entity governed by the French Monetary and Financial Code. The conditions whereby it conducts its missions on national territory are set out in its Public Service Contract. The three main missions are monetary strategy; financial stability, together with the High Council of financial stability (Haut Conseil de la Stabilité Financière) which implements macroprudential policy; and the provision of economic services to the community. In addition, it participates in the preparation and implementation of decisions taken centrally by the ECB Governing Council.

Banque de France is a member of the Eurosystem, which groups together the European Central Bank (ECB) and the national central banks of all countries that have adopted the euro. Banque de France is a public entity governed by the French Monetary and Financial Code. The conditions whereby it conducts its missions on national territory are set out in its Public Service Contract. The three main missions are monetary strategy; financial stability, together with the High Council of financial stability (Haut Conseil de la Stabilité Financière) which implements macroprudential policy; and the provision of economic services to the community. In addition, it participates in the preparation and implementation of decisions taken centrally by the ECB Governing Council.

Foreign banks can operate in France either as subsidiaries or branches but need to obtain a license. Credit institutions’ licenses are generally issued by France’s Prudential Authority (Autorité de Contrôle Prudentiel et de Résolution or ACPR) which reviews whether certain conditions are met (e.g., minimum capital requirement, sound and prudent management of the bank, compliance with balance sheet requirements, etc.). Both EU law and French legislation apply to foreign banks. Foreign banks or branches are additionally subject to prudential measures and must provide periodic reports to the ACPR regarding operations in France, including detailed reports on their financial situation. At the EU level, the ‘passporting right’ allows a foreign bank settled in any EU country to provide their services across the EU, including France. There are about 941 credit institutions authorized to carry on banking activities in France; the list of foreign banks is available on this website:  https://www.regafi.fr/spip.php?page=results&type=advanced&id_secteur=3&lang=en&denomination=&siren=&cib=&bic=&nom=&siren_agent=&num=&cat=01-TBR07&retrait=0 

Foreign Exchange and Remittances

Foreign Exchange

For purposes of controlling exchange, the French government considers foreigners as residents from the time they arrive in France. French and foreign residents are subject to the same rules; they are entitled to open an account in a foreign currency with a bank established in France, and to establish accounts abroad. They must report all foreign accounts on their annual income tax returns, and money earned in France may be freely converted into dollars or any other currency and transferred abroad.

France is one of nineteen countries (known collectively as the Eurozone) that use the euro currency. Exchange rate policy for the euro is handled by the European Central Bank, located in Frankfurt, Germany. The average euro to USD exchange rate from March 1, 2020 to March 1, 2021 was 1 USD to 0.86 euro.

France is a founding member of the OECD-based Financial Action Task Force (FATF, a 39-member intergovernmental body). As reported in the Department of State’s France Report on Terrorism, the French government has a comprehensive anti-money laundering/ counterterrorist financing (AML/CTF) regime and is an active partner in international efforts to control money laundering and terrorist financing.  Tracfin, the French government’s financial intelligence unit, is active within international organizations, and has signed new bilateral agreements with foreign countries.

Remittance Policies

France’s investment remittance policies are stable and transparent. All inward and outward payments must be made through approved banking intermediaries by bank transfers. There is no restriction on the repatriation of capital. Similarly, there are no restrictions on transfers of profits, interest, royalties, or service fees. Foreign-controlled French businesses are required to have a resident French bank account and are subject to the same regulations as other French legal entities. The use of foreign bank accounts by residents is permitted.

Sovereign Wealth Funds

France has no sovereign wealth fund per se (none that use that nomenclature) but does operate funds with similar intent. The Public Investment Bank (Bpifrance) supports small and medium enterprises (SMEs), larger enterprises (Entreprises de Taille Intermedaire), and innovating businesses with over €36 billion ($42.5 billion) assets under management. The government strategy is defined at the national level and aims to fit with local strategies.  Bpifrance may hold direct stakes in companies, hold indirect stakes via generalist or sectorial funds, venture capital, development or transfer capital.  In November 2020, Bpifrance became a member of the One Planet Sovereign Wealth Funds (OPSWF) international initiative, which federates international sovereign wealth funds mobilized to contribute to the transition towards a more sustainable economy. Bpifrance stepped up its support for the ecological and energy transition, aiming to reach nearly €6 billion ($7.1 billion) per year by 2023.

Capital Markets and Portfolio Investment

There is no law prohibiting or limiting foreign investment in Gabon. Aside from the preference in employment given to Gabonese workers, from a general corporate law perspective, there are no specific legislative requirements. Regardless of the type of company, there must be one resident representative on the management board of all Gabonese companies. However, this resident representative can be a non-Gabonese citizen.

However, in the oil and gas industry, the state is entitled to hold a mandatory participating interest in a petroleum contract of up to 20 percent. Any acquisition by the sate in excess of the 20 percent must be purchased at market price.

In addition to this, the Gabon Oil Company (i.e., the national oil and gas company) is also entitled to acquire at market price a participating interest in any petroleum contract of up to 15 percent.

The contracting company can assign its rights and obligations under any hydrocarbons contracts to a third party, subject to the prior approval of the Ministry of Oil and Hydrocarbons and the Ministry of Economy. The state is entitled to right of first refusal on application to assign these rights to a third party, excluding assignments between the contracting company and its affiliates.The Gabonese government encourages and supports foreign portfolio investment, but Gabon’s capital markets are poorly developed. Gabon has been home to the Central Africa Regional Stock Exchange, which began operation in August 2008. Additionally, the Bank of Central African States is in the process of consolidating the Libreville Stock Exchange into a single CEMAC zone stock exchange to be based in Douala, Cameroon; this process began in July 2019.

On June 25, 1996, Gabon formally notified the IMF that they accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement. These sections provide that members shall not impose or engage in certain measures, namely restrictions on making payments and transfers for current international transactions, discriminatory currency arrangements, or multiple currency practices, without the approval of the IMF.

Foreign investors are authorized to get credit on the local market and have access to a variety of credit instruments offered by local banks without restriction.

Money and Banking System

The banking sector is composed of seven commercial banks and is open to foreign institutions. It is highly concentrated, with three of the largest banks accounting for 77 percent of all loans and deposits. The lack of diversification in the economy has constrained bank growth in the country, given that the financing of the oil sector is largely undertaken by foreign international banks. Access to banking services outside major cities is limited.

According to data from the Gabonese General Directorate for the Economy and Fiscal Policy, the term resources of the banking sector, mainly made up of accounts payable. term, and special regime deposit accounts (cash certificates), fell by 8% in the first half of 2020, due in particular to the negative impact of COVID-19 on economic activity. These resources stood at 552.1 billion FCFA at the end of June 2020, compared to 600 billion a year earlier.

The Gabonese banking sector remains weak due to its difficulty in financing the private sector due to unreliable and often incomplete documentation presented by new companies. In addition, loan rates offered by banks are very high – around 15 percent – discouraging individuals and businesses.

BGFI Bank Gabon is the largest Gabonese bank in both deposits and loans with approximatively 45 percent of the market share and a balance sheet total of over 3,000 billion FCFA, according to the Professional Association of Gabon Credit Institutions (APEC). The Bloomfield Investment Corporation financial rating agency gave the BGFI Bank a mark of A+ in recognition for its financial strength and management system.

Gabon shares a common Central Bank (Bank of Central African States) and a common currency, the Communauté Financière Africaine (CFA) Franc, with the other countries of CEMAC. The CFA is pegged to the euro.

Foreign banks are allowed to establish operations in the country. There is one U.S. bank (Citigroup) present in Gabon. There are no restrictions on a foreigner’s ability to establish a bank account in the local economy.

Gabon’s financial system is shallow and financial intermediation levels remain low. Basic documents are required for applying for a residency permit in Gabon.

Foreign Exchange and Remittances

Foreign Exchange

The Bank of Central African States’ policy on foreign exchange requirements is in flux. Please contact the Embassy for additional information.

Funds associated with any form of investment to be freely converted into any world currency now have to go through the Bank of Central African States’ new process related to foreign and exchange currency rules.

Gabon’s currency is the FCFA, which is convertible and is tied to the Euro (EUR 1:FCFA 656). As of March 2021, 1 U.S. dollar is roughly equivalent to CFA 535

Remittance Policies

The Gabonese government recently changed investment remittance policies to tighten access to foreign exchange for investment remittances. There is no time limitation on capital inflows or outflows.

Sovereign Wealth Funds

Gabon created a Sovereign Wealth Fund (SWF) in 2008. Initially called the Fund for Future Generations (Fonds des Génerations Futures) and later changed to the Sovereign Funds of the Gabonese Republic (Fonds Souverains de la République Gabonaise), the current iteration of Gabon’s SWF is referred to as Gabon’s Strategic Investment Funds (Fonds Gabonaises d’Investissements Stratégiques, or FGIS). As of September 2013, the most recent FGIS report, the FGIS had USD 2.4 billion in assets and was actively making investments. Further details are not available.

Gabon’s sovereign wealth fund does not follow the Santiago principles, nor does Gabon participate in the IMF-hosted International Working Group on SWFs.

Capital Markets and Portfolio Investment

Banks and policymakers alike would like to see the exposure ratio return to the long-run average over time, if the emergence of lending opportunities, both large-scale investment projects and retail credit, can be supported by the banks without compromising their financial soundness and overall financial stability. Gambian banks are trying to return to a more balanced portfolio structure in the medium run following the decline in private sector lending relative to investment in government securities. Central Bank of the The Gambia staff contend that the decline in the ratio was delayed by foreign banks entering the local market with an aggressive lending strategy to capture market share.

The country does not have its own stock market. Sufficient liquidity does not exist in the markets to enter and exit sizeable positions. There is no effective regulatory system to encourage and facilitate portfolio investment, or policies to facilitate the free flow of financial resources into the products and factor markets. Credit is allocated on market terms. Personal loans remain rare among Gambians; interest rates exceeding 25% mean that few loans are economically rational. Foreign investors are able to get credit on the local market. The private sector has access to a variety of credit instruments. GoTG respects the IMF Article obligations for member countries and refrains from restrictions on payments and transfers for current international transactions.

Money and Banking System

Total assets of the banking industry increased by 15.6 in 2020, going from D50.88 billion (USD 993 million) to D58.82 billion (USD 1.2 million). In 2019 asset quality improved significantly with a non-performing loan ratio of 3.3%, lower than 7.2% in 2018.

The banking system had been adequately capitalized, liquid, and profitable with a capital adequacy ratio of 32.6 percent in December 2020. The ratio of liquid assets to total assets calculated at 63.8% and the ratio of non-performing loans to total loans at calculated at 6.82%. The three largest banks accounted for D30.97 billion (USD 604 Million) and totaled 53.62% of the industry’s total assets.

At the last Monetary Policy Committee meeting in March 2021, amid fears of the continuous impact of COVID-19, the Central Bank reduced the policy rate to 10%. Net foreign assets of the banking system stood at D16.8 billion (USD 329 million) in December 2019 compared with D10.4 billion (USD 204 million) in 2018. Net domestic assets of the banking system stood at D26.1 billion (USD 512 million) in December 2019 representing an increase of 11.8% from last year. Foreign banks or branches can establish operations in The Gambia but are subject to the country’s banking regulations. One U.S. bank struggled to obtain the necessary approvals to begin operations in the country, but it eventually secured all the necessary permits. All correspondent banking relationships have been maintained for the past three years. There are no restrictions on foreigners opening a bank account.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on foreign investors converting or repatriating funds in The Gambia.

Funds associated with any form of investment can be freely converted into any world currency. The Dalasi (GMD) has a floating exchange rate that is determined by market forces.

The domestic foreign exchange market is stabilized and supported by improved foreign exchange liquidity conditions, together with market confidence in the government and economy. The performance of the external sector, coupled with improved transparency in the exchange rate policy, are major contributing factors to the stability of the exchange rate of the dalasi. The volume of transactions in the foreign market measured by aggregate purchases and sales of foreign currency in the year December 2018 increased to USD 1.96 billion from USD 1.35 billion in December 2017.

Purchase of foreign currency, indicating supply, increased from USD 679.6 million in 2017 to USD 975.7 million in 2018, representing an increase of 43.6%. Improved private remittance inflows, growth in foreign direct investment flows, and project disbursements are contributing factors to the improvement of supply conditions in the market.

The Bank limited its intervention on the domestic foreign exchange market to moves building foreign reserves. In 2018, the Central Bank’s purchases of foreign currencies amounted to USD 31.2 million, all of which went to the foreign currency reserve fund.

Remittance Policies

There have been no recent changes or plans to change investment remittance policies in The Gambia. Currently there are no time limitations on remittances and investors may repatriate profits and dividends through commercial banks or licensed money transfer agencies at prevailing exchange rates. There are no plans to tighten access to foreign exchange for investment remittances. Remittance and capital transfers stood at USD 588 million in 2020, a 78% rise compared with 2019, leading to a positive balance of payments overall.

Sovereign Wealth Funds

Neither the host government nor a government-affiliate maintains a Sovereign Wealth Fund.

Capital Markets and Portfolio Investment

The National Bank of Georgia regulates the securities market. All market participants submit their reports in line with international standards. All listed companies must make public filings, which are then uploaded to the National Bank’s website, allowing investors to evaluate a company’s financial standing. The Georgian securities market includes the following licensed participants: Stock Exchanges, a Central Securities Depository, eight brokerage companies, and four independent securities registrars. ( https://www.nbg.gov.ge/index.php?m=487&lng=eng )

The Georgian Stock Exchange (GSE) is the only organized securities market in Georgia. Designed and established with the help of USAID and operating under a legal framework drafted with the assistance of American experts, the GSE complies with global best practices in securities trading and offers an efficient investment facility to both local and foreign investors. The GSE’s automated trading system can accommodate thousands of securities that can be traded by brokers from workstations on the GSE floor or remotely from their offices: https://gse.ge/en/ 

No law or regulation authorizes private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation or control. Cross-shareholder or stable-shareholder arrangements are not used by private firms in Georgia. Georgian legislation does not protect private firms from takeovers. There are no regulations authorizing private firms to restrict the investment activity of foreign partners or to limit the ability of foreign partners to gain control over domestic enterprises.

The government and Central Bank (National Bank of Georgia) respect IMF Article VIII and do not impose any restrictions on payments and transfers in current international transactions.

Credit from commercial banks is available to foreign investors as well as domestic clients, although interest rates are high. Banks continue offering business, consumer, and mortgage loans.

The government adopted a new law in 2018 that introduced an accumulative pension scheme, which became effective on January 1, 2019. The pension scheme is mandatory for legally employed people under 40. For the self-employed and those above the age of 40, enrolment in the program is voluntary. The pension savings system applies to Georgian citizens, foreign citizens living in Georgia with permanent residency in the country, and stateless persons who are employed or self-employed and receive an income.

The government expects that that the new system will boost domestic capital market, as the pension funds will be invested within Georgia. The Pension Agency of Georgia made its first large scale investment in March 2020, when it invested 560 million GEL (around USD 200 million) in deposit certificates of high-rated Georgian commercial banks. According to the Agency, as of February 2021, over GEL 1.3 billion ($392 million) was accumulated in the Pension Fund of Georgia. Pension assets are placed in Georgian commercial banks at an effective rate of 10.8% per annum; 76% of assets are invested in certificates of deposit and term deposits, and 24% – in current interest-bearing accounts.

Money and Banking System

Banking is one of the fastest growing sectors in the Georgian economy. The banking sector is well-regulated and capitalized despite regional and global challenges faced in many neighboring countries. As of March 1, 2021, Georgia’s banking sector consists of 15 commercial banks, including 14 foreign-controlled banks, with 154 commercial bank branches and 830 service centers throughout the country. In March 2021, Georgian commercial banks held GEL 57.3 billion (around USD 17.4 billion) in total assets. As of early 2021, there were 18 insurance companies and 39 microfinance (MFI) organizations operating in Georgia. MFIs held GEL 1.5 billion (USD 455 million) in total assets as of January 1, 2021. Two Georgian banks are listed on the London Stock Exchange: TBC Bank (listed in 2014) and the Bank of Georgia (2006).

The National Bank of Georgia  (NBG) is Georgia’s central bank, as defined by the Constitution. The rights and obligations of the NBG as the central bank, the principles of its activity, and the guarantee of its independence are defined in the Organic Law of Georgia on the National Bank of Georgia. The National Bank supervises the financial sector to facilitate the financial stability and transparency of the financial system, as well as to protect the rights of the sector’s consumers and investors. Through the Financial Monitoring Service of Georgia, a separate legal entity, the NBG undertakes measures against illicit income legalization and terrorism financing. In addition, the NBG is the government’s banker and fiscal agent. ( www.nbg.gov.ge ). The IMF, credit rating agencies, and other international organizations positively assess the NBG’s macroeconomic framework and inflation targeting regime. In March 2021, the NBG was awarded the Transparency Award by the international publisher Central Banking. The award highlighted the improved communications on monetary policy, financial stability, consumer protection and financial education. The NBG also was nominated for the Risk Manager Award of 2020 by the same group. In 2020, Global Finance named Koba Gvenetadze, Governor of the NBG, among the Best Central Bankers for the third time.

The International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), the U.S. International Development Finance Corporation (DFC), the Asian Development Bank (ABD), and other international development agencies have a variety of lending programs making credit available to large and small businesses in Georgia. Georgia’s two largest banks – TBC and Bank of Georgia – have correspondent banking relationships with the United States through Citibank, and some other banks have a relationship with JP Morgan.

Georgia does not restrict foreigners from establishing a bank account in Georgia.

Foreign Exchange and Remittances

Foreign Exchange

Georgian law guarantees the right of an investor to convert and repatriate income after payment of all required taxes. The investor is also entitled to convert and repatriate any compensation received for expropriated property. Georgia has accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement, effective as of December 20, 1996, to refrain from imposing restrictions on payments and transfers for current international transactions and from engaging in discriminatory currency arrangements or multiple currency practices without IMF approval. Parliament’s 2011 adoption of the Act of Economic Freedom further reinforced this provision.

Under the U.S.-Georgia BIT, the Georgian government guarantees that all money transfers relating to a covered investment by a U.S. investor can be made freely and without delay into and out of Georgia.

Foreign investors have the right to hold foreign currency accounts with authorized local banks. The sole legal tender in Georgia is the lari (GEL), which is traded on the Tbilisi Interbank Currency Exchange and in the foreign exchange bureau market.

The currency of Georgia is the lari, denoted GEL. The NBG publishes the official exchange rate daily on its website. The official exchange rate of the Georgian lari against other foreign currencies is determined according to the rate on international markets or the issuer country’s domestic interbank currency market (at 15:00) on the basis of cross-currency exchange rates. The sources used for the acquisition of exchange rates are the Reuters and Bloomberg systems and the corresponding webpages of central banks. The information is received, calculated, and disseminated automatically.

Georgia has a floating exchange rate. The National Bank of Georgia does not intend to peg the exchange rate and does not generally intervene in the foreign exchange market, except under certain circumstances when the GEL’s fluctuation has a high magnitude, such as during the COVID-19 pandemic.

Remittance Policies

There are no restrictions, limitations, or delays involved remittances from overseas. Several Georgian banks participate in the SWIFT and Western Union interbank communication networks. Businesses report that it takes a maximum of three days for money transferred abroad from Georgia to reach a beneficiary’s account, unless otherwise provided by a customer’s order. There is no indication that remittance policies will be altered in the future. Travelers must declare at the border currency and securities in their possession valued at more than GEL 30,000 (around USD 9,000).

Sovereign Wealth Funds

Georgia does not have a Sovereign Wealth Fund.

Capital Markets and Portfolio Investment

As an EU member state with a well-developed financial sector, Germany welcomes foreign portfolio investment and has an effective regulatory system. Germany has a very open economy, routinely ranking among the top countries in the world for exports and inward and outward foreign direct investment. As a member of the Eurozone, Germany does not have sole national authority over international payments, which are a shared task of the European Central Bank and the national central banks of the 19 member states, including the German Central Bank (Bundesbank). A European framework for national security screening of foreign investments, which entered into force in April 2019, provides a basis under European law to restrict capital movements into Germany on the basis of threats to national security. Global investors see Germany as a safe place to invest, as the real economy – up until the COVID-19 crisis– continued to outperform other EU countries.German sovereign bonds continue to retain their “safe haven” status.

Listed companies and market participants in Germany must comply with the Securities Trading Act, which bans insider trading and market manipulation. Compliance is monitored by the Federal Financial Supervisory Authority (BaFin) while oversight of stock exchanges is the responsibility of the state governments in Germany (with BaFin taking on any international responsibility). Investment fund management in Germany is regulated by the Capital Investment Code (KAGB), which entered into force on July 22, 2013. The KAGB represents the implementation of additional financial market regulatory reforms, committed to in the aftermath of the global financial crisis. The law went beyond the minimum requirements of the relevant EU directives and represents a comprehensive overhaul of all existing investment-related regulations in Germany with the aim of creating a system of rules to protect investors while also maintaining systemic financial stability.

Money and Banking System

Although corporate financing via capital markets is on the rise, Germany’s financial system remains mostly bank-based. Bank loans are still the predominant form of funding for firms, particularly the small- and medium-sized enterprises that comprise Germany’s “Mittelstand,” or mid-sized industrial market leaders. Credit is available at market-determined rates to both domestic and foreign investors, and a variety of credit instruments are available. Legal, regulatory and accounting systems are generally transparent and consistent with international banking norms. Germany has a universal banking system regulated by federal authorities, and there have been no reports of a shortage of credit in the German economy. After 2010, Germany banned some forms of speculative trading, most importantly “naked short selling.” In 2013, Germany passed a law requiring banks to separate riskier activities such as proprietary trading into a legally separate, fully capitalized unit that has no guarantee or access to financing from the deposit-taking part of the bank. Since the creation of the European single supervisory mechanism (SSM) in November 2014, the European Central Bank directly supervises 21 banks located in Germany (as of January 2021) among them four subsidiaries of foreign banks.

Germany supports a global financial transaction tax and is pursuing the introduction of such a tax along with other EU member states.

Germany has a modern and open banking sector that is characterized by a highly diversified and decentralized, small-scale structure. As a result, it is extremely competitive, profit margins notably in the retail sector are low and the banking sector considered “over-banked” and in need of consolidation. The country’s “three-pillar” banking system consists of private commercial banks, cooperative banks, and public banks (savings banks/Sparkassen and the regional state-owned banks/Landesbanken). This structure has remained unchanged despite marked consolidation within each “pillar” since the financial crisis in 2008/9. The number of state banks (Landesbanken) dropped from 12 to 5, that of savings banks from 446 in 2007 to 374 at the end of 2019 and the number of cooperative banks has dropped from 1,234 to 814. Two of the five large private sector banks have exited the market (Dresdner, Postbank). The balance sheet total of German banks dropped from 304 percent of GDP in 2007 to about 265 percent of end-2019 GDP with banking sector assets worth €9.1 trillion. Market shares in corporate finance of the banking groups remained largely unchanged (all figures for end of 2019): Credit institutions 27 percent (domestic 17 percent, foreign banks 10 percent), savings banks 31 percent, state banks 10 percent, credit cooperative banks 21 percent, promotional banks 6 percent.

The private bank sector is dominated by globally active banks Deutsche Bank (Germany’s largest bank by balance sheet total) and Commerzbank (fourth largest bank), with balance sheets of €1.3 trillion and €466.6 billion respectively (2019 figures). Commerzbank received €18 billion in financial assistance from the federal government in 2009, for which the government took a 25 percent stake in the bank (now reduced to 15.6 percent). Merger talks between Deutsche Bank and Commerzbank failed in 2019. The second largest of the top ten German banks is DZ Bank, the central institution of the Cooperative Finance Group (after its merger with WGZ Bank in July 2016), followed by German branches of large international banks (UniCredit Bank or HVB, ING-Diba), development banks (KfW Group, NRW.Bank), and state banks (LBBW, Bayern LB, Helaba, NordLB).

German banks’ profitability deteriorated in the years prior to the COVID-19 crisis due to the prevailing low and negative interest rate environment that narrowed margins on new loans irrespective of debtors’ credit worthiness, poor trading results and new competitors from the fintech sector, and low cost efficiency. In 2018, according to the latest data by the Deutsche Bundesbank (Germany’s central bank), German credit institutions reported a pre-tax profit of €18.9 billion or 0.23 percent of total assets. Their net interest income remained below its long-term average to €87.2 billion despite dynamic credit growth (19 percent since end-2014 until end-2019 in retail and 23 percent in corporate loans) on ongoing cost-reduction efforts. Thanks to continued favorable domestic economic conditions, their risk provisioning has been at an all time low. Their average return on equity before tax in 2018 slipped to 3.74 percent (after tax: 2.4 percent) (with savings banks generating a higher return, big banks a lower return, and Landesbanken a –2.45 percent return). Both return on equity and return on assets were at their lowest level since 2010.

Brexit promptedsome banking activities to relocate from the United Kingdom to the EU, with many foreign banks (notably U.S. and Japanese banks) choosing Frankfurt as their new EU headquarters. Their Core Tier 1 equity capital ratios improved as did their liquidity ratios, but no German large bank has been able to organically raise its capital for the past decade.

In 2020, the insolvency of financial services provider WireCard revealed certain weaknesses in German banking supervision. WireCard, which many viewed as a promising innovative format for the processing of credit card transactions, managed to conceal inadequate equity from supervisory authorities while also inflating its actual turnover. The Wirecard insolvency led to the replacement of the head of banking supervisory authority BaFin and triggered both an ongoing overhaul of the German banking supervision and a continuing parliamentary investigation.

It remains unclear how the COVID-19 crisis will affect the German banking sector. Prior to the pandemic, the bleaker German economic outlook prompted a greater need for value adjustment and write-downs in lending business. German banks’ ratio of non-performing loans was low going into the crisis (1.24 percent). In March 2020, the German government provided large-scale asset guarantees to banks (in certain instances covering 100 percent of the credit risk) via the German government owned KfW bank to avoid a credit crunch. So far, German banks have come through the crisis unscathed thanks to extensive liquidity assistance from the ECB, moratoria and fiscal support for the economy. Nevertheless, 25 German banks were downgraded in 2020 and many more were put on negative watch, though CDS spreads for the two largest private banks have fallen dramatically since the height of the crisis in March 2020 and are currently around pre-COVID levels. The second and third COVID-waves, however, are likely to take a toll on credit institutions and 2021 could prove to be the toughest test for banks since the 2008/9 global financial crisis. According to the Bundesbank, loan defaults by German banks could quadruple to 0.8 percent of the loan portfolio (or €13 billion). The Bundesbank’s focus in particular is on aircraft loans. According to Bloomberg’s calculations, the major German regional banks have lent €15 billion for aircraft financing. At Deka alone, the asset manager of the savings banks, the ratio of non-performing loans in aircraft financing is at a relatively high 7.7 percent.

Foreign Exchange and Remittances

Foreign Exchange

As a member of the Eurozone, Germany uses the euro as its currency, along with 18 other EU countries. The Eurozone has no restrictions on the transfer or conversion of its currency, and the exchange rate is freely determined in the foreign exchange market.

The Deutsche Bundesbank is the independent central bank of the Federal Republic of Germany. It has been a part of the Eurosystem since 1999, sharing responsibility with the other national central banks and the European Central Bank (ECB) for the single currency, and thus has no scope to manipulate the bloc’s exchange rate. Germany’s persistently high current account surplus – the world’s second largest in 2020 at USD 261 billion (6.9 percent of GDP) – has shrunk for the fifth year in a row. Despite the decrease, the persistence of Germany’s surplus remains a matter of international controversy. German policymakers view the large surplus as the result of market forces rather than active government policies, while the European Commission (EC) and IMF have called on authorities to rebalance towards domestic sources of economic growth by expanding public investment, using available fiscal space, and other policy choices that boost domestic demand.

Germany is a member of the Financial Action Task Force (FATF) and is committed to further strengthening its national system for the prevention, detection and suppression of money laundering and terrorist financing. Federal law is enforced by regional state prosecutors. Investigations are conducted by the Federal and State Offices of Criminal Investigations (BKA/LKA). The administrative authority for imposing anti-money laundering requirements on financial institutions is the Federal Financial Supervisory Authority (BaFin).

The Financial Intelligence Unit (FIU) – located at the General Customs Directorate in the Federal Ministry of Finance – is the national central authority for receiving, collecting and analyzing reports of suspicious financial transactions that may be related to money laundering or terrorist financing. On January 1, 2020, legislation to implement the 5th EU Money Laundering Directive and the European Funds Transfers Regulation (Geldtransfer-Verordnung) entered into force. The Act amends the German Money Laundering Act (Geldwäschegesetz – GwG) and a number of further laws. It provides, inter alia, the FIU and prosecutors with expanded access to data. On March 9, 2021 the Bundestag passed an anti-money laundering law seeking to improve Germany’s criminal legal framework for combating money laundering while simultaneously implementing the EU’s 6th Money Laundering Directive (EU 2018/1673 – hereafter “the Directive”). The Directive lays down minimum rules on the definition of criminal offenses and sanctions to combat money laundering. The law goes beyond the minimum standard set out in the Directive by broadening the definition of activities that could be prosecuted as money laundering offenses. Previously, the money laundering section in the German Criminal Code was designed to criminalize acts in connection with a list of serious “predicate offenses,” the underlying crime generating illicit funds, e.g., drug trafficking. The new law dispenses with the previously defined list, allowing any crime to be considered as a “predicate offense” to money laundering (the “All- Crimes Approach”). This is a paradigm shift in German criminal law, and implements an additional priority laid out in Germany’s “Strategy to Combat Money Laundering and Terrorist Financing” adopted in 2019.

The number of suspected money laundering and terrorist financing cases rose sharply in 2019 from 77.000 suspicious activity reports (SARs) to 114.914 according to the 2019 annual report of FIU (a new record and 12-fold that of 2009). The vast majority (98 percent) of suspicious transaction reports were filed by German banks and other financial institutions in order to avoid legal risks after a court ruling that held anti-money laundering (AML) officers personally liable, thus including many “false positives”. At the same time, the activities resulted in just 156 criminal charges, 133 indictments and only 54 verdicts.

In its annual report 2018, the FIU noted an “extreme vulnerability” in Germany’s real estate market to money laundering activities. Transparency International found that about €30 billion in illicit funds were funneled into German real estate in 2017. The results of the first concerted action by supervisory authorities of the German federal states in the automotive industry in 2019, for example, were sobering: only 15 percent of car dealers had implemented AML provisions, the rest had deficiencies, showing the “need for further sensitization.” The report also noted a slight upward trend in the number of SARs related to crypto assets. Around 760 SARs cited “anomalies in connection with cryptocurrencies”, as reporting noted, especially the forwarding of funds to trading platforms abroad for the exchange of funds into cryptocurrencies. However, the FIU itself has come under criticism. Financial institutions deplore the quality of its staff and the effectiveness of its work. The Institute of Public Auditors in Germany (IDW) criticizes that the precautions taken to prevent money laundering in high-risk industries outside the financial sector are monitored much less intensively. A review of the FIU scheduled for 2020 has been postponed due to the pandemic.

There is no difficulty in obtaining foreign exchange.

Remittance Policies

There are no restrictions or delays on investment remittances or the inflow or outflow of profits.

Germany is the largest remittance-sending country in the EU, making up almost 18% of all outbound personal remittances of the EU-27 (Eurostat). Migrants in Germany posted USD 25.1 billion (0.6 percent of GDP) abroad in 2019 (World Bank). Remittance flows into Germany amounted to around USD 16.5 billion in 2019, approximately 0.4 percent of Germany’s GDP.

The issue of remittances played a role during the German G20 Presidency in 2017. During its presidency, Germany passed an updated version of its “G20 National Remittance Plan.” The document states that Germany’s focus will remain on “consumer protection, linking remittances to financial inclusion, creating enabling regulatory frameworks and generating research and data on diaspora and remittances dynamics.” The 2017 “G20 National Remittance Plan” can be found at https://www.gpfi.org/publications/2017-g20-national-remittance-plans-overview 

Sovereign Wealth Funds

The German government does not currently have a sovereign wealth fund or an asset management bureau.

Capital Markets and Portfolio Investment

Private sector growth in Ghana is constrained by financing challenges. Businesses continue to face difficulty raising capital on the local market. While credit to the private sector has increased in nominal terms, levels as percentage of GDP have remained stagnant over the last decade, and high government borrowing has driven interest rates above 21 percent and crowded out private investment.

Capital markets and portfolio investment are gradually evolving. The longest-term domestic bonds are 15 years, with Eurobonds ranging up to 41-year maturities. Foreign investors are permitted to participate in auctions of bonds only with maturities of two years or longer. In November 2020, foreign investors held about 17.9 percent (valued at USD 4.6 billion) of the total outstanding domestic securities. In 2015, the Ghana Stock Exchange (GSE) added the Ghana Fixed-Income Market (GFIM), a specialized platform for secondary trading in debt instruments to improve liquidity.

The rapid accumulation of debt over the last decade, and particularly the past three years, has raised debt sustainability concerns. Ghana received debt relief under the Heavily Indebted Poor Country (HIPC) initiative in 2004, and began issuing Eurobonds in 2007. In February 2020, Ghana sold sub-Saharan Africa’s longest-ever Eurobond as part of a $3 billion deal with a tenor of 41 years. In 2020, total public debt, roughly evenly split between external and domestic, stood at approximately 76 percent of GDP, partly as a result of the economic shock of COVID-19 as revenue declined and expenditures spiked.

The Ghana Stock Exchange (GSE) has 31 listed companies, four government bonds, and one corporate bond. Both foreign and local companies are allowed to list on the GSE. The Securities and Exchange Commission regulates activities on the Exchange. There is an eight percent tax on dividend income. Foreigners are permitted to trade stocks listed on the GSE without restriction. There are no capital controls on the flow of retained earnings, capital gains, dividends, or interest payments. The GSE composite index (GGSECI) has exhibited mixed performance.

Money and Banking System

Banks in Ghana are relatively small, with the largest in the country in terms of operating assets, Ecobank Ghana Ltd., holding assets of about USD 2.1 billion in 2019. The Central Bank increased the minimum capital requirement for commercial banks from 120 million Ghana cedis (USD 22 million) to 400 million (USD 70 million), effective December 2018, as part of a broader effort to strengthen the banking industry. As a result of the reforms and subsequent closures and mergers of some banks, the number of commercial banks dropped from 36 to 23. Eight are domestically controlled, and the remaining 15 are foreign controlled. In total, there are nearly 1,500 branches distributed across the sixteen regions of the country.

Overall, the banking industry in Ghana is well capitalized with a capital adequacy ratio of 19.8 percent as of December 2020, above the 11.5 percent prudential and statutory requirement. The non-performing loans ratio increased from 14.3 percent in December 2019 to 14.5 percent as of December 2020. Lending in foreign currencies to unhedged borrowers poses a risk, and widely varying standards in loan classification and provisioning may be masking weaknesses in bank balance sheets. The BoG has almost completed actions to address weaknesses in the non-bank deposit-taking institutions sector (e.g., microfinance, savings and loan, and rural banks) and has also issued new guidelines to strengthen corporate governance regulations in the banks.

Recent developments in the non-banking financial sector indicate increased diversification, including new rules and regulations governing the trading of Exchange Traded Funds. Non-banking financial institutions such as leasing companies, building societies, and village savings and loan associations have increased access to finance for underserved populations, as have rural and mobile banking. Currently, Ghana has no “cross-shareholding” or “stable shareholder” arrangements used by private firms to restrict foreign investment through mergers and acquisitions, although, as noted above, the Payments Systems and Services Act, 2019 (Act 987), does require a 30 percent Ghanaian company or Ghanaian holding by any electronic payments service provider, including banks or special deposit-taking institutions.

Foreign Exchange and Remittances

Foreign Exchange

Ghana operates a managed-float exchange rate regime. The Ghana cedi can be exchanged for dollars and major currencies. Investors may convert and transfer funds associated with investments, provided there is documentation of how the funds were acquired. Ghana’s investment laws guarantee that investors can transfer the following transactions in convertible currency out of Ghana: dividends or net profits attributable to an investment; loan service payments where a foreign loan has been obtained; fees and charges with respect to technology transfer agreements registered under the GIPC Act; and the remittance of proceeds from the sale or liquidation of an enterprise or any interest attributable to the investment. Companies have not reported challenges or delays in remitting investment returns. For details, please consult the GIPC Act ( http://www.gipcghana.com ) and the Foreign Exchange Act guidelines ( http://www.sec.gov.gh ). Persons arriving in or departing from Ghana are permitted to carry up to USD 10,000.00 without declaration; any greater amount must be declared.

Ghana’s foreign exchange reserve needs are largely met through cocoa, gold, and oil exports; government securities; foreign assistance; and private remittances.

Remittance Policies

There is a single formal system for transferring currency out of the country through the banking system. The Foreign Exchange Act, 2006 (Act 723) provides the legal framework for the management of foreign exchange transactions in Ghana. It fully liberalized capital account transactions, including allowing foreigners to buy certain securities in Ghana. It also removed the requirement for the Bank of Ghana (the central bank) to approve offshore loans. Payments or transfer of foreign currency can be made only through banks or institutions licensed to do money transfers. There is no limit on capital transfers as long as the transferee can identify the source of capital.

Sovereign Wealth Funds

Ghana’s only sovereign wealth fund is the Ghana Petroleum Fund (GPF), which is funded by oil profits and flows to the Ghana Heritage Fund and Ghana Stabilization Fund. The Petroleum Revenue Management Act (PRMA), 2011 (Act 815), spells out how revenues from oil and gas should be spent and includes transparency provisions for reporting by government agencies, as well as an independent oversight group, the Public Interest and Accountability Committee (PIAC). Section 48 of the PRMA requires the Fund to publish an audited annual report by the Ghana Audit Service. The Fund’s management meets the legal obligations. Management of the Ghana Petroleum Fund is a joint responsibility between the Ministry of Finance and the Bank of Ghana. The minister develops the investment policy for the GPF, and is responsible for the overall management of GPF funds, consults regularly with the Investment Advisory Committee and Bank of Ghana Governor before making any decisions related to investment strategy or management of GPF funds. The minister is also in charge of establishing a management agreement with the Bank of Ghana for the oversight of the funds. The Bank of Ghana is responsible for the day-to-day operational management of the Petroleum Reserve Accounts (PRAs) under the terms of Operation Management Agreement.

For additional information regarding Ghana Petroleum Fund, please visit the 2019 Petroleum Annual Report at: https://www.mofep.gov.gh/publications/petroleum-reports .

Capital Markets and Portfolio Investment

Following EU regulations, Greece is open to foreign portfolio investment.  Law 3371/2005 sets an effective legal framework to encourage and facilitate portfolio investment.  Law 3283/2004 incorporates the European Council’s Directive 2001/107, setting the legal framework for the operation of mutual funds.  The Bank of Greece complies with its IMF Article VIII obligations and does not generally impose restrictions on payments.  Transfers for current international transactions are allowed but are subject to specific conditions for approval.  The lack of liquidity in the Athens Stock Exchange along with the challenging economic environment have hindered the allocation of credit but is accessible to foreign investors on the local market, who also have access to a variety of credit instruments.

Money and Banking System

Greece’s banking system will not be generally considered “healthy” and able to allocate funding to domestic firms that need it the most until its major banks adequately deal with the large amounts of non-performing loans (NPLs) on their balance sheets.

In November 2015, following an Asset Quality Review and Stress Test conducted by the ECB as a requirement of the 2015 ESM agreement, a third recapitalization of Greece’s four systemic banks (National Bank of Greece, Piraeus Bank, Alpha Bank, and Eurobank) took place.  The recapitalization concluded with the banks remaining in private hands, after raising  EUR6.5 billion from foreign investors, mostly hedge funds.  In September 2020, the ratio of NPLs decreased to 35.8%, down from 40.6% in December 2019.  Banks estimate that about 20% of non-performing exposures (NPEs) are owned by so-called “strategic defaulters” – borrowers who refrain from paying their debts to lenders to take advantage of the laws enacted during the financial crisis to protect borrowers from foreclosure or creditors’ collection even though they are able to pay their obligations.

Developing an effective NPL reduction strategy has been among the most difficult challenges for the Greek economy.  Greek banks’ NPL ratio, at 35.8%, remains the highest in the eurozone, well over the European average of around 3%.  Under the terms of the ESM agreement, Greece remains obliged to create an NPL market through which the loans could, over time, be sold or transferred for servicing purposes to foreign investors.  The Bank of Greece has licensed more than ten servicers, and the sale and securitization environment for non-performing loans continues to mature, with all of Greece’s systemic banks having conducted portfolio sales of secured and unsecured loan tranches since mid-2017.  The potential sale and/or transfer of Greek NPLs continues to receive interest by many Greek and foreign companies and funds, signaling a viable market.  The Greek state operates an auction platform for collateral and foreclosed assets, although the bulk of auctions still conclude with the selling bank as the purchaser of the assets.  The government introduced its “Hercules” asset protection scheme in late 2019, providing guarantees to banks as an incentive to securitize EUR 30 billion more in NPLs.  The plan offloads bad debt by wrapping it into asset backed securities via special purpose vehicles that will purchase the NPLs.  The sales are financed by notes issued by the special purpose vehicles with a government guarantee for senior tranches, thereby limiting the risk to the Greek state.  Since all four systemic banks have availed themselves of the plan, the Greek government submitted an official request for an extension of the Hercules scheme on March 16, 2021 that will permit banks to further reduce non-performing loans (NPLs) in 2021 and 2022.

Poor asset quality inhibits banks’ ability to provide systemic financing, although the situation is slowly improving.  The annual growth rate of total deposits increased to 8.5% in 2020.   Deposits increased by roughly EUR 9 billion over 2019, up from around EUR 200 billion in early 2019, a significant improvement from the crisis years, when deposits shrunk from their highest level of EUR237 billion in September 2009 to around EUR123 billion in September 2017.  Greece’s systemic banks held the following assets at the end of 2020:  Piraeus Bank, EUR71.6 billion; National Bank of Greece, EUR64.3 billion; Alpha Bank, EUR70 billion; and Eurobank, EUR67.7 billion.

Few U.S. financial institutions have a retail presence in Greece.  In September 2014, Alpha Bank acquired the retail operations of Citibank, including Diners Club.  Bank of America serves only companies and some special classes of pensioners.

There are a limited number of cross-shareholding arrangements among Greek businesses.  To date, the objective of such arrangements has not been to restrict foreign investment.  The same applies to hostile takeovers, a practice which has been recently introduced in the Greek market.  The government actively encourages foreign portfolio investment.

Greece has a reasonably efficient capital market that offers the private sector a wide variety of credit instruments.  Credit is allocated on market terms prevailing in the eurozone and credit is equally accessible by Greek and foreign investors.  An independent regulatory body, the Hellenic Capital Market Commission, supervises brokerage firms, investment firms, mutual fund management companies, portfolio investment companies, real estate investment trusts, financial intermediation firms, clearing houses and their administrators (e.g. the Athens Stock Exchange), and investor indemnity and transaction security schemes (e.g. the Common Guarantee Fund and the Supplementary Fund), and also encourages and facilitates portfolio investments.

Owner-registered bonds and shares are traded on the Athens Stock Exchange (ASE).  It is mandatory in Greece for the shares of banking, insurance, and public utility companies to be registered.  Greek corporations listed on the ASE that are also state contractors are required to have all their shares registered.

Greece has not announced that it intends to implement or allow the implementation of blockchain technologies in its banking transactions.

Foreign Exchange and Remittances

Foreign Exchange

Greece’s foreign exchange market adheres to EU rules on the free movement of capital.  Although the government imposed capital controls in 2015, at the height of the crisis, on September 1, 2019, all capital controls were removed.  Greece is a member of the eurozone, which employs a freely floating exchange rate.  Greece is not engaged in currency manipulation for the purpose of gaining a competitive advantage.

Remittance Policies

On September 1, 2019, all capital controls were removed.

Sovereign Wealth Funds

There are no sovereign wealth funds in Greece.  Public pension funds may invest up to 20% of their reserves in state or corporate bonds.

Capital Markets and Portfolio Investment

Grenada possesses a robust legislative and policy framework that facilitates free flow of financial resources. Its currency, the Eastern Caribbean dollar, has a fixed exchange rate established by the regional Eastern Caribbean Central Bank (ECCB). Foreign employees of investment enterprises and their families may repatriate their earnings after paying personal income tax and all other taxes due. The government of Grenada encourages foreign investors to seek investment capital from financial institutions chartered outside Grenada due to the short domestic supply of capital. Foreign investors are more likely to tap local financial markets for working capital. The government, local banks, and the ECCB respect IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.

The private sector has access to the limited number of credit instruments. Grenadian stocks are traded on the Eastern Caribbean Securities Exchange, whose limited liquidity may pose difficulties in conducting transactions.

Money and Banking System

The financial industry in Grenada is regulated by two entities: The ECCB and the Grenada Authority for Regulation of the Financial Industry (GARFIN). The ECCB regulates the banking system. GARFIN oversees non-banking financial institutions through a regulatory system that encourages and facilitates portfolio investment. The estimated total assets of the largest banks are USD $1.03 billion. Information on the percentage of non-performing assets is not available. Grenada has not experienced cross-shareholding or hostile takeovers. As of November 30, 2020, commercial banks in Grenada deferred debt service on 4,069 commercial bank loans due to job losses and a reduction in salaries caused by the COVID-19 pandemic. This was the second highest number of deferrals in the Eastern Caribbean Currency Union (ECCU).

Foreign banks or branches can establish operations in Grenada subject to prudential measures and regulations governed by the ECCB. For the requirements and procedures, foreign banks can refer to the following website: https://www.eccb-centralbank.org/p/grenada-1 

There is correspondent banking available with all licensed commercial banks. No correspondent banking relationships have been lost in the past three years. There are no restrictions on a foreigner’s ability to establish a bank account.

In addition to the banking sector, there are alternative financial services provided through credit unions. GARFIN regulates credit unions.

Foreign Exchange and Remittances

Foreign Exchange

Grenada’s currency is the Eastern Caribbean dollar issued by the ECCB located in Saint Kitts and Nevis. The exchange rate is also determined by the ECCB. The Eastern Caribbean dollar is pegged to the U.S. dollar at 2.7, adding to the stability of trade and investment in Grenada. The national currency rate does not fluctuate.

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with investments. Funds associated with any form of investment can be freely converted. Banks reserve the right to delay transactions if deemed suspicious or outside the typical level of activity on the account.

Remittance Policies

There are no difficulties or delays regarding remittances and no proposed policy changes that would either tighten or relax access to foreign exchange for investment remittances.

Transfers of currency are protected by Article VII of the International Monetary Fund Articles of Agreement. Grenada is also a member of the Caribbean Financial Action Task Force.

Sovereign Wealth Funds

Grenada does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Guatemala’s capital markets are weak and inefficient because they lack a securities regulator. The local stock exchange (Bolsa Nacional de Valores) deals almost exclusively in commercial paper, repurchase agreements (repos), and government bonds. The Guatemalan Central Bank (Banguat) and the Superintendent of Banks (SIB) were drafting an updated capital markets bill that included a chapter on securitization companies and the securitization process as of March 2021. Notwithstanding the lack of a modern capital markets law, the government debt market continues to develop. Domestic treasury bonds represented 56.9 percent of total public debt as of December 2020.

Guatemala lacks a market for publicly traded equities, which raises the cost of capital and complicates mergers and acquisitions. As of December 2020, borrowers faced a weighted average annual interest rate of 15.5 percent in local currency and 6.6 percent in foreign currency, with some banks charging over 40 percent on consumer or micro-credit loans. Commercial loans to large businesses offered the lowest rates and were on average 6.8 percent in local currency as of December 2020. Dollar-denominated loans typically are some percentage points lower than those issued in local currency. Foreigners rarely rely on the local credit market to finance investments.

Money and Banking System

Overall, the banking system remains stable. The Monetary Board, Banguat, and SIB approved various temporary measures during 2020 to increase liquidity of the banking system during the first months of the pandemic and to allow banks to approve restructuring of loans or deferral of loans to businesses and individuals affected by the pandemic. Non-performing loans represented 2 percent of total loans as of January 2021. According to information from the SIB, Guatemala’s 17 commercial banks had an estimated $51 billion in assets in December 2020. The six largest banks control about 87 percent of total assets. In addition, Guatemala has 11 non-bank financial institutions, which perform primarily investment banking and medium- and long-term lending, and three exchange houses. Access to financial services is very high in Guatemala City, as well as in major regional cities. Guatemala has 17.2 access points per 10,000 adults at the national level and 24.1 access points per 10,000 adults in the capitol area as of December 2020. There were 15,024 banking accounts per 10,000 adult at the national level and 35,901 banking accounts per 10,000 adults in the capital area as of December 2020. Most banks offer a variety of online banking services.

Foreigners are normally able to open a bank account by presenting their passport and a utility bill or some other proof of residence. However, requirements may vary by bank.

In April 2002, the Guatemalan congress passed a package of financial sector regulatory reforms that increased the regulatory and supervisory authority of the SIB, which is responsible for regulating the financial services industry. The reforms brought local practices more in line with international standards and spurred a round of bank consolidations and restructurings. The 2002 reforms required that non-performing assets held offshore be included in loan-loss-provision and capital-adequacy ratios. As a result, a number of smaller banks sought new capital, buyers, or mergers with stronger banks, reducing the number of banks from 27 in 2005 to 17 in 2020.

Guatemalan banking and supervisory authorities and the Guatemalan congress actively work on new laws in the business and financial sectors. In August 2012, the Guatemalan congress approved reforms to the Banking and Financial Groups Law and to the Central Bank Organic Law that strengthened supervision and prudential regulation of the financial sector and resolution mechanisms for failed or failing banks. The Guatemalan government submitted to congress proposed amendments to the Banking and Financial Groups Law in November 2016 and an anti-money laundering and counter-terrorism financing draft law in August 2020. Both proposed laws were pending congressional approval as of April 2021.

Foreign banks may open branches or subsidiaries in Guatemala subject to Guatemalan financial controls and regulations. These include a rule requiring local subsidiaries of foreign banks and financial institutions operating in Guatemala to meet Guatemalan capital and lending requirements as if they were stand-alone operations. Groups of affiliated credit card, insurance, financial, commercial banking, leasing, and related companies must issue consolidated financial statements prepared in accordance with uniform, generally accepted, accounting practices. The groups are audited and supervised on a consolidated basis.

The total number of correspondent banking relationships with Guatemala’s financial sector showed a slight decline in 2016, but the changes in the relationships were similar to those seen throughout the region and reflected a trend of de-risking. The situation stabilized in 2017. The number of correspondent banking relationships increased in 2020.

Alternative financial services in Guatemala include credit and savings unions and microfinance institutions.

Foreign Exchange and Remittances

Foreign Exchange

Guatemala’s Foreign Investment Law and CAFTA-DR commitments protect the investor’s right to remit profits and repatriate capital. There are no restrictions on converting or transferring funds associated with an investment into a freely usable currency at a market-clearing rate. U.S. dollars are freely available and easy to obtain within the Guatemalan banking system. In October 2010, monetary authorities approved a regulation to establish limits for cash transactions of foreign currency to reduce the risks of money laundering and terrorism financing. The regulation establishes that monthly deposits over $3,000 will be subject to additional requirements, including a sworn statement by the depositor stating that the money comes from legitimate activities. There are no legal constraints on the quantity of remittances or any other capital flows and there have been no reports of unusual delays in the remittance of investment returns.

The Law of Free Negotiation of Currencies allows Guatemalan banks to offer different types of foreign-currency-denominated accounts. In practice, the majority of such accounts are in U.S. dollars. Some banks offer pay through dollar-denominated accounts in which depositors make deposits and withdrawals at a local bank while the bank maintains the actual account on behalf of depositors in an offshore bank.

Capital can be transferred from Guatemala to any other jurisdiction without restriction. The exchange rate moves in response to market conditions. The government sets one exchange rate as reference, which it applies only to its own transactions and which is based on the commercial rate. The Central Bank intervenes in the foreign exchange market only to prevent sharp movements. The reference exchange rate of quetzals (GTQ) to the U.S. dollar has remained relatively stable since 1999. However, as U.S. inflation has been lower than Guatemalan inflation over this period there has been significant real exchange appreciation of about 100 percent of the quetzal against the dollar since 1999 that has reduced Guatemala’s export competitiveness.

Remittance Policies

There are no time limitations on remitting different types of investment returns.

Sovereign Wealth Funds

Guatemala does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Commercial credit for private and public enterprises is difficult and expensive to obtain in Guinea. The FY 2021 Millennium Challenge Corporation score for Access to Credit in Guinea remained at 21 percent, and was at 50 percent in FY 2017.

The legislature passed a Build, Operate, and Transfer (BOT) convention law in 1998 (changed to the Public-Private Partnership, or PPP, in 2018), which provides rules and guidelines for PPP and related infrastructure development projects. The law lays out the obligations and responsibilities of the government and investors and stipulates the guarantees provided by the government for such projects. The Investment Code allows income derived from investment in Guinea, the proceeds of liquidating that investment, and the compensation paid in the event of nationalization, to be transferred to any country in convertible currency. The legal and regulatory procedures, based on French civil law, are not always applied uniformly or transparently.

Individuals or legal entities making foreign investments in Guinea are guaranteed the freedom to transfer the original foreign capital, profits resulting from investment, capital gains on disposal of investment, and fair compensation paid in the case of nationalization or expropriation of the investment to any country of their choice. The Guinean franc is subject to a managed floating exchange rate. The few commercial banks in Guinea are dependent on the BCRG for foreign exchange liquidity, making large transfers of foreign currency difficult.

Laws governing takeovers, mergers, acquisitions, and cross-shareholding are limited to rules for documenting financial transactions and filing any change of status documents with the economic register. There are no laws or regulations that specifically authorize private firms to adopt articles of incorporation that limit or prohibit investment.

Money and Banking System

Guinea’s financial system is small and dominated by the banking sector. It comprises 16 active banks, 13 insurance companies and 26 microfinance institutions. Guinea’s banking sector is overseen by the BCRG, which also serves as the agent of the government treasury for overseeing banking and credit operations in Guinea and abroad. The BCRG manages foreign exchange reserves on behalf of the State. The Office of Technical Assistance of the Department of the Treasury assesses that Guinea does not properly manage debt and that its treasury is too involved in the process, although improvements made in 2017-2018 point to a better future. Further information on the BCRG can be found in French at http://www.bcrg-guinee.org .

Due to the difficulty of accessing funding from commercial banks, small commercial and agricultural enterprises have increasingly turned to microfinance, which has been growing rapidly with a net increase in deposits and loans. The quality of products in the microfinance sector remains mediocre, with bad debt accounting for five percent of loans with approximately 17 percent of gross loans outstanding.

Guinea plans to broaden the country’s SME base through investment climate reform, improved access to finance, and the establishment of SME growth corridors. Severely limited access to finance (especially for SMEs), inadequate infrastructure, deficiencies in logistics and trade facilitation, corruption and the diminished capacity of the government, inflation, and poor education of the workforce has seriously undermined investor confidence in Guinean institutions. Guinea’s weak enabling environment for business, its history of poor governance, erratic policy, and inconsistent regulatory enforcement exacerbate the country’s poor reputation as an investment destination. As a result, private participation in the economy remains low and firms’ productivity measured by value added is one of the lowest in Africa. Firms’ links with the financial sector are weak: only 3.9 percent of firms surveyed in the 2016 World Bank Enterprise survey had a bank loan. http://www.enterprisesurveys.org/data/exploreeconomies/2016/guinea#finance 

Credit to the private sector is low, at around 9.3 percent of GDP in 2018. Commercial banks are reluctant to extend loans due to the lack of credit history reporting for potential borrowers. The government, through the central bank, is in the process of establishing a credit information bureau to overcome this asymmetry of credit information. Despite the pandemic, the banking sector remains liquid and solvent with ample credit to the private sector. Excess reserves in local currency increased by 51 percent by the end of September 2019, which was fueled by a strong deposit growth (21 percent). Despite the COVID-19 slowdown, private sector credit grew by 17 percent by the end of September 2020.

Guinea is a cash-based society driven by trade, agriculture, and the informal sector, which all function outside the banking sector. The banking sector is highly concentrated in Conakry, and is technologically behind. Banks in Guinea tend to favor short-term lending at high interest rates. In collaboration with the U.S. Treasury’s Office of Technical Assistance, the central bank is implementing a bank deposit insurance scheme. The deposit coverage limit has not been set yet, but the central bank began to collect premiums from commercial banks in 2019.

While the microfinance sector grew strongly from a small base, it was hit hard during the 2014-2016 Ebola crisis. Currently it is not generally profitable and needs capacity and technology upgrades. Furthermore, many microfinance institutions struggle to meet higher minimum capital requirements imposed by the central bank since 2019. This heightened financial hurdle will likely lead to a consolidation of the microfinance sector. The efficiency and use of payment services by all potential users needs to be improved, with an emphasis on greater financial inclusion.

The penetration of digital cellphone fund transfers is increasing. Two foreign e-money (or mobile banking) institutions lead the effort to digitize payments and improve access to financial services in underserved and rural segments of the population. However, the vast majority of operations processed by these e-money institutions remains cash-in cash-out transactions within a single network. In an effort to modernize payment methods, the government is implementing a national switch, a nationwide platform that will interface all electronic payment systems and facilitate payment processing between service providers. As of 2020 this service was still under development.

Generally, there are no restrictions on foreigners’ ability to establish bank accounts in Guinea. EcoBank is the preferred bank for most U.S. dealings with Foreign Account Tax Compliant Act (FACTA) reporting requirements. In October 2020, Vista Bank Group announced that it acquired a majority stake in BICIGUI (Banque Internationale pour le Commerce et l’Industrie de la Guinee) and BICIAB (Banque Internationale pour le Commerce et l’Agriculture du Burkina Faso). After this acquisition the Vista Bank Group, a U.S. owned financial institution, has over 87 agencies and 320 employees across Guinea.

In collaboration with the U.S. Treasury’s Office of Technical Assistance, the central bank is implementing a bank deposit insurance scheme. The deposit coverage limit has not been set yet, but the central bank began to collect premiums from commercial banks in 2019.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions or limitations placed on foreign investors for converting, transferring, or repatriating funds associated with an investment. Although there have been no recent changes to remittance policies, it is difficult to obtain foreign exchange in Guinea. Guinea has experienced significantly weakened liquidity levels over the last several years due to government mismanagement, populist policies, corruption, and a decrease in mining revenue due to lower global commodity prices. Commercial banks’ liquidity levels are affected by tight reserve requirements (22 percent of deposits) that are in line with IMF performance criteria.

Until December 2015, the exchange rate was managed by the BCRG and held to a four percent variance from the unofficial rate. The exchange rate has remained relatively stable since 2013 and has only recently depreciated versus the U.S. dollar. Between 2013 and 2015, the Guinean franc maintained a value of between 7,000 and 7,500 GNF/USD. In late 2015, the unofficial rate reached a value ten percent higher than the official rate, during which time Guinea nearly exhausted its foreign currency reserves. The IMF recommended the BCRG float the GNF and the official rate jumped to over 9,000 GNF/USD by March 2016. In 2020, The central bank continued to limit its intervention in the foreign exchange market and implement a rules-based intervention strategy. This monetary policy has targeted preserving liquidity in the banking sector while containing inflation.

Remittance Policies

Guinea has no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, or management or technical service fees. The BCRG needs to be informed of any major transfers, and the wait time to remit investment returns is less than 60 days. Guinea is a member of the Inter-Governmental Action Group against Money Laundering in West Africa, but is not included on the Financial Action Task Force. Guinea does not have a country report in the 2020 International Narcotics Control Strategy Report.

There are no limits on the conversion of U.S. dollars to Guinean francs. The official exchange rate retains the capacity for volatility, but is currently holding at approximately 10,007 GNF/USD (as of March 2021). A weakened economy largely resulting from low commodity prices caused the GNF to depreciate from an average of 7,000 GNF/USD in early 2015. Since mid-2016, the official exchange rate has been keeping pace with the rate in the parallel black market.

Sovereign Wealth Funds

Guinea does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Guyana has its own stock market, which is supervised by the Guyana Association of Securities Companies and Intermediaries (GASCI).  Dividends earned from the local stock exchange are tax free.  Guyana’s local stock market performed well in 2020 with a 15 percent increase in its market capitalization.  Credit is available on market terms. The Central Bank respects IMF Article VIII with regard to payments and transfers for international transactions.

Money and Banking System

Guyana relies heavily on cash payments for most financial transactions, but credit cards and mobile payment options are increasingly common. The GoG’s monetary policy remains accommodative, aimed at achieving price stability and controlling liquidity within the economy. The financial sector is regulated by the Bank of Guyana (BOG), the country’s central bank.  The BOG is empowered under the 1995 Financial Institutions Act and the Bank of Guyana Act to regulate the financial sector.  Under these regulations a bank operating in Guyana must maintain high levels of liquidity and a strong deposit and asset base.

In the middle of 2020, licensed depository financial institutions’ (LDFIs’) capital levels continued to be high, while non-performing loans (NPLs) increased marginally during the first half of 2020. The capital adequacy ratio (CAR) remained well above the prudential benchmark of 8.0 percent at 30.7 percent. The stock of NPLs deteriorated to 10.6 percent of total loans. Stress testing was performed by the Central bank with preliminary results indicating that the banking industry’s and individual institutions’ shock absorptive capacities remained adequate under the various scenarios for foreign currency and liquidity. However, vulnerabilities were observed in the investment and credit portfolios. Guyana’s Banking Stability index strengthened from -0.22 in March 2020 to 0.15 in June 2020 attributed to improvement in liquidity. The commercial banking sector grew by 7.2 percent from March 2019 to March 2020. Foreign banks seeking to open operations in Guyana are encouraged to engage with the Bank of Guyana and GO-INVEST.

Guyana has six commercial banks.  Foreign banks can provide domestic services or enter the market with a license from the BoG.  There are no restrictions on a foreigner’s ability to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

The Guyanese Dollar (GYD) is fully convertible and transferable, and generally stable in its value against the U.S. dollar. The Guyana dollar weighted mid-rate, relevant for official transactions, remained constant at GYD 208.50 as at half year 2020. Guyana employs a de jure float exchange rate.

No limits exist on inflows or repatriation of funds. However, regulations require that all persons entering and exiting Guyana declare all currency in excess of $10,000 to customs authorities at the port of entry. It is common practice for foreign investors to use subsidiaries outside of Guyana to handle earnings generated by exports.

Remittance Policies 

There is no limit on the acquisition of foreign currency, although the government limits the amount that several state-owned firms may keep for their own purchases.  Regulations on foreign currency denominated bank accounts in Guyana allow funds to be wired in and out of the country electronically without having to go through cumbersome exchange procedures.  Foreign companies operating in Guyana have not reported experiencing government-induced difficulties in repatriating earnings in recent years.

Sovereign Wealth Funds

Guyana established a sovereign wealth fund, the Natural Resource Fund (NRF), in 2019, which is governed by the 2019 Natural Resources Act in accordance with the Santiago Principles. In December 2019, the Ministry of Finance and Bank of Guyana signed an operational agreement for the NRF . However, the Ali administration, noting the NRF’s passage under a previous government, has committed to repeal and replace the act to further insulate the NRF from potential political intervention. Until the NRF is amended the GoG does not expect to access the funds which has are held in the New York Federal Reserve Bank. As at March 10, 2021, the SWF held a balance of approximately $268 million.

Capital Markets and Portfolio Investment

The scale of financial services remains modest in Haiti. The banking sector is well capitalized and profitable. In principle, there are no limitations to foreigners’ access to the Haitian credit market, but limited credit is available through commercial banks. The free and efficient flow of capital, however, is hindered by Haitian accounting practices, which are below international standards. While there are no restrictions on foreign investment through mergers or acquisitions, there is no Haitian stock market, so there is no way for investors to purchase shares in a company outside of direct transactions. As summarized in the most recent (2020) IMF Article IV consultation for Haiti, however, the country has accepted the obligations of Article VIII and maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions.

The standards that govern the Haitian legal, regulatory, and accounting systems do not comply with international norms. Haitian laws do not require external audits of domestic companies. Local firms calculate taxes, obtain credit or insurance, prepare for regulatory review, and assess real profit and loss. Accountants use basic accounting standards set by the Organization of Certified Professional Accountants in Haiti.

Administrative oversight in the banking sector is superior to oversight in other sectors. Under Haitian law, however, banks are not required to comply with internationally recognized accounting standards, and they are often not audited by internationally recognized accounting firms. Nevertheless, Haiti’s Central Bank requires that banks apply internal audit procedures. As part of their corporate governance all private banks also have in-house audit functions. Most private banks follow international accounting norms and use consolidated reporting principles. The Central Bank is generally viewed as one of the well-functioning Haitian government institutions.

Money and Banking System

The banking sector has concentrated on credit for trade financing and in the proliferation of bank branches to capture deposits and remittances. Telebanking has expanded access to banking services for Haitians. Foreign banks are free to establish operations in Haiti. Three major banking institutions (Unibank, Sogebank and Banque Nationale de Credit) hold roughly 80 percent, or HTG 325 billion (approximately $4 billion), of total banking sector assets. With its acquisition of the Haitian operations of Scotiabank in 2017, Unibank became Haiti’s largest banking company, with a deposit market share of 35 percent. As part of the deal, Scotiabank remains one of Unibank’s international correspondent banks. U.S.-based Citibank also has a correspondent banking relationship with Unibank.

The three major commercial banks also hold 76 percent of the country’s total loan portfolio, while 70 percent of total loans are monopolized by 10 percent of borrowers. The concentration of holdings and limited number of borrowers increases the Haitian banking system’s vulnerability to systemic credit risk and restricts the availability of capital. The quality of loan portfolios in the banking system has slightly improved. Per the Haitian Central Bank, the ratio of nonperforming loans over total loans was 5.37 percent in December 2020, compared to 6.89 percent in December 2019. The Central Bank conducts regular inspections to ensure that financial institutions are in compliance with minimum capital requirements, asset quality, currency, and credit risk management.

The Central Bank’s main challenge is maintaining sound monetary policy in the context of a larger-than-expected government deficit and a depreciating local currency. The exchange rate suffers from continued pressure on the foreign exchange market. The Central Bank has made a series of interventions with a prior objective to support the value of the gourde by increasing the dollar supply in the foreign exchange market. Selling U.S. dollars in the foreign exchange market has also allowed the Central Bank to dry up the excess liquidity of the gourde in the market with the potential effect of tempering the inflation rate. Annual inflation decelerated to 18.7 percent as of January 2021, remaining on a gradual downward trend since September 2020. As of the beginning of March 2021, Haiti’s stock of net international reserves was approximately $501 million.

There are no legal limitations on foreigners’ access to the domestic credit market. However, banks demand collateral of real property to grant loans. Given the lack of effective cadastral and civil registries, loan applicants face numerous challenges in obtaining credit. The banking sector is extremely conservative in its lending practices. Banks typically lend exclusively to their most trusted and credit-worthy clients. Based on a 2018 study by FinScope Haiti, only one percent of the adult population has access to a bank loan. The high concentration of assets does not allow for product innovation at major banks.

To provide greater access to financial services for individuals and prospective investors, the Haitian government’s banking laws recognize tangible movable property (such as portable machinery, furniture, and tangible personal property) as collateral for loans. These laws allow individuals to buy condominiums, and banks to accept personal property, such as cars, bank accounts, etc., as collateral for loans. USAID has a loan portfolio guarantee program with a diversified group of financial institutions to encourage them to expand credit to productive small and medium enterprises, and rural micro-enterprises. Haiti has a credit rating registry in effect for users of the banking sector but does not have the relevant legislation in place to establish a credit rating bureau.

Haiti’s Central Bank issued a series of monetary policy measures to alleviate the potential impact of COVID-19 on the financial system and the economy in March 2020. These measures included: a reduction in the Central Bank’s policy rate to help lower interest rates on loans; the decrease of reserve requirement ratios to reduce the cost for banks to capture resources and grant loans; a reduction in the Central Bank’s refinancing rate to lower the cost of access to liquidity; the alleviation of loan repayment conditions for customers over a three-month period; the waiver of the Central Bank’s fees on interbank transfers to reduce transaction costs for customers; and the increase of limits on transactions through mobile payment services.

Foreign Exchange and Remittances

Foreign Exchange

The Haitian gourde (HTG) is convertible for commercial and capital transactions. The Central Bank publishes a daily reference rate, which is a weighted average of exchange rates offered in the formal and informal exchange markets. The difference between buying and selling rates is generally less than five percent. Funds can be freely converted into specific currencies such as the U.S. dollar, Canadian dollar, the Euro, the Dominican Republic peso, and the Panamanian peso. The U.S. dollar is usually the most widely available currency, and may be available at times when conversion into another currency is not an option. Starting in the fall of 2020, however, a shortage of U.S. dollars in the formal foreign exchange market in Haiti has been a persistent issue for businesses engaging in international trade.

Remittance Policies

The Haitian government does not impose restrictions on the inflow or outflow of capital. The Law of 1989 governs international transfer operations and remittances. Remittances are Haiti’s primary source of foreign currency and are equivalent to approximately one-third of GDP. In 2020, Haiti received about $3.2 billion in remittances. There are no restrictions or controls on foreign payments or other fund transfer transactions. While restrictions apply on the amount of money that may be withdrawn per transaction, there is no restriction on the amount of foreign currency that residents may hold in bank accounts, and there is no ceiling on the amount residents may transfer abroad.

The Haitian government has expressed an intention to put in place stricter measures to monitor money transfers in accordance with Haiti’s efforts to deter illicit cash flows, as mandated by the 2013 Anti-Money Laundering Act. The Haitian Central Bank (BRH) issued a circular in June 2020 applicable to commercial banks and transfer houses. The circular, which went into force as of October 2020, specifies that international transfers must be paid in foreign currency if the beneficiary receives the funds in their U.S. dollar-denominated bank account, while transfers must be paid in gourdes if the beneficiary requests payment at any point of service (branch, agency, office, kiosk) on Haitian national territory. According to the circular, payments in gourdes are made at the daily reference exchange rate published by the Central Bank.

Sovereign Wealth Funds

To date Haiti does not have a Sovereign Wealth Fund.

Per information released by the Central Bank in September 2018, since 2011 Haiti has levied a tax of $1.50 on all transfers into and out of the country, with the proceeds designated for the National Fund for Education. According to a Central Bank report in September 2018, more than $120 million has been collected since July 2011 on taxes from remittances from the diaspora.

Capital Markets and Portfolio Investment

There are no government restrictions on foreign investors’ access to local credit markets, though the local banking system generally extends only limited amounts of credit. Investors should not consider local banks a significant capital resource for new foreign ventures unless they use specific business development credit lines made available by bilateral or multilateral financial institutions such as the Central American Bank for Economic Integration.

A limited number of credit instruments are available in the local market. The only security exchange operating in the country is the Central American Securities Exchange (BCV) in Tegucigalpa, but investors should exercise caution before buying securities listed on it. Supervised by the National Banking and Insurance Commission (CNBS), the BCV theoretically offers instruments to trade bankers’ acceptances, repurchase agreements, short-term promissory notes, Honduran government private debt conversion bonds, and land reform repayment bonds. In practice, however, the BCV is almost entirely composed of short- and medium-term government securities and no formal secondary market for these bonds exists.

A few banks have offered fixed rate and floating rate notes with maturities of up to three years, but outside of the banks’ issuances, the private sector does not sell debt or corporate stock on the exchange. Any private business is eligible to trade its financial instruments on the BCV, and firms that participate are subject to a rigorous screening process, including public disclosure and ratings by a recognized rating agency. Historically, most traded firms have had economic ties to the other business and financial groups represented as shareholders of the exchange. As a result, risk management practices are lax and public confidence in the institution is limited.

Money and Banking System

The Honduran financial system is comprised of commercial banks, state-owned banks, savings and loans institutions, and financial companies. There are currently 16 commercial banks operating in Honduras. There is no offshore banking or homegrown blockchain technology in Honduras. Honduras has a highly professional, independent Central Bank and an effective banking regulator, the Comisión Nacional de Bancos y Seguros. While access to credit remains limited in Honduras, especially for historically underserved populations, the financial sector is a source of economic stability in the country.

Foreign Exchange and Remittances

Foreign Exchange

Article 10.8 of CAFTA-DR ensures the free transfer of funds related to a covered investment. Local financial institutions freely exchange U.S. dollars and other foreign currencies. Foreigners may open bank accounts with a valid passport. For deposits exceeding the maximum deposits specified for different account types (corporate or small-medium enterprises), banks require documentation verifying the fund’s origin.

The Investment Law guarantees foreign investors access to foreign currency needed to transfer funds associated with their investments in Honduras, including:

• Imports of goods and services necessary to operate
• Payment of royalty fees, rents, annuities, and technical assistance
• Remittance of dividends and capital repatriation

The Central Bank of Honduras  instituted a crawling peg in 2011 that allows the lempira to fluctuate against the U.S. dollar by seven percent per year. The Central Bank mandates any daily price of the crawling peg be no greater than 100.075 percent of the average for the prior seven daily auctions. These restrictions limit devaluation to a maximum of 4.8 percent annually. As of March 31, 2021, the exchange rate is 24.0199 lempira to the U.S. dollar.

The Central Bank uses an auction system to allocate foreign exchange based on the following regulations:

• The Central Bank sets base prices every five auctions according to the differential between the domestic inflation rate and the inflation rate of Honduras’ main commercial partners.
• The Central Bank’s Board of Directors determines the procedure to set the base.
• The Board of Directors establishes the exchange commission and the exchange agencies in their foreign exchange transactions.
• Individuals and corporate bodies can participate in the auction system for dollar purchases, either by themselves or through an exchange agency. The offers can be no less than $10,000, no more than $300,000 for individuals, and no more than $1.2 million for corporations.

To date, the U.S. Embassy in Honduras has not received complaints from individuals regarding the process for converting or transferring funds associated with investments.

Remittance Policies

The Investment Law guarantees investors the right to remit their investment returns and, if they liquidate their investments, to remit the principal capital invested. Foreign investors that choose to remit their investment proceeds from Honduras do so through foreign exchange transactions at Honduran banks or foreign banks operating in Honduras. These exchange transactions are subject to the same foreign exchange process and regulation as other transactions.

Sovereign Wealth Funds

Honduras does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

There are no impediments to the free flow of financial resources.  Non-interventionist economic policies, complete freedom of capital movement, and a well-understood regulatory and legal environment make Hong Kong a regional and international financial center.  It has one of the most active foreign exchange markets in Asia.

Assets and wealth managed in Hong Kong posted a record high of USD 3.7 trillion in 2019 (the latest figure available), with two-thirds of that coming from overseas investors.  To enhance the competitiveness of Hong Kong’s fund industry, OFCs as well as onshore and offshore funds are offered a profits tax exemption.

The HKMA’s Infrastructure Financing Facilitation Office (IFFO) provides a platform for pooling the efforts of investors, banks, and the financial sector to offer comprehensive financial services for infrastructure projects in emerging markets.  IFFO is an advisory partner of the World Bank Group’s Global Infrastructure Facility.

Under the Insurance Companies Ordinance, insurance companies are authorized by the Insurance Authority to transact business in Hong Kong.  As of February 2021, there were 165 authorized insurance companies in Hong Kong, 70 of them foreign or mainland Chinese companies.

The Hong Kong Stock Exchange’s total market capitalization surged by 24.0 percent to USD 6.1 trillion in 2020, with 2,538 listed firms at year-end.  Hong Kong Exchanges and Clearing Limited, a listed company, operates the stock and futures exchanges.  The Securities and Futures Commission (SFC), an independent statutory body outside the civil service, has licensing and supervisory powers to ensure the integrity of markets and protection of investors.

No discriminatory legal constraints exist for foreign securities firms establishing operations in Hong Kong via branching, acquisition, or subsidiaries.  Rules governing operations are the same for all firms.  No laws or regulations specifically authorize private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control.

In 2020, a total of 291 Chinese enterprises had “H” share listings on the stock exchange, with combined market capitalization of USD 906 billion.  The Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connects allow individual investors to cross trade Hong Kong and mainland stocks.  In December 2018, the ETF Connect, which was planned to allow international and mainland investors to trade in exchange-traded fund products listed in Hong Kong, Shanghai, and Shenzhen, was put on hold indefinitely due to “technical issues.” However, China approved two cross-listings of ETFs between Shanghai Stock exchange and the Tokyo Stock Exchange in June 2019, and between Shenzhen Stock Exchange and Hong Kong Stock Exchange in October 2020.

By the end of 2020, 50 mainland mutual funds and 29 Hong Kong mutual funds were allowed to be distributed in each other’s markets through the mainland-Hong Kong Mutual Recognition of Funds scheme. Hong Kong also has mutual recognition of funds programs with Switzerland, Thailand, Ireland, France, the United Kingdom, and Luxembourg.

Hong Kong has developed its debt market with the Exchange Fund bills and notes program.  Hong Kong Dollar debt stood at USD 292 billion by the end of 2020.  As of November 2020, RMB 1,203.5 billion (USD 180.5 billion) of offshore RMB bonds were issued in Hong Kong.  Multinational enterprises, including McDonald’s and Caterpillar, have also issued debt.  The Bond Connect, a mutual market access scheme, allows investors from mainland China and overseas to trade in each other’s respective bond markets through a financial infrastructure linkage in Hong Kong.  In the first eight months of 2020, the Northbound trading of Bond Connect accounted for 52 percent of foreign investors’ total turnover in the China Interbank Bond Market.  In December 2020, the HKMA and the People’s Bank of China (PBoC) set up a working group to drive the initiative of Southbound trading, with the target of launching it within 2021.

In June 2020, the PBoC, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, the HKMA and the Monetary Authority of Macau announced that they decided to implement a cross-boundary Wealth Management Connect pilot scheme in the Greater Bay Area (GBA), an initiative to economically integrate Hong Kong and Macau with nine cities in Guangdong Province.  Under the scheme, residents in the GBA can carry out cross-boundary investment in wealth management products distributed by banks in the GBA.  These authorities are still working on the implementation details for the scheme.

In December 2020, the SFC concluded its consultation on proposed customer due diligence requirements for OFCs.  The new requirements will enhance the anti-money laundering and counter-financing of terrorism measures with respect to OFCs and better align the requirements for different investment vehicles for funds in Hong Kong.  Upon the completion of the legislative process, the new requirements will come into effect after a six-month transition period.

In February 2021, the HKG announced it would issue green bonds regularly and expand the scale of the Government Green Bond Program to USD 22.5 billion within the next five years.

The HKG requires workers and employers to contribute to retirement funds under the Mandatory Provident Fund (MPF) scheme.  Contributions are expected to channel roughly USD five billion annually into various investment vehicles.  By September of 2020, the net asset values of MPF funds amounted to USD 131 billion.

Money and Banking System

Hong Kong has a three-tier system of deposit-taking institutions: licensed banks (161), restricted license banks (17), and deposit-taking companies (12).  HSBC is Hong Kong’s largest banking group.  With its majority-owned subsidiary Hang Seng Bank, HSBC controls more than 50.9 percent of Hong Kong Dollar (HKD) deposits.  The Bank of China (Hong Kong) is the second-largest banking group, with 15.4 percent of HKD deposits throughout 200 branches.  In total, the five largest banks in Hong Kong had more than USD 2 trillion in total assets at the end of 2019.  Thirty-five U.S. “authorized financial institutions” operate in Hong Kong, and most banks in Hong Kong maintain U.S. correspondent relationships.  Full implementation of the Basel III capital, liquidity, and disclosure requirements completed in 2019.

Credit in Hong Kong is allocated on market terms and is available to foreign investors on a non-discriminatory basis.  The private sector has access to the full spectrum of credit instruments as provided by Hong Kong’s banking and financial system.  Legal, regulatory, and accounting systems are transparent and consistent with international norms.  The HKMA, the de facto central bank, is responsible for maintaining the stability of the banking system and managing the Exchange Fund that backs Hong Kong’s currency.  Real Time Gross Settlement helps minimize risks in the payment system and brings Hong Kong in line with international standards.

Banks in Hong Kong have in recent years strengthened anti-money laundering and counterterrorist financing controls, including the adoption of more stringent customer due diligence (CDD) process for existing and new customers.  The HKMA stressed that “CDD measures adopted by banks must be proportionate to the risk level and banks are not required to implement overly stringent CDD processes.”

In November 2020, the HKG launched a three-month public consultation on its proposed amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.  Among other proposed changes, the HKG suggested introducing a licensing regime for virtual asset services providers and a two-tier registration regime for precious assets dealers.  The HKG will analyze feedback from the public before introducing a draft bill to the LegCo.

The NSL granted police authority to freeze assets related to national security-related crimes.  In October 2020, the HKMA advised banks in Hong Kong to report any transactions suspected of violating the NSL, following the same procedures as for money laundering.  Hong Kong authorities reportedly asked financial institutions to freeze bank accounts of former lawmakers, civil society groups, and other political targets who appear to be under investigation for their pro-democracy activities.

The HKMA welcomes the establishment of virtual banks, which are subject to the same set of supervisory principles and requirements applicable to conventional banks.  The HKMA has granted eight virtual banking licenses by the end of January 2021.

The HKMA’s Fintech Facilitation Office (FFO) aims to promote Hong Kong as a fintech hub in Asia.  FFO has launched the faster payment system to enable bank customers to make cross-bank/e-wallet payments easily and created a blockchain-based trade finance platform to reduce errors and risks of fraud.  The HKMA has signed nine fintech co-operation agreements with the regulatory authorities of Brazil, Dubai, France, Poland, Singapore, Switzerland, Thailand, the United Arab Emirates, and the United Kingdom.

Foreign Exchange and Remittances

Foreign Exchange

Conversion and inward/outward transfers of funds are not restricted.  The HKD is a freely convertible currency linked via de facto currency board to the U.S. dollar.  The exchange rate is allowed to fluctuate in a narrow band between HKD 7.75 – HKD 7.85 = USD 1.

Remittance Policies

There are no recent changes to or plans to change investment remittance policies.  Hong Kong has no restrictions on the remittance of profits and dividends derived from investment, nor reporting requirements on cross-border remittances.  Foreign investors bring capital into Hong Kong and remit it through the open exchange market.

Hong Kong has anti-money laundering (AML) legislation allowing the tracing and confiscation of proceeds derived from drug-trafficking and organized crime.  Hong Kong has an anti-terrorism law that allows authorities to freeze funds and financial assets belonging to terrorists.  Travelers arriving in Hong Kong with currency or bearer negotiable instruments (CBNIs) exceeding HKD 120,000 (USD 15,385) must make a written declaration to the CED.  For a large quantity of CBNIs imported or exported in a cargo consignment, an advanced electronic declaration must be made to the CED.

Sovereign Wealth Funds

The Future Fund, Hong Kong’s wealth fund, was established in 2016 with an endowment of USD 28.2 billion.  The fund seeks higher returns through long-term investments and adopts a “passive” role as a portfolio investor.  About half of the Future Fund has been deployed in alternative assets, mainly global private equity and overseas real estate, over a three-year period.  The rest is placed with the Exchange Fund’s Investment Portfolio, which follows the Santiago Principles, for an initial ten-year period.  In February 2020, the HKG announced that it will deploy 10 percent of the Future Fund to establish a new portfolio, which is called the Hong Kong Growth Portfolio (HKGP), focusing on domestic investments to lift the city’s competitiveness in financial services, commerce, aviation, logistics and innovation.  Between December 2020 and January 2021, the HKMA conducted a market survey to better understand the profiles of private equity firms with interest to become a general partner for the HKGP.

Capital Markets and Portfolio Investment

The Hungarian financial system offers a full range of financial services with an advanced information technology infrastructure.  The Hungarian Forint (HUF) has been fully convertible since 2001, and both Hungarian financial market and capital market transactions are fully liberalized.  The Capital Markets Act of 2001 sets out rules on securities issues, including the conversion and marketing of securities. As of 2007, separate regulations were passed on the activities of investment service providers and commodities brokers (2007), on Investment Fund Managing Companies (2011), as well as on Collective Investments (2014), providing more sophisticated legislation than those in the Capital Markets Act.  These changes aimed to create a regulatory environment where free and available equity easily matches with the best investment opportunities. The 2016 modification of the Civil Code removed remaining obstacles to promote collection of public investments in the course of establishing a public limited company.

The  Budapest Stock Exchange (BSE)  re-opened in 1990 as the first post-communist stock exchange in the Central and Eastern European region.  Since 2010, the BSE has been a member of the Central and Eastern Europe (CEE) Stock Exchange Group. In 2013, the internationally recognized trading platform Xetra replaced the previous trading system.  Currently, the BSE has 40 members and 62 issuers. The issued securities are typically shares, investment notes, certificates, corporate bonds, mortgage bonds, government bonds, treasury bills, and derivatives.  In 2021, the BSE had a market capitalization of $28.3 billion, and the average monthly equity turnover volume amounted to $2.1 billion. The most traded shares are OTP Bank, Gedeon Richter, MOL, Magyar Telekom, and Masterplast

Financial resources flow freely into the product and factor markets.  In line with IMF rules, international currency transactions are not limited and are accessible both in domestic or foreign currencies. Individuals can hold bank accounts in either domestic or foreign currencies and conduct transactions in foreign currency. Since March 2020, commercial banks introduced real time bank transfers for domestic currency transactions.

Commercial banks provide credit to both Hungarian and foreign investors at market terms.  Credit instruments include long-term and short-term liquidity loans. All banks publish total credit costs, which includes interest rates as well as other costs or fees.

Money and Banking System

There are no rules preventing a foreigner or foreign firm from opening a bank account in Hungary.  Valid personal documents (i.e., a passport) are needed and as of 2015, when the Foreign Account Tax Compliance Act (FATCA) came into force, also a declaration of whether the individual is a U.S. citizen.  Banks have not discriminated against U.S. citizens in opening bank accounts based on FATCA.

The Hungarian banking system has strengthened over the past few years, and the capital position of banks is generally adequate even in the challenging economic environment created by COVID-19.  Following several years of deleveraging after the 2008 crisis, the banking system is mainly deposit funded. The penetration of the banking system decreased slightly in 2019 due to a relatively high GDP growth rate. The sector’s total assets amounted to 92.6 percent of GDP.

The Hungarian banking system is healthy and banks have a stable capital position.  The loan-to-deposit ratio has been gradually decreasing from its 160 percent peak in 2009 after the financial crisis to 85 percent in 2015, and has been fluctuating between this value and a 92.4 percent peak in 2019. In spring 2020, during the first wave of the COVID-19 in Hungary, it reached 91.6 percent but decreased to 81.7 percent by the end of the year. The liquidity cover ratio was 160 percent in the first wave of COVID-19, then climbed to 220.8 percent by the end of the year. In response to the COVID-19 crisis, the Central Bank restructured and expanded its monetary policy tools to provide liquidity to the financial sector through currency swaps, fixed-rate loans, and exemptions from minimum reserve requirements. The Central Bank also introduced instruments to influence short- and long-term term yields. It offered low-interest loans through commercial banks to the SME sector and launched a government securities purchase program on the secondary market.

The ratio of non-performing loans (NPLs) has been gradually decreasing from a high of 18 percent in 2013 to 4.1 percent in 2019 as a result of portfolio cleaning, the improving economic environment, and increased lending.  In the first wave of the pandemic the NPL ratio increased slightly, but by the end of the year it continued the decreasing trend and fell to 3.6 percent. The banking sector became profitable after several years of losses between 2010 and 2015, reaching a return on equity (ROE) record high of 16.8 percent in 2017. Since then, ROE has gradually decreased, to 12.3 percent by the end of 2019 and more steeply during the COVID-19 pandemic to 6.5 percent in December 2020, which is still slightly higher than the EU average. The banking sector’s total assets exceeded 90 percent of GDP in 2020, of which 64 percent were held by five banks. The largest bank in Hungary is OTP Bank, which is mostly Hungarian-owned and controls 25 percent of the market, with about $29 billion in assets.

Hungary has a modern two-tier financial system and a developed financial sector, although there have been some reports that regulatory issues have arisen as a result of the Central Bank’s (MNB) 2013 absorption of the Hungarian Financial Supervisory Authority (PSZAF), which had been the financial sector regulatory body.  Between 2000 and 2013, the PSZAF served as a consolidated financial supervisor, regulating all financial and securities markets. PSZAF, in conjunction with the MNB, managed a strong two-pillar system of control over the financial sector, producing stability in the market, effective regulation, and a system of checks and balances.  In 2013, the MNB absorbed the PSZAF and over the past few years has efficiently strengthened its supervisory role over the financial sector and established a customer protection system.

In accordance with the GOH’s stated goal of reducing foreign ownership in the financial sector, the proportion of foreign banks’ total assets in the financial sector decreased to about 40 percent in 2019, down from a peak of 70 percent before the 2008-2009 financial crisis. Foreign banks are subject to central bank uniform regulations and prudential measures, which are applied to Hungary’s entire financial market without discrimination. On March 2, 2020, MNB launched an immediate e-transfer system up to a maximum of HUF 10 million (about $32,000) for domestic transactions in HUF. Commercial banks have extensive direct correspondent banking relationships and are capable of transferring domestic or foreign currencies to most banks outside of Hungary.  Since 2018, however, the cashing of U.S. checks is no longer possible. No loss or jeopardy of correspondent banking relations has been reported.

Recent regulations restrict foreign currency loans to only those that earn income in foreign currency, in an effort to eliminate the risk of exchange rate fluctuations.  Foreign investors continue to have equal – if not better – access to credit on the global market, with the exception of special GOH credit concessions such as small business loans.

Foreign Exchange and Remittances

Foreign Exchange

The Hungarian forint (HUF) has been convertible for essentially all business transactions since January 1, 1996, and foreign currencies are freely available in all banks and exchange booths.  Hungary complies with all OECD convertibility requirements and IMF Article VIII. Act XCIII of 2001 on Foreign Exchange Liberalization lifted all remaining foreign exchange restrictions and allowed free movement of capital in line with EU regulations.

According to Hungary’s EU accession agreement, it must eventually adopt the Euro once it meets the relevant criteria. The GOH has not set a specific target date even though Hungary meets most of the necessary fiscal and financial criteria.  According to the Ministry of Finance, Hungary’s economic performance should mirror the Eurozone average more closely before adapting the Euro.

Short-term portfolio transactions, hedging, short, and long-term credit transactions, financial securities, assignments and acknowledgment of debt may be carried out without any limitation or declaration.  While the Forint remains the legal tender in Hungary, parties may settle financial obligations in a foreign currency. Many Hungarians took out mortgages denominated in foreign currency prior to the global financial crisis, and suffered when the Forint depreciated against the Swiss Franc and the Euro.  Despite strong pressure, the Hungarian Supreme Court ruled that there is nothing inherently illegal or unconstitutional in loan agreements that are foreign currency denominated, upholding existing contract law. New consumer loans, however, are denominated in Forints only, unless the debtor receives regular income in a foreign currency.

Market forces determine the value of the Hungarian Forint. Analysts note that the MNB’s consistently low interest rates have contributed to a nearly 30 percent decline in the value of the of the Forint against the Euro since 2010.

Remittance Policies

There is no limitation on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or imported inputs. The timeframes for remittances are in line with the financial sector’s normal timeframes (generally less than 30 days), depending on the destination of the transfer and on whether corresponding banks are easily found.

Sovereign Wealth Funds

Hungary does not maintain a sovereign wealth fund.

Capital Markets and Portfolio Investment

Capital controls were lifted in March 2017 after more than eight years of restricting the free movement of capital.  New foreign currency inflows fall under the Rules on Special Reserve Requirements for new Currency Inflows, no. 223/2019 which took effect on March 6, 2019, and replaced the older Rules no. 490/2016 on the same subject.  The rules contain provisions on the implementation of special reserve requirements for new foreign currency inflows, including the special reserve base, holding period, special reserve ratio, settlement currency, and interest rates on deposit institutions’ capital flow accounts with the Central Bank of Iceland and Central Bank certificates of deposit.  The rules set the interest rate on capital flow accounts with the Central Bank of Iceland and Central Bank certificates of deposits at 0 percent and specify the Icelandic krona as the settlement currency.  The current rules set the holding period at one year and the special reserve ratio at 0 percent.  For more information see the Central Bank of Iceland’s website (https://www.cb.is/foreign-exch/capital-flow-measures/).

Foreign portfolio investment has increased significantly over the past few years in Iceland after being dormant in the years following the economic crash.  U.S. investment funds have been particularly active on the Icelandic stock exchange.  The Icelandic stock exchange operates under the name Nasdaq Iceland.  For companies listed on Nasdaq Iceland, follow this link:  (http://www.nasdaqomxnordic.com/hlutabref/Skrad-fyrirtaeki/iceland).

The private sector has access to financing through the commercial banks and pensions funds.

The IMF 2019 Article IV Consultation report states that “the de jure exchange rate arrangement is free floating, and the de facto exchange rate arrangement under the IMF classification system is floating.  In the period from November 2018 to October 31, 2019, the Central Bank of Iceland (CBI) intervened in the foreign exchange market on 14 of the 248 working days.  The CBI publishes daily data on its foreign exchange intervention with a lag.  Iceland has accepted the obligations under Article VIII, Sections 2(a), 3, and 4 and maintains no exchange restrictions subject to Fund jurisdiction under Article VIII, Section 2(a).  Iceland continues to maintain certain measures that constitute exchange restrictions imposed for security reasons based on UN Security Council Resolutions.”

(source:  https://www.imf.org/en/Publications/CR/Issues/2019/12/19/Iceland-2019-Article-IV-Consultation-Press-Release-and-Staff-Report-48891).

Money and Banking System

The Central Bank of Iceland is an independent institution owned by the State and operates under the auspices of the Prime Minister.  Its objective is to promote price stability, financial stability, and sound and secure financial activities.  The bank also maintains international reserves and promotes a safe, effective financial system, including domestic and cross-border payment intermediation. For more information see the Central Bank of Iceland’s website (https://www.cb.is/).

The Icelandic banking sector is generally healthy.  After the financial collapse of 2008, the Central Bank of Iceland introduced stringent measures to ensure that the financial system remains “safe, stable, and effective (https://www.cb.is/financial-stability/).”  There are three commercial banks in Iceland: Landsbankinn, Islandsbanki, and Arion Bank.  The Government of Iceland took over operations of the banks during the financial collapse in September and October 2008.  Landsbankinn (formerly known as Landsbanki Islands) and Islandsbanki (formerly known as Glitnir) are government owned (the government of Iceland owns 98.2 percent shares in Landsbankinn and 100 percent shares in Islandsbanki), while Arion Bank (formerly known as Kaupthing Bank) has been privatized.  Arion Bank is listed on the Icelandic stock exchange Nasdaq Iceland.  There is one investment bank in Iceland, Kvika, which is listed on Nasdaq Iceland.  The Minister of Finance is seeking to privatize Landsbankinn and Islandsbanki.  Icelandic pension funds offer loans and mortgages and are active investors in Icelandic companies.  There are no foreign banks operating in Iceland.

All companies have access to regular commercial banking services in Iceland.  Businesses have access to financing with the commercial banks, but  banks have reduced corporate lending in the past months due to the current economic climate (the Icelandic economy had started to cool in late 2019).

Establishing a bank account in Iceland requires a local personal identification number known as a “kennitala.”  Foreign nationals should contact Registers Iceland for more information on how to register in Iceland (https://www.skra.is/english/).

Foreign Exchange and Remittances

Foreign Exchange

The Act on Investment by Non-Residents in Business Enterprises no. 34/1991 and no. 46/1996 states that “non-residents who invest in Icelandic enterprises shall have the right to convert into any currency, for which the Central Bank of Iceland maintains a regular exchange rate any dividends received or other profits and proceeds from sales of investments.” (Source: https://www.government.is/search/$LisasticSearch/Search/?SearchQuery=The+Act+on+Investment+by+Non-residents+in+Business+Enterprises+).  In 2008, however, the Central Bank of Iceland temporarily imposed capital controls to prevent a massive capital outflow following the collapse of the financial sector; those restrictions were largely lifted in March 2017.  Transactions involving imports and exports of goods and services, travel, interest payments, contractual installment payments and salaries were still permitted under the capital controls.

The Annual Report on Exchange Arrangements and Exchange Restrictions 2018, published by the International Monetary Fund (IMF), states that “Iceland fully eliminated exchange restrictions on conversions and transfers related to current international transactions with bonds.” “Iceland progressively relaxed and finally eliminated restrictions on withdrawing foreign currency cash from resident’s domestic foreign exchange accounts and eased rules governing transfers abroad for some financial transactions.  It also gradually eased and eventually removed the requirement that residents repatriate foreign currency acquired abroad.”

(source: https://www.imf.org/en/Publications/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions/Issues/2019/04/24/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions-2018-46162).

The Central Bank of Iceland publishes the official exchange rate on its website (https://www.cb.is/statistics/official-exchange-rate/).  “The exchange rate of the Icelandic krona is determined in the foreign exchange market, which is open between 9:15hrs. and 16:00 hrs. on weekdays.  Once a day, the Central Bank of Iceland fixes the official exchange rate of the krona against foreign currencies, for use as a reference in official agreements, court cases, and other contracts between parties that do not specify another reference exchange rate; cf. Article 19 of the Act on the Central Bank of Iceland and fixes the official exchange rate index at the same time.  This is done between 10:45 hrs. and 11:00 hrs. each morning that regulated foreign exchange markets are in operation.  Under extraordinary circumstances, the Central Bank may temporarily suspend its quotation of the exchange rate of the krona.”

Remittance Policies

Most restrictions on foreign exchange transactions and cross-border movement of domestic and foreign currency were lifted on March 14, 2017, when capital controls were lifted.  New foreign currency inflows fall under the Rules on Special Reserve Requirements for new Currency Inflows, no. 223/2019 which took effect on March 6, 2019, and replaced the older rules no. 490/2016 on the same subject.  The rules contain provisions on the implementation of special reserve requirements for new foreign currency inflows, including the special reserve base, holding period, special reserve ratio, settlement currency, and interest rates on deposit institutions’ capital flow accounts with the Central Bank of Iceland and Central Bank certificates of deposit.  The rules set the interest rate on capital flow accounts with the Central Bank of Iceland and Central Bank certificates of deposits at 0 percent and specify the Icelandic krona as the settlement currency.  The Foreign Exchange Act no. 87/1992 and the Act no. 42/2016 Amending the Foreign Exchange Act state that the holding period may range up to five years and that the special reserve ratio may range up to 75 percent; however, the aforementioned rules set the holding period at one year and the special reserve ratio at 0 percent.  For more information see the Central Bank of Iceland’s website (https://www.cb.is/foreign-exch/capital-flow-measures/).

Sovereign Wealth Funds

The Government of Iceland has proposed establishing a sovereign wealth fund, called the National Fund of Iceland.  The bill to establish the fund has not passed through Parliament.  The stated purpose of the fund is “to serve as a sort of disaster relief reserve for the nation, when the Treasury suffers a financial blow in connection with severe, unforeseen shocks to the national economy, either due to a plunge in revenues or the cost of relief measures that the government has considered unavoidable to undertake.”

Capital Markets and Portfolio Investment

The Indonesia Stock Exchange (IDX) index has 713 listed companies as of December 2020 with a daily trading volume of USD 642.5 million and market capitalization of USD 486 billion.  Over the past six years, there has been a 43 percent increase in the number listed companies, but the IDX is dominated by its top 20 listed companies, which represent 55.5 percent of the market cap.  There were 51 initial public offerings in 2020 – one more than in 2019.  During the fourth quarter of  2020, domestic entities conducted 66 percent of total IDX stock trades.

Government treasury bonds are the most liquid bonds offered by Indonesia.  Corporate bonds are less liquid due to less public knowledge of the product and the shallowness of the market.  The government also issues sukuk (Islamic treasury notes) as part of its effort to diversify Islamic debt instruments and increase their liquidity.  Indonesia’s sovereign debt as of March 2021 was rated as BBB by Standard and Poor’s, BBB by Fitch Ratings and Baa2 by Moody’s.

OJK began overseeing capital markets and non-banking institutions in 2013, replacing the Capital Market and Financial Institution Supervisory Board.  In 2014, OJK also assumed BI’s supervisory role over commercial banks.  Foreigners have access to the Indonesian capital markets and are a major source of portfolio investment.  Indonesia respects International Monetary Fund (IMF) Article VIII by refraining from restrictions on payments and transfers for current international transactions.

Money and Banking System

Although there is some concern regarding the operations of the many small and medium sized family-owned banks, the banking system is generally considered sound, with banks enjoying some of the widest net interest margins in the region.  As of December 2020, commercial banks had IDR 9,178 trillion (USD 640 billion) in total assets, with a capital adequacy ratio of 23.9 percent.  Outstanding loans fell by 2.4 percent in 2020 compared to growth of 6.08 percent in 2019, due to the COVID-19 pandemic induced recession.  Gross non-performing loans (NPL) in December 2020 increased to 3.06 percent from 2.53 percent the previous year.  Rising NPL rates were partly mitigated through a loan restructuring program implemented by OJK as part of the COVID-19 recovery efforts.

OJK Regulation No.56/03/2016 limits bank ownership to no more than 40 percent by any single shareholder, applicable to foreign and domestic shareholders.  This does not apply to foreign bank branches in Indonesia.  Foreign banks may establish branches if the foreign bank is ranked among the top 200 global banks by assets.  A special operating license is required from OJK in order to establish a foreign branch.  The OJK granted an exception in 2015 for foreign banks buying two small banks and merging them.  To establish a representative office, a foreign bank must be ranked in the top 300 global banks by assets.

On March 16, 2020, OJK issued Regulation Number 12/POJK.03/2020 on commercial bank consolidation.  The regulation aims to strengthen the structure, and competitiveness of the national banking industry by increasing bank capital and encouraging consolidation of banks in Indonesia.  This regulation increases minimum core capital requirements for commercial banks and Capital Equivalency Maintained Asset requirements for foreign banks with branch offices by least IDR 3 trillion (USD 209 million), by December 31, 2022.

In 2015, OJK eased rules for foreigners to open a bank account in Indonesia.  Foreigners can open a bank account with a balance between USD 2,000-50,000 with just their passport.  For accounts greater than USD 50,000, foreigners must show a supporting document such as a reference letter from a bank in the foreigner’s country of origin, a local domicile address, a spousal identity document, copies of a contract for a local residence, and/or credit/debit statements.

Growing digitalization of banking services, spurred on by innovative payment technologies in the financial technology (fintech) sector, complements the conventional banking sector.  Peer-to-peer (P2P) lending companies and e-payment services have grown rapidly over the past decade.  Indonesian policymakers are hopeful that these fintech services can reach underserved or unbanked populations and micro, small, and medium-sized enterprises (MSMEs).  As of June 2020, fintech lending reached IDR 113.46 trillion (USD 7.6 billion) in loan disbursements, while payment transactions using e-money in 2020 are estimated to have increased by 38.5 percent to IDR 201 trillion (USD 14 billion) year-on-year.

Foreign Exchange and Remittances

Foreign Exchange

The rupiah (IDR), the local currency, is freely convertible.  Currently, banks must report all foreign exchange transactions and foreign obligations to the central bank, Bank Indonesia (BI).  With respect to the physical movement of currency, any person taking rupiah bank notes into or out of Indonesia in the amount of IDR 100 million (USD 6,600) or more, or the equivalent in another currency, must report the amount to the Directorate General of Customs and Excise (DGCE).  Taking more than IDR 100 million out of Indonesia in cash also requires prior approval of BI.  The limit for any person or entity to bring foreign currency bank notes into or out of Indonesia is the equivalent of IDR 1 billion (USD 66,000).

Banks on their own behalf or for customers may conduct derivative transactions related to derivatives of foreign currency exchange rates, interest rates, and/or a combination thereof.  BI requires borrowers to conduct their foreign currency borrowing through domestic banks registered with BI.  The regulations apply to borrowing in cash, non-revolving loan agreements, and debt securities.

Under the 2007 Investment Law, Indonesia gives assurance to investors relating to the transfer and repatriation of funds, in foreign currency, on:capital, profit, interest, dividends and other income;

funds required for (i) purchasing raw material, intermediate goods or final goods, and (ii) replacing capital goods for continuation of business operations;

additional funds required for investment;

funds for debt payment;

royalties;

income of foreign individuals working on the investment;

earnings from the sale or liquidation of the invested company;

compensation for losses; and

compensation for expropriation.

U.S. firms report no difficulties in obtaining foreign exchange.

In 2015, the government announced a regulation requiring the use of the rupiah in domestic transactions.  While import and export transactions can still use foreign currency, importers’ transactions with their Indonesian distributors must use rupiah.  The central bank may grant a company permission to receive payment in foreign currency upon application, and where the company has invested in a strategic industry.

Remittance Policies

The government places no restrictions or time limitations on investment remittances.  However, certain reporting requirements exist.  Banks should adopt Know Your Customer (KYC) principles to carefully identify customers’ profile to match transactions.  Indonesia does not engage in currency manipulation.

As of 2015, Indonesia is no longer subject to the intergovernmental Financial Action Task Force (FATF) monitoring process under its on-going global Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) compliance process.  It continues to work with the Asia/Pacific Group on Money Laundering (APG) to further strengthen its AML/CTF regime.  In 2018, Indonesia was granted observer status by FATF, a necessary milestone toward becoming a full FATF member.

Sovereign Wealth Funds

The Indonesian Investment Authority (INA), also known as the sovereign wealth fund, was legally established by the 2020 Omnibus Law on Job Creation.  INA’s supervisory board and board of directors were selected through competitive processes and announced in January and February 2021.  The government has capitalized INA with USD 2 billion through injections from the state budget and intends to add another USD 3 to 4 billion in state-owned assets.  INA aims to attract foreign equity and invest that capital in long-term Indonesian assets to improve the value of the assets through enhanced management.  According to Indonesian government officials, the fund will consist of a master portfolio with sector-specific sub-funds, such as infrastructure, oil and gas, health, tourism, and digital technologies.

Capital Markets and Portfolio Investment

Iraq remains one of the most under-banked countries in the Middle East.  The Iraqi banking system includes around 68 private banks and seven state-owned banks.  As of early 2021, 20 foreign banks have licensed branches in Iraq and several others have strategic investments in Iraqi banks.  The three largest banks in Iraq are Rafidain Bank, Rasheed Bank, and the Trade Bank of Iraq (TBI), which account for roughly 85 percent of Iraq’s banking sector assets.  Iraq’s economy remains primarily cash based, with many banks acting as little more than ATMs.  Rafidain and Rasheed offer standard banking products but primarily provide pension and government salary payments to individual Iraqis.

Credit is difficult to obtain and expensive.  Iraq ranks 186 out of 190 in terms of ease of getting credit in the World Bank’s 2020 Doing Business Report.  Although the volume of lending by privately-owned banks is growing, most privately-owned banks do more wire transfers and other fee-based exchange services than lending.  Businesses are largely self-financed or between individuals in private transactions.  State-owned banks mainly make financial transfers from the government to provincial authorities or individuals, rather than business loans.

The CBI introduced a small and medium enterprise lending program in 2015, in which 35 private banks have reportedly participated.  In early 2020, the CBI launched a real estate lending initiative and an Islamic finance consolidation program.

The main purpose of TBI is to provide financial and related services to facilitate trade, particularly through letters of credit.  Although CBI granted private banks permission to issue letters of credit below $50 million, TBI continues to process nearly all government letters of credit.

Money and Banking System

Although banking sector reform was a priority of Iraq’s IMF Stand-By Arrangement, the GOI has had only incremental success reforming its two largest state-owned banks, Rafidain and Rasheed.  Private banks are mostly active in currency exchanges and wire transfers.  CBI is headquartered in Baghdad, with branches in Basrah and Erbil.  CBI’s Erbil branch, and the IKR’s state-owned banking system, are now electronically linked to the CBI system.  The CBI now has full supervisory authority over the financial sector in the IKR, including the banks and non-bank financial institutions.

Foreign Exchange and Remittances

Foreign Exchange

The currency of Iraq is the dinar (IQD).  Iraqi authorities confirm that in practice, there are no restrictions on current and capital transactions involving currency exchange as long as valid documentation supports underlying transactions.  The Investment Law allows investors to repatriate capital brought into Iraq, along with proceeds.  Funds can be associated with any form of investment and freely converted into any world currency.  The Investment Law also allows investors to maintain accounts at banks licensed to operate in Iraq and transfer capital inside or outside of the country.

The GOI’s monetary policy since 2003 has focused on ensuring price stability primarily by maintaining a de facto peg between the IQD and the U.S. dollar, while seeking exchange rate predictability by supplying U.S. dollars to the Iraqi market.  In December 2020, the GOI announced that it would officially devalue the dinar’s peg to the U.S. dollar by 22 percent.  Banks may engage in spot transactions in any currency; however, they are not allowed to engage in forward transactions in Iraqi dinars for speculative purposes through auction but can do so through wire transfer.  There are no taxes or subsidies on purchases or sales of foreign exchange.

Remittance Policies

There are no recent changes to Iraq’s remittance policies.  Foreign nationals are allowed to remit their earnings, including U.S. dollars, in compliance with Iraqi law.  Iraq does not engage in currency manipulation.

Sovereign Wealth Funds

Iraq does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Capital markets and portfolio investments operate freely with no discrimination between Irish and foreign firms. In some instances, development authorities and commercial banks facilitate loan packages to foreign firms with favorable credit terms. All loans are offered on market terms. There was limited credit available, especially to small and medium-sized enterprises (SMEs), after the financial crisis of 2008. Bank balance sheets have since improved with lending levels increasing as the health of the economy improved. The government established the Strategic Banking Corporation of Ireland (SBCI) to ensure SMEs had access to credit available at market terms. Irish legal, regulatory, and accounting systems are transparent and consistent with international norms and provide a secure environment for portfolio investment. The current capital gains tax rate is 33 percent (since December 2012).

Euronext, an EU-based grouping of stock exchange operators in 2018 acquired and operates the Irish Stock Exchange (ISE), now known as Euronext Dublin.

Money and Banking System

The Irish banking sector, like many worldwide, came under intense pressure in 2007 and 2008 following the collapse of Ireland’s construction industry and the end of Ireland’s property boom. A number of Ireland’s financial lenders were severely under-capitalized and required government bailouts to survive. The government, fearing a flight of private investments, introduced temporary guarantees (still in operation) to personal depositors in 2008 to ensure that deposits remained in Ireland. Anglo Irish Bank (Anglo), a bank heavily involved in construction and property lending, failed and was resolved by the government. The government subsequently took majority stakes in several other lenders, effectively nationalized two banks and acquired a significant proportion of a third. The National Asset Management Agency (NAMA), established in 2009, acquired most of the property-related loan books of the Irish banks (including Anglo) at a fraction of their book value.

The government, with its increased exposure to bank debts and a rising budget deficit, had difficulty in placing sovereign debt on international bond markets following the economic crash of 2008. Ireland had to seek assistance from the Troika (International Monetary Fund (IMF), EU and European Central Bank (ECB)) in November 2010. A rescue package of EUR 85 ($110) billion with EUR 67.5 ($88) billion of this provided by the Troika was agreed to cover government deficits and costs related to the bank recapitalizations.

The government then took effective control of Allied Irish Bank (AIB), following a further recapitalization by the end of 2010. The government took into state control, and then resolved, two building societies, Irish Nationwide Building Society and Educational Building Society. The government helped re-capitalize Irish Life and Permanent (the banking portion of which was spun off and now operates under the name Permanent TSB) and the Bank of Ireland (BOI).

Irish banks were forced to deleverage their non-core assets in line with Troika bailout program recommendations and were effectively limited to service domestic banking demand. BOI succeeded in remaining non-nationalized by realizing capital from the sale of non-essential portfolios and by imposing some targeted burden sharing with some of its bondholders. The government sold just over 28 percent of its shareholding in AIB Bank in July 2017, but it still retains the remainder of the shareholding.

Soon after it exited the Troika program in 2013, Ireland re-entered sovereign debt markets. International financing rates continued to fall to record lows for Irish debt, and Ireland was able to fully repay all of it’s IMF loans by securing bond sales at less expensive rates. Ireland also paid off some bilateral loans extended to it by Denmark and Sweden ahead of schedule in 2017. Currently, Ireland is placing its debt at very low, and sometimes negative, interest rates.

Ireland’s retail banking sector rebounded from the crisis and is now healthy and well capitalized in line with ECB rules on bank capitalizations. The stock of non-performing loans on bank balance sheets remains high; and banks continue to divest themselves of these loans through bundle sales to investors. Ulster Bank, part of the UK-based NatWest Banking group and Ireland’s third largest retail bank, announced its withdrawal from retail banking in Ireland, in early 2021. Ulster Bank, which has not yet set its date for full departure, is expected to sell its loan books to other financial institutions including to Ireland’s remaining retail banks

The Central Bank of Ireland (CBI) is responsible for both central banking and financial regulation. The CBI is a member of the European System of Central Banks (ESCB), whose primary objective is to maintain price stability in the euro area.

There are a large number of U.S. banks with operations in Ireland, many of whom are located in Dublin’s International Financial Services Center (IFSC) Dublin. The IFSC originally functioned somewhat like a business park for financial services firms. U.S. banks located in Ireland provide a range of financial services to clients in Europe and worldwide. Among these firms are State Street, Citigroup, Merrill Lynch, Wells Fargo, JP Morgan, and Northern Trust. The regulation of the international banks operating throughout Ireland falls under the jurisdiction of the CBI.

Ireland is part of the Eurozone, and therefore does not have an independent monetary policy. The ECB formulates and implements monetary policy for the Eurozone and the CBI implements that policy at the national level. The Governor of the CBI is a member of the ECB’s Governing Council and has an equal say as other ECB governors in the formulation of Eurozone monetary and interest rate policy. The CBI also issues euro currency in Ireland, acts as manager of the official external reserves of gold and foreign currency, conducts research and analysis on economic and financial matters, oversees the domestic payment and settlement systems, and manages investment assets on behalf of the State.

Foreign Exchange and Remittances

Foreign Exchange

Ireland uses the euro as its national currency and enjoys full current and capital account liberalization. Foreign exchange is easily available at market rates. Ireland is a member of the Financial Action Task Force (FATF).

Remittance Policies

There are no restrictions or significant reported delays in the conversion or repatriation of investment capital, earnings, interest, or royalties, nor are there any announced plans to change remittance policies. Likewise, there are no limitations on the import of capital into Ireland.

Sovereign Wealth Funds

The National Treasury Management Agency (NTMA) is the asset management bureau of the government. NTMA is responsible for day-to-day funding for government operations normally through the sale of sovereign debt worldwide. NTMA is also responsible for investing Irish government funds, such as the national pension funds, in financial instruments worldwide.

Ireland suspended issuing sovereign debt upon entering the Troika bailout program in 2010 but has been successfully placing Irish debt since Ireland’s 2013 exit from the Troika program,

The NTMA also has oversight of the National Asset Management Agency (NAMA), the agency established to take on, and dispose of, the property-related loan books of Ireland’s bailed-out banks.

The Ireland Strategic Investment Fund (ISIF) established in 2014 has the statutory mandate to invest on a commercial basis to support economic activity and employment in Ireland. The dual objective mandate of the ISIF – investment return and economic impact –requires all of its investments to generate returns as well as having a positive (i.e. job-creating) economic impact in Ireland. The ISIF assisted a number of small and medium sized enterprises during Ireland’s economic revival.

Capital Markets and Portfolio Investment

The Israeli government is supportive of foreign portfolio investment. The Tel Aviv Stock Exchange (TASE) is Israel’s only public stock exchange.

Financial institutions in Israel allocate credit on market terms. For many years, banks issued credit to only a handful of individuals and corporate entities, some of whom held controlling interests in banks. However, in recent years, banks significantly reduced their exposure to large borrowers following the introduction of stronger regulatory restrictions on preferential lending practices.

The primary profit center for Israeli banks is consumer-banking fees. Various credit instruments are available to the private sector and foreign investors can receive credit on the local market. Legal, regulatory, and accounting systems are transparent and conform to international norms, although the prevalence of inflation-adjusted accounting means there are differences from U.S. accounting principles.

In the case of publicly traded firms where ownership is widely dispersed, the practice of “cross-shareholding” and “stable shareholder” arrangements to prevent mergers and acquisitions is common, but not directed particularly at preventing potential foreign investment. Israel has no laws or regulations regarding the adoption by private firms of articles of incorporation or association that limit or prohibit foreign investment, participation, or control.

Money and Banking System

The Bank of Israel (BOI) is Israel’s Central Bank and regulates all banking activity and monetary policy. In general, Israel has a healthy banking system that offers most of the same services as the U.S. banking system. Fees for normal banking transactions are significantly higher in Israel than in the United States and some services do not meet U.S. standards. There are 12 commercial banks and four foreign banks operating in Israel, according to the BOI. Five major banks, led by Bank Hapoalim and Bank Leumi, the two largest banks, dominate Israel’s banking sector. Bank Hapoalim and Bank Leumi control nearly 60 percent of Israel’s credit market. The State of Israel holds 6 percent of Bank Leumi’s shares. All of Israel’s other banks are privatized.

Foreign Exchange and Remittances

Foreign Exchange

Israel completed its foreign exchange liberalization process on January 1, 2003, when it removed the last restrictions on the freedom of institutional investors to invest abroad. The Israeli shekel is a freely convertible currency and there are no foreign currency controls. The BOI maintains the option to intervene in foreign currency trading in the event of movements in the exchange rate not in line with fundamental economic conditions, or if the BOI assesses the foreign exchange market is not functioning appropriately. Israeli citizens can invest without restriction in foreign markets. Foreign investors can open shekel accounts that allow them to invest freely in Israeli companies and securities. These shekel accounts are fully convertible into foreign exchange. Israel’s foreign exchange reserves totaled USD 185 billion at the end of February 2021.

Transfers of currency are protected by Article VII of the International Monetary Fund (IMF) Articles of Agreement: http://www.imf.org/External/Pubs/FT/AA/index.htm#art7 

Remittance Policies

Most foreign currency transactions must be carried out through an authorized dealer. An authorized dealer is a banking institution licensed to arrange, inter alia, foreign currency transactions for its clients. The authorized dealer must report large foreign exchange transactions to the Controller of Foreign Currency. There are no limitations or significant delays in the remittance of profits, debt service, or capital gains.

Sovereign Wealth Funds

Israel passed legislation to establish the Israel Citizens’ Fund, a sovereign wealth fund managed by the BOI, in 2014 to offset the effect of natural gas production on the exchange rate. The original date for beginning the fund’s operations was 2018 but has been postponed until late 2021. The law establishing the fund states that it will begin operating a month after the state’s tax revenues from natural gas exceed USD 307 million (1 billion New Israeli Shekels).

Capital Markets and Portfolio Investment

The GOI welcomes foreign portfolio investments, which are generally subject to the same reporting and disclosure requirements as domestic transactions.  Financial resources flow relatively freely in Italian financial markets and capital is allocated mostly on market terms.  Foreign participation in Italian capital markets is not restricted.  In practice, many of Italy’s largest publicly traded companies have foreign owners among their primary shareholders.  While foreign investors may obtain capital in local markets and have access to a variety of credit instruments, gaining access to equity capital is difficult.  Italy has a relatively underdeveloped capital market and businesses have a long-standing preference for credit financing.  The limited venture capital available is usually provided by established commercial banks and a handful of venture capital funds.

Netherlands-based Euronext is acquiring Italy’s stock exchange, the Milan Stock Exchange (Borsa Italiana), from the London Stock Exchange.  The acquisition should be completed by mid-2021.  The exchange is relatively small, 377 listed companies and a market capitalization of 37 percent of GDP at the end of December 2020.  Although the exchange remains primarily a source of capital for larger Italian firms, Borsa Italiana created “AIM Italia” in 2012 as an alternative exchange with streamlined filing and reporting requirements to encourage SMEs to seek equity financing.  Additionally, the GOI recognizes that Italian firms remain overly reliant on bank financing and has initiated some programs to encourage alternative forms of financing, including venture capital and corporate bonds.  Financial experts have held that slow CONSOB (the Italian Companies and Stock Exchange Commission) processes and cultural biases against private equity have limited equity financing in Italy, and the Italian Association of Private Equity, Venture Capital, and Private Debt (AIFI) estimates investment by private equity funds in Italy decreased by 26 percent from 2018 to 2019, totaling €7.2 billion – a low figure given the size of Italy’s economy.

Italy’s financial markets are regulated by the Italian securities regulator CONSOB, Italy’s central bank (the Bank of Italy), and the Institute for the Supervision of Insurance (IVASS).  CONSOB supervises and regulates Italy’s securities markets (e.g., the Milan Stock Exchange).  As of January 2021, the European Central Bank directly supervised 11 of Italy’s largest banks and indirectly supervised less significant Italian banks through the Bank of Italy.  IVASS supervises and regulates insurance companies.  Liquidity in the primary markets is sufficient to enter and exit sizeable positions, though Italian capital markets are small by international standards.  Liquidity may be limited for certain less-frequently traded investments (e.g., bonds traded on the secondary and OTC markets).

Italian policies generally facilitate the flow of financial resources to markets.  Dividends and royalties paid to non-Italians may be subject to a withholding tax, unless covered by a tax treaty.  Dividends paid to permanent establishments of non-resident corporations in Italy are not subject to the withholding tax.

Italy imposed a financial transactions tax (FTT, a.k.a. Tobin Tax) beginning in 2013.  Financial trading is taxed at 0.1 percent in regulated markets and 0.2 percent in unregulated markets.  The FTT applies to daily balances rather than to each transaction.  The FTT applies to trade in derivatives as well, with fees ranging from €0.025 to €200.  High-frequency trading is also subject to a 0.02 percent tax on trades occurring every 0.5 seconds or faster (e.g., automated trading).  The FTT does not apply to “market makers,” pension and small-cap funds, transactions involving donations or inheritances, purchases of derivatives to cover exchange/interest-rate/raw-materials (commodity market) risks, government and other bonds, or financial instruments for companies with a capitalization of less than €500 million.  The FTT has been criticized for discouraging small savers from investing in publicly traded companies on the Milan stock market.

There are no restrictions on foreigners engaging in portfolio investment in Italy.  Financial services companies incorporated in another EU member state may offer investment services and products in Italy without establishing a local presence.

Since April 2020, investors, Italian or foreign, acquiring a stake of more than one percent of a publicly traded Italian firm must inform CONSOB but do not need its approval.  Earlier the limit was three percent for non-SMEs and five percent for SMEs.

Any Italian or foreign investor seeking to acquire or increase its stake in an Italian bank equal to or greater than ten percent must receive prior authorization from the Bank of Italy (BOI).  Acquisitions of holdings that would change the controlling interest of a banking group must be communicated to the BOI at least 30 days in advance of the closing of the transactions.  Approval and advance authorization by the Italian Insurance Supervisory Authority are required for any significant acquisition in ownership, portfolio transfer, or merger of insurers or reinsurers.  Regulators retain the discretion to reject proposed acquisitions on prudential grounds (e.g., insufficient capital in the merged entity).

Italy has sought to curb widespread tax evasion by improving enforcement and changing attitudes.  GOI actions include a public communications effort to reduce tolerance of tax evasion; increased and visible financial police controls on businesses (e.g., raids on businesses in vacation spots at peak holiday periods); and audits requiring individuals to document their income.  In 2014 Italy’s Parliament approved the enabling legislation for a package of tax reforms, many of which entered into force in 2015.  The tax reforms institutionalized some OECD best practices to encourage taxpayer compliance, including by reducing the administrative burden for taxpayers through the increased use of technology such as e-filing, pre-completed tax returns, and automated screenings of tax returns for errors and omissions prior to a formal audit.  The reforms also offer additional certainty for taxpayers through programs such as cooperative compliance and advance tax rulings (i.e., binding opinions on tax treatment of transactions in advance) for prospective investors.  The Draghi-led government has said it plans to pursue a general tax reform to simplify Italy’s tax system, which remains complex and has relatively high tax rates on labor income.

The GOI and the Bank of Italy have accepted and respect IMF obligations, including Article VIII.

Money and Banking System

Despite isolated problems at individual Italian banks, the banking system remains sound and capital ratios exceed regulatory thresholds.  However, Italian banks’ profit margins have suffered since 2011.  The BOI said the profitability of Italian banks in 2019 was broadly in line with that of European peers but that the annualized rate of return on equity (ROE) at 5.0% (net of extraordinary components) was below the estimated cost of equity.  In the first nine months of 2020, according to the BOI, the return on equity fell from 7.8 to 2.2 percent, though the downturn slowed in the third quarter.  The capitalization of large banks (the ratio between common tier 1 equity and risk weighted assets) was 15.1 percent as of the third quarter of 2020.

While the financial crisis brought a pronounced worsening of the quality of banks’ assets, the ratio of non-performing loans (NPLs) to total outstanding loans has decreased significantly since its height in 2017.  As of January 2021, net NPLs stand at €19.9 billion, the lowest level since June 2009 and down from €20.9 billion in December 2020 and €26.3 billion in January 2020.  ABI, the Italian banking association, reported the NPL ratio was 1.14% (net of provisions) in January 2021, down from 1.2% of December 2020 and 4.89% in November 2015.  The GOI has also taken steps to facilitate acquisitions of NPLs by outside investors.

In 2016, the GOI created a €20 billion bank rescue fund to assist struggling Italian banks in need of liquidity or capital support.  Italy’s fourth-largest bank, Monte dei Paschi di Siena (MPS), became the first bank to avail itself of this fund in January 2019.  The government currently owns 64% of MPS but hopes to exit the bank by the end of 2021, as agreed with EU authorities.  To attract a private buyer for MPS and otherwise encourage M&A activity in the banking sector, the GOI allocated €2.0 billion in tax benefits in the 2021 budget.  The GOI also facilitated the sale of two struggling “Veneto banks” (Banca Popolare di Vicenza and Veneto Banca) to Intesa San Paolo in 2017.  In 2019, Banca Carige, the smallest Italian bank under ECB supervision, was put under special administration.

The main risks for Italian banks are possible deterioration in credit quality and a further decline in profitability.  The rate of new NPLs (as of January 2021) has remained very low despite the COVID-induced economic crisis, benefiting from government measures to extend credit, including through state guarantees on loans, and flexibility from supervisory authorities regarding loan classification.  Some analysts express concern that NPL levels could rise again once government support begins to decline.  Government loan guarantees (to large companies via SACE, Italy’s export credit agency, and to SMEs via the Central Guarantee Fund, or Fondo Centrale di Garanzia) and repayment moratoriums also helped lead to an 8.5 percent increase in credit to firms in 2020, the fastest rate of growth since 2008.

Despite some banking-sector M&A activity since the financial crisis, the ECB, OECD, and Italian government have had to encourage additional consolidation to improve efficiency.  In 2019, Italy had 55 (down from 58) banking groups and 98 stand-alone banks, 229 fewer than one year earlier and as well as 80 subsidiaries of foreign banks.  The cooperative credit reform and the consolidation of the network of small cooperative and mutual banks significantly altered the structure of the banking system.  The most significant recent consolidation was Intesa San Paolo’s takeover in 2020 of UBI Banca, which created Italy’s largest banking group.  The Italian banking sector remains overly concentrated on physical bank branches for delivering services, further contributing to sector-wide inefficiency and low profitability.  Electronic banking is available in Italy, but adoption remains below euro-zone averages.  Cash remains widely used for transactions.

Most non-insurance investment products are marketed by banks and tend to be debt instruments.  Italian retail investors are conservative, valuing the safety of government bonds over most other investment vehicles.  Less than ten percent of Italian households own Italian company stocks directly.  Several banks have established private banking divisions to cater to high-net-worth individuals with a broad array of investment choices, including equities and mutual funds.

Credit is allocated on market terms, with foreign investors eligible to receive credit in Italy.  In general, credit in Italy remains largely bank-driven.  In practice, foreigners may encounter limited access to finance, as Italian banks may be reluctant to lend to prospective borrowers (even Italians) absent a preexisting relationship.  Weak demand, combined with risk aversion by banks, continues to limit lending, especially to smaller firms.

The Ministry of Economy and Finance and BOI have indicated interest in blockchain technologies to transform the banking sector.  As of March 2021, the Italian Banking Association (ABI) had implemented a Distributed Ledger Technology-based system across the Italian banking sector.  The process aims to reconcile material (and not digitalized) products that are exchanged between banks, such as commercial paper or promissory notes.

According to the Financial Action Task Force, Italy has a strong legal and institutional framework to fight money laundering and terrorist financing, and authorities have a good understanding of the risks the country faces.  Italy, however, presents a continued risk of money laundering from activities of organized crime and its significant black-market economy.

Foreign Exchange and Remittances

Foreign Exchange

In accordance with EU directives, Italy has no foreign exchange controls.  There are no restrictions on currency transfers; there are only reporting requirements.  Banks are required to report any transaction over €1,000 due to money laundering and terrorism financing concerns.  Profits, payments, and currency transfers may be freely repatriated.  Residents and non-residents may hold foreign exchange accounts.  In 2016, the GOI raised the limit on cash payments for goods or services to €3,000.  Payments above this amount must be made electronically.  Enforcement remains uneven.  The rule exempts e-money services, banks, and other financial institutions, but not payment services companies.

Italy is a member of the European Monetary Union (EMU), with the euro as its official currency.  Exchange rates are floating.

Remittance Policies

There are no limitations on remittances, though transactions above €1,000 must be reported.  In December 2018 Parliament passed a decree that imposed a 1.5 percent tax on remittances sent outside of the EU via money transfer.  The government estimates that the tax on remittances to countries outside of the EU will raise several hundred million euros per year.

Sovereign Wealth Funds

The state-owned national development bank Cassa Depositi e Prestiti (CDP) launched a strategic wealth fund in 2011, now called CDP Equity (formerly Fondo Strategico Italiano – FSI).  CDP Equity has €3.4 billion in invested capital and twelve companies in its portfolio, holding both majority and minority participations.  CDP Equity invests in companies of relevant national interest and on its website (http://en.cdpequity.it/) provides information on its funding, investment policies, criteria, and procedures.  CDP Equity is open to capital investments from outside institutional investors, including foreign investors.  CDP Equity is a member of the International Working Group of Sovereign Wealth Funds and follows the Santiago Principles.

Capital Markets and Portfolio Investment

Credit is available at market terms, and foreigners are allowed to borrow freely on the local market at market-determined rates of interest. A relatively effective regulatory system was established to encourage and facilitate portfolio investment. Jamaica has had its own stock exchange, the Jamaica Stock Exchange (JSE), since 1969. The JSE was the top performing capital market indices in 2018 and was among the top five performers in 2019. The Financial Services Commission (FSC) and the Bank of Jamaica (BOJ), the central bank, regulate these activities. Jamaica adheres to IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.

Money and Banking System

At the end of 2019 there were 11 deposit-taking institutions (DTIs) consisting of eight commercial banks, one merchant bank (Licensed under the Financial Institutions Act) and two building societies. The number of credit unions shrank from 47 at the end of 2009 to 25 at the end of 2019. Commercial banks held assets of approximately USD13 billion and liabilities of USD11.3 billion at the end of 2020. Non-performing loans (NPL) of USD185 million at end December 2020, were 2.9 percent of total loans. Five of the country’s eight commercial banks are foreign-owned. After a financial sector crisis in the mid-1990s led to consolidations, the sector has remained largely stable.

In October 2018, the GOJ took legislative steps to modernize and make the central bank operationally independent through the tabling of amendments to the Bank of Jamaica (BOJ) Act. The modernization program includes, inter alia, the institutionalization of the central bank independence, improved governance, and the transitioning of monetary policy towards inflation targeting. The modernization efforts continued in 2020 with the passage of the Bank of Jamaica Amendment Act to allow for, among other things: (1) full-fledged inflation targeting; (2) improved capitalization, governance, transparency, and accountability; (3) monetary policy decisions to be devolved to a monetary policy committee; and (4) the central bank Governor to account to Parliament. The Act will therefore remove the power of the government to give monetary policy direction to the central bank. These changes will move Jamaica’s financial governance framework closer in line with international standards.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on holding funds or on converting, transferring, or repatriating funds associated with an investment. In 2017, the BOJ implemented a new system called the BOJ Foreign Exchange Intervention & Trading Tool (B-FXITT) for the sale and purchase of foreign exchange (FX) to market players. The new system is a more efficient and transparent way of intervening in the FX market to smooth out demand and supply conditions.

Investment-related funds are freely convertible to regularly traded currencies, particularly into United States, Canadian dollars and United Kingdom pounds. However, foreign exchange transactions must be conducted through authorized foreign exchange dealers, “cambios,” and bureau de change. Foreign exchange is generally available and investors are free to remit their investment returns.

Remittance Policies

The country’s financial system is fully liberalized and subject to market conditions. There is no required waiting period for the remittance of investment returns. Any person or company can purchase instruments denominated in foreign currency. There are no restrictions or limitations on the inflow or outflow of funds for the remittance of profits or revenue. The country does not possess the financial muscle to engage in currency manipulation.

Jamaica was listed among the Major Money Laundering Jurisdictions in the U.S. Department of State’s 2020 International Narcotics Control Strategy Report (INCSR), while noting that the GoJ has enacted legislation to address corruption.

In February 2020, Jamaica was grey listed by the Financial Action Task Force, for failing to address some of the deficiencies identified in the 2017 Caribbean Financial Action Task Force Mutual Evaluation Report (MER) on anti-money laundering and counter-terrorist financing measures ( https://www.cfatf-gafic.org/index.php/documents/4th-round-meval-reports ).

Having entered an Observation Period following the 2017 publication of the MER, Jamaica’s progression towards remedying partially and non-compliant areas was slow. GoJ has developed a FAFT action plan which includes developing a broader understanding of its money laundering/terrorist financing risk and including all financial institutions and designated non-financial businesses and professions in the AML/CFT regime, and ensuring adequate risk-based supervision in all sectors.

Sovereign Wealth Funds

Jamaica does not have a sovereign wealth fund or an asset management bureau.

Capital Markets and Portfolio Investment

Japan maintains no formal restrictions on inward portfolio investment except for certain provisions covering national security. Foreign capital plays an important role in Japan’s financial markets, with foreign investors accounting for the majority of trading shares in the country’s stock market. Historically, many company managers and directors have resisted the actions of activist shareholders, especially foreign private equity funds, potentially limiting the attractiveness of Japan’s equity market to large-scale foreign portfolio investment, although there are signs of change. Some firms have taken steps to facilitate the exercise of shareholder rights by foreign investors, including the use of electronic proxy voting. The Tokyo Stock Exchange (TSE) maintains an Electronic Voting Platform for Foreign and Institutional Investors. All holdings of TSE-listed stocks are required to transfer paper stock certificates into electronic form.

The Japan Exchange Group (JPX) operates Japan’s two largest stock exchanges – in Tokyo and Osaka – with cash equity trading consolidated on the TSE since July 2013 and derivatives trading consolidated on the Osaka Exchange since March 2014.

In January 2014, the TSE and Nikkei launched the JPX Nikkei 400 Index. The index puts a premium on company performance, particularly return on equity (ROE). Companies included are determined by such factors as three-year average returns on equity, three-year accumulated operating profits and market capitalization, along with others such as the number of external board members. Inclusion in the index has become an unofficial “seal of approval” in corporate Japan, and many companies have taken steps, including undertaking share buybacks, to improve their ROE. The Bank of Japan has purchased JPX-Nikkei 400 exchange traded funds (ETFs) as part of its monetary operations, and Japan’s massive Government Pension Investment Fund (GPIF) has also invested in JPX-Nikkei 400 ETFs, putting an additional premium on membership in the index.

Japan does not restrict financial flows and accepts obligations under IMF Article VIII.

Credit is available via multiple instruments, both public and private, although access by foreigners often depends upon visa status and the type of investment.

Money and Banking System

Banking services are easily accessible throughout Japan; it is home to many of the world’s largest private commercial banks as well as an extensive network of regional and local banks. Most major international commercial banks are also present in Japan, and other quasi-governmental and non-governmental entities, such as the postal service and cooperative industry associations, also offer banking services. For example, the Japan Agriculture Union offers services through its bank (Norinchukin Bank) to members of the organization. Japan’s financial sector is generally acknowledged to be sound and resilient, with good capitalization and with a declining ratio of non-performing loans. While still healthy, most banks have experienced pressure on interest margins and profitability as a result of an extended period of low interest rates capped by the Bank of Japan’s introduction of a negative interest rate policy in 2016.

The country’s three largest private commercial banks, often collectively referred to as the “megabanks,” are Mitsubishi UFJ Financial, Mizuho Financial, and Sumitomo Mitsui Financial. Collectively, they hold assets approaching close to USD 8 trillion at 2020 year end. Japan’s third largest bank by assets – with more than USD 2 trillion – is Japan Post Bank, a financial subsidiary of the Japan Post Group that is still majority state-owned, 56.9 percent as of September 2020. Japan Post Bank offers services via 23,831 Japan Post office branches, at which Japan Post Bank services can be conducted, as well as Japan Post’s network of about 32,000 ATMs nationwide.

A large number of foreign banks operate in Japan offering both banking and other financial services. Like their domestic counterparts, foreign banks are regulated by the Japan Financial Services Agency (FSA). According to the IMF, there have been no observations of reduced or lost correspondent banking relationships in Japan. There are 518 correspondent financial institutions that have current accounts at the country’s central bank (including 123 main banks; 11 trust banks; 50 foreign banks; and 247 credit unions).

Foreigners wishing to establish bank accounts must show a passport, visa, and foreigner residence card; temporary visitors may not open bank accounts in Japan. Other requirements (e.g., evidence of utility registration and payment, Japanese-style signature seal, etc.) may vary according to institution. Language may be a barrier to obtaining services at some institutions; foreigners who do not speak Japanese should research in advance which banks are more likely to offer bilingual services.

Japanese regulators are encouraging “open banking” interactions between financial institutions and third-party developers of financial technology applications through application programming interfaces (“APIs”) when customers “opt-in” to share their information.  As a result of the government having set a target to have 80 banks adopt API standards by 2020, more than 100 subject banks reportedly have done so  Many of the largest banks are participating in various proofs of concept using blockchain technology.  While commercial banks have not yet formally adopted blockchain-powered systems for fund settlement, they are actively exploring options, and the largest banks have announced intentions to produce their own virtual currencies at some point.  The Bank of Japan is researching blockchain and its applications for national accounts and established a “Fintech Center” to lead this effort.  The main banking regulator, the Japan Financial Services Agency also encourages innovation with financial technologies, including sponsoring an annual conference on “fintech” in Japan.  In April 2017, amendments to the Act on Settlements of Funds went into effect, permitting the use of virtual currencies as a form of payment in Japan, but virtual currency is still not considered legal tender (e.g., commercial vendors may opt to accept virtual currencies for transactional payments, though virtual currency cannot be used as payment for taxes owed to the government).  The law also requires the registration of virtual currency exchange businesses.  There are currently 27-registered virtual currency exchanges in Japan. In 2017, Japan accounted for approximately half of the world’s trades of Bitcoin, the most prevalent blockchain currency (digital decentralized cryptographic currency).

Foreign Exchange and Remittances

Foreign Exchange

Generally, all foreign exchange transactions to and from Japan—including transfers of profits and dividends, interest, royalties and fees, repatriation of capital, and repayment of principal—are freely permitted. Japan maintains an ex-post facto notification system for foreign exchange transactions that prohibits specified transactions, including certain foreign direct investments (e.g., from countries under international sanctions) or others that are listed in the appendix of the Foreign Exchange and Foreign Trade Act.

Japan has a floating exchange rate and has not intervened in the foreign exchange markets since November 2011. It has joined statements of the G-7 and G-20 affirming that countries would not target exchange rates for competitive purposes.

Remittance Policies

Investment remittances are freely permitted.

Sovereign Wealth Funds

Japan does not operate a sovereign wealth fund.

Capital Markets and Portfolio Investment

There are three key capital market institutions: the Jordan Securities Commission (JSC), the Amman Stock Exchange (ASE), and the Securities Depository Center (SDC). The ASE launched an Internet Trading Service in 2010, providing an opportunity for investors to engage in securities trading independent of geographic location.

Jordan’s stock market is one of the most open among its regional competitors, with no cap on foreign ownership. As of March 2021, non-Jordanian ownership in companies listed on the ASE represented 50.7 percent of the total market value (32 percent Arab investors and 18.7 percent non-Arab investors). Non-Jordanian ownership in the financial sector was 52.8 percent, 19.3 percent in the services sector and 63.1 percent in the industrial sector.

In spite of recent reforms and technological advances, the ASE suffers from intermittent liquidity problems and low trading activity. The financial market peaked in 2007-2008, with average trading volumes topping $118 million per day. Following the global economic downturn, the market declined precipitously, with market capitalization falling from a record high of $41 billion in 2007 to $21 billion as of Dec 31, 2019 and dropped further to $18.2 billion in 2020 due to the pandemic.

The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.

Credit is allocated on market terms.  The private sector has access to a limited variety of credit instruments relative to countries with more developed capital markets.

Money and Banking System

Jordan has 25 banks, including commercial banks, Islamic banks, and foreign bank branches.  Jordan does not distinguish between investment banks and commercial banks.  Concentration in the banking sector has decreased in over the past decade; the assets of the largest five banks accounted for 54.6 percent of licensed banks’ total assets at the end of 2019.  Licensed banks’ total assets reached JD 51.2 billion ($72 billion) at the end of 2019.  Banking sector assets grew by 5.6 percent in the first eleven months of 2020 to reach JD 56.5 billion ($79 billion). The banking system is capably supervised by the CBJ, which publishes an annual Financial Stability Report.  (  https://www.cbj.gov.jo/EchoBusv3.0/SystemAssets/PDFs/EN/JFSRE2019Final_23-11-2020.pdf )

Banks continue to be profitable and well-capitalized with deposits being the primary funding base.  Liquidity and capital adequacy indicators remain strong largely due to the banks’ conservative and risk averse approach, and due to strict regulations on lending, particularly mortgage lending.  Non-performing loan ratios have increased slightly and are expected to increase further in 2021 as a result of COVID-19.  Jordan’s rate of non-performing loans, as a percentage of all bank loans, was 4.9 percent at the end of 2018, reached 5 percent by the end of 2019, and increased to 5.4 in the first six months of 2020.

Jordan has historically had low banking penetration. The CBJ launched a Financial Inclusion Strategy in 2018 to increase access to the formal banking sector. Following the first iteration of the strategy, 42 percent of people in Jordan above the age of 15 had bank accounts, up from 33 percent previously.

Banking Law No. 28 of 2000 does not discriminate between local and foreign banks, however capital requirements differ. The minimum capital requirements for foreign banks are JD 50 million ($70.6 million), and JD 100 million ($141 million) for local banks.  The law also protects depositors’ interests, diminishes money market risk, guards against the concentration of lending, and includes articles on electronic banking practices and anti-money laundering. The CBJ set up an independent Deposit Insurance Corporation (DIC) in 2000 that insures deposits up to JOD 50,000 ($71,000). The DIC also acts as the liquidator of banks as directed by the CBJ.

Foreigners are allowed to open bank accounts with a valid passport and a Jordanian residence permit.

In January 2017, the CBJ established the Jordan Payments and Clearing Company, with an aim to establish and develop digital retail and micro payments along with the investment in innovative technology and digital financial services.  The CBJ actively supports technology and is running JoMoPay, a mobile payment system and provides regulatory support to a privately-operated electronic bill payment service eFAWATEER.com.

Foreign Exchange and Remittances

Foreign Exchange

The CBJ supervises and licenses all currency exchange businesses. These entities are exempt from paying commissions on exchange transactions and therefore enjoy a competitive edge over banks.

The Jordanian Dinar (JD or JOD) is fully convertible for all commercial and capital transactions. Since 1995, the JD has been pegged to the U.S. dollar at an exchange rate of JD 1 to USD 1.41.

Other notable foreign exchange regulations include:

• Non-residents are allowed to open bank accounts in foreign currencies. These accounts are exempted from all transfer-related commission fees charged by the CBJ.
• Banks are permitted to purchase unlimited amounts of foreign currency from their clients in exchange for JODs on a forward basis. Banks are permitted to sell foreign currencies in exchange for JODs on a forward basis for the purpose of covering the value of imports.
• There is no restriction on the amount of foreign currency that residents may hold in bank accounts, and there is no ceiling on the amount residents may transfer abroad. Banks do not require prior CBJ approval for a transfer of funds, including investment-related transfers.
• Jordanian law entitles foreigners to remit abroad all returns, profits, and proceeds arising from the liquidation of investment projects. Non-Jordanian workers are permitted to transfer their salaries and compensation abroad.

Remittance Policies

Jordanian law entitles foreigners to remit abroad all returns, profits, and proceeds arising from the liquidation of investment projects. Non-Jordanian workers are permitted to transfer their salaries and compensation abroad.

Sovereign Wealth Funds

Jordan does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Kazakhstan maintains a stable macroeconomic framework, although weak banks inhibit the financial sector’s development , valuation and accounting practices are inconsistent, and large state-owned enterprises (SOEs) that dominate the economy face challenges in preparing complete financial reporting. Capital markets remain underdeveloped and illiquid, with small equity and debt markets dominated by SOEs and lacking in retail investors. Most domestic borrowers obtain credit from Kazakhstani banks, although foreign investors often find margins and collateral requirements onerous, and it is often cheaper and easier for foreign investors to use retained earnings or borrow from their home country. The government actively seeks to attract FDI, including portfolio investment. Foreign clients may only trade via local brokerage companies or after registering at Kazakhstan’s Stock Exchange (KASE) or at the AIFC.

KASE, in operation since 1993 and with 189 listed companies, trades a variety of instruments, including equities and funds, corporate bonds, sovereign debt, international development institutions debt, foreign currencies, repurchase agreements (REPO) and derivatives. Most of KASE’s trading is comprised of money market (84 percent) and foreign exchange (10 percent). As of January1, 2021, stock market capitalization was USD 45.3 billion, while the corporate bond market was around USD 35.2 billion. The Single Accumulating Pension Fund, the key source of the country’s local currency liquidity accumulated USD 30.7 billion as of January1, 2021.

In 2018, the government launched the Astana International Financial Center (AIFC), a regional financial hub modeled after the Dubai International Financial Center. The AIFC has its own stock exchange (AIX), regulator, and court (see Part 4). The AIFC has partnered with the Shanghai Stock Exchange, NASDAQ, Goldman Sachs International, the Silk Road Fund, and others. AIX currently has 88 listings in its Official List, including 30 traded on its platform.

Kazakhstan is bound by Article VIII of the International Monetary Fund’s Articles of Agreement, adopted in 1996, which prohibits government restrictions on currency conversions or the repatriation of investment profits. Money transfers associated with foreign investments, whether inside or outside of the country, are unrestricted; however, Kazakhstan’s currency legislation requires that a currency contract must be presented to the servicing bank if the transfer exceeds USD 10,000. Money transfers over USD 50,000 require the servicing bank to notify the transaction to the authorities, so the transferring bank may require the transferring parties, whether resident or non-resident, to provide information for that notification.

Money and Banking System

As of January 1, 2021, Kazakhstan had 26 commercial banks. The five largest banks (Halyk Bank, Sberbank-Kazakhstan, Forte Bank, Kaspi Bank and Bank CenterCredit) held assets of approximately USD 47.4 billion, accounting for 64.0 percent of the total banking sector.

Kazakhstan’s banking system remains impaired by legacy non-performing loans, poor risk management, weak corporate governance practices, and significant related-party exposures.  In recent years, the government has undertaken measures to strengthen the sector, including capital injections, enhanced oversight, and expanded regulatory authorities. In 2019, the National Bank of Kazakhstan (NBK) initiated an asset quality review (AQR) of 14 major banks, which combined held 87 percent of banking assets as of April 1, 2019. According to NBK officials, the AQR showed sufficient capitalization on average across the 14 banks and set out individual corrective measure plans for each of the banks to improve risk management. As of January 2021, the ratio of non-performing loans to banking assets was 6.8 percent, down from 31.2 percent in January 2014. The COVID-19 pandemic and the fall in global oil prices may pose additional risks to Kazakhstan’s banking sector.

Kazakhstan has a central bank system led by the NBK. In January 2020, parliament established the Agency for Regulation and Development of the Financial Market (ARDFM), which assumed the NBK’s role as main financial regulator overseeing banks, insurance companies, the stock market, microcredit organizations, debt collection agencies, and credit bureaus. The NBK retains its core central bank functions as well as management of the country’s sovereign wealth fund and pension system assets. The NBK, and ARDFM as its successor, is committed to the incremental introduction of the Basel III regulatory standard. As of January 2021, Basel III methodology applies to capital and liquidity calculation with required regulatory ratios gradually changing to match the standard.  Starting December 16, 2020, as a part of WTO commitments, Kazakhstan allowed foreign banks to operate in the country via branches (previously only local subsidiaries were allowed). To open a branch, foreign banks must have international credit ratings of BBB or higher, a minimum of $20 billion in global assets, and comply with other NBK and ARDFM norms and requirements.  Foreigners may open bank accounts in local banks as long as they have a local tax registration number.

Foreign Exchange and Remittances

Foreign Exchange

Transfers of currency are protected by Article VII of the International Monetary Fund (IMF) Articles of Agreement (http://www.imf.org/External/Pubs/FT/AA/index.htm#art7).

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment (e.g. remittances of investment capital, earnings, loan or lease payments, or royalties). Funds associated with any form of investment may be freely converted into any world currency, though local markets may be limited to major world currencies.

Foreign company branches are treated as residents, except for non-financial organizations treated as non-residents based on previously made special agreements with Kazakhstan.  With some exceptions, foreign currency transactions between residents are forbidden. There are no restrictions on foreign currency operations between residents and non-residents, unless specified otherwise by local foreign currency legislation. Companies registered with AIFC are not subject to currency and settlement restrictions.

Kazakhstan abandoned its currency peg in favor of a free-floating exchange rate and inflation-targeting monetary regime in August 2015, although the NBK has intervened in foreign exchange markets to combat excess volatility. Kazakhstan maintains sufficient international reserves according to the IMF. As of January 1, 2021, international reserves at the NBK, including foreign currency, gold, and National Fund assets, totaled USD 94.4 billion.  

Remittance Policies

The U.S. Mission in Kazakhstan is not aware of any concerns about remittance policies or the availability of foreign exchange conversion for the remittance of profits. Local currency legislation permits non-residents to freely receive and transfer dividends, interest and other income on deposits, securities, loans, and other currency transactions with residents. However, such remittances are subject to reporting requirements. There are no time limitations on remittances; and timelines to remit investment returns depend on the internal procedures of the servicing bank. Residents seeking to transfer property or money to a non-resident in excess of USD 500,000 are required to register the contract with the NBK. 

Sovereign Wealth Funds

The National Fund of the Republic of Kazakhstan was established to support the country’s social and economic development via accumulation of financial and other assets, as well as to reduce the country’s dependence on the oil sector and external shocks. The National Fund’s assets are generated from direct taxes and other payments from oil companies, public property privatization, sale of public farmlands, and investment income. The government, through the Ministry of Finance, controls the National Fund, while the NBK acts as the National Fund’s trustee and asset manager. The NBK selects external asset managers from internationally recognized investment companies or banks to oversee a part of the National Fund’s assets.  Information about external asset managers and assets they manage is confidential. As of January 1, 2021, the National Fund’s assets were USD 58.7 billion or around 34 percent of GDP.

The government receives regular transfers from the National Fund for general state budget support, as well as special purpose transfers ordered by the President. The National Fund is required to retain a minimum balance of no less than 30 percent of GDP.

Kazakhstan is not a member of the IMF-hosted International Working Group of Sovereign Wealth Funds.

Capital Markets and Portfolio Investment

Though relatively small by Western standards, Kenya’s capital markets are the deepest and most sophisticated in East Africa. The 2020 Morgan Stanley Capital International Emerging and Frontier Markets Index, which assesses equity opportunity in 27 emerging economies, ranked the Nairobi Securities Exchange (NSE) as the best performing exchange in sub-Saharan Africa over the last decade. The NSE operates under the jurisdiction of the Capital Markets Authority of Kenya. It is a full member of the World Federation of Exchanges, a founding member of the African Securities Exchanges Association (ASEA) and the East African Securities Exchanges Association (EASEA). The NSE is a member of the Association of Futures Markets and is a partner exchange in the United Nations-led Sustainable Stock Exchanges initiative. Reflecting international confidence in the NSE, it has always had significant foreign investor participation. In July 2019, the NSE launched a derivatives market that facilitates trading in future contracts on the Kenyan market. The bond market is underdeveloped and dominated by trading in government debt securities. The government’s domestic debt market, however, is deep and liquid. Long-term corporate bond issuances are uncommon, limiting long-term investment capital.

In November 2019, Kenya repealed the interest rate capping law passed in 2016, which had slowed private sector credit growth. There are no restrictions on foreign investors seeking credit in the domestic financial market. Kenya’s legal, regulatory, and accounting systems generally align with international norms. In 2017, the Kenya National Treasury launched the world’s first mobile phone-based retail government bond, locally dubbed M-Akiba. M-Akiba has generated over 500,000 accounts for the Central Depository and Settlement Corporation, and The National Treasury has made initial dividend payments to bond holders.

The African Private Equity and Venture Capital Association (AVCA) 2014-2019 report on venture capital performance in Africa ranked Kenya as having the second most developed venture capitalist ecosystem in sub-Saharan Africa. The report also noted that over 20 percent of the venture capital deals in Kenya, from 2014-2019, were initiated by companies headquartered outside Africa.

The Central Bank of Kenya (CBK) is working with regulators in EAC member states through the Capital Market Development Committee (CMDC) and East African Securities Regulatory Authorities (EASRA) on a regional integration initiative and has successfully introduced cross-listing of equity shares. The combined use of both the Central Depository and Settlement Corporation (CDSC) and an automated trading system has aligned the Kenyan securities market with globally accepted standards. Kenya is a full (ordinary) member of the International Organization of Securities Commissions Money and Banking System.

Kenya has accepted the International Monetary Fund’s Article VIII obligation and does not provide restrictions on payments and transfers for current international transactions.

Money and Banking System

In 2020, the Kenyan banking sector included 41 commercial banks, one mortgage finance company, 14 microfinance banks, nine representative offices of foreign banks, eight non-operating bank holdings, 69 foreign exchange bureaus, 19 money remittance providers, and three credit reference bureaus, which are licensed and regulated by the CBK. Fifteen of Kenya’s commercial banks are foreign owned. Major international banks operating in Kenya include Citibank, Absa Bank (formerly Barclays Bank Africa), Bank of India, Standard Bank, and Standard Chartered. The 12 commercial banks listed banks on the Nairobi Securities Exchange owned 89 percent of the country’s banking assets in 2019.

The COVID-19 pandemic has significantly affected Kenya’s banking sector. According to the CBK, 32 out of 41 commercial banks restructured loans to accommodate affected borrowers. Non-performing loans (NPLs) reached 14.1 percent by the end of 2020 – a two percent increase year-on-year – and are continuing to rise.

In March 2017, following the collapse of Imperial Bank and Dubai Bank, the CBK lifted its 2015 moratorium on licensing new banks. The CBK’s decision to restart licensing signaled a return of stability in the Kenyan banking sector. In 2018, Societé Generale (France) also set up a representative office in Nairobi. Foreign banks can apply for license to set up operations in Kenya and are guided by the CBK’s 2013 Prudential Guidelines.

In November 2019, the GOK repealed the interest rate capping law through an amendment to the Banking Act. This amendment has enabled financial institutions to use market-based pricing for their credit products. While this change has slightly increased the cost of borrowing for some clients, it effectively ensures the private sector uninterrupted access to credit.

The percentage of Kenya’s total population with access to financial services through conventional or mobile banking platforms is approximately 80 percent. According to the World Bank, M-Pesa, Kenya’s largest mobile banking platform, processes more transactions within Kenya each year than Western Union does globally. The 2017 National ICT Masterplan envisages the sector contributing at least 10 percent of GDP, up from 4.7 percent in 2015. Several mobile money platforms have achieved international interoperability, allowing the Kenyan diaspora to conduct financial transactions in Kenya from abroad.

Foreign Exchange and Remittances

Foreign Exchange Policies

Kenya has no restrictions on converting or transferring funds associated with investment. Kenyan law requires persons entering the country carrying amounts greater than KES 1,000,000 (approximately USD 10,000), or the equivalent in foreign currencies, to declare their cash holdings to the customs authority to deter money laundering and financing of terrorist organizations. Kenya is an open economy with a liberalized capital account and a floating exchange rate. The CBK engages in volatility controls aimed at smoothing temporary market fluctuations. In 2020, the average exchange rate was KES 106.45/USD according to CBK statistics. The foreign exchange rate fluctuated by nine percent from December 2019 to December 2020.

Remittance Policies

Kenya’s Foreign Investment Protection Act (FIPA) guarantees foreign investors’ right to capital repatriation and remittance of dividends and interest to foreign investors, who are free to convert and repatriate profits including un-capitalized retained profits (proceeds of an investment after payment of the relevant taxes and the principal and interest associated with any loan).

Foreign currency is readily available from commercial banks and foreign exchange bureaus and can be freely bought and sold by local and foreign investors. The Central Bank of Kenya Act (2014), however, states that all foreign exchange dealers are required to obtain and retain appropriate documents for all transactions above the equivalent of KES 1,000,000 (approximately USD 10,000). Kenya has 15 money remittance providers as at 2020 following the operationalization of money remittance regulations in April 2013.

The State Department’s Bureau of International Narcotics and Law Enforcement listed Kenya as a country of primary concern for money laundering and financial crimes. The inter-governmental Financial Action Task Force (FATF) removed Kenya from its “Watchlist” in 2014, noting the country’s progress in creating the legal and institutional framework to combat money laundering and terrorism financing.

Sovereign Wealth Funds

In 2019, the National Treasury published the Kenya Sovereign Wealth Fund policy and the draft Kenya Sovereign Wealth Fund Bill (2019), both of which remain pending. The fund would receive income from any future privatization proceeds, dividends from state corporations, oil and gas, and minerals revenues due to the national government, revenue from other natural resources, and funds from any other source. The Kenya Information and Communications Act (2009) provides for the establishment of a Universal Service Fund (USF). The purpose of the USF is to fund national projects that have significant impact on the availability and accessibility of ICT services in rural, remote, and poor urban areas. In 2020 during the COVID-19 pandemic, the USF committee partnered with the Kenya Institute of Curriculum Development to digitize the education curriculum for online learning.

Capital Markets and Portfolio Investment

Kosovo has an open-market economy, and the market determines interest rates. Individual banks conduct risk analysis and determine credit allocation. Foreign and domestic investors can get credit on the local market. Access to credit for the private sector and financial products are limited but gradually improving.

The country generally has a positive attitude towards foreign portfolio investment. Kosovo does not have a stock exchange. The regulatory system conforms with EU directives and international standards. There are no restrictions beyond normal regulatory requirements related to capital sourcing, fit, and properness of the investors. The CBK has taken all required measures to improve policies for the free flow of financial resources. Requirements under the SAA with the EU oblige the free flow of capital. The government respects the IMF’s Article VIII conditions on the flow of capital.

Money and Banking System

Kosovo has 11 commercial banks (of which nine are foreign) and 20 micro-finance institutions (of which 12 are foreign). The official currency of Kosovo is the euro, although the country is not a member of the Eurozone. In the absence of an independent monetary policy, prices are highly responsive to market trends in the larger Eurozone.

The IMF estimates 2020 economic growth at -6 percent due to COVID-19. In spite of this shock, Kosovo’s private banking sector remains well capitalized and profitable. Difficult economic conditions, weak contract enforcement, and a risk-averse posture have traditionally limited banks’ lending activities. However, financial services and bank lending have improved markedly over the past several years, albeit from a low baseline. In March 2021, the rate of non-performing loans was 2.7 percent, only slightly above the pre-pandemic February 2020 rate of 2.5 percent. The three largest banks own 56.2 percent of the total 5.3 billion euros of assets in the entire banking sector; foreign-owned banks have 86.3 percent of the market share. Despite positive trends, relatively little lending is directed toward long-term investment activities. Interest rates have dropped significantly in recent years, from an average of about 12.7 percent in 2012 to an average of 3.1 percent in March 2021. Slower lending is notable in the northern part of Kosovo due to a weak judiciary, informal business activities, and fewer qualified borrowers.

The Central Bank of Kosovo (CBK) is an independent government body responsible for fostering the development of competitive, sound, and transparent practices in the banking and financial sectors. It supervises and regulates Kosovo’s banking sector, insurance industry, pension funds, and micro-finance institutions. The CBK also performs other standard central bank tasks, including cash management, transfers, clearing, management of funds deposited by the Ministry of Finance, Labor and Transfers and other public institutions, collection of financial data, and management of a credit register.

Foreign banks and branches can establish operations in the country. They are subject to the same licensing requirements and regulations as local banks. The country has not lost any correspondent banking relationships in the past three years and no such relationship is currently in jeopardy. There are no restrictions on foreigners opening bank accounts; they can do so upon submission of valid identification documentation.

Kosovo is a signatory country to the United States’ Foreign Account Tax Compliance Act (FATCA), aimed at addressing tax evasion by U.S. citizens or permanent residents with foreign bank accounts. For more information, visit the FATCA website: https://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-FATCA .

Foreign Exchange and Remittances

Foreign Exchange

The Foreign Investment Law guarantees the unrestricted use of income from foreign investment following payment of taxes and other liabilities. This guarantee includes the right to transfer funds to other foreign markets or foreign-currency conversions, which must be processed in accordance with EU banking procedures. Conversions are made at the market rate of exchange. Foreign investors are permitted to open bank accounts in any currency. Kosovo adopted the euro in 2002 but is not a Eurozone member. The CBK administers euro exchange rates on a daily basis as referenced by the European Central Bank.

Remittance Policies

Remittances are a significant source of income for Kosovo’s population, representing approximately 15 percent of GDP (or over USD 1.163 billion) in 2020. Despite COVID-19’s shock to all world economies, remittances to Kosovo have been very resilient and grew by 15.1% in 2020. The majority of remittances come from Kosovo’s European-based diaspora, particularly in Germany and Switzerland. The Central Bank reports that remittances are mainly used for personal consumption, not for investment purposes.

Kosovo does not apply any type of capital controls or limitations on international capital flows. As such, access to foreign exchange for investment remittances is fully liberalized.

Sovereign Wealth Funds

Kosovo does not have any sovereign wealth funds.

Capital Markets and Portfolio Investment

Foreign financial investment firms operating in Kuwait characterize the government’s attitude toward foreign portfolio investment as welcoming.  An effective regulatory system exists to encourage and facilitate portfolio investment. Existing policies and infrastructure facilitate the free flow of financial resources into the capital market.  Government bodies comply with guidelines outlined by IMF Article VIII and refrain from restricting payments and transfers on current international transactions. In November 2015, the Capital Markets Authority issued a regulation covering portfolio management, but it does not apply to foreign investors.

The privatized stock exchange, named the Boursa, lists 172 companies.  In February 2019, a consortium led by Kuwait National Investment Company that included the Athens Stock Exchange won a tender to acquire 44 percent of the Kuwaiti Boursa.  In December 2019, the Capital Markets Authority sold its 50 percent stake in the Kuwaiti Boursa as part of an Initial Public Offering. The offering was oversubscribed by more than 8.5 times. Kuwait’s Public Institution for Social Security owns the remaining six percent of shares.

FTSE Russell upgraded the status of the Boursa to Secondary Emerging Market in 2017.  In March 2019, MSCI announced a proposal to reclassify the MSCI Kuwait Index from Frontier to Emerging Markets. MSCI aims to implement the potential reclassification to coincide with the May 2020 Semi-Annual Index Review. On December 1, 2020, Boursa Kuwait completed the Kuwaiti capital market’s inclusion into the MSCI Emerging Markets Indexes with the successful implementation of the first tranche of index inclusion.

While the debt market is not well developed, local banks have the capacity to meet domestic demand.  Credit is allocated on market terms. Foreign investors can obtain local credit on terms that correspond to collateral provided and intended use of financing.  The private sector has access to a variety of credit instruments. The Central Bank restricts commercial banks’ use of structured and complex derivatives but permits routine hedging and trading for non-speculative purposes.  In March 2017, the government issued USD 8 billion in five- and ten-year notes but was unable to secure approval from the National Assembly for issuance of 30-year notes.

Money and Banking System

The Central Bank of Kuwait reported that banking sector assets totaled KD 72.44 billion (USD 232.42 billion) in April 2020.

Twenty-two banks operate in Kuwait: five conventional local banks, five Islamic banks, 11 foreign banks, and one specialized bank.  Conventional banks include: National Bank of Kuwait, Commercial Bank of Kuwait, Gulf Bank, Al-Ahli Bank of Kuwait, and Burgan Bank. Sharia-compliant banks include Kuwait Finance House, Boubyan Bank, Kuwait International Bank, Al-Ahli United Bank, and Warba Bank.  Foreign banks include BNP Paribas, HSBC, Citibank, Qatar National Bank, Doha Bank, Dubai-based Mashreq Bank, the Bank of Muscat, Riyadh-based Al Rajhi Bank (the largest Sharia-compliant bank in the world), the Bank of Bahrain and Kuwait (BBK), the Industrial and Commercial Bank of China (ICBC), and Union National Bank.  The government-owned Industrial Bank of Kuwait provides medium- and long-term financing to industrial companies and Kuwaiti citizens through customized financing packages. In December 2018, the Ministry of Commerce and Industry began permitting more than 49 percent foreign ownership in local banks with the approval of the Central Bank of Kuwait.

Following the global financial crisis in 2008 when large losses reduced confidence in the local banking sector, the Council of Ministers and the National Assembly passed legislation to guarantee deposits at local banks to rebuild confidence.

Foreign banks can offer retail services.  In 2013, the Central Bank announced that foreign banks could open multiple branches on a case-by-case basis.  In 2017, the Al-Rajhi Bank opened its second branch. Qatar National Bank received CBK’s approval in 2014 and opened its second branch in 2018.  Kuwaiti law restricts foreign banks from offering investment banking services. Foreign banks are subject to a maximum credit concentration equivalent to less than half the limit of the largest local bank and are prohibited from directing clients to borrow from external branches of their bank.  Foreign banks may also open representative offices.

Foreign Exchange and Remittances

Foreign Exchange

The Kuwaiti dinar has been tied to an undisclosed and changing basket of major currencies since May 2007.  Reverse engineering suggests that the U.S. dollar accounts for some 70-80 percent of this basket. Foreign exchange purchases must be processed through a bank or licensed foreign exchange dealer.  Equity, loan capital, interest, dividends, profits, royalties, fees, and personal savings can be transferred into or out of Kuwait without hindrance. The Foreign Direct Investment Law permits investors to transfer all or part of their investment to another foreign or domestic investor, including cash transfers.

Remittance Policies

No restrictions exist on the inflow or outflow of remittances, profits, or revenue.  Foreign investors may elect to remit through a legal parallel market, including one using convertible, negotiable instruments.  Nevertheless, each investor must ensure compliance with Kuwait’s anti-money laundering laws. Time limitations or waiting periods do not apply to remittances.  Kuwait is not known to engage in currency manipulation. The Central Bank advises buy, sell, and middle rates daily.

Sovereign Wealth Funds

The Kuwait Investment Authority (KIA) manages the Kuwait General Reserve Fund and the Kuwait Fund for Future Generations.  By law, ten percent of oil revenues must be deposited each year into the Fund for Future Generations. In 2020, the National Assembly suspended this requirement due to the large government deficit. KIA management reports to a Board of Directors appointed by the Council of Ministers.  The Minister of Finance chairs the board; other members include the Minister of Oil, the Central Bank Governor, the Undersecretary of the Ministry of Finance, and five representatives from Kuwait’s private sector (three of whom must not hold any other public office).  An internal audit office reports directly to the Board of Directors and an external auditor. This information is provided to the State Audit Bureau, which audits KIA continuously and reports annually to the National Assembly.

The 1982 law establishing the KIA prohibits the public disclosure of the size of sovereign wealth holdings and asset allocations.  KIA conducts closed-door presentations for the Council of Ministers and the National Assembly on the full details of all funds under its management, including its strategic asset allocation, benchmarks, and rates of return.  The Sovereign Wealth Fund Institute estimated that KIA manages one of the world’s largest sovereign funds with more than USD 533.65 billion in assets as of end of May 2020. Economic stress and budget deficits since 2016 due to diminishing oil revenues and, in 2020, the COVID-19 pandemic, has led to the near depletion of the General Reserve Fund. As of April 2021, the Kuwaiti government and the National Assembly are considering options for generating the liquidity necessary to maintain governmental functions. Authorization to issue debt has stalled in the National Assembly, although it still seems a more likely eventual solution than the politically controversial step of drawing funds from the Fund for Future Generations.

Capital Markets and Portfolio Investment

The Kyrgyz government is generally open toward foreign portfolio investment, though experts from international financial institutions (IFIs) have noted that capital markets in the Kyrgyz Republic remain underdeveloped. The economy of the Kyrgyz Republic is primarily cash-based, although non-cash consumer transactions, such as debit cards and transaction machines, have quadrupled.  The number of bank payment cards in use increased by 2.5 times and e-wallets 10 times in the last five years. The Kyrgyz Republic maintained its B2 sovereign credit rating with Moody’s, which downgraded its outlook in November 2020 from stable to negative due to political instability. The government debt market is small and limited to short maturities, though Kyrgyz bonds are available for foreign ownership. Broadly, credit is allocated on market terms, but experts have noted that the presence of the Russian-Kyrgyz Development Fund subsidized sources of credit have introduced market distortions. Bank loans remain the primary source of private sector credit, and local portfolio investors often highlight the need to develop additional financial instruments in the Kyrgyz Republic. There are two stock exchanges in the Kyrgyz Republic (Kyrgyz Stock Exchange and Stock Exchange of the Kyrgyz Republic), but all transactions are conducted through the Kyrgyz Stock Exchange. In 2020, the total value of transactions amounted to 11.83 billion Kyrgyz soms (approximately USD 140 million). The small market lacks sufficient liquidity to enter and exit sizeable positions. Since 1995, the Kyrgyz Republic has accepted IMF Article VIII obligations. Foreign investors are able to acquire loans on the local market if the business is operating on the territory of the Kyrgyz Republic and collateral meets the requirements of local banks. The average interest rate for loans in USD is between 10-15 percent.

Money and Banking System

The National Bank of the Kyrgyz Republic (NBKR) is a nominally independent body whose mandate is to achieve and maintain price stability through monetary policy. The Bank is also tasked with maintaining the safety and reliability of the banking and payment systems. The NBKR licenses, regulates, and supervises credit institutions. The penetration level of the banking sector is 48.4 percent.

According to the IMF, the Kyrgyz banking system at present remains well capitalized with still sizeable, non-performing loans (NPLs). NPLs increased from 8.0 percent to 10.5 percent in 2020, with restructured loans of about 25 percent. Net capital adequacy ratio increased from 24.1 percent to 24.9 percent in 2020. Total assets in the Kyrgyz banking system in 2020 equaled approximately USD 3.4 billion. As of June 2020, the Kyrgyz Republic’s three largest banks by total assets were Optima Bank (approximately USD 430 million), Aiyl Bank (approximately USD 353 million), and Kyrgyz Investment and Credit Bank (KICB; approximately USD 328 million).

There are currently 23 commercial banks in the Kyrgyz Republic, with 312 operating branches throughout the country; the five largest banks comprise more than 50 percent of the total market. No U.S. bank operates in the Kyrgyz Republic and Kyrgyz banks do not maintain correspondent accounts from U.S. financial institutions, following widespread de-risking in 2018. There are ten foreign banks operating in the Kyrgyz Republic: Demir Bank, National Bank of Pakistan, Halyk Bank, Optima Bank, Finca Bank, Bai-Tushum Bank, Amanbank, Kyrgyz-Swiss Bank, Chang An Bank,and Kompanion Bank are entirely foreign held. Other banks are partially foreign held, including KICB and BTA Bank. KICB has multinational organizations as shareholders including the European Bank for Reconstruction and Development (EBRD), Economic Finance Corporation, the Aga Khan Fund for Economic Development and others.

The micro-finance sector in the Kyrgyz Republic is robust, representing nearly 10 percent the market size of the banking sector. Trade accounted for 37.5 percent of the total loan portfolio of the banking sector, followed by agriculture (29 percent) and consumer loans (12.5 percent). The microfinance sector in the Kyrgyz Republic is rapidly growing. In 2020, around 140 microfinance companies, 92 credit unions, 220 pawnshops and 421 currency exchange offices operated in the Kyrgyz Republic. Over the last five years, the three largest microfinance companies (Bai-Tushum, FINCA, and Kompanion) transformed into banks with full banking licenses.

Foreign Exchange and Remittances

Foreign Exchange

Foreign exchange is widely available and rates are competitive. The local currency, the Kyrgyz som, is freely convertible and stable compared to other currencies in the region. While the som is a floating currency, the NBKR periodically intervenes in the market to mitigate the risk of exchange rate shocks. Given significant currency fluctuations among Post-Soviet countries in 2020, the Kyrgyz som was one of the most stable currencies, with the dollar exchange rate rising 18.9 percent over the year. In 2020, the NBKR conducted 29 foreign exchange interventions and in total, sold USD 265.9 million. The NBKR conducts weekly inter-bank currency auctions, in which competitive bids determine market-based transaction prices. Banks usually clear payments within a single business day. Complaints of currency conversion issues are rare. With occasional exceptions in the agricultural and energy sectors, barter transactions have largely been phased out.

Remittance Policies

Remittances typically account for 25-30 percent of GDP. In 2020 net remittances reached $2.37 billion, a 1,25 percent reduction from 2019. In January 2020, the Central Bank of Russia increased the cap on monthly money transfers to the Kyrgyz Republic to 150,000 rubles. (Note: In July 2019, the Central Bank of Russia had lowered the cap on money transfers per month to the Kyrgyz Republic to 100,000 ruble.)

In May 2019, the follow up assessment by the Financial Action Task Force (FATF) concluded that the Kyrgyz Republic demonstrated political commitment in improving its anti-money laundering and countering financing of terrorism, and in addressing technical compliance deficiencies identified in the 2018 Mutual Evaluation Report (MER) assessment. However, the country still lacks a comprehensive national risk assessment and underlying risk-based approach for monitoring and identifying suspicious activities.

Sovereign Wealth Funds

The Kyrgyz Republic’s Sovereign Wealth Fund originated from proceeds of the Kumtor gold mine and is composed of shares in the parent company of the gold mine operator, Centerra Gold. The Kyrgyz Republic owns roughly 77.4 million shares of the company, which are currently valued at USD 836 million.

Capital Markets and Portfolio Investment

Laos does not have a well-developed capital market, although government policies increasingly support the formation of capital and free flow of financial resources.  The Lao Securities Exchange (LSX) began operations in 2011 with two stocks listed, both of them state-owned – the Banque Pour l’Commerce Exterieur (BCEL), and the power generation arm of the electrical utility, Electricite du Laos – Generation (EDL-Gen).  In 2012, the Lao government increased the proportion of shares that foreigners can hold on the LSX from 10 to 20 percent.  As of March 2021, there are eleven companies listed on the LSX: BCEL, EDL-Gen, Petroleum Trading Laos (fuel stations), Lao World (property development and management), Souvanny Home Center (home goods retail), Phousy Construction and Development (Construction and real estate development), Lao Cement (LCC), Mahathuen Leasing (leasing), Lao Agrotech (palm oil plantation and extraction factory), Vientiane Center (property development and management), and Lao ASEAN Leasing (LALCO) ( financing and leasing).  News and information about the LSX is available at http://www.lsx.com.la/.

Businesses report that they are often unable to exchange kip into foreign currencies through central or local banks.  Analysts suggest that concerns about dollar reserves may have led to temporary problems in the convertibility of the national currency.  Private banks allege that the Bank of Lao PDR withholds dollar reserves.  The Bank of Lao PDR alleges that the private banks already hold sizable reserves and have been reluctant to give foreign exchange to their customers in order to maintain unreasonably high reserves.  The tightness in the forex market led to a temporary 9.1 percent divergence between official and gray-market currency rates in December 2020, and since 2017 the Lao kip has depreciated against both the dollar and Thai baht.

Lao and foreign companies alike, and especially small- and medium-sized enterprises (SMEs), note the lack of long-term credit in the domestic market.  Loans repayable over more than five years are very rare, and the choice of credit instruments in the local market is limited.  The Credit Information Bureau, developed to help inject more credit into markets, still has very little information and has not yet succeeded in mitigating lender concerns about risk.

Money and Banking System

The banking system is under the supervision of the Bank of Lao PDR, the nation’s central bank, and includes more than 40 banks, most of them commercial.  Private foreign banks can establish branches in all provinces of Laos.  ATMs have become ubiquitous in urban centers.  Technical assistance to Laos’ financial sector has led to some reforms and significant improvements to Laos’ regulatory regime on anti-money laundering and countering the financing of terrorism, but overall capacity within the financial governance structure remains poor.

The banking system is dominated by large, government-owned banks.  The health of the banking sector is difficult to determine given the lack of reliable data, though banks are widely believed to be poorly regulated and there is broad concern about bad debts and non-performing loans that have yet to be fully reconciled by the state-run banks, in particular.  The IMF and others have encouraged the Bank of Lao PDR to facilitate recapitalization of the state-owned banks to improve the resilience of the sector.

While publicly available data is difficult to find, non-performing loans are widely believed to be a major concern in the financial sector, fueled in part by years of rapid growth in private lending.  The government’s fiscal difficulties in 2013 and 2014 led to non-payment on government infrastructure projects.  The construction companies implementing the projects in turn could not pay back loans for capital used in construction.  Many analysts believe the full effects of the government’s fiscal difficulties have not yet worked their way through the economy.  In recent years, Laos is projected to continue running a budget deficit of 7.6 percent, which coupled with rising public or publicly held debt estimated to reach 69 percent of GDP, add to concerns about Laos’ fiscal outlook.  In 2018 Laos passed a new law on Public Debt Management aimed at reducing the debt-to-GDP ratio in the coming years.

Foreign Exchange and Remittances

Foreign Exchange

There are no published, formal restrictions on foreign exchange conversion, though restrictions have previously been reported, and because the market for Lao kip is relatively small, the currency is rarely convertible outside the immediate region.  Laos persistently maintains low levels of foreign reserves, which are estimated to cover only 1.1 months’ worth of total imports.  The reserve buffer is expected to remain relatively low due to structurally weak export growth in the non-resource sector and debt service payments.  The decline in reserves was due to a drawdown of government deposits primarily for external debt service payments, some intervention in the foreign exchange market to manage the volatility of the currency (notwithstanding a more flexible currency), and financing the continuing current account deficit. The Bank of the Lao PDR (BOL) occasionally imposes daily limits on converting funds from Lao kip into U.S. dollars and Thai baht, or restricts the sectors able to convert Lao kip into dollars, sometimes leading to difficulties in obtaining foreign exchange in Laos.

In order to facilitate business transactions, foreign investors generally open commercial bank accounts in both local and foreign convertible currency at domestic and foreign banks in Laos.  The Enterprise Accounting Law places no limitations on foreign investors transferring after-tax profits, income from technology transfer, initial capital, interest, wages and salaries, or other remittances to the company’s home country or third countries provided that they request approval from the Lao government.  Foreign enterprises must report on their performance annually and submit annual financial statements to the Ministry of Planning and Investment (MPI).

According to a recent report from Laos’ National Institute for Economic Research (NIER), the increasing demand for USD and Thai baht for the import of capital equipment for projects and consumer goods,  coupled with growing demand for foreign currency to pay off foreign debts has resulted in a depreciation of the exchange rate in 2020.  The official nominal kip/U.S. dollar reference rate depreciated 6.23 percent  in 2020, while the kip/baht exchange rate depreciated  8.15 percent.

Remittance Policies

There have been no recent changes to remittance law or policy in Laos.  Formally, all remittances abroad, transfers into Laos, foreign loans, and payments not denominated in Lao kip must be approved by the BOL.  In practice, many remittances are understood to flow into Laos informally, and relatively easily, from a sizeable Lao workforce based in Thailand.  Remittance-related rules can be vague and official practice is reportedly inconsistent.

Sovereign Wealth Funds

There are no known sovereign wealth funds in Laos.

Capital Markets and Portfolio Investment

Latvian government policies do not interfere with the free flow of financial resources or the allocation of credit. Local bank loans are available to foreign investors.

Money and Banking System

Latvia’s retail banking sector, which is composed primarily of Scandinavian retail banks, generally maintains a positive reputation. Latvian banks servicing non-resident clients, however, have come under increased scrutiny for inadequate compliance with anti-money laundering standards. In 2018, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) identified Latvia’s third-largest bank as a “foreign bank of primary money laundering concern” and issued a proposed rule prohibiting U.S. banks from doing business with or on behalf of the bank. The Latvian bank regulator has also levied fines against several non-resident banks for AML violations in recent years.

Latvia is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a Financial Action Task Force (FATF)-style regional body. On August 23, 2018, MONEYVAL issued a report finding that Latvia’s AML regime was in substantial compliance with only one out of eleven assessment categories, was in moderate compliance with eight areas, but in low compliance with two areas. In late 2019 and early 2020, MONEYVAL and the FATF concluded that Latvia has developed and implemented strong enough reforms for combating financial crimes to avoid increased monitoring via the so-called “grey list.” While it will continue enhanced monitoring under MONEYVAL to continue strengthening the system, with this decision, Latvia became the first member state under the MONEYVAL review to successfully implement all 40 FATF recommendations. The most recent MONEYVAL report can be found at: https://rm.coe.int/anti-money-laundering-and-counter-terrorist-financing-measures-latvia-/16809988c1 

According to Latvian banking regulators, Latvia’s regulatory framework for commercial banking incorporates all principal requirements of EU directives, including a unified capital and financial markets regulator. Existing banking legislation includes provisions on accounting and financial statements (including adherence to international accounting), minimum initial capital requirements, capital adequacy requirements, large exposures, restrictions on insider lending, open foreign exchange positions, and loan-loss provisions. An Anti-Money Laundering Law and Deposit Guarantee Law have been adopted. An independent Financial Intelligence unit (FIU) operates under the supervision of the Ministry of Interior. Some of the banking regulations, such as capital adequacy and loan-loss provisions, reportedly exceed EU requirements.

According to the Finance Latvia Association, total assets of the country’s banks at the end of 2020 stood at 24.56 billion euros. More information is available at: https://www.financelatvia.eu/en/industry-data/ .

Securities markets are regulated by the Law on the Consolidated Capital Markets Regulator, the Law on the Financial Instrument Market, and several other laws and regulations.

The NASDAQ/OMX Riga Stock Exchange (RSE) ( www.nasdaqomxbaltic.com ) operates in Latvia, and the securities market is based on the continental European model. Latvia, Estonia, and Lithuania have agreed to create a pan-Baltic capital market by creating a single index classification for the entire Baltic region. Latvia is currently rated by various index providers as a frontier market due to its small size and limited liquidity. More information is available here: https://www.ebrd.com/news/2019/latvia-takes-next-step-toward-a-panbaltic-capital-market.html 

Foreign Exchange and Remittances

Foreign Exchange

The currency of Latvia is the euro. There are no restrictions on exchanging currencies or capital movement and foreign investors are allowed to extract their profits in any currency with no restraints. As of March 18, 2021, one euro is worth $1.1912. Details available here: https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/eurofxref-graph-usd.en.html 

Remittance Policies

Latvian law provides for unrestricted repatriation of profits associated with an investment. Investors can freely convert local currency into foreign exchange at market rates, and have no difficulty obtaining foreign exchange from Latvian commercial banks for investment remittances. Exchange rates and other financial information can be obtained at the European Central Bank website: https://www.ecb.europa.eu/stats/exchange/eurofxref/html/index.en.html .

Sovereign Wealth Funds

Latvia does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

There are no restrictions on portfolio investment, and foreign investors may invest in Lebanese equities and fixed income certificates.  While legally Lebanon is a free market economy and does not restrict the movement of capital into or out of the country, the country’s banks have imposed informal capital controls on dollar withdrawals and financial outflows from Lebanon since October 2019. There are de facto restrictions on outbound payments and transfers for current international transactions, but these have yet to be codified into law. Although in April 2020, the Central Bank of Lebanon required money transfer services such as Western Union and MoneyGram to disburse inbound transfers in local currency, the Central Bank later allowed them to disburse in U.S. dollars by August 2020, ostensibly to attract remittance inflows. The Banking Control Commission of Lebanon (BCCL) has a department which oversees and conducts on-site and off-site audits of money exchange institutions and electronic money transfer firms operating in Lebanon using a risk-based supervision approach.

Credit is allocated on market terms, and foreign investors may obtain credit facilities on the local market.  However, as Lebanon entered its economic crisis in the fall of 2019 and defaulted on its dollar-denominated debt in March 2020, local and international credit is virtually nonexistent. Banks have substantially reduced retail loans, such as housing, consumer, or personal loans, as well as have reduced heavily international limits of credit and debit cards, and maintains commercial loans mainly to agriculture, industrial and trade sectors for SMEs and large corporates.

Government legislation allows the listing of tradable stocks on the Beirut Stock Exchange (BSE).  By regulation, an investor should inform the BSE when her/his portfolio of shares in any listed company reaches ten percent and five percent in any listed bank.  For an investor to acquire more than five percent of shares of any listed bank requires prior approval from the Central Bank.  Currently, the BSE lists six commercial banks, four companies including Solidere – one of the largest publicly held companies in the region – and eight sovereign Eurobond issues (all in U.S. Dollars). However, the BSE suffers from a lack of liquidity and low trading volumes in the absence of significant institutional and foreign investors and had an annual trading volume of only 3.2 percent of market capitalization in 2020.  Weak market turnover discourages investors from committing funds to the market and discourages issuers from seeking listings on the BSE.

Traditional businesses owned by commercially powerful families dominate most sectors.  The government is trying to improve the transparency of such firms to help solidify an emerging capital market for company shares.  The Cabinet approved in September 2017 a decree to establish the Beirut Stock Exchange SAL (BSE SAL) as a joint-stock company that will replace the current BSE.  Initially, the Lebanese state will own the capital of BSE SAL and will privatize the company within one year.  The delay in the process triggered the CMA to issue in January 2019 a Request for Proposal (RFP) for an electronic trading platform that will allow trading in products not traded in the BSE, such as foreign currencies, commodities, and listed SMEs and start-ups. The CMA has granted the winning consortium of Bank Audi and the Athens Stock Exchange (ATHEX) a license to set up and operate an electronic trading platform (ETP). The consortium will contribute capital of $20 million to a special purpose vehicle (SPV) that will be created to operate the platform. The consortium has opened the door for banks and financial institutions to also contribute to the SPV’s capital. After ten years of operating the ETP, the consortium will have to list nearly 60 percent of the SPV shares on the ETP. More information can be found on: www.cma.gov.lb/.  Lebanon hosts the headquarters of the Arab Stock Exchanges.

Money and Banking System

Lebanon’s banks are insolvent. The government’s April 2020 economic plan estimated losses in Lebanon’s financial sector at $83 billion dollars; as of March 2021, many economists believe the number is closer to $100 billion in losses. Banks are no longer serving their core functions: making productive loans or allowing those with dollar deposits to withdraw them. Clients cannot transfer money overseas. Lebanon has yet to adopt formal capital controls legislation, but most economic analysts believe such a law is necessary to preserve what limited foreign currency is left in the country and provide a level playing field to all Lebanese. At the behest of the Central Bank, in April 2020, banks began providing Lebanese lira at rates higher than the official pegged rate to customers with dollar-denominated accounts, but less than 60 percent of the market value of USD banknotes.

Lebanon relied on dollar inflows from abroad to finance imports and public spending and to maintain the Lebanese lira-to-USD peg, in place since 1997. Those dollars were deposited in Lebanese banks, which in turn lent them to the state in the form of deposits at the Central Bank or Lebanese debt instruments. Nearly 70 percent of bank assets are tied to the sovereign in those two forms. In 2019, as dollar inflows dried up and banking sector assets were tied to long-term deposits at the Central Bank and illiquid debt instruments, banks had trouble meeting their dollar obligations to clients, planting the seeds of the current crisis.

Lebanon’s default on its dollar-denominated debt in March 2020 – Lebanese banks at the time held $12.7 billion in Lebanon’s dollar bonds – further eroded the balance sheets of Lebanese banks. Financial experts estimated that 40 percent of loans from Lebanese banks were non-performing in December 2020. Bankers reported that correspondent banks overseas have stopped providing them with lines of credits – or only provide facilities with onerous conditions – further hampering bank efficacy in Lebanon. Lebanon’s April 30, 2020 economic plan hinted at a potential “haircut” on dollar deposits, in which wealthy account holders could lose some of their deposits to help recapitalize banks after shareholders “bail-in” (convert their deposits into bank shares) their financial institutions. In May 2020, banks released their own economic plan suggesting they be given state assets to cover losses rather than a “bail-in” or “haircut,” leading to an impasse that persists today, with necessary financial sector restructuring on hold.

The Lebanese banking sector covers the entire country with 1,047 operating commercial and investment bank branches as of June 2020. According to World Bank Development indicators, there are 534 depositors with commercial banks per 1,000 adults, 215 borrowers from commercial banks per 1,000 adults, and 38 ATMs per 100,000 adults. The total domestic assets of Lebanon’s fifteen largest commercial banks reached approximately $165 billion as of the end of 2020 (about 86.6 percent of total banking assets), according to Central Bank data.

Lebanon’s Central Bank was established in 1963. Lebanon’s Central Bank imposes strict compliance with regulations on banks and financial institutions, and commercial banks, in turn, maintain strict compliance regimes.  However, the United States designated Jammal Trust Bank in August 2019 as a Specially Designated Global Terrorist for its role in financing Foreign Terrorist Organization Hizballah. Foreign banks and branches need the Central Bank’s approval to establish operations in Lebanon.  Moreover, any shareholder with more than five percent of a bank’s share capital must obtain prior approval from the Central Bank to acquire additional shares in that bank, and must inform the Central Bank when selling shares.  In addition, any shareholder needs to obtain prior approval from the Central Bank if he/she wants to become a board member.   The use of cryptocurrencies is prohibited in Lebanon by the Central Bank.  The Central Bank announced that it is developing a digital currency that it plans to issue for domestic use only.

There are no legal restrictions in Lebanon on a foreigner or non-resident’s ability to open a bank account in local or foreign currency, provided they abide by Lebanese compliance rules and regulations.  Currently, however, most banks are not taking on new clients or new accounts. Banks claim they have stringent inquiry mechanisms to ensure compliance with international and domestic regulations and implement Lebanon’s anti-money laundering and counter-terror finance laws.  Banks inform customers of Know-Your-Customer requirements and ask them about the purpose of opening new accounts and about the sources of funds to be deposited.  Lebanese banks note they are compliant with the Foreign Account Tax Compliance Act (FATCA).  Lebanon adopted the OECD Common Reporting Standards since January 1, 2018.

Foreign Exchange and Remittances

Foreign Exchange

Commercial banks in late 2019 introduced informal capital controls on Lebanese depositors to stem the outflow of foreign currency; these controls have persisted today, and banks have barred virtually all overseas transfers. Clients with Lebanese lira (LBP) denominated accounts can only convert their lira to dollars outside of banks at licensed and unlicensed money exchangers.

As of March 2021, Lebanon in practice had several different exchange rates. Since 1997, the LBP has been pegged to the U.S. dollar at 1,507.5 LBP/1 USD. However, as Lebanese continue to demand scarce dollars in the Lebanese financial system, the currency depreciated on the parallel market, the only source of U.S. dollar banknotes for most Lebanese. The Central Bank only made dollars available to importers at the official rate for imports of fuel, wheat, and medicine. It has also made dollars available at 3,900 LBP/1 USD for importers of “critical” food items. This 3,900 LBP/1 USD rate is also the “bank rate” – the rate at which banks convert U.S. dollar-denominated accounts to local currency when clients withdraw dollars. The prevailing market rate for U.S. dollar banknotes, however, reached 10,000 LBP/1 USD on March 2, 2021, and 15,000 LBP/1 USD two weeks later. As of April 12, the prevailing market rate was 13,000 LBP/1 USD. Different stores and shops offered varying exchange rate conversions at ad hoc rates as well.

The conversion of foreign currencies or precious metals is unfettered. Lebanon’s Central Bank posts a daily local currency-exchange rate on its website:   http://www.bdl.gov.lb/ . Lebanon has one of the most heavily dollarized economies in the world, and businesses commonly accept payment (and return change) in a combination of LBP and U.S. dollars, but given the scarcity of U.S. dollars, some businesses offered discounts or better prices for cash dollar payments.

Remittance Policies

While capital controls curtailed the ability of those holding dollar-denominated bank accounts in Lebanon to withdraw or transfer their currencies overseas, those in Lebanon with access to “fresh dollars” (i.e., new dollars from abroad or not from within the local financial system) were able to access, withdraw, and transfer overseas dollars. For the vast majority of Lebanese and businesses in Lebanon, remitting any money overseas, including investment returns, remained nearly impossible. Most economists believe capital controls must continue for the foreseeable future to prevent a bank run and preserve the limited foreign currency remaining in Lebanon, although they prefer formal and legal capital controls passed by Lebanon’s Parliament.

Sovereign Wealth Funds

Lebanon does not have a sovereign wealth fund. The government’s economic rescue plan, approved by the Cabinet on April 30, 2020, calls for the creation of a Public Asset Management Company that would include state assets and properties to help restore depositors’ funds and boost economic recovery. Lebanon’s Offshore Petroleum Resource Law states that proceeds generated from oil and gas exploration must be deposited in a Sovereign Wealth Fund.  Creating the fund requires a separate law, which the government has yet to adopt.  Lebanon currently receives no proceeds from natural resources that could flow into a sovereign wealth fund.

Capital Markets and Portfolio Investment

Through the Central Bank of Lesotho (CBL), the GOL promotes the development of financial markets in Lesotho. Lesotho’s capital market is relatively underdeveloped, with no secondary market for capital market transactions.  The Maseru Securities Market launched in 2016 under the wing of the CBL will soon list the first company on its stock exchange. The trading of government bonds; corporate bonds and company shares is strictly electronic— there is no physical building.  For now, bond trading is operated by the Central Bank of Lesotho. For the 2020/21 fiscal year, the government financed a fiscal deficit of approximately USD 85.7 million through external borrowing.

The government accepted the obligations of IMF Article VIII in 1997 and continues to refrain from imposing restrictions on the making of payments and transfers for current international transactions.  Foreign participation in government securities is allowed as long as foreign investors can open accounts with local banks through which funds can be collected.  Lesotho is part of the Common Monetary Area (CMA). The current account has been fully liberalized for all inward and outward cross-border transactions.  However, some transactions still need approval from the Central Bank.  A Central Bank Report reflected that Private Sector credit from the banking sector declined by 0.7 percent in February 2020 while a decline of 0.2 percent was registered in January 2020.

Credit is allocated on market terms, and foreign investors are able to get credit on the local market.  Interest rates are quite high by global standards. LNDC does not provide credit to foreign investors but can acquire equity in foreign companies investing in strategic economic sectors.  The private sector has access to a limited number of credit instruments, such as credit cards, loans, overdrafts, checks, and letters of credit. In January 2016, Lesotho’s first credit bureau was launched and has been functional. In July 2020, the parliament passed the Secured Interest in Movable Property Act to allow movable property to be considered as collateral in requesting for credit from commercial banks.

Money and Banking System

Lesotho has a central bank and four commercial banks, including subsidiaries of

South African banks (subject to measures and regulations under the Institutions Act of 2012) and the government-owned Lesotho Post Bank. Commercial banks in Lesotho are well-capitalized, liquid, and compliant with international banking standards; however, interest rates are high by global standards.  Three South African banks account for almost 92.5 percent of the country’s banking assets, which totaled over M17.07 billion (USD 1.1 billion) by December 2019.  The share of bank nonperforming loans to total gross loans was approximately 3.3 percent in December 2019.  Foreigners are allowed to establish a bank account and may hold foreign currency accounts in local banks; however, they are required to provide a residence permit as a precondition for opening a bank account to comply with the “know your customer” requirements. The country lost one correspondent banking relationships in the past three years.  Currently there are no banking relationships in jeopardy.

Foreign Exchange and Remittances

Foreign Exchange

There are restrictions on converting or transferring funds associated with an investment into a freely usable currency and at a legal market-clearing rate.  Funds can only be converted into the world’s widely recognized currencies such as the U.S. dollar, British Pound, and the Euro. Incoming funds can be converted into the local currency if the investor does not have the Customer Foreign Currency (CFC) account. If the investor has a CFC account, such funds can remain foreign in that account without any obligation to convert to Maloti.

Remittance Policies

According to the CBL, there are no plans to change remittance policies.  The current average delay period for remitting investment returns such as dividends, return of capital, interest and principal on private foreign debt, lease payments, royalties, and management fees through normal legal channels is two days, provided the investor has submitted all the necessary documentation related to the remittance. There has never been a case of blockage of such transfers, and shortages of forex that could lead to blockage are unlikely given that the CBL maintains net international reserves at a target of 4.3 months of import cover.

Payments of royalties should seek approval from the Central Bank. Export proceeds should be repatriated into the country within the period of six months (180 days).

Sovereign Wealth Funds

There is no sovereign wealth fund or asset management bureau in Lesotho.

Capital Markets and Portfolio Investment

The Liberian government welcomes foreign investment, although Liberia’s domestic capital market is not well developed. Private sector investors have limited credit and investment options. The government does not hold foreign portfolio investments abroad. Liberia offers no domestic capital market or portfolio investment option, such as a stock market, in the country. In 2019, the Central Bank of Liberia (CBL) began issuing CBL bills, but in 2020, the CBL reported a declining trend in the issuance of its bills, partly due to sluggish commercial activities occasioned by COVID-19 and low demand from the commercial banks. The CBL respects IMF Article VIII and does not implement restrictions on payments and transfers for current international transactions. Many foreign investors prefer to obtain credit from, and retain profits, in foreign banking institutions.

Money and Banking System

Nine commercial banks, branch outlets including payment windows/annexes, a development finance company, and a deposit taking microfinance institution provide banking services within Liberia.  Eight of the commercial banks are foreign banks. Numerous licensed foreign exchange bureaus, microfinance institutions, credit unions, rural community finance institutions, and village savings and loan associations (“susus”) also provide financial services.  Foreign banks or branches can establish operations in Liberia, subject to regulations set out by the Central Bank of Liberia (CBL).  There are no restrictions on foreigner’s ability to establish a bank account with any of the commercial banks.

The commercial banking system in Liberia is small, and although generally stable, chronic shortages of Liberian dollar currency in the past several years have undermined confidence in the banking sector. The CBL describes the banking industry as “generally safe, sound and viable” based on its published indicators of financial health. At the end of calendar year 2020, the capital adequacy ratio was approximately three times higher than the regulatory minimum, and the liquidity ratio was 2.5 times higher.

According to a 2019 report by the Central Bank of Liberia (CBL), a significant number of commercial bank assets were held in Liberian government bonds which cannot easily be converted into liquid assets (cash), due to cash availability issues. As of December 2020, the CBL reported L$6 billion (approx. USD 35 million) in outstanding treasury bills. Starting in 2018, commercial banks and businesses have reported considerable difficulty in accessing Liberian dollars.  In addition, since 2019, commercial banks, businesses, and private individuals have had difficulties accessing U.S. dollars. Beginning June 2020, it became increasing difficult for businesses and private individuals to access Liberian dollars through commercial banks due to continued shortage in currency in the banking system. Also in 2020, banks reported shortages in both Liberian and the U.S. dollars liquidity and attributed the shortage to hoarding of large amounts of currency by large businesses and individuals. In addition, some commercial bank representatives have expressed concern about the CBL’s capability to manage the banking sector effectively.

The CBL has engaged several short- and long-term measures, including printing of a small amount of Liberian dollar banknotes and promoting the usage of electronic payment platforms (mobile money, electronic fund transfers, etc.), in its attempt to restore public confidence in the banking system and mitigate the liquidity pressure in the economy. Liberia’s constitution requires that the legislature authorize the printing of currency, which the CBL officially proposed on February 4. The country awaits the Legislature’s authorization to print new banknotes followed by a procurement and printing process to partially relieve its currency issues.

Commercial banks face persistent challenges in profit generation and loan repayment. The issue of non-performing loans (NPLs) remains a major challenge in the banking sector and continues to negatively affect profitability.  Although NPLs are down from their peak in the summer of 2020, they remain more than double the CBL’s threshold.

The CBL reported a NPL ratio of 15% in December 2020, down from the previous high of over 20% earlier in the year. These are still more than double the CBL’s threshold.

Foreign banks or branches can establish operations in Liberia, subject to regulations set out by the CBL. There are no restrictions on foreigner’s ability to establish a bank account with any of the commercial banks, beyond standard know your customer rules.

Foreign Exchange and Remittances

Foreign Exchange

Foreign investors may convert, transfer, and repatriate funds associated with an investment (e.g., remittances of investment capital, earnings, loans, lease payments, and royalties).  Liberian law allows for the transfer of dividends and net profits after tax to investors’ home countries.

Liberia has a floating exchange rate system. Both the Liberian Dollar (LD) and U.S. Dollar (USD) are legal tender. Market supply and demand dictates the exchange rate. The CBL sets and displays official, indicative exchange rates (thresholds) on daily basis. It requires commercial banks and licensed money exchange bureaus to display their daily LD to USD market exchange rates which generally are close to CBL threshold rates.  In addition to commercial banks, licensed foreign exchange bureaus, petrol stations, supermarkets, and other stores provide exchange services. Many unregistered or unlicensed money exchangers exchange money throughout the country.

Remittance Policies

Liberia permits 100 percent repatriation of funds and does not have currency exchange restrictions. Remittances may be sent to Liberia through Western Union, MoneyGram, RIA Money Transfer, and wire transfer.

Sovereign Wealth Funds

The Government of Liberia does not maintain a Sovereign Wealth Fund (SWF) or similar entity.

Capital Markets and Portfolio Investment

The Libyan government passed a law in 2007 to establish a stock market, primarily to support privatization of SMEs, but it is not well-capitalized, has few listings, and does not have a high volume of trading. Capital markets in Libya are underdeveloped, and the absence of a venture capital industry limits opportunities for SMEs with growth potential and innovative start-ups to access risk financing for their ventures.

Money and Banking System

Libya has been attempting to modernize its banking sector since before the revolution, including through a privatization program that has opened state-owned banks to private shareholders. The Central Bank of Libya (CBL) owns the Libyan Foreign Bank, which operates as an offshore bank, with responsibility for satisfying Libya’s international banking needs (apart from foreign investment). The banking system is governed by Law No. 1 of 2005, as amended by Law No. 46 of 2012 on Islamic banking. In accordance with that amendment, Law No. 1 of 2013 prohibits interest in all civil and commercial transactions. The banking modernization program has also been seeking, among other components, to establish electronic payment systems and expand private foreign exchange facilities.

The CBL is responsible for the receipt of all of Libya’s oil revenues, prints Libyan dinars, and controls the country’s foreign exchange reserves. After being effectively divided since 2014 between its eastern and western branches as a result of the civil conflict, the CBL is beginning the process of reunifying following the establishment of a unity government in March 2021. Both CBL branches are currently undergoing an audit by a respected international firm, which will help restore integrity, transparency and confidence in the Libyan financial system and create a foundation for the CBL’s reunification.

The CBL in Tripoli controls access to all foreign currency in Libya, and it provides Libyans access to hard currency by issuing letters of credit (LCs). Access to LCs in Libya has historically been an issue, but in January 2021 the CBL set a single, unified foreign exchange rate (described in the next section), which is expected to increase importers’ access to LCs.

The availability of financing on the local market is weak. Libyan banks can only offer limited financial products, loans are often made on the basis of personal connections (rather than business plans), and public bank managers lack clear incentives to expand their portfolios. Lack of financing acts as a brake on Libya’s development, hampering both the completion of existing projects and the start of new ones. This has been particularly damaging in the housing sector, where small-scale projects often languish for lack of steady funding streams. Libya tied for last on the ease of getting credit in the World Bank ‘Ease of Doing Business’ index.

Foreign Exchange and Remittances

Foreign Exchange

The 2010 Investment Law provides investors the right to open an account in a convertible currency in a Libyan commercial bank and to obtain local and foreign financing. The Libyan Banking Law (Law No. 1 of 2005) allows any Libyan person or entity to retain foreign exchange and conduct exchanges in that currency. Libyan commercial banks are allowed to open accounts in foreign exchange and conduct cash payments and transfers (including abroad) in foreign currency. Commercial banks operating in Libya may grant credit in foreign exchange and transact in foreign exchange among themselves.

The Central Bank set a single, unified official exchange rate of 4.48 LYD/USD in January 2021. Previously, the official rate was 1.4 LYD/USD for the purposes of government procurement, while private entities were charged roughly 3.7 LYD/USD by the Central Bank. There exists a significant black market for hard currency that for the past several years typically exchanged Libyan dinars for foreign exchange at a rate nearly double the official private rate, but the CBL’s setting of a single exchange rate has thus far significantly lowered the black market rate, which hovered around 5 LYD/USD as of March 21, 2021. Entities engaging in foreign exchange must be licensed by the Central Bank. Foreign exchange facilities are available at most large hotels and airports, and ATMs are becoming more widely available. The importation of currency must be declared at time of entry. The Central Bank’s Decree No. 1 of 2013 regulates foreign exchange, including by specifying authorities for the execution of foreign transfers, and by prescribing limits on the transfer of currency abroad for different public and private entities.

Most firms seeking to receive payment for services/products in Libya operate using letters of credit facilitated through foreign banks (often based in Europe). Foreign energy companies remitting large sums often make arrangements for direct transfers to accounts offshore. While the introduction of the foreign exchange fee in September 2018 greatly facilitated the Central Bank’s issuance of LCs, in response to the January 2020 oil shutdown the Central Bank has generally limited LCs to a minimum of $100,000 with a three-month limit to complete transactions.

Remittance Policies

The 2010 Investment Law allows for the remittance of net annual profits generated by an investment and of foreign invested capital in case of liquidation, expiration of the project period, or insurmountable impediments to the investment within the first six months. As noted, the Central Bank charges a foreign exchange fee of 163 percent on sales of Libyan dinars for hard currency.

Sovereign Wealth Funds

Libya maintains a sovereign wealth fund called the Libya Investment Authority (LIA). UN Security Council Resolution 1970 (2011) froze many of the LIA’s assets outside Libya. The freeze on the LIA’s assets is intended to preserve Libya’s assets through its post-revolutionary transition for the benefit of all Libyans. An evaluation of the LIA’s assets in 2012 put their value at USD 67 billion; a new assets valuation has just been completed by an international firm but the figure has yet to be publicly released. The international community and private consultancies continue to provide technical assistance to the LIA to help it improve its governance, including adherence to the Santiago Principles, a set of 24 widely accepted best practices for the operation of sovereign wealth funds. The LIA is also currently undergoing an audit by an international firm.

Capital Markets and Portfolio Investment

Government policies do not interfere with the free flow of financial resources or the allocation of credit. In 1994, Lithuania accepted the requirements of Article VIII of the Articles of Agreement of the International Monetary Fund to liberalize all current payments and to establish non-discriminatory currency agreements. Lithuania ensures the free movement of capital and does not plan to impose any restrictions. The government imposes no restrictions on credits related to commercial transactions or the provision of services, or on financial loans and credits. Non-residents may open accounts with commercial banks.

Money and Banking System

The banking system is stable, well-regulated, and conforms to EU standards. Currently there are 11 commercial banks holding a license from the Bank of Lithuania, six foreign bank branches, two foreign bank representative offices, the Central Credit Union of Lithuania and 65 credit unions. Two hundred-eighty EU banks provide cross-border services in Lithuania without a branch operating in the country, and three financial institutions controlled by EU licensed foreign banks provide services without a branch. Nearly all foreign banks are headquartered in Sweden, Norway, and Denmark. By the end of 2018 the total assets of major Lithuanian banks were $32.1 billion:

• Swedbank – 37.1% (swedbank.lt)
• SEB – 27.1% (seb.lt)
• Luminor 20.8% (luminor.lt)
• Siauliu Bankas – 7.9% (sb.lt)

Other smaller banks:

• Citadele (citadele.lt)
• Siaulius Bankas (sb.lt )
• Medicinos Bankas (medbank.lt)
• Finasta (http://finasta.com/lit/lt)
• Revolut (revolut.com )
• European Merchants Bank (europeanmerchantbank.com)
• Mano Bankas (mano.bank)

Effective January 1, 2015, all of the banks are controlled by the European Central Bank and the Bank of Lithuania. There is no restriction on portfolio investment. The right of ownership to shares acquired through automatically matched trades is transferred on the third working day following the conclusion of the transaction. The Vilnius Stock Exchange is part of the OMX group of exchanges and offers access to 80 percent of all securities trading in the Nordic and Baltic marketplace. OMX is owned by the U.S. firm NASDAQ and the Dubai Bourse. The supervisory service at the Bank of Lithuania oversees commercial banks and credit unions, securities market, and insurance companies. Lithuanian law does not regulate hostile takeovers.

Foreign Exchange and Remittances

Foreign Exchange

Lithuania has no restrictions on foreign exchange.

Remittance Policies

Lithuanian remittance policies allow free and unrestricted transfers.

Sovereign Wealth Funds

Lithuania does not maintain any Sovereign Wealth Funds.

Capital Markets and Portfolio Investment

Luxembourg government policies, which reflect the European Union’s free movement of capital framework, facilitate the free flow of financial resources to support the product and factor markets. Credit is allocated on market terms, and foreign investors can get credit on the local market, thanks to the sophisticated and extremely developed international financial sector, depending on the banks’ individual lending policies.

Since the financial crisis and tighter regulation through EU central banking authority and stability mechanisms, banks had become more selective in their lending practices pre-COVID. The private sector has access to a variety of credit instruments, including those issued by the National Public Investment Agency (SNCI), and there is an effective regulatory system established to encourage and facilitate portfolio investment.

Luxembourg continues to be recognized as a model of fighting money-laundering activities within its banking system through the enactment of strict regulations and monitoring of fund sources. Indeed, the number of enforcements reflects the degree to which the government remains committed to fighting money-laundering. The country has its own stock market, a sub-set of which was rebranded in 2016 as a “green exchange” to promote securities (primarily bonds in Luxembourg) reflecting ecologically sound investments.

Money and Banking System

Luxembourg’s banking system is sound and strong, having been shored up following the global financial crisis by emergency investments by the Government of Luxembourg in BGL BNP Paribas (formerly Banque Generale du Luxembourg and then Fortis) and in Banque Internationale a Luxembourg (BIL), formerly Dexia, in 2008.

At the end of 2020, 128 credit institutions were operating, with total assets of EUR 851 billion during the first quarter of 2020 (USD 1,018 billion), and approximately 26,000 employees.

Luxembourg has a central bank, Banque Centrale de Luxembourg. Foreign banks can establish operations, subject to the same regulations as Luxembourgish banks.

Due to the U.S. FATCA law, local retail bank Raiffeisen bank still refuses U.S. citizens as clients. However, two banks have offered to serve U.S. citizen customers: BIL and the State Bank and Savings Bank (Banque et Caisse d’Epargne de l’Etat).

On February 21, 2018, the Luxembourg House of Financial Technology (LHoFT) signed a Memorandum of Understanding (MoU) with the European FinTech platform, B-Hive, based in Brussels, and the Dutch Blockchain Coalition, that will favor collaboration in the field of distributed ledger technology, otherwise known as blockchain. The MoU confirms mutual interest and defines the fields of collaboration, among other things, on how blockchain technology can benefit society and business in general or on how they can help define international and/or European standards for distributed ledger technology.

The Ministry of Finance is tracking developments very closely in the field of virtual currencies and has said it will adapt its legislation in accordance with the results of ongoing European and international studies. Luxembourg places virtual currencies under the legal regime of payment companies. The CSSF continues close supervision and oversight of virtual currencies.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, lease payments) into a freely usable currency and at a legal market-clearing rate. Luxembourg was a proponent of the euro currency and adopted it immediately at inception in 1999 (as part of the “Eurozone” of EU member states adopting the euro to replace their former domestic currencies.) The European Central Bank is the authority in charge of the euro currency. Pre COVID, Luxembourg has taken steps to move toward a “cash-less” system and the COVID-19 pandemic further accelerated the move towards an increasingly “cash-less” economy.

Remittance Policies

There have not been any recent changes to remittance policies with respect to access to foreign exchange for investment remittances. There is no difficulty in obtaining foreign exchange, which has been freely traded since the 1960s, and the Luxembourg stock market trades in forty different currencies, so is truly international and expanding rapidly.

The average delay period currently in effect for remitting investment returns such as dividends, return of capital, interest and principal on private foreign debt, lease payments, royalties and management fees through normal, legal channels is approximately 24 hours. Investors can remit through a legal parallel market including one utilizing cash and convertible negotiable instruments (such as dollar-denominated host government bonds issued in lieu of immediate payments in dollars). There is no limitation on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or imported inputs.

Sovereign Wealth Funds

Luxembourg created a sovereign wealth fund in 2014. The fund is under the auspices of the Ministry of Finance and operates with 234 million euros of assets. Until the fund reaches 250 million euros of assets, it operates a conservative investment policy, with a portfolio of 57% of bonds, 40% of stocks and 3% of liquidities. The sovereign wealth fund only invests outside of Luxembourg and is audited by an independent audit company.

Capital Markets and Portfolio Investment

Macau allows free flows of financial resources.  Foreign investors can obtain credit in the local financial market.  The GOM is stepping up its efforts to develop finance leasing businesses and exploring opportunities to establish a system for trade credit insurance to take a greater role in promoting cooperation between companies from Portuguese-speaking countries.

Since 2010, the People’s Bank of China (PBoC) has provided cross-border settlement of funds for Macau residents and institutions involved in transactions for RMB bonds issued in Hong Kong.  Macau residents and institutions can purchase or sell, through Macau RMB participating banks, RMB bonds issued in Hong Kong and Macau.  The Macau RMB Real Time Gross Settlements (RMB RTGS) System came into operation in March 2016 to provide real-time settlement services for RMB remittances and interbank transfer of RMB funds.  The RMB RTGS System is intended to improve risk management and clearing efficiency of RMB funds and foster Macau’s development into an RMB clearing platform for trade settlement between China and Portuguese-speaking countries.  In December 2019, the PBoC canceled an existing quota of RMB 20,000 (USD 3,057) exchanged in Macau for each individual transaction.

Macau has no stock market, but Macau companies can seek a listing in Hong Kong’s stock market.  Macau and Hong Kong financial regulatory authorities cooperate on issues of mutual concern.  Under the Macau Insurance Ordinance, the MMA authorizes and monitors insurance companies.  There are 12 life insurance companies and 13 non-life insurance companies in Macau.  For the first three quarters of 2020, total gross premium income from insurance services amounted to USD 6.0 billion.

In October 2018, the Legislative Assembly took steps to tackle cross-border tax evasion.  Offshore institutions in Macau and their tax benefits, including credit institutions, insurers, underwriters, and offshore trust management companies, were thoroughly abolished starting from January 1, 2021.  Decree 9/2012, in effect since October 2012, stipulates that banks must compensate depositors up to a maximum of MOP 500,000 (USD 62,500) in case of a bank failure.  To finance the deposit protection scheme, the GOM has injected MOP 150 million (USD 18.75 million) into the deposit protection fund in 2013, with banks paying an annual contribution of 0.05 percent of the amount of protected deposits held.  The deposit protection fund had MOP 486 million (USD 60.75 million) available by the end of 2018, according to the MMA.

Money and Banking System

The MMA functions as a de facto central bank.  It is responsible for maintaining the stability of Macau’s financial system and for managing its currency reserves and foreign assets.  At present, there are thirty-one financial institutions in Macau, including 12 local banks and 19 branches of banks incorporated outside Macau.  There is also a finance company with restrictive banking activities, two financial leasing companies and a non-bank credit institution dedicated to the issuance and management of electronic money stored value card services.  In addition, there are 11 moneychangers, two cash remittance companies, two financial intermediaries, six exchange counters, two payment service institutions, and two other financial institutions (one is a representative office).  The Bank of China (Macau) and Industrial and Commercial Bank of China (ICBC) are the two largest banks in Macau, with total assets of USD 79.8 billion and USD 33.9 billion, respectively.  Banks with capital originally from mainland China and Portugal had a combined market share of about 86 percent of total deposits in the banking system at the end of 2016.  In 2019, the total assets of the banking sector amounted to USD 252 billion.  Total deposits amounted to USD 83.8 billion by the end of 2019.  In the fourth quarter of 2020, banks in Macau maintained a capital adequacy ratio of 14.5 percent, well above the minimum eight percent recommended by the Bank for International Settlements.  Accounting systems in Macau are consistent with international norms.

The MMA prohibits the city’s financial institutions, banks, and payment services from providing services to businesses issuing virtual currencies or tokens.  In December 2020, the MMA said it  is communicating with the People’s Bank of China (PBoC) about the feasibility of issuing digital currency in Macau.

Foreign Exchange and Remittances

Foreign Exchange

Profits and other funds associated with an investment, including investment capital, earnings, loan repayments, lease payments, and capital gains, can be freely converted and remitted.  The domestic currency, the Macau Official Pataca (MOP), is pegged to the Hong Kong Dollar at 1.03 and indirectly to the U.S. Dollar at an exchange rate of approximately MOP 7.99 = USD 1.  The MMA is committed to exchange rate stability through maintenance of the peg to the Hong Kong Dollar.

Although Macau imposes no restrictions on capital flows or foreign exchange operations, exporters are required to convert 40 percent of foreign currency earnings into MOP.  This legal requirement does not apply to tourism services.

Remittance Policies

There are no recent changes to or plans to change investment remittance policies.  Macau does not restrict the remittance of profits and dividends derived from investment, nor does it require reporting on cross-border remittances.  Foreign investors can bring capital into Macau and remit it freely.

A Memorandum of Understanding on anti-money laundering (AML) actions between MMA and PBoC, increased information exchanges between the two parties, as well as cooperation on onsite inspections of casino operations.  Furthermore, Macau’s terrorist asset-freezing law, which is based on United Nations (UN) Security Council resolutions, requires travelers entering or leaving with cash or other negotiable monetary instruments valued at MOP 120,000 (USD 15,000) or more to sign a declaration form and submit it to the Macau Customs Service.

In December 2019, the PBoC increased a daily limit set on the amount of RMB-denominated funds sent by Macau residents to personal accounts held in mainland China from RMB 50,000 (USD 6,250) to RMB 80,000 (USD 10,000).

Sovereign Wealth Funds

The International Monetary Fund (IMF) suggested in July 2014 that the GOM invest its large fiscal reserves through a fund modeled on sovereign wealth funds to protect the city’s economy from economic downturns.  In November 2015, the GOM decided to establish such a fund, called the MSAR Investment and Development Fund (MIDF), through a substantial allocation from the city’s ample fiscal reserves.  However, the GOM in 2019 withdrew a draft bill that proposed the use of USD 7.7 billion to seed the MIDF over public concerns about the government’s supervisory capability.

Capital Markets and Portfolio Investment

Madagascar has neither a stock market nor a competitive and transparent bond market. Foreigners living overseas and companies with headquarters outside Madagascar cannot participate in its bond markets. In addition to market–based bonds with less than 52-week maturity, in the last few years, the Government has introduced longer-term bonds (maximum three-year maturity) with a more attractive return. Portfolio investment opportunities are extremely limited. Foreign investment in government debt is still limited to Malagasy nationals and legal residents.

There are no restrictions on payments and transfers for international currency transactions per IMF Article VIII. The Central Bank and the Ministry of Finance require documents prior to any transfer of currency to foreign countries. There is no ceiling imposed on international transactions, but justification remains mandatory.

The private sector has access to a variety of credit instruments. Credit is provided at market terms and can be offered either in local or foreign currency. Credit obtained in local currency is often more expensive than foreign currency due to inflation and lack of competition.

The Central Bank does not impose direct caps on loans but instead uses indirect tools to limit credit, such as imposing reserve requirements on banks (11 percent of deposits in local currency and 24 percent on deposits in foreign currency). The Central Bank adopted this new policy of differentiation in 2020 to encourage conversion of foreign currency deposits into Ariary. Foreign investors can get credit on the local market if they have an officially registered company/subsidiary located in the country. In December 2020, the average interest rates on loans to customers was as high as 13. percent, between 9.14 percent for long term loans and 15.5 percent for short term loans. For deposits, the average return was 2.64%.

Money and Banking System

Madagascar’s banking penetration rate is very low. Only 12 percent of the population has a bank account, which includes accounts with microfinance institutions. Less than three percent of the population has access to commercial bank loans, and there are just 97.3 deposit accounts per 1000 adults.

There are only eleven commercial banks in Madagascar. As rates are high and competition low, banking activities are very profitable. Loans and credit to the private sector represent 53% of bank assets whereas loans (including TB) to the government represent 17%. Non-performing loans accounted for 5% of overall loans and credit in 2019.

Overall assets of all commercial banks were USD 3.69 billion or 25.4% of GDP as of December 2019.

Madagascar has a central bank system. Its main objectives are to ensure the stability of the local currency internally (acceptable inflation rate) and externally (acceptable fluctuation of the exchange rate). The Central Bank has no clear mandate to promote economic growth. There is no inter-bank lending system in place. As part of ongoing ECF negotiations with the IMF, the Central Bank is currently weighing a strategy that would target interest rates instead of the money supply in order to ensure tighter control of monetary policy.

As of November 2019, the Central Bank is no longer using a benchmark rate as a reference to its monetary policy tools. Instead, it has implemented two different rates. The first is the deposit rate of 0.9% that commercial banks may use while depositing their excess of liquidity; the second rate is the lending rate set at 5.30%. Banks will use this latter rate while borrowing money from the Central Bank for their normal operations or to honor their reserve requirements. By adopting this policy, the Central Bank is adopting a clear expansionary policy as the lending rate has come down from 9.50% to 5.30%. This policy is consistent with a lower inflation rate of 4.5% in 2020.

Only one of eleven operating commercial banks is local. The other ten are subsidiaries of French, Moroccan, Gabonese, and Mauritian banks and are subject to prudential measures imposed by the CSBF or Banking and Financial Supervision Committee. Madagascar has not lost any correspondent banking relationships in the past three years nor are any currently in jeopardy.

Foreigners having legal residency status in the country can establish a bank account in either local or major foreign currencies (USD and Euro).

Foreign Exchange and Remittances

Foreign Exchange

Foreign investors do not face restrictions or limitations in converting, transferring, or repatriating funds associated with an investment. However, the monetary authorities and the Ministry of Economy and Finance require traceability of capital inflows and outflows. Funds can be freely converted into major foreign currencies.

Madagascar adopted a managed floating exchange rate system in 1994. The exchange rate fluctuates but the Central Bank intervenes to prevent abrupt depreciation or appreciation of the Ariary. In general, the Central Bank of Madagascar keeps the value of the Ariary fluctuating in a two percent range. The Central Bank’s regular interventions to stabilize the currency during the COVID-19 pandemic and resulting decline in Malagasy exports has limited depreciation to 4.7% during 2020.

In 2020, Madagascar set up a national gold reserve because of the implementation of the MOU between the Ministry of Mines and Strategic Resources (MMRS) and the Central Bank of Madagascar (BFM). The GOM not only wants to use gold as a reserve asset of the Central Bank but to use repatriation of profits from gold exports to strengthen the national currency. However, in September 2020, the GOM suspended gold exports after exporters failed to repatriate their profits and has since decided gold should stay in country to increase the Central Bank’s reserves.

Remittance Policies

There are no recent changes or plans to change investment remittance policies. There are no restrictions on converting or transferring funds associated with foreign investment, including remittances of investment capital, earnings, loan repayments, and lease payments. Exporters have to repatriate their assets within 90 days for manufacturers of goods and 30 days for service providers. They are required to repatriate all of their turnover, with at least 70 percent of it going into the forex market within 30 days. However, when foreign currency reserves are dwindling, the Ministry of Economy and Finance can decide to sanction exporters who fail to repatriate their assets in a timely fashion. Among the sanctions that the Ministry can impose is the suspension of their access to the digital forex market platform.

Sovereign Wealth Funds

Madagascar does not have a Sovereign Wealth Fund that manages national savings for investment purposes. However, Madagascar’s Prime Minister said during his address at the National Assembly in December 2020 that the government was committed to the establishment of a sovereign wealth fund.

Capital Markets and Portfolio Investment

The Malawi government recognizes the importance of foreign portfolio investment and has made efforts to provide a platform for such investment through the establishment of a Malawi Stock Exchange ( MSE ). The MSE hosts 16 listed companies (of which two listed in 2020) with a total market capitalization of $2,320.28 million as of end January 2021 up from $2,062.89 million in February 2020. The demand and supply of shares for existing listed companies is limited. The stock exchange is licensed under the Financial Services Act 2010 and operates under the Securities Act 2010 and the Companies Act 2013. Other regulations include the Capital Market Development Act 1990, and Capital Market Development Regulations 1992 as amended in 2013.

Foreign investors can buy and sell shares at the stock market without any restrictions. Trading in shares can either be direct or through any one of four established brokers. There is a secondary market in government securities, and both local and foreign investors have equal access to purchase these securities. Malawi respects obligations under IMF article VIII and, therefore, refrains from imposing restrictions on making payments and transfers for current international transactions or from engaging in discriminatory currency arrangements or multiple currency practices without IMF approval. Liquidity for stock market participation is not a major problem with a variety of credit instruments on hand. Credit is generally allocated on market terms. The cost of credit is high but may fall in the medium term subject to continued moderate inflation, near stable exchange rate and policy rate downward adjustments. Foreign investors may utilize domestic credit but proceeds from investments made using local resources are not remittable.

Money and Banking System

According to the Institute of Bankers in Malawi, only 25 percent of the adult population in Malawi use banking services. Access to credit remains one of the biggest challenges for businesses and particularly SMEs, mostly due to the cost of credit. For instance, the base-lending rate in March 2021 was 11.9 percent, lowest in over a decade. The potential for using mobile banking technology to increase financial access in Malawi is emerging and official RBM Reports  have provided evidence of increasing usage of electronic transactions.

Malawi has a generally sound banking sector, overseen and regulated by the central bank. In 2021, there were eight full-service commercial banks with over 150 branches across the country. The banking sector remained profitable and stable with adequate liquidity and capital positions throughout 2020. Prudential regulations have limited net foreign exchange exposure and non-performing loan rates continue to fall, though spreads continue to be high. The sector, however, is highly concentrated and heavily invested in domestic government debt, which is a possible systemic risk. The banking sector continues to perform though in 2019 some banks underwent rationalization processes where voluntary retirement and other initiatives reduced operational expenses. Total bank assets (eight banks) as of December 2020 were at MK2,242.2 billion roughly 46% of which fell under two largest banks: National Bank and Standard Bank.

The Reserve Bank of Malawi (RBM) is Malawi’s central bank, and it plays a critical role in ensuring efficiency, reliability, and integrity of the payment system in Malawi. It is also a supervisory authority over commercial banks and other financial institutions including insurance companies. There are no restrictions on foreign banks in Malawi. The Banking Act provides the regulations applicable to commercial banks and other financial institutions and provides a supervisory mandate to the Reserve Bank. As of December 2020, four of eight banks were foreign owned. The RBM maintains correspondent banking relationships with almost all central banks across the world and 14 major banks in Asia, Europe, Africa, and the United States. Major commercial banks in Malawi also maintain correspondent banking relationships with banks from Africa, Europe, Asia, and US. For local business, banks require that a foreigner possess a Temporary Employment Permit or business residency permit before opening a bank account.

Foreign Exchange and Remittances

Foreign Exchange

Government policy seeks to ensure the availability of foreign exchange for business transactions and remittances to attract investors and spur economic growth. Commercial banks may operate as forex dealers. Investors have access to forex with no legal limitation, both to pay for imports and to transfer financial payments abroad. Specifically, there are no licensing requirements to import forex and full repatriation of profits, dividends, investment capital, and interest and principal payments for international loans is permitted once the loan and/or investment is registered with the RBM. Malawian investors seeking foreign financing must seek permission from the RBM before acquiring an international loan. RBM Website  has several laws and regulations regarding foreign exchange transactions.

The Malawi Kwacha (K) is convertible into major world currencies such as the U.S. Dollar, British Pound, Euro, Japanese Yen, Chinese Yuan, and South African Rand, as well as key regional and trading partners’ currencies. Since May 7, 2012, the value of the local currency has floated freely against major world currencies though the RBM intervenes to avoid sharp depreciation or appreciation. Float aside, the MWK/USD rate remained remarkably stable since 2016 but has faced sustained depreciation since June 2020 losing over 5% by end December 2020. Foreign exchange is available throughout the year but RBM sets rules on the requirements to obtain forex from commercial banks and authorized dealers. Malawi’s official foreign exchange reserves, as of February 2021, are sufficient to cover 2.31 months of imports. Antidotally, since 2019 periodic forex scarcity has delayed some USD remittances.

Remittance Policies

Investment remittance policies in Malawi have not changed in the past year. There are no restrictions on remittance of foreign investment funds (including capital, profits, loan repayments, and lease repayments) if the capital and loans were obtained from foreign sources and registered with the RBM. The terms and conditions of international loans, management contracts, licensing and royalty arrangements, and similar transfers require initial RBM approval. The RBM grants approval according to prevailing international standards; subsequent remittances do not require further approval. All commercial banks are authorized by the RBM to approve remittances, and approvals are automatic if the applicant’s accounts have been audited and sufficient forex is available. There are no time limitations on remittances.

Sovereign Wealth Funds

Malawi does not have a Sovereign Wealth Fund or similar entity.

Capital Markets and Portfolio Investment

Foreigners may trade in securities and derivatives. Malaysia houses one of Asia’s largest corporate bond markets and is the largest sukuk (Islamic bond) market in East Asia. Both domestic and foreign companies regularly access capital in Malaysia’s bond market. Malaysia provides tax incentives for foreign companies issuing Islamic bonds and financial instruments in Malaysia.

Malaysia’s stock market (Bursa Malaysia) is open to foreign investment and foreign corporation issuing shares. However, foreign issuers remain subject to Bumiputera ownership requirements of 12.5 percent if the majority of their operations are in Malaysia. Listing requirements for foreign companies are similar to that of local companies, although foreign companies must also obtain approval of regulatory authorities of foreign jurisdiction where the company was incorporated and valuation of assets that are standards applied in Malaysia or International Valuation Standards and register with the Registrar of Companies under the Companies Act 1965 or 2016.

Malaysia has taken steps to promote good corporate governance by listed companies. Publicly listed companies must submit quarterly reports that include a balance sheet and income statement within two months of each financial quarter’s end and audited annual accounts for public scrutiny within four months of each year’s end. An individual may hold up to 25 corporate directorships. All public and private company directors are required to attend classes on corporate rules and regulations.

Legislation also regulates equity buybacks, mandates book entry of all securities transfers, and requires that all owners of securities accounts be identified. A Central Depository System (CDS) for stocks and bonds established in 1991 makes physical possession of certificates unnecessary. All shares traded on the Bursa Malaysia must be deposited in the CDS. Short selling of stocks is prohibited.

Money and Banking System

International investors generally regard Malaysia’s banking sector as dynamic and well regulated. Although privately owned banks are competitive with state-owned banks, the state-owned banks dominate the market. The five largest banks – Maybank, CIMB, Public Bank, RHB, and AmBank – account for an estimated 75 percent of banking sector loans. According to the World Bank, total banking sector lending for 2019 was 120.8 percent of GDP, and 1.5 percent of the Malaysian banking sector’s loans were non-performing for 2019.

Bank Negara prohibits hostile takeovers of banks, but the Securities Commission has established non-discriminatory rules and disclosure requirements for hostile takeovers of publicly traded companies.

Foreign Exchange and Remittances

Foreign Exchange

In December 2016, the central bank, began implementing new foreign exchange management requirements. Under the policy, exporters are required to convert 75 percent of their export earnings into Malaysian ringgit. The goal of this policy was to deepen the market for the currency, with the goal of reducing exchange rate volatility. The policy remains in place, with the Central Bank giving case-by-case exceptions. All domestic trade in goods and services must be transacted in ringgit only, with no optional settlement in foreign currency. The Central Bank has demonstrated little flexibility with respect to the ratio of earnings that exporters hold in ringgit. Post is unaware of any instances where the requirement for exporters to hold their earnings in ringgit has impeded their ability to remit profits to headquarters.

Remittance Policies

Malaysia imposes few investment remittances rules on resident companies. Incorporated and individual U.S. investors have not raised concerns about their ability to transfer dividend payments, loan payments, royalties or other fees to home offices or U.S.-based accounts. Tax advisory firms and consultancies have not flagged payments as a significant concern among U.S. or foreign investors in Malaysia. Foreign exchange administration policies place no foreign currency asset limits on firms that have no ringgit-denominated debt. Companies that fund their purchases of foreign exchange assets with either onshore or offshore foreign exchange holdings, whether or not such companies have ringgit-denominated debt, face no limits in making remittances. However, a company with ringgit-denominated debt will need approval from the Central Bank for conversions of RM50 million or more into foreign exchange assets in a calendar year.

The Treasury Department has not identified Malaysia as a currency manipulator.

Sovereign Wealth Funds

The Malaysian Government established government-linked investment companies (GLICs) as vehicles to harness revenue from commodity-based industries and promote growth in strategic development areas. Khazanah is the largest of the GLICs, and the company holds equity in a range of domestic firms as well as investments outside Malaysia. The other GLICs – Armed Forces Retirement Fund (LTAT), National Capital (PNB), Employees Provident Fund (EPF), Pilgrimage Fund (Tabung Haji), Public Employees Retirement Fund (KWAP) – execute similar investments but are structured as savings vehicles for Malaysians. Khazanah follows the Santiago Principles and participates in the International Forum on Sovereign Wealth Funds.

Khazanah was incorporated in 1993 under the Companies Act of 1965 as a public limited company with a charter to promote growth in strategic industries and national initiatives. As of December 31, 2020, Khazanah’s “realizable” assets stood at RM95.3 billion as compared to RM136 billion in 2019. Its profit from operations fell to RM2.9 billion in 2020 as compared to RM7.4 billion in 2019. Dividend income from investee companies rose to RM5.2 billion from RM3.8 billion According to its Annual Review 2020 presentation, Khazanah’s priorities, going forward, include further enhancing commercial returns, delivering impactful value through strategic investments, becoming a responsible organization through embedding ESG considerations across all investment activities, building a strong digital and technology foundation. https://www.khazanah.com.my/our-performance/khazanah-annual-review-2021/ 

Capital Markets and Portfolio Investment

Maldives Stock Exchange (MSE), first opened in 2002 as a small securities trading floor, was licensed as a private stock exchange in 2008.  The Securities Act of January 2006 created the Capital Market Development Authority (CMDA) to regulate the capital markets.  The MSE functions under the CMDA.  The only investment opportunities available to the public are shares in the Bank of Maldives, Islamic Bank of Maldives, five state-owned public companies, a foreign insurance company, a foreign telecommunications company, and a local shipping company.  The market capitalization of all listed companies listed was USD 857 million at the end of 2018.

Foreigners can invest in the capital market as both retail and institutional investors.  Capital market license holders from other jurisdictions can also seek licenses to carry out services in the Maldives capital market.  There are no restrictions on foreign investors obtaining credit from banks in Maldives nor are there restrictions on payments and transfers for current international transactions.

Money and Banking System 

The Maldives financial sector is dominated by the banking sector.  The banking sector consists of eight banks, of which three are locally incorporated, four are branches of foreign banks and one is a fully owned subsidiary of a foreign bank.  There are 52 branches of these banks throughout the country of which 33 are in the rural areas.  Additionally, at the end of 2017 there were 116 automatic teller machines (of which 51 were in rural areas) and 230 agent banking service providers.  Maldives has correspondent banking relationships with six banks.  Maldives has not announced intentions to allow the implementation of blockchain technologies (cryptocurrencies) in its banking system.  International money transfer services are offered by four remittance companies through global remittance networks.  Two telecommunications companies offer mobile payment services through mobile wallet accounts and this service does not require customers to hold bank accounts.

Non-bank financial institutions in the country consist of four insurance companies, a pension fund, and a finance leasing company, a specialized housing finance institution and money transfer businesses.  Maldives Real Time Gross Settlement System and Automated Clearing House system is housed in the MMA for interbank payments settlements for large value and small value batch processing transactions respectively.  There has been an increase in usage of electronic payments such as card payments and internet banking.  All financial institutions currently operate under the supervision of the MMA.

Foreign Exchange and Remittances

Foreign Exchange

Rules relating to the foreign exchange market are stipulated in the Monetary Regulation of the MMA.  Both residents and non-residents may freely trade and purchase currency in the foreign exchange market.  Residents do not need permission to maintain foreign currency accounts either at home or abroad and there is no distinction made between foreign national or non-resident accounts held with the banks operating in Maldives.  The exchange rate is maintained within a horizontal band, with the value of the Rufiyaa allowed to fluctuate against the U.S. dollar within a band of 20 percent on either side of a central parity of MVR12.85 per U.S. dollar.  In practice, however, the rufiyaa has been virtually fixed at the band’s weaker end of Rf 15.42 per dollar, according to the IMF.

Remittance Policies

Rules regarding foreign remittances are governed by the Regulation for Remittance Businesses under the Maldives Monetary Authority Act of 1981.  There are no restrictions on repatriation of profits or earnings from investments.  In 2016, the government imposed a three percent remittance tax on money transferred out of Maldives by foreigners employed in the Maldives.  However, Maldives Inland Revenue Authority (MIRA) repealed the remittance tax effective from January 1, 2020 to reduce “out-of-bank” money transactions that have become commonplace following implementation of the tax.

Sovereign Wealth Funds

In 2016, Maldives Finance Minister announced plans to establish a “Sovereign Development Fund (SDF)” that would support foreign currency obligations incurred to executive public sector development projects.  The government has not published any documents related to the SDF and does not have a published policy document regulating funding or a general approach to withdrawals with regard to SDF.  The MoF plans to issue a separate publication on SDF investments sometime within 2021.  This publication will include information on deposits into and withdrawals/investments from the SDF.  The MoF also reported it is in the process of drafting regulations detailing a general approach to deposits, withdrawals, and investments from the SDF.

Allocations to the SDF are included in the budget and published in the MoF’s weekly and monthly fiscal development reports published regularly on its website.  The Ministry reported two sources of funding for the SDF – revenue gathered through Airport Development Fees charged to all travelers entering and departing Maldives and ad hoc allocations made by the MoF at its discretion.  Expected ADF receipts are included in the Revenue Tables of the Budget.  Reports from the MoF show that the size of the SDF fund had amassed USD 206.5 million as of February 25, 2021.

Capital Markets and Portfolio Investment

Portfolio investment is not a current practice in Mali. In 1994, the government instituted a system of treasury bonds available for purchase by individuals or companies. The payment of dividends or the repurchase of bonds may be done through a compensation procedure offsetting corporate income taxes or other sums due to the government.

The WAEMU stock exchange program based in Abidjan has a branch in each WAEMU country, including Mali. One Malian company is quoted in the stock exchange. The planned privatization of Mali’s state-run electricity company (EDM), telecommunications entity (Societé des Telecommunications du Mali or SOTELMA), cotton ginning company (Compagnie Malienne pour le Développement du Textile or CMDT), and Bamako-Senou Airport offer prospects for some companies to be listed on the WAEMU stock exchange.

Money and Banking System

WAEMU statutes and the BCEAO govern the banking system and monetary policy in Mali. Commercial banks in Mali enjoy considerable liquidity. The majority of banks’ loanable funds, however, do not come from deposits, but rather from other liabilities, such as lines of credit from the BCEAO and North African and European banks. Despite having sufficient loanable funds, commercial banks in Mali tend to have highly conservative lending practices. Bank loans generally support short-term activities, such as letters of credit to support export-import activities and short-term lines of credit and bridge loans for established businesses. Small- and medium-sized businesses have reportedly had difficulty obtaining access to credit. The Guarantee Fund for Private Sector (le Fonds de Garantie du Secteur Privé or FGSP) is a partially state-owned financial institution which provides guarantees up to 50 percent of the loan that SMEs/SMIs and microfinance institutions could borrow from commercial banks. The FGSP also provides direct financing to the private sector. Mali recently increased the financial resources of the FGSP as a measure to support the private sector to face the economic impact of the COVID-19 pandemic. Mali also created a National Directorate of Small and Medium Enterprises (SMEs) in 2020 in part to address the challenges SMEs face in accessing financing.

In order to improve the business environment and soundness of the financial system, the BCEAO adopted a uniform law regarding credit reference bureaus. The Government of Mali aligned its legislation with this regional requirement by authorizing a credit reference bureau in Mali to collect and process information from financial institutions, public sources, water and electricity companies, and other entities to create credit records for clients. The credit rating system aims to increase the solvency of borrowers and improve access to credit.

Mali’s microfinance sector has grown rapidly. Despite this growth, microfinance institutions suffer from poor governance and management of resources and have not put in place all government regulations or regional best practices to ensure sufficient financial controls and transparency.

Money laundering and terrorist financing are concerns in Mali. Although Mali’s anti-money laundering law designates a number of reporting entities, companies have noted that very few comply with their legal obligations. While businesses are technically required to report cash transactions over approximately $10,000, most reportedly do not. Despite the operation of a number of al-Qaeda-linked terrorist and armed groups in northern and central Mali, the country’s financial intelligence unit, the National Financial Information Processing Unit (CENTIF), receives relatively few suspicious transaction reports concerning possible cases of terrorist financing. With the exception of casinos, designated non-financial businesses and professions are not subject to customer due diligence requirements.

Mali is a member of the Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA), a Financial Action Task Force (FATF)-style regional body. Mali’s most recent mutual evaluation report completed November 2019 can be found at http://www.giaba.org/reports/mutual-evaluation/Mali.html .

Foreign Exchange and Remittances

Foreign Exchange

As one of the eight WAEMU countries, Mali uses the CFA franc—issued by the BCEAO—as its currency. The CFA franc is pegged to the euro and supported by the French treasury, which ensures a fixed rate of exchange. The Malian investment code allows the foreign transfer and conversion of funds associated with investments, including profits. Local currency exchanges are available at Malian banks.

There are no limits on the inflow or outflow of funds for repatriation of profits, debt service, capital, or capital gains. In the CFA franc zone, there is no limit on the export of capital provided that an exporter has adequate documentation to support a transaction and the exporter meets the domiciliation requirement. Most commercial banks have direct investments in western capital markets.

Article 12 of Mali’s 2012 investment code states that foreign investors may transfer abroad, without prior authorization, all payments relating to business operations in Mali (including net profits, interest, dividends, income, allowances, savings of expatriated salaried employees). Capital and financial transactions (such as buying and selling stocks, assets, and compensation from expropriation) are free to transfer abroad but are subject to declaration requirements to the Ministry of Economy and Finances. These transfers must be done through authorized intermediaries such as banks or financial institutions.

Remittance Policies

Mali does not have a specific policy for remittances. According to the World Bank, personal remittances from Mali’s diaspora represented around six percent of GDP in 2018.

Sovereign Wealth Funds

Mali does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Malta’s Stock Exchange was established in 1993. In 2002, the Financial Markets Act effectively replaced the Malta Stock Exchange Act of 1990 as the law regulating the operations and setup of the Malta Stock Exchange. This legislation divested the Malta Stock Exchange of its regulatory functions and transferred these functions to the Malta Financial Services Authority (MFSA). The Financial Markets Act also set up a Listing Authority, which is responsible for granting “Admissibility to Listing” to companies seeking to have their securities listed on the Exchange.

To date, the few companies publicly listed on the Malta Stock Exchange have not faced the threat of hostile takeovers. Malta has no laws or regulations authorizing firms to adopt articles of incorporation/association that would limit foreign investment, participation, or control. Legal, regulatory, and accounting systems are transparent and consistent with international norms; several U.S. auditing firms have local offices.

Money and Banking System

The Maltese banking system is considered sound. In recent years, local commercial banks expanded the scope of their lending portfolios. Capital is available from both public and private sources; both foreign and local companies can obtain capital from local lending facilities. Commercial banks and their subsidiaries can provide loans at commercial interest rates. It is possible for new investors to negotiate soft loans from the government covering up to 75 percent of the projected capital outlay.

No U.S. bank has a branch in Malta. BNF and HSBC Malta currently maintain direct correspondent banking relationships with U.S. banks. Some local banks act as correspondents of several U.S. banks via other EU banks, though such a relationship often results in higher transaction costs.

The majority of banks have stopped opening accounts for companies that do not operate in Malta, those that operate in the electronic gaming sector, and those operating in the cryptocurrency sector. The few banks that still offer these services have tightened their due diligence processes, resulting in long delays to open accounts.

Malta takes pride in being the first country to propose a legal framework for the creation of an Authority to regulate Blockchain, Artificial Intelligence, and Internet of Things (IOT) devices. In 2018, Government enacted three legislations that provide a regulatory framework on Distributed Ledger Technology, issuers of Initial Coin Offerings (ICOs), and related service providers dealing in virtual currencies, which currently fall outside the scope of a legislative and regulatory regime.

Foreign Exchange and Remittances

Foreign Exchange

As long as investors present the appropriate documents to the Central Bank of Malta, there are no limitations on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or imported raw materials. There are no significant delays in converting investment returns to foreign currency after presentation of the necessary documents. Maltese regulations and practices affecting remittances of investment capital and earnings have been streamlined, as several foreign exchange controls were relaxed to conform to EU directives. Malta joined the Eurozone in January 2008.

Remittance Policies

A company incorporated under the laws of Malta is considered ordinarily resident and domiciled in Malta. Companies which are ordinarily resident and domiciled in Malta are subject to tax on their worldwide income. A company not incorporated in Malta, but managed and controlled in Malta, is subject to tax on a remittance basis on its foreign-sourced income.

Companies subject to tax on a remittance basis are taxed on:

• Income and capital gains deemed to arise in Malta
• Income deemed arise outside Malta and remitted to Malta

Companies subject to the remittance basis are not taxed on:

• Income deemed to arise outside Malta which is not remitted to Malta
• Capital gains arising outside Malta

Companies which are not incorporated in Malta are considered to be resident in Malta when their management and control is shifted to Malta.

Malta does not allow the application of the remittance basis of taxation to individuals who are either (a) domiciled but not ordinarily resident or (b) ordinarily resident but not domiciled in Malta, whose spouse is both ordinarily resident and domiciled in Malta. In this regard, such individuals will now become taxable on their worldwide income and capital gains, irrespective of receipt/remittance of such income to Malta not domiciled in Malta.

Sovereign Wealth Funds

Malta has recently established the National Development and Social Fund (NDSF) to manage and administer receipts from the country’s Individual Investor Programme. Since inception through October 2019, it raised a total of €544 million ($593 million). The Sovereign Wealth Fund Institute ranked Malta’s NDSF the 71st world’s largest sovereign wealth fund. The fund receives 70 percent of its contributions from the country’s citizenship program. It has future charitable commitments of €56 million and, funds will also be funneled into the economy to help soften the economic crises brought about by the COVID-19 pandemic. The mission of the NDSF is to contribute towards, promote, and support major projects and initiatives of national importance and public interest. These initiatives and projects are intended to develop and improve the economy, public services, and the general well-being of present and future generations.

Capital Markets and Portfolio Investment

There are no stock exchanges or financial regulatory institutions in the country.

Money and Banking System

There are currently two banks with branches in the Marshall Islands. The Bank of Guam is a publicly owned U.S. company with its headquarters in Guam. It complies with all U.S. regulations and is FDIC-insured. The Bank of the Marshall Islands is a privately-owned Marshallese company with headquarters in Majuro.

Foreign Exchange and Remittances

Foreign Exchange

The government does not impose any restrictions on converting or transferring funds associated with an investment. The Marshall Islands uses the U.S. dollar as its official currency, and there is no central bank. There are no official remittance policies and no restrictions on foreign exchange transactions. There have been no reported difficulties in obtaining foreign exchange as the vast majority of funds are denominated in U.S. dollars.

Remittance Policies

While the government encourages reinvestment of profits locally, there are no laws restricting repatriation of profits, dividends, or other investment capital acquired in the Marshall Islands. To comply with international money laundering commitments, cash transactions and transfers exceeding USD 10,000 are reported by the banks to the Banking Commission, which monitors this information and has the authority to investigate financial records when necessary. To date, however, the country has not successfully prosecuted any money laundering cases.

Sovereign Wealth Funds

The Marshall Islands has no sovereign wealth fund (SWF) or asset management bureau (AMB), but the Compact of Free Association established a Trust Fund for the Marshall Islands that is independently overseen by a committee composed of the United States, Taiwan, and Marshall Islands representatives.

Capital Markets and Portfolio Investment

The government is favorable to portfolio investment. Private entities, whether foreign or national, have the right to freely establish, acquire, own, and/or dispose of interests in business enterprises and receive legal remuneration. Privatization and liberalization programs have also helped put private enterprises on an equal footing with respect to access to markets and credit. In principle, government policies encourage the free flow of financial resources and do not place restrictions on access by foreign investors. Most foreign investors, however, prefer external financing due to the high interest rates and procedural complexities that prevail locally. Credit is often difficult to obtain due to a lax legal system to enforce regulations that build trust and guarantee credit return. There are no legal or policy restrictions on converting or transferring funds associated with investments. Investors are guaranteed the free transfer of convertible currencies at the legal market rate, subject to the availability. Similarly, foreigners working in Mauritania are guaranteed the prompt transfer of their professional salaries.

Commercial bank loans are virtually the only type of credit instrument. There is no stock market or other public trading of shares in Mauritanian companies. Currently, individual proprietors, family groups, and partnerships generally hold companies, and portfolio investments.

Money and Banking System

The IMF has assisted Mauritania with the stabilization of the banking sector and as a result, access to domestic credit has become easier and cheaper. A proliferation of banks has fostered competition that has contributed to the decline in interest rates from 30 percent in 2000 to 10 percent in 2009, to 6.5 percent in 2020, not including origination costs and other fees

Nevertheless, the banking system remains fragile due to liquidity constraints in the financial markets. The country’s five largest banks are estimated to have USD 100 million in combined reserves; however, these figures cannot be independently verified, making an evaluation of the banking system’s strength impossible. As of April 2020, 25 banks, national and foreign, operate in Mauritania, despite the fact that only 15 percent of the population hold bank accounts.

The Central Bank of Mauritania is in charge of regulating the Mauritanian banking industry, and the Central Bank has made reforms to streamline the financial sector’s compliance with international standards. The Central Bank performs yearly audits of Mauritanian banks. There are no restrictions enforced on foreigners who wish to obtain an individual or business banking account.

In March 2020 the Central Bank of Mauritania (BCM) announced the reduction in interest rate on credit from 9 percent to 6.5 percent as part of measures aimed at counter the effects of COVID-19 on the country’s economy.

In 2018, the Central Bank of Mauritania lost all correspondent banking relationships with banks in the United States due to de-risking policies enforced by U.S. banks. The Central Bank subsequently was able to reestablish a correspondent banking relationship in 2019, however there are still no Mauritanian banks that have been able to do so. Local branches of international banks (such as Societe Generale or Attijari) do maintain correspondent banking relationships with U.S. banks and are able to clear transactions in USD.

Foreign Exchange and Remittances

Foreign Exchange

There are no legal or policy restrictions on converting or transferring funds associated with investments. Investors are guaranteed the free transfer of convertible currencies at the legal market rate, subject to the availability of such currencies. Similarly, foreigners working in Mauritania are guaranteed the prompt transfer of their professional salaries. To transfer funds, investors are required to open a foreign exchange bank account in Mauritania. There are no maximum legal transaction limits for investors transferring money into or out of Mauritania, although regulations to withdraw money may be complicated in practice.

Businesses transfer money through the traditional Hawala system—they deposit their money in a Hawala store and designate a beneficiary for pick up. The Hawala system has become a reliable substitute to the high interest rate, long wait period and transaction fees imposed by local banks. However, the Central Bank closed 691 illegal money transfer points in 2019 to restructure the financial sector. Currently, only nine agencies have a provisional authorization for transfer of funds. Individuals and companies may obtain hard currency through the informal market and commercial banks for the payment of purchases or the repatriation of dividends. If the bank has hard currency available, there is no delay in effect for remitting investment returns. However, if the bank does not have enough reserves, the hard currency must be obtained from the Central Bank in order to conduct the transfer. The Central Bank is required to prioritize government transfers, which could present further delays. Delays of one to three weeks, although relatively uncommon, can occur.

In January 2018, the government of Mauritania introduced a new currency. The new currency drops a zero from the country’s previous currency; the value and the name of the currency remained the same, although the currency code changed from MRO to MRU. Local banks had to adapt their software, change their checkbooks, and reconfigure their ATMs to bring them into compliance with the new currency.

Remittance Policies

There is no limit on the inflow or outflow of funds for remittances of profits, debt service, capital or capital gains. The local currency, the ouguiya, is freely convertible within Mauritania, but its exportation is not legally authorized. Hard currencies can be obtained from the central bank and local commercial banks or parallel financial market in the informal sector. The Central Bank holds regular foreign exchange auctions, allowing market forces to fix the value of the ouguiya.

Sovereign Wealth Funds

The Central Bank administers the National Fund for Hydrocarbon Reserves, a sovereign wealth fund (SWF), which was established in 2006. The SWF is funded from the revenues received from the extraction of oil, any royalties and corporate taxes from oil companies, and from the profits made through the fund’s investment activities. The fund’s mandate is to create macroeconomic stability by setting aside oil revenues for developmental projects. However, the management of the SWF lacks transparency and the projected revenue streams remain unrealized.

Capital Markets and Portfolio Investment

The Mauritian government welcomes foreign portfolio investment.

The Stock Exchange of Mauritius (SEM) was created in 1989 and was opened to foreign investors following the lifting of foreign exchange controls in 1994.  Foreign investors do not need approval to trade shares, except for when doing so would result in their holding more than 15 percent in a sugar company, a rule detailed in the Securities (Investment by Foreign Investors) Rules of 2013.  Incentives to foreign investors include no restrictions on the repatriation of revenue from the sale of shares and exemption from tax on dividends for all resident companies and for capital gains of shares held for more than six months.

The SEM currently operates two markets: the Official Market and the Development and Enterprise Market (DEM).  As of December 2019, the shares of 58 companies (local, global business, and foreign companies) were listed on the Official Market, representing a market capitalization of 7.4 billion USD, a fall of 15.8% from the previous financial year. This fall is mainly attributed to the impact of the Covid 19 pandemic.  Unique in Africa, the SEM can list, trade, and settle equity and debt products in U.S. dollars, Euros, Pounds Sterling, South African Rand, as well as Mauritian Rupees.  A variety of new asset classes of securities such as global funds, depositary receipts, mineral companies, and specialist securities including exchange-traded funds and structured products have also been introduced on the SEM.  The DEM was launched in 2006 and the shares of 39 companies are currently listed on this market with a market capitalization of 1.1 billion USD as of June 2020, falling by 24.4 percent during the financial year 2019-2020.  Foreign investors accounted for 26.4 percent of the trading volume on the exchange for the financial year 2019-2020, compared to 39.5 percent for the financial year 2018-2019.  Standard & Poor’s, Morgan Stanley, Dow Jones, and FTSE have included the Mauritius stock market in a number of their stock indices.  Since 2005, the SEM has been a member of the World Federation of Exchanges.  The SEM is also a partner exchange of the Sustainable Stock Exchanges Initiative.  In 2018, in line with its strategy to digitalize its investor services, SEM launched the mySEM mobile application.

In 2020, the slowdown in domestic economic activity resulting from the Covid-19 pandemic caused many listed companies to publish reduced earnings and defer dividend payments.  After a strong decline between March and April 2020, the SEMDEX and SEM-10 continued a downward trend during the rest of the year. Stocks associated with tourism were the hardest hit.

The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.

A variety of credit instruments is available to local and foreign investors through the banking system.

Money and Banking System

Mauritius has a sophisticated banking sector.  As of the end September 2020, 19 banks were licensed to undertake banking business, of which eight were local banks, eight were foreign-owned subsidiaries, and three are branches of foreign banks. The license of one bank was revoked in August 2020.  Another bank is currently under conservatorship.  One bank conducts solely Islamic banking.  Further details can be obtained at https://www.bom.mu/financial-stability/supervision/licensees/list-of-licensees.

The Mauritian banking sector historically accounts for about 7 percent of GDP (excluding bank-owned leasing businesses) and is the main component of financial services, which contribute 12 percent of GDP.  The total assets of the sector represented around 393.8 percent of GDP at the end of September 2020, compared to 319.3 percent at the end of March 2020.  The banking landscape is relatively concentrated, with the two, long-established domestic entities:  the Mauritius Commercial Bank (MCB) and the State Bank of Mauritius (SBM), which together constitute about 40 percent of the total domestic market.  Maubank, the third-largest bank in the country, became operational in 2016 following a merger between the Mauritius Post & Cooperative Bank and the National Commercial Bank.  The Bank of China started operations in Mauritius in 2016.  Other foreign banks present in Mauritius include HSBC, Barclays Bank, Bank of Baroda, Habib Bank, BCP Bank (Mauritius), Standard Bank, Standard Chartered Bank, State Bank of India, and Investec Bank.  Per the Bank of Mauritius, total banking assets as of January 2021 amounted to 43.5 billion USD).

Mauritian banks are compliant with international norms such as Basel III, IFRS 9, US Foreign Account Tax Compliance Act (FATCA), and the OECD’s Common Reporting Standard (CRS).

At the end of September 2020, non-banking, deposit-taking institutions, comprising leasing companies and finance companies, held assets equivalent to 15 percent of GDP, an increase of about 2 percent since April 2020.  Further details can be obtained at https://www.bom.mu/sites/default/files/financial_stability_report_-_december_2020_0.pdf.

According to the Banking Act of 2004, all banks are free to conduct business in all currencies.  There are also six non-bank deposit-taking institutions, as well as 12 money changers and foreign exchange dealers.  There are no official government restrictions on foreigners opening bank accounts in Mauritius, but banks may require letters of reference or proof of residence for their due diligence.  The Bank of Mauritius carries out the supervision and regulation of banks as well as non-bank financial institutions authorized to accept deposits.  The Bank of Mauritius has endorsed the Core Principles for Effective Banking Supervision as set out by the Basel Committee on Banking Supervision.

In July 2017, the Banking Act was amended to double the minimum capital requirement to 11.2 million USD from 5.8 million USD.  The Central Bank began reporting the liquidity coverage ratio in 2017 to improve the liquidity profile of banks and their ability to withstand potential liquidity disruptions.  The latest International Monetary Fund Article IV report highlights that banks have increased exposure to the region and that the Bank of Mauritius has strengthened cross-border supervision and cooperation with foreign regulators.  The IMF report also recommends that additional steps be taken to strengthen financial stability, including lowering the high non-performing loans stock through a more stringent approach to writing-off legacy exposures, and by safeguarding the longer-term forex funding needs stemming from banks’ swift expansion abroad.

As part of its Covid-19 response, the BoM has made 132 USD million available through commercial banks as special relief funds to help meet cash flow and working capital requirements.  The cash reserve ratio applicable to commercial banks was reduced to 8 percent from 9 percent.  The BoM also put on hold the Guideline on Credit Impairment Measurement and Income Recognition, which took effect in January 2020.

In July 2019, the Bank of Mauritius Act was amended to allow the Bank of Mauritius to use special reserve funds in exceptional circumstances and with approval of the central bank’s board for the repayment of central government external debt obligations, provided that repayments would not adversely affect the bank’s operations.  This provision was used in January 2020 to repay government debt worth 450 USD million, raising concerns about the central bank’s independence.

Most major banks in Mauritius have correspondent banking relationships with large banks overseas.  In recent years, according to industry experts, no banks have lost correspondent banking relationships and none report being in jeopardy of doing so as of April 2020.

In January 2019, the Bank of Mauritius signed a memorandum of cooperation with the Mauritius Police Force on financial crimes and illicit activities relating to the financial services sector.  In February 2020, the Financial Action Task Force (FATF) named Mauritius as a jurisdiction under increased monitoring, commonly known as the Grey List.  At that time, Mauritius made a high-level political commitment to work with the FATF and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to strengthen the effectiveness of its AML/CFT regime.  Since the completion of its Mutual Evaluation Report in 2018, Mauritius has made progress on a number of its recommended actions to improve technical compliance and effectiveness, including amending the legal framework to require legal persons and legal arrangements to disclose of beneficial ownership information and improving the processes of identifying and confiscating proceeds of crimes.  Mauritius is working to implement its action plan, including (i) demonstrating that the supervisors of its global business sector and Designated Non-Financial Businesses and Professions implement risk-based supervision; (ii) ensuring the access to accurate basic and beneficial ownership information by competent authorities in a timely manner; (iii) demonstrating that law enforcement agencies have capacity to conduct money laundering investigations, including parallel financial investigations and complex cases; (iv) implementing a risk based approach for supervision of its non-profit sector to prevent abuse for terrorism financing purposes, and (v) demonstrating the adequate implementation of targeted financial sanctions through outreach and supervision.

In October 2020, the European Commission added Mauritius to its list of AML-CTF high-risk jurisdictions.  As of April 2021, Mauritius was still on the EU and FATF lists.

In February 2018, the Fintech and Innovation-driven Financial Services (FIFS) Regulatory Committee held its first meeting at the Financial Services Commission, the regulator for the non-banking financial services, to assess the regulatory framework concerning FIFS regulations in Mauritius and to identify priority areas within the regulatory space of fintech activities.  In May 2018, the Committee submitted recommendations for regulating the fintech sector to authorities.  A National Regulatory Sandbox License (RSL) Committee was set up to assess all fintech applications requiring a sandbox license for business activities without an existing legal framework.

Effective March 2019, the Financial Services Commission allows businesses that provide custodial services for digital assets.  According to the Bank of Mauritius 2019 Annual Report, the FIFS committee has initiated work on approaches to regulate Fintech tools such as artificial intelligence, big data, distributed ledger technologies, and biometrics.

In June 2020, the BoM announced that it was creating a central Know Your Client registry.

Foreign Exchange and Remittances

Foreign Exchange 

The government of Mauritius abolished foreign exchange controls in 1994.  Consequently, no approval is required for converting, transferring, or repatriating profits, dividends, or capital gains earned by a foreign investor in Mauritius.  Funds associated with any form of investment can be freely converted into any world currency.

The exchange rate is generally market-determined though the Bank of Mauritius, the central bank, occasionally intervenes.  Between January 2019 and December 2019, the Mauritian rupee depreciated against the U.S. dollar by 6.4 percent, the pound by 8.3 percent, and the euro by 3.6 percent.  Due to the Covid-19 crisis, the Bank of Mauritius intervened regularly on the domestic foreign exchange market in early 2020.

Remittance Policies

There are no time or quantity limits on remittance of capital, profits, dividends, and capital gains earned by a foreign investor in Mauritius.  Mauritius has a well-developed and modern banking system.  There is no legal parallel market in Mauritius for investment remittances.  The Embassy is unaware of any proposed changes by the government to its investment remittance policies.

Sovereign Wealth Funds

The government of Mauritius does not have a Sovereign Wealth Fund.

Capital Markets and Portfolio Investment

The Mexican government is generally open to foreign portfolio investments, and foreign investors trade actively in various public and private asset classes.  Foreign entities may freely invest in federal government securities.  The Foreign Investment Law establishes foreign investors may hold 100 percent of the capital stock of any Mexican corporation or partnership, except in those few areas expressly subject to limitations under that law.  Foreign investors may also purchase non-voting shares through mutual funds, trusts, offshore funds, and American Depositary Receipts.

They also have the right to buy directly limited or nonvoting shares as well as free subscription shares, or “B” shares, which carry voting rights.  Foreigners may purchase an interest in “A” shares, which are normally reserved for Mexican citizens, through a neutral fund operated by one of Mexico’s six development banks.  Finally, Mexico offers federal, state, and local governments bonds that are rated by international credit rating agencies.  The market for these securities has expanded rapidly in past years and foreign investors hold a significant stake of total federal issuances.  However, foreigners are limited in their ability to purchase sub-sovereign state and municipal debt.  Liquidity across asset classes is relatively deep.

Mexico established a fiscally transparent trust structure known as a FICAP in 2006 to allow venture and private equity funds to incorporate locally.  The Securities Market Law (Ley de Mercado de Valores) established the creation of three special investment vehicles which can provide more corporate and economic rights to shareholders than a normal corporation.  These categories are: (1) Investment Promotion Corporation (Sociedad Anonima de Promotora de Inversion or SAPI); (2) Stock Exchange Investment Promotion Corporation (Sociedad Anonima Promotora de Inversion Bursatil or SAPIB); and (3) Stock Exchange Corporation (Sociedad Anonima Bursatil or SAB).  Mexico also has a growing real estate investment trust market, locally referred to as Fideicomisos de Infraestructura y Bienes Raíces (FIBRAS) as well as FIBRAS-E, which allow for investment in non-real estate investment projects.  FIBRAS are regulated under Articles 187 and 188 of Mexican Federal Income Tax Law.

Money and Banking System

Financial sector reforms signed into law in 2014 have improved regulation and supervision of financial intermediaries and have fostered greater competition between financial services providers.  While access to financial services – particularly personal credit for formal sector workers – has expanded in the past four years, bank and credit penetration in Mexico remains low compared to OECD and emerging market peers.  Coupled with sound macroeconomic fundamentals, reforms have created a positive environment for the financial sector and capital markets.  According to the National Banking and Stock Commission (CNBV), the banking system remains healthy and well capitalized.  Non-performing loans have fallen 60 percent since 2001 and now account for 2.1 percent of all loans.

Mexico’s banking sector is heavily concentrated and majority foreign-owned:  the seven largest banks control 85 percent of system assets and foreign-owned institutions control 70 percent of total assets.  The USMCA maintains national treatment guarantees.  U.S. securities firms and investment funds, acting through local subsidiaries, have the right to engage in the full range of activities permitted in Mexico.

The Bank of Mexico (Banxico), Mexico’s central bank, maintains independence in operations and management by constitutional mandate.  Its main function is to provide domestic currency to the Mexican economy and to safeguard the Mexican Peso’s purchasing power by gearing monetary policy toward meeting a 3 percent inflation target over the medium term.

Mexico’s Financial Technology (FinTech) law came into effect in March 2018 and administration released secondary regulations in 2019, creating a broad rubric for the development and regulation of innovative financial technologies.  The law covers both cryptocurrencies and a regulatory “sandbox” for start-ups to test the viability of products, placing Mexico among the FinTech policy vanguard.  The reforms have already attracted significant investment to lending fintech companies and mobile payment companies.  Six fintechs have been authorized to operate in the Mexican market and CNBV is reviewing other applications.

Foreign Exchange and Remittances

Foreign Exchange

The Government of Mexico maintains a free-floating exchange rate.

Mexico maintains open conversion and transfer policies.  In general, capital and investment transactions, remittance of profits, dividends, royalties, technical service fees, and travel expenses are handled at market-determined exchange rates.  Mexican Peso (MXN)/USD exchange is available on same day, 24- and 48-hour settlement bases.  In order to prevent money-laundering transactions, Mexico imposes limits on USD cash deposits.  Businesses in designated border and tourism zones may deposit more than USD 14,000 per month subject to reporting rules and providing justification for their need to conduct USD cash transactions.  Individual account holders are subject to a USD 4,000 per month USD cash deposit limit.  In 2016, Banxico launched a central clearing house to allow for USD clearing services wholly within Mexico to improve clearing services for domestic companies with USD income.

Remittance Policies

There have been no recent changes in Mexico’s remittance policies.  Mexico continues to maintain open conversion and transfer policies.

Sovereign Wealth Funds

The Mexican Petroleum Fund for Stability and Development (FMP) was created as part of 2013 budgetary reforms.  Housed in Banxico, the fund distributes oil revenues to the national budget and a long-term savings account.  The FMP incorporates the Santiago Principles for transparency, placing it among the most transparent Sovereign Wealth Funds in the world.  Both Banxico and Mexico’s Supreme Federal Auditor regularly audit the fund.  Mexico is also a member of the International Working Group of Sovereign Wealth Funds.  The Fund received  MXN 197.3 billion (approximately USD 9.9 billion) in income in 2020.  The FMP is required to publish quarterly and annual reports, which can be found at www.fmped.org.mx .

Capital Markets and Portfolio Investment

There are no stock or commodities exchanges in the FSM.

Money and Banking System

The two commercial banks operating in the country, the Bank of Guam and the Bank of the FSM, can only make small, short-term unsecured loans because of the prohibition of using land or businesses as collateral, difficulties inherent in collecting debts, and the inability to identify collateral that can be attached and sold in the event of default. There are no credit reporting agencies.  The Bank of the FSM is prohibited by its charter from investing in any securities not insured by the U.S. government, so the bulk of its holdings are in U.S. Treasury bonds. The Bank of Guam operates as a deposit collector and transactions facilitator in the FSM, with most of its loans made in Guam.

The Bank of the FSM is protected from takeover by a trigger from the Federal Deposit Insurance Corporation (FDIC) that will cancel its insurance status if foreign ownership exceeds 30 percent.  Foreigners are not allowed to open accounts with the bank unless they provide proof of local residence and work permits and fulfill U.S. Treasury “know thy customer” requirements.

Money Exchange companies such as Western Union operate within FSM and handle the majority of remittances.

Since most businesses are family owned, there are no shares that can be acquired for mergers, acquisitions, or hostile takeovers. The FSM enacted a secured transaction law in 2005 and established a filing office in October 2006 primarily to serve the foreign corporate registration market.

Foreign Exchange and Remittances

Foreign Exchange

The currency of the FSM remains the U.S. dollar.  The only two commercial banks operating in the country at present are the Bank of Guam and the Bank of the FSM, both of which were FDIC insured.

Remittance Policies

There are no specific restrictions on repatriating profits from a business, except in the state of Chuuk, where an amount greater than USD 50,000 requires state approval.

Statistics on family-level and personal remittances are difficult to obtain, with various studies reporting figures ranging from USD 3 to USD 14 million per year entering the FSM.  However, remittances travel into and out of the country. Micronesians working abroad and in the United States sent money to their families in the FSM, while Filipino professionals and laborers working in FSM sent money to their families in the Philippines. The World Bank estimates a drop in remittances of 3.3 percent for FY2020 due to reductions in employment attributable to the COVID-19 pandemic. It did not, however, provide monetary estimates of remittance flows.

Sovereign Wealth Funds

The FSM had no sovereign wealth fund, but the government established a national trust fund modeled on the Compact Trust Fund to provide additional government income after 2023.  That fund is managed by a U.S.-based commercial fund manager.

Capital Markets and Portfolio Investment

Moldova’s securities market is underdeveloped. Official National Bank of Moldova (NBM) statistics include data on portfolio investments, yet there is a lack of open-source information fully reflect the trends and relevance of these investments. NBM data shows that most portfolio investments target banks, while the National Statistics Bureau does not differentiate between foreign direct investment and portfolio investments of less than 10 percent in a company.

Laws, governmental decisions, NBM regulations, and Stock Exchange regulations provide the framework for capital markets and portfolio investment in Moldova. The government began regulatory reform in this area in 2007 with a view to spurring the development of the weak non-banking financial market. Since 2008, two bodies in particular – the NBM and the National Commission for Financial Markets – have regulated financial and capital markets.

Foreign investors are not restricted from obtaining credit from local banks, the main source of business financing. However, stringent lending practices limit access to credit for Moldovan companies, especially SMEs. The government has eased some lending regulations to assist SMEs to obtain credit during the COVID-19 pandemic. Local commercial banks provide mostly short-term, high-interest loans and require large amounts of collateral, reflecting the country’s perceived high economic risk. Progress in lending activity suffered a sharp reversal in 2015 after the late-2014 banking crisis, triggered by a massive bank fraud, which severely weakened the banking system. Extreme monetary tightening by the NBM following significant currency flight connected to the resulting bank bailouts led to prohibitively high interest rates. In recent years, lending conditions improved as interest rates continued to hover around nine percent.

Large investments can rarely be financed through a single bank and require a bank consortium. Recent years have seen growth in leasing and micro-financing, leading to calls for clear regulation of the non-bank financial sector. As a result, Parliament passed a new law on the non-bank financial sector, which entered into effect on October 1, 2018. Raiffeisen Leasing remains the only international leasing company which has opened a representative office in Moldova.

Even prior to the COVID-19 pandemic, the private sector’s access to credit instruments has been limited by the insufficiency of long-term funding, high interest rates, and unrealistic lending forecasts by banks. Financing through local private investment funds is virtually non-existent. A few U.S. investment funds have been active on the Moldovan market. The government adopted a 2018-2022 strategy for the development of the non-banking financial sector aimed at bolstering the capital markets combined with prudential supervision. A new Central Securities Depository was established under the supervision of the National Bank of Moldova to bring greater transparency and integrity to ownership and the recordkeeping associated with it.

Acting as an independent regulatory agency, the National Commission for Financial Markets (NCFM) supervises the securities market, insurance sector and non-bank financial institutions. A new capital markets law adopting EU regulations came into effect in 2013. It was designed to open up capital markets to foreign investors, strengthen NCFM’s powers of independent regulator, and set higher capital requirements on capital market participants.

Money and Banking System

In 2014, a crisis at three Moldovan banks (which resulted in their closure and the loss of USD 1.2 billion), two of them among the country’s largest, undermined confidence in the banking system. The role of a Moldovan bank in the “Russian Laundromat” case, estimated to have laundered from USD 20 to 80 billion, further underscored these challenges. The crisis shook Moldova’s banking system, causing some foreign correspondent banks to terminate ties with Moldovan banks and others to significantly tighten their lending.

In March 2020, Moldova successfully completed its IMF program after implementing reforms in financial and banking sectors. As a result of these reforms, the financial sector is better prepared to withstand the economic impact of the COVID-19 crisis. There is a high degree of capital and liquidity, and an overall reduction of non-performing loans to below eight percent. Moldovan banks remain the main, albeit currently limited, source of business financing. The non-bank financial institutions however have been gaining sizable market share, especially in individual and SME lending, where banks have been encumbered by prudential banking rules. Bank assets account for about 52 percent of GDP. Banks are also the largest loan providers, with loans amounting to approximately USD 2.6 billion. The COVID-19 crisis slowed down bank lending in 2020.

Moldova currently has 11 commercial banks. The NBM regulates the commercial bank sector and reports to Parliament. Foreign bank subsidiaries must register in Moldova and operate under the local banking legislation. Although the integrity of true bank ownership records is questionable, foreign investors’ share in Moldovan banks’ capital is approximately 87 percent of total capital, and includes such major foreign investors as OTP Bank (Hungary), Erste Bank (Austria), Banca Transilvania (Romania) and Doverie Holding (Bulgaria).

As of December 31, 2020, total bank assets were MDL 103.9 billion (USD 6 billion) and 90 percent of total assets in the financial sector. Moldova’s three largest commercial banks account for roughly 65 percent of the total bank assets, as follows: Moldova Agroindbank – MDL 30.4 billion (USD 1.75 billion); Moldindconbank – MDL 21.3 billion (USD 1.2 billion); and Victoriabank – MDL 15.4 billion (USD 887.7 million). To prevent another crisis, the NBM instituted special monitoring of these top three banks over concerns about the transparency of bank shareholders; this monitoring was lifted in April 2020.

After 2016, the Moldovan Parliament adopted legislation that would strengthen the independence of decision making at the NCFM and NBM – to help address systemic supervisory problems that had a negative effect on Moldova’s financial sector. To strengthen the system of tracking shares and shareholders, with USAID assistance, authorities put in place a law establishing the aforementioned Centralized Securities Depository. In addition, all bank shares must be sold and purchased on the Moldovan Stock Exchange. These measures have improved the transparency and reliability of the financial sector.

NBM’s Banking Law of 2018 and the Bank Recovery and Resolution Law from 2016 bring the financial sector closer to harmonization with EU standards, including through the application of stronger risk-based supervision to banks, increased enforcement powers and monetary penalties applied to banks, structures to address problem banks, and strengthening the NBM’s ability to conduct risk assessments. Also, NBM required banks to increase their credit loss provisioning and take urgent action to reinforce internal risk management as well as procedures on related-party financing. In addition, the NBM developed a methodology to better identify the related parties at banks.

Foreign Exchange and Remittances

Foreign Exchange

Moldova accepted Article VIII of the IMF Charter in 1995, which required liberalization of foreign exchange operations. There are no restrictions on the conversion or transfer of funds associated with foreign investment in Moldova. After the payment of taxes, foreign investors are permitted to repatriate residual funds. Residual fund transfers are not subject to any other duties or taxes and do not require special permissions. Moldova’s central bank uses a floating exchange rate regime and intervenes only to smooth sharp fluctuations.

Between late 2014 and early 2016, the national currency, the leu (plural lei), depreciated following challenges in the political environment, Russian bans on Moldovan food exports, and falling remittances from Russia, which impacted Moldova’s balance of payments. A massive banking fraud and a subsequent bailout program further undermined the leu, which depreciated by 36 percent. Since 2016, the National Bank has been pursuing a tight monetary policy that has contributed to a strengthening of the leu. In 2020, the national currency exchange rate fluctuated, but stabilized in the second half of the year.

Remittance Policies

No significant delays in the remittances of investment returns have been reported. Domestic commercial banks have accounts in leading multinational banks, and foreign investors enjoy the right to repatriate their earnings.

The Moldovan leu is the only accepted legal tender in the retail and service sectors in Moldova. Foreign exchange regulation of the NBM allows foreigners and residents to use foreign currencies in some current and capital transactions in the territory of Moldova. Generally, there are no difficulties associated with the exchange of foreign or local currency in Moldova.

Sovereign Wealth Funds

The embassy is not aware of any sovereign wealth funds run by the government of Moldova.

Capital Markets and Portfolio Investment

Mongolia imposes few restrictions on capital flows and has respected IMF Article VIII by not restricting international payments and transfers.  However, capital markets remain underdeveloped, with little ability to trade futures or derivatives.  The state-owned Mongolian Stock Exchange ( MSE ) is the primary venue for domestic capital and portfolio investments.

Money and Banking System

Mongolia’s four-largest commercial banks – Khan, Trade and Development Bank (TDB), Khas, and Golomt – are majority owned by a combination of both Mongolian and foreign investors and collectively hold 83 percent of all banking assets, or about $10.6 billion (as of December 2020).  Mongolian commercial banks had rates of non-performing loans averaging 11.8 percent in December 2020, an increase from December 2019’s 9.9 percent.  Ongoing COVID-19 rules enabling the postponement of consumer-loan and mortgage payments may create some additional forbearance risk in the banking sector.  The Bank of Mongolia, Mongolia’s central bank, regulates banking operations.  The Bank of Mongolia allows foreigners to establish domestic accounts so long as they can prove lawful residence in Mongolia.

Parliament amended Mongolia’s Law on Banking in January 2021.  The amended law states that ownership by a shareholder and their related parties collectively and as certified by the Bank of Mongolia shall not exceed 20 percent. Banks have until December 31, 2023 to comply with this divestment requirement.  In addition, Mongolia’s four systemically important commercial banks – Khan, TDB, Khas, and Golomt – and the state-owned State Bank must list themselves on the Mongolian Stock Exchange through an IPO by June 30, 2022.  The new rules should improve bank governance by creating accountability to a broader group of shareholders.

The IMF has reported unaddressed macroprudential concerns regarding the relatively large banking system, resulting in the Extended Fund Facility’s unsuccessful completion in May 2020.  Mongolia’s banking system remains broadly undercapitalized, while commercial banking practices and regulatory supervision remain inadequate for ensuring macroeconomic stability.  Mongolia also has a significant number of illiquid banks.  Potential investors in Mongolia’s banking sector are advised to conduct careful due diligence as sector participants and regulators have expressed concerns that the balance sheets of certain systemically important banks may have been inflated or misreported to create the perception of higher capital-adequacy ratios than is accurate.

International and domestic sector participants observe that the Bank of Mongolia does not exercise adequate macroprudential oversight over banks, enabling these banks to misreport their assets.  It has also allowed insolvent smaller banks to continue operating despite not having enough assets to cover liabilities.  Investors contemplating IPO participation should carefully factor in the additional systemic risk associated with these regulatory concerns.

Mongolia’s 2020 removal from the Financial Action Task Force can give confidence to investors that the country takes seriously anti-money laundering and countering the financing of terrorism concerns.

Foreign Exchange and Remittances

Foreign Exchange

The government employs a liberal foreign exchange regime; its national currency, the tugrik (denoted as MNT), is fully convertible into a wide array of international currencies.  Foreign and domestic businesses have reported no problems converting or transferring funds aside from occasional, market-driven shortages of foreign reserves.

Mongolia’s Currency Law requires domestic transactions use MNT, unless exempted by the Bank of Mongolia.  Regulation prohibits listing of wholesale or retail prices in any way – including as an internal accounting practice – that effectively denominates or otherwise indexes prices to currencies other than MNT.  Hedging mechanisms available elsewhere to mitigate exchange risk are generally unavailable given the small size of the market.  Letters of credit in a variety of currencies are available for trade facilitation.  The government sometimes pays for goods and services with promissory notes that cannot be directly exchanged for other currencies.

Remittance Policies

Businesses report no chronic, government-induced delays remitting investment returns or receiving inbound funds, although challenges with correspondent-banking relationships sometimes slow remittances.  Most transfers are completed within a few days to a week; however, occasional currency shortages, most often of U.S. dollars, may cause commercial banks and the central bank to limit transfers temporarily.  Remittances sent abroad are subject to a 10-percent withholding tax to cover potential tax liabilities.

Sovereign Wealth Funds

Mongolia’s Ministry of Finance manages two sovereign wealth funds (SWF) funded through diversion of mining sector revenues: The Fiscal Stabilization Fund and the Future Heritage Fund.  The Fiscal Stabilization Fund diverts revenues that might promote boom and bust cycles of spending; however, Mongolia’s recent fiscal crises have depleted this fund.  The Future Heritage Fund, resembling Norway’s Global Pension Fund, accumulates mining revenues for the future and invests the proceeds exclusively outside Mongolia.  The Ministry of Finance and the IMF project the Future Heritage Fund should start accumulating $104-125 million annually in 2022, coinciding with increased revenues from the Oyu Tolgoi copper and gold mine.  These SWFs are not meaningfully funded as 2021, however.

Capital Markets and Portfolio Investment

The banking sector in Montenegro is fully privatized with 12 privately owned banks operating in the country. The banking sector operates under market terms.  Foreign investors are able to get credit on the local market, and they have access to a variety of credit instruments since the majority of the banks in Montenegro belong to international banking chains.

The largest foreign investor-banks are OTP (Hungary) operating as CKB in Montenegro, Erste Bank (Austria) and NLB (Slovenia). The remaining, smaller foreign banks do not belong to large international groups.  A new set of banking laws have been adopted and some of the existing laws have been amended to improve regulation of the banking sector, provide a higher level of depositor safety, and increase trust in the banking sector itself.  The Law on the Protection of Deposits has been adopted to bring local legislation on protecting deposits up to European standards.  In accordance with the law, a fund for protecting deposits has been established and deposits are guaranteed up to the amount of EUR 50,000 (approximately USD 55,556).

Until 2010, Montenegro had two stock exchanges.  After a successful merger (in 2010), only one stock exchange operates on the capital market under the name of Montenegro Stock Exchange (MSE).  In December 2013, the Istanbul Stock Exchange purchased 24.38 percent of the MSE (www.montenegroberza.com).  Three types of securities are traded: shares of companies, shares of investment funds, and bonds (old currency savings bonds, pension fund bonds, and bonds from restitution.)  The MSE is organized on the principle of member firms, which trade in their own names and for their own account (dealers) in the name and for the account of their clients (brokers).  Members of the MSE can be a legal entity registered as a broker under the Law on Securities provided they meet conditions laid down by the Statute of the Stock Exchange.  In addition, members may include banks and insurance companies, once approved by the Commission for Securities to perform stock exchange trade.  MSE currently has 11 stock brokers.

Money and Banking System

According to Central Bank of Montenegro, the banking sector remained solvent and liquid, with a share of 5.5 percent of non-performing loans.  In 2020, lending activity grew by 3.2 percent in relation to the end of 2019 while the interest rate dropped to 5.84 percent as a result of increased competition.

Montenegro is one of a few countries that does not belong to the Euro zone but uses the Euro as its official currency (without any formal agreement).  Since its authority is limited in monetary policies, the Central Bank, in its role as the state’s fiscal agent, has focused on control of the banking system and maintenance of the payment system. The Central Bank also regulates the process for establishing a bank.  A bank can be founded as a joint-stock company and acquire the status of a legal entity by registering in the court register.  An application for registration in the court register must be submitted 60 days from when the bank is first licensed.

Foreign Exchange and Remittances

Foreign Exchange Policies

The Foreign Investment Law guarantees the right to transfer and repatriate profits in Montenegro.  Montenegro uses the Euro as its domestic currency. There are no other limitations placed on the transfer of foreign currency.

Remittance Policies

There are no difficulties in the free transfer of funds exercised on the basis of profit, repayment of resources, or residual assets. The Central Bank of Montenegro publishes statistics on remittances as a proportion of GDP, with the latest data available indicating that in 2018 remittances accounted for approximately 10 percent of GDP.

Sovereign Wealth Funds

There are no sovereign wealth funds in Montenegro.

Capital Markets and Portfolio Investment

Morocco encourages foreign portfolio investment and Moroccan legislation applies equally to Moroccan and foreign legal entities and to both domestic and foreign portfolio investment. The Casablanca Stock Exchange (CSE), founded in 1929 and re-launched as a private institution in 1993, is one of the few exchanges in the region with no restrictions on foreign participation. The CSE is regulated by the Moroccan Capital Markets Authority. Local and foreign investors have identical tax exposure on dividends (10 percent) and pay no capital gains tax. With a market capitalization of around $66 billion and 76 listed companies, CSE is the second largest exchange in Africa (after the Johannesburg Stock Exchange). Nonetheless, the CSE saw only 14 new listings between 2010-2020. There was only one new initial public offering (IPO) in 2020. Short selling, which could provide liquidity to the market, is not permitted. The Moroccan government initiated the Futures Market Act (Act 42-12) in 2015 to define the institutional framework of the futures market in Morocco and the role of the regulatory and supervisory authorities. As of March 2021, futures trading was still pending implementation and is not expected to commence until 2023.

The Casablanca Stock Exchange demutualized in November of 2015. This change allowed the CSE greater flexibility and more access to global markets, and better positioned it as an integrated financial hub for the region. The Moroccan government holds a 25 percent share of the CSE but has announced its desire to sell to another major exchange to bring additional capital and expertise to the market. Morocco has accepted the obligations of IMF Article VIII, sections 2(a), 3, and 4, and its exchange system is free of restrictions on making payments and transfers on current international transactions. Credit is allocated on market terms, and foreign investors are able to obtain credit on the local market.

Money and Banking System

Morocco has a well-developed banking sector, where penetration is rising rapidly and recent improvements in macroeconomic fundamentals have helped resolve previous liquidity shortages. Morocco has some of Africa’s largest banks, and several are major players on the continent and continue to expand their footprint. The sector has several large, homegrown institutions with international footprints, as well as several subsidiaries of foreign banks. According to the IMF’s 2016 Financial System Stability Assessment on Morocco , Moroccan banks comprise about half of the financial system with total assets of 140 percent of GDP – up from 111 percent in 2008.

According to Bank Al-Maghrib (the Moroccan central bank) there are 24 banks operating in Morocco (five of these are Islamic “participatory” banks), six offshore institutions, 27 finance companies, 12 micro-credit associations, and 19 intermediary companies operating in funds transfer. Among the 19 traditional banks, the top seven banks comprise 90 percent of the system’s assets (including both on- and off-balance-sheet items). Attijariwafa, Morocco’s largest bank, is the sixth largest bank in Africa by total assets (approximately $55 billion in December 2019). The Moroccan royal family is the largest shareholder. Foreign (mainly French) financial institutions are majority stakeholders in seven banks and nine finance companies. Moroccan banks have built up their presence overseas mainly through the acquisition of local banks, thus local deposits largely fund their subsidiaries.

The overall strength of the banking sector has grown significantly in recent years. Since financial liberalization, credit is allocated freely and Bank Al-Maghrib has used indirect methods to control the interest rate and volume of credit. The banking penetration rate is approximately 56 percent, with significant opportunities remaining for firms pursuing rural and less affluent segments of the market. At the start of 2017, Bank Al-Maghrib approved five requests to open Islamic banks in the country. By mid-2018, over 80 branches specializing in Islamic banking services were operating in Morocco. The first Islamic bonds (sukuk) were issued in October 2018. In 2019, Islamic banks in Morocco granted $930 million in financing. The GOM passed a law authorizing Islamic insurance products (takaful) in 2019, but as of March 2021 the implementation regulations are still pending, and the products are not yet active.

Following an upward trend beginning in 2012, the ratio of non-performing loans (NPL) to bank credit stabilized in 2017 through 2019 at 7.6 percent. This was offset by COVID-related complications causing the NPL rate to jump to 9.9 percent in the end of 2020.

Morocco’s accounting, legal, and regulatory procedures are transparent and consistent with international norms. Morocco is a member of UNCTAD’s international network of transparent investment procedures  . Bank Al-Maghrib is responsible for issuing accounting standards for banks and financial institutions. Bank Al Maghrib requires that all entities under its supervision use International Financial Reporting Standards (IFRS). The Securities Commission is responsible for issuing financial reporting and accounting standards for public companies. Moroccan Stock Exchange Law ( Law 52-01 ) stipulates that all companies listed on the Casablanca Stock Exchange (CSE), other than banks and similar financial institutions, can choose between IFRS and Moroccan Generally Accepted Accounting Principles (GAAP). In practice, most public companies use IFRS.

Legal provisions regulating the banking sector include Law No. 76-03 on the Charter of Bank Al-Maghrib, which created an independent board of directors and prohibits the Ministry of Finance and Economy from borrowing from the Central Bank except under exceptional circumstances. Even with the financial crisis caused by COVID-19, the central bank did not provide financing directly to the state, but instead used other monetary tools (such as reducing reserve requirements) to intervene and reinforce the banking sector. Law No. 34-03 (2006) reinforced the supervisory authority of Bank Al-Maghrib over the activities of credit institutions. Foreign banks and branches are allowed to establish operations in Morocco and are subject to provisions regulating the banking sector. At present, the U.S. Mission is not aware of Morocco losing correspondent banking relationships.

There are no restrictions on foreigners’ abilities to establish bank accounts. However, foreigners who wish to establish a bank account are required to open a “convertible” account with foreign currency. The account holder may only deposit foreign currency into that account; at no time can they deposit dirhams. There are anecdotal reports that Moroccan banks have closed accounts without giving appropriate warning and that it has been difficult for some foreigners to open bank accounts.

Morocco prohibits the use of cryptocurrencies, noting that they carry significant risks that may lead to penalties.

Foreign Exchange and Remittances

Foreign Exchange

Foreign investments financed in foreign currency can be transferred tax-free, without amount or duration limits. This income can be dividends, attendance fees, rental income, benefits, and interest. Capital contributions made in convertible currency, contributions made by debit of forward convertible accounts, and net transfer capital gains may also be repatriated. For the transfer of dividends, bonuses, or benefit shares, the investor must provide balance sheets and profit and loss statements, annexed documents relating to the fiscal year in which the transfer is requested, as well as the statement of extra-accounting adjustments made to obtain the taxable income.

A currency-convertibility regime is available to foreign investors, including Moroccans living abroad, who invest in Morocco. This regime facilitates their investments in Morocco, repatriation of income, and profits on investments. Morocco guarantees full currency convertibility for capital transactions, free transfer of profits, and free repatriation of invested capital, when such investment is governed by the convertibility arrangement. Generally, the investors must notify the government of the investment transaction, providing the necessary legal and financial documentation. With respect to the cross-border transfer of investment proceeds to foreign investors, the rules vary depending on the type of investment. Investors may import freely without any value limits to traveler’s checks, bank or postal checks, letters of credit, payment cards or any other means of payment denominated in foreign currency. For cash and/or negotiable instruments in bearer form with a value equal to or greater than $10,000, importers must file a declaration with Moroccan Customs at the port of entry. Declarations are available at all border crossings, ports, and airports.

Morocco has achieved relatively stable macroeconomic and financial conditions under an exchange rate peg (60/40 Euro/Dollar split), which has helped achieve price stability and insulated the economy from nominal shocks. In March of 2020, the Moroccan Ministry of Economy, Finance, and Administrative Reform, in consultation with the Central Bank, adopted a new exchange regime in which the Moroccan dirham may now fluctuate within a band of ± 5 percent compared to the Bank’s central rate (peg). The change loosened the fluctuation band from its previous ± 2.5 percent. The change is designed to strengthen the capacity of the Moroccan economy to absorb external shocks, support its competitiveness, and contribute to improving growth.

Remittance Policies

Amounts received from abroad must pass through a convertible dirham account. This type of account facilitates investment transactions in Morocco and guarantees the transfer of proceeds for the investment, as well as the repatriation of the proceeds and the capital gains from any resale. AMDIE recommends that investors open a convertible account in dirhams on arrival in Morocco to quickly access the funds necessary for notarial transactions.

Sovereign Wealth Funds

Ithmar Capital is Morocco’s investment fund and financial vehicle, which aims to support the national sectorial strategies. Ithmar Capital is a full member of the International Forum of Sovereign Wealth Funds and follows the Santiago Principles. The $1.8 billion fund was launched in 2011 by the Moroccan government, supported by the royal Hassan II Fund for Economic and Social Development. This fund initially supported the government’s long-term Vision 2020 strategic plan for tourism. The fund is currently part of the long-term development plan initiated by the government in multiple economic sectors.

Capital Markets and Portfolio Investment

The Mozambique Stock Exchange (Bolsa de Valores de Mocambique, BVM) is a public institution under the guardianship of the Minister of Economy and Finance and the supervision of the Central Bank of Mozambique.  In general, the BVM is underutilized as a means of financing and investment.  However, the government has expressed interest in reforming market rules in an effort to increase capitalization and potentially prepare the ground for new rules that would require foreign companies active in Mozambique to be listed on the local stock exchange. Corporate and government bonds are traded on the BVM and there is only one dealer that operates in the country, with all other brokers incorporated into commercial banks, which act as the primary dealers for treasury bills.  The secondary market in Mozambique remains underdeveloped.  Available credit instruments include medium and short-term loans, syndicated loans, foreign exchange derivatives, and trade finance instruments, such as letters of credit and credit guarantees.  The BVM remains illiquid, in the sense that very limited activity occurs outside the issuing time.  Investors tend to hold their instruments until maturity.  The market also lacks a bond yield curve as government issuances use a floating price regime for the coupons with no price discovery for tenures above 12 months.

The GRM notified the IMF that it has accepted the obligations of Article VIII sections 2, 3, and 4 of the IMF Articles of Agreement, effective May 20, 2011.

Money and Banking System

According to the Mozambican Bank Association December 2020 bank survey, there are 19 commercial banks operating in Mozambique. The top three banks – Banco Comercial e de Investimentos (BCI), Banco Internacional de Mocambique SA (BIM), and Standard Bank – account for 69 percent of the total assets, total loans and advances, and total deposits held by commercial banks in Mozambique.

Between 2018-2019, the value of non-performing loans (NPL) decreased by 2 percent, but the NPL ratio worsened from 8.5 percent to 9.1 percent over the same period.  Banking sector profits have dropped by 2 percent due to the reduction of prime lending rates, costs of rehabilitation of branches and property damage from cyclones Idai and Kenneth, and reduced commission income following new Central Bank legislation limiting charges for certain services to promote financial inclusion.

In 2016, Mozambique launched a six-year National Financial Inclusion Strategy which has led to limited improvements in access to formal financial services. According to 2019 FinScope data, 21 percent of the population has access to a bank account, still well below the country’s 2022 target of 60 percent. As of March 2020, Mozambique had 706 bank agencies, 1,755 ATMs and 36,701 point of sale devices. Most banking locations are concentrated in provincial capitals and rural districts often have no banks at all.  Thanks to the partnership between mobile communications companies and banks for electronic or mobile-money transactions, access to financial services is improving. The number of services available from ATMs is also increasing. There are also 1,697 banking agents in the country that provide basic banking services to customers without access to a bank branch.

Credit is allocated on market terms, but eligibility requirements exclude much of the population from obtaining credit. Banks request collateral, but since land cannot be used as collateral, the majority of individuals do not qualify for loans. Foreign investor export activities in critical areas related to food, fuel, and health markets have access to credit in foreign and local currencies.  All other sectors have access to credit only in the local currency.

Foreign Exchange and Remittances

Foreign Exchange

In 2017 Mozambique approved new foreign exchange control rules in Law No. 49/2017. Under the terms of the new law, Mozambican residents are now required to deposit export earnings into an export earnings account in foreign currency, which can only be used for specifically defined purposes.  Under the new decree, foreign exchange operations will now be processed electronically in real time by the commercial banks.  Applications for capital operations are now processed by commercial banks and forwarded to the Central Bank. Foreign direct investment (FDI) up to USD 250,000 no longer requires prior authorization from the Bank of Mozambique and only needs to be registered with the commercial bank handling the transactions.  Shareholder and intercompany loans made by foreign entities up to USD 5 million require no authorization from the Central Bank, provided the loans are interest free or lower than the base lending rate for the relevant currency, the repayment period is at least three years, and no other fees or charges apply.

A special foreign exchange regime for oil, gas, and mining sectors allows for greater flexibility in foreign exchange and financing operations.  The law, which went into force in January 2018, stipulates that profits from petroleum rights are entirely taxed at an autonomous tax rate of 32 percent.  The law also guarantees tax stabilization for up to 10 years, starting from the beginning of commercial production with an investment amount of USD 100 million.  The Ministry of Economy and Finance can also approve the use of U.S. dollars, if the company has invested at least USD 500 million and more than 90 percent of its transactions are in U.S. dollars.  The law also revoked a 50 percent tax rate reduction related to the production tax that was available when extracted products were used locally.

Remittance Policies

The 2021 Central Bank’s Aviso 6/GBM/2020 requires at least 30 percent of export proceeds to be converted into local currency.  However, per the Central Bank Circular issued in February 2021, this conversion rule does not apply for rent paid in a foreign currency by non-resident entitles to a Mozambican landlord.

Sovereign Wealth Funds

In October 2020, Mozambique’s Central Bank published an initial proposal for a Sovereign Wealth Fund (SWF) to manage the expected increase in government revenues from the natural gas projects in northern Mozambique. As of April 2021, the government is currently revising the proposal and aims to put forward a formal legislative proposal by the end of the year for review and approval by Mozambique’s National Assembly.

The initial draft from the Central Bank calls for 50 percent of government revenue from the natural gas sector as well as other extractive industries to be used to fund the SWF for a period of 20 years and sets up strict payout criteria for any withdrawals from the SWF before it reaches maturity. In general, the government’s proposal follows the Santiago Principles and the government is working with the International Forum of Sovereign Wealth Funds to refine its proposal. In total, the government estimates it will receive USD 96 billion from the Rovuma Basin natural gas projects over the lifetime of the projects. Delays in construction and evolving international energy prices, however, could lead to lower-than-expected returns from the natural gas projects.

Capital Markets and Portfolio Investment

There is a free flow of financial resources within Namibia and throughout the Common Monetary Area (CMA) countries of the South African Customs Union (SACU), which include Namibia, Botswana, eSwatini, South Africa, and Lesotho. Capital flows with the rest of the world are relatively free, subject to the South African currency exchange rate. The Namibia Financial Institutions Supervisory Authority (NAMFISA) registers portfolio managers and supervises the actions of the Namibian Stock Exchange (NSX) and other non-banking financial institutions.

Although the NSX is the second-largest stock exchange in Africa, this ranking is largely because many South African firms listed on the Johannesburg exchange are also listed (dual listed) on the NSX. By law, Namibia’s government pension fund and other Namibian funds are required to allocate a certain percentage of their holdings to Namibian investments. Namibia has a world-class banking system that offers all the services needed by a large company. Foreign investors are able to get credit on local market terms.

There are no laws or practices by private firms in Namibia to prohibit foreign investment, participation, or control; nor are there any laws or practices by private firms or government precluding foreign participation in industry standards-setting consortia.

Money and Banking System

Namibia’s central bank, the Bank of Namibia (BON), regulates the banking sector. Namibia has a highly sophisticated and developed commercial banking sector that is comparable with the best in Africa. There are eight commercial banks: Standard Bank, Nedbank Namibia, Bank Windhoek, FNB Namibia, Trustco Bank, Letshego Bank Limited, Banco BIC, and Banco Atlantico. Bank Windhoek and Trustco Bank are the only locally-owned banks, and Trustco Bank specializes in micro-finance. Standard Bank, Nedbank, and FNB are South African subsidiaries, Banco BIC and Banco Atlantico are Angolan. A significant proportion of bank loans come in the form of bonds or mortgages to individuals. There is little or no investment banking activity.

The Development Bank of Namibia (DBN) and Agribank are Namibian government-owned banks with a mandate for development project financing. Agribank’s mandate is specifically in the agriculture sector.

While there are no restrictions on foreigners’ ability to open bank accounts, a non-resident must open a “non-resident” account at a Namibian commercial bank to facilitate loan repayments. This account would normally be funded from abroad or from rentals received on the property purchased, subject to the bank holding the account being provided with a copy of any rental. Non-residents who are in possession of a valid Namibian work permit/permanent residency are considered to be residents for the duration of their work permit and are therefore not subject to borrowing restrictions placed on non-residents without the necessary permits.

The BON does not recognize cryptocurrencies, such as Bitcoin, as legal tender in Namibia. The BON is reluctant to allow the implementation of blockchain technologies in banking transactions.

Foreign Exchange and Remittances

Foreign Exchange

The Namibian dollar is pegged at parity to the South African rand, and rand are accepted as legal tender in Namibia. The FIA offers investors meeting certain eligibility criteria the opportunity to obtain a Certificate of Status Investment (CSI). A “status investor” is entitled to:

• Preferential access to foreign exchange to repay foreign debt, pay royalties and similar charges, and remit branch profits and dividends;
• Preferential access to foreign currency in order to repatriate proceeds from the sale of an enterprise to a Namibian resident;
• Exemption from regulations which might restrict certain business or categories of business to Namibian participation;
• Right to international arbitration in the event of a dispute with the government; and
• Payment of just compensation without undue delay and in freely convertible currency in the event of expropriation.

Remittance Policies

According to World Bank Development Indicators, remittances to Namibia have been consistently less than 0.15 percent of GDP for at least the last decade. The majority of remittances are processed through commercial banks. There have been no plans to change investment remittance policies in recent times.

Sovereign Wealth Funds

Namibia does not have a Sovereign Wealth Fund (SWF), but the government has publicly stated its intention to create one. The Government Institution Pension Fund (GIPF) provides retirement and benefits for employees in the service of the Namibian government as well as institutions established by an act of the Namibian Parliament.

Capital Markets and Portfolio Investment

The Nepal Stock Exchange (NEPSE) is the only stock exchange in Nepal. The majority of NEPSE’s 255 listed companies are hydropower companies and banks, with the NEPSE listings for banks driven primarily by a regulatory requirement rather than commercial considerations. There are few opportunities for foreign portfolio investment in Nepal.  Foreign investors are not allowed to invest in the Nepal Stock Exchange nor permitted to trade in the shares of publicly listed Nepali companies; only Nepali citizens and Non-Resident Nepalis (NRNs) are allowed to invest in NEPSE and trade stock. The FITTA, however, allows for the creation of a “venture capital fund” to enable foreign institutional investors to take equity stakes in Nepali companies.

The Securities Board of Nepal (SEBON) regulates NEPSE, but the Board does little to encourage and facilitate portfolio investment. While both NEPSE and SEBON have been enhancing their capabilities in recent years, Post’s view is that the NEPSE is far from becoming a mature stock exchange and likely does not have sufficient liquidity to allow for the entry and exit of sizeable positions. Some experts have raised concerns about the Ministry of Finance’s degree of influence over both SEBON and NEPSE and have cited lack of independence from government influence as an impediment to the development of Nepal’s capital market. (See: https://milkeninstitute.org/reports/framing-issues-modernizing-public-equity-market-nepal .)

Nepal moved to full convertibility (no foreign exchange restrictions for transactions in the current account)  when it accepted Article VIII obligations of IMF’s Articles of Agreement in May 1994. In line with this, the GoN and NRB refrain from imposing restrictions on payments and transfers for current international transactions.

Credit is generally allocated on market terms, although special credit arrangements exist for farmers and rural producers through the Agricultural Development Bank of Nepal.  Foreign-owned companies can obtain loans on the local market. The private sector has access to a variety of credit and investment instruments. These include public stock and direct loans from finance companies and joint venture commercial banks. Foreign investors can access equity financing locally, but in order to do so, the investor must be incorporated in Nepal under the Companies Act of 2006 and listed on the stock exchange. The banking sector has grappled with shortages of loanable funds in the last couple of years resulting in high interest rates on loans. One of the major reasons for this is slow and inefficient government spending leading to lack of liquidity in the system. With the return of relative political stability in 2018, it was hoped this problem would be reduced but it has continued.

Money and Banking System

The NRB has promoted mergers in the financial sector and published merger bylaws in 2011 to help consolidate and better regulate the banking sector.  As of January 2021, there were 27 commercial banks, 19 development banks, and 21 finance companies registered with the NRB. This total does not include micro-finance institutions, savings and credit cooperatives, non-government organizations (NGOs), and other institutions, which provide many of the functions of banks and financial institutions.  There are no legal provisions to defend against hostile takeovers, but there have been no reports of hostile takeovers in the banking system.

Nepal’s poor infrastructure and challenging terrain has meant that many parts of the country do not have access to financial services.  A 2015 study by the UN Capital Development Fund (UNCDF) reported that 61 percent of Nepalis had access to formal financial services (40 percent to formal banking). Following local elections in 2017, the GoN established 753 local government units and promised that each unit would be served by at least one bank.  As of January 2020, 8 local units were still without a bank. Most of the local units without banks are in remote locations with few suitable buildings and a lack of proper security and internet connectivity.

(UNCDF) reported that 61 percent of Nepalis had access to formal financial services (40 percent to formal banking). Following local elections in 2017, the GoN established 753 local government units and promised that each unit would be served by at least one bank.  As of January 2020, 8 local units were still without a bank. Most of the local units without banks are in remote locations with few suitable buildings and a lack of proper security and internet connectivity.

Nepal’s banking sector is relatively healthy, though fragmented, and NRB bank supervision, while improving, remains weak, allegedly due to political influence according to several private sector representatives.  The GoN hopes to strengthen the banking system by reducing the number of smaller banks and it has actively encouraged consolidation of commercial banks; there are currently 27 commercial banks, down from 78 in 2012. Most banks locate their branches in and around Kathmandu and in the large cities of southern Nepal.  Some banks are owned by prominent business houses, which could create conflicts of interest. There are also a large number of cooperative banks that are governed not by the NRB but by the Ministry of Agricultural, Land Management, and Cooperatives. These cooperatives compete with banks for customers.

In January 2017, Parliament approved the Bank and Financial Institutions (BAFI) Act.  First introduced in 2013, BAFI is designed to strengthen corporate governance by setting term limits for Chief Executive Officers and board members at banks and financial institutions.  The legislation also aims to reduce potential conflicts of interest by prohibiting business owners from serving on the board of any bank from which their business has taken loans.

In 2018, NRB was criticized for not taking action to relieve a liquidity crunch and the Nepal Banker’s Association came to a gentlemen’s agreement to limit deposit rates.  The NRB did not protest this action, leading to some criticism that it was not fulfilling its role as a regulator against what many perceived as cartel behavior.

The NRB regulates the national banking system and also functions as the government’s central bank. As a regulator, NRB controls foreign exchange; supervises, monitors, and governs operations of banking and non-banking financial institutions; determines interest rates for commercial loans and deposits; and determines exchange rates for foreign currencies.  As the government’s bank, NRB manages all government income and expenditure accounts, issues Nepali bills and treasury notes, makes loans to the government, and determines monetary policy.

Existing banking laws do not allow retail branch operations by foreign banks, which compels foreign banks to set up a local bank if choosing to operate in Nepal.  For example, Standard Chartered formed Standard Chartered Nepal. All commercial banks have correspondent banking arrangements with foreign commercial banks, which they use for transfers and payments.  Standard Chartered is the only correspondent bank with a physical presence in Nepal and handles foreign transactions for the NRB. Nepal will be undergoing a review by the Financial Action Task Force (FATF) in 2021 to assess its anti-money laundering regime. Although unlikely, Nepal risks losing its correspondent banking relationships or increased FATF monitoring if it fails this assessment.  Foreigners who are legal residents of Nepal with proper work permits and business visas are allowed to open bank accounts.

Foreign Exchange and Remittances

Foreign Exchange

The FITTA allows foreign investors to repatriate all profits and dividends, all money raised through the sale of shares, all payments of principal and interest on any foreign loans, and any amounts invested in transferring foreign technology. Doing so, however, requires multiple approvals and extended procedures which have historically resulted in such transactions taking months to complete. Foreign nationals working in local industries are also allowed to repatriate 75 percent of their income. Opening bank accounts and obtaining permission for remittance of foreign exchange are available based on the recommendation of the DOI, which usually has provided approval of the original investment.

In practice, repatriation is difficult, time consuming, and not guaranteed.  The relevant GoN department and the NRB, which regulates foreign exchange, must both approve the repatriation of funds. In most cases, approval must also be obtained from the DOI. In the case of the telecommunications sector, the Nepal Telecommunications Authority must also approve the repatriation. In joint venture cases, the NRB and the Ministry of Finance must grant approval. Repatriation of funds is expected to become easier after the single window service center, as provided for by the FITTA, comes fully into operation.

In the past, several foreign companies reported that the GoN insisted on contracts denominated in Nepal’s currency, the Nepali rupee (NPR), and not major world currencies, such as the U.S. dollar. This seems to be changing, at least in the energy sector, where the GoN has adopted a policy that permits the Nepal Electricity Authority to sign Power Purchase Agreements (PPAs) denominated in U.S. dollars (or other hard foreign currency).  There are some limits on so-called “forex” or hard currency PPAs, including, for example, the stipulations that only costs or borrowing in foreign currency are covered and that payments may only be made for 10 years or the term of the loan, whichever is less. Provisions for repatriation are governed by NRB procedures, as is conversion of foreign investors’ funds into other currencies. Nepal’s currency has been pegged to the Indian rupee (INR) since 1994 at a rate of 1.6 NPR to 1 INR. As such, the NPR fluctuates relative to world currencies in line with the INR. According to the April 2020 IMF Article IV Consultation—Press Release; Staff Report; and Statement by the Executive Director for Nepal ( https://www.imf.org/en/Countries/NPL ), the peg to the INR reduces exchange rate uncertainty for trade and investment with India, its major trading partner, but the appreciation of the Nepali rupee against the Indian rupee has also resulted in the overvaluation of the Nepali rupee and could affect Nepal’s competitiveness.

Remittance Policies

The FITTA legislation promises to make it easier to remit investment earnings, but it will depend on how effectively the single window, as well as associated approvals and procedures, functions in practice. In the interim, foreign investors will continue to use the old process of applying to the NRB to repatriate funds from the sale of shares. For repatriation of funds connected with dividends, principal and interest on foreign loans, technology transfer fees, or expatriate salaries, the foreign investor applies first to the DOI and then to the NRB. At the DOI stage of obtaining remittance approval, foreign investors must submit remittance requests to a commercial bank. Final remittance approval is granted by the NRB Department of Foreign Exchange, a process that is reported by foreign investors to be opaque and time-consuming. After administrative approvals, a lengthy clearance process between the NRB and the commercial bank further slows the foreign exchange transfer. The experience of U.S. and other foreign investors so far indicates serious discrepancies between the government’s stated policies in the FITTA and implementation in practice.

Sovereign Wealth Funds

Nepal has no sovereign wealth funds.

Capital Markets and Portfolio Investment

The Netherlands is home to the world’s oldest stock exchange – established four centuries ago – and Europe’s first options exchange, both located in Amsterdam.  The Amsterdam financial exchanges are part of the Euronext group that operates stock exchanges and derivatives markets in Amsterdam, Brussels, Lisbon, and Paris. Dutch financial markets are fully developed and operate at market rates, facilitating the free flow of financial resources.  The Netherlands is an international financial center for the foreign exchange market, Eurobonds, and bullion trade.

The flexibility that foreign companies enjoy in conducting business in the Netherlands extends into the area of currency and foreign exchange.  There are no restrictions on foreign investors’ access to sources of local finance.

Money and Banking System

The Dutch banking sector is firmly embedded in the European System of Central Banks, of which the Dutch Central Bank (DNB) is the national prudential banking supervisor.  AFM, the Dutch securities and exchange supervisor, supervises financial institutions and the proper functioning of financial markets and falls under the EU-wide European Securities and Markets Authority (ESMA). The highly concentrated Dutch banking sector is over three times as large as the rest of the Dutch economy, making it one of Europe’s largest banking sectors in relation to GDP.  Three banks, ING, ABN AMRO, and Rabobank, hold nearly 85 percent of the banking sector’s total assets.  The largest bank, ING, has a balance sheet of just over $1 trillion (€937 billion).

The DNB does not consider Bitcoin and similar cryptocurrencies to be legitimate currency, as they do not fulfill the traditional purpose of money as stable means of exchange or saving, and their value is not supported via central bank guarantee mechanisms.  DNB considers current cryptocurrencies to be risky investments that are especially vulnerable to criminal abuse and has begun requiring that providers of financial services related to exchange and deposit of cryptocurrencies register with the DNB, per anti-money laundering (AML) legislation.

The DNB acknowledges however that in the future, cash transactions will likely be replaced with digital transactions that require central bank-issued and -guaranteed cryptocurrencies.  Dutch society has already embraced cash-less commerce to a high degree – seventy percent of over-the-counter shopping is via PIN transactions and contactless payment – and DNB is participating with central banks from Canada, Japan, England, Sweden, Switzerland, and the Bank for International Settlements in research about a possible central bank-issued cryptocurrency.

Foreign Exchange and Remittances

Foreign Exchange

The Netherlands is a founding member of the EU and one of the first members of the Eurozone.  The European Central Bank supervises monetary policy, and the president of the Dutch Central Bank (DNB) sits on the European Central Bank’s Governing Council.

There are no restrictions on the conversion or repatriation of capital and earnings (including branch profits, dividends, interest, royalties), or management and technical service fees, with the exception of the nominal exchange-license requirements for nonresident firms.

Remittance Policies

The Netherlands does not impose waiting periods or other measures on foreign exchange for remittances.  Similarly, there are no limitations on the inflow or outflow of funds for remittance of profits or revenue.  The Netherlands, as a Eurozone member, does not engage in currency manipulation tactics. The Netherlands has been a member of the Financial Action Task Force) FATF since 1990 and – because of the membership of its Caribbean territories in the Caribbean FATF (C-FATF) – strongly supports C-FATF.

With the promulgation of additional, preventative anti-money laundering and counterfeiting legislation, the Netherlands has remedied many of the deficiencies revealed in a 2011 Mutual Evaluation Report.  As a result, FATF removed the Netherlands from its “regular follow-up process” in February 2014.  The Netherlands is preparing for its next mutual evaluation report in 2022. The State Department’s Bureau of International Narcotics and Law Enforcement’s International Narcotics Control Strategy Report (INCSR) has listed the Netherlands as a “country of primary concern,” largely because the country is a major global trade and financial center and consequently an attractive venue for laundering funds generated by illicit activities.

More information can be found at  https://www.state.gov/wp-content/uploads/2021/02/21-00620-INLSR-Vol2_Report-FINAL.pdf [1 MB].

Sovereign Wealth Funds

The Netherlands has no sovereign wealth funds.

Capital Markets and Portfolio Investment

New Zealand policies generally facilitate the free flow of financial resources to support the flow of resources in the product and factor markets. Credit is generally allocated on market terms, and foreigners are able to obtain credit on the local market. The private sector has access to a limited variety of credit instruments. New Zealand has a strong infrastructure of statutory law, policy, contracts, codes of conduct, corporate governance, and dispute resolution that support financial activity. The banking system, mostly dominated by foreign banks, is rapidly moving New Zealand into a “cashless” society.

New Zealand adheres to International Monetary Fund (IMF) Article VIII and does not place restrictions on payments and transfers for international transactions.

New Zealand has a range of other financial institutions, including a securities exchange, investment firms and trusts, insurance firms and other non-bank lenders. Non-bank finance institutions experienced difficulties during the global financial crisis (GFC) due to risky lending practices, and the government of New Zealand subsequently introduced legal changes to bring them into the regulatory framework. This included the introduction of the Non-bank Deposit Takers Act 2013 and associated regulations which impose requirements on exposure limits, minimum capital ratios, and governance. It requires non-bank institutions be licensed and have suitable directors and senior officers. It also provides the RBNZ with powers to detect and intervene if a non-bank institution becomes distressed or fails.

The RBNZ is the prudential regulator and supervisor of all insurers carrying on insurance business in New Zealand and is responsible for administering the Insurance (Prudential Supervision) Act 2010. The RBNZ administers the Act to promote the maintenance of a sound and efficient insurance sector; and promoting public confidence in the insurance sector.

The GFC also prompted New Zealand to introduce broad-based financial market law reform which included the establishment of the Financial Markets Authority (FMA) in 2014. The Financial Markets Conduct Act (FMC) 2013 provided a new licensing regime to bring New Zealand financial market regulations in line with international standards. It expanded the role of the FMA as the primary regulator of fair dealing conduct in financial markets, provided enforcement for parts of the Financial Advisers Act 2008, and made the FMA one of the three supervisors for AML/CFT, alongside the RBNZ and the Department of Internal Affairs. The FMA supervises approximately 800 reporting entities.

Legal, regulatory, and accounting systems are transparent. Financial accounting standards are issued by the New Zealand Accounting Standards Board (NZASB), which is a committee of the External Reporting Board established under the Crown Entities Act 2004. The NZASB has the delegated authority to develop, adopt and issue accounting standards for general purpose financial reporting in New Zealand and are based largely on international accounting standards, and GAAP.

Smaller companies (except issuers of securities and overseas companies) that meet proscribed criteria face less stringent reporting requirements. Entities listed on the stock exchange are required to produce annual financial reports for shareholders. Stocks in a number of New Zealand listed firms are also traded in Australia and in the United States. Small, publicly held companies not listed on the NZX may include in their constitution measures to restrict hostile takeovers by outside interests, domestic or foreign. However, NZX rules generally prohibit such measures by its listed companies.

In December 2019, the government introduced the Financial Market Infrastructure Bill to establish a new regulatory regime for financial market infrastructures (FMI), and to provide certain FMIs with legal protections relating to settlement finality, netting, and the enforceability of their rules. The bill aims to maintain a sound and efficient financial system; avoid significant damage to the financial system resulting from problems with an FMI, an operator of an FMI, or a participant of an FMI; promote the confident and informed participation of businesses, investors, and consumers in the financial markets; and promote and facilitate the development of fair, efficient, and transparent financial markets. The bill if passed would be administered jointly by the RBNZ and the FMA. The bill passed its first reading in February 2020 and is with the select committee.

In 2018, the market capitalization of listed domestic companies in New Zealand was 42 percent of GDP, at USD 86 billion. The small size of the market reflects in part the risk averse nature of New Zealand investors, preferring residential property and bank term deposits over equities or credit instruments for investment. New Zealand’s stock of investment in residential property is valued at NZD 1.19 trillion (USD 774 billion).

Money and Banking System

The Reserve Bank (RBNZ) regulates banks in New Zealand in accordance with the Reserve Bank of New Zealand Act 1989. The RBNZ is statutorily independent and is responsible for conducting monetary policy and maintaining a sound and efficient financial system. The New Zealand banking system consists of 26 registered banks, and more than 90 percent of their combined assets are owned by foreign banks, mostly Australian. There is no requirement in New Zealand for financial institutions to be registered to provide banking services, but an institution must be registered to call itself a bank.

In November 2017, the government announced it would undertake the first ever review of the RBNZ Act. In December 2018, the government passed an amendment to the Act to broaden the legislated objective of monetary policy beyond price stability, to include supporting maximum sustainable employment. It also requires that monetary policy be decided by a consensus of a Monetary Policy Committee, which must also publish records of its meetings. While policy decisions at the RBNZ have been made by the Governing Committee for several years before the amendment, the Act had laid individual accountability with the Governor, who could be removed from office for inadequate performance according to the goals set through the Policy Targets Agreement.

Applicants for bank registration must meet qualitative and quantitative criteria set out in the RBNZ Act. Applicants who are incorporated overseas are required to have the approval of their home supervisor to conduct banking business in New Zealand, and the applicant must meet the ongoing prudential requirements imposed on it by the overseas supervisor. Accordingly, the conditions of registration that apply to branch banks mainly focus on compliance with the overseas supervisor’s regulatory requirements.

The RBNZ introduced a Dual Registration Policy for Small Foreign Banks in December 2016. Foreign-owned banks are permitted to apply for dual registration – operating both a branch and a locally incorporated subsidiary in New Zealand – provided both entities comply with relevant prudential requirements. Locally incorporated subsidiaries are separate legal entities from the parent bank. They are required, among other things, to maintain minimum capital requirements in New Zealand and have their own board of directors, including independent directors. In contrast, bank branches are essentially an extension of the parent bank with the ability to leverage the global bank balance sheet for larger lending transactions. Capital and governance requirements for branch banks are established by the home regulatory authority. There are no local capital or governance requirements for registered bank branches in New Zealand.

In addition to registered banks, the RBNZ supervises and regulates insurance companies in accordance with the Insurance (Prudential Supervision) Act of 2010 and non-bank lending institutions. Non-bank deposit takers are regulated under the Non-bank Deposit Takers Act of 2013.

New Zealand has no permanent deposit insurance scheme and the RBNZ has no requirement to guarantee the viability of a registered bank. The RBNZ operates the Open Bank Resolution (OBR) which allows a distressed bank to be kept open for business, while placing the cost of a bank failure primarily on the bank’s shareholders and creditors, rather than on taxpayers. While the scheme has been generally successful, in 2010 the government paid out NZD 1.6 billion (USD 1 billion) to cover investor losses when New Zealand’s largest locally-owned finance company at the time, went into receivership. There have since been bailouts of several insurance companies and other small finance companies.

New Zealand’s banking system relies on offshore wholesale funding markets as a result of low levels of domestic savings. Banks can raise funds in international markets relatively easily at reasonable cost, but are vulnerable to global market volatility, geopolitics, and domestic economic conditions. Domestically, banks face exposure due to the concentration of New Zealand exports in a small number of commodity-based sectors which can be subject to considerable price volatility. Residential mortgage and agricultural lending exposures have also presented risk.

The four largest banks (ASB, ANZ, BNZ and Westpac) control 88 percent of the retail and commercial banking market measured in terms of total banking assets. With the addition of Kiwibank, that rises to 91 percent. Kiwibank launched in 2002 and is majority owned by NZ Post (53 percent), with the NZ Superannuation Fund (25 percent), and the Accident Compensation Corporation (22 percent).

The RBNZ reports the total assets of registered banks to be about NZD 631 billion (USD 410 billion) as of March 2020. Assets of insurance companies’ assets were valued at NZD 81 billion (USD 53 billion) and NZD 14.4 billion (USD 9.4 billion) for non-bank lending institutions. The RBNZ estimates approximately 0.6 percent of bank loans are non-performing. Agriculture loans make up about 13 percent of bank lending and has seen higher rates of non-performing loans – particularly dairy farms – in 2019. The RBNZ expect non-performing to rise again having recovered only in the past few years from the Global Financial Crisis.

The four banks have capital generally above the regulatory requirements. The initial findings from a RBNZ review of bank capital requirements released in March 2017 found New Zealand banks to be “in the pack” in terms of capital ratios relative to international peers. There have since been subsequently four rounds of consultations revisiting capital requirements after the Australian Financial System Inquiry made recommendations that were subsequently accepted by the Australian Prudential Regulation Authority to improve the resilience of the Australian banks. While this contributes to the ultimate soundness of the New Zealand subsidiaries, it does not directly strengthen their balance sheets.

In February 2019, the RBNZ proposed to almost double capital requirements for the four big banks. The RBNZ proposed to require banks’ Tier 1 capital to be comprised solely of equity and to increase from the current minimum of 8.5 percent of total capital to 16 percent over five years. It also wants Tier 1 capital to be pure equity, rather than hybrid-type securities that usually behave as debt, but which can be converted into equity if required, and which are about a fifth of the cost of pure equity. Since the GFC, the minimum tier 1 capital has already been raised from 4 percent of risk-weighted assets to 8.5 percent.

In December 2019, the RBNZ announced the minimum total capital ratio will increase from 10.5 percent currently to 18 percent for the four largest banks, and 16 percent for the smaller local banks. For the largest banks, at least 16 percent must consist of tier 1 capital, and within this at least 13.5 percent must be common equity. For the small banks, the requirements are 14 percent and 11.5 percent respectively. Debt instruments that can be converted to equity will no longer count towards regulatory capital. However, banks will able to make greater use of redeemable preference shares. Initially in order to give the banks time to accumulate capital through retained earnings the changes were to be phased in over a seven-year period starting from July 2020. The RBNZ has delayed the introduction until July 1, 2021 due to the COVID-19 pandemic.

The penetration of New Zealand’s major banks has improved since the introduction of the voluntary superannuation scheme, KiwiSaver in 2007. The increase in their market share is also a result of the appointment of three additional banks as default KiwiSaver providers in 2014. People who start a new job are automatically enrolled in KiwiSaver and must opt-out if they do not want to be a member. Contributions are made by the employee, the employer and if eligible from the government in the form of a tax credit. At the start of 2021 there were more than 3 million KiwiSaver members, and the amount invested in KiwiSaver schemes is estimated to be NZD 62 billion (USD 40.3 billion). While funds can only be withdrawn at the age of 65 with very few exceptions, members can shift their funds. Over the course of 2020 as markets dropped, KiwiSavers shifted NZD 1.5 billion (USD 975 million) from share-heavy funds to cash or conservative funds.

There are some restrictions on opening a bank account in New Zealand that include providing proof of income and needing to be a permanent New Zealand resident of 18 years old or above. Access to money in the account will not be granted until the individual presents one form of photo ID and a proof of address in-person at a branch of the bank in New Zealand. Some banks will require a copy of the applicant’s visa. If the applicant does not apply for an IRD number, the tax rate on income earned will default to the highest rate of 33 percent. New Zealand banks typically have a dedicated branch for migrants and businesses to set up banking arrangements.

Foreign Exchange and Remittances

Foreign Exchange

New Zealand has revoked all foreign exchange controls. Accordingly, there are no such restrictions – beyond those that seek to prevent money laundering and financing of terrorism – on the transfer of capital, profits, dividends, royalties or interest into or from New Zealand. Full remittance of profits and capital is permitted through normal banking channels and there is no difficulty in obtaining foreign exchange. However, withholding taxes can apply to certain payments out of New Zealand including dividends, interest, and royalties, and may apply to capital gains for non-residents and on the payment of profits to certain non-resident contractors.

New Zealand operates a free-floating currency. As a small nation that relies heavily on trade and global financial and geopolitical conditions, the New Zealand currency experiences more fluctuation when compared with other developed high-income countries.

Remittance Policies

The Pacific Islands are the main destination of New Zealand remittances from residents and from temporary workers participating in the Recognized Seasonal Employer (RSE) scheme. The RSE allows the horticulture and viticulture industries to recruit workers from nine Pacific Island nations for seasonal work when there are not enough New Zealand workers. Other people who use remittance services include recently resettled refugees, and other migrant workers particularly in the hospitality and construction sectors.

Anti-money laundering and combatting terrorism financing laws have made access to cross-border financial services difficult for some Pacific island countries. Banks, non-bank institutions, and people in occupations that typically handle large amounts of cash, are required to collect additional information about their customers and report any suspicious transactions to the New Zealand Police.

Financial institutions have had to comply with the AML/CFT Act since 2013, including remitters, trust and company service providers, payment providers, and other lending institutions. If a bank is unable to comply with the Act in its dealings with a customer, it must not do business with that person. This would include not processing certain transactions, withdrawing the banking products and services it offers, and choosing not to have that person or entity as a customer. Since then New Zealand banks have been reducing their exposure to risks and charging higher fees for remittance services, which in some instances has led to the forced closing of accounts held by money transfer operators (MTOs).

The New Zealand government is working with banks to improve the bankability of small MTOs, and to develop low cost products for seasonal migrant workers in the RSE. New Zealand is also using its membership in global fora to encourage a coordinated approach to addressing high remittance costs, and is working with Pacific Island governments to find ways to lower costs in the receiving country, such as the adoption and use of an electronic payments systems infrastructure.

The New Zealand Treasury released a report in March 2017 to explore feasible policy options to address the issues in the New Zealand remittance market that would maintain access and reduce costs of remitting money from New Zealand to the Pacific. In 2018, the New Zealand and Australian governments hosted a series of roundtable meetings in Auckland, Sydney, and Tonga, with the Asian Development Bank and the International Monetary Fund that included officials from banks, MTOs, and regulators from Australia, New Zealand, and the Pacific, senior officials from international financial institutions, and training providers to discuss the issue and identify practical solutions to address the costs and risks of transferring remittances to Pacific countries and difficulties in undertaking cross-border transactions.

Barriers to remittances to Pacific nations remain a significant public policy issue during 2019, and work is underway led by MFAT and involving financial regulators in New Zealand and overseas, to address some of these barriers. A pilot of a Know Your Customer and Customer Due Diligence Utility is being planned for remittances between Samoa, Australia and New Zealand.

Sovereign Wealth Funds

The New Zealand Superannuation Fund was established in September 2003 under the New Zealand Superannuation and Retirement Income Act 2001. The fund was designed to partially provide for the future cost of New Zealand Superannuation, which is a universal benefit paid by the New Zealand government to eligible residents over the age of 65 years irrespective or income or asset levels.

The Act also created the Guardians of New Zealand Superannuation, a Crown entity charged with managing and administering the fund. It operates by investing government contributions and the associated returns in New Zealand and internationally, in order to grow the size of the fund over the long term. Between 2003 and 2009, the government contributed NZD 14.9 billion (USD 9.7 billion) to the fund, after which it temporarily halted contributions during the Global Financial Crisis. In December 2017, the newly elected government resumed contributions, with plans to resume contributions to the full amount according to the formula set out in the 2001 Act from 2022. The Fund received an estimated NZD 500 million (USD 325 million) payment in the year to June 2018, and a NZD 1 billion (USD 650 million) contribution in the year to June 2019.

Planned contributions for the year to June 2020 will be NZD 1.5 billion (USD 975 million) according to Budget 2020 announced in May. This increases to NZD 2.1 billion (USD 1.4 billion) in the year to June 2021 and NZD 2.4 billion (USD 1.6 billion) in the year to June 2022. The legislated formula suggests lower contributions be made due to the impact of COVID-19 on GDP forecasts. Between fiscal years 2019/20 and 2022/23, Budget 2020 transfers small amounts of the capital contributions to a new fund administered by the Guardians of New Zealand Superannuation, which will invest via the New Zealand Venture Investment Fund Limited (NZVIF). The government has not indicated it will suspend its contributions during the economic impact of the pandemic.

In June 2019, the fund was valued at NZD 43.1 billion (USD 28 billion) of which 48.8 percent was in North America, 17.3 percent in Europe, 12.9 percent in New Zealand, 10.9 percent in Asia excluding Japan, 6 percent in Japan, and 1.6 percent in Australia. During 2018/19 the fund earned a pre-tax return of 7 percent. In the first four months of 2020, the fund made losses of NZD 4.6 billion (USD 3 billion).

The guardians have a stated commitment to responsible investment, including environmental, social and governance factors, which is closely aligned to the United Nations Principles for Responsible Investment. It is a member of the International Forum of Sovereign Wealth Funds and is signed up to the Santiago Principles.

The fund operates its own environmental, social, and governance principles with a responsible investment framework. Companies that are directly involved in the following activities are excluded from the Fund: the manufacture of cluster munitions, testing of nuclear explosive devices, and anti-personnel mines; the manufacture of tobacco; the processing of whale meat; recreational cannabis; and the manufacture of civilian automatic and semi-automatic firearms, magazines or parts. As of December 2019, the fund does not make investments in 14 countries, mainly located in Africa and the Middle East.

Following the attack on two Christchurch mosques by a gunman using legally obtained guns on March 15, the fund divested NZD 19 million (USD 13 million) from seven companies (including four U.S. companies), involved in the manufacture of civilian automatic and semi-automatic firearms, magazines or parts that are prohibited under recently enacted New Zealand law. Due to the live-stream of the attack the NZSF announced on March 20, 2019 it had joined up with other New Zealand wealth funds as a shareholder of Facebook, Twitter, and YouTube owner Alphabet, to strengthen controls to prevent the live-streaming of objectionable content. The NZSF aims to achieve this from the collective action of New Zealand’s investor sector with a global coalition of shareholders as well as the pressure put on the companies by other stakeholder groups. The NZSF will undertake discussions with the companies concerned in confidence and will report on milestones achieved in future Annual Reports. For further information including a full list of participants see: https://www.nzsuperfund.nz/how-we-invest/ 

In recent years the NZSF has explicitly excluded companies that are directly involved in the manufacture of: cluster munitions, testing of nuclear explosive devices, anti-personnel mines, tobacco, recreational cannabis, and the processing of whale meat. In 2013, the fund divested a group of five U.S. companies due to their involvement with nuclear weapons. In 2007, the fund divested NZD 37.6 million (USD 24.4 million) in 20 tobacco companies.

In June 2017, the fund transitioned NZD 14 billion (USD 9 billion) passive global equity portfolio (constituting 40 percent of the fund) to low carbon, selling passive holdings in 297 companies worth NZD 950 million (USD 617 million). The aim of the Climate Change Investment Strategy is to reduce exposure to investments in carbon and fossil fuels. The guardians applied their carbon exclusion methodology again in June 2018 and June 2019.

The government manages two other wealth funds that also aim to reduce future liability and burden on New Zealanders. The Government Superannuation Fund (GSF) aims to meet the cost of 57,000 state sector employees who worked between 1948 to 1995 and are entitled to an additional fixed retirement income. The GSF was valued at NZD 4.5 billion (USD 2.9 billion) in June 2019. The Accident Compensation Corporation (ACC) covers all New Zealanders and visitors’ costs if they are injured in an accident under a no-fault scheme. In addition to ACC levies paid by workers and businesses, the ACC operates a fund to meet the future costs of injuries. As of June 2019, it was valued at NZD 44 billion (USD 29 billion), of which about 72 percent in New Zealand and 4 percent in Australia. Over 2018/19 the fund earned a return of 13.1 percent. ACC is one of the largest investors, owning about 2.6 percent of the market capitalization of the New Zealand share market, and directly owns 22 percent of Kiwibank.

Capital Markets and Portfolio Investment

There are no restrictions on foreign portfolio investment. Nicaragua does not have its own equities market and there is no regulatory structure to facilitate publicly held companies. There is a small bond market that traffics primarily in government bonds but also sells some corporate debt to institutional investors. In 2019 and 2020 this market has traded less than only 10 percent of the volume from before the political-economic crisis. The Superintendent of Banks and Other Financial Institutions (SIBOIF) supervises this fledgling market.

New policies threaten the free flow of financial resources into the product and factor markets, as well as foreign currency convertibility. Banks must now request foreign currency purchases in writing, 48 hours in advance, and the BCN reserves the right to arbitrarily deny these requests.

To shore up liquidity, banks have sharply restricted lending, increased interest rates, and implemented stricter collateral standards. The overall size and depth of Nicaragua’s financial markets and portfolio positions are very limited.

Money and Banking System

While the banking system has grown and developed in the past two decades, Nicaragua remains underbanked relative to other countries in the region. Only 19 percent of Nicaraguans aged 15 or older have bank accounts, and only 8 percent have any savings in such accounts, approximately half the rate of other countries in the region according to World Bank data. One-third of Nicaraguans continue to save their money in their home or other location while 49 percent have no savings. Nicaragua also has one of the lowest mobile banking rates in Central America.

After the sociopolitical crisis sharply slashed the National Financial System in 2018, the banking sector recovered slightly in 2019 and 2020. Liquidity ratios dipped 6 percent year-on-year to 41 percent (six percent less than 2019 levels) suggesting a credit portfolio recovery. However, the overall credit portfolio continued to contract, registering a $271 million reduction compared to 2019. The ratio of non-performing loans to banking sector assets reached 17 percent, five percent higher than 2019. The banking sector remains fragile and vulnerable to sociopolitical uncertainty.

The banking industry remains conservative and highly concentrated, with four banks (BANPRO, LAFISE Bancentro, BAC, and FICOHSA) constituting 77 percent of the country’s market share. The crisis sparked large withdrawals of deposits from the banking system. Those withdrawals have stabilized but total assets still lag pre-crisis levels—as of December 2020, the financial system had total assets worth $4.3 billion, a 10 percent increase over 2019 ($3.9 billion) but 22 percent lower than in March 2018 ($5.5 billion).

On April 17, 2019, the Department of Treasury designated BANCORP—a subsidiary of ALBA de Nicaragua (ALBANISA), a joint venture between the State-owned oil companies of Nicaragua (49%) and Venezuela (51%)—for money laundering and corruption. On April 22, BANCORP presented its dissolution to SIBOIF. BANCORP’s closure was secretive and outside the legal framework that governs financial institutions in Nicaragua.

The Central Bank of Nicaragua (BCN) was established in 1961 as the regulator of the monetary system with the sole right to issue the national currency, the Córdoba. Foreign banks can open branches in Nicaragua. The number of correspondent banking relationships with the United States shrank during the crisis as Wells Fargo Bank withdrew altogether and Bank of America withdrew correspondent services from a local bank. Recent amendments to the “Consumer Protection Law,” could force local banks to service suspicious account holders—including persons designated under international sanctions regimes—jeopardizing correspondent banking relationships.

Foreigners can open bank accounts if they are legal residents in the country. The Foreign Investment Law allows foreign investors residing in the country to access local credit and local banks have no restrictions accepting property located abroad as collateral.

Foreign Exchange and Remittances

Foreign Exchange

Nicaragua is a highly dollarized economy. The Foreign Investment Law (2000/344) and the Banking, Nonbank Intermediary, and Financial Conglomerate Law (2005/561) allow investors to convert freely and transfer funds associated with an investment. CAFTA-DR ensures the free transfer of funds related to a covered investment. However, as international sanctions target the Ortega regime’s corruption and money-laundering activities, investors should be aware that transactions with the Nicaraguan government may lead banks to reject related transactions. Transfers of funds over $10,000 requires additional paperwork and due diligence.

Local financial institutions freely exchange U.S. dollars and other foreign currencies, although there are reports that SIBOIF has taken steps to ensure more Nicaraguan Córdobas are in circulation to shore up the local currency. In October 2018, the BCN notified banks that in place of an on-line automated clearing house for foreign currency purchases, banks must now request such purchases in writing, 48 hours in advance, and provide the BCN with the names of savers who want to withdraw their foreign currency deposits, as well as the amount each individual requests.

The BCN adjusts the official exchange rate daily according to a crawling peg that devalues the Córdoba against the U.S. dollar at an annual rate. The devaluation rate remained stable at 5 percent from 2004 until October 28, 2019, when the BCN announced it would devalue the Córdoba by only three percent against the U.S. Dollar. On November 25, 2020, the BCN announced yet another downward adjustment in the official exchange rate, devaluing the Córdoba by another two percent. The official exchange rate as of December 31, 2020, was 34.82 Córdobas to one U.S. dollar. The daily exchange rate can be found on the BCN’s website. 

Remittance Policies

There are no limitations on the inflow or outflow of funds for remittances or access to foreign exchange for remittances. However, some U.S. and local banks refuse to process any transfers abroad by government officials, agencies, or State-owned entities (SOE) due to the high risk of corruption and laundering.

Sovereign Wealth Funds

Nicaragua does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Niger’s government welcomes foreign portfolio investment where possible. Niger’s capital markets are extremely underdeveloped, and the country do not have its own stock market. However, the country shares a regional stock market The Bourse Régionale des Valeurs Mobilières (BRVM) with the eight (8) Member States in the West African Economic and Monetary Union (WAEMU), namely: Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. This is the only stock market in the world shared by several countries, run totally in digital format and integrated in a perfect manner.

Although an effective regulatory system exists, and policies in fact encourage portfolio investment, there is little market liquidity and hence little opportunity for such investment. The agency UMOA-Titres (AUT), a regional agency to support public securities issuance and management in the WAEMU (bonds market), is dedicated to helping member states use capital markets to raise the resources they need to fund their economic development policies at reasonable cost.

There are no limits on the free flow of financial resources.

The government works closely with the IMF to ensure that payments and transfers overseas occur without undue restrictions. Credit is allocated on market terms and foreigners do not face discrimination.

Credit is allocated on market terms through large corporations. Although foreign investors are generally able to get credit on the local market, limited domestic availability tends to drive investors to international markets. To access a variety of credit instruments, the private sector often looks to multinational institutions in Niger or international sources for credit. Private actors in the agriculture, livestock, forestry, and fisheries sectors (which account for more than 40 percent of GDP) receive less than one percent of total bank credit.

Money and Banking System

Less than three percent of Nigeriens have a bank account and the debt rate of the financial sector, measured by the ratio money supply, is at 24.1 percent in 2012 (the average for the sub-region is 32 percent). The banking sector in Niger is generally healthy and well capitalized.

As of December 31, 2017, the resources mobilized by the banking system amounted to 1096.5 billion CFA (1.9 billion USD), an increase of 63.1 billion cfaf (112.5 million USD) or 6.1 percent compared to the same period of 2016. This evolution mainly explained by the increase in net capital of banks by 34.9 billion cfaf (62.3 million USD) or 27.3 percent and the increase of borrowing deposits by 16.3 billion CFA (29 million USD) or 2.0 percent. Demand deposits represent more than half of the total resources of the sector throughout the period under review. Foreign banks control about 80 percent of the sector’s assets, with SONIBANK, BIA Niger, Ecobank and Bank of Africa (BOA) being the largest banks operating in the country.

The Central Bank of West African States governs Niger’s banking institutions and sets minimum reserve requirements through its national Central Bank representation.

There are no restrictions on a foreigner’s ability to establish a bank account, and foreign banks and their subsidiaries operate within the economy without undue restrictions. Niger is a part of the West African Economic and Monetary Union (WAEMU), which utilizes the CFA, pegged to the Euro at 655.61 CFA per euro.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment, including remittances.

Funds are freely convertible into any world currency. However, the government must approve currency conversions above 2 million CFA (approximately 3,413 USD).

The exchange rate is determined via the euro’s fluctuations on the international currency market. The CFA is pegged to the euro.

Remittance Policies

Niger’s Investment Code offers the possibility to transfer income of any kind, including capital investment and the proceeds of investment liquidation, regardless of the destination.

There are no limitations or waiting periods on remittances, though the Ministry of Finance must approve currency conversions above 2 million CFA (approximately 3,250 USD).

Sovereign Wealth Funds

Niger does not maintain a Sovereign Wealth Fund (SWF), and does not subscribe to the Santiago Principles. The government has plans for a build-up of reserves at the Central Bank of West African States (BCEAO) using oil revenues.

Capital Markets and Portfolio Investment

The NIPC Act of 1995, amended in 2004, liberalized Nigeria’s foreign investment regime, which has facilitated access to credit from domestic financial institutions. Foreign investors who have incorporated their companies in Nigeria have equal access to all financial instruments. Some investors consider the capital market, specifically the Nigerian Stock Exchange (NSE), a financing option, given commercial banks’ high interest rates and the short maturities of local debt instruments. The NSE was the world’s best performing stock market in 2020, as assessed by Bloomberg. It closed the year at 40,270 points, a 50% increase from the end of 2019. The NSE equity market capitalization increased by 62% to 21 trillion naira ($55.4 billion) from 2019 to 2020 while market turnover increased by 7% to 1 trillion ($2.6 billion). Domestic investors dominated the NSE for the second consecutive year with a 65% share of market turnover by value. Foreign investors had accounted for over 50% of the market in 2018. The NSE’s bond market capitalization increased by 36% to 18 trillion naira ($47.5 billion) from 2019 to 2020. At 92%, the Nigeria government accounted for the majority of issuances raising 2.4 trillion naira ($6.3 billion) in 2020. Much of the growth in the NSE may be attributable to declining rates in Nigeria’s debt market. Treasury bill rates fell below 1% in 2020 with 91-day bills briefly dipping below 0% before settling at a record low of 0.34%. As of March 2021, the NSE had 168 listed companies, 132 listed bonds, and 12 exchange-traded funds. The Nigerian government has considered requiring companies in certain sectors such as telecoms, oil and gas, or over a certain size to list on the NSE as a means to encourage greater corporate participation and sectoral balance in the Nigerian Stock Exchange, but those proposals have not been enacted.

The government employs debt instruments, issuing treasury bills of one year or less, and bonds of various maturities ranging from two to 30 years. Nigeria is increasingly relying on the bond market to finance a widening deficit especially as domestic bond rates fell well below Nigeria’s Eurobond rates in 2020, and Nigeria continues to shirk the conditionalities attached to multilateral borrowing. Some state governments have issued bonds to finance development projects, while some domestic banks have used the bond market to raise additional capital. Nigeria’s SEC has issued stringent guidelines for states wishing to raise funds on capital markets, such as requiring credit assessments conducted by recognized credit rating agencies.

The CBN plans to stop offering its lucrative Open Market Operations (OMO) bills to non-residents, a departure from its strategy of attracting hard currency investments to shore up foreign exchange supply. OMO bills have recently provided foreign investors with returns of up to 30% in dollar terms, which has led to issuances being oversubscribed. CBN officials say OMO offerings to foreigners will be phased out once current obligations have been redeemed due to the large debt burden placed on the CBN. The CBN has also placed limits on transactions that can be made in foreign currency due to this foreign currency shortage. The OMO bills’ market was estimated at about $40 billion at the end of 2020, with foreigners holding about a third.

Money and Banking System

The CBN is the apex monetary authority of Nigeria; it was established by the CBN Act of 1958 and commenced operations on July 1, 1959. It has oversight of all banks and other financial institutions and is designed to be operationally independent of political interference although the CBN governor is appointed by the president and confirmed by the Senate. The amended CBN Act of 2007  mandates the CBN to have the overall control and administration of the monetary and financial sector policies of the government. The new Banking and Other Financial Institutions Act (BOFIA) of 2020 broadens CBN’s regulatory oversight function to include financial technology companies as it prohibits the operations of unlicensed financial institutions.

Foreign banks and investors are allowed to establish banking business in Nigeria provided they meet the current minimum capital requirement of N25 billion ($65 million) and other applicable regulatory requirements for banking license as prescribed by the CBN. The CBN regulations for foreign banks regarding mergers with or acquisitions of existing local banks in the country stipulate that the foreign institutions’ aggregate investment must not be more than 10% of the latter’s total capital.

In addition, any foreign-owned bank in Nigeria desirous of acquiring or merging with a local bank must have operated in Nigeria for a minimum of five years. To qualify for merger or acquisition of any of Nigeria’s local banks, the foreign bank must have achieved a penetration of two-thirds of the states of the federation. This provision mandates that the foreign-owned bank have branches in at least 24 out of the 36 states in Nigeria. The CBN also stipulates that the foreign bank or investors’ shareholding arising from the merger or acquisition should not exceed 40% of the total capital of the resultant entity.

The CBN currently licenses 22 deposit-taking commercial banks in Nigeria. Following a 2009 banking crisis, CBN officials intervened in eight of 24 commercial banks and worked to stabilize the sector through reforms, including the adoption of uniform year-end International Financial Reporting Standards to increase transparency, a stronger emphasis on risk management and corporate governance, and the nationalization of three distressed banks. As of 2019, there were 5,000 bank branches operating in Nigeria and, according to the Nigeria interbank settlement scheme, 40 million Nigerians had a Bank Verification Number (BVN), which every bank account holder is mandated to have.

Before October 2018, only banks and licensed financial institutions were allowed to provide financial services in Nigeria, and about 37% of 100 million adult Nigerians were financially excluded. The CBN reiterated its commitment to enhance the level of financial inclusion in the country and defined a target of 80% financial inclusion rate by 2020 and 95% by 2024. Its revised National Financial Inclusion Strategy was planned to focus on women; rural areas; youth; Northern Nigeria; and micro, small, and medium enterprises. The CBN plans to massively leverage technology with the licensing of mobile money operators and approved some telecom companies to operate as payment service banks because of their huge subscriber base.

The CBN supports non-interest banking. Several banks have established Islamic banking operations in Nigeria including Jaiz Bank International Plc, Nigeria’s first full-fledged non-interest bank, which commenced operations in 2012. A second non-interest bank, Taj Bank, started operations in December 2019. There are six licensed merchant banks: (1) Coronation Merchant Bank Limited, (2) FBN Merchant Bank, (3) FSDH Merchant Bank Ltd, (4) NOVA Merchant Bank, (5) Greenwich Merchant Bank, and (6) Rand Merchant Bank Nigeria Limited.

Many bank branches’ operations were disrupted by the COVID-19 pandemic, and profitability was expected to be impacted. The CBN announced monetary interventions to cushion the impact of the pandemic including the reduction of interest rates on CBN intervention loans from 9% to 5%, a one-year moratorium on CBN loans, and regulatory forbearance to restructure loans in impacted sectors like aviation and hospitality. The banking sector remained resilient despite the operational disruptions, currency devaluation, and monetary policy tweaks. Banking stocks remained top picks for investors and the banking index of the Nigeria Stock Exchange grew by 10% in 2020. Many banks were able to leverage technology to deliver services to customers and therefore earned income on digital channels usage which had grown during the lockdown.

The CBN has continued its system of liquidity management using unorthodox monetary policies. The measures included an increase in cash reserve ratio (CRR) to 27.5% – among the highest globally – to absorb the excess liquidity within the system which was a direct consequence of the lack of investment opportunities. The CBN arbitrarily debited banks for carrying excess loanable deposits on their books resulting in the effective CRR for some banks rising as high as 50%, which limited banks’ capacity to lend. The CBN also enforced a 65% minimum loan to deposit ratio in order to increase private sector credit and boost productivity. In December 2020, the CBN released some of the excess CRR back to banks by selling them special bills in an attempt to improve liquidity and support economic recovery.

CBN reported that non-performing loans (NPLs) declined marginally to 5.5% in September 2020 from 6.1% in December 2019. Full year NPLs are projected to have remained relatively stable despite the challenges presented by the pandemic in 2020. It is expected that the effect of the pandemic, currency devaluation, and subsidy removal could become more evident in some sectors of the economy which may result in defaults on loans and increasing banks’ NPLs.

The top ten banks in Nigeria control nearly 70% of the banking sector. Twelve out of the commercial banks listed on the NSE (Access Bank, GT Bank, Fidelity Bank, FCMB, Sterling Bank, FBNH, Union Bank, Zenith Bank, UBA, Ecobank, Stanbic IBTC, and Wema Bank) reported a combined total asset of N42.9 trillion ($112.9 billion) as of September 2020. This represents an 12% rise from total assets of N38.4 trillion ($101 billion) in December 2019. The size of their total assets also indicates how much support they can give to the Nigerian economy as their collective total assets represent roughly one-third of Nigeria’s GDP. FBNH and Access Bank lead the pack with N6.9 trillion ($18.1 billion) each in assets, closely followed by Zenith Bank with N6.8 trillion ($17.9 billion) and UBA with N4.8 trillion ($12.6 billion). The CBN reported that total deposits increased by N8.4 trillion or 32% and aggregate credit grew by N3.45 trillion or 13% by December 2020.

In 2013, the CBN introduced a stricter supervision framework for the country’s top banks, identified as “Systemically Important Banks” (SIBs) as they account for a majority of the industry’s total assets, loans and deposits, and their failure or collapse could disrupt the entire financial system and the country’s real economy. The current list, released in 2019, includes seven banks which were selected based on their size, interconnectedness, substitutability, and complexity. These banks accounted for 64% of the industry’s total assets of N35.1 trillion and 65% of the industry’s total deposits of N21.7 trillion. Under the supervision framework, the operations of SIBs are closely monitored with regulatory authorities conducting stress tests on the SIBs’ capital and liquidity adequacy. Moreover, SIBs are required to maintain a higher minimum capital adequacy ratio of 15%.

Under Nigerian laws and banking regulations, one of the conditions any foreigner seeking to open a bank account in Nigeria must fulfill is to be a legal resident in Nigeria. The foreigner must have obtained the Nigerian resident permit, known as the Combined Expatriate Residence Permit and Aliens Card which can only be processed by a foreigner that has been employed by a Nigerian company through an expatriate quota. Another requirement is the biometric BVN, which every account holder in Nigeria must have according CBN regulations.

Only a company duly registered in Nigeria can open a bank account in the country. Therefore, a foreign company is not entitled to open a bank account in Nigeria unless its subsidiary has been registered in Nigeria.

Foreign Exchange and Remittances

Foreign Exchange

Foreign currency for most transactions is procured through local banks in the inter-bank market, irrespective of investment type. Low value foreign exchange, typically in U.S. dollars, British pounds or the Euro, may also be procured at a premium from foreign exchange bureaus, called Bureaus de Change. In 2020, the COVID-19 pandemic affected foreign currency inflows to Nigeria. In response, the CBN placed some capital restrictions to manage investment outflows. Domestic and foreign businesses frequently express strong concern about the CBN’s foreign exchange restrictions, which they report prevent them from importing needed equipment and goods and from repatriating naira earnings. Foreign exchange demand remains high due to the dependence on foreign inputs for manufacturing and refined petroleum products.

In 2015, the CBN published a list of 41 product categories which could no longer be imported using official foreign exchange channels ( https://www.cbn.gov.ng/out/2015/ted/ted.fem.fpc.gen.01.011.pdf ). The list has since been increased to include fertilizer, dairy products, and maize bringing the total number of product categories to 44.

The CBN maintains a managed-float exchange rate regime where the exchange rate is fixed with little room to maneuver. It also maintains several “windows” through which foreign exchange is sold to different clients at different rates. While the CBN had been able to maintain convergence between its various rates in 2019, the forex shortages experienced in 2020 caused a divergence of exchange rates starting March 2020. The CBN devalued the official exchange rate through 2020 from 305 naira to the dollar to 379 naira to the dollar. The Investors and Exporters (I&E) rate, used by businesses to repatriate and trade, has since depreciated to around 408 naira to the dollar while the retail market rate depreciated to 480 naira to the dollar as of December 2020.

Remittance Policies

The NIPC guarantees investors unrestricted transfer of dividends abroad (net a 10% withholding tax). Companies must provide evidence of income earned and taxes paid before repatriating dividends from Nigeria. Money transfers usually take no more than 48 hours. In 2015, the CBN mandated that all foreign exchange remittances be transferred through banks. Such remittances may take several weeks depending on the size of the transfer and the availability of foreign exchange at the remitting bank. Due to the forex shortages currently being experienced in Nigeria, remittances take longer than usual. The CBN claims to have plans to clear the backlog of demand with targeted forex injections into the market. Transfers of currency are protected by Article VII of the International Monetary Fund Articles of Agreement ( http://www.imf.org/External/Pubs/FT/AA/index.htm#art7 ).

Sovereign Wealth Funds

The Nigeria Sovereign Investment Authority (NSIA) manages Nigeria’s sovereign wealth fund. It was created by the NSIA Act in 2011 and began operations in October 2012 with $1 billion seed capital and received an additional $250 million each in 2015 and 2017 bringing total capital to $1.5 billion. It was created to harness Nigeria’s excess oil revenues toward economic stability, wealth creation, and infrastructure development.

The NSIA is a public agency that subscribes to the Santiago Principles, which are a set of 24 guidelines that assign “best practices” for the operations of Sovereign Wealth Funds globally. The NSIA invests through three ring-fenced funds: the Future Generations Fund for diversified portfolio of long term growth, the Nigeria Infrastructure Fund for domestic infrastructure development, and the Stabilization Fund to act as a buffer against short-term economic instability. The NSIA does not take an active role in management of companies. The Embassy has not received any report or indication that NSIA activities limit private competition.

Capital Markets and Portfolio Investment

The government openly welcomes foreign portfolio investors. The establishment of the Macedonian Stock Exchange (MSE) in 1995 made it possible to regulate portfolio investments, although North Macedonia’s capital market is modest in turnover and capitalization. Market capitalization in 2020 was $3.5 billion, a 1.2 percent drop from the previous year. The main index, MBI10, increased by 1.2 percent, reaching 4,705 points at year-end. Foreign portfolio investors accounted for an average of 7.6 percent of total MSE turnover, 17.4 percentage points less than in 2019. The current regulatory framework does not appear to discriminate against foreign portfolio investments.

There is an effective regulatory system for portfolio investments, and North Macedonia’s Securities and Exchange Commission (SEC) licenses all MSE members to trade in securities and regulates the market. In 2020, the total number of listed companies was 104, two less than in 2019, and total turnover increased by 6.4 percent. Compared to international standards, overall liquidity of the market is modest for entering and/or exiting sizeable positions. Individuals generally trade on the MSE as individuals, rather than through investment funds, which have been present since 2007.

There are no legal barriers to the free flow of financial resources into the products and factor markets. The National Bank of the Republic of North Macedonia (NBRNM) respects IMF Article VIII and does not impose restrictions on payments and transfers for current international transactions. A variety of credit instruments are provided at market rates to both domestic and foreign companies.

Money and Banking System

In its regular report on Article IV consultations, published January 2020, the International Monetary Fund assessed North Macedonia’s banking sector is healthy, well-capitalized, liquid, and profitable. Banks comfortably meet capital adequacy requirements, but efforts are needed to further mitigate credit risk. Domestic companies secure financing primarily from their own cash flows and bank loans due to the lack of corporate bonds and other securities as credit instruments.

Financial resources are almost entirely managed through North Macedonia’s banking system, consisting of 14 banks and a central bank, the NBRNM. On August 12, 2020, NBRNM revoked the operating license of Eurostandard Bank due to the bank’s insolvency. Eurostandard Bank controlled just 1.3 percent of the total banking sector’s assets, and its closure did not affect the banking sector’s stability, but did improve its overall ratio of non-performing loans by one percentage point. The banking sector is highly concentrated, with three of the largest banks controlling 57.6 percent of the banking sector’s total assets of about $10.7 billion and collecting 70.9 percent of total household deposits. The largest commercial bank in the country has estimated total assets of about $2.4 billion, and the second largest about $2 billion. The nine smallest banks, which have individual market shares of less than 6 percent each, account for 23.5 percent of total banking sector assets. Foreign banks or branches are allowed to establish operations in the country on equal terms as domestic operators, subject to licensing and prudent supervision from the NBRNM. In 2020, foreign capital remained present in 13 of North Macedonia’s 14 banks, and was dominant in 10 banks, controlling 71.5 percent of total banking sector assets, 80.4 percent of total loans, and 69.4 percent of total deposits.

According to the NBRNM, the banking sector’s non-performing loans at the end of Q3 of 2020 (latest available data) were 3.4 percent of total loans, dropping by 1.4 percentage points on an annual basis, mostly due to the NBRNM’s anti-crisis measures allowing temporary postponement of loan installment payments and regulatory amendments in managing and calculating credit risk. Total profits at the end of Q3 of 2020 reached $112 million, which was 2.1 percent higher compared to the same period of 2019.

Banks’ liquid assets at the end of Q3 of 2020 were 29.9 percent of total assets, 2.5 percentage points lower compared to the same period in 2019, remaining comfortably high. In 2020, the NBRNM conducted different stress-test scenarios on the banking sector’s sensitivity to increased credit risk, liquidity shocks, and insolvency shocks, all of which showed the banking sector is healthy and resilient, with a capital adequacy ratio remaining above the legally required minimum of eight percent. The actual capital adequacy ratio of the banking sector at the end of Q3 of 2020 was 16.9 percent, unchanged compared to the same period in 2019, with all banks, except the one which was closed, maintaining a ratio above the required minimum.

There are no restrictions on a foreigner’s ability to establish a bank account. All commercial banks and the NBRNM have established and maintain correspondent banking relationships with foreign banks. The banking sector lost no correspondent banking relationships in the past three years, nor were there any indications that any current correspondent banking relationships were in jeopardy. There is no intention to implement or allow the implementation of blockchain technologies in banking transactions in North Macedonia. Also, alternative financial services do not exist in the economy. The transaction settlement mechanism is solely through the banking sector.

Foreign Exchange and Remittances

Foreign Exchange

The Constitution provides for free transfer, conversion, and repatriation of investment capital and profits by foreign investors. Funds associated with any form of investment can be freely converted into other currencies. Conversion of most foreign currencies is possible at market rates on the official foreign exchange market. In addition to banks and savings houses, numerous authorized exchange offices also provide exchange services. The NBRNM operates the foreign exchange market but participates on an equal basis with other entities. There are no restrictions on the purchase of foreign currency.

Parallel foreign exchange markets do not exist in the country, largely due to the long-term stability of the national currency, the denar (MKD). The denar is convertible domestically but is not convertible on foreign exchange markets. The NBRNM is pursuing a strategy of pegging the denar to the euro and has successfully kept it at the same level since 1997. Required foreign currency reserves are spelled out in the banking law.

Remittance Policies

There were no changes in investment remittance policies, and there are no immediate plans for changes to the regulations. By law, foreign investors are entitled to transfer profits and income without being subject to a transfer tax. All types of investment returns are generally remitted within three working days. There are no legal limitations on private financial transfers to and from North Macedonia. Remittances from workers in the diaspora represent a significant source of income for North Macedonia’s households. In 2020, net private transfers amounted to $1.5 billion, accounting for 12.2 percent of GDP.

Sovereign Wealth Funds

North Macedonia does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

There are no restrictions in Oman on the flow of capital and the repatriation of profits.  Foreigners may invest in the Muscat Securities Market so long as they do so through an authorized broker.  Access to Oman’s limited commercial credit and project financing resources is open to Omani firms with foreign participation.  At this time, there is not sufficient liquidity in the market to allow for the entry and exit of sizeable amounts of capital.  According to the 2018 annual report on exchange arrangements and exchange restrictions of the International Monetary Fund, Article VIII practices are reflected in Oman’s exchange system.

The Commercial Companies Law requires the listing of joint stock companies with capital in excess of $5.2 million.  The law also requires companies to existence for two years before their owners can float them for public trading.  Publicly traded firms in Oman are still a relatively rare phenomenon; the majority of businesses are private family enterprises.

Money and Banking System

The banking system is sound and well capitalized with low levels of non-performing loans and generally high profits.  Oman’s banking sector includes eight local banks, nine foreign banks, two Islamic banks, and two specialized banks.  Bank Muscat, the largest domestic bank operating in Oman, has $28.1 billion in assets.  The Central Bank of Oman (CBO) is responsible for maintaining the internal and external value of the national currency.  It is also the single integrated regulator of Oman’s financial services industry.  The CBO issues regulations and guidance to all banks operating within Oman’s borders.  Foreign businesspeople must have a residence visa or an Omani commercial registration to open a local bank account.  There are no restrictions for foreign banks to establish operations in the country as long as they comply with CBO instructions.

Foreign Exchange and Remittances

Foreign Exchange

Oman does not have restrictions or reporting requirements on private capital movements into or out of the country.  The Omani rial (RO) is pegged at a rate of RO 0.3849 to $1, and there is no difficulty in obtaining exchange.  In general, all other currencies are first converted to dollars, then to the desired currency; national currency rates fluctuate, therefore, as the dollar fluctuates.  The government has consistently stated publicly that it is committed to maintaining the current peg.  The government has stated publicly that it will not join a proposed Gulf Cooperation Council (GCC) common currency.  There is no delay in remitting investment returns or limitation on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains returns on intellectual property, or imported inputs.

Remittance Policies

Oman does not restrict the remittance abroad of equity or debt capital, interest, dividends, branch profits, royalties, management and service fees, and personal savings, but it does apply withholding tax to many of these transfers at a rate of 10 percent.  Because Oman’s currency is pegged to the dollar, the Omani government is unable to engage in currency manipulation tactics.  Investors can remit through legal parallel markets utilizing convertible, negotiable instruments.  There are no surrender requirements for profits earned overseas.

The GCC, of which Oman is a member, is a member of the Financial Action Task Force (FATF) and its regional body.  In February 2019, Oman hosted a workshop on combating money laundering and terrorism in cooperation with FATF.  The level of compliance of Oman’s anti-money laundering and counter-terrorist financing regime with the FATF Recommendations is comparatively high for the region, and the legal framework is sound.  However, the government has not yet fully addressed a number of gaps, including completing the certification procedures for anti-money laundering/countering the financing of terrorism (AML/CFT), issuing AML/CFT regulations to the sectors identified in Oman’s CFT law, and designating wire transfer amounts for customer due diligence procedures.  Statistics regarding suspicious transaction reports, investigations, and convictions are not widely available.

Sovereign Wealth Funds

The Oman Investment Authority (OIA) is Oman’s principal Sovereign Wealth Fund.  It replaced the State General Reserve Fund (SGRF) in June 2020 by Royal Decree 61/2020.  SGRF joined the International Forum of Sovereign Wealth Funds in 2015 as a full member and follows the Santiago Principles.  Omani law does not require sovereign wealth funds to publish an annual report or submit their books for an independent audit.  Many of the smaller wealth funds and pension funds actively invest in local projects.

The OIA focuses on two main investment categories:  public markets assets (tradable) that include global equity, fixed income bonds and short-term assets; and private markets assets (non-tradable) which include private investments in real estate, logistics, services, commercial, and industrial projects.

Capital Markets and Portfolio Investment

Pakistan’s three stock exchanges (Lahore, Islamabad, and Karachi) merged to form the Pakistan Stock Exchange (PSX) in January 2016.  As a member of the Federation of Euro-Asian Stock Exchanges and the South Asian Federation of Exchanges, PSX is also an affiliated member of the World Federation of Exchanges and the International Organization of Securities Commissions.  Per the Foreign Exchange Regulations, foreign investors can invest in shares and securities listed on the PSX and can repatriate profits, dividends, or disinvestment proceeds.  The investor must open a Special Convertible Rupee Account with any bank in Pakistan in order to make portfolio investments.  In 2017, the government modified the capital gains tax and imposed a 15 percent tax on stocks held for less than 12 months, 12.5 percent on stocks held for more than 12 but less than 24 months, and 7.5 percent on stocks held for more than 24 months. The 2012 Capital Gains Tax Ordinance appointed the National Clearing Company of Pakistan Limited to compute, determine, collect, and deposit the capital gains tax.

The SBP and SECP provide regulatory oversight of financial and capital markets for domestic and foreign investors.  Interest rates depend on the reverse repo rate (also called the policy rate).

Pakistan has adopted and adheres to international accounting and reporting standards – including IMF Article VIII, with comprehensive disclosure requirements for companies and financial sector entities.

Foreign-controlled manufacturing, semi-manufacturing (i.e. goods that require additional processing before marketing), and non-manufacturing concerns are allowed to borrow from the domestic banking system without regulated limits.  Banks are required to ensure that total exposure to any domestic or foreign entity should not exceed 25 percent of a bank’s equity.  Foreign-controlled (minimum 51 percent equity stake) semi-manufacturing concerns (i.e., those producing goods that require additional processing for consumer marketing) are permitted to borrow up to 75 percent of paid-up capital, including reserves.  For non-manufacturing concerns, local borrowing caps are set at 50 percent of paid-up capital.  While there are no restrictions on private sector access to credit instruments, few alternative instruments are available beyond commercial bank lending.  Pakistan’s domestic corporate bond, commercial paper and derivative markets remain in the early stages of development.

Money and Banking System

The State Bank of Pakistan (SBP) is the central bank of Pakistan.

According to the most recent statistics published by the SBP (2021), only 24 percent of the adult population uses formal banking channels to conduct financial transactions while 25 percent are informally served by the banking sector; women are financially excluded at higher rates than men.  The remaining 51 percent of the adult population do not utilize formal financial services.

Pakistan’s financial sector has been described by international banks and lenders as performing well in recent years.  According to the latest review of the banking sector conducted by SBP in July 2020, improving asset quality, stable liquidity, robust solvency, and slow pick-up in private sector advances were noted.  The asset base of the banking sector expanded by 7.8 percent during 2020 due to a surge in banks’ investments, which increased by 22.8 percent (or PKR 2 trillion).  The five largest banks, one of which is state-owned, control 50.4 percent of all banking sector assets.

SBP conducted the 6th wave of the Systemic Risk Survey in August-2020.  The survey results indicated respondents perceived key risks for the financial system to be mostly exogenous and global in nature.  Importantly, the policy measures rolled out by SBP to mitigate the effects of COVID-19 have been very well received by the stakeholders.

The risk profile of the banking sector remained satisfactory and moderation in profitability and asset quality improved as non-performing loans as a percentage of total loans (infection ratio) was recorded at 9.7 percent at the end of FY 2020 (June 30, 2020).  In 2020, total assets of the banking industry were estimated at $151.9 billion and net non-performing bank loans totaled approximately $1 billion– 1.9 percent of net total loans.

The penetration of foreign banks in Pakistan is low, making a small contribution to the local banking industry and the overall economy.  According to a study conducted by the World Bank Group in 2018, (the latest data available) the share of foreign bank assets to GDP stood at 3.5 percent while private credit by deposit to GDP stood at 15.4 percent.  Foreign banks operating in Pakistan include Citibank, Standard Chartered Bank, Deutsche Bank, Samba Bank, Industrial and Commercial Bank of China, Bank of Tokyo, and the Bank of China.  International banks are primarily involved in two types of international activities: cross-border flows, and foreign participation in domestic banking systems through brick-and-mortar operations.  SBP requires foreign banks to hold at minimum $300 million in capital reserves at their Pakistani flagship location, and maintain at least an 8 percent capital adequacy ratio.  In addition, foreign banks are required to maintain the following minimum capital requirements, which vary based on the number of branches they are operating:

• 1 to 5 branches: $28 million in assigned capital;
• 6 to 50 branches: $56 million in assigned capital;
• Over 50 branches: $94 million in assigned capital.

Foreigners require proof of residency – a work visa, company sponsorship letter, and valid passport – to establish a bank account in Pakistan.  There are no other restrictions to prevent foreigners from opening and operating a bank account.

Foreign Exchange and Remittances

Foreign Exchange

As a prior action of its July 2019 IMF program, Pakistan agreed to adopt a flexible market-determined exchange rate.  The SBP regulates the exchange rate and monitors foreign exchange transactions in the open market, with interventions limited to safeguarding financial stability and preventing disorderly market conditions.  However, other government entities can influence SBP decisions through their membership on the SBP’s board; the finance secretary and the Board of Investment chair currently sit on the board.

Banks are required to report and justify outflows of foreign currency.  Travelers leaving or entering Pakistan are allowed to physically carry a maximum of $10,000 in cash.  While cross-border payments of interest, profits, dividends, and royalties are allowed without submitting prior notification, banks are required to report loan information so SBP can verify remittances against repayment schedules.  Although no formal policy bars profit repatriation, U.S. companies have faced delays in profit repatriation due to unclear policies and coordination between the SBP, the Ministry of Finance and other government entities.  Mission Pakistan has provided advocacy for U.S. companies which have struggled to repatriate their profits.  Exchange companies are permitted to buy and sell foreign currency for individuals, banks, and other exchange companies, and can also sell foreign currency to incorporated companies to facilitate the remittance of royalty, franchise, and technical fees.

There is no clear policy on convertibility of funds associated with investment in other global currencies.  The SBP opts for an ad-hoc approach on a case-by-case basis.

Remittance Policies

The 2001 Income Tax Ordinance of Pakistan exempts taxes on any amount of foreign currency remitted from outside Pakistan through normal banking channels.  Remittance of full capital, profits, and dividends over $5 million are permitted while dividends are tax-exempt.  No limits exist for dividends, remittance of profits, debt service, capital, capital gains, returns on intellectual property, or payment for imported equipment in Pakistani law.  However, large transactions that have the potential to influence Pakistan’s foreign exchange reserves require approval from the government’s Economic Coordination Committee.  Similarly, banks are required to account for outflows of foreign currency.  Investor remittances must be registered with the SBP within 30 days of execution and can only be made against a valid contract or agreement.

In September 2020, Prime Minister Imran Khan launched the Roshan Digital Account (RDA) project aimed at providing digital banking facilities to overseas Pakistanis.  Customers can use  both PKR and USD for transactions and the accounts receive special tax treatment.

Sovereign Wealth Funds

Pakistan does not have its own sovereign wealth fund (SWF) and no specific exemptions for foreign SWFs exist in Pakistan’s tax law.  Foreign SWFs are taxed like any other non-resident person unless specific concessions have been granted under an applicable tax treaty to which Pakistan is a signatory.

Capital Markets and Portfolio Investment

Panama has a stock market with an effective regulatory system developed to support foreign investment. Article 44 of the constitution guarantees the protection of private ownership of real property and private investments. Some private companies, including multinational corporations, have issued bonds in the local securities market. Companies rarely issue stock on the local market and, when they do, often issue shares without voting rights. Investor demand is generally limited because of the small pool of qualified investors. While some Panamanians may hold overlapping interests in various businesses, there is no established practice of cross-shareholding or stable shareholder arrangements designed to restrict foreign investment through mergers and acquisitions. Panama has agreed to IMF Article VIII and pledged not to impose restrictions on payments and transfers for current international transactions.

In 2012, Panama modified its securities law to regulate brokers, fund managers, and matters related to the securities industry. The Commission structure was modified to follow the successful Banking Law model and now consists of a superintendent and a board of directors. The Superintendency of the Securities Market is generally considered a competent and effective regulator. Panama is a full signatory to the International Organization of Securities Commissions (IOSCO).

Government policy and law with respect to access to credit treat Panamanian and foreign investors equally. Panamanian interest rates closely follow international rates (i.e., the U.S. federal funds rate, the London Interbank Offered Rate, etc.), plus a country-risk premium.

Money and Banking System

Panama’s banking sector is developed and highly regulated and there are no restrictions on a foreigner’s ability to establish a bank account. Foreigners are required to present a passport and taxpayer identification number and an affidavit indicating that the inflow and outflow of money meets the tax obligations of the beneficiary’s tax residence. The adoption of financial technology in Panama is nascent, but there are several initiatives underway to modernize processes.

Some U.S. citizens and entities have had difficulty meeting the high documentary threshold for establishing the legitimacy of their activities both inside and outside Panama. Banking officials counter such complaints by citing the need to comply with international financial transparency standards. Several of Panama’s largest banks have gone so far as to refuse to establish banking relationships with whole sectors of the economy, such as casinos and e-commerce, in order to avoid all possible associated risks. Regulatory issues have made it difficult for some private U.S. citizens to open bank accounts in Panama, leaving some legitimate businesses without access to banking services in Panama. Panama has no central bank.

The banking sector is highly dependent on the operating environment in Panama, but it is generally well-positioned to withstand shocks. The banking sector could be impacted if Panama’s sovereign debt rating continues to fall. In early 2021, Fitch downgraded four private banks and one state-owned bank, based primarily on concerns about Panama’s pandemic-related weakening of public finances. As of this writing, three banks have been downgraded to non-investment grade. Approximately 4.7 percent of total banking sector assets are estimated to be non-performing. The four largest banks have total assets of $54.5 billion, which represents 47.07 percent of the National Banking System.

Panama’s 2008 Banking Law regulates the country’s financial sector. The law concentrates regulatory authority in the hands of a well-financed Banking Superintendent (https://www.superbancos.gob.pa/).

Traditional bank lending from the well-developed banking sector is relatively efficient and is the most common source of financing for both domestic and foreign investors, offering the private sector a variety of credit instruments. The free flow of capital is actively supported by the government and is viewed as essential to Panama’s 68 banks (2 official banks, 39 domestic banks, 17 international banks, and 10 bank representational offices).

Foreign banks can operate in Panama and are subject to the same regulatory regime as domestic banks. Panama has not lost any correspondent banking relationships in the last three years.

There are no restrictions on, nor practical measures to prevent, hostile foreign investor takeovers, nor are there regulatory provisions authorizing limitations on foreign participation or control, or other practices that restrict foreign participation. There are no government or private sector rules that prevent foreign participation in industry standards-setting consortia. Financing for consumers is relatively open for mortgages, credit cards, and personal loans, even to those earning modest incomes.

Panama’s strategic geographic location, dollarized economy, status as a regional financial, trade, and logistics hub, and favorable corporate and tax laws make it an attractive destination for money launderers. Money laundered in Panama is believed to come in large part from the proceeds of drug trafficking. Tax evasion, bank fraud, and corruption are also believed to be major sources of illicit funds in Panama. Criminals have been accused of laundering money through shell companies and via bulk cash smuggling and trade at airports and seaports, and in active free trade zones.

In 2015, Panama strengthened its legal framework, amended its criminal code, harmonized legislation with international standards, and passed a law on anti-money laundering/combating the financing of terrorism (AML/CFT). Panama also approved Law 18 (2015), which severely restricts the use of bearer shares; companies still using them must appoint a custodian and maintain strict controls over their use. In addition, Panama passed Law 70 (2019), which criminalizes tax evasion and defines it as a money laundering predicate offense.

In June 2019, the Financial Action Task Force (FATF) added Panama to its grey list of jurisdictions subject to ongoing monitoring due to strategic AML/CFT deficiencies. FATF cited Panama’s lack of “positive, tangible progress” in measures of effectiveness. Panama agreed to an Action Plan in four major areas: 1) risk, policy, and coordination; 2) supervision; 3) legal persons and arrangements; and 4) money laundering investigation and prosecution. The Action Plan outlined concrete measures that were to be completed in stages by May and September 2020. Due to the COVID-19 pandemic, FATF granted Panama two extensions, pushing the deadline to January 2021. At its plenary in February 2021, FATF left Panama on the grey list and noted its progress so far, but also pointed to Action Plan items that still need to be addressed.

Panama is only beginning to accurately track criminal prosecutions and convictions related to money laundering and tax evasion. Law enforcement needs more tools and training to conduct long-term, complex financial investigations, including undercover operations. The criminal justice system remains at risk for corruption. However, Panama has made progress in assessing high-risk sectors, improving inter-ministerial cooperation, and passing (though not yet implementing) a law on beneficial ownership. Additionally, the GoP and the United States recently signed an MOU to provide training to combat money laundering and corruption, through judicial investigations, prosecutions, and convictions.

Foreign Exchange and Remittances

Foreign Exchange

Panama’s official currency is the U.S. Dollar.

Remittance Policies

Panama has customer due diligence, bulk cash, and suspicious transaction reporting requirements for money service providers (MSB), including 18 remittance companies. Post is not aware of any time limits or waiting periods for remittances. In 2017, the Bank Superintendent assumed oversight of AML/CFT compliance for MSBs. The Ministry of Commerce and Industry (MICI) grants operating licenses for remittance companies under Law 48 (2003). There have not been any changes to the remittance policies in 2020.

Sovereign Wealth Funds

Panama started a sovereign wealth fund, called the Panama Savings Fund (FAP), in 2012 with an initial capitalization of $1.3 billion. The fund follows the Santiago Principles and is a member of the International Forum of Sovereign Wealth Funds. The law mandates that from 2015 onward contributions to the National Treasury from the Panama Canal Authority in excess of 3.5 percent of GDP must be deposited into the Fund. In October 2018, the rule for accumulation of the savings was modified to require  that when contributions from the Canal exceed 2.5 percent of GDP, half the surplus must go to national savings. At the end of 2020 the fund had $1.38 billion in equity, compared to $1.39 billion at the end of 2019, with less than 3 percent invested domestically. Panama withdrew $105 million from the FAP in 2020 for pandemic relief.  The fund had a gross income of $96 million in 2020.

Capital Markets and Portfolio Investment

Portfolio investments are unregulated and limited to the availability of stocks. PNG has one stock market in Port Moresby, PNGX Limited (Formerly POMSoX). Founded in 1999, it is closely aligned with the Australian Stock Exchange (ASX) and mimics its procedures.

Credit is allocated on market terms, and foreign investors are able to get credit on the local market, much more so than in previous years due to the liberalization of policies, provided that foreign investors have a good credit history. Credit instruments are limited to leasing and bank finance.

Money and Banking System

PNG’s commercial banking sector comprises four commercial banks. Two are Australian institutions, Westpac and Australian and New Zealand Group (ANZ) banks, with local banks Bank of South Pacific (BSP) and Kina Bank.

BSP is both the largest bank and non-mining taxpayer in PNG. BSP operates 79 branches, 52 sub-branches, 351 agents, 499 ATMs, 11,343 electronic funds transfer at point of sale (EFTPOS) units and 4261 employees.

Official government sources indicate that much remains to be done in terms of financial inclusion, with nearly three quarters of PNG’s population lacking access to formal financial services. Most of those excluded represent the low-income population in rural areas, urban settlements, especially women.

Based on the Oxford Business Group business update issue of 2018, assets in the commercial sector have recorded exponential growth since 2002, with the Bank of PNG reporting that total commercial banking assets rose from PGK3.9 billion (USD 1.2billion) in that year to reach PGK 20.3billion (USD 6.3bn) in 2011. Growth has been slower in recent years, however, with total assets rising from PGK 22.7 billion (USD 7.1billion) in 2012 to a high of PGK 29.8 billion.

The banking system in Papua New Guinea is sound. The Bank of Papua New Guinea acts as the central bank for Papua New Guinea. The Central Banking Act of 2000 outlines the powers, functions, and objectives of the Bank. Foreigners are required to show documentation either of their employment or their business along with proof of a valid visa in order to register for a bank account.

Foreign Exchange and Remittances

Foreign Exchange

While there are no legal restrictions on such activities, a lack of available foreign exchange makes such conversions, transfers, and repatriations time consuming. Bank of Papua New Guinea requires that all funds held in PNG be held in PNG kina. This rule was announced with little notice and caught many businesses off-guard in 2016. While there was an appeal process for businesses that wished to keep non-PGK accounts, none of the appeals were granted.

Remittance Policies

There have been no recent changes or plans to change remittance policies. Remittance is done only through direct bank transfers. All remittances overseas in excess of PGK 50,000 (USD 15,340) per year require a tax clearance certificate issued by the Internal Revenue Commission (IRC). In addition, approval of PNG’s Central Bank – the Bank of Papua New Guinea – is required for annual remittances overseas in excess of PGK 500,000 (USD 153,420).

While there are no legal time limitations on remittances, foreign companies have waited many months for large transfers or performed transfers in small increments over time due to a shortage of foreign exchange.

Sovereign Wealth Funds

A Sovereign Wealth Fund Bill was passed in Parliament on July 30, 2015. However, falling commodity prices have severely impacted government revenues. Plans for the SWF have been put on hold indefinitely.

Capital Markets and Portfolio Investment

Credit is available but expensive. As of January 2021, banks charged on average 25 percent interest on consumer loans (up to 34 percent), with the vast majority favoring repayment horizons of one year. Loans for up to 10 years are available at higher interest rates. High collateral requirements are generally imposed. Private banks, in general, avoid mortgage loans. Because of the difficulty in obtaining bank loans, Paraguay has seen growth in alternative and informal lending mechanisms, such as “payday” lenders. These entities can charge up to 85 percent interest on short-term loans according to banking contacts. The high cost of capital makes the stock market an attractive, although underdeveloped option. Paraguay has a relatively small capital market that began in 1993. As of February 2021, the Asuncion Stock exchange consisted of 104 companies. Many family-owned enterprises fear losing control, dampening enthusiasm for public offerings. Paraguay passed a law in 2017 abolishing anonymously held businesses, requiring all holders of “bearer shares” to convert them. Foreign banks and branches are allowed to establish operations in country, as such Paraguay currently has three foreign bank branches and four majority foreign-owned banks.

The Paraguayan government issued Paraguay’s first sovereign bonds in 2013 for USD 500 million to accelerate development in the country. Since then, Paraguay has issued bonds each year. During 2020, Paraguay issued a total of USD 1,450 million (USD 1 billion under its National Emergency Law due to the COVID-19 pandemic) and recently in 2021 for USD 826 million. The debt component of the 2021 bond raised USD 500 million of new money at the lowest cost ever for a Paraguayan sovereign bond (2.74 percent). The transaction’s historically low interest rate, oversubscription, and its extension of Paraguay’s maturity profile reflect increased investor confidence in Paraguay. Proceeds are expected to finance key infrastructure development programs designed to promote economic and social development and job creation.

Commercial banks also issue debt to fund long-term investment projects.

Paraguay became an official member of the IMF in December 1945 and its Central Bank respects IMF Article VIII related to the avoidance of restrictions on current payments.

Money and Banking System

Paraguay’s banking system includes 17 banks with an approximate total USD 24.5 billion in assets and USD 18 billion in deposits. The banking system is generally sound but remains overly liquid. Long-term financing for capital investment projects is scarce. Most lending facilities are short-term. Banks and finance companies are regulated by the Banking Superintendent, which is housed within, and is under the direction of, the Central Bank of Paraguay.

The Paraguayan capital markets are essentially focused on debt issuances. As the listing of stock is limited, with the exception of preferred shares, Paraguay does not have clear rules regarding hostile takeovers and shareholder activism.

Paraguay has a high percentage of unbanked citizens. Six out of ten adults do not have bank accounts. Many Paraguayans use alternative methods to save and transfer money. In recent years, the use of e-wallets has grown considerably to fill this void. According to the Central Bank of Paraguay, the total transactions increased by 51.2 percent, from USD 374 million in January-September 2019 to USD 565 million in January-September 2020. The number of quarterly transactions also increased considerably from 4.9 million in April-June 2019 to 8.5 million in July-September 2020. E-wallet providers noted this increase was the result of the COVID-19 subsidies transferred to the e-wallet of beneficiaries outside of the formal banking sector. This growth made the Central Bank publish regulations on e-wallets in February 2020 to expand their “know your customer” (KYC) and other requirements to match those of traditional bank operations.

Foreign Exchange and Remittances

Foreign Exchange Policies

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment (e.g. remittances of investment capital, earnings, loan or lease payments, royalties). Funds associated with any form of investment can be freely converted into any world currency. Paraguay has a flexible exchange rate system making the national currency rate fluctuate according to the foreign-exchange market mechanisms.

Remittance Policies

There are currently no plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances. There are no time limitations on remittances. Paraguay is a member of the GAFILAT, a Financial Action Task Force (FATF)-style regional body. GAFILAT initiated a review of Paraguay’s work and measures taken against money laundering in December 2019. The final assessment was postponed for the third time due to the COVID-19 pandemic, and is currently scheduled for August 2021.

Sovereign Wealth Funds

Paraguay does not have a sovereign wealth fund. However, in December 2020, the Ministry of Finance presented to Congress the draft law for the Strengthening of Fiscal Governance that will reform Paraguay´s current Fiscal Responsibility Law and create Paraguay´s first wealth fund to strengthen the country´s macroeconomic stability in years of poor economic development and/or emergency situations.

Capital Markets and Portfolio Investment

Peru allows foreign portfolio investment and does not place restrictions on international transactions. The private sector has access to a variety of credit instruments. Peruvian mutual funds managed $12.7 billion in December 2020. Private pension funds managed a total of $47.2 billion in December 2020.

The Lima Stock Exchange (BVL) is a member of the Integrated Latin American Market, which includes stock markets from Pacific Alliance countries (Peru, Chile, Colombia, and Mexico). As of July 2018, mutual funds registered in Pacific Alliance countries may trade in the Lima Stock Exchange.

The Securities Market Superintendent (SMV) regulates the securities and commodities markets. SMV’s mandate includes controlling securities market participants, maintaining a transparent and orderly market, setting accounting standards, and publishing financial information about listed companies. SMV requires stock issuers to report events that may affect the stock, the company, or any public offerings. Trading on insider information is a crime, with some reported prosecutions in past years. SMV must vet all firms listed on the Lima Stock Exchange or the Public Registry of Securities. SMV also maintains the Public Registry of Securities and Stock Brokers.

London Stock Exchange Group FTSE Russell downgraded Peru from Secondary Emerging Market to Frontier status in March 2020. In a statement, the BVL stated that the decision is not necessarily replicable among the other index providers adding that Morgan Stanley Capital International, which is considered a main benchmark for emerging markets, is not expected to reconsider the BVL’s status.

Money and Banking System

Peru’s banking sector is highly consolidated. Sixteen commercial banks account for 90 percent of the financial system’s total assets, valued at $164 billion in December of 2020. In 2020, three banks accounted for 72 percent of loans and 70 percent of deposits among commercial banks. Peru has a relatively low level of access to financial services at 50 percent, particularly outside Lima and major urban areas.

The Central Bank of Peru (BCRP) is an independent institution, free to manage monetary policy to maintain financial stability. The BCRP’s primary goal is to maintain price stability via inflation targeting between one to three percent. Year-end inflation reached 1.8 percent in 2020.

The banking system is considered generally sound, thanks to the GOP’s lessons learned during the 1997-1998 Asian financial crisis. Non-performing bank loans accounted for 3.8 percent of gross loans as of December 2020, an increase from the three percent registered in 2019. The rapid implementation of the $39.5 billion BCRP loan guarantee program in response to the COVID-19 pandemic attenuated loan default risk, but banks are still expected to feel an impact on credit operations within sensitive sectors such as tourism, services, and retail.

Under the PTPA, U.S. financial service suppliers have full rights to establish subsidiaries or branches for banks and insurance companies. Peruvian law and regulations do not authorize or encourage private firms to adopt articles of incorporation or association to limit or restrict foreign participation. However, larger private firms often use “cross-shareholding” and “stable shareholder” arrangements to restrict investment by outsiders – not necessarily foreigners – in their firms. As close families or associates often control ownership of Peruvian corporations, hostile takeovers are practically non-existent. In the past few years, several companies from the region, China, North America, and Europe have begun actively buying local companies in power transmission, retail trade, fishmeal production, and other industries. While foreign banks are allowed to freely establish banks in the country, they are subject to the supervision of Peru’s Superintendent of Banks and Securities (SBS).

Foreign Exchange and Remittances

Foreign Exchange

There were no reported difficulties in obtaining foreign exchange. Under Article 64 of the Constitution, the GOP guarantees the freedom to hold and dispose of foreign currency. Exporters and importers are not required to channel foreign exchange transactions through the Central Bank and can conduct transactions freely on the open market. Anyone may open and maintain foreign currency accounts in Peruvian commercial banks. Under the PTPA, portfolio managers in the United States are able to provide portfolio management services to both mutual funds and pension funds in Peru, including funds that manage Peru’s privatized social security accounts.

The Constitution guarantees free convertibility of currency. However, limited capital controls still exist as private pension fund managers (AFPs) are constrained by how much of their portfolio can be invested in foreign securities. The maximum limit is set by law (currently 50 percent since July 2011), but the BCRP sets the operating limit AFPs can invest abroad. Over the years, the BCRP has gradually increased the operating limit. Peru reached the 50 percent limit in September 2018.

The foreign exchange market mostly operates freely. Funds associated with any form of investment can be freely converted into any world currency. To quell “extreme variations” of the exchange rate, the BCRP intervenes through purchases and sales in the open market without imposing controls on exchange rates or transactions. Since 2014,BCRP has pursued de-dollarization to reduce dollar denominated loans in the market and purchased U.S. dollars to mitigate the risk that spillover from expansionary U.S. monetary policy might result in over-valuation of the Peruvian Sol relative to the U.S. dollar. In December 2020, dollar-denominated loans reached 22 percent, and deposits 32 percent.

The U.S. Dollar averaged PEN 3.49 per $1 in 2020.

Remittance Policies

Article 7 of the Legislative Decree 662 issued in 1991 provided that foreign investors may send, in freely convertible currencies, remittances of the entirety of their capital derived from investments, including the sale of shares, stocks or rights, capital reduction or partial or total liquidation of companies, the entirety of their dividends or proven net profit derived from their investments, and any considerations for the use or enjoyment of assets that are physically located in Peru, as registered with the competent national entity, without a prior authorization from any national government department or decentralized public entities, or regional or municipal Governments, after having paid all the applicable taxes.

Sovereign Wealth Funds

Peru’s Ministry of Economy and Finance (MEF) manages the Fiscal Stabilization Fund which serves as a buffer for the GOP’s fiscal accounts in the event of adverse economic conditions. It consists of treasury surplus, concessional fees, and privatization proceeds, and is capped at four percent of GDP. The fund was nearly completely exhausted to finance increased spending in response to the COVID-19 pandemic, dropping from $5.5 billion at the end of 2019 to $1 million at the end of 2020. The Fund is not a party to the IMF International Working Group or a signatory to the Santiago Principles.

Capital Markets and Portfolio Investment

The Philippines welcomes the entry of foreign portfolio investments, including local and foreign-issued equities listed on the Philippine Stock Exchange (PSE).  Investments in certain publicly listed companies are subject to foreign ownership restrictions specified in the Constitution and other laws.  Non-residents are allowed to issue bonds/notes or similar instruments in the domestic market with prior approval from the Central Bank; in certain cases, they may also obtain financing in Philippine pesos from authorized agent banks without prior Central Bank approval.

Although growing, the PSE (with 271 listed firms as of end-2020) lags behind many of its neighbors in size, product offerings, and trading activity.  Efforts are underway to deepen the equity market, including introduction of new instruments (e.g., real investment trusts) and plans to amend listing rules for small and medium enterprises (SME).  The securities market is growing, and while it remains dominated by government bills and bonds, corporate issuances continue to expand due to the favorable interest rate environment and recent regulatory reforms.  Hostile takeovers are uncommon because most companies’ shares are not publicly listed and controlling interest tends to remain with a small group of parties.  Cross-ownership and interlocking directorates among listed companies also decrease the likelihood of hostile takeovers.

The Bangko Sentral ng Pilipinas (BSP/Central Bank) does not restrict payments and transfers for current international transactions in accordance to the country’s acceptance of International Monetary Fund Article VIII obligations of September 1995.  Purchase of foreign currencies for trade and non-trade obligations and/or remittances requires submission of a foreign exchange purchase application form if the foreign exchange is sourced from banks and/or their subsidiary/affiliate foreign exchange corporations falls within specified thresholds (currently USD 500,000 for individuals and USD 1 million for corporates/other entities).  Purchases above the thresholds are also subject to the submission of minimum documentary requirements but do not require prior Central Bank approval.  Meanwhile, a person may freely bring in or carryout foreign currencies up to USD 10,000; more than this threshold requires submission of a foreign currency declaration form.

Credit is generally granted on market terms and foreign investors are able to obtain credit from the liquid domestic market.  However, some laws require financial institutions to set aside loans for preferred sectors such as agriculture, agrarian reform, and MSMEs.  Notwithstanding, bank loans to these sectors remain constrained; for example, lending to MSMEs only amount to 5.9 percent of the total banking system loans despite comprising 99 percent of domestic firms. The government has implemented measures to promote lending to preferred sectors at competitive rates, including the establishment of a centralized credit information system and enactment of the 2018 Personal Property Security Law allowing the use of non-traditional collaterals (e.g., movable assets like machinery and equipment and inventories).  The government also established the Philippine Guarantee Corporation in 2018 to expand development financing by extending credit guarantees to priority sectors, including MSMEs.

Money and Banking System

The Bangko Sentral ng Pilipinas (BSP/Central Bank) is a highly respected institution that oversees a stable banking system.  The Central Bank has pursued regulatory reforms promoting good governance and aligning risk management regulations with international standards.  Capital adequacy ratios are well above the eight percent international standard and the Central Bank’s 10 percent regulatory requirement.  The non-performing loan ratio was at 3.7 percent as of end-2020, and there is ample liquidity in the system, with the liquid assets-to-deposits ratio estimated at about 53 percent.  Commercial banks constitute more than 93 percent of the total assets of the Philippine banking industry.  As of September 2020, the five largest commercial banks represented 60 percent of the total resources of the commercial banking sector.  The banking system was liberalized in 2014, allowing the full control of domestic lenders by non-residents and lifting the limits to the number of foreign banks that can operate in the country, subject to central bank prudential regulations.   Twenty-six of the 46 commercial banks operating in the country are foreign branches and subsidiaries, including three U.S. banks (Citibank, Bank of America, and JP Morgan Chase).  Citibank has the largest presence among the foreign bank branches and currently ranks 12th overall in terms of assets.  Despite the adequate number of operational banks, 31 percent of cities and municipalities in the Philippines were still without banking presence as of end-2019 and 4.6 percent were without any financial access point. The level of bank account penetration – the percentage of adults with a formal transaction account – stands at 34.5 percent, nearly halfway to the central bank goal of 70 percent by 2023.

Foreign residents and non-residents may open foreign and local currency bank accounts.  Although non-residents may open local currency deposit accounts, they are limited to the funding sources specified under Central Bank regulations.  Should non-residents decide to convert to foreign currency their local deposits, sales of foreign currencies are limited up to the local currency balance.  Non-residents’ foreign currency accounts cannot be funded from foreign exchange purchases from banks and banks’ subsidiary/affiliate foreign exchange corporations.

Foreign Exchange and Remittances

Foreign Exchange

The Bangko Sentral ng Pilipinas (Central Bank) has actively pursued reforms since the 1990s to liberalize and simplify foreign exchange regulations.  As a general rule, the Central Bank allows residents and non-residents to purchase foreign exchange from banks, banks’ subsidiary/affiliate foreign exchange corporations, and other non-bank entities operating as foreign exchange dealers and/or money changers and remittance agents to fund legitimate foreign exchange obligations, subject to provision of information and/or supporting documents on underlying obligations.  No mandatory foreign exchange surrender requirement is imposed on exporters, overseas workers’ incomes, or other foreign currency earners; these foreign exchange receipts may be sold for pesos or retained in foreign exchange in local and/or offshore accounts.  The Central Bank follows a market-determined exchange rate policy, with scope for intervention to smooth excessive foreign exchange volatility.

Remittance Policies

Foreign exchange policies do not require approval of inward foreign direct and portfolio investments unless the investor will purchase foreign currency from banks to convert its local currency proceeds or earnings for repatriation or remittance.  Registration of foreign investments with the Central Bank or custodian banks is generally optional.  Duly registered foreign investments are entitled to full and immediate repatriation of capital and remittance of dividends, profits, and earnings.  The Central Bank particularly requires foreign exchange for divestment purposes to be directly remitted to the account of non-resident investor on the date of purchase, with limited exemptions.  To repatriate capital from investments that did not fully materialize, non-resident investors can exchange excess local currencies provided at least 50 percent of inwardly remitted foreign exchange have been invested onshore, except for certain conditions.

As a general policy, government-guaranteed private sector foreign loans/borrowings (including those in the form of notes, bonds, and similar instruments) require prior Central Bank approval.  Although there are exceptions, private sector loan agreements should also be registered with the Central Bank if serviced through the purchase of foreign exchange from the banking system.

The Philippines strengthened its Anti-Money Laundering Act (AMLA) on January 29, 2021. The amended law expands covered entities and empowers the Anti-Terrorism Council to designate covered persons.

Sovereign Wealth Funds

The Philippines does not presently have sovereign wealth funds.

Capital Markets and Portfolio Investment

The Polish regulatory system is effective in encouraging and facilitating portfolio investment.  Both foreign and domestic investors may place funds in demand and time deposits, stocks, bonds, futures, and derivatives.  Poland’s equity markets facilitate the free flow of financial resources.  Poland’s stock market is the largest and most developed in Central Europe.  In September 2018, it was reclassified as developed market status by FTSE Russell’s country classification report.  The stock market’s capitalization amounts to less than 40 percent of GDP.  Although the Warsaw Stock Exchange (WSE) is itself a publicly traded company with shares listed on its own exchange after its partial privatization in 2010, the state retains a significant percentage of shares which allows it to control the company.  WSE has become a hub for foreign institutional investors targeting equity investments in the region.  It has also become an increasingly significant source of capital.

In addition to the equity market, Poland has a wholesale market dedicated to the trading of treasury bills and bonds (Treasury BondSpot Poland).  This treasury market is an integral part of the Primary Dealers System organized by the Finance Ministry and part of the pan-European bond platform.  Wholesale treasury bonds and bills denominated in zlotys and some securities denominated in euros are traded on the Treasury BondSpot market.  Non-government bonds are traded on Catalyst, a WSE managed platform.  The capital market is a source of funding for Polish companies.  While securities markets continue to play a subordinate role to banks in the provision of finance, the need for medium-term financial support for the modernization of the electricity and gas sectors is likely to lead to an increase in the importance of the corporate bond market.  The Polish government acknowledges the capital market’s role in the economy in its development plan.  Foreigners may invest in listed Polish shares, but they are subject to some restrictions in buying large packages of shares.  Liquidity remains tight on the exchange.

The Capital Markets Development Strategy, published in 2018, identifies 20 key barriers and offers 60 solutions.  Some key challenges include low levels of savings and investment, insufficient efficiency, transparency and liquidity of many market segments, and lack of taxation incentives for issuers and investors.  The primary aim of the strategy is to improve access of Polish enterprises to financing.  The strategy focuses on strengthening trust in the market, improving the protection of individual investors, the stabilization of the regulatory and supervisory environment and the use of competitive new technologies.  The strategy is not a law, but sets the direction for further regulatory proposals.  The Ministry of Finance assumes in its development directions for 2021-2024, the liquidation of approximately 50 percent of barriers to the development of the financial market identified in the strategy and an increase in the capitalization of companies listed on the WSE to 50 percent of GDP.  The WSE has signed an agreement with the European Bank for Reconstruction and Development (EBRD) on cooperation in the promotion of advanced environmental reporting by listed companies in Poland and the region of Central and Southeast Europe.  Poland is one of the most rigorously supervised capital markets in Europe according to the European Commission.

The Employee Capital Plans program (PPK)—which is designed to increase household saving to augment individual incomes in retirement—could provide a boost to Poland’s capital markets and reduce dependence on foreign saving as a source for investment financing.  The program has been delayed due to the outbreak of the COVID-19 pandemic.

High-risk venture capital funds are becoming an increasingly important segment of the capital market.  The market is still shallow, however, and one major transaction may affect the value of the market in a given year.  The funds remain active and Poland is a leader in this respect in Central and Eastern Europe.

In 2020, Poland saw an almost 70 percent increase in venture capital (VC) funding, with around $500 million flowing into Polish startups throughout the year, according to a report by PFR Ventures and Inovo Venture Partners.  This marks a new record for Poland, which is increasingly emerging as an important startup hub.  According to the report, a quarter of Polish startups that received VC funding in 2020 were involved in or around healthcare.

In 2020, WSE strengthened its position as the global leader when it comes to the number of listed companies from the game developers sector.  The WSE’s main and start-up markets list a total of 58 game development companies.

Poland provides full IMF Article VIII convertibility for current transactions.  Banks can and do lend to foreign and domestic companies.  Companies can and do borrow abroad and issue commercial paper, but the market is less robust than in Western European countries or the United States.  The Act on Investment Funds allows for open-end, closed-end, and mixed investment funds, and the development of securitization instruments in Poland.  In general, no special restrictions apply to foreign investors purchasing Polish securities.

Credit allocation is on market terms.  The government maintains some programs offering below-market rate loans to certain domestic groups, such as farmers and homeowners.  Foreign investors and domestic investors have equal access to Polish financial markets.  Private Polish investment is usually financed from retained earnings and credits, while foreign investors utilize funds obtained outside of Poland as well as retained earnings.  Polish firms raise capital in Poland and abroad.

Recent changes in the governance structure of the Polish Financial Supervisory Authority (KNF) are aimed at increasing cross governmental coordination and a better-targeted response in case of financial shocks, while achieving greater institutional effectiveness through enhanced resource allocation.  KNF’s supplementary powers have increased, allowing it to authorize the swift acquisition of a failing or likely to fail lender by a stronger financial institution.

Money and Banking System

The Polish financial sector entered the pandemic with strong capital and liquidity buffers and without significant imbalances.  The COVID-19 pandemic presents risks for the Polish financial sector resulting from a sharp economic slowdown and an increase in the number of business failures.  Loosening of reserve requirements, government-provided loan guarantees, and fiscal support measures should help to mitigate losses faced by financial sector firms including banks.

The banking sector plays a dominant role in the financial system, accounting for about 70 percent of financial sector assets.  The sector is mostly privately owned, with the state controlling about 40 percent of the banking sector and the biggest insurance company.  Poland had 30 locally incorporated commercial banks at the end of August 2020, according to KNF.  The number of locally-incorporated banks has been declining over the last five years.  Poland’s 533 cooperative banks play a secondary role in the financial system, but are widespread.  The state owns eight banks.  Over the last few years, growing capital requirements, lower prospects for profit generation and uncertainty about legislation addressing foreign currency mortgages has pushed banks towards mergers and acquisitions.  KNF welcomes this consolidation process, seeing it as a “natural” way to create an efficient banking sector.

The Polish National Bank (NBP) is Poland’s central bank.  At the end of 2020, the banking sector was overall well capitalized and solid.  Poland’s banking sector meets European Banking Authority regulatory requirements.  The share of non-performing loans is close to the EU average and recently has been rising, but modestly.  In December 2020, non-performing loans were 6.8 percent of portfolios.  Poland’s central bank is willing and able to provide liquidity support to the banking sector, in local and foreign currencies, if needed.  The NBP responded swiftly to the COVID-19 pandemic.  It cut rates in early 2020 to 0.1 percent from 1.5 percent over the previous five years and started buying government bonds.  To support liquidity in the banking sector, the central bank has lowered reserve requirements, introduced repo operations, and offered bill discount credit aimed at refinancing loans granted to enterprises by banks.

The banking sector is liquid, still profitable, and major banks are well capitalized, although disparities exist among banks.  This was confirmed by NBP’s Financial Stability Report and stress tests conducted by the central bank.  In 2020, the net profit of the banking sector amounted to PLN 7.8 billion ($2 billion), decreasing on an annual basis by around 44 percent – according to the data of the Polish Financial Supervision Authority.  Returns on equity fell to around 3 percent in 2020 vs 6.7 percent in 2019.  The level of write-offs and provisions as well as the net commission income increased significantly.  The need to make allowances to cover the costs of the pandemic and loans in Swiss francs had a significant impact on the decline in business profitability – the result from impairment losses and provisions increased by 33 percent up to PLN 12.7 billion ($3.2 billion).  Profits remain under pressure due to low interest rates, the issue of conversion of Swiss francs mortgage portfolios into Polish zlotys, and a special levy on financial institutions (0.44 percent of the value of assets excluding equity and Polish sovereign bonds).

The ECJ issued a judgement in October 2019 on mortgages in Swiss francs, taking the side of borrowers.  The ECJ annulled the loan agreements, noting an imbalance between the parties and the use of prohibited clauses.  The legal risk arising from the portfolio of foreign exchange mortgage loans has risen and is substantial.  The number of borrowers who have filed lawsuits against banks and the percentage of court rulings in favor of borrowers has increased.  In December 2020, the head of Poland’s financial market regulator KNF proposed a plan for banks to convert foreign currency loans into zlotys as if they had been taken out in the local currency originally.  This solution could cost the banking sector PLN 34.5 billion ($8.8 billion).  While some observers initially expected banks to finalize a plan for such out-of-court settlements before the Supreme Court sitting, scheduled for April 2021, lenders appear to be waiting for guidelines that could prove crucial to clients trying to decide whether they should go to court.  An additional financial burden for banks resulted from the necessity to return any additional fees they charged customers who repaid loans ahead of schedule.

Since 2015, the Polish government established an active campaign aiming to increase the market share of national financial institutions.  Since 2017, Polish investors’ share in the banking sector’s total assets exceeds the foreign share in the sector.  The State controls around 40 percent of total assets, including the two largest banks in Poland.  These two lenders control about one third of the market.  Rating agencies warn that an increasing state share in the banking sector might impact competitiveness and profits in the entire financial sector.  There is concern that lending decisions at state-owned banks could come under political pressure.  Nevertheless, Poland’s strong fundamentals and the size of its internal market mean that many foreign banks will want to retain their positions.

The financial regulator has restricted the availability of loans in euros or Swiss francs in order to minimize the banking system’s exposure to exchange risk resulting from fluctuations.  Only individuals who earn salaries denominated in these currencies continue to enjoy easy access to loans in foreign currencies.

In 2020, NBP had relationships with 27 commercial and central banks and was not concerned about losing any of them.

The coronavirus-driven recession will likely depress business volumes and increase loan losses, but Polish banks seem to have strong enough capital and liquidity positions to persevere.

Foreign Exchange and Remittances

Foreign Exchange

Poland is not a member of the Eurozone; its currency is the Polish zloty.  The current government has shown little desire to adopt the euro (EUR).  The Polish zloty (PLN) is a floating currency; it has largely tracked the EUR at approximately PLN 4.2-4.3 to EUR 1 in recent years and PLN 3.7 – 3.8 to $1.  Foreign exchange is available through commercial banks and exchange offices.  Payments and remittances in convertible currency may be made and received through a bank authorized to engage in foreign exchange transactions, and most banks have authorization.  Foreign investors have not complained of significant difficulties or delays in remitting investment returns such as dividends, return of capital, interest and principal on private foreign debt, lease payments, royalties, or management fees.  Foreign currencies can be freely used for settling accounts.

Poland provides full IMF Article VIII convertibility for currency transactions.  The Polish Foreign Exchange Law, as amended, fully conforms to OECD Codes of Liberalization of Capital Movements and Current Invisible Operations.  In general, foreign exchange transactions with the EU, OECD, and European Economic Area (EEA) are accorded equal treatment and are not restricted.

Except in limited cases which require a permit, foreigners may convert or transfer currency to make payments abroad for goods or services and may transfer abroad their shares of after-tax profit from operations in Poland.  In general, foreign investors may freely withdraw their capital from Poland, however, the November 2018 tax bill included an exit tax.  Full repatriation of profits and dividend payments is allowed without obtaining a permit.  A Polish company (including a Polish subsidiary of a foreign company), however, must pay withholding taxes to Polish tax authorities on distributable dividends unless a double taxation treaty is in effect, which is the case for the United States.  Changes to the withholding tax in the 2018 tax bill increased the bureaucratic burden for some foreign investors (see Section 2).  The United States and Poland signed an updated bilateral tax treaty in February 2013 that the United States has not yet ratified.  As a rule, a company headquartered outside of Poland is subject to corporate income tax on income earned in Poland, under the same rules as Polish companies.

Foreign exchange regulations require non-bank entities dealing in foreign exchange or acting as a currency exchange bureau to submit reports electronically to NBP at: http://sprawozdawczosc.nbp.pl.

An exporter may open foreign exchange accounts in the currency the exporter chooses.

Remittance Policies

Poland does not prohibit remittance through legal parallel markets utilizing convertible negotiable instruments (such as dollar-denominated Polish bonds in lieu of immediate payment in dollars).  As a practical matter, such payment methods are rarely, if ever, used.

Sovereign Wealth Funds

The Polish Development Fund (PFR) is often referred to as Poland’s Sovereign Wealth Fund.   PFR is an umbrella organization pooling resources of several governmental agencies and departments, including EU funds.  A strategy for the Fund was adopted in September 2016, and it was registered in February 2017.  PFR supports the implementation of the Responsible Development Strategy.  The PFR operates as a group of state-owned banks and insurers, investment bodies, and promotion agencies.  The budget of the PFR Group initially reached PLN 14 billion ($3.6 billion), which managers estimate is sufficient to raise capital worth PLN 90-100 billion ($23-25 billion).  Various actors within the organization can invest through acquisition of shares, through direct financing, seed funding, and co-financing venture capital.  Depending on the instruments, PFR expects different rates of return.

In July 2019, the President of Poland signed the Act on the System of Development Institutions.  Its main goal is to formalize and improve the cooperation of institutions that make up the PFR Group, strengthen the position of the Fund’s president and secure additional funding from the Finance Ministry.  The group will have one common strategy.  The introduction of new legal solutions will increase the efficiency and availability of financial and consulting instruments.  An almost four-fold increase in the share capital will enable PFR to significantly increase the scale of investment in innovation and infrastructure and will help Polish companies expand into foreign markets.  While supportive of overseas expansion by Polish companies, the Fund’s mission is domestic.

PFR plans to invest PLN 2.2 billion ($560 million) jointly with private-equity and venture-capital firms and PLN 600 million ($153 million) into a so-called fund of funds intended to kickstart investment in midsize companies.

Since its inception, PFR has carried out over 30 capital transactions, investing a total of PLN 8.3 billion ($2.1 billion) directly or through managed funds.  PFR, together with the support of other partners, has implemented investment projects with a total value of PLN 26.2 billion ($6.7 billion).  The most significant transactions carried out together with state-controlled insurance company PZU S.A. include the acquisition of 32.8 percent of the shares of Bank Pekao S.A. (PFR’s share is 12.8 percent); the acquisition of 100 percent of the shares in PESA Bydgoszcz S.A. (a rolling stock producer); and the acquisition of 99.77 percent of the shares of Polskie Koleje Linowe S.A.  PFR has also completed the purchase, together with PSA International Ptd Ltd and IFM Investors, of DCT Gdansk, the largest container terminal in Poland (PFR’s share is 30 percent).  Also, 59 funds supported by PFR Ventures have invested almost PLN 3.5 billion ($1.0 billion) () in nearly 400 companies.  Over one third of this sum went to innovative, young start-ups and the rest for financing mature companies.  In April 2020, the President of Poland signed into law an amendment to the law on development institution systems, expanding the competencies of PFR as part of the government’s Anti-Crisis Shield.  The Act assumes that, in the years 2020-2029, the maximum limit of government budget expenditures resulting from the financial effects of the amendment will be PLN 11.7 billion ($3.0 billion).

The amendment expands the competencies of PFR so that it can more efficiently support businesses in the face of the coronavirus epidemic.  The fund has been charged with management of the Financial Shield, a loan and subsidies government scheme worth approximately PLN 100 billion ($25.0 billion) for firms to maintain liquidity and protect jobs.  The scheme is accessible to small, medium and large firms.

Capital Markets and Portfolio Investment

The Portuguese stock exchange is managed by Euronext Lisbon, part of the NYSE Euronext Group, which allows a listed company access to a global and diversified pool of investors.  The Portuguese Stock Index-20 (PSI20) is Portugal’s benchmark index representing the largest (only 18, not 20, since 2018) and most liquid companies listed on the exchange. The Portuguese stock exchange offers a diverse product portfolio: shares, funds, exchange traded funds, bonds, and structured products, including warrants and futures.

The Portuguese Securities Market Commission (CMVM) supervises and regulates securities markets, and is a member of the Committee of European Securities Regulators and the International Organization of Securities Commissions.  Additional information on CMVM can be found here:  http://www.cmvm.pt/en/Pages/homepage.aspx.

Portugal respects IMF Article VIII by refraining from placing restrictions on payments and transfers for current international transactions.  Credit is allocated on market terms, and foreign investors are eligible for local market financing. Private sector companies have access to a variety of credit instruments, including bonds.

Money and Banking System

Portugal has 148 credit institutions, of which 60 are banks.  Online banking penetration stood at 60 percent in 2019. Portugal’s banking assets totaled EUR 410.4 billion at the end of June 2020. Portuguese banks’ non-performing loan portfolios remain among the largest in Europe despite improving since the global financial crisis. Total loans stood at around €200 billion, 5.5% of which constitute non-performing loans, above the Eurozone average of around 2.8% percent.

Banks’ return on equity and on assets remained was 0.9% in the first half of 2020 versus 4.9% for full-year 2019.  In terms of capital buffers, the Common Equity Tier 1 ratio stabilized at 14.6% as of June 2020.

Foreign banks are allowed to establish operations in Portugal.  In terms of decision-making policy, a general ‘four-eyes policy,’ with two individuals approving actions, must be in place at all banks and branches operating in the country, irrespective of whether they qualify as international subsidiaries of foreign banks or local banks.  Foreign branches operating in Portugal are required to have such decision-making powers that enable them to operate in the country, but this requirement generally does not prevent them from having internal control and rules governing risk exposure and decision-making processes, as customary in international financial groups.

No restrictions exist on a foreigners’ ability to establish a bank account and both residents and non-residents may hold bank accounts in any currency.  However, any transfers of EUR 10,000 or more must be declared to Portuguese customs authorities. See more at: https://www.bportugal.pt/.

Foreign Exchange and Remittances

Foreign Exchange

Portugal has no exchange controls and there are no restrictions on the import or export of capital.  Funds associated with any form of investment can be freely converted into any world currency.

Portugal is a member of the European Monetary Union (Eurozone) and uses the euro, a floating exchange rate currency controlled by the European Central Bank (ECB).  The Bank of Portugal is the country’s central bank; the Governor of the Bank of Portugal participates on the board of the ECB.

Remittance Policies

There are no limitations on the repatriation of profits or dividends.  There are no time limitations on remittances.

Sovereign Wealth Funds

The Ministry of Labor, Solidarity, and Social Security manages Portugal’s Social Security Financial Stabilization Fund (FEFSS), with total assets of around EUR 22 billion.  It is not a Sovereign Wealth Fund (SWF) and does not subscribe to the voluntary code of good practices (Santiago Principles), or participate in the IMF-hosted International Working Group on SWFs.  Among other restrictions, Portuguese law requires that at least 25 percent of the fund’s assets be invested in Portuguese public debt, and limits FEFSS investment in equity instruments to that of EU or OECD members.  FEFSS acts as a passive investor and does not take an active role in the management of portfolio companies.

Capital Markets and Portfolio Investment

The government of Qatar has permitted foreign portfolio investment since 2005. There are no restrictions on the flow of capital in Qatar. Qatar Central Bank (QCB) adheres to conservative policies aimed at maintaining steady economic growth and a stable banking sector. It respects IMF Article VIII and does not restrict payments or transfers for international transactions. It allocates loans on market terms, and essentially treats foreign companies the same way it does local ones.

Existing legislation currently limits foreign ownership of Qatari companies listed on the Qatar Stock Exchange to 49 percent. The law permits foreign capital investment up to 100 percent in most sectors upon approval of an application submitted to MOCI’s Invest in Qatar Center. Foreign portfolio investment in national oil and gas companies or companies with the right of exploration of national resources cannot exceed 49 percent.

Almost all import transactions require standard letters of credit from local banks and their correspondent banks in the exporting countries. Financial institutions extend credit facilities to local and foreign investors within the framework of standard international banking practices. Creditors typically require foreign investors to produce a letter of guarantee from their local sponsor or equity partner.

In accordance with QCB guidelines, banks operating in Qatar give priority to Qataris and to public development projects in their financing operations. Additionally, banks usually refrain from extending credit facilities to single customers exceeding 20 percent of the bank’s capital and reserves. QCB does not allow cross-sharing arrangements among banks. QCB requires banks to maintain a maximum credit ratio of 90 percent.

Qatar has become an important banking and financial services hub in the Gulf region. Qatar’s monetary freedom score is 80.7 out of 100 (“free”) and ranks third in the Middle East and North Africa region (after the United Arab Emirates and Israel) in terms of economic freedom.

Money and Banking System

There are 17 licensed banks in Qatar, seven of which are foreign institutions. Qatar also has 20 exchange houses, six investment and finance companies, 16 insurance companies, and 17 investment funds. Other foreign banks and financial institutions operate under the Qatar Financial Center’s platform, but they are not licensed by QCB; they are regulated by the Qatar Financial Center Regulatory Authority and are not allowed to have retail branches in Qatar. Qatar National Bank is the largest financial institution by assets in the Middle East and Africa, with total assets exceeding $259.5 billion. To open a bank account in Qatar, foreigners must present proof of residency.

As the main financial regulator, QCB continues to introduce incentives for local banks to ensure a strong financial sector that is resilient during times of economic volatility. QCB manages liquidity by mandating a reserve ratio of 4.5 percent and utilizing treasury bonds, bills, and other macroprudential measures. Banks that do not abide by the required reserve ratio are penalized. QCB uses repurchase agreements, backed by government securities, to inject liquidity into the banks. According to QCB data, total domestic liquidity reached $164.8 billion in December 2020, and only 2.2 percent of Qatar’s bank loans in 2019 were nonperforming. International ratings agencies have expressed confidence in the financial stability of the country’s banks, given liquidity levels strong earnings and the support of the Central Bank to the banking industry.

Cryptocurrency trading is illegal in Qatar, per a 2018 Qatar Central Bank circular. In January 2020, the Qatar Financial Centre Regulatory Authority (QFCRA) announced that firms operating under QFC are not permitted to provide or facilitate the provision or exchange of crypto assets and related services.

Foreign Exchange and Remittances

Foreign Exchange

Due to minimal demand for the Qatari riyal outside Qatar and the national economy’s dependence on gas and oil revenues, which are priced in dollars, the government has pegged the riyal to the U.S. dollar. The official peg is QAR 1.00 per $0.27 or $1.00 per QAR 3.64, as set by the government in June 1980 and reaffirmed by Amiri decree 31/2001.

Per the provisions of Law 20/2019 on Combating Money Laundering and Terrorism Financing and following the issuance of Cabinet Resolution 41/2019, starting February 2020, travelers to or from Qatar are required to complete a declaration form upon entry or departure, if carrying cash, precious metals, financial instruments, or jewelry, valued at QAR 50,000 or more ($13,736).

Remittance Policies

Qatar neither delays remittance of foreign investment returns nor restricts transfer of funds associated with an investment, such as return on dividends, return on capital, interest and principal payments on private foreign debt, lease payments, royalties, management fees, proceeds generated from sale or liquidation, sums garnered from settlements and disputes, and compensation from expropriation to financial institutions outside Qatar.

In accordance with Law 20/2019 on Combating Money Laundering and Terrorism Financing, QCB requires financial institutions to apply due diligence prior to establishing business relationships, carrying out financial transactions, and performing wire transfers. Executive regulations for this law promulgate that originator information should be secured when a wire transfer exceeds QAR 3,500 ($962). Similarly, due diligence is required when a customer is completing occasional transactions in a single operation or several linked operations of an amount exceeding QAR 50,000 ($13,736).

Qatar is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. Qatar is currently undergoing its second round FATF Mutual Evaluation and is tentatively scheduled to have its onsite assessment in summer 2021. In July 2017, Qatar signed a counterterrorism Memorandum of Understanding with the United States, which provides for information sharing, joint training, enhanced cooperation, and other deliverables related to combating money laundering and terrorism financing.

Sovereign Wealth Funds

The Qatar Investment Authority (QIA), Qatar’s sovereign wealth fund, was established by Amiri Decree 22/2005. Chaired by the Amir, the Supreme Council for Economic Affairs and Investment oversees QIA, which does not disclose its assets (independent analysts estimate QIA’s holdings to be around $295 billion). QIA pursues direct investments and favors luxury brands, prime real estate, infrastructure development, and banks. Various QIA subsidiaries invest in other sectors, as well. In 2015, QIA opened an office in New York City to facilitate its $45 billion commitment of investments in the United States. QIA’s real estate subsidiary, Qatari Diar, has operated an office in Washington, D.C. since 2014.

QIA was one of the early supporters of the Santiago Principles, and among the few members that drafted the initial and final versions of the principles and continues to be a proactive supporter of their implementation. QIA was also a founding member of the IMF-hosted International Working Group of Sovereign Wealth Funds. QIA supported the establishment of the International Forum of Sovereign Wealth Funds and helped create the Forum’s constitution.

Capital Markets and Portfolio Investment

The ROC government maintains a neutral attitude toward foreign portfolio investment and does not widely practice foreign portfolio investment.

ROC does not have a national stock exchange. ROC-based companies may seek regional listing on the Douala Stock Exchange, which merged with the Economic and Monetary Community of Central Africa (CEMAC) Zone Stock Exchange. The Bank of Central African States (BEAC) determines monetary and credit policies within the CEMAC framework to ensure the stability of the common regional currency.

Existing policies facilitate the free flow of financial resources, though complex products are not widely used.

The government and Central Bank respect IMF Article VIII in principle, however, within the last year the BEAC imposed restrictions on international payments and transfers. Mining and oil companies especially expressed concerns about the new restrictions.

In June 2019, the BEAC issued a number of directives to implement currency exchange controls previously approved by CEMAC on December 21, 2018. The CEMAC regulation provides the framework, terms, and conditions for the regulation of foreign exchange transactions in the CEMAC member States – Cameroon, Central African Republic, Chad, Equatorial Guinea, Gabon, and the Republic of the Congo. The new regulation increases the BEAC’s role in declaring and authorizing international transactions, the control of the compliance with the foreign exchange regulations and the interpretation of the CEMAC Regulation. The regulation was supposed to enter into force on March 1, 2019, however the compliance/application of the regulation is extended to December 31, 2021 referring to the decision of the Governor n°119 /GR/2020.

The BEAC monitors credits and market terms. Foreign investors can obtain credit on the local market as long as they have a locally registered company. ROC, however, offers only a limited range of credit instruments.

Money and Banking System

Banking penetration likely remains in the 10- to 12-percent range, although a government survey conducted in 2015 estimated a rate of 25-30 percent. High intermediation costs and high collateral requirements limit the pool of customers. Microfinance banks and mobile banking remain the fastest growth areas in the banking sector.

The current economic crisis and the government’s consecutive years of fiscal deficits have additionally strained the banking sector over the past five years. Overall loan default has remained around 30 percent in the reporting period due to strained economic conditions.

Non-performing loans amount to approximately 30 percent in 2020.

Fiscal transparency issues limit any estimate of the total assets controlled by ROC’s largest banks. The assets of the largest banks have likely decreased significantly in recent years as a result of the economic crisis.

ROC participates in the Central African Economic and Monetary Community (CEMAC) zone and the Central Bank of the Central African States (BEAC) system. BEAC’s regulatory body, the Banking Commission of Central Africa (COBAC), supervises the Congolese banking sector.

Foreign banks and branches may operate in ROC and constitute the majority of banking operations in ROC. BEAC banking regulations govern foreign and domestic banks in ROC. No banks have left ROC in the past ten years.

No known restrictions exist on a foreigner’s ability to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

In 2019, the Bank of the Central African States (BEAC) imposed new restrictions on international payments and transfers that have negatively affected foreign exchange. CEMAC regulations require banks to record and report the identity of customers engaging in transactions valued at over $10,000. The BEAC recently began monitoring closely fund transfers larger than $100,000.

New BEAC restrictions have created difficulties obtaining foreign currencies from commercial banks. No U.S.-based banks operate in ROC but transfers directly to and from the United States are possible.

ROC and other CEMAC member states use the Central African CFA Franc (FCFA, sometimes abbreviated XAF) as a common currency. The CFA is pegged to the Euro as an intervention monetary unit at a fixed exchange rate of 1 Euro: 655.957 CFA Franc.

Remittance Policies

In 2019, the Bank of the Central African States (BEAC) imposed new restrictions on international payments and transfers that have negatively affected remittances.

In June 2019, the Bank of Central African States issued a number of standard operating procedures to implement currency exchange controls. Since the implementation of these regulations, the average waiting period for any fund transfer is 10 days in 2020.

Sovereign Wealth Funds

GROC maintains no formal Sovereign Wealth Fund (SWF). An ROC law envisages the establishment of an SWF at the BEAC and acquiring mostly risk-free foreign assets.

Capital Markets and Portfolio Investment

Romania welcomes portfolio investment. In September 2019, the Financial Times and the London Stock Exchange (FTSE) promoted the Bucharest Stock Exchange (BVB) to Emerging Secondary Capital Market status from Frontier Capital Market classification.  The Financial Regulatory Agency (ASF) regulates the securities market. The ASF implements the registration and licensing of brokers and financial intermediaries, the filing and approval of prospectuses, and the approval of market mechanisms.

The BVB resumed operations in 1995 after a hiatus of nearly 50 years. The BVB operates a two-tier system with the main market consisting of 83 companies. The official index, BET, is based on an index of the ten most active stocks. BET-TR is the total return on market capitalization index, adjusted for the dividends distributed by the companies included in the index. Since 2015, the BVB also has an alternative trading system (MTS-AeRO) with 289 listed companies – mostly small- and medium-sized enterprises (SMEs) – and features relaxed listing criteria. The BVB allows trade in corporate, municipal, and international bonds. Investors can use gross basis trade settlements, and trades can be settled in two net settlement cycles. The BVB’s integrated group includes trading, clearing, settlement, and registry systems. The BVB’s Multilateral Trading System (MTS) allows trading in local currency of 16 foreign stocks listed on international capital markets.

Neither the government nor the Central Bank imposes restrictions on payments and transfers. Country funds, hedge funds, private pension funds, and venture capital funds continue to participate in the capital markets. Minority shareholders have the right to participate in any capital increase. Romanian capital market regulation is now EU-consistent, with accounting regulations incorporating EC Directives IV and VII.

Money and Banking System

Thirty- five banks and credit cooperative national unions currently operate in Romania. The largest is the privately-owned Transilvania Bank (18.4 percent market share), followed by Austrian-owned Romanian Commercial Bank (BCR-Erste, 14.2 percent); French-owned Romanian Bank for Development (BRD-Société Générale, 11.0 percent); Dutch-owned ING (9.5 percent); Austrian-owned Raiffeisen (9.2 percent), and Italian-owned UniCredit (8.1 percent).

The banking system is stable and well-provisioned relative to its European peers. According to the National Bank of Romania, non-performing loans (NPLs) have steadily fallen in recent years and currently account for 3.89 percent of total bank loans. As of December 2020, the banking system’s solvency rate was 22.7 percent, which has remained steady over recent years.

The government has encouraged foreign investment in the banking sector, and mergers and acquisitions are not restricted. The only remaining state-owned banks are the National Savings Bank (CEC Bank) and EximBank, comprising 10.63 percent of the market combined, having grown after the latter’s acquisition of Banca Romaneasca from Greek-owned NBG.

While the National Bank of Romania must authorize all new non-EU banking entities, banks and non-banking financial institutions already authorized in other EU countries need only notify the National Bank of Romania of plans to provide local services based on the EU passport.

In response to the COVID-19 pandemic, the government instituted a credit/lease installment moratorium in 2020, and later extended it into 2021. Borrowers are permitted a total of nine months of non-payment of their installments. As of September 2020, 558,000 borrowers applied for the installment moratorium, representing 14.7 percent of the total non-government credit balance.

Foreign Exchange and Remittances

Foreign Exchange

Romania does not restrict the conversion or transfer of funds associated with direct investment. All profits made by foreign investors in Romania may be converted into another currency and transferred abroad at the market exchange rate after payment of taxes.

Romania’s national currency, the Leu, is freely convertible in current account transactions, in accordance with the International Monetary Fund’s (IMF) Article VII.

Remittance Policies

There is no limitation on the inflow or outflow of funds for remittances of profits, debt service, capital gains, returns on intellectual property, or imported inputs. Proceeds from the sales of shares, bonds, or other securities, as well as from the conclusion of an investment, can be repatriated.

Romania implemented regulations liberalizing foreign exchange markets in 1997. The inter-bank electronic settlement system became fully operational in 2006, eliminating past procedural delays in processing capital outflows. Commission fees for real-time electronic banking settlements have gradually been reduced.

Capital inflows are also free from restraint. Romania concluded capital account liberalization in September 2006, with the decision to permit non-residents and residents abroad to purchase derivatives, treasury bills, and other monetary instruments.

Sovereign Wealth Funds

Plans to establish a Sovereign Development and Investment Fund (SDIF) were repealed by the government in January 2020.

Capital Markets and Portfolio Investment

Russia is open to portfolio investment and has no restrictions on foreign investments. Russia’s two main stock exchanges – the Russian Trading System (RTS) and the Moscow Interbank Currency Exchange (MICEX) – merged in December 2011. The MICEX-RTS bourse conducted an initial public offering on February 15, 2013, auctioning an 11.82 percent share.

The Russian Law on the Securities Market includes definitions of corporate bonds, mutual funds, options, futures, and forwards. Companies offering public shares are required to disclose specific information during the placement process as well as on a quarterly basis. In addition, the law defines the responsibilities of financial consultants assisting companies with stock offerings and holds them liable for the accuracy of the data presented to shareholders. In general, the Russian government respects IMF Article VIII, which it accepted in 1996. Credit in Russia is allocated generally on market terms, and the private sector has access to a variety of credit instruments. Foreign investors can get credit on the Russian market, but interest rate differentials tend to prompt investors from developed economies to borrow on their own domestic markets when investing in Russia.

Money and Banking System

Banks make up a large share of Russia’s financial system. Although Russia had 396 licensed banks as of March 1, 2020, state-owned banks, particularly Sberbank and VTB Group, dominate the sector. The top three largest banks are state-controlled (with private Alfa Bank ranked fourth). The top three banks held 51.4 percent of all bank assets in Russia as of March 1, 2020. The role of the state in the banking sector continues to distort the competitive environment, impeding Russia’s financial sector development. At the beginning of 2019, the aggregate assets of the banking sector amounted to 91.4 percent of GDP, and aggregate capital was 9.9 percent of GDP. By January 2020 and 2021, the aggregate assets of Russian banks reached 92.2 and 97.2 percent, respectively. Russian banks reportedly operate on short time horizons, limiting capital available for long-term investments. Overall, the share of retail non-performing loans (NPLs) to total gross loans slightly increased from 4.4 percent of total gross retail loans in January 2020 to 4.5 percent in April 2021, while corporate NPLs declined from 7.5 percent to 6.5 percent in the same period, according to the Central Bank of Russia. ACRA-Rating analytical agency expects an increase in retail NPLs to 6.0 percent and corporate NPL – to 8.8 percent by the end of 2021.

Foreign banks are allowed to establish subsidiaries, but not branches within Russia and must register as a business entity in Russia.

Foreign Exchange and Remittances

Foreign Exchange

While the ruble is the only legal tender in Russia, companies and individuals generally face no significant difficulty in obtaining foreign currency from authorized banks. The CBR retains the right to impose restrictions on the purchase of foreign currency, including the requirement that the transaction be completed through a special account, according to Russia’s currency control laws. The CBR does not require security deposits on foreign exchange purchases. Otherwise, there are no barriers to remitting investment returns abroad, including dividends, interest, and returns of capital, apart from the fact that reporting requirements exist and failure to report in a timely fashion will result in fines.

Currency controls also exist on all transactions that require customs clearance, which, in Russia, applies to both import and export transactions, and certain loans. As of March 1, 2018, the CBR no longer requires a “transaction passport” (i.e., a document with the authorized bank through which a business receives and services a transaction) when concluding import and export contracts. The CBR also simplified the procedure to record import and export contracts, reducing the number of documents required for bank authorization. The government has also lifted the requirement to repatriate export revenues if settlements under a foreign trade contract are set in Russian rubles effective January 1, 2020.

Remittance Policies

The CBR retains the right to impose restrictions on the purchase of foreign currency, including the requirement that the transaction be completed through a special account, according to Russia’s currency control laws. The CBR does not require security deposits on foreign exchange purchases. To navigate these requirements, investors should seek legal expert advice at the time of making an investment. Banking contacts confirm that investors have not had issues with remittances and in particular with repatriation of dividends.

Sovereign Wealth Funds

In 2018, Russia combined its two sovereign wealth funds to form the National Welfare Fund (NWF). The fund’s holdings amounted to $165.4 billion, or 12.0 percent of GDP as of April 1, 2020 and grew to $185.9 billion, or 12.0 percent of GDP as of May 1, 2021. The Ministry of Finance oversees the fund’s assets, while the CBR acts as the operational manager. Russia’s Accounts Chamber regularly audits the NWF, and the results are reported to the State Duma. The NWF is maintained in foreign currencies, and is included in Russia’s foreign currency reserves, which amounted to $563.4 billion as of March 31, 2020. In June 2021, Russia’s Ministry of Finance announced plans to completely divest the $41 billion worth of NWF U.S. dollar holdings within a month, replacing them with RMB (Chinese Yuan), Euros and gold by July 2021.

Capital Markets and Portfolio Investment

In February 2021, the GOR introduced new incentives to support the Rwanda Stock Exchange and the Capital Market Authority through the Investment Code. A preferential withholding tax of five percent is applicable to dividends and interest income paid to investors in companies listed on the Rwanda Stock Exchange. A preferential corporate income tax rate of three percent applies to collective investment schemes. A preferential corporate income tax rate of fifteen percent applies to fund management entities, wealth management services, financial advisory entities, financial technology entities, captive insurance schemes, mortgage finance institutions, fund administrators, finance lease entities, and asset backed securities.

In December 2017, the GOR established Rwanda Finance Limited (RFL), a state-owned enterprise charged with creating the Kigali International Financial Centre (KIFC). The goal is to create a conducive ecosystem to entice pan-African and international financial service providers and investment funds to Rwanda. KIFC is scheduled to be launched on the sidelines of Commonwealth Heads Of Governments Meeting (CHOGM) taking place in Kigali in June 2021. RFL has successfully pushed the GOR to change many Rwandan investment, banking, and commercial laws to in order to align with OECD/EU and AML/CFT requirements. In November 2019, BNR introduced a multiple bond issuance program. In the 2019-2020 financial year, seven bonds were reopened, eight new bonds were issued, and three multiple issuances were performed. Oversubscription reached 138% on average. BNR implemented reforms in recent years that are helping to create a secondary market for Rwandan treasury bonds.

In November 2019, BNR introduced a multiple bond issuance program. In the 2019-2020 financial year, seven bonds were reopened, eight new bonds were issued, and three multiple issuances were performed. Oversubscription reached 138% on average. BNR implemented reforms in recent years that are helping to create a secondary market for Rwandan treasury bonds.

In January 2021, the IMF completed its third review of Rwanda’s economic performance under a Policy Coordination Instrument, which can be found here: https://www.imf.org/en/Publications/CR/Issues/2021/01/04/Rwanda-Third-Review-Under-the-Policy-Coordination-Instrument-Press-Release-Staff-Report-and-49984

https://www.imf.org/en/Publications/CR/Issues/2021/01/04/Rwanda-Third-Review-Under-the-Policy-Coordination-Instrument-Press-Release-Staff-Report-and-49984

Money and Banking System

Many U.S. investors express concern that local access to affordable credit is a serious challenge in Rwanda. Interest rates are high for the region, banks offer predominantly short-term loans, collateral requirements can be higher than 100 percent of the value of the loan, and Rwandan commercial banks rarely issue significant loan values. The prime interest rate is 16-18 percent. Large international transfers are subject to authorization. Investors who seek to borrow more than $1 million must often engage in multi-party loan transactions, usually by leveraging support from larger regional banks. Credit terms generally reflect market rates, and foreign investors can negotiate credit facilities from local lending institutions if they have collateral and “bankable” projects. In some cases, preferred financing options may be available through specialized funds including the Export Growth Fund, BRD, or FONERWA.

The banking sector holds more than 67 percent of total financial sector assets in Rwanda. In total, Rwanda’s banks have assets of around $3.8 billion, which increased 18.5 percent between June 2018 and June 2020, according to BNR. Rwanda’s financial sector remains highly concentrated. The share of the three largest banks’ assets increased from 46.5 percent in December 2018 to 48.4 percent in December 2019. The largest, the partially state-owned Bank of Kigali (BoK), holds more than 30 percent of all assets. The total number of bank and micro-finance institution (MFI) accounts increased from 7.1 million to 7.7 million between 2018-2019.

Local banks often generate significant revenue from holding government debt and from charging a variety of fees to banking customers. The capital adequacy ratio decreased to 23.7 percent in June 2020 from 24.1 percent over the year but was still well above the prudential minimum of 15 percent, suggesting the Rwandan banking sector continues to be generally risk averse. Non-performing loans increased from 4.9 in December 2019 to 5.5 percent in June 2020 due to the COVID-19 pandemic’s disruption of economic activities.

The IMF gives BNR high marks for its effective monetary policy. BNR introduced a new monetary policy framework in 2019, which shifted toward an inflation-targeting monetary framework in place of a quantity-of-money framework. In April 2020, the BNR arranged a 50 billion RWF ($53.4 Million) liquidity fund for local banks facing challenges from COVID-19. The BNR allowed banks to restructure loans affected by the pandemic by authorizing an average of four months in loan holidays. Additionally, in March 2020, the BNR took a decision to suspend distribution of dividends from profits generated in 2019.

Foreign banks are permitted to establish operations in Rwanda, with several Kenyan-based banks in the country. Atlas Mara Limited acquired a majority equity stake in Banque Populaire du Rwanda (BPR) in 2016. BPR/Atlas Mara has the largest number of branch locations and is Rwanda’s second largest bank after BoK. Atlas Mara was, in turn, acquired by Kenyan based KCB bank. Moroccan-based Bank of Africa, a minority bank in Rwanda, actively discourages American account holders due to requirements imposed by the Foreign Account Tax Compliance Act (FACTA), which charges foreign banks for expenses incurred while auditing an American.

In November 2020, the GOR signed an MOU with the African Export-Import Bank (Afreximbank) to host the permanent headquarters of Afrexim Fund for Export Development in Africa (FEDA) in Kigali. FEDA will operate as an equity investment fund that provides seed capital to companies in Africa, emphasizing projects that promote intra-African trade, trade-related infrastructure, and value-added exports. According to RDB, the fund will have an initial commitment of $350 million from Afreximbank and is expected to grow to over $1 billion in the future.

Rwandans primarily rely on cash or mobile money to conduct transactions, though use of debit and credit cards is expanding. By December 2019, the number of debit cards in the country grew eight percent year over year to 945,000, and the number of mobile banking customers grew 22 percent to 1,266,000. Credit cards are becoming more common in major cities, especially at locations frequented by foreigners, but are not used in rural areas. In the financial year 2019-20, the number of retail point of sale (POS) using cards increased by 29 percent compared to 2018-19. ATM terminals decreased by 15 percent due to the adoption of other channels such as agency, internet, and mobile banking. Use of mobile money has grown by more than 500 percent since March 2020 due to changes brought about by COVID-19 and business closures.

Foreign Exchange and Remittances

Foreign Exchange

In 1995, the government abandoned a dollar peg and established a floating exchange rate regime under which all lending and deposit interest rates were liberalized. On a daily basis, the BNR publishes an official exchange rate, which is typically within a two percent range of rates seen in the local market. Some investors report occasional difficulty in obtaining foreign exchange. Rwanda generally runs a large trade deficit, estimated at more than ten percent of GDP in 2019. In the 2019-2020 fiscal year, BNR reported that Rwanda’s trade deficit widened by 23.7 percent. Transacting locally in foreign currency is prohibited in Rwanda. Regulations set a ceiling on the amount of foreign currency that can leave the country per day. In addition, regulations specify limits for sending money outside the country; the BNR must approve any transaction that exceed these limits.

Most local loans are in local currency. In December 2018, BNR issued a new directive on lending in foreign currency which requires the borrower to have a turnover of at least RWF 50 million ($50,000) or equivalent in foreign currency and have a known income stream in foreign currency not below 150 percent of the total installment repayments. Moreover, the repayments must be in foreign currency. The collateral pledged by non-resident borrowers must be valued at 150 percent of the value of the loan. In addition, BNR requires banks to report regularly on loans granted in foreign currency.

Remittance Policies

Investors can remit payments from Rwanda only through authorized commercial banks. There is no limit on the inflow of funds, although local banks are required to notify BNR of all transfers over $10,000 to mitigate the risk of potential money laundering. Additionally, there are some restrictions on the outflow of export earnings. Companies generally must repatriate export earnings within three months after the goods cross the border. Tea exporters must deposit sales proceeds shortly after auction in Mombasa, Kenya. Repatriated export earnings deposited in commercial banks must match the exact declaration the exporter used crossing the border.

Rwandans working overseas can make remittances to their home country without impediment. It usually takes up to three days to transfer money using SWIFT financial services. The concentrated nature of the Rwandan banking sector limits choice, and some U.S. investors have expressed frustration with the high fees charged for exchanging Rwandan francs to dollars.

Sovereign Wealth Funds

In 2012, the Rwandan government launched the Agaciro Development Fund (ADF), a sovereign wealth fund that includes investments from Rwandan citizens and the international diaspora. By September 30, 2019, the fund was worth 194.3 billion RWF in assets ($204 million). The ADF operates under the custodianship of the BNR and reports quarterly and annually to MINECOFIN. ADF is a member of the International Forum of Sovereign Wealth Funds and is committed to the Santiago Principles. ADF only operates in Rwanda. In addition to returns on investments, voluntary contributions from citizens and the private sector, and other donations, ADF receives RWF 5 billion ($5 million) every year from tax revenues and five percent of proceeds from every public asset that the GOR has privatized. The fund also receives five percent of royalties from minerals and other natural resources each year. The government has transferred a number of its shares in private enterprises to the management of ADF including those in the BoK, Broadband Systems Corporation (BSC), Gasabo 3D Ltd, Africa Olleh Services (AoS), Korea Telecom Rwanda Networks (KTRN), and the One and Only Nyungwe Lodge. ADF invests mainly in Rwanda. While the fund can invest in foreign non-fixed income investments, such as publicly listed equity, private equity, and joint ventures, the AGDF Corporate Trust Ltd (the fund’s investment arm) held no financial assets and liabilities in foreign currency, according to the 2018 annual report (the most recent report available).

Capital Markets and Portfolio Investment

St. Kitts and Nevis is a member of the ECCU.  As such, it is also a member of the ECSE and the Regional Government Securities Market.  The ECSE is a regional securities market established by the ECCB and licensed under the Securities Act of 2001, a uniform regional body of legislation governing the buying and selling of financial products for the eight member territories.  In 2020, the ECSE listed 155 securities, comprising 135 sovereign debt instruments, 13 equities, and seven corporate debt securities.  Market capitalization stood at $1.8 billion.  St. Kitts and Nevis is open to portfolio investment.

St. Kitts and Nevis accepted the obligations of Article VIII of the International Monetary Fund Agreement, Sections 2, 3 and 4 and maintains an exchange system free of restrictions on making payments and transfers for current international transactions.  The private sector has access to credit on the local market through loans, purchases of non-equity securities, trade credits, and other accounts receivable that establish a claim for repayment.

Money and Banking System

The eight participating governments of the ECCU have passed the Eastern Caribbean Central Bank Agreement Act.  The Act provides for the establishment of the ECCB, its management and administration, its currency, relations with financial institutions, relations with the participating governments, foreign exchange operations, external reserves, and other related matters.  St. Kitts and Nevis is a signatory to this agreement, and the ECCB controls St. Kitts and Nevis’s currency and regulates its domestic banks.

Domestic and foreign banks can establish operations in St. Kitts and Nevis.  The Banking Act requires all commercial banks and other institutions to be licensed in order to conduct any banking business.  The ECCB regulates financial institutions.  As part of ongoing supervision, licensed financial institutions are required to submit monthly, quarterly, and annual performance reports to the ECCB.  In its latest annual report, the ECCB listed the commercial banking sector as stable.  Assets of commercial banks totaled $2.5 billion (6.8 billion Eastern Caribbean dollars) at the end of 2019.

St. Kitts and Nevis is well served by bank and non-bank financial institutions.  There are minimal alternative financial services.  Some citizens still participate in informal community group lending.

The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S. and European banks.  CARICOM remains committed to engaging with key stakeholders and appointed a Committee of Ministers of Finance on Correspondent Banking to monitor the issue.

In 2019, the ECCB started an 18-month financial technology pilot to launch a Digital Eastern Caribbean dollar (DXCD) with its partner, Barbados-based Bitt Inc.  An accompanying mobile application, DCash, was officially launched on March 31, 2021 in four pilot countries including St. Kitts and Nevis.  The DCash pilot phase will run for 12 months.  The digital Eastern Caribbean currency will operate alongside physical Eastern Caribbean currency.

St. Kitts and Nevis enacted the Virtual Assets Bill, 2020, to regulate virtual currencies with the expectation that they will become increasingly prevalent.  The bill is intended to facilitate the ease of doing business in a cashless society, and to combat theft, fraud, money laundering, Ponzi schemes, and terrorist financing.

Foreign Exchange and Remittances

Foreign Exchange

St. Kitts and Nevis is a member of the ECCU and the ECCB.  The currency of exchange is the Eastern Caribbean Dollar (XCD).  As a member of the OECS, St. Kitts and Nevis has a fully liberalized foreign exchange system.  The XCD was pegged to the United States dollar at a rate of 2.70  Eastern Caribbean dollars to $1.00 in 1976.  As a result, the XCD does not fluctuate, creating a stable currency environment for trade and investment in St. Kitts and Nevis.

Remittance Policies

Companies registered in St. Kitts and Nevis have the right to repatriate all capital, royalties, dividends, and profits.  There are no restrictions on the repatriation of dividends for totally foreign-owned firms.  A mixed foreign-domestic company may repatriate profits to the extent of its foreign participation.

As a member of the OECS, there are no exchange controls in St. Kitts and Nevis and the invoicing of foreign trade transactions are allowed in any currency.  Importers are not required to make prior deposits in local funds and export proceeds do not have to be surrendered to government authorities or to authorized banks.  There are no controls on transfers of funds.  St. Kitts and Nevis is a member of the Caribbean Financial Action Task Force (CFATF).

The country passed the Anti-Money Laundering Bill, 2019.  The stated intent of this bill is to begin to bring the country into alignment with international standards for combating money laundering.  St. Kitts and Nevis also passed the Proceeds of Crime and Asset Recovery Bill, 2019, which aims to provide the government with an additional tool to combat money laundering and terrorist financing.

In 2016, the government signed an Intergovernmental Agreement in observance of FATCA, making it mandatory for banks in St. Kitts and Nevis to report the banking information of U.S. citizens.

Sovereign Wealth Funds

Neither the government of St. Kitts and Nevis, nor the ECCB, of which St. Kitts and Nevis is a member, maintains a sovereign wealth fund.

Capital Markets and Portfolio Investment

Saint Lucia is a member of the ECCU.  As such, it is a member of the Eastern Caribbean Securities Exchange (ECSE) and the Regional Government Securities Market.  The ECSE is a regional securities market established by the ECCB and licensed under the Securities Act of 2001, a uniform regional body of legislation governing the buying and selling of financial products for the eight member territories.  In 2020, the ECSE listed 155 securities, comprising 135 sovereign debt instruments, 13 equities, and seven corporate debt securities.  Market capitalization stood at $1.8 billion.  Saint Lucia is open to portfolio investment.

Saint Lucia has accepted the obligations of Article VIII of the International Monetary Fund Agreement, Sections 2, 3 and 4 and maintains an exchange system free of restrictions on making payments and transfers for current international transactions.  Foreign tax credit is allowed for the lesser of the tax payable in the foreign country or the tax charged under Saint Lucia tax law.  The private sector has access to credit on the local market through loans, purchases of non-equity securities, and trade credits and other accounts receivable that establish a claim for repayment.

Money and Banking System

The eight participating governments of the ECCU have passed the Eastern Caribbean Central Bank Agreement Act.  The Act provides for the establishment of the ECCB, its management and administration, its currency, relations with financial institutions, relations with the participating governments, foreign exchange operations, external reserves, and other related matters.  Saint Lucia is a signatory to this agreement and the ECCB controls Saint Lucia’s currency and regulates its domestic banks.

The Banking Act is a harmonized piece of legislation across the ECCU.  The Minister of Finance usually acts in consultation with, and on the recommendation of, the ECCB with respect to those areas of responsibility within the Minister of Finance’s portfolio.

Domestic and foreign banks can establish operations in Saint Lucia.  The Banking Act requires all commercial banks and other institutions to be licensed in order to conduct any banking business.  The ECCB regulates financial institutions.  As part of ongoing supervision, licensed financial institutions are required to submit monthly, quarterly, and annual performance reports to the ECCB.

In its latest annual report, the ECCB listed the commercial banking sector in Saint Lucia as stable.  Assets of commercial banks totaled $2.8 billion (6.4 billion Eastern Caribbean dollars) in at the end of 2019.  In its latest annual report, the ECCB listed the commercial banking sector in Saint Lucia as stable. Saint Lucia is well-served by bank and non-bank financial institutions.

The Caribbean region has witnessed a withdrawal of correspondent banking services by the U.S. and European banks.  CARICOM remains committed to engaging with key stakeholders on the issue and appointed a Committee of Ministers of Finance on Correspondent Banking to monitor the issue.

In 2019, the ECCB launched an 18-month financial technology pilot to launch a Digital Eastern Caribbean dollar (DXCD) with its partner, Barbados-based Bitt Inc.  An accompanying mobile application, DCash was officially launched on March 31, 2021 in four pilot countries including Saint Lucia.  The DCash pilot phase will run for 12 months.  The digital Eastern Caribbean currency will operate alongside physical Eastern Caribbean currency.  Saint Lucia does not have any specific legislation to regulate cryptocurrencies.

Foreign Exchange and Remittances

Foreign Exchange

Saint Lucia is a member of the ECCU and the ECCB.  The currency of exchange is the Eastern Caribbean dollar (XCD).  Saint Lucia has a fully liberalized foreign exchange system.  The Eastern Caribbean dollar has been pegged to the United States dollar at a rate of XCD 2.70 to $1.00 since 1976.  As a result, the Eastern Caribbean dollar does not fluctuate, creating a stable currency environment for trade and investment in Saint Lucia.

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.  Funds can also be freely converted into any of the major world currencies.

Remittance Policies

Companies registered in Saint Lucia have the right to repatriate all capital, royalties, dividends, and profits.  There are no restrictions on the repatriation of dividends for totally foreign-owned firms.

As a member of the OECS, there are no exchange controls in Saint Lucia, and parties can invoice foreign trade transactions in any currency.  Importers are not required to make prior deposits in local funds and are not required to surrender export proceeds to government authorities or to authorized banks.  There are no controls on transfers of funds.  Saint Lucia is a member of the Caribbean Financial Action Task Force (CFATF).

Sovereign Wealth Funds

Neither the Government of Saint Lucia, nor the ECCB, of which Saint Lucia is a member, maintains a sovereign wealth fund.

Capital Markets and Portfolio Investment

St. Vincent and the Grenadines is a member of the ECCU.  As such, it is also a participant on the Eastern Caribbean Securities Exchange (ECSE) and the Regional Government Securities Market.  The ECSE is a regional securities market established by the ECCB and regulated by the Eastern Caribbean Securities Regulatory Commission.  The Securities Act of 2001 regulates activities on the ECSM.

The ECSE and its subsidiaries, the Eastern Caribbean Central Securities Depository and the Eastern Caribbean Central Securities Registry, facilitate activities on the ECSE.  The main activities are the primary issuance and secondary trading of corporate and sovereign securities, the clearance and settlement of issues and trades, maintaining securities holders’ records, and providing custodial, registration, transfer agency, and paying agency services in respect of listed and non-listed securities.  As of March 31, 2020, there were 154 securities listed on the ECSE, comprising 134 sovereign debt instruments, 13 equities, and seven corporate bonds.  Market capitalization stood at 666 million USD (1.8 billion Eastern Caribbean dollars), representing a 0.3 percent decrease from the previous year.  St. Vincent and the Grenadines is open to portfolio investment.

St. Vincent and the Grenadines accepted the obligations of Article VIII of the International Monetary Fund Agreement, sections 2, 3, and 4, and maintains an exchange system free of restrictions on making international payments and transfers.  St. Vincent and the Grenadines does not have a credit bureau.

Money and Banking System

Eight participating governments passed the Eastern Caribbean Central Bank Agreement Act.  The Act provides for the establishment of the ECCB, its management and administration, its currency, relations with financial institutions, relations with the participating governments, foreign exchange operations, external reserves, and other related matters.  St. Vincent and the Grenadines is a signatory to this agreement.  Therefore, the ECCB controls the country’s currency and regulates its domestic banks.

The Banking Act 2015 is a harmonized piece of legislation across all ECCU member states.  The ECCB and the Ministers of Finance of member states jointly carry out banking supervision under the Act.  The Ministers of Finance usually act in consultation with the ECCB with respect to those areas of responsibility within the Minister of Finance’s portfolio.

Domestic and foreign banks can establish operations in St. Vincent and the Grenadines.  The Banking Act requires all commercial banks and other institutions to be licensed.  The ECCB regulates financial institutions.  As part of supervision, licensed financial institutions are required to submit monthly, quarterly, and annual performance reports to the ECCB.  In its latest annual report, the ECCB listed the commercial banking sector in St. Vincent and the Grenadines as stable.  Assets of commercial banks totaled $833 million (2.25 billion Eastern Caribbean dollars) at the end of December 2019 and remained relatively consistent during the previous year.  The reserve requirement for commercial banks was six percent of deposit liabilities.

The Caribbean region has witnessed a withdrawal of correspondent banking services by U.S., Canadian, and European banks due to risk management concerns.  CARICOM remains committed to engaging with key stakeholders on the issue and appointed a Committee of Ministers of Finance on Correspondent Banking to continue to monitor the issue.

Bitt, a Barbadian company, developed digital currency DCash in partnership with ECCB.  The first successful DCash retail central bank digital currency (CDBC) consumer-to-merchant transaction took place in Grenada in February following a multi-year development process.  The CBB and the FSC established a regulatory sandbox in 2018 where financial technology entities can do live testing of their products and services.  This allowed regulators to gain a better understanding of the product or service and to determine what, if any, regulation is necessary to protect consumers.  Bitt completed its participation and formally exited the sandbox in 2019.  Bitt is expected to launch DCash in St. Vincent and the Grenadines in mid-2021.  St. Vincent and the Grenadines does not have any specific legislation to regulate cryptocurrencies.

Foreign Exchange and Remittances

Foreign Exchange

St. Vincent and the Grenadines is a member of the ECCU and the ECCB.  The currency of exchange is the Eastern Caribbean dollar (XCD).  As a member of the OECS, its foreign exchange system is fully liberalized.  The XCD has been pegged to the U.S. dollar at a rate of XCD 2.70 to USD 1.00 since 1976.  As a result, the Eastern Caribbean dollar does not fluctuate, creating a stable currency environment for trade and investment.

Remittance Policies

Companies registered in St. Vincent and the Grenadines have the right to repatriate all capital, royalties, dividends, and profits free of all taxes or any other charges on foreign exchange transactions.  International companies are exempt from taxation.  Under present regulations, there are no personal income taxes, estate taxes, corporate income taxes, or withholding taxes for international companies operating in St. Vincent and the Grenadines.  International companies are also exempt from competitive tax for 25 years.

Only banks may make currency conversions.  St. Vincent and the Grenadines is a member of the CFATF.

In 2014, the government of St. Vincent and the Grenadines signed an intergovernmental agreement with the United States to facilitate compliance for FATCA, which makes it mandatory for St. Vincent and the Grenadines’ banks to report the banking information of U.S. citizens.

Sovereign Wealth Funds

Neither the government of St. Vincent and the Grenadines, nor the ECCB, maintains a sovereign wealth fund.

Capital Markets and Portfolio Investment

The capital market is regulated by the Central Bank of Samoa (CBS). Since January 1998, the Central Bank has implemented monetary policy by issuing its own Securities using market-based techniques – commonly known as Open Market Operations (OMO). CBS Securities are the predominant monetary policy instrument, which is issued to influence the amount of liquidity in the financial system.

Capital Markets in Samoa are in their infancy with the Unit Trust of Samoa (UTOS) domestic market established in 2010, and no international stock exchange. More information on UTOS can be found in section 10.

Samoa has accepted the obligations of IMF Article VIII, Sections 2, 3, and 4, and maintains an exchange system that is free of restrictions on payments and transfers for current international transactions.

Money and Banking System

Samoa is well-served with banking and finance infrastructure. It has four commercial banks, complimented by a dynamic development bank. The sector is ably regulated by the Central Bank of Samoa. The largest banks are regional operators ANZ and BSP, which offer a wide range of services based upon electronic banking platforms. Although they service all markets, they tend to dominate the top-end, encompassing corporate, government and high net worth individuals. Samoa is still a cash-based society, however, and this has enabled two locally owned entrants, the National Bank of Samoa and Samoa Commercial Bank, to each garner double-digit market share, despite entering the market quite recently.

The banking sector appears healthy although recent reports have indicated the state-owned development bank is carrying a significant amount of bad debt, over 20% of its loan portfolio. The government also interfered with the bank’s attempts to foreclose on non-performing assets.

With its International Finance Centre (SIFA)—the first Pacific center to be white-listed by the OECD—and a well-structured financial services sector, Samoa is well placed to service the needs of both local and offshore businesses.

The Government, through the Central Bank, has been largely resistant of block chain technologies. Their skepticism is somewhat warranted with the discovery of several cryptocurrency schemes operating in the country widely believed to be scams.

Foreign Exchange and Remittances

Foreign Exchange

The Central Bank of Samoa (CBS) controls all foreign exchange transactions as well as matters relating to monetary stability and supply of money within the country. This includes international transactions, overseas transfer of funds and funding of imports, and registration of insurance companies. Repatriation of overseas capital and profits is normally permitted provided the original investment entered Samoa through the banking system or in an otherwise formally approved manner. Investors also have the freedom to repay principle and interest on foreign loans raised for the purpose of the investment and the freedom to pay fees to foreign parties for the use of intellectual property rights.

Remittance Policies

Repatriation of capital and profit remittances on foreign capital is permitted, although it must be approved by the CBS based on submission of necessary documents, such as the following: a) Application letter explaining the request;

a) Application letter explaining the request; b) Audited accounts relating to the profit remittance year(s) requested;

b) Audited accounts relating to the profit remittance year(s) requested; c) A copy of the Authorized Directors’ Resolution approving the specified dividend payment; and

c) A copy of the Authorized Directors’ Resolution approving the specified dividend payment; and d) A tax clearance certificate from the Ministry for Revenue.

d) A tax clearance certificate from the Ministry for Revenue.

Samoa’s Financial Intelligence Unit (FIU) within the Central Bank and the Ministry of Foreign Affairs and Trade do issue and provide to all financial institutions governed under the Money Laundering Prevention Act 2007.

Sovereign Wealth Funds

There is no sovereign wealth fund or asset management bureau in Samoa. The country has the Samoa National Provident Fund which manages and invests members’ savings for their retirement.

Capital Markets and Portfolio Investment

Portfolio investment is undeveloped and unclear. The Central Bank of STP (BCSTP) issued Treasury bills (T-bills) for the first time on June 29, 2015 for STN 75 million (approximately $3.7 million) at the fixed interest rate of 6.2 percent, with a maturity of six months. The demand was 20 percent higher than the offer, due to the participation of three domestic banks. The most recent issuance occurred on March 15, 2018. STP does not have a stock market. Articles 13 and 14 of the Foreign Exchange Regulations facilitate the free flow of financial resources under the supervision of the Central Bank. Foreign investors are able to get credit on the local market; however, access to credit is difficult due to the limited variety of credit instruments, high interest rates, and the number of guarantees requested by the commercial banks. As a result, on the World Bank Doing Business Report 2020, STP ranked 165 out 190 economies regarding access to credit, a 4-point drop compared to the previous year. There are currently no significant U.S. investors active in STP.

Money and Banking System

STP has five private commercial banks. Portuguese, Nigerian, Angolan, Cameroonian, Gabonese, and Togolese, as well as Säo Toméan, interests are represented in the ownership and management of the commercial banks. The International Bank of STP (BISTP) is the largest in terms of assets; however, banks’ asset estimations are not publicly available. In early 2018, the BCSTP declared the commercial bank “Private Bank” insolvent and opened a public tender to liquidate its assets and liabilities. The Gabonese investment bank BGFI opened its São Toméan operation in March 2012. Banking services are available in the capital with a few smaller branches in cities in the north, south, and center of the country, as well as in Príncipe. In December 2020, the Governor of the Central Bank announced STP’s financial system would begin accepting Visa and MasterCard over the course of 2021.

In addition to retail banking, commercial banks offer most corporate banking services, or can procure them from overseas. Local credit to the private sector is limited and expensive, but available to both foreign and local investors on equal terms. The country’s main economic actors finance themselves outside STP. Foreigners must establish residency to open a bank account.

Foreign Exchange and Remittances

Foreign Exchange

The BCSTP supervises the national financial system and defines monetary and exchange rate policies in STP. Among other responsibilities, it sells hard currency and establishes the reference rate. In case of a shortage, access to foreign currency is limited; however, there is no official norm restricting access. Article 18 of the Investment Code dictates that foreign investors are allowed to transfer or repatriate funds associated with an investment.

The dobra (STN) is the national currency. In July 2009, STP and Portugal signed an economic cooperation agreement to peg the dobra to the euro rather than a weighted basket of currencies. Based on the 2017 Monetary Law, the BCSTP introduced a new currency to modernize and strengthen the country’s financial system. With the introduction of the new dobra on January 1, 2018, the exchange rate is currently 24.5 dobra to the euro. This peg offers credible parity, minimizes monetary instability costs, and provides better credibility for exchange rate and monetary policy. The exchange rate to the U.S. dollar fluctuates.

Remittance Policies

Repatriation of capital is possible with prior authorization. According to both the Foreign Exchange Law and the Investment Code, transfer of profits outside the country is also allowed after the deductions for legal and statutory reserves and the payment of existing taxes owed. The government encourages reinvestments with associated reductions in income taxes.

Sovereign Wealth Funds

STP does not have a traditional sovereign wealth fund (SWF). It does have a small National Oil Account (NOA). The NOA was previously funded by signing bonuses paid by energy and oil companies to gain rights to conduct exploration and production activities. According to officials from the budget department, the Law of Petroleum allows the government to withdraw up to 20 percent of the balance of the NOA every year as calculated on June 30 of the previous year. Details are available on the state budget and under NOA online: www.grip.st/?cntnr_informac=informac&ficherselt=DT-166- Envio de Extracto da Conta Nacional de Petroleo junto BCSTP.pdf

Capital Markets and Portfolio Investment

Saudi Arabia’s financial policies generally facilitate the free flow of private capital and currency can be transferred in and out of the Kingdom without restriction. Saudi Arabia maintains an effective regulatory system governing portfolio investment in the Kingdom. The Capital Markets Law, passed in 2003, allows for brokerages, asset managers, and other nonbank financial intermediaries to operate in the Kingdom. The law created a market regulator, the Capital Market Authority (CMA), established in 2004, and opened the Saudi stock exchange (Tadawul) to public investment.

Since 2015, the CMA has progressively relaxed the rules applicable to qualified foreign investors, easing barriers to entry and expanding the foreign investor base. The CMA adopted regulations in 2017 permitting corporate debt securities to be listed and traded on the exchange; in March 2018, the CMA authorized government debt instruments to be listed and traded on the Tadawul. The Tadawul was incorporated into the FTSE Russell Emerging Markets Index in March 2019, resulting in a foreign capital injection of $6.8 billion. Separately, the $11 billion infusion into the Tadawul from integration into the MSCI Emerging Markets Index took place in May 2019. The Tadawul was also added to the S&P Dow Jones Emerging Market Index.

Money and Banking System

The banking system in the Kingdom is generally well-capitalized and healthy. The public has easy access to deposit-taking institutions. The legal, regulatory, and accounting systems used in the banking sector are generally transparent and consistent with international norms. In November 2020, the SAG approved the Saudi Central Bank Law, which changed the name of the Saudi Arabian Monetary Authority (SAMA) to the Saudi Central Bank. Under the new law, the Saudi Central Bank is responsible for maintaining monetary stability, promoting the stability of and enhancing confidence in the financial sector, and supporting economic growth. The Saudi Central Bank will continue to use the acronym “SAMA” due to its widespread use.

SAMA generally gets high marks for its prudential oversight of commercial banks in Saudi Arabia. SAMA is a member and shareholder of the Bank for International Settlements in Basel, Switzerland.

In 2017, SAMA enhanced and updated its previous Circular on Guidelines for the Prevention of Money Laundering and Terrorist Financing. The enhanced guidelines have increased alignment with the Financial Action Task Force (FATF) 40 Recommendations, the nine Special Recommendations on Terrorist Financing, and relevant UN Security Council Resolutions. Saudi Arabia is a member of the Middle East and North Africa Financial Action Task Force (MENA-FATF). In 2019, Saudi Arabia became the first Arab country to be granted full membership of the FATF, following the organization’s recognition of the Kingdom’s efforts in combating money laundering, financing of terrorism, and proliferation of arms. Saudi Arabia had been an observer member since 2015.

The SAG has authorized increased foreign participation in its banking sector over the last several years. SAMA has granted licenses to a number of new foreign banks to operate in the Kingdom, including Deutsche Bank, J.P. Morgan Chase N.A., and Industrial and Commercial Bank of China (ICBC). A number of additional, CMA-licensed foreign banks participate in the Saudi market as investors or wealth management advisors. Citigroup, for example, returned to the Saudi market in early 2018 under a CMA license.

Credit is normally widely available to both Saudi and foreign entities from commercial banks and is allocated on market terms. The Saudi banking sector has one of the world’s lowest non-performing loan (NPL) ratios, roughly 2.0 percent in 2020. In addition, credit is available from several government institutions, such as the SIDF, which allocate credit based on government-set criteria rather than market conditions. Companies must have a legal presence in Saudi Arabia to qualify for credit. The private sector has access to term loans, and there have been a number of corporate issuances of sharia-compliant bonds, known as sukuk.

The New Government Tenders and Procurement Law (GTPL) was approved in 2019. The New GTPL applies to procurement by government entities and works and procurements executed outside of Saudi Arabia. The Ministry of Finance has a pivotal role under the new GTPL by setting policies and issuing directives, collating and distributing information, maintaining a list of boycotts, and approving tender and prequalification forms, contract forms, performance evaluation forms, and other documents. In 2018, the Ministry of Finance launched the Electronic Government Procurement System (Etimad Portal) to consolidate and facilitate the process of bidding and government procurement for all government sectors, enhancing transparency amongst sectors of government and among competing entities.

In 2021, SAMA introduced the new Instant Payment System (Sarie) to facilitate instant, 24/7 money transfers across local banks.

Foreign Exchange and Remittances

Foreign Exchange

There is no limitation in Saudi Arabia on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or imported inputs, other than certain withholding taxes (withholding taxes range from five percent for technical services and dividend distributions to 15 percent for transfers to related parties, and 20 percent or more for management fees). Bulk cash shipments greater than $10,000 must be declared at entry or exit points. Since 1986, when the last currency devaluation occurred, the official exchange rate has been fixed by SAMA at 3.75 Saudi riyals per U.S. dollar. Transactions typically take place using rates very close to the official rate.

Remittance Policies

Saudi Arabia is one of the largest remitting countries in the world, with roughly 75 percent of the Saudi labor force comprised of foreign workers. Remittances totaled approximately $39.9 billion in 2020. There are currently no restrictions on converting and transferring funds associated with an investment (including remittances of investment capital, dividends, earnings, loan repayments, principal on debt, lease payments, and/or management fees) into a freely usable currency at a legal market-clearing rate. There are no waiting periods in effect for remitting investment returns through normal legal channels.

The Ministry of Human Resources and Social Development is progressively implementing a “Wage Protection System” designed to verify that expatriate workers, the predominant source of remittances, are being properly paid according to their contracts. Under this system, employers are required to transfer salary payments from a local Saudi bank account to an employee’s local bank account, from which expatriates can freely remit their earnings to their home countries.

Sovereign Wealth Funds

The Public Investment Fund (PIF, www.pif.gov.sa ) is the Kingdom’s officially designated sovereign wealth fund. While PIF lacks many of the attributes of a traditional sovereign wealth fund, it has evolved into the SAG’s primary investment vehicle.

Established in 1971 to channel oil wealth into economic development, the PIF has historically been a holding company for government shares in partially privatized state-owned enterprises (SOEs), including SABIC, the National Commercial Bank, Saudi Telecom Company, Saudi Electricity Company, and others. Crown Prince Mohammed bin Salman is the chairman of the PIF and announced his intention in April 2016 to build the PIF into a $2 trillion global investment fund, relying in part on proceeds from the initial public offering of up to five percent of Saudi Aramco shares.

Since that announcement, the PIF has made a number of high-profile international investments, including a $3.5 billion investment in Uber, a commitment to invest $45 billion into Japanese SoftBank’s VisionFund, a commitment to invest $20 billion into U.S. Blackstone’s Infrastructure Fund, a $1 billion investment in U.S. electric car company Lucid Motors, and a partnership with cinema company AMC to operate movie theaters in the Kingdom. Under the Vision 2030 reform program, the PIF is financing a number of strategic domestic development projects, including: “NEOM,” a planned $500 billion project to build an “independent economic zone” in northwest Saudi Arabia; “The Line,” a $100-$200 billion project to build an environmentally friendly, carless, zero-carbon city at NEOM; “Qiddiya,” a new, large-scale entertainment, sports, and cultural complex near Riyadh; “the Red Sea Project”, a massive tourism development on the western Saudi coast; and “Amaala,” a wellness, healthy living, and meditation resort also located on the Red Sea.

At the end of 2020, the PIF reported its investment portfolio was valued at nearly $400 billion, mainly in shares of state-controlled domestic companies. In an effort to rebalance its investment portfolio, the PIF has divided its assets into six investment pools comprising local and global investments in various sectors and asset classes: Saudi holdings; Saudi sector development; Saudi real estate and infrastructure development; Saudi giga-projects; international strategic investments; and an international diversified pool of investments.

In 2021, Crown Prince Mohammed bin Salman launched a new five-year strategy for the PIF. The 2021-2025 strategy will focus on launching new sectors, empowering the private sector, developing the PIF’s portfolio, achieving effective long-term investments, supporting the localization of sectors, and building strategic economic partnerships. Under the new strategy, by 2025, the PIF will invest $267 billion into the local economy, contribute $320 billion to non-oil GDP, and create 1.8 million jobs. The Crown Prince also stated that the SAG would increase the size of the PIF more than five-fold to $2 trillion by 2030. The SAG declared it is investing nearly $220 billion through PIF, the National Development Fund, and the Royal Commission for Riyadh to transform Riyadh into a global city with 15 to 20 million inhabitants by 2030 (from its current population of about 7.5 million), and expects to attract a similar amount of investment from the private sector. The PIF also plans to establish a new major airline that will complement the state-owned Saudia (formerly Saudi Arabian Airlines) and compete with other major aviation companies in the region.

The Ministry of Finance announced in 2020 that $40 billion was being transferred from the Kingdom’s foreign reserves, held by the central bank SAMA, to the PIF to fund investments. In addition to previous investments in Uber, Magic Leap, Lucid Motors, Facebook, Starbucks, Disney, Boeing, Citigroup, LiveNation, Marriott, several European energy firms, and Carnival Cruise Lines, the PIF made a number of new investments in the latter half of 2020 including equity investments in CloudKitchens, Activision Blizzard, Electronic Arts, and Take-Two Interactive Software.

In practice, SAMA’s foreign reserve holdings also operate as a quasi-sovereign wealth fund, accounting for the majority of the SAG’s foreign assets. SAMA invests the Kingdom’s surplus oil revenues primarily in low-risk liquid assets, such as sovereign debt instruments and fixed-income securities. SAMA’s foreign reserves fell from $502 billion in January 2020 to $450 billion in January 2021. SAMA’s foreign reserve holdings peaked at $746 billion in mid-2014.

Though not a formal member, Saudi Arabia serves as a permanent observer to the International Working Group on Sovereign Wealth Funds.

Capital Markets and Portfolio Investment

Serbia welcomes both domestic and foreign portfolio investments and regulates them efficiently. The Government removed most restrictions on short-term portfolio investments in April 2018. Residents of Serbia, both companies and persons, are now allowed to purchase foreign short-term securities issued by EU residents and EU countries, and by international financial organizations who have EU countries in their membership. Banks registered in Serbia can also purchase short-term securities issued by OECD countries. Foreigners may only purchase short-term securities in Serbia if they have residency and/or headquarters in EU countries. Payments related to long-term securities have no restriction.

In January-November 2020, Serbia recorded net inflows of 1.5 billion USD in portfolio investment, according to the National Bank of Serbia. Analysts explain that this inflow mostly as a result of Serbia’s issuance of Eurobonds on the international market. The Serbian government regularly issues bonds to finance its budget deficit, including short-term, dinar-denominated T-bills, and dinar-denominated, euro-indexed government bonds. The total value of government debt securities issued on the domestic market reached 12.4 billion USD in December 2020, with 77% in dinars and 23% in euros. In addition, Serbia issued a total value of 5.1 billion EUR of Eurobonds on the international market. The share of dinar denominated securities held by non-residents was 26%, which was equal to 2.5 billion USD at the end of December 2020.

Total Serbian government-issued debt instruments on the domestic and international markets stood at $18 billion in December 2020.

Serbia’s international credit ratings are improving. In March 2021, Moody’s Investors Service upgraded Serbia’s long-term issuer and senior unsecured ratings from Ba3 to Ba2 while adjusting its outlook from positive to stable. In December 2019, Standard & Poor’s raised its ratings for Serbia from BB to BB+ with a positive outlook. In May 2020 S&P maintained its BB+ rating after raising it from BB in December 2019, but it modified the outlook from positive to stable; it confirmed the BB+ rating on December 14, 2020. Fitch raised Serbia’s credit rating from BB to BB+ in September 2019 and confirmed it in September 2020 with a stable outlook. The improved ratings remain below investment grade.

Serbia’s equity and bond markets are underdeveloped. Corporate securities and government bonds are traded on the Belgrade Stock Exchange (BSE) www.belex.rs. Of 990 companies listed on the exchange, shares of fewer than 100 companies are traded regularly (more than once a week). Total annual turnover on the BSE in 2020 was 455 million USD, which represents a decrease of 47%. The trading volumes have declined since 2007, when the total turnover reached 2.7 billion USD.

Established in 1995, the Securities Commission regulates the Serbian securities market. The Commission also supervises investment funds in accordance with the Investment Funds Law. As of February 2021, 19 registered investment funds operate in Serbia: http://www.sec.gov.rs/index.php/en/public-registers-of-information/register-of-investment-funds.

Market terms determine credit allocation. In September 2020, the total volume of issued loans in the financial sector stood at 26 billion USD. Average interest rates are decreasing but still higher than the EU average. The business community cites tight credit policies and expensive commercial borrowing for all but the largest corporations as impediments to business expansion. Around 62% of all lending is denominated in euros, an additional 0.1% in Swiss francs, and 0.2% in U.S. dollars, all of which provide lower rates, but also shift exchange-rate risk to borrowers.

Foreign investors are able to obtain credit on the domestic market. The government and central bank respect IMF Article VIII, and do not place restrictions on payments or transfers for current international transactions.

Hostile takeovers are extremely rare in Serbia. The Law on Takeover of Shareholding Companies regulates defense mechanisms. Frequently after privatization, the new strategic owners of formerly state-controlled companies have sought to buy out minority shareholders.

Money and Banking System

Serbian companies often do not access credit, instead turning to friends or family when they need investment and operational funds. Only a few corporate and municipal bonds have been issued, and the financial market is not well developed. In April 2020, the government amended corporate-bond issuance legislation to increase companies’ access to financing in response to COVID-19’s economic impact. According to a statement from the Finance Minister, the amendments aim to cut the timeline for issuing corporate bonds from 77 to 17 days and cut the price to issue a corporate bond from 88,000 USD to 11,000 USD. State-owned Telekom Srbija issued corporate bonds for the first time with a total value of 200 million EUR, of which the National Bank of Serbia (NBS) purchased around 70 million EUR.

The NBS regulates the banking sector. Foreign banks may establish operations in Serbia, and foreigners may freely open both local currency and hard currency non-resident accounts. The banking sector comprises 91% of the total assets of the financial sector. As of September 2020, consolidation had reduced the sector to 26 banks with total assets of 43 billion USD (about 80% of GDP), with 86% of the market held by foreign-owned banks. The top ten banks, with country of ownership and estimated assets, are Banca Intesa (Italy, 6.8 billion USD in assets); UniCredit (Italy, 5.1 billion USD); Komercijalna Banka (recently sold to Slovenia’s NLB Bank, 4.6 billion USD); OTP (Hungary, 3.7 billion USD); Raiffeisen (Austria, 3.7 billion USD); Erste Bank (Austria, 2.8 billion USD) AIK Banka Nis (Serbia, 2.3 billion USD); Eurobank EFG (Greece, 1.9 billion USD); Vojvodjanska Banka (Hungary, 2.4 billion USD); and Postanska Stedionica (Serbian government, 2.7 billion USD). For more information, see:

• https://www.nbs.rs/sr_RS/finansijske-institucije/banke/bilans-stanja/
• https://www.nbs.rs/export/sites/NBS_site/documents/kontrola-banaka/kvartalni_izvestaj_IV_19.pdf

Four state-owned banks in Serbia went bankrupt after the global financial crisis in 2008. The state compensated the banks’ depositors with payouts of nearly 1 billion USD. A number of state-controlled banks have had financial difficulties since the crisis because of mismanagement and, in one instance, alleged corruption. The banks honored all withdrawal requests during the financial crisis and appear to have regained consumer trust, as evidenced by the gradual return of withdrawn deposits to the banking system. In December 2020, savings deposits in the banking sector reached 14.4 billion USD, exceeding pre-crisis levels.

The IMF assessed in its January 2021 report on Serbia’s Policy Coordination Instrument that the financial sector has shown improved resilience since the 2017 Article IV Consultation. As of June 2020, banks’ capital adequacy was stable at 22.7%, well above the regulatory minimum, while asset quality is improving. Banks’ profitability remains robust with return on assets and return on equity ratios of 1.1% and 6.5% respectively in December 2020. The IMF assessed in 2018 that authorities had made important progress, with the aggregate stock of non-performing loans (NPLs) falling both in nominal terms and relative to total loans. Since the adoption of an NPL resolution strategy in mid-2015, NPLs have declined from 21.6% to 3.7% of the total loan portfolio as of December 2020. NPLs remain fully provisioned. In addition, there are significant foreign-exchange risks, as 67% of all outstanding loans are indexed to foreign currencies (primarily the euro). In April 2019, the government adopted a law that protected consumers who had taken mortgage loans denominated in Swiss francs by converting them into euros. Banks and the state shared losses resulting from a reduction of outstanding principal and interest balances. This law enabled borrowers to continue servicing debt on more favorable terms.

The parliament adopted Serbia’s first Law on Cryptocurrencies in December 2020 to be implemented as of June 29, 2021. The law regulates the issuance, trade, and service provision of digital assets, as well as the NBS and Securities Commission’s supervision of digital assets. The law will regulate cryptocurrencies market and protect consumers, as it defines standards which every cryptocurrencies service provider must fulfill. Companies trading in this area must be licensed. The law limits issuance of digital assets per issuer at 3 million EUR per year. While trading in cryptocurrencies is free for persons and most companies, the law prohibits possession and trade of digital assets for financial institutions under NBS supervision. The government must adopt related bylaws before the law can be implemented. The Serbian Administration for Prevention of Money Laundering and Terrorist Financing oversees every transaction in cryptocurrencies performed on ATMs or online in Serbia. As of February 2021, there were total of 24 ATMs for cryptocurrencies in Serbia installed in Belgrade, Novi Sad, Nis, Subotica, Indjija and Kopaonik.

The company ECD Group has installed an online platform for trading in cryptocurrencies (Bitcoin BTC, Litecoin LTC, Ethereum ETH, Tether, and Bitcoin Cash) at https://ecd.rs/ . The company claims to have over 20,000 registered users of the platform, while the Chief Operating Officer of the company claims that a total of 50,000 people in Serbia have opened an account and executed at least one transaction. EDC claims that it has executed over 100,000 transactions since it was established in 2012. As of June 2019, Xcalibra established a new digital platform (Xcalibra.com) to trade cryptocurrencies in Serbian dinars without mediator currencies, which will avoid currency exchange loss. There is also a Bitcoin Association of Serbia.- http://www.bitcoinasocijacija.org .

Foreign Exchange and Remittances

Foreign Exchange

Serbia’s Foreign Investment Law guarantees the right to transfer and repatriate profits from Serbia, and foreign exchange is available. Serbia permits the free flow of capital, including for investment, such as the acquisition of real estate and equipment. Non-residents may maintain both foreign-currency and dinar-denominated bank accounts without restrictions. Investors may use these accounts to make or receive payments in foreign currency. The government amended the Foreign Exchange Law in December 2014 to authorize Serbian citizens to conclude transactions abroad through internet payment systems such as PayPal.

Many companies have raised concerns that the NBS uses excessive enforcement of the Foreign Exchange Law to individually examine all cross-currency financial transactions – including intra-company transfers between foreign headquarters and local subsidiaries, as well as loan disbursements to international firms – thus raising the cost and bureaucratic burden of transactions and inhibiting the development of e-commerce within Serbia. For this reason, international financial institutions and the business community have urged revision of the law. The NBS has defended the measure as necessary to prevent money laundering and other financial crimes.

The NBS targets inflation in its monetary policy and regularly intervenes in the foreign-exchange market to that end. In 2020, the NBS made net sales of 1.4 billion EUR on the interbank currency market to prevent sharp fluctuations of the dinar. In 2020, the dinar remained stable against the euro and appreciated 10% against the U.S. dollar. No evidence has been reported that Serbia engages in currency manipulation. According to the IMF, Serbia maintains a system free of restrictions on current international payments and transfers, except with respect to blocked pre-1991 foreign currency savings abroad. In February 2021, JP Morgan announced it would include Serbian government bonds into the JP Morgan GBI-EM Index of Emerging Market bonds beginning June 30, 2021.

Remittance Policies

Personal remittances constitute a significant source of income for Serbian households. In 2020, total remittances from abroad reached 3 billion USD, approximately 6% of GDP.

The Law on Foreign Exchange Operations regulates investment remittances, which can occur freely and without limits. The Investment Law allows foreign investors to freely and without delay transfer all financial and other assets related to the investment to a foreign country, including profit, assets, dividends, royalties, interest, earnings share sales, proceeds from sale of capital and other receivables. The Foreign Investors’ Council, a business association of foreign investors, confirms that Serbia has no limitations on investment remittances.

Sovereign Wealth Funds

Serbia does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Seychelles welcomes foreign portfolio investment. The Seychelles Securities Act ( https://fsaseychelles.sc/component/edocman/securities-act-2007/download?Itemid=0 ) provides the legal framework for the Seychelles stock market. The Seychelles Securities Exchange, now known as MERJ Exchange, has operated since 2012. Listing and trading are available in Euros, Pounds Sterling, Seychelles Rupees, South African Rand, and Australian Dollars. MERJ is an affiliate of the World Federation of Exchanges, a full member of ANNA and a partner exchange of the Sustainable Stock Exchange Initiative. In Q1 2021, there were 47 equity listings with a total market capitalization of $1.244 billion and three debt listings with a market capitalization of $246 million. Portfolio investment in Seychelles is limited by the small size of the economy and banking sector. The buying and selling of sizeable positions may have an outsized impact on the Seychelles Rupee and the economy in general. There are no restrictions on trading by foreigners.

Existing policies facilitate the free flow of financial resources in and out of the economy. The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Foreign investors are able to obtain credit on the local market and through the Seychelles banking system, and a variety of credit instruments are available to both local and foreign investors.

Money and Banking System

Seychelles has a two-tier banking system that separates the central and commercial bank functions and roles. Commercial banks, both domestic and foreign, are regulated and supervised by the Central Bank of Seychelles (CBS). According to the Central Bank of Seychelles Act 2004, the CBS is responsible for the formulation and implementation of Seychelles’ Monetary and Exchange Rate policies. The CBS is the only administrative body responsible for receiving applications for banking licenses, whether domestic or offshore, and issuing the corresponding licenses.

As of March 2021, there were eight commercial banks in operation: Absa Bank, Bank of Baroda, Mauritius Commercial Bank (Seychelles), Nouvobanq, Seychelles Commercial Bank, Al Salam Bank Seychelles Ltd, Bank of Ceylon, and Bank AL Habib Limited. According to a 2016 report by the CBS, 94 percent of Seychellois use banks. Seychelles also has three non-banking financial institutions: the Seychelles Credit Union, a savings and credit cooperative society; the Development Bank of Seychelles, which provides flexible financing for businesses and projects to promote economic growth and employment; and the Housing Finance Corporation, a government-owned company that provides financing to Seychellois for the purchase of land, the construction of homes, and financing home improvements.

Seychelles has a number of laws that govern the financial services sector: Financial Institutions Act 2004, Prevention of Terrorism Act 2004, International Business Companies Act 2016, Anti-Money Laundering and Combating the Financing of Terrorism Act 2020, Beneficial Ownership Act 2020, Data Protection Act, Mutual and Hedge Fund Act 2007, and Central Bank Act 2004. The Seychellois banking sector is generally healthy, though it is limited by small size and reliance on correspondent bank relationships. Due to concerns about money-laundering and illicit finance in the Seychellois financial sector, some local banks have lost their correspondent banking relationship with foreign banks, a phenomenon known as de-risking, making it difficult for local banks to perform international transactions. In 2017, the CBS and the Financial Services Authority visited foreign financial centers to address de-risking. The government is actively working with international experts, including the World Bank and International Monetary Fund, to ensure Seychelles is not perceived as high-risk jurisdiction.

In February 2020, the European Union added Seychelles to the list of non-cooperative jurisdictions for tax purposes as Seychelles had not implemented the tax reforms by the agreed deadline of December 2019 to which it had committed. In December 2019, France added Seychelles to its blacklist of tax havens for not providing adequate information on French offshore entities operating in the island nation’s jurisdiction. On March 5, 2020, the President signed the National Assembly passed the Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) Act 2020 and the Beneficial Ownership (BO) Act 2020. These two pieces of legislation address the deficiencies identified in the 2018 Mutual Evaluation Report of the Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG). In March 2021, the International Trusts (Amendment) Bill 2021 was approved by the National Assembly and the National Anti-Money Laundering and Countering the Financing of Terrorism Committee established that the following laws will be presented to the National Assembly by June to fully comply with the Financial Action Task Force’s (FATF) recommendations:

1. Re-enactment of the Registration of Association Act;
2. New Asset Management Framework;
3. Amendments to the Beneficial Ownership Act, 2020; and
4. Virtual Assets Service Providers Bill, 2021.

According to the CBS in January 2021, non-performing loans to total gross loans in the Seychelles banking sector stood at 2.65 percent, and foreign currency deposits totaled 11,862 million Seychelles Rupees ($561 million).

A wide range of financial services such as checking accounts, savings accounts, loans, transactions in foreign currencies, and foreign currency accounts are available in the banking system. Foreigners and foreign/offshore firms must establish residency or proof of business registration to obtain a bank account.

Foreign Exchange and Remittances

Foreign Exchange

Since the 2008 IMF reform package, the government places no restrictions or limitations on foreign investors converting, transferring, or repatriating funds associated with investment. Funds are freely converted. Seychelles maintains a floating exchange rate for the Seychelles Rupee (SCR), which fluctuated between SCR 12 and SCR 14.5 to $1 from 2015 to 2019. In 2020, the SCR depreciated by 53 percent with the average rate in January 2020 being SCR 14 to $1 compared to SCR 21.5 in December 2020, due to the unprecedented impact of the Covid-19 pandemic on the tourism sector.

Remittance Policies

Foreign exchange controls were removed in 2008 and foreign investors are free to repatriate their profits and other incomes. The embassy is unaware of any planned changes to remittance policies, time limits on remittances, or use of any legal parallel market.

Sovereign Wealth Funds

Seychelles does not maintain any sovereign wealth funds.

Capital Markets and Portfolio Investment

Limited capital market and portfolio investment opportunities exist in Sierra Leone. The country established stock exchange in 2009 to provide a place for enterprise formation and a market for the trading of stocks and bonds. The exchange initially listed only one stock, a state-controlled bank but in early 2017, it had three listings that expressed willingness to trade their shares at the exchange.

Sierra Leone acceded to the IMF Article VIII in January 1996, which removed all restrictions on payments and transfers for current international transactions. The regulatory system does not interfere with the free flow of financial resources. Nonetheless, foreign, and domestic businesses alike have difficulty obtaining commercial credit. Foreign interests may access credit under the same market conditions as Sierra Leoneans, but banks loan small amounts at high-interest rates. Foreign investors typically bring capital in from outside the country.

Money and Banking System

Sierra Leone’s banking sector, supervised by the central bank of Sierra Leone, consists of 13 commercial banks, 69 foreign exchange bureau, 17 community banks, 32 credit-only microfinance, 5 deposit-taking microfinance including Apex Bank, 2 discount houses, a home mortgage finance company, a leasing company, three mobile financial services providers, and a stock exchange. More than 100 bank branches exist throughout the country, with activity concentrated in Freetown. The banking system currently has seven correspondent banks. While the commercial banking sector is characterized by poor performance with significant financial vulnerability, the central bank of Sierra Leone in 2018 approved the take over a commercial bank acquired in 2016 by a foreign investor.

Foreign individuals and companies are permitted to establish bank accounts. The use of mobile money is taking a central place in money transfers. Other electronic payments and ATM usage are available in urban areas but limited in rural settings, while the Bank of Sierra Leone is set to roll out a “national payment switch” to facilitate connectivity among different banks’ electronic systems. Telecommunications companies are upgrading to specifically enhance mobile money services and e-commerce.

As part of structural reforms in the banking sector under the Extended Credit Facility of the International Monetary Fund, the Bank of Sierra Leone pledged to establish a special resolution framework for troubled financial institutions, establish a deposit insurance system, strengthen its capacity to supervise, oversee the non-bank financial institution sector, and facilitate the adoption of International Financial Reporting Standards (IFRS) both internally and across the financial sector.

Inadequate supervisory oversight of financial institutions, weak regulations, and corruption have made Sierra Leone vulnerable to money laundering. While the country’s anti-money laundering (AML) controls remain underdeveloped and underfunded, the Financial Intelligence Unit (FIU) completed a national risk assessment in 2017 and is currently working with the Economic Crime Team of the Office of Technical Assistance, U.S. Department of the Treasury to enhance its capacity with a series of technical visits in 2018 and 2019, and others scheduled for 2020 with the FIU. The GIABA (a French acronym for Groupe Intergouvernemental d’Action Contre la Blanchiment d’Argent en Afrique de l’Ouest, which in English is, ‘The Inter-Government Action against Money Laundering in West Africa’) and the EU also funded a workshop on designated non-financial business and professions on Anti-Money Laundering and Combating Financing Terrorism (AML/CFT) preventive measures.

Foreign Exchange and Remittances

Sierra Leone has a floating exchange rate regime and the currency, the Leone, has depreciated slowly over the years mainly due to the increasing demand to finance current consumption and a decreasing inflow of foreign currency resulting from decreased exports and remittances.

Foreign Exchange

In August 2019, the government-mandated the exclusive use of the Leones for all contracts and payments, prohibited individuals and other entities from holding more than USD 10,000 or its equivalent in any foreign currency, and travelers must declare foreign currencies of more than USD 10,000 or its equivalent. Contravention of these directives is punishable by law as stipulated in the 2019 Bank of Sierra Leone Act. In late 2020 however, an acute shortage of domestic currency hit the market, compelling the central bank to order sufficient domestic currency to meet the market demand and lifted the restriction on foreign currency holdings to mitigate the effects of the scarcity.

The Investment Promotion Act 2004 guarantees foreign investors and expatriate employees the right to repatriate earnings and the proceeds of the sale of assets. There are no restrictions placed on converting or transferring funds associated with investments, including remittances, earnings, loan repayments, or lease payments for as long as these transactions are done through the banking system.

With the approval of the Bank of Sierra Leone, investors can withdraw any amount from commercial banks and transfer the funds into any freely convertible currency at market rates. The exchange rate is market-determined, and the Bank of Sierra Leone sometimes conducts weekly foreign exchange auctions of U.S. dollars, but only commercial banks registered in Sierra Leone may participate. Sierra Leone is a party to the ECOWAS Common Currency, the ECO, and efforts to introduce this common currency are being given serious consideration, though it has repeatedly been delayed.

Remittance Policies

The law provides that investors may freely repatriate proceeds and remittances. The Embassy is not aware of any recent complaints from investors regarding the remittance of investment returns, or any planned policy changes on this issue.

Sovereign Wealth Funds

Sierra Leone has not established a sovereign wealth fund which was legislated under the 2018 Extractive Industries Revenue Act and the 2016 Public Financial Management Act. The implementation has been delayed because of the collapse of the international iron ore prices as well as other minerals in 2014-16, which also coincided with the Ebola outbreak, both of which deteriorated the fundamentals of the economy, especially in the extractive sector.

Capital Markets and Portfolio Investment

The government takes a favorable stance towards foreign portfolio investment and fixed asset investments. While it welcomes capital market investments, the government has introduced macro-prudential policies aimed at reducing foreign speculative inflows in the real estate sector since 2009. The government promotes Singapore’s position as an asset and wealth management center, and assets under management grew 5.4 percent in 2018 to USD 2.4 trillion (SD 3.4 trillion) – the latest year for which MAS conducted a survey.

The Government of Singapore facilitates the free flow of financial resources into product and factor markets, and the Singapore Exchange (SGX) is Singapore’s stock market. An effective regulatory system exists to encourage and facilitate portfolio investment. Credit is allocated on market terms and foreign investors can access credit, U.S. dollars, Singapore dollars (SGD), and other foreign currencies on the local market. The private sector has access to a variety of credit instruments through banks operating in Singapore. The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.

Money and Banking System

Singapore’s banking system is sound and well regulated by MAS, and the country serves as a financial hub for the region. Banks have a very high domestic penetration rate, and according to World Bank Financial Inclusion indicators, over 97 percent of persons held a financial account in 2017. (latest year available). Local Singapore banks saw net profits rise 27 percent in the last quarter of 2019. Banks are statutorily prohibited from engaging in non-financial business. Banks can hold 10 percent or less in non-financial companies as an “equity portfolio investment.” At the end of 2019, the non-performing loans ratio (NPL ratio) of the three local banks remained at an averaged 1.5 percent since the last quarter of 2018.

Foreign banks require licenses to operate in the country. The tiered licenses, for Merchant, Offshore, Wholesale, Full Banks and Qualifying Full Banks (QFBs) subject banks to further prudential safeguards in return for offering a greater range of services. U.S. financial institutions enjoy phased-in benefits under the USSFTA. Since 2006, U.S.-licensed full-service banks that are also QFBs have been able to operate at an unlimited number of locations (branches or off-premises ATMs) versus 25 for non-U.S. full service foreign banks with QFB status.

Under the OECD Common Reporting Standards (CRS), which has been in effect since January 2017, Singapore-based Financial Institutions (SGFIs) – depository institutions such as banks, specified insurance companies, investment entities, and custodial institutions – are required to: 1) establish the tax residency status of all their account holders; 2) collect and retain CRS information for all non-Singapore tax residents in the case of new accounts; and 3) report to tax authorities the financial account information of account holders who are tax residents of jurisdictions with which Singapore has a Competent Authority Agreement (CAA) to exchange the information. As of December 2019, Singapore has established more than 80 exchange relationships, include with the United States, established in September 2018.

U.S. financial regulations do not restrict foreign banks’ ability to hold accounts for U.S. citizens. U.S. citizens are encouraged to alert the nearest U.S. Embassy of any practices they encounter with regard to the provision of financial services.

Fintech investments in Singapore rose from USD 365 million in 2018 to USD 861 million in 2019. To strengthen Singapore’s position as a global Fintech hub, MAS has created a dedicated Fintech Office as a one-stop virtual entity for all Fintech-related matters to enable experimentation and promote an open-API (Application Programming Interfaces) in the financial industry. Investment in payments start-ups accounted for about 40 percent of all funds. Singapore has more than 50 innovation labs established by global financial institutions and technology companies.

MAS also aims to be a regional leader in blockchain technologies and has worked to position Singapore as a financial technology center. MAS and the Association of Banks in Singapore are prototyping the use of Distributed Ledger Technology (DLT) for inter-bank clearing and settlement of payments and securities. Following a five-year collaborative project to understand the technology, a test network launched to facilitate collaboration in the cross-border blockchain ecosystem. Technical specifications for the functionalities and connectivity interfaces of the prototype network are publicly available. ( https://www.mas.gov.sg/schemes-and-initiatives/Project-Ubin ).

Alternative financial services include retail and corporate non-bank lending via finance companies, cooperative societies, and pawnshops; and burgeoning financial technology-based services across a wide range of sectors including: crowdfunding, initial coin offerings, and payment services and remittance. In January 2020, the Payment Services Bill went into effect, which will require all cryptocurrency service providers to be licensed with the intent to provide more user protection. Smaller payment firms will receive a different classification from larger institutions and will be less heavily regulated. Key infrastructure supporting Singapore’s financial market include interbank (MEP), Foreign exchange (CLS, CAPS), retail (SGDCCS, USDCCS, CTS, IBG, ATM, FAST, NETS, EFTPOS), securities (MEPS+-SGS, CDP, SGX-DC) and derivatives settlements (SGX-DC, APS) ( https://www.mas.gov.sg/regulation/payments/payment-systems )

Foreign Exchange and Remittances

Foreign Exchange

The USSFTA commits Singapore to the free transfer of capital, unimpeded by regulatory restrictions. Singapore places no restrictions on reinvestment or repatriation of earnings and capital, and maintains no significant restrictions on remittances, foreign exchange transactions and capital movements.

Singapore’s monetary policy has been centered on the management of the exchange rate since 1981, with the stated primary objective of promoting medium term price stability as a sound basis for sustainable economic growth. As described by MAS, there are three main features of the exchange rate system in Singapore: 1) MAS operates a managed float regime for the Singapore dollar with the trade-weighted exchange rate allowed to fluctuate within a policy band; 2) the Singapore dollar is managed against a basket of currencies of its major trading partners; and 3) the exchange rate policy band is periodically reviewed to ensure that it remains consistent with the underlying fundamentals of the economy.

Remittance Policies

There are no time or amount limitations on remittances. No significant changes to investment remittance were implemented or announced over the past year. Local and foreign banks may impose their own limitations on daily remittances.

Sovereign Wealth Funds

The Government of Singapore has three key investment entities: GIC Private Limited (GIC) is the sovereign wealth fund in Singapore that manages the government’s substantial foreign investments, fiscal, and foreign reserves, with the stated objective to achieve long-term returns and preserve the international purchasing power of the reserves. Temasek is a holding company wholly owned by the Ministry of Finance with investments in Singapore and abroad. MAS, as the central bank of Singapore, manages the Official Foreign Reserves, and a significant proportion of its portfolio is invested in liquid financial market instruments.

GIC does not publish the size of the funds under management, but some industry observers estimate its managed assets may exceed $400 billion. GIC does not invest domestically, but manages Singapore’s international investments, which are generally passive (non-controlling) investments in publicly traded entities. The United States is its top investment destination, accounting for 34 percent of GIC’s portfolio as of March 2020, while Asia (excluding Japan) accounts for 19 percent, the Eurozone 13 percent, Japan 13 percent, and UK 6 percent. Investments in the United States are diversified and include industrial and commercial properties, student housing, power transmission companies, and financial, retail and business services. GIC is a member of the International Forum of Sovereign Wealth Funds. Although not required by law, GIC has published an annual report since 2008.

Temasek began as a holding company for Singapore’s state-owned enterprises, now GLCs, but has since branched out to other asset classes and often holds significant stake in companies. As of March 2020, Temasek’s portfolio value reached $226 billion, and its asset exposure to Singapore is 24 percent; 42 percent in the rest of Asia, and 17 percent in North America. According to the Temasek Charter, Temasek delivers sustainable value over the long term for its stakeholders. Temasek has published a Temasek Review annually since 2004. The statements only provide consolidated financial statements, which aggregate all of Temasek and its subsidiaries into a single financial report. A major international audit firm audits Temasek Group’s annual statutory financial statements. GIC and Temasek uphold the Santiago Principles for sovereign investments.

Other investing entities of government funds include EDB Investments Pte Ltd, Singapore’s Housing Development Board, and other government statutory boards with funding decisions driven by goals emanating from the central government.

Capital Markets and Portfolio Investment

Capital markets remain relatively underdeveloped given Slovenia’s level of prosperity. Enterprises rarely raise capital through the stock market and tend to rely on the traditional banking system and private lenders to meet their capital needs.

Established in 1990, the Ljubljana Stock Exchange (LSE) is a member of the International Association of Stock Exchanges (FIBV). In 2015, the Zagreb Stock Exchange acquired the LSE. However, the number of companies listed on the exchange is limited and trading volume is very light, with annual turnover similar to a single day’s trading on the NYSE. Low liquidity remains an issue when entering or exiting sizeable positions.

In 1995, the Central Securities Clearing Corporation (KDD) was established to provide central securities custody services, clear and settle securities transactions, and maintain the central securities registry on the LSE electronic trading system. In 2017, KDD successfully aligned its procedures to that of the uniform European securities settlement platform TARGET2-Securities (T2S).  In 2019, Slovenia’s Securities Market Agency (ATVP) licensed KDD to operate under the EU’s Central Securities Depository Regulation (CSDR) and provide services as a Central Securities Depository (CSD), pursuant to Article 17 of the Regulation (EU) 909/2014 on improving securities settlement in the European Union and on central securities depositories.

Established in 1994, the ATVP has powers similar to those of the U.S. Securities and Exchange Commission and supervises investment firms, the Ljubljana Stock Exchange (LSE), the KDD, investment funds, and management companies. It also shares responsibility with the Bank of Slovenia for supervision of banking and investment services.

Slovenia adheres to Article VIII of the International Monetary Fund’s Article of Agreement and is committed to full current account convertibility and full repatriation of dividends.

The LSE uses different dissemination systems, including real-time online trading information via Reuters and the Business Data Solutions System. The LSE also publishes information on the Internet at  http://www.ljse.si/ .

Foreign investors in Slovenia have the same rights as domestic investors, including the ability to obtain credit on the local market.

Money and Banking System

There is a relatively high degree of concentration in Slovenia’s banking sector, with 11 commercial banks, three savings banks, and two foreign bank branches in Slovenia serving two million people. All commercial banks are private as of January 2021, and most have foreign owners and shareholders. SID Bank (Slovenian Export and Development Bank), which supports Slovenian companies’ export activities and provides financing for economic development, remains state-owned. In 2008, the combined effects of the global financial crisis, the collapse of the construction sector, and diminished demand for exports led to significant capital shortfalls. Bank assets declined steadily after 2009 but rebounded in 2016 and have remained steady since then. Since the crisis, most banks have refocused their business activities towards SMEs and individuals/households, prompting larger companies to search for alternative financing sources. According to European Banking Federation data, Slovenia’s banking sector assets totaled EUR 41.2 billion (USD 49.4 billion) at the end of 2019, equaling approximately 86 percent of GDP, still EUR 8.2 billion less than the total banking assets volume at the end of 2009, when banking sector assets equaled 146 percent of GDP.

Slovenia’s banking sector was devastated by the 2009 economic crisis. Nova Ljubljanska Banka (NLB) and Nova Kreditna Banka Maribor (NKBM) faced successive downgrades by credit rating agencies due to the large numbers of nonperforming loans in their portfolios. In 2013, the government established a Bank Asset Management Company (BAMC) with a management board comprised of financial experts to promote stability and restore trust in the financial system. In exchange for bonds, BAMC agreed to manage the nonperforming assets of three major state banks, conducting three such operations from December 2013 through March 2014. The government also injected EUR 3.5 billion (USD 4.2 billion) into Slovenia’s three largest banks, NLB, NKBM, and Abanka. These measures helped recapitalize and revitalize the country’s largest commercial banks.

According to World Bank data, 2.8 percent of NLB’s total assets and an estimated 3.4 percent of all Slovenian banking assets were non-performing as of the end of 2019. According to European Bank Authority statistics, 5.3 percent of all loans in Slovenia were past due in June 2019, a marked turnaround from the post-crisis period.

NLB, the country’s largest bank, was privatized in 2019, although the government remains a major shareholder with a 25 percent plus one share stake. Of the remaining shares, more than fifty percent are spread among several international investors on fiduciary account at Bank of New York, while a number of Slovenian institutional and private investors purchased the remainder. The country’s second largest bank, Nova Kreditna Banka Maribor (NKBM), was sold to an American fund (80 percent) and the European Bank of Reconstruction and Development (EBRD) (20 percent) in 2016. In 2020, NKBM acquired the country’s third largest state-owned bank, Abanka. As of January 2021, the banks have been fully merged. With a total asset of EUR 9.2 billion (USD 11 billion) and approximately 22 percent market share, NKBM is on par with the country’s largest commercial bank NLB.

Banking legislation authorizes commercial banks, savings banks, and stock brokerage firms to purchase securities abroad. Investment funds may also purchase securities abroad, provided they meet specified diversification requirements. The Slovenian government adopted in March 2021 a draft banking legislation, which transposed provisions of an EU directive on exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers, and capital conservation measures. The new legislation also addresses the 2019 Constitutional Court decision that invalidated a provision that exempted banks from worker representation requirements in corporate governance. Under the proposed legislation, workers will be entitled to at least one seat of a bank’s supervisory board, but these workers’ representatives must meet professional qualifications of the supervisory board. The banking legislation is expected to be finalized by the National Assembly in summer 2021.

Despite Slovenia’s vibrant blockchain technology ecosystem and several global blockchain companies headquartered in the country, Slovenian banks have been slow to adopt blockchain technologies to process banking transactions.

The Bank of Slovenia, established on June 25, 1991, is Slovenia’s central bank. The Bank of Slovenia has been a member of the European System of Central Banks (ESCB) since Slovenia joined the European Union in 2004. The Bank of Slovenia gave up responsibility for monetary policy to the Eurosystem when Slovenia adopted the euro as its currency in 2007. As a member of the Eurosystem, the Bank of Slovenia coordinates with other EU central banks to implement the common monetary policy, manage foreign exchange reserves, ensure the smooth functioning of payment systems, and issue euro banknotes.

Slovenian law allows non-residents to open bank accounts in Slovenia on presentation of a passport, a Slovenian tax number, and a foreign tax number. Company owners must be present to open a business bank account.

Slovenia’s takeover legislation is fully harmonized with EU regulations. In 2006, Slovenia implemented EU Directive 2004/25/ES by adopting a new takeover law. The law was amended in 2008 to reflect Slovenia’s adoption of the euro as its currency. The law defines a takeover as a party’s acquisition of 25 percent of a company’s voting rights and requires the public announcement of a potential takeover offer for all current shareholders. The acquiring party must publicly issue a takeover offer for each additional acquisition of 10 percent of voting rights until it has acquired 75 percent of voting rights. The law also stipulates that the acquiring party must inform the share issuer whenever its stake in the target company reaches, surpasses, or drops below five, 10, 20, 25, 33, 50, or 75 percent. The law applies to all potential takeovers.

It is common for acquisitions to be blocked or delayed, and drawn out negotiations and stalled takeovers have hurt Slovenia’s reputation in global financial markets. In 2015, the privatization of Slovenia’s state-owned telecommunications company, Telekom Slovenije, failed in large part due to political attempts to discourage the sale of a state-owned company. Slovenia’s biggest retailer, Mercator, faced similar challenges in 2014 when a lengthy and arduous process and strong domestic opposition preceded its eventual sale to a Croatian buyer. The U.S.-owned Central European Media Enterprises dropped its politically controversial sale of Slovenian media house Pro Plus to then-U.S. owned United Group in January 2019 after the Competition Protection Agency failed to issue a ruling on the proposed acquisition despite reviewing the case for more than 18 months. The government has also struggled to meet its commitment to open Slovenia’s economy to international capital markets.

Thirteen insurance companies, two re-insurance companies, three retirement companies, and five branches of foreign firms operate in Slovenia. The three largest insurance companies in Slovenia account for over 60 percent of the market, with the largest, state-owned Triglav d.d., controlling 37 percent, while foreign insurance companies constitute less than 10 percent. In 2016, two Slovenian and two Croatian insurance companies merged into a new company, SAVA. Insurance companies primarily invest their assets in non-financial companies, state bonds, and bank-issued bonds.

Since 2000, there have been significant changes in legislation regulating the insurance sector. The Ownership Transformation of Insurance Companies Act, which seeks to privatize insurance companies, has stalled on several occasions due to ambiguity over the estimated share of state-controlled capital. Although plans for insurance sector privatization have been under discussion since 2005, there has been no implementation.

Slovenia currently has three registered health insurance companies and a variety of companies offering other kinds of insurance. Under EU regulations, any insurance company registered in the EU can market its services in Slovenia, provided the insurance supervision agency of the country where the company is headquartered has notified the Slovenian Supervision Agency of the company’s intentions.

Foreign Exchange and Remittances

Foreign Exchange

Slovenia adheres to Article VIII of the IMF Article of Agreement and is committed to full current account convertibility and full repatriation of dividends. To repatriate profits, joint stock companies must provide evidence of the settlement of tax liabilities, notarized evidence of distribution of profits to shareholders, and proof of joint stock company membership (Article of Association). All other companies must provide evidence of the settlement of tax liabilities and the company’s act of establishment.

For the repatriation of shares in a domestic company, the party must submit its act of establishment, a contract on share withdrawal, and evidence of the settlement of tax liabilities to the authorized bank.

Slovenia replaced its previous currency, the Slovenian tolar, with the euro in January 2007. The Eurozone has a freely floating exchange rate.

Remittance Policies

Not applicable/information not available.

Sovereign Wealth Funds

Slovenia does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

Somalia has no structured financial system and does not have portfolio investment financial products in the market.  Somalia does not issue government bonds or corporate bonds.  There is one private stock exchange operating in Somalia, but the government has no authority to regulate trade in stocks and securities.

Money and Banking System

Somalia’s banking system has yet to recover from years of conflict.  Moving money into and around the country through traditional banking mechanisms is difficult.  The Somali shilling lacks legitimacy, as it has not been printed since 1991 and more than 98 percent of the bills in circulation are counterfeit, printed by warlords and rogue businessmen.  Consequently, much of the Somali economy relies on the U.S. dollar.

Since the FGS reestablished the CBS in 2009, it has been slowly developing the tools and capabilities to oversee licensing and supervision of commercial banks and money transfer businesses.  The CBS has issued licenses to 10 banks and seven informal money transfer systems known as hawalas.  A 2019 anti-money laundering/countering the financing of terrorism law requires enhanced KYC controls and created the government’s financial investigation unit, the FRC.  Nevertheless, a 2020 UN report found that al-Shabaab moves millions of dollars through the formal banking system, which keeps Somalia’s financial risk profile high.  Somalia’s banks are also stymied by the lack of any national identification, which creates challenges in verifying client identity.

Only 15 percent of Somalis have formal bank accounts due to a lack of branches in many towns and the difficulty of obtaining acceptable forms of identification to open accounts.  Mobile finance therefore plays an important role in the economy.  Mobile money platforms have been essentially unregulated since their introduction in 2012.  In February 2021 the CBS issued its first mobile money license.

There is no publicly available data regarding the assets of privately owned banks.  No foreign banks operate in Somalia.  The CBS issued an interim license to an Egyptian bank in April 2019, but the bank has not opened.

Foreign Exchange and Remittances

Foreign Exchange

While the official currency for Somalia is the Somali shilling, almost all of the currency in circulation is counterfeit.  As a result, Somalia’s economy is largely dollarized, and a significant portion of daily transactions are conducted through phone-based mobile money managed by telecommunications companies.

There is no restriction or limitation on converting or repatriating funds associated with outside investment.  The shilling is volatile and fluctuates rapidly against the dollar.  Since there is no government agency that determines monetary policy at this time, the exchange rate is set by currency traders located in Mogadishu’s Bakara market.  The government has plans to print a new currency but does not have the budget do so in the near term.

Remittance Policies

For two decades there was no functioning banking system in Somalia.  Instead, hawalas transferred money into, out of, and within Somalia.  Somalis in the diaspora remit more than $1 billion annually, accounting for between 20 and 40 percent of Somalia’s GDP.  While the effects of the COVID-19 pandemic on Somalia’s financial sector are still uncertain, during the early stages of the pandemic the country saw a drop in remittances.

Sovereign Wealth Funds

There are no sovereign wealth funds or any other state-owned investment fund.

Somalia has no fully or partially state-owned enterprises.

Privatization Program

Since the government does not own any business entities, there are no entities to privatize.  The World Bank has supported the development of a public-private partnership law, but parliament has not yet acted on it.

Capital Markets and Portfolio Investment

South Africa recognizes the importance of foreign capital in financing persistent current account and budget deficits, and South Africa’s financial markets are regarded as some of the most sophisticated among emerging markets. A sound legal and regulatory framework governs financial institutions and transactions. The fully independent South African Reserve Bank (SARB) regulates a wide range of commercial, retail and investment banking services according to international best practices, such as Basel III, and participates in international forums such as the Financial Stability Board and G-20 Finance Ministers and Central Bank Governors. The Johannesburg Stock Exchange (JSE) serves as the front-line regulator for listed firms but is supervised by the Financial Services Board (FSB). The FSB also oversees other non-banking financial services, including other collective investment schemes, retirement funds and a diversified insurance industry. The South African government has committed to tabling a Twin Peaks regulatory architecture to provide a clear demarcation of supervisory responsibilities and consumer accountability and to consolidate banking and non-banking regulation.

South Africa has access to deep pools of capital from local and foreign investors that provides sufficient scope for entry and exit of large positions. Financial sector assets amount to almost three times the country’s GDP, and the JSE is the largest on the continent with capitalization of approximately USD 670 billion and 335 companies listed on the main, alternative, and other smaller boards as of January 2021. Non-bank financial institutions (NBFI) hold about two thirds of financial assets. The liquidity and depth provided by NBFIs make these markets attractive to foreign investors, who hold more than a third of equities and government bonds, including sizeable positions in local-currency bonds. A well-developed derivative market and a currency that is widely traded as a proxy for emerging market risk allows investors considerable scope to hedge positions with interest rate and foreign exchange derivatives.

SARB’s exchange control policies permit authorized currency dealers, to buy and borrow foreign currency freely on behalf of domestic and foreign clients. The size of transactions is not limited, but dealers must report all transactions to SARB. Non-residents may purchase securities without restriction and freely transfer capital in and out of South Africa. Local individual and institutional investors are limited to holding 25 percent of their capital outside of South Africa.

Banks, NBFIs, and other financial intermediaries are skilled at assessing risk and allocating credit based on market conditions. Foreign investors may borrow freely on the local market. In recent years, the South African auditing profession has suffered significant reputational damage with allegations that two large foreign firms aided, and abetted irregular client management practices linked to the previous administration, or engaged in delinquent oversight of listed client companies. South Africa’s WEF competitiveness rating for auditing and reporting fell from number one in the world in 2016, to number 60 in 2019.

Money and Banking System

South African banks are well capitalized and comply with international banking standards. There are 19 registered banks in South Africa and 15 branches of foreign banks. Twenty-nine foreign banks have approved local representative offices. Five banks – Standard, ABSA, First Rand (FNB), Capitec, and Nedbank – dominate the sector, accounting for over 85 percent of the country’s banking assets, which total over USD 390 billion. SARB regulates the sector according to the Bank Act of 1990. There are three alternatives for foreign banks to establish local operations, all of which require SARB approval: separate company, branch, or representative office. The criteria for the registration of a foreign bank are the same as for domestic banks. Foreign banks must include additional information, such as holding company approval, a letter of “comfort and understanding” from the holding company, and a letter of no objection from the foreign bank’s home regulatory authority. More information on the banking industry may be found at www.banking.org.za .

The Financial Services Board (FSB) governs South Africa’s non-bank financial services industry (see website: www.fsb.co.za/ ). The FSB regulates insurance companies, pension funds, unit trusts (i.e., mutual funds), participation bond schemes, portfolio management, and the financial markets. The JSE Securities Exchange SA (JSE), the sixteenth largest exchange in the world measured by market capitalization, enjoys the global reputation of being one of the best regulated. Market capitalization stood at USD 670 billion as of January 2021, with 335 firms listed. The Bond Exchange of South Africa (BESA) is licensed under the Financial Markets Control Act. Membership includes banks, insurers, investors, stockbrokers, and independent intermediaries. The exchange consists principally of bonds issued by government, state-owned enterprises, and private corporations. The JSE acquired BESA in 2009. More information on financial markets may be found at www.jse.co.za . Non-residents can finance 100 percent of their investment through local borrowing. A finance ratio of 1:1 also applies to emigrants, the acquisition of residential properties by non-residents, and financial transactions such as portfolio investments, securities lending and hedging by non-residents.

Foreign Exchange and Remittances

Foreign Exchange

The SARB Exchange Control Department administers foreign exchange policy. An authorized foreign exchange dealer, normally one of the large commercial banks, must handle international commercial transactions and report every purchase of foreign exchange, irrespective of the amount. Generally, there are only limited delays in the conversion and transfer of funds. Due to South Africa’s relatively closed exchange system, no private player, however large, can hedge large quantities of Rand for more than five years. While non-residents may freely transfer capital in and out of South Africa, transactions must be reported to authorities. Non-residents may purchase local securities without restriction. To facilitate repatriation of capital and profits, foreign investors should ensure an authorized dealer endorses their share certificates as “non-resident.” Foreign investors should also be sure to maintain an accurate record of investment.

Remittance Policies

Subsidiaries and branches of foreign companies in South Africa are considered South African entities, treated legally as South African companies, and subject to SARB’s exchange control. South African companies generally may freely remit to non-residents repayment of capital investments; dividends and branch profits (provided such transfers are made from trading profits and are financed without resorting to excessive local borrowing); interest payments (provided the rate is reasonable); and payment of royalties or similar fees for the use of know-how, patents, designs, trademarks or similar property (subject to SARB prior approval).

While South African companies may invest in other countries, SARB approval/notification is required for investments over R500 million (USD 33.5 million). South African individuals may freely invest in foreign firms listed on South African stock exchanges. Individual South African taxpayers in good standing may make investments up to a total of R4 million (USD 266,000) in other countries. As of 2010, South African banks are permitted to commit up to 25 percent of their capital in direct and indirect foreign liabilities. In addition, mutual and other investment funds can invest up to 25 percent of their retail assets in other countries. Pension plans and insurance funds may invest 25 percent of their retail assets in other countries.

Before accepting or repaying a foreign loan, South African residents must obtain SARB approval. SARB must also approve the payment of royalties and license fees to non-residents when no local manufacturing is involved. DTIC must approve the payment of royalties related to patents on manufacturing processes and products. Upon proof of invoice, South African companies may pay fees for foreign management and other services provided such fees are not calculated as a percentage of sales, profits, purchases, or income.

Sovereign Wealth Funds

Although the President and the Finance Minister announced in February 2020 the aim to create a Sovereign Wealth Fund, no action has been taken.

Capital Markets and Portfolio Investment

The ROK has an effective regulatory system that encourages portfolio investment.  The Korea Exchange (KRX) is comprised of a stock exchange, futures market, and stock market following the 2005 merger of the Korea Stock Exchange, Korea Futures Exchange, and Korean Securities Dealers Automated Quotations (KOSDAQ) stock markets.  It is tracked by the Korea Composite Stock Price Index (KOSPI).  There is sufficient liquidity in the market to enter and exit sizeable positions.  At the end of February 2021, over 2,400 companies were listed with a combined market capitalization of USD 2.2 trillion.  The ROK government uses various incentives, such as tax breaks, to facilitate the free flow of financial resources into the product and factor markets.   The ROK does not restrict payments and transfers for current international transactions, in accordance with the general obligations of member states under International Monetary Fund (IMF) Article VIII.  Credit is allocated on market terms.  The private sector has access to a variety of credit instruments.  While non-resident foreigners can issue bonds in South Korean won, they are otherwise unable to borrow money in local currency.  Foreign portfolio investors enjoy open access to the ROK stock market.  Aggregate foreign investment ceilings were abolished in 1998, and foreign investors owned 36.7 percent of benchmark KOSPI stocks and 9.9 percent of the KOSDAQ as of February 2021.  Foreign portfolio investment decreased slightly over the past year.  Foreign investors owned 31.7 percent of benchmark stocks and 7.7 percent of listed bonds, according to the Financial Services Commission in March 2021.  U.S. investors represent 41.4 percent of total foreign holdings, a gradual increase over the last three years.  The ROK Financial Services Commission in March 2020 banned the short-selling of stocks to stabilize stock price volatility during the COVID-19 pandemic.  The ban is currently set to expire in May 2021.

Money and Banking System

Financial sector reforms enacted to increase transparency and promote investor confidence are often cited as a reason for the ROK’s rapid rebound from the 2008 global financial crisis.  Since 1998, the ROK government has recapitalized its banks and non-bank financial institutions, closed or merged weak financial institutions, resolved many non-performing assets, introduced internationally-accepted risk assessment methods and accounting standards for banks, forced depositors and investors to assume appropriate levels of risk, and taken steps to help end the policy-directed lending of the past.  These reforms addressed the weak supervision and poor lending practices in the Korean banking system that helped cause and exacerbate the 1997-1998 Asian financial crisis.  The ROK banking sector is healthy overall, with a low non-performing loan ratio of 0.28 percent at the end of 2020, dropping 0.09 percentage points from the prior year.  Korean commercial banks held more than USD 3.3 trillion in total assets at the end of 2020.  Foreign commercial banks or branches can establish local operations, which would be subject to oversight by ROK financial regulators.  The ROK has not lost any correspondent banking relationships in the past three years, nor are any relationships in jeopardy.  There are no legal restrictions on a foreigner’s ability to establish a bank account in the ROK; however, commercial banks may refuse to accept foreign nationals as customers unless they show local residency or identification documents.  The Bank of Korea (BOK) is the central bank.

Foreign Exchange and Remittances

Foreign Exchange

All ROK banks, including branches of foreign banks, are permitted to deal in foreign exchange.   Applicants must notify foreign exchange banks in advance of applications for foreign investment.  In effect, these notifications are pro forma, and can be approved within hours.   Applications are denied only on specific grounds, including national security, public order and morals, international security obligations, and health and environmental concerns.  Exceptions to the advance notification approval system exist for project categories subject to joint-venture requirements and certain projects in the shipping and distribution sector.  According to the Foreign Exchange Transaction Act (FETA, as noted), transactions that could harm international peace or public order require additional monitoring or screening for concerns such as money laundering or gambling.  Three specific types of transactions are restricted:

1. Non-residents are not permitted to buy won-denominated hedge funds, including forward currency contracts;
2. The Financial Services Commission will not permit foreign currency borrowing by “non-viable” domestic firms; and
3. The ROK government monitors and ensures that South Korean firms that have extended credit to foreign borrowers collect their debts. The ROK government has retained the authority to re-impose restrictions in the case of severe economic or financial emergency.

Funds associated with any form of investment can be freely converted into any world currency.  In 2020, 77 percent of spot transactions in the market were between the U.S. dollar and South Korean won, while daily transaction (spot and future) was equal to USD 52.84 billion, down 5.3 percent from the previous year.  Exchange rates are generally determined by the market.  The U.S. Department of the Treasury assessed that ROK authorities had historically intervened on both sides of the currency market, with a net impact that resisted won appreciation as demonstrated by a sustained rise in reserves and a net forward position.  In its January 2020 report to Congress, the Treasury Department assessed that in 2018 and the first half of 2019, ROK government authorities on balance intervened to support the won through small net sales of foreign exchange.  The BOK’s most recent intervention report, released in December 2020 and covering the third quarter of 2020, showed zero net intervention.

Remittance Policies

The right to remit profits is granted at the same time as the original investment approval.  Banks control the pro forma approval process for FETA-defined open sectors.  For conditionally- or partially-restricted investments (as defined by FETA), the relevant ministry must approve both the initial investment and eventual remittance.  When foreign investment royalties or other payments are included in a technology licensing agreement, either a bank or the MOEF must approve the agreement and the projected stream of royalties.  Approvals are quick and routine.  An investor wishing to send a remittance must present an audited financial statement to a bank to substantiate the payment.  The ROK routinely permits the repatriation of funds but reserves the right to limit capital outflows in exceptional circumstances, such as situations when uncontrolled outflows skew the national balance of payments, cause excessive fluctuation in interest or exchange rates, or threaten the stability of domestic financial markets.  To repatriate funds, firms must also present a stock valuation report issued by a recognized securities company or the ROK appraisal board.  There are no time restrictions on remittances.

Sovereign Wealth Funds

The Korea Investment Corporation (KIC) is a wholly government-owned sovereign wealth fund established in July 2005 under the KIC Act.  KIC’s steering committee is comprised of its Chief Executive Officer, the Minister of Economy and Finance, the Bank of Korea Governor, and six private sector members appointed by the ROK President.  KIC is on the Public Institutions Management Act (PIMA) list.  The KIC Act mandates that KIC manage assets entrusted by the ROK government and central bank; the KIC generally adopts a passive role as a portfolio investor.  The corporation’s assets under management stood at USD 183.1 billion at the end of 2020.  KIC is required by law to publish an annual report, submit its books to the steering committee for review, and follow all domestic accounting standards and rules.  It follows the Santiago Principles and participates in the IMF-hosted International Working Group on Sovereign Wealth Funds.  The KIC does not invest in domestic assets, aside from a one-time USD 23 million investment into a domestic real estate fund in January 2015.

Capital Markets and Portfolio Investment

The Investment Act mentions portfolio investment, but South Sudan does not have a functioning market for financial assets. South Sudan does not have a stock market or related regulatory system. There are no known policies for promotion of investment into product and factor markets.

South Sudan’s formal financial system offers few financial products. It is difficult for foreign investors to get credit on the local market due to the shortage of hard currency, the lack of accurate means of obtaining reliable figures or audited accounts, the absence of a credit reference bureau, and South Sudan’s failure to document land ownership properly. According to the World Bank, 50 percent of all South Sudanese firms cite access to finance as a constraint.

Banks are often unwilling to lend due to the lack of adequate laws to protect lenders and difficulties related to personal identification. After the Bank of South Sudan confiscated commercial banks’ reserves on deposit at the central bank in 2015, diverting them to the use of the government, companies and individuals had difficulty accessing their funds. This made depositors reluctant to trust their funds to the banking system.

The Bank of South Sudan launched treasury bills on August 18, 2016 for purchase by members of the public, companies, and commercial banks. This lasted until April 2017, when people stopped investing in the bills due to high inflation and a lack of a secondary market for them. The bank had previously issued treasury bills in 2012 without success. In November 2020, the government said the Bank of South Sudan would issue central bank bonds as investment vehicles, but these have not yet appeared in the market.

Money and Banking System

The public and private financial sectors are in distress. The banking sector faces significant challenges because of the civil conflict, high inflation, and a volatile currency. The economy of South Sudan is cash-based with limited use of demand deposits. The IMF has categorized South Sudan’s financial sector as small and undeveloped. There are nine foreign-owned banks. There are no known restrictions on a foreigner’s ability to establish a bank account. In September 2019, South Sudan introduced mobile money via two private sector companies to boost digital transactions. Remittances to Uganda and Kenya across one of the platforms began in April 2020.

Many international banks operating in South Sudan had to restructure and recapitalize following government defaults in 2015. As a result, most international banks operate as foreign exchange traders or deposit holders. The limited lending banks do conduct are to businesses with well- documented contracts with international organizations and government employees. Anecdotal reports indicate, however, that even this limited lending contracted in 2019. This behavior would seem to be confirmed by the IMF’s April 2019 report where it indicated that non-performing loans for foreign and domestic banks were on the rise. Many domestic banks are heavily undercapitalized.

The Bank of South Sudan, the central bank, has limited assets and functions more as a commercial bank servicing the governments transactions than as a monetary policy institution.

Foreign Exchange and Remittances

Foreign Exchange

Foreign investors cannot remit funds through the parallel market. They are required by law to remit through banks or foreign exchange bureaus at an exchange rate that is below the market rate.

The Executive Board of the IMF on March 20, 2021 approved a disbursement of SDR 123 million (50 percent of quota or about US$ 174.2 million) to South Sudan under the Rapid Credit Facility (RCF) program. This second IMF disbursement to South Sudan will provide foreign exchange and budgetary support, both necessitated in part due to the sharp decline in international oil prices triggered by the COVID-19 pandemic and devastating floods. This disbursement follows a smaller disbursement of approximately $52 million in December 2020 used to pay civil service salary arrears. The Bank of South Sudan has been holding weekly dollar auctions since December 2020 for foreign exchange bureaus and expanded this practice to commercial banks in April 2021. As of May 2021, sales of dollars into the economy have caused an approximately 30 percent appreciation in the value of South Sudanese Pound against the dollar in the unofficial forex parallel market. Simultaneously, the Bank of South Sudan has been devaluing the official SSP-dollar exchange rate daily at a controlled rate. As a result, the gap between the official reference exchange rate and the unofficial parallel market rate shrank by 90 percent in four weeks (April 18 – May 18, 2021).

The 2009 Investment Promotion Act guarantees unconditional transferability in and out of South Sudan “in freely convertible currency of capital for investment; payments in respect of loan servicing where foreign loans have been obtained; and the remittance of proceeds, net of all taxes and other statutory obligations, in the event of sale or liquidation of the enterprise.” In reality, the ability to exchange local currency for foreign currency is severely restricted. Some international and U.S. businesses have complained that the inability to repatriate proceeds has hurt their businesses.

Remittance Policies

The World Bank estimated remittances to South Sudan at roughly $600 million in 2018, roughly 14 percent of GDP. As markets contract globally and earners are impacted by lockdowns, trade disruptions, layoffs, and illness, the amount of remittance inflows is likely to drop. During the 2008 financial crisis and the 2017 oil slump, remittance inflows dropped by 4 percent and 11 percent, respectively. Given the global scale and economic impact of COVID-19, decreases in remittances are likely to be larger than in the two previous crises. Interconnectivity of mobile money platforms between Kenya, Uganda and South Sudan, might counter this by boosting transactions.

There have been no recent changes to investment remittance policies, and no known waiting periods on remittances.

Sovereign Wealth Funds

The Petroleum Revenue Management Act of 2013 created a sovereign wealth fund (SWF) to set aside surplus profits from oil sales. The law established the Oil Revenue Stabilization Account to act as a buffer against volatility in oil prices and the Future Generations Fund to set aside some funds for future generations. The SWF is supposed to distribute 10 percent of oil profits into the Oil Revenue Stabilization Account and 15 percent to the Future Generations Fund. To date, however, neither has received any financing. The Comprehensive Peace Agreement (CPA) that ended the civil war with Sudan set a 2 percent share of oil revenue for the oil producing states along with a 3 percent share to the local communities. However, in August 2017, the government announced that it would stop paying these shares. The September 2018 peace agreement calls for full implementation of Petroleum Revenue Management Act revenue sharing provisions. In April 2021 the Auditor-General reported that the shared intended for state and local governments in the oil producing regions have been diverted to the Office of President, the Ministry of Finance, and other unauthorized entities with an estimated loss to the intended recipients of over $31 million.

Capital Markets and Portfolio Investment

The Securities and Exchange Commission (SEC) governs the CSE, unit trusts, stockbrokers, listed public companies, margin traders, underwriters, investment managers, credit rating agencies, and securities depositories.  Foreign portfolio investment is encouraged.  Foreign investors can purchase up to 100 percent of equity in Sri Lankan companies in permitted sectors.  Investors may open an Inward Investment Account (IIA) with any commercial bank in Sri Lanka to bring in investments.  As of August 30, 2020, 289 companies representing 20 business sectors are listed on the CSE.  As stock market liquidity is limited, investors need to manage exit strategies carefully.

In accordance with its IMF Article VIII obligations, the government and the Central Bank of Sri Lanka (CBSL) generally refrain from restrictions on current international transfers.  When the government experiences balance of payments difficulties, it tends to impose controls on foreign exchange transactions.  Due to pressures on the balance of payments caused by the COVID-19 economic crisis, Sri Lanka took several measures to restrict imports and limit outward capital transactions.

The state consumes over 50 percent of the country’s domestic financial resources and has a virtual monopoly on the management and use of long-term savings.  This inhibits the free flow of financial resources to product and factor markets.  High budget deficits have caused interest rates to rise and resulted in higher inflation.  On a year-to-year basis, inflation was approximately 5.1 percent in March of 2021, and the average prime lending rate was 9.91 percent.  Retained profits finance a significant portion of private investment in Sri Lanka with commercial banks as the principal source of bank finance and bank loans as the most widely used credit instrument for the private sector.  Large companies also raise funds through corporate debentures.  Credit ratings are mandatory for all deposit-taking institutions and all varieties of debt instruments.  Local companies can borrow from foreign sources.  FDI finances about 6 percent of overall investment.  Foreign investors can access credit on the local market and are free to raise foreign currency loans.

Money and Banking System

Sri Lanka has a diversified banking system.  There are 25 commercial banks:  13 local and 12 foreign.  In addition, there are seven specialized local banks.  Citibank N.A. is the only U.S. bank operating in Sri Lanka.  Several domestic private commercial banks have substantial government equity acquired through investment agencies controlled by the government.  Banking has expanded to rural areas, and by end of 2020 there were over 3,619 commercial bank branches and over 6,176 Automated Teller Machines throughout the country.  Both resident and non-resident foreign nationals can open foreign currency banking accounts.  However, non-resident foreign nationals are not eligible to open Sri Lankan Rupee accounts.

CBSL is responsible for supervision of all banking institutions and has driven improvements in banking regulations, provisioning, and public disclosure of banking sector performance.  Credit ratings are mandatory for all banks.  CBSL introduced accounting standards corresponding to International Financial Reporting Standards for banks on January 1, 2018, and the application of the standards substantially increased impairment provisions on loans.  The migration to the Basel III capital standards began in July of 2017 on a staggered basis, with full implementation was kicking in on January 1, 2019 and some banks having had to boost capital to meet full implementation of Basel III requirements.  In addition, banks must increase capital to meet CBSL’s new minimum capital requirements deadline, which is set for December 31, 2022. A staggered application of capital provisions for smaller banks unable to meet capital requirements immediately will likely be allowed.

Total assets of the banking industry stood at LKR 14,666 billion ($75.2 billion) as of December 31, 2020.  The two fully state-owned commercial banks – Bank of Ceylon and People’s Bank – are significant players, accounting for about 33 percent of all banking assets.  The Bank of Ceylon currently holds a non-performing loan (NPL) ratio of 4.98 percent (up from 4.79 percent in 2019).  The People’s Bank currently holds a NPL ratio of 3.85 percent (up from 3.68 percent in 2019).  Both banks have significant exposure to SOEs but, these banks are implicitly guaranteed by the state.  The six-month debt moratorium issued by the CBSL for distressed borrowers will expired in March 2021, the impact of this is yet to be reflected on the banking sector NPL

In October 2019, Sri Lanka was removed from the Financial Action Task Force (FATF) gray list after making significant changes to its Anti-Money Laundering/Countering the Finance of Terrorism (AML/CFT) laws.  CBSL is exploring the adoption of blockchain technologies in its financial transactions and appointed two committees to investigate the possible adoption of blockchain and cryptocurrencies.

Sri Lanka has a rapidly growing alternative financial services industry that includes finance companies, leasing companies, and microfinance institutes.  In response, CBSL has established an enforcement unit to strengthen the regulatory and supervisory framework of non-banking financial institutions.  Credit ratings are mandatory for finance companies as of October 1, 2018.   The government also directed banks to register with the U.S. Internal Revenue Service (IRS) to comply with the U.S. Foreign Accounts Tax Compliance Act (FATCA).  Almost all commercial banks have registered with the IRS.

Foreign Exchange and Remittances

Foreign Exchange

Sri Lanka generally has investor-friendly conversion and transfer policies.  Companies say they can repatriate funds relatively easily.  In accordance with its Article VIII obligations as a member of the IMF, Sri Lanka liberalized exchange controls on current account transactions in 1994 and, in 2010-2012, the government relaxed exchange controls on several categories of capital account transactions.  A new Foreign Exchange Act, No. 12 of 2017, came into operation on November 20, 2017 and further liberalized capital account transactions to simplify current account transactions.  Foreign investors are required to open Inward Investment Accounts (IIA) to transfer funds required for capital investments but there are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment through an IIA in any foreign currency designated by CBSL.

Remittance Policies

No barriers exist, legal or otherwise, to remittance of corporate profits and dividends for foreign enterprises since 2017 when Sri Lanka relaxed investment remittance policies with the new Foreign Exchange Act.  Remittances are done through IIAs.  There are no waiting periods for remitting investment returns, interest, and principal on private foreign debt, lease payments, royalties, and management fees provided there is sufficient evidence to prove the originally invested funds were remitted into the country through legal channels.  Exporters must repatriate export proceeds within 120 days.

Sovereign Wealth Funds

Sri Lanka does not have a sovereign wealth fund.  The government manages and controls large retirement funds from private sector employees and uses these funds for budgetary purposes (through investments in government securities), stock market investments, and corporate debenture investments.

Capital Markets and Portfolio Investment

The government does not promote portfolio investment.

There is a small self-regulating stock market with eleven companies registered. It meets twice a month but does not have an electronic exchange. There is no effective regulatory system to encourage and facilitate portfolio investment. At present, Suriname is facing liquidity shortfalls. Sufficient policies do exist to facilitate the free flow of financial resources.

As an IMF Article VIII member, Suriname has agreed to refrain from restrictions on payments and transfers for current international transactions.

Credit is allocated on market terms and at market rates. Foreign investors that establish businesses in Suriname are able to get credit on the local market, usually with a payment guarantee from the parent company. The private sector has access to a variety of credit instruments. Larger companies can obtain customized credit products. There is, however, a Central Bank regulation that limits a commercial bank’s credit exposure to a single client.

Money and Banking System

The private sector has access to a variety of credit instruments. Larger companies can obtain customized credit products

According to the IMF Article IV Consultation in 2019, the banking system faces pressing vulnerabilities.

Based on the latest (July 2019) data, the capital adequacy ratio for the banking system stood at 10.5 percent (above the 10 percent minimum requirement), but non-performing loans in the banking system remained high (12.5 percent of gross loans), and profitability was low (0.7 percent return on assets). Deposit and loan dollarization remain high.

Total estimated assets of Suriname’s largest banks:

DSB Bank (annual report, 2018): $1,007 million. DSB annual report 2019 is delayed due to COVID-19 and time needed to implement IFRS.

Hakrin Bank (annual report 28, 2019): $671.2 million

Republic Bank Limited (2020 annual report, Suriname-based assets): $396.5 million. (The Republic Bank Limited of Trinidad and Tobago acquired Royal Bank of Canada’s Suriname holdings in 2015.)

Finabank (annual report, 2019): $322.8 million

Suriname has a central bank system.

Foreign banks or branches are allowed to establish operations in Suriname. They are subject to the same measures and regulations as local banks. According to an IMF assessment in 2016, banks in Suriname are among those in the region that have lost their correspondent relationships. The IMF notes that though the loss of correspondent banking relationships has not reached systemic proportions, a critical risk still exists. According to the IMF’s Article IV Consultation report in 2019, there is a possibility of losing corresponding banking relationships given recent overseas investigations of potential money laundering via Suriname’s financial sector. The reputational risk to both local and foreign banks acting as their correspondents is substantial. In March 2021, Suriname announced that it had completed a National Risk Assessment to identify and assess its vulnerability to money laundering and the financing of terrorism.

There are no restrictions for foreigners to open a bank account. Banks require U.S. citizens to provide the information necessary to comply with the Foreign Accounts Tax Compliance Act (FATCA).

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment, such as remittances of investment capital, earnings, loan or lease payments, or royalties. There can be shortages in the availability of U.S. cash dollars at local banks, which can affect businesses.

Funds associated with any form of investment can be freely converted into a usable currency at legal market clearing rates with the permission of the Foreign Exchange Commission. However, the criteria for obtaining permissions are opaque.

In September 2020, the Central Bank of Suriname (CBvS) announced the depreciation of the Surinamese Dollar (SRD). The previous official exchange rate was SRD7.52 to $1 dollar. The new sale rate was adjusted to SRD14.29 to $1 dollar. In March 2021, the CBvS announced that it had come to an agreement with the government to establish a minimum and maximum exchange rate for the U.S. dollar, namely that the rate must stay between SRD14.29 and SRD16.30 to $1. In addition to the official exchange rate, different rates are available unofficially in parallel exchange markets. Media reports indicate that exchange rate policy is a key component of Suriname’s negotiations with the International Monetary Fund – negotiations which began in 2020.

Remittance Policies

There are no recent changes or plans to change investment remittance policies.

The waiting period on remittances can be relatively short for dividends; return on investments, interest, and principal on private foreign debt; lease payments; royalties; and management fees. The time needed to process the requests depends on the sector and the amount transferred. Transfers through the banking system can range from same day to one week waiting times, contingent upon approval by the Foreign Exchange Commission.

Sovereign Wealth Funds

On May 4, 2017, the National Assembly passed legislation establishing a Sovereign Wealth Fund (SWF). In August 2020, President Santokhi announced that the government would operationalize Suriname’s SWF, as the previous government had not instituted the necessary state decrees to do so. In December 2020, the government held talks with experts from Norway to learn more from the Norwegian Sovereign Wealth Fund.

Suriname does not participate in the International Forum of Sovereign Wealth Funds.

Capital Markets and Portfolio Investment

Credit is allocated on market terms and is made available to foreign investors in a non-discriminatory fashion.  The private sector has access to a variety of credit instruments.  Legal, regulatory, and accounting systems are transparent and consistent with international norms.  NASDAQ-OMX is a modern, open, and active forum for domestic and foreign portfolio investment.  It is Sweden’s official stock exchange and operates under specific legislation.  Furthermore, the Swedish government is neutral toward portfolio investment and Sweden has a fully capable regulatory system that encourages and facilitates portfolio investments.

Money and Banking System

Several foreign banks, including Citibank, have established branch offices in Sweden, and several niche banks have started to compete in the retail bank market.  The three largest Swedish banks are Skandinaviska Enskilda Banken (SEB), Svenska Handelsbanken, and Swedbank.  Nordea is the largest foreign bank and largest bank in Sweden, while Danske Bank is the second largest foreign bank and the fifth largest bank in Sweden.  A deposit insurance system was introduced in 1996, whereby individuals received protection of up to SEK 250,000 (USD 29,250) of their deposits in case of bank insolvency.  On December 31, 2010, the maximum compensation was raised to the SEK equivalent of 100,000 euro.

The banks’ activities are supervised by the Swedish Financial Supervisory Authority, Finansinspektionen, http://www.fi.se, to ensure that standards are met.  Swedish banks’ financial statements meet international standards and are audited by internationally recognized auditors only.  The Swedish Bankers’ Association, http://www.bankforeningen.se, represents banks and financial institutions in Sweden.  The association works closely with regulators and policy makers in Sweden and Europe.  Sweden is not part of the Eurozone; however, Swedish commercial banks offer euro-denominated accounts and payment services.

On July 1, 2014, Sweden signed the Foreign Account Tax Compliance Act (FATCA) agreement with the U.S. Financial institutions in Sweden are now obligated to submit information in accordance with FATCA to the Swedish Tax Agency.  In February 2015, the Swedish Parliament decided on new laws and regulations needed to implement FATCA.  The Parliamentary decision means the government’s proposals in Bill 2014/15:41 were adopted, including for example, the introductions of:

• a new law on the identification of reportable accounts with respect to the agreement;
• changes to tax procedure act;
• new legislation on the exchange of information with respect to the agreement; and
• consequential amendments to the Income Tax Act and other laws.

The provisions entered into force on April 1, 2015.  For full text of Bill 2014/15:41, please see http://www.regeringen.se/contentassets/bd8cf7f897364944b35f5f30c099bc0c/genomforande-av-avtal-mellan-sveriges-regering-och-amerikas-forenta-staters-regering-for-att-forbattra-internationell-efterlevnad-av-skatteregler-och-for-att-genomfora-fatca-prop.-20141541.

Foreign banks or branches offering financial services must have an authorization from the Swedish Financial Supervisory Authority, Finansinpektionen, to conduct operations.  As part of the authorization application process, FI reviews the firm’s capital situation, business plan, owners, and management.  Parts of the firm’s daily operations may also require authorization from FI.  The applicable regulatory code can be found at http://www.fi.se/en/our-registers/search-fffs/2009/20093/.

There are no reported losses of correspondent banking relationships in the past three years and there are no current correspondent banking relationships that are in jeopardy.  Foreigners have the right to open an account in a bank in Sweden provided he/she can identify him/herself and the bank conducts an identity check.  The bank cannot require the person to have a Swedish personal identity number or an address in Sweden.

Foreign Exchange and Remittances

Foreign Exchange

Sweden adheres to a floating exchange rate regime and the national currency rate fluctuates.

Remittance Policies

Sweden does not impose any restrictions on remittances of profits, proceeds from the liquidation of an investment, or royalty and license fee payments.  A subsidiary or branch may transfer fees to a parent company outside of Sweden for management services, research expenditures, etc.  Funds associated with any form of investment can be freely converted into any world currency.  In general, yields on invested funds, such as dividends and interest receipts, may be freely transferred.  A foreign-owned firm may also raise foreign currency loans both from its parent corporation and credit institutions abroad.  There are no recent changes or plans to change investment remittance policies.  There are no time limitations on remittances.

Sovereign Wealth Funds

Sweden does not maintain a sovereign wealth fund or similar entity.

Capital Markets and Portfolio Investment

The Swiss government’s attitude toward foreign portfolio investment and market structures is positive, resulting in high global rankings by many indices.

The SIX Swiss stock exchange based in Zurich is a significant international stock market  based on market capitalization.

Money and Banking System

Switzerland is home to a sophisticated banking system that provides a high degree of service to both foreign and domestic entities.  Switzerland also has an effective regulatory system that encourages and facilitates portfolio investment.  The Swiss Bankers Association, which has nearly 300 member financial institutions, estimated that Switzerland’s banking sector managed assets amounting to approximately USD 8 trillion in 2019, almost half of which come from abroad, making Switzerland the world market leader in cross-border wealth management.  The largest banks, UBS and Credit Suisse, have total assets of approximately USD 1 trillion and USD 800 million, respectively, while Raiffeisen Switzerland holds about USD 250 billion and Zurich Cantonal Bank holds roughly USD 170 billion.  Switzerland’s independent central bank is the Swiss National Bank (SNB).

U.S. citizens who are resident in Switzerland may face difficulties in opening bank accounts at smaller Swiss banks as a result of the administrative costs of complying with additional regulatory and administrative procedures required for the accounts of U.S. persons under accepted disclosure rules.  Several associations provide information about Swiss banks that offer services to U.S. clients.  For more information, see the following page at the U.S. Embassy Bern website: https://ch.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/living-in-ch/banking-resources/

The Swiss government created a blockchain task force in January 2018 to foster cooperation between the traditional banking sector and the nascent industry and to discuss potential legal and regulatory reforms to attract blockchain technologies while maintaining anti-money laundering controls.  In December 2018, the Swiss government endorsed a report on the legal framework for blockchain and distributed ledger technology (DLT) in the financial sector, with the goal of creating favorable conditions for Switzerland to evolve as a leading location for fintech and DLT companies.  In September 2020, Parliament approved a “blockchain act,” proposed by the Swiss government to adapt federal legislation to recent developments in DLT.  The act will be implemented in two phases.  Company law reforms came into force on February 1, 2021, and a second batch of legislation on financial market infrastructure upgrades will follow in summer 2021.  This opens the doors to a fully regulated cryptocurrency and digital securities industry in Switzerland.  There are now a wide range of companies in Switzerland that can create and list DLT-compatible digital securities.  A network of trading platforms is expected to be established in 2021 as well.

Foreign Exchange and Remittances

Foreign Exchange

In 2015 the Swiss National Bank (SNB) abandoned the Swiss franc’s euro peg (CHF 1.20 / EUR), starting a period of strengthening of the franc over time.  Perceived as a “safe haven” currency, the franc often strengthens during times of economic downturn or crisis.  As of March 2021, the franc traded at just over CHF 1.10 / EUR, and just over CHF 0.94 / USD.

Since 2015, the SNB has attempted to limit the excessive strengthening of the franc by instituting a negative interest rate for commercial bank deposits at the SNB, currently set at -0.75 percent, while continuing an expansionary monetary policy through intervention in the foreign currency market.

In December 2020, the U.S. Treasury Department released its semi-annual Foreign Exchange Policies report, concluding that Switzerland had manipulated its currency under the terms of the Omnibus Trade and Competitiveness Act of 1988 and the Trade Facilitation and Trade Enforcement Act of 2015.  The report found that Switzerland met all three criteria used to determine currency manipulation in the 12 months through June 2020: a goods trade surplus with the United States of over $20 billion, a current account surplus of over 2 percent of GDP, and one-sided currency interventions totaling at least 2 percent of GDP.  The report acknowledged the economic upheaval from COVID generated massive safehaven inflows to the Swiss franc, which dramatically increased the upward pressure on the franc.  The SNB assessed in December 2020 that the franc was “highly valued,” and said it would maintain its current monetary and foreign currency intervention policies as needed to stabilize the economy and prices.  The strength of the franc lowers effective prices of imports to Switzerland, but also harms Swiss competitiveness as an export-oriented economy.

Remittance Policies

There are currently no restrictions on converting, repatriating, or transferring funds associated with an investment (including remittances of capital, earnings, loan repayments, lease payments, royalties) into a freely usable currency at the legal market clearing rate.

Sovereign Wealth Funds

Switzerland does not have a sovereign wealth fund or an asset management bureau.

Capital Markets and Portfolio Investment

Taiwan authorities welcome foreign portfolio investment in the Taiwan Stock Exchange (TWSE) and Taipei Stock Exchange, with foreign investment accounting for approximately 45 percent of TWSE capitalization in 2020. Taiwan allows the establishment of offshore banking, securities, and insurance units to attract a broader investor base. The Financial Supervisory Commission (FSC) utilizes a negative list approach to regulating local banks’ overseas business not involving the conversion of the NTD.

Taiwan’s capital market is mature and active. At the end of 2020, 948 companies were listed on the TWSE, with a total market trading volume of USD 157.4 billion (including transactions of stocks, Taiwan Depository Receipts, exchange-traded funds, and warrants). Foreign portfolio investors are not subject to a foreign ownership ceiling, except in certain restricted companies, and are not subject to any ceiling on portfolio investment. The turnover ratio in the TWSE rose to 126 percent in 2020 as the TWSE Capitalization Weighted Stock Index (TAIEX) soared 23 percent in 2020. Payments and transfers resulting from international trade activities are fully liberalized in Taiwan. A wide range of credit instruments, all allocated on market terms, is available to domestic- and foreign-invested firms alike.

Money and Banking System

Taiwan’s banking sector is healthy, tightly regulated, and competitive, with 36 banks servicing the market. The sector’s non-performing loan ratio has remained below 1 percent since 2010, with a sector average of 0.24 in September 2020. Capital-adequacy ratios (CAR) are generally high, and several of Taiwan’s leading commercial lenders are government-controlled, enjoying implicit state guarantees. The sector as a whole had a CAR of 14.1 percent as of September 2020, far above the Basel III regulatory minimum of 10.5 percent required by 2019. Taiwan banks’ liquidity coverage ratio, which was required by Basel III to reach 100 percent by 2019, averaged 132.6 percent in September 2020. Taiwan’s banking system is primarily deposit-funded and has limited exposure to global financial, wholesale markets. Regulators have encouraged local banks to expand to overseas markets, especially in Southeast Asia, and minimize exposure in the PRC. Taiwan Central Bank statistics show that Taiwan banks’ PRC net exposure on an ultimate risk basis was USD 49.8 billion in the third quarter of 2020, trailing the United States’ USD 94.2 billion. Taiwan’s largest bank in terms of assets is the wholly state-owned Bank of Taiwan, which had USD 186.2 billion of assets as of December 2020. Taiwan’s eight state-controlled banks (excluding the Taiwan Export and Import Bank) jointly held nearly USD 912 billion, or 48 percent of the banking sector’s total assets.

The Taiwan Central Bank operates as an independent agency and state-owned company under the Executive Yuan, free from political interference. The Central Bank’s mandates are to maintain financial stability, develop Taiwan’s banking business, guard the stability of the NTD’s external and internal value, and promote economic growth within the scope of the three aforementioned goals.

Foreign Exchange and Remittances

Foreign Exchange

Foreign banks are allowed to operate in Taiwan as branches and foreign-owned subsidiaries, but financial regulators require foreign bank branches to limit their customer base to large corporate clients. As a measure to promote the asset management business in Taiwan, since May 2015, foreigners holding a valid visa entering Taiwan have been allowed to open an NTD account with local banks with passports and an ID number issued by the immigration office. These requirements replaced the previous dual-identification (passport and resident card) requirements. Please refer to the Taiwan Bankers’ Association’s webpage: https://www.ba.org.tw/PublicInformation/BusinessDetail/10?returnurl=%2Ffor detailed information regarding various types of bank services (credit card, loans, etc.) for foreigners in Taiwan.

There are few restrictions in place in Taiwan on converting or transferring direct investment funds. Foreign investors with approved investments can readily obtain foreign exchange from designated banks. The remittance of capital invested in Taiwan must be reported in advance to the Investment Commission, but the Commission’s approval is not required. Funds can be freely converted into major world currencies for remittance, but to retain funds in Taiwan, they must be held in currency denominations offered by banks. In addition to commonly used U.S. dollar, euro, and Japanese yen-denominated deposit accounts, most Taiwan banks offer up to 15 foreign currency denominations. The exchange rate is based on the market rate offered by each bank. The NTD fluctuates under a managed float system.

Remittance Policies

There are no restrictions on remittances deriving from approved direct investment and portfolio investment. Prior approval is not required if the cumulative amount of inward or outward remittances does not exceed the annual limit of USD 5 million for an individual or USD 50 million for a corporate entity. Declared earnings, capital gains, dividends, royalties, management fees, and other returns on investment may be repatriated at any time. For large transactions requiring the exchange of NTD into foreign currency that could potentially disrupt Taiwan’s foreign exchange market, the Taiwan Central Bank may require the transaction to be scheduled over several days. According to law firms servicing foreign investors, there is no written guideline on the size of such transactions but amounts more than USD 100 million may be affected. Capital movements arising from trade in merchandise and services, as well as from debt servicing, are not restricted. No prior approval is required to move foreign currency funds not involving conversion between NTD and foreign currency.

Sovereign Wealth Funds

Taiwan does not have a sovereign wealth fund, although the American business community has advocated for one. Taiwania Capital Management Company, a partially government-funded investment company, was established in October 2017 to promote investment in innovative and other target industries. In December 2018, Taiwania raised USD 350 million for two funds investing in IoT and biotech industries.

Capital Markets and Portfolio Investment

Foreign portfolio investment is not a priority for the Tajik government, and the country lacks a securities market.  According to government statistics, portfolio investment in Tajikistan totaled USD 502.5 million at the end of 2020.  This includes the USD 500 million Eurobond the National Bank of Tajikistan issued in 2017.  The National Bank of Tajikistan has made efforts to develop a system to encourage and facilitate portfolio investments, including credit rating mechanisms implemented by Moody’s and S&P.  Apart from these initial steps, however, Tajikistan has not established policies to facilitate the free flow of financial resources into product and factor markets.

Tajikistan does not place any restrictions on payments and transfers for current international transactions, per IMF Article VIII.  It regards transfers from all international sources as revenue, however, and taxes them accordingly.  Commercial banks apply market terms for credits, but are also under considerable pressure by governing elites and their family and friends to provide favorable loans for commercially questionable projects.  The private sector offers access to several different credit instruments.  Foreign investors can get credit on the local market, but those operating in Tajikistan avoid local credit because of comparatively high interest rates.

Money and Banking System

According to the latest National Bank of Tajikistan (NBT) report from December 2020, 69 credit institutions, including 18 banks, including one Islamic bank, 18 microcredit deposit organizations, five microcredit organizations, and 27 microcredit funds, function in Tajikistan.  Tajikistan has 356 bank branches, an eight percent increase from 2019.

Tajikistan’s banking system is on a recovery path following a 2015 financial crisis.  AgroInvestBank and TojikSodirotbank, two of Tajikistan’s largest, are in fact collapsed banks awaiting liquidation.  Tajikistan’s banking sector has assets of USD 2.32 billion as of December 2020, a 2.2 percent increase from 2019.  Total liabilities in 2019 were unchanged from 2018, reaching USD 1.6 billion.  Banking-sector capital adequacy and liquidity indicators exceed the NBT’s minimum requirements. Although authorities report 23.4 percent of commercial loans are non-performing, other estimates range as high as 50 percent.

The NBT is Tajikistan’s central bank and, in recent years, has pursued policies to strengthen financial inclusion and cashless payments.  Foreign banks can establish operations but are subject to National Bank of Tajikistan regulations.  United States commercial banks discontinued correspondent banking relations with Tajik commercial banks in 2012.  To establish a bank account, foreigners must submit a letter of application, a passport copy, and Tajik government-issued taxpayer identification number.

Foreign Exchange and Remittances

Foreign Exchange

Tajikistan places no legal limits on commercial or non-commercial money transfers, and investors may freely convert funds associated with any form of investment into any world currency.  However, businesses often find it difficult to conduct large currency transactions due to the limited amount of foreign currency available on the domestic financial market.  Investors are free to import currency, but once they deposit it in a Tajik bank account it may be difficult to withdraw.

In 2015, the National Bank of Tajikistan reorganized foreign currency operations and shut down all private foreign exchange offices in Tajikistan.  Since that time, only commercial bank exchange offices may exchange money and transactions require customers to register with an identity document.  In 2019, the National Bank of Tajikistan launched a national money transfer center that centralizes the receipt of all remittances from abroad.

The government’s policy supports a stable exchange rate but remains susceptible to changes in the Russian ruble due to the high volume of remittances.  During 2020, the Tajik somoni fell 16.6 percent against the U.S. dollar to TJS 11.3 for 1 U.S. dollar.  Defending the somoni’s rate to the dollar puts pressure on Tajikistan’s foreign currency and gold reserves and leads to differences between the official exchange rate and the non-bank market rate.

Remittance Policies

Beginning in 2016, the National Bank of Tajikistan mandated that commercial banks disburse remittances in local currency.  There are no official time or quantity limitations on the inflow or outflow of funds for remittances.  Tajikistan’s tax code classifies all inflows as revenue and taxes them accordingly; however, the Tajik government does not tax remittances from labor migrants.

Sovereign Wealth Funds

Tajikistan does not have a sovereign wealth fund.  The country does have a “Special Economic Reforms Fund,” but, according to official statistics, it is empty.

Capital Markets and Portfolio Investment

Tanzania’s Dar es Salaam Stock Exchange (DSE) is a self-listed publicly owned company. In 2013, the DSE launched a second-tier market, the Enterprise Growth Market (EGM) with lower listing requirements designed to attract small and medium sized companies with high growth potential. As of March 1, 2021, DSE’s total market capitalization reached USD 6.7 billion, a 36.1 percent drop from December 2017 figure, with the drop is primarily attributed to the effects of the COVID 19 pandemic. The Capital Markets and Securities Authority (CMSA) Act facilitates the flow of capital and financial resources to support the capital market and securities industry. Tanzania, however, restricts the free flow of investment in and out of the country, and Tanzanians cannot sell or issue securities abroad unless approved by the CMSA.

Under the Capital Markets and Securities (Foreign Investors) Regulation 2014, there is no aggregate value limitation on foreign ownership of listed non-government securities. Only foreign individuals or companies from other EAC nations are permitted to participate in the government securities market. Even with this recent development allowing EAC participation, foreign ownership of government securities is still limited to 40 percent of each security issued.

Tanzania’s Electronic and Postal Communications Act 2010 amended in 2016 by the Finance Act 2016 requires telecom companies to list 25 percent of their shares via an initial public offering (IPO) on the DSE. Of the seven telecom companies that filed IPO applications with the CMSA, only Vodacom’s application received approval.

As part of the Mining (Minimum Shareholding and Public Offering) Regulations 2016, large scale mining operators were required to float a 30 percent stake on the DSE by October 7, 2018. Currently, no mining companies are listed on the DSE.

Money and Banking System

Tanzania’s financial inclusion rate increased significantly over the past decade thanks to mobile phones and mobile banking. However, participation in the formal banking sector remains low. Low private sector credit growth and high non-performing loan (NPL) rates are persistent problems. The NPL ratios further deteriorated with the COVID 19 pandemic.

According to the IMF’s most recent Financial System Stability Assessment, Tanzania’s bank-dominated financial sector is small, concentrated, and at a relatively nascent stage of development. Financial services provision is dominated by commercial banks, with the ten largest institutions being preeminent in terms of mobilizing savings and intermediating credit. The report found that nearly half of Tanzania’s 45 banks are vulnerable to adverse shocks and risk insolvency in the event of a global financial crisis. (Source: https://www.imf.org/en/Publications/CR/Issues/2018/12/04/United-Republic-of-Tanzania-Financial-Sector-Assessment-Program-Press-Release-Staff-Report-46418 )

The two largest banks are CRDB Bank and National Microfinance Bank (NMB), which represent almost 30 percent of the market. The only U.S. bank is Citibank Tanzania Limited. Private sector companies have access to commercial credit instruments including documentary credits (letters of credit), overdrafts, term loans, and guarantees. Foreign investors may open accounts and earn tax-free interest in Tanzanian commercial banks.

The Banking and Financial Institution Act 2006 established a framework for credit reference bureaus, permits the release of information to licensed reference bureaus, and allows credit reference bureaus to provide to any person, upon a legitimate business request, a credit report. Currently, there are two private credit bureaus operating in Tanzania – Credit Info Tanzania Limited and Dun & Bradstreet Credit Bureau Tanzania Limited.

Foreign Exchange and Remittances

Foreign Exchange

Tanzanian regulations permit unconditional transfers through any authorized bank in freely convertible currency of net profits, repayment of foreign loans, royalties, fees charged for foreign technology, and remittance of proceeds. The only official limit on transfers of foreign currency is on cash carried by individuals traveling abroad, which cannot exceed USD 10,000 over a period of 40 days. Investors rarely use convertible instruments.

The Bank of Tanzania’s new Bureau de Change regulations with stringent requirements came into force in June 2019. The regulations include a minimum capital requirement of TZS 1 billion (Approx. USD 431,000) and a non-interest-bearing deposit of USD 100,000 with the Bank of Tanzania (the regulator). Regulations also require the business premises to be fitted with CCTV cameras, and new stringent procedures and policies for detecting and reporting money laundering and terrorism finance. The Bank of Tanzania closed more than ninety percent of all forex shops in the country, stating that they did not pass inspection for compliance with these requirements. In response, commercial banks and Tanzania Posts Corporation were licensed to provide forex services.

The value of the Tanzanian currency, the shilling, is determined by a free-floating exchange rate system based on supply and demand in international foreign exchange markets. However, Interbank Foreign Exchange Market (IFEM) and the rates quoted by commercial banks and exchange bureaus often vary considerably. There are anecdotal reports that the Bank of Tanzania has artificially fixed the exchange rate.

The last Article IV Executive Board Consultation was on March 18, 2019. The GoT did not consent to publication of the report and discussions for an IMF staff monitored program are stalled.

Remittance Policies

There are no recent changes or known plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances.

Sovereign Wealth Funds

Tanzania does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

The Thai government maintains a regulatory framework that broadly encourages and facilitates portfolio investment. The Stock Exchange of Thailand, the country’s national stock market, was established under the Securities Exchange of Thailand Act B.E. 2535 in 1992. There is sufficient liquidity in the markets to allow investors to enter and exit sizeable positions. Government policies generally do not restrict the free flow of financial resources to support product and factor markets. The Bank of Thailand, the country’s central bank, has respected IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.

Credit is generally allocated on market terms rather than by “direct lending.” Foreign investors are not restricted from borrowing on the local market. In theory, the private sector has access to a wide variety of credit instruments, ranging from fixed term lending to overdraft protection to bills of exchange and bonds. However, the private debt market is not well developed. Most corporate financing, whether for short-term working capital needs, trade financing, or project financing, requires borrowing from commercial banks or other financial institutions.

Money and Banking System

Thailand’s banking sector, with 15 domestic commercial banks, is sound and well-capitalized. As of December 2020, the non-performing loan rate was low (around 3.25 percent industry wide), and banks were well prepared to handle a forecast rise in the NPL rate in 2021 due to the pandemic. The ratio of capital funds/risk-weighted assets (capital adequacy) was high (20.1 percent). Thailand’s largest commercial bank is Bangkok Bank, with assets totaling USD 100 billion as of December 2020. The combined assets of the five largest commercial banks totaled USD 492.6 billion, or 70.82 percent of the total assets of the Thai banking system, at the end of 2020.

In general, Thai commercial banks provide the following services: accepting deposits from the public; granting credit; buying and selling foreign currencies; and buying and selling bills of exchange (including discounting or re-discounting, accepting, and guaranteeing bills of exchange). Commercial banks also provide credit guarantees, payment, remittance and financial instruments for risk management. Such instruments include interest-rate derivatives and foreign-exchange derivatives. Additional business to support capital market development, such as debt and equity instruments, is allowed. A commercial bank may also provide other services, such as bank assurance and e-banking.

Thailand’s central bank is the Bank of Thailand (BOT), which is headed by a Governor appointed for a five-year term. The BOT serves the following functions: prints and issues banknotes and other security documents; promotes monetary stability and formulates monetary policies; manages the BOT’s assets; provides banking facilities to the government; acts as the registrar of government bonds; provides banking facilities for financial institutions; establishes or supports the payment system; supervises financial institutions manages the country’s foreign exchange rate under the foreign exchange system; and determines the makeup of assets in the foreign exchange reserve.

Apart from the 15 domestic commercial banks, there are currently 11 registered foreign bank branches, including three American banks (Citibank, Bank of America, and JP Morgan Chase), and four foreign bank subsidiaries operating in Thailand. To set up a bank branch or a subsidiary in Thailand, a foreign commercial bank must obtain approval from the Ministry of Finance and the BOT. Foreign commercial bank branches are limited to three service points (branches/ATMs) and foreign commercial bank subsidiaries are limited to 40 service points (branches and off-premise ATMs) per subsidiary. Newly established foreign bank branches are required to have minimum capital funds of 125 million baht (USD 3.99 million at 2020 average exchange rates) invested in government or state enterprise securities, or directly deposited with the Bank of Thailand. The number of expatriate management personnel is limited to six people at full branches, although Thai authorities frequently grant exceptions on a case-by-case basis.

Non-residents can open and maintain foreign currency accounts without deposit and withdrawal ceilings. Non-residents can also open and maintain Thai baht accounts; however, in an effort to curb the strong baht, the Bank of Thailand capped non-resident Thai deposits to 200 million baht across all domestic bank accounts. However, in January 2021, the Bank of Thailand began allowing non-resident companies greater flexibility to conduct baht transactions with domestic financial institutions under the non-resident qualified company scheme. Participating non-financial firms which trade and invest directly in Thailand are allowed to manage currency risks related to the baht without having to provide proof of underlying baht holdings for each transaction. This will allow firms to manage baht liquidity more flexibly without being subject to the end-of-day outstanding limit of 200 million baht for non-resident accounts. Withdrawals are freely permitted. Since mid-2017, the BOT has allowed commercial banks and payment service providers to introduce new financial services technologies under its “Regulatory Sandbox” guidelines. Recently introduced technologies under this scheme include standardized QR codes for payments, blockchain funds transfers, electronic letters of guarantee, and biometrics.

Thailand’s alternative financial services include cooperatives, micro-saving groups, the state village funds, and informal money lenders. The latter provide basic but expensive financial services to households, mostly in rural areas. These alternative financial services, with the exception of informal money lenders, are regulated by the government.

Foreign Exchange and Remittances

Foreign Exchange

There are no limitations placed on foreign investors for converting, transferring, or repatriating funds associated with an investment; however, supporting documentation is required. Any person who brings Thai baht currency or foreign currency in or out of Thailand in an aggregate amount exceeding USD 15,000 or the equivalent must declare the currency at a Customs checkpoint. Investment funds are allowed to be freely converted into any currency.

The exchange rate is generally determined by market fundamentals but is carefully scrutinized by the BOT under a managed float system. During periods of excessive capital inflows/outflows (i.e., exchange rate speculation), the central bank has stepped in to prevent extreme movements in the currency and to reduce the duration and extent of the exchange rate’s deviation from a targeted equilibrium.

Remittance Policies

Thailand imposes no limitations on the inflow or outflow of funds for remittances of profits or revenue for direct and portfolio investments. There are no time limitations on remittances.

Sovereign Wealth Funds

Thailand does not have a sovereign wealth fund and the Bank of Thailand is not pursuing the creation of such a fund. However, the International Monetary Fund has urged Thailand to create a sovereign wealth fund due to its large accumulated foreign exchange reserves. As of December 2020, Thailand had the world’s 13th largest foreign exchange reserves at USD 258.1 billion.

Capital Markets and Portfolio Investment

Togo and the other West African Economic and Monetary Union (WAEMU) member countries are working toward greater regional integration with unified external tariffs. Togo relies on the West African Economic and Monetary Union (WAEMU) Regional Stock Exchange in Abidjan, Cote d’Ivoire to trade equities for Togolese public companies.

WAEMU has established a common accounting system, periodic reviews of member countries’ macroeconomic policies based on convergence criteria, a regional stock exchange, and the legal and regulatory framework for a regional banking system. The government and central bank respect IMF Article VIII and refrain from restrictions on payments and transfers for current international transactions. Credit is generally allocated on market terms. With sufficient collateral, foreign investors are generally able to get credit on the local market. The private sector in general has access to a variety of credit instruments when and if collateral is available.

Money and Banking System

The penetration of banking services in the country is low and generally only available in major cities.

The government and the banking sector have worked to restore Togo’s reputation as a regional banking center, which was weakened by political upheavals from 1991 to 2005, and several regional and sub-regional banks now operate in Togo, including Orabank, Banque Atlantique, Bank of Africa, Diamond Bank, International Bank of Africa in Togo (BIAT), and Coris Bank.

Additionally, Togo is home to the headquarters of the ECOWAS Bank for Investment and Development (EBID), the West African Development Bank (BOAD – the development bank of the West African Economic and Monetary Union), Oragroup, and Ecobank Transnational Inc. (ETI), the largest independent regional banking group in West Africa and Central Africa, with operations in 36 countries in Sub-Saharan Africa.

The banking sector is generally healthy, and the total assets of Togo’s largest banks are approximately $25-30 billion, including Ecobank, a very large regional bank headquartered in Lomé.

Togo’s monetary policy and banking regulations are managed by the Central Bank of West African States (BCEAO). No known correspondent relationships were lost in the past four years. No known correspondent banking relationships are in jeopardy.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on the transfer of funds to other FCFA-zone countries or to France. The transfer of more than FCFA 500,000 (about $1,000) outside the FCFA-zone requires justification documents (e.g. pro forma invoice) to be presented to bank authorities.

The exchange system is free of restrictions for payments and transfers for international transactions. Some American investors in Togo have reported long delays (30 – 40 days) in transferring funds from U.S. banks to banks located in Togo. This is reportedly because banks in Togo have limited contacts with U.S. banks to facilitate the transfer of funds.

Togo uses the CFA franc (FCFA), which is the common currency of the eight (8) West African Economic and Monetary Union (WAEMU) countries. The currency is fixed to the Euro at a rate of 656 FCFA to 1 Euro. As a result of this fixed exchange rate, Togo’s inflation rate is consistently below 2%.

Remittance Policies

The 2012 Investment Code provides for the free transfer of revenues derived from investments, including the liquidation of investments, by non-residents.

Sovereign Wealth Funds

Togo does not maintain a Sovereign Wealth Fund (SWF) or other similar entity.

Capital Markets and Portfolio Investment

The government welcomes foreign portfolio investment.

TT has its own stock market and has an established regulatory framework to encourage and facilitate portfolio investment. There is enough liquidity in the markets to enter and exit sizeable positions.

Existing policies facilitate the free flow of financial resources into the product and factor markets.

The government and central bank respect IMF article VIII by refraining from restrictions on payment and transfers for current international transactions. Shortages of foreign exchange, exacerbated by the government’s maintenance of the local currency at values higher than those which the market would bear, however, cause considerable delays in payments and transfers for international transactions.

A full range of credit instruments is available to the private sector. There are no restrictions on borrowing by foreign investors, who are able to access credit. Credit is allocated on market terms, but interest rates tend to be higher for foreign borrowers.

Money and Banking System

Banking services are widespread throughout urban areas, but penetration is significantly lower in rural areas.

Although the banking sector is healthy and well-capitalized, the IMF in its 2020 Financial Stability Assessment Program noted Trinidad and Tobago’s banks are exposed to sovereign risk and potential liquidity risks stemming from non-bank financial entities in the group. The financial system as a whole faces risks of increasing household debt, a lack of supervisory independence and out-of-date regulatory frameworks, the sovereign-bank nexus and the absence of a macro-prudential toolkit, and contagion risks between investment funds and banks. The report further states that the financial sector legislation and regulation have not kept pace with international best practice. The supervisors operate with guidelines in key areas instead of binding powers, which limits their authority

In 2019, the estimated total assets of Trinidad and Tobago’s largest banks was $21.9 billion.

TT has a central bank system. Foreign banks may establish operations in TT provided they obtain a license from the central bank. Trinidad and Tobago has lost correspondent banking relationships in the past three years. The U.S. Mission is not aware of any current correspondent banking relationships that are in jeopardy.

There are no restrictions on a foreigner’s ability to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

Shortages of foreign exchange, exacerbated by the government’s maintenance of the local currency at values higher than those which the market would bear, cause considerable delays in conversion into world currencies. Businesses continue to report a cumbersome bureaucratic process and a minimum three-month delay in such conversions.

The central bank intervenes to maintain an unofficial peg to the U.S. dollar, using a managed float in which the exchange rate fluctuates mildly day-to-day, and limits the availability of foreign currency.

Remittance Policies

While there are no recent changes or plans to change investment remittance policies to tighten or relax access to foreign exchange for investment remittances, commercial banks have enacted policies that limit access to foreign exchange due to national shortages, on guidance from the Ministry of Finance and the central bank.

Although there are no official time limitations on remittances, timeliness of remittances depends on availability of foreign currency.

Sovereign Wealth Funds

The value of TT’s Heritage and Stabilization Fund the fund as of September 2020 is approximately $5.7 billion. The fund invests in U.S. short duration fixed income, U.S. core domestic fixed income, U.S. core domestic equities, and non-U.S. core international equities.

The sovereign wealth fund (SWF) follows the voluntary code of good practices known as the Santiago Principles. TT participates in the IMF-hosted International Working Group on Sovereign Wealth Funds.

None of the SWF is invested domestically. There are no potentially negative ramifications for U.S. investors in the local market.

Capital Markets and Portfolio Investment

Tunisia’s financial system is dominated by its banking sector, with banks accounting for roughly 85 percent of financing in Tunisia. Overreliance on bank financing impedes economic growth and stronger job creation. Equity capitalization is relatively small; Tunisia’s stock market provided 9.1 percent of corporate financing in 2019 according to the Financial Market Council annual report. Other mechanisms, such as bonds and microfinance, contribute marginally to the overall economy.

Created in 1969, the Bourse de Tunis (Tunis stock exchange) listed 80 companies as of December 2020. The total market capitalization of these companies was USD 8.41 billion, equivalent to 23.1% of the GDP. During the last five years, the exchange’s regulatory and accounting systems have been brought more in line with international standards, including compliance and investor protections. The exchange is supervised and regulated by the state-run Capital Market Board. Most major global accounting firms are represented in Tunisia. Firms listed on the stock exchange must publish semiannual corporate reports audited by a certified public accountant. Accompanying accounting requirements exceed what many Tunisian firms can, or are willing to, undertake. GOT tax incentives attempt to encourage companies to list on the stock exchange. Newly listed companies that offer a 30 percent capital share to the public receive a five-year tax reduction on profits. In addition, individual investors receive tax deductions for equity investment in the market. Capital gains are tax-free when held by the investor for two years.

Foreign investors are permitted to purchase shares in resident (onshore) firms only through authorized Tunisian brokers or through established mutual funds. To trade, non-resident (offshore) brokers require a Tunisian intermediary and may only service non-Tunisian customers. Tunisian brokerage firms may have foreign participation, as long as that participation is less than 50 percent. Foreign investment of up to 50 percent of a listed firm’s capital does not require authorization.

Money and Banking System

According to the Central Bank of Tunisia (CBT) annual report on banking supervision published in March 2021, Tunisia hosts 30 banks, of which 23 are onshore and seven are offshore. Onshore banks include three Islamic banks, two microcredit and SME financing banks, and 18 commercial universal banks.

Domestic credit to the private sector provided by banks stood at 64 percent of GDP in 2019. According to the World Bank, this level is higher than the MENA region average of 56.7 percent. In the World Bank’s Doing Business 2020 survey, Tunisia’s ranking in terms of ease of access to credit fell from 99 in 2019 to 104 in 2020. Tunisia’s banking system penetration has grown by five percent annually for the past five years. 87 percent of banks are located in the coastal regions, with about 41 percent in the greater Tunis area alone.

Tunisia’s banking system activity is mainly within the 23 onshore banks, which accounted for 92.3 percent of assets, 93.8 percent of loans, and 97 percent of deposits in 2019. The onshore banks offer identical services targeting Tunisia’s larger corporations. Meanwhile, SMEs and individuals often have difficulty accessing bank capital due to high collateral requirements.

The CBT report noted that tighter monetary policy resulted in a slowdown in credit activity in 2019, affecting both loans to professionals (which only grew by 4.8% compared to an increase of 10.2% in 2018) and loans to individuals (0.4% compared to 5.5% in 2018).

Foreign banks are permitted to open branches and establish operations in Tunisia under the offshore regime and are subject to the supervision of the Central Bank.

Government regulations control lending rates. This prevents banks from pricing their loan portfolios appropriately and incentivizes bankers to restrict the provision of credit. Competition among Tunisia’s many banks has the effect of lowering observed interest rates; however, banks often place conditions on loans that impose far higher costs on borrowers than interest rates alone. These non-interest costs may include collateral requirements that come in the form of liens on real estate. Often, collateral must equal or exceed the value of the loan principal. Collateral requirements are high because banks face regulatory difficulties in collecting collateral, thereby adding to costs. According to the CBT banking supervision report, nonperforming loans (NPLs) were at 13.4 percent of all bank loans in 2019, mostly in the agriculture (27.1 percent) and tourism (47 percent) sectors.

Beyond the banks and stock exchange, few effective financing mechanisms are available in the Tunisian economy. A true bond market does not exist, and government debt sold to financial institutions is not re-traded on a formal, transparent secondary market. Private equity remains a niche element in the Tunisian financial system. Firms experience difficulty raising sufficient capital, sourcing their transactions, and selling their stakes in successful investments once they mature. The microfinance market remains underexploited, with non-governmental organization Enda Inter-Arabe the dominant lender in the field.

The GOT recognizes two categories of financial service activity: banking (e.g., deposits, loans, payments and exchange operations, and acquisition of operating capital) and investment services (reception, transmission, order execution, and portfolio management). Non-resident financial service providers must present initial minimum capital (fully paid up at subscription) of 25 million Tunisian dinars (USD 8.9 million) for a bank, 10 million dinars (USD 3.5 million) for a non-bank financial institution, 7.5 million dinars (USD 2.6 million) for an investment company, and 250,000 dinars (USD 89,000) for a portfolio management company.

Foreign Exchange and Remittances

Foreign Exchange

The Tunisian Dinar can only be traded within Tunisia, and it is illegal to move dinars out of the country.  The dinar is convertible for current account transactions (export-import operations, remittances of investment capital, earnings, loan or lease payments, royalties, etc.).  Central Bank authorization is required for some foreign exchange operations.  For imports, Tunisian law prohibits the release of hard currency from Tunisia as payment prior to the presentation of documents establishing that the merchandise has been shipped to Tunisia. In 2020, the dinar appreciated 4 percent against the dollar and 2 percent against the Euro.

Non-residents are exempt from most exchange regulations.  Under foreign currency regulations, non-resident companies are defined as having:

• Non-resident individuals who own at least 66 percent of the company’s capital, and
• Capital fully financed by imported foreign currency.

Foreign investors may transfer funds at any time and without prior authorization.  This applies to principal as well as dividends or interest capital.  The procedures for repatriation are complex, however, and within the discretion of the Central Bank.  The difficulty in the repatriation of capital and dividends is one of the most frequent complaints of foreign investors in Tunisia.

There are no limits to the amount of foreign currency that visitors can bring to Tunisia to exchange into local currency.  However, amounts exceeding the equivalent of 25,000 dinars (USD 8,900) must be declared to customs at the port of entry.  Non-residents must also report foreign currency imports if they wish to re-export or deposit more than 5,000 dinars (USD 1,780).  Tunisian customs authorities may require currency exchange receipts on exit from the country.

Remittance Policies

Tunisia’s 2016 Investment Law enshrines the right of foreign investors to transfer abroad funds in foreign currency with minimal interference from the Central Bank.  Ministerial decree no. 417 of May 2018 states that the Central Bank of Tunisia must decide on foreign currency remittance requests within 90 days. In case of no response, the investor may contact the Higher Investment Authority, which will give final approval within 30 days.

Sovereign Wealth Funds

By decree no. 85-2011, the GOT established a sovereign wealth fund, “Caisse des Depots et des Consignations” (CDC), to boost private sector investment and promote small and medium enterprise (SME) development. It is a state-owned investment entity responsible for independently managing a portion of the state’s financial assets. The CDC was set up with support from the French CDC and the Moroccan CDG (Caisse de Depots et de Gestion) and became operational in early 2012. The original impetus for the creation of the CDC was to manage assets confiscated from the former ruling family as independently as possible to serve the public interest. More information is available about the CDC at www.cdc.tn . As of December 2019, CDC had 8.2 billion dinars (USD 2.8 billion) in assets and 348 million dinars (USD 118 million) in capital.

All CDC investments are made locally, with the objective of boosting investments in the interior regions and promoting SME development.

The CDC is governed by a supervisory committee composed of representatives from different ministries and chaired by the Minister of Finance.

Capital Markets and Portfolio Investment

The Turkish Government encourages and offers an effective regulatory system to facilitate portfolio investment.  Since the start of 2020, a currency crisis that has been exacerbated by the COVID-19 pandemic, and high levels of dollarization have raised liquidity concerns among some commentators.  Existing policies facilitate the free flow of financial resources into product and factor markets.  The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.  Credit is generally allocated on market terms, though the GOT has increased low- and no-interest loans for certain parties, and pressured state-owned, and even private banks to increase their lending, especially for stimulating economic growth and public projects.  Foreign investors are able to get credit on the local market.  The private sector has access to a variety of credit instruments.

The Turkish banking sector, a central bank system, remains relatively healthy.  The estimated total assets of the country’s largest banks were as follows at the end of 2020:  Ziraat Bankasi A.S. – USD 127.09 billion, Turkiye Vakiflar Bankasi – USD 93.04 billion,  Halk Bankasi – USD 91.64 billion, Is Bankasi – USD 79.92 billion, Garanti Bankasi– USD  66.31 billion, Yapi ve Kredi Bankasi – USD 61.86 billion, Akbank – USD 60.11 billion. (Conversion rate: 7.42 TL/1 USD).  According to the Turkish Banking Regulation and Supervision Agency (BDDK), the share of non-performing loans in the sector was approximately 4.08 percent at the end of 2020.  The only requirements for a foreigner to open a bank account in Turkey are a passport copy and either an identification number from the Ministry of Foreign Affairs or a Turkish Tax identification number.

The Turkish Government adopted a framework Capital Markets Law in 2012, aimed at bringing greater corporate accountability, protection of minority-shareholders, and financial statement transparency.  Turkish capital markets in 2020 drew growing interest from domestic investors, according to data from the Central Registry Agency (MKK).  In 2020, the number of local real investors reached 2 million, up an average of 65,200 per month, with the total portfolio value reaching USD 28.31 billion.

The BDDK monitors and supervises Turkey’s banks.  The BDDK is headed by a board whose seven members are appointed for six-year terms.  Bank deposits are protected by an independent deposit insurance agency, the Savings Deposit Insurance Fund (TMSF).  Because of historically high local borrowing costs and short repayment periods, foreign and local firms frequently seek credit from international markets to finance their activities.  Foreign banks are allowed to establish operations in the country.

Foreign Exchange and Remittances

Foreign Exchange

Turkish law guarantees the free transfer of profits, fees, and royalties, and repatriation of capital.  This guarantee is reflected in Turkey’s 1990 Bilateral Investment Treaty (BIT) with the United States, which mandates unrestricted and prompt transfer in a freely-usable currency at a legal market-clearing rate for all investment-related funds.  There is little difficulty in obtaining foreign exchange in Turkey, and there are no foreign-exchange restrictions, though in 2019, the GOT continued to encourage businesses to conduct trade in lira.  An amendment to the Decision on the Protection of the Value of the Turkish Currency was made with Presidential Decree No. 85 in September 2018 wherein the GOT tightened restrictions on Turkey-based businesses  conducting numerous types of transactions using foreign currencies or indexed to foreign currencies.  The Turkish Ministry of Treasury and Finance may grant exceptions, however.  Funds associated with any form of investment can be freely converted into any world currency.  The exchange rate is heavily managed by the Central Bank of the Republic of Turkey.  Turkish banking regulations and informal government instructions to Turkish banks limit the supply of Turkish lira to the London overnight swaps market.  Turkey took a variety of measures to prop up the lira in 2020, including the imposition of withdrawal limits and time delays, mostly for private individuals owning FX deposit accounts.  In March 2020, the bank insurance and transaction tax introduced in 2019 was increased from 0.2 percent to 1 percent for purchases of FX and gold.  Running down its FX reserves and freezing international banks out of its FX market provided short-term relief during June and July, but reduced these reserves to dangerously low levels.  The BDDK raised the limits for swap, forward, option and other derivative transactions that Turkish lenders can execute with nonresidents.  Previously, swap limits with foreigners were lowered to levels of 1 percent, 2 percent, and 10 percent for weekly, monthly and annual terms, respectively.  Then the limits were raised from 2 percent to 5 percent of bank equity for trades with seven days to maturity; from 5 percent to 10 percent  for those with 30 days to maturity; and from 20 percent to 30 percent for one-year to maturity transactions.

There is no limit on the amount of foreign currency that may be brought into Turkey, but not more than 25,000 Turkish lira or €10,000 worth of foreign currency may be taken out without declaration. Although the Turkish Lira (TL) is fully convertible, most international transactions are denominated in U.S. dollars or Euros due to their universal acceptance.  Banks deal in foreign exchange and do borrow and lend in foreign currencies.  While for the most part, foreign exchange is freely traded and widely available, a May 2019 government decree imposed a settlement delay for FX purchases by individuals of more than USD 100,000, while as mentioned above there is also a 0.2 percent tax on FX purchases.  Foreign investors are free to convert and repatriate their Turkish Lira profits.

The exchange rate was heavily managed by the Central Bank of the Republic of Turkey (CBRT) with a “dirty float” regime until November 2020, when a new central bank governor assumed responsibility.  After several months of increased policy rates, tight monetary policy, and a more stable Turkish Lira, the governor was fired, as a result of which the lira quickly depreciated by 10 percent.  It is still too early to predict the medium to long-term effects of the recent changes to the CBRT on currency and macroeconomic stability.

The BDDK announced on April 12, 2020 new limits to FX transactions.  The agency cut the limit for Turkish banks’ FX swap, spot and forward transactions with foreign entities to 1 percent of a bank’s equity, a move that effectively aims to curtail transactions that could raise hard currency prices.  The limit had already been halved to 25 percent in August 2018, when the currency crisis hit.  These moves to shield the lira have meant a de facto departure from Turkey’s official policy of a floating exchange rate regime over the past year.

Remittance Policies

In Turkey, there have been no recent changes or plans to change investment remittance policies, and indeed the GOT in 2018 actively encouraged the repatriation of funds.  The GOT announced “Assets Peace” in May 2018 which incentivized citizens to bring assets to Turkey in the form of money, gold, or foreign currency by eliminating any tax burden on the repatriated assets.  The Assets Peace has been extended until June 30, 2021.  There are also no time limitations on remittances.  Waiting periods for dividends, return on investment, interest and principal on private foreign debt, lease payments, royalties, and management fees do not exceed 60 days.   There are no limitations on the inflow or outflow of funds for remittances of profits or revenue.

According to the Presidential Decree No. 1948 published in the Official Gazette No. 30994 dated December 30, 2019, the above-mentioned notification and declaration periods for activities related to the “Asset Peace Incentive” defined in Paragraphs 1, 3 and 6 of Temporary Article 90 of Income Tax Code have been extended for six more months following the previous expiration dates.

Sovereign Wealth Funds

The GOT announced the creation of a sovereign wealth fund (called the Turkey Wealth Fund, or TVF) in August 2016.  Unlike traditional sovereign wealth funds, the controversial fund consists of shares of state-owned enterprises (SOEs) and is designed to serve as collateral for raising foreign financing.  However, the TVF has not launched any major projects since its inception.  In September 2018, the President became the Chair of the TVF.  Several leading SOEs, such as natural gas distributor BOTAS, Turkish Airlines, and Ziraat Bank have been transferred to the TVF, which in 2020 became the largest shareholder in domestic telecommunications firm Turkcell.  Critics worry management of the fund is opaque and politicized.  The fund’s consolidated financial statements are available on its website (https://www.tvf.com.tr/en/investor-relations/reports), although independent audits are not made publicly available.    Firms within the fund’s portfolio appear to have increased their debt loads substantially since 2016.  International ratings agencies consider the fund a quasi-sovereign.  The fund was already exempt from many provisions of domestic commercial law and new legislation adopted April 16 granted it further exemptions from the Capital Markets Law and Turkish Commercial Code, while also allowing it to take ownership of distressed firms in strategic sectors.  As part of its response to the COVID-19 pandemic, in 2020 Turkey allowed the TVF to take equity positions in private companies in distress.

Turkmenistan’s underdeveloped financial system and severe hard currency shortage significantly hinder the free flow of financial resources. The largest state banks include: The State Bank for Foreign Economic Relations (Vnesheconombank), Dayhanbank, Turkmenbashy Bank, Turkmenistan Bank, and Halk Bank. These banks have narrow specializations—foreign trade, agriculture, industry, social infrastructure, and savings and mortgages, respectively. Senagat Bank took over Garagum Bank in 2017 and now is the sole remaining local bank providing general banking services for businesses.

There are also four foreign commercial banks in the country: a joint Turkmen-Turkish bank (joint venture of Dayhanbank and Ziraat Bank), a branch of Saderat Bank of Iran, as well as Deutsche Bank and Commerzbank offices, which provide European bank guarantees for companies and for the Turkmen government; they do not provide general banking services. The National Bank in Pakistan is permanently closing its Ashgabat branch as part of a larger restructuring of its international operations.

Insufficient liquidity can make it difficult for investors to exit the market easily. There were no reported cases where foreign investors received credit on the local market. The Union of Industrialists and Entrepreneurs, a nominally independent organization of private companies and businesspeople, is in fact closely controlled by the government and issues loans with no more than one per cent interest per annum to its member companies to finance projects in strategic sectors, including animal husbandry, agriculture, food production and processing, and industrial development. According to unofficial reports, credit is not allocated on market terms. The European Bank for Reconstruction and Development (EBRD) provides some loans to private small- and medium-sized enterprises (SMEs) in Turkmenistan. There is no publicly available information to confirm whether the government or Central Bank respect IMF Article VIII. There is no stock market in the country.

Money and Banking System

The total assets of the country’s largest bank, Vnesheconombank, were TMT 33.9 billion ($9.7 billion at the official exchange rate) as of December 31, 2019. The bank’s financial statements are published at: http://www.tfeb.gov.tm/en/about-bank-en/financial-statements .

Vnesheconombank’s list of correspondent banks is available at: http://www.tfeb.gov.tm/index.php/en/about-bank-en/correspondent-relations .

The assets of other banks are believed to be much smaller. All banks, including commercial banks, are tightly regulated by the state. Commercial banks are prohibited from providing services to state enterprises.

State banks primarily service state enterprises and allocate credit on subsidized terms to state entities. Foreign investors are only able to secure credit on the local market through equity loans from EBRD and Turkmen-Turkish Bank. There are no capital markets in Turkmenistan, although the 1993 Law on Securities and Stock Exchanges outlines the main principles for issuing, selling, and circulating securities. The 1999 Law on Joint Stock Societies further provides for the issuance of common and preferred stock and bonds and convertible securities in Turkmenistan, but in the absence of a stock exchange or investment company, there is no market for securities. The Embassy is not aware of any official restrictions on a foreigner’s ability to establish a bank account based on residency status, though in practice foreigners may only open foreign currency accounts, and not manat accounts.

Foreign Exchange

The government tightly controls the country’s foreign exchange flows. The Central Bank controls the fixed rate by releasing U.S. dollars into official exchange markets. Foreign exchange regulations adopted in June 2008 allow the Central Bank to provide banks with access to foreign exchange. These regulations also allowed commercial banks to open correspondent accounts.

For the last several years, the government has been unable to meet demand for U.S. dollars. For example, debit cards have daily and monthly withdrawal limits. (The limits fluctuate but tend to hover around $15 per day and $150 per month.). The government has also imposed administrative procedures that make withdrawals more cumbersome (e.g., proof of residency is now required). In January 2016, the Central Bank of Turkmenistan further restricted access to foreign currency and issued a press release preventing banks from selling U.S. dollars at the country’s exchange points. In addition, when an individual purchases foreign currency through a wire transfer (limited to the equivalent of the monthly salaries of the individual and his/her immediate family members’ monthly salaries), the currency (at an exchange rate of 3.5 manat per USD) must be deposited onto the individual’s international debit card (Visa or MasterCard). The individual does not receive cash. There have been media reports in the past that Vnesheconombank has blocked the Visa cards of some of its customers without notice. The government also introduced an amendment to the Administrative Offenses Code that raises the fines for illegal foreign exchange transactions (i.e., selling and purchasing foreign currency via informal channels) and also trading in foreign currency on the territory of Turkmenistan.

Turkmenistan imports the majority of its industrial equipment and consumer goods. The government’s export earnings, foreign exchange reserves, and foreign loans pay for industrial equipment and infrastructure projects.

At the end of 2015, a black market for U.S. dollars emerged in Turkmenistan. The official exchange rate is TMT 3.5/USD. During the 2020 calendar year covered by this report, the average black-market exchange rate was TMT 22.2/USD.

Remittance Policies

Foreign investors generating revenue in foreign currency do not generally have problems repatriating their profits; the problem lies with foreign companies earning manat. These companies struggle to convert and repatriate earnings. Some foreign companies receiving income in Turkmen manat seek indirect ways to convert local currency to hard currency through the local purchase of petroleum and textile products for resale on the world market. Since the government of Turkmenistan introduced numerous limitations on foreign currency exchange in January 2016, converting local currency remains a challenge in many sectors. Some foreign companies have complained of non-payment or major delays in payment by the government.

In June 2010, Turkmenistan became a full member of the Eurasian Group (EAG), a regional organization to combat money laundering and terrorism financing. EAG is an associate member of the Financial Action Task Force (FATF). EAG aims to increase the transparency of financial systems in the region, including measures related to correspondent banking, money and value transfer services, and wire transfer services.

The government maintains a sovereign wealth fund known as the Stabilization Fund, which mainly holds state budget surpluses. The government also keeps a separate fund known as the Foreign Exchange Reserve Fund (FERF) for oil and gas revenues. There is no publicly available information about the size of these funds or how they are managed.

Capital Markets and Portfolio Investment

The government generally welcomes foreign portfolio investment and has put in place a legal and institutional framework to manage such investments. The Capital Markets Authority (CMA) licenses brokers and dealers and oversees the USE, which is now trading the stock of 17 companies. Liquidity remains constrained to enter and exit sizeable positions on the USE. Capital markets are open to foreign investors and there are no restrictions for foreign investors to open a bank account in Uganda. However, the government imposes a 15% withholding tax on interest and dividends. Foreign-owned companies may trade on the stock exchange, subject to some share issuance requirements. The government respects IMF Article VIII and refrains from restricting payments and transfers for current international transactions.

Credit is available from commercial banks on market terms and foreign investors can access credit. However, persistently high lending rates, including high yields on Ugandan government-issued securities, push up interest rates on commercial loans, undermining the private sector’s access to affordable credit. For instance, commercial lending rates averaged 19% and government 10-year bonds averaged 16% at the end of February 2021.

Money and Banking System

Formal banking participation remains low, with only 35.5% of Ugandans having access to bank accounts, many via their membership in formal savings groups. However, 16 million Ugandans have bank accounts, while more than 30 million use mobile money to conduct basic financial transactions. Uganda’s banking and financial sector is generally healthy, though non-performing loans remain a problem. According to the Bank of Uganda’s Financial Soundness Indicators, Uganda’s non-performing loan rate stood at 6% at the end of June 2020. The effects of COVID-19 on the economy triggered the rise in non-performing loans in 2020 as business slowed down due to a government-imposed lockdown, among other measures. Uganda has 26 commercial banks, with the top six controlling at least 60% of the banking sector’s total assets, valued at $9.7 billion. The Bank of Uganda regulates the banking sector, and foreign banks may establish branches in the country. In February 2020, the Financial Action Taskforce added Uganda to its “Grey List” due to the country’s insufficient implementation of its anti-money laundering and countering financing of terrorism policies. As of the end of February 2021, Uganda was still on this watch list due to seven strategic deficiencies in the implementation of AML/CFT policies. As a result, Uganda’s correspondent banking relationships face increased oversight. Uganda does not restrict foreigners’ ability to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

Uganda keeps open capital accounts, and there are no restrictions on capital transfers in and out of Uganda. If, however, an investor benefited from tax incentives on the original investment, he or she will need to seek a “certificate of approval” to “externalize” the funds. Investors may convert funds associated with any form of investment into any world currency. The Ugandan shilling (UGX) trades on a market-based floating exchange rate.

Remittance Policies

There are no restrictions for foreign investors on remittances to and from Uganda.

Sovereign Wealth Funds

In 2015, the government established the Uganda Petroleum Fund (PF) to receive and manage all government revenues from the oil and gas sector. By law, the government must spend a portion of proceeds from the fund on oil-related infrastructure, with parliament appropriating the remainder of revenues through the normal budget procedure. As of June 2020, the PF had a balance of $24 million. Uganda does not have a sovereign wealth fund, but plans to establish a fund called the Petroleum Revenue Investment Reserve (PRIR) to ensure responsible and long-term management of revenue from Uganda’s oil resources when oil production begins. In 2019, Uganda inaugurated PRIR’s investment advisory committee. The committee is meant to advise the Ugandan government on how to invest proceeds from oil revenue and establish fund governance, but that work is ongoing.

Capital Markets and Portfolio Investment

The Ukrainian government encourages foreign portfolio investment in Ukraine, but Ukraine’s capital and commodity markets remain underdeveloped.  Ukraine’s capital market consists of markets for stocks and for commodities.  Liquidity is limited and investors have few investment options.  The financial market includes ten stock exchanges, a settlement center, two depositories, and a securities market regulator.  Government bonds constitute 95 percent of the trades.  A few corporate securities are listed, but the volume of their trades is insignificant.  With limited exceptions, only Ukrainian-licensed securities traders may handle securities transactions.  In January 2020, China’s Bohai Commodity Exchange acquired a 49.9% stake in one of Ukraine’s leading stock exchanges, JSC PFTS Stock Exchange.  The commodity market in Ukraine does not have a transparent regulatory framework.

The regulator of Ukraine’s capital market, the National Securities and Stock Market Commission, lacks financial and operational independence and is not a signatory to the Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information of the International Organization of Securities Commissions.  Ukraine has been a member of the International Organization of Securities Commissions (IOSCO) since 1996.  In February 2021, a new draft law “On the National commission on securities and stock exchanges” was registered in parliament and is pending consideration.  The law would strengthen the independence and institutional capacity of the Securities Commission and facilitate compliance with IOSCO standards.  Ukraine committed to adoption of the law as part of its IMF program.  In November 2019, Ukraine adopted the so-called “Split” law to regulate the non-banking financial services sector.  The law, which entered into force on July 1, 2020, transitions Ukraine from a sectoral regulatory model to an integrated model, and lays the foundation for the full development of consumer rights protections and market conduct regulations in the financial markets. The law dissolved the National Commission for State Regulation of Financial Services Markets and split up its regulatory functions between the National Bank of Ukraine and the National Securities and Stock Market Commission.  The National Bank of Ukraine now supervises and regulates the insurance market, leasing and factoring companies, credit unions, credit bureaus, pawnshops and other financial companies, while the National Securities and Stock Market Commission regulates private funds, including pension funds, construction financing, and real estate transactions.

For many years, Ukrainian capital markets have struggled due to significant gaps and inconsistencies in the regulatory framework.  In June 2020, parliament passed the law “On amendments to certain laws regarding facilitating investments and new financial instruments,” aimed at restarting Ukrainian capital markets.  The law will bring Ukrainian legislation in line with key provisions of EU laws on capital markets (MiFID II, MiFIR, EMIR, the Settlement Finality Directive, and the Financial Collateral Directive), create a framework for updated capital markets’ infrastructure, and regulate commodity markets and derivatives.  The law is expected to have a transformative effect on Ukraine’s capital markets as it provides for new financial instruments for savings and investment, new tools for risk management, and new requirements for market transparency. The law is expected to enter into force on July 1, 2021.

Credit is largely allocated on market terms, and foreign investors are able to get credit on the local market through a variety of credit instruments.

Money and Banking System

Ukraine’s banking sector has seen remarkable progress following the 2014-2015 crisis thanks in large part to  banking sector cleanup, which resulted in the closure of over 100 banks for insolvency or money laundering activities, and the professionalization of Ukraine’s central bank, the National Bank of Ukraine.  At the end 2020, 73 solvent banks were operating in Ukraine.

Partly due to the Covid-19 pandemic, the number of unprofitable banks ticked up in 2020.  Eight banks were unprofitable in 2020 compared to six in 2019, and two banks were declared insolvent due to non-compliance with capital requirements.  The banking sector in Ukraine reported net profit of UAH 41.3 billion ($1.4 billion) for 2020, roughly a quarter of the profit reported in 2019.  State-owned PrivatBank accounted for more than half of the banking sector’s total profits.  In 2020, banks’ total assets increased by 22 percent to UAH 1.8 trillion ($64 billion), the total amount of loans decreased by 6.8 percent to UAH 963 billion ($34 billion), while total obligations increased by 24.6 percent to UAH 1.6 trillion ($21 billion).

Non-performing loans (NPL) decreased from 48.4 percent in 2019 to 41 percent in 2020 but remain one of the biggest unresolved issues in the banking sector.  State-owned banks wrote off UAH 30.6 billion ($1.1 billion) in local currency loans and $3.1 billion in dollar-denominated loans in 2020, reducing their share of NPLs from 63.5 percent to 57.4 percent.  The share of NPLs in foreign commercial banks decreased from 16 percent to 12.3 percent, and in Ukrainian commercial banks from 18.6 percent to 14.6 percent. Greater oversight by the National Financial Stability Council, along with the National Bank’s new criteria for writing off distressed assets, has improved the banks’ NPL strategies.

Foreign-owned banks may carry out all activities conducted by domestic banks, and there are no restrictions on their participation in the banking system, including operating via subsidiaries.  A foreign company can open a bank account in Ukraine for the purposes of investment operations; otherwise, it needs to register a representative office in Ukraine.  A nonresident private person can open a bank account in Ukraine.  A foreign investor may open an account in a bank operating in Ukraine and transfer in funds for further investment or invest directly into an account of a Ukrainian resident company.

Foreign Exchange and Remittances

Foreign Exchange

The National Bank of Ukraine (NBU) continued in 2020 to liberalize currency controls, which had been put in place to stabilize the Ukrainian foreign exchange market during the 2014 economic crisis.  Under the law “On Currency and Currency Transactions”, which entered into force in February 2019, individuals can purchase foreign currency online and on credit.  The National Bank increased the cap for currency transfers by individuals from EUR 50,000 in December 2019 to EUR 200,000 in February 2021.  The daily limit was raised to UAH 399.9 thousand (or the USD/EUR equivalent).  Currency transfers abroad for legal entities are capped at EUR 2 million a year. The cap includes any outward investments.  According its currency liberalization road map, one of NBU’s priorities is to eliminate foreign currency transfer limits for individuals. Even though many restrictions for foreign currency transactions have been loosened, the new regulations still require Ukrainian banks to monitor most foreign currency transactions.

In 2019, the NBU abolished all restrictions related to the repatriation of dividends. The NBU also cancelled the mandatory sale of foreign currency proceeds by businesses from June 2019.  In addition, it removed the hryvnia reserve requirement banks had to keep for foreign currency purchases, and it now allows unlimited daily purchase of foreign currency by individuals through banks, financial institutions, and via online banking.

The NBU now allows transactions from Ukrainian bank accounts opened by non-resident legal entities. Foreign companies can open, and make payments from, current accounts as well as accumulate and buy foreign currencies using these accounts.

The NBU has developed a road map for removing currency restrictions with the goal of reaching a full capital flow regime.  The roadmap is publicly available on the NBU’s website in both Ukrainian and English:

https://bank.gov.ua/en/markets/liberalization

Further liberalization is contingent on implementation of BEPS legislation and general macro-economic conditions.

The NBU has a floating exchange rate regime, although the NBU may carry out currency interventions to meet two objectives: reducing excessive currency fluctuations and replenishment of international reserves.

Remittance Policies

In 2020, the National Bank of Ukraine doubled the limit for some retail foreign currency remittances, including for investment abroad or foreign deposits, to EUR 200,000 ($230,000) per year.  As long as they comply with the limit, individuals are permitted to remit foreign currency (or the national currency hryvnia) abroad or to current accounts of corporate nonresidents in Ukraine.  The transactions allowed include: investing abroad, depositing funds into one’s own accounts abroad, transferring funds under life insurance agreements, or making loans to nonresidents.  In 2020, individuals transferred about EUR 274 million ($315 million) abroad.  The NBU aims to completely remove the limit on international investments by individuals, subject to the full adoption and implementation of the BEPS legislation.

Sovereign Wealth Funds

Ukraine does not maintain or operate a sovereign wealth fund.

Capital Markets and Portfolio Investment  

UAE government efforts to create an environment that fosters economic growth and attracts foreign investment resulted in:  i) no taxes or restrictions on the repatriation of capital; ii) free movement of labor and low barriers to entry (effective tariffs are five percent for most goods); and iii) an emphasis on diversifying the economy away from oil, which offers a broad array of investment options for FDI.  Key non-hydrocarbon drivers of the economy include real estate, renewable energy, tourism, logistics, manufacturing, and financial services.

The UAE issued investment fund regulations in September 2012 known as the “twin peak” regulatory framework designed to govern the marketing of investment funds established outside the UAE to domestic investors and the establishment of local funds domiciled inside the UAE.  This regulation gave the Securities and Commodities Authority (SCA), rather than the Central Bank, authority over the licensing, regulation, and marketing of investment funds.  The marketing of foreign funds, including offshore UAE-based funds, such as those domiciled in the DIFC, require the appointment of a locally licensed placement agent.  The UAE government has also encouraged certain high-profile projects to be undertaken via a public joint stock company to allow the issuance of shares to the public.  Further, the UAE government requires any company carrying out banking, insurance, or investment services for a third party to be a public joint stock company.

The UAE has three stock markets:  Abu Dhabi Securities Exchange, Dubai Financial Market, and NASDAQ Dubai.  SCA, the onshore regulatory body, classifies brokerages into two groups:  those that engage in trading only while the clearance and settlement operations are conducted through clearance members, and those that engage in trading clearance and settlement operations for their clients.  Under the regulations, trading brokerages require paid-up capital of $820,000, whereas trading and clearance brokerages need $ 2.7 million.  Bank guarantees of $367,000 are required for brokerages to trade on the bourses.

In June 2020, the SCA amended the decision on issuing and offering Islamic securities, to ensure SCA legislation is in line with the principles of the International Organization of Securities Commissions (IOSCO).  In July 2020, SCA embarked on a project to restructure the legislative system for broker classification to keep pace with global practices and enhance the confidence of domestic and foreign investors.  According to the restructuring project, the following five licensing categories were introduced:  dealing in securities, dealing in investments, safekeeping, clearing and registration, credit rating, and arrangement and counseling.

The SCA’s decision on Capital Adequacy Criteria of Investment Manager and Management Company stipulates that the investment manager and the management company must allocate capital to constitute a buffer for credit risk, market risk, or operational risk, even if it does not appear as a line item in the balance sheet.

On the issue of Real Estate Investment Fund control, the SCA stipulates that a public or private real estate investment fund shall invest at least 75 percent of its assets in real estate assets.  According to the SCA, a real estate investment fund may establish or own one or more real estate services companies provided that its investment in the ownership of each company and its subsidiaries shall not be more than 20 percent of the fund’s total assets.

Credit is generally allocated on market terms, and foreign investors can access local credit markets.  Interest rates usually closely track those in the United States since the local currency is pegged to the dollar.  However, there have been complaints that GREs crowd out private sector borrowers to the detriment of mostly local SMEs.

Money and Banking System  

The UAE has a robust banking sector with 48 banks, 21 of which are foreign institutions, and six are GCC-based banks.  The number of national bank branches declined to 541 by the end of 2020, compared to 656 at the end of 2019, due to bank mergers and the transition to online banking.

Non-performing loans (NPL) comprised 6.2 percent of outstanding loans in 2019, compared with 5.7 percent in 2018, according to figures from the Central Bank of the UAE (CBUAE). Under a new reporting standard, the NPL ratio of the UAE banking system for the year-end 2018 stood at 5.6 percent, compared to 7.1 percent under the previous methodology.  The CBUAE recorded total sector assets of USD 868 billion as of December 2020.

The banking sector remains well-capitalized but has experienced a decline in lending and a rise in NPL as a result of the pandemic.  These factors have significantly reduced reported profits as banks have made greater provisions for non-performing loans.  On March 15, 2020, the CBUAE announced the USD $ 27.2 billion Targeted Economic Support Scheme (TESS) stimulus package, which included USD $13.6 billion in zero-interest, collateralized loans for UAE-based banks, and USD $13.6 billion in funds freed up from banks’ capital buffers.  In November 2020, The CBUAE extended The TESS to June 2021.

There are some restrictions on foreigners’ ability to establish a current bank account, and legal residents and Emiratis can access loans under more favorable terms than non-residents.

Foreign Exchange and Remittances  

Foreign Exchange Policies  

According to the IMF, the UAE has no restrictions on making payments and transfers for international transactions, except security-related restrictions.  Currencies trade freely at market-determined prices.  The UAE dirham has been pegged to the dollar since 2002.  The mid-point between the official buying and selling rate for the dirham (AED or Dhs) is fixed at AED 3.6725 per USD.

Remittance Policies  

The Central Bank of the UAE initiated the creation of the Foreign Exchange & Remittance Group (FERG), comprising various exchange companies, which is registered with the Dubai Chamber of Commerce & Industry.  Unlike their counterparts across the world that deal mainly in money exchange, exchange companies in the UAE are primary conduits for transferring large volumes of remittances through official channels.  According to migration and remittance data from the World Bank, in 2019, the UAE had migrant remittance outflows of USD $44.9 billion.  Exchange companies are important partners in the UAE government’s electronic salary transfer system, called the Wage Protection System.  They also handle various ancillary services ranging from credit card payments to national bonds, to traveler’s checks.

As part of its focus on improving Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) systems within the UAE, in September 2020, the CBUAE introduced a mandatory registration framework for Hawala providers or informal money transfer service providers that operate in the UAE.

Sovereign Wealth Funds  

Abu Dhabi is home to four sovereign wealth funds—the Abu Dhabi Investment Authority (ADIA) and Mubadala Investment Company are the largest—with estimated total assets of approximately USD $814.6 billion as of February 2020.  Each fund has a chair and board members appointed by the Ruler of Abu Dhabi.  President Khalifa Bin Zayed Al Nahyan is the chair of ADIA and Abu Dhabi Crown Prince Mohammed Bin Zayed Al Nahyan is the chair of Mubadala.  Other rapidly expanding Abu Dhabi sovereign funds include: ADQ, with investment portfolios in food and agriculture, aviation, financial services, healthcare, industries, logistics, media, real estate, tourism and hospitality, transport and utilities; and EDGE, which covers  weapons, cyber defense and electronic warfare and intelligence, among others.  Emirates Investment Authority, the UAE’s federal sovereign wealth fund, is modest by comparison, with estimated assets of about USD 44 billion.  The Investment Corporation of Dubai (ICD) is Dubai’s primary sovereign wealth fund, with an estimated USD $301 billion in assets according to ICD’s June 2020 financial report.

UAE funds vary in their approaches to managing investments.  ADIA generally does not actively seek to manage or take an operational role in the public companies in which it invests, while Mubadala tends to take a more active role in particular sectors, including oil and gas, aerospace, infrastructure, and early-stage venture capital.  According to ADIA, the fund carries out its investment program independently and without reference to the government of Abu Dhabi.

In 2008, ADIA agreed to act alongside the IMF as co-chair of the International Working Group of Sovereign Wealth Funds, which eventually became the International Forum of Sovereign Wealth Funds (IFSWF).  Comprising representatives from 31 countries, the IFSWF was created to demonstrate that sovereign wealth funds had robust internal frameworks and governance practices, and that their investments were made only on an economic and financial basis.

Capital Markets and Portfolio Investment

The City of London houses one of the largest and most comprehensive financial centers globally.  London offers all forms of financial services:  commercial banking, investment banking, insurance, venture capital, private equity, stock and currency brokers, fund managers, commodity dealers, accounting and legal services, as well as electronic clearing and settlement systems and bank payments systems.  London is highly regarded by investors because of its solid regulatory, legal, and tax environments, a supportive market infrastructure, and a dynamic, highly skilled workforce.

The UK government is generally hospitable to foreign portfolio investment.  Government policies are intended to facilitate the free flow of capital and to support the flow of resources in product and services markets.  Foreign investors are able to obtain credit in local markets at normal market terms, and a wide range of credit instruments are available.  The principles underlying legal, regulatory, and accounting systems are transparent, and  are consistent with international standards.  In all cases, regulations have been published and are applied on a non-discriminatory basis by the Bank of England’s Prudential Regulation Authority (PRA).

The London Stock Exchange is one of the most active equity markets in the world.  London’s markets have the advantage of bridging the gap between the day’s trading in the Asian markets and the opening of the U.S. market.  This bridge effect is also evidenced by the fact that many Russian and Central European companies have used London stock exchanges to tap global capital markets.

The Alternative Investment Market (AIM), established in 1995 as a sub-market of the London Stock Exchange, is specifically designed for smaller, rapidly expanding companies.  The AIM has a more flexible regulatory system than the main market and has no minimum market capitalization requirements.  Since its launch, the AIM has raised more than £68 billion ($95 billion) for more than 3,000 companies.

Money and Banking System

The UK banking sector is the largest in Europe and represents the continent’s deepest capital pool.  More than 150 financial services firms from the EU are based in the UK.  The financial and related professional services industry contributed approximately 10 percent of UK economic output in 2020, employed approximately 2.3 million people, and contributed the most to UK tax receipts of any sector.  The long-term impact of Brexit on the financial services industry is uncertain at this time.  Some firms have already moved limited numbers of jobs outside the UK in order to service EU-based clients, but the UK is anticipated to remain a top financial hub.

The Bank of England serves as the central bank of the UK.  According to its guidelines, foreign banking institutions are legally permitted to establish operations in the UK as subsidiaries or branches.  Responsibilities for the prudential supervision of a foreign branch are split between the parent’s home state supervisors and the Prudential Regulation Authority (PRA).  The PRA, however, expects the whole firm to meet the PRA’s threshold conditions.  The PRA expects new foreign branches to focus on wholesale and corporate banking and to do so at a level that is not critical to the UK economy.  The Financial Conduct Authority (FCA) is the conduct regulator for all banks operating in the United Kingdom.  For foreign branches the FCA’s Threshold Conditions and conduct of business rules apply, including areas such as anti-money laundering.  Eligible deposits placed in foreign branches may be covered by the UK deposit guarantee program and therefore foreign branches may be subject to regulations concerning UK depositor protection.

There are no legal restrictions that prohibit foreign residents from opening a business bank account; setting up a business bank account as a non-resident is in principle straightforward.   In practice, however, most banks will not accept applications from overseas due to fraud concerns and the additional administration costs.  To open a personal bank account, an individual must at minimum present an internationally recognized proof of identification and prove residency in the UK.  This can present a problem for incoming FDI and American expatriates.  Unless the business or the individual can prove UK residency, they will have limited banking options.

Foreign Exchange and Remittances

Foreign Exchange

The pound sterling is a free-floating currency with no restrictions on its transfer or conversion.  Exchange controls restricting the transfer of funds associated with an investment into or out of the UK are not exercised.

Remittance Policies

Not applicable.

Sovereign Wealth Funds

The United Kingdom does not maintain a national wealth fund.  Although there have at time been calls to turn The Crown Estate – created in 1760 by Parliament as a means of funding the British monarchy – into a wealth fund, there are no current plans to do so.  Moreover, with assets of just under $20 billion, The Crown Estate would be small in relation to other national funds.

Capital Markets and Portfolio Investment

Uruguay passed a capital markets law (No. 18,627) in 2009 to jumpstart the local capital market. However, despite some successful bond issuances by public firms, the local capital market remains underdeveloped and highly concentrated in sovereign debt. This makes it very difficult to finance business ventures through the local equity market, and restricts the flow of financial resources into the product and factor markets. Due to the underdevelopment and lack of sufficient liquidity in its capital market, Uruguay typically receives only “active” investments oriented to establishing new firms or gaining control over existing ones and lacks “passive investments” from major investment funds.

The government maintains an open attitude towards foreign portfolio investment, though there is no effective regulatory system to encourage or facilitate it. Uruguay does not impose any restrictions on payments and transfers for current international transactions.

Uruguay allocates credit on market terms, but long-term banking credit has traditionally been difficult to obtain. Foreign investors can access credit on the same market terms as nationals.

As part of the process of complying with OECD requirements (see Bilateral Investment Agreements section), Uruguay banned “bearer shares” in 2012, which had been widely used. Private firms do not use “cross shareholding” or “stable shareholder” arrangements to restrict foreign investment, nor do they restrict participation in or control of domestic enterprises.

Money and Banking System

Uruguay established its Central Bank (BCU) in 1967 as an autonomous state entity. The government-owned Banco de la República Oriental del Uruguay (BROU) is the nation’s largest commercial bank and has the largest market share. The rest of the banking system comprises a government-owned mortgage bank and nine international commercial banks. The BCU’s Superintendent of Financial Services regulates and supervises foreign and domestic banks or branches alike. As of April 2021, the banking sector seems healthy, with good capital and liquidity ratios.

Since Uruguay’s establishment of a financial inclusion program in 2011, and especially after the passage of a financial inclusion law in 2014 (No. 19,210), the use of debit cards, credit cards, and bank accounts has increased significantly. Uruguay has authorized a number of private sector firms to issue electronic currency. Articles 215 and 216 of the Urgency Law (No. 19,889) reinstated the possibility of paying workers’ salaries in cash instead of electronically.

With regard to technological innovation in the financial sector, the first regional Fintech Forum was held in Montevideo in 2017, leading to the creation of the Fintech Ibero-American Alliance. While some local firms have developed domestic and international electronic payment systems, emerging technologies like blockchain and crypto currencies remain underdeveloped.

There have been some cases of U.S. citizens having difficulties establishing a first-time bank account, mostly related to the United States’ Foreign Account Tax Compliance Act provisions.

Foreign Exchange and Remittances

Foreign Exchange

Uruguay maintains a long tradition of not restricting the purchase of foreign currency or the remittance of profits abroad. Free purchases of any foreign currency and free remittances were preserved even during the severe 2002 financial crisis.

Uruguay does not engage in currency manipulation to gain competitive advantage. Since 2002, the peso has floated relatively freely, albeit with intervention from the Central Bank aimed at reducing the volatility of the price of the dollar. Foreign exchange can be obtained at market rates and there is no black market for currency exchange.

Remittance Policies

Uruguay maintains a long tradition of not restricting remittance of profits abroad.

Article 7 of the U.S. – Uruguay BIT provides that both countries “shall permit all transfers relating to investments to be made freely and without delay into and out of its territory.” The agreement also establishes that both countries will permit transfers “to be made in a freely usable currency at the market rate of exchange prevailing at the time of the transfer.”

Sovereign Wealth Funds

There are no sovereign wealth funds in Uruguay.

Capital Markets and Portfolio Investment

Prior to 2017, the government focused on investors capable of providing technology transfers and employment in local industries and had not prioritized attraction of portfolio investments. In 2017, the GOU announced its plans to improve the capital market and use stock market instruments to meet its economic development goals. The government created a new Agency for the Development of Capital Markets (CMDA) in January 2019 as the institution responsible for development and regulation of the securities market and protection of the rights and legitimate interests of investors in securities market. CMDA is currently implementing a capital markets development strategy for 2020-2025. According to CMDA officials, the goal of the strategy is to make the national capital market big enough to attract not only institutional investors, but to become a key driver of domestic wealth creation. The U.S. Government is supporting this strategy through a technical assistance program led by the Department of the Treasury.

Uzbekistan has its own stock market, which supports trades through the Republican Stock Exchange “Tashkent,” Uzbekistan’s main securities trading platform and only corporate securities exchange ( https://www.uzse.uz ). The stock exchange mainly hosts equity and secondary market transactions with shares of state-owned enterprises. In most cases, government agencies determine who can buy and sell shares and at what prices, and it is often impossible to locate accurate financial reports for traded companies.

Uzbekistan formally accepted IMF Article VIII in October 2003, but due to excessive protectionist measures of the government, businesses had limited access to foreign currency, which stimulated the grey economy and the creation of multiple exchange rate systems. Effective September 5, 2017, the GOU eliminated the difference between the artificially low official rate and the black-market exchange rate and allowed unlimited non-cash foreign exchange transactions for businesses. The Law on Currency Regulation (ZRU-573 of October 22, 2019) fully liberalized currency operations, current cross-border and capital movement transactions.

In 2019, the GOU considerably simplified repatriation of capital invested in Uzbekistan’s industrial assets, securities, and stock market profits. According to the law (ZRU-531), foreign investors that have resident entities in Uzbekistan can convert their dividends and other incomes to foreign currencies and transfer them to their accounts in foreign banks. Non-resident entities that buy and sell shares of local companies can open bank accounts in Uzbekistan to accumulate their revenues.

Under the law, foreign investors and private sector businesses can have access to various credit instruments on the local market, but the still-overregulated financial system yields unreliable credit terms. Access to foreign banks is limited and is usually only granted through their joint ventures with local banks. Commercial banks, to a limited degree, can use credit lines from international financial institutions to finance small and medium sized businesses.

Money and Banking System

As of January 2021, 32 commercial banks operate in Uzbekistan. Five commercial banks are state-owned, 13 banks are registered as joint-stock financial organizations (eight of which are partly state-owned), seven banks have foreign capital, and seven banks are private. Commercial banks have 884 branches and a network of exchange offices and ATMs throughout the country. State-owned banks hold 84% of banking sector capital and 85% of banking sector assets, leaving privately owned banks as relatively small niche players. The nonbanking sector is represented by 63 microcredit organizations and 64 pawn shops.

In May 2020, President Mirziyoyev approved a five-year strategy for reformation of the banking sector to address existing weaknesses of the banking sector, such as excessive share of state assets, insufficient competition, poor quality of corporate governance and banking services in comparison with best international standards, as well as a relatively low penetration of modern global technologies. The goal of the strategy is to reduce the state share in the sector from the current 84% to 60% and to increase the market share of the non-banking sector from current 0.35% to 4%. The government will privatize its shares in six banks and facilitate modernization of banking services in remaining state-owned banks.

According to assessments of international rating agencies, including Fitch and Moody’s, the banking sector of Uzbekistan is stable and poses limited near-term risks, primarily due to high concentration and domination of the public sector, which controls over 80% of assets in the banking system. Moody’s notes high resilience of the country’s banking system to the impact of the COVID pandemic in comparison with other CIS countries. The average rate of capital adequacy within the system is 18.4%, and the current liquidity rate is 67.4%. The growing volume of state-led investments in the economy supports the stability of larger commercial banks, which often operate as agents of the government in implementing its development strategy. Privately owned commercial banks are relatively small niche players. The government and the Central Bank of Uzbekistan (CBU) still closely monitor commercial banks.

According to the Central Bank of Uzbekistan, the share of nonperforming loans out of total gross loans is 2.1% (as of January 1, 2021). The average share of nonperforming loans in state-owned banks is about 2.1% and 1.9% in private banks. A majority of Uzbekistan’s commercial banks have earned “stable” ratings from international rating agencies.

As of January 1, 2021, the banking sector’s capitalization was about $5.8 billion, and the value of total bank assets in the whole country was equivalent to about $37 billion. The three largest state-owned banks – the National Bank of Uzbekistan, Asaka Bank, and Uzpromstroybank – hold 46% of the banking sector’s capital ($2.7 billion) and 47.7% of the assets ($17.5 billion).

Uzbekistan maintains a central bank system. The Central Bank of Uzbekistan (CBU) is the state issuing and reserve bank and central monetary authority. The bank is accountable to the Supreme Council of Uzbekistan and is independent of the executive bodies (the bank’s organization chart is available here: http://www.cbu.uz/en/).

In general, any banking activity in Uzbekistan is subject to licensing and regulation by the Central Bank of Uzbekistan. Foreign banks often feel pressured to establish joint ventures with local financial institutions. Currently there are seven banks with foreign capital operating in the market, and five foreign banks have accredited representative offices in Uzbekistan, but do not provide direct services to local businesses and individuals. Information about the status of Uzbekistan’s correspondent banking relationships is not publicly available.

Foreigners and foreign investors can establish bank accounts in local banks without restrictions. They also have access to local credit, although the terms and interest rates do not represent a competitive or realistic source of financing.

Foreign Exchange and Remittances

Foreign Exchange

Uzbekistan adopted Article VIII of the IMF’s Articles of Agreement in October 2003, but full implementation of its obligations under this article began only in September 2017. In accordance with new legislation (ZRU 531 of March 2019 and ZRU-573 of October 2019), all businesses, including foreign investors, are guaranteed the ability to convert their dividends and other incomes in local currencies to foreign currencies and transfer to foreign bank accounts for current cross-border, dividend payments, or capital repatriation transactions without limitations, provided they have paid all taxes and other financial obligations in compliance with local legislation. Uzbekistan authorities may stop the repatriation of a foreign investor’s funds in cases of insolvency and bankruptcy, criminal acts by the foreign investor, or when so directed by arbitration or a court decision.

The exchange rate is determined by the CBU, which insists that it is based on free market forces (10,600 s’om per one U.S dollar as of March 2021). On February 15, 2015, trade sessions at the local FX Exchange transferred from the previous “fixing” methods to the combination of “call auction” and bilateral continuous auctions (“matching”). The CBU publishes the official exchange rate of foreign currencies at 1600 every business day for accounting, statistical and other reporting purposes, as well as for the calculation of customs and other mandatory payments in the territory of Uzbekistan.

After the almost 50% devaluation of the national currency in September 2017, the exchange rate had been relatively stable in 2018 with an average of 2.4% annual devaluation. In 2019, the devaluation of s’om accelerated to 14%, although the CBU reported it had made $3.6 billion in interventions in the forex market to support the local currency. In 2020, the annual devaluation was held below 10%. The local currency’s relative stability in 2020 was supported by reduced imports and strong FX reserves ($34.9 billion by January 1, 2021).

Remittance Policies

President Mirziyoyev launched foreign exchange liberalization reform on September 2017 by issuing a decree “On Priority Measures for Liberalization of Monetary Policy.” The Law on Currency Regulation (ZRU-573), adopted on October 22, 2019, has liberalized currency exchange operations, current cross-border, and capital movement transactions. Business entities can purchase foreign currency in commercial banks without restrictions for current international transactions, including import of goods, works and services, repatriation of profits, repayment of loans, payment of travel expenses and other transfers of a non-trade nature.

Banking regulations mandate that the currency conversion process should take no longer than one week. In 2019 businesses reported that they observed no delays with conversion and remittance of their investment returns, including dividends; return on investment, interest and principal on private foreign debt; lease payments; royalties; and management fees.

Sovereign Wealth Funds

The Fund for Reconstruction and Development of Uzbekistan (UFRD) serves as a sovereign wealth fund. Uzbekistan’s Cabinet of Ministers, Ministry of Finance, and the five largest state-owned banks were instrumental in establishing the UFRD, and all those institutions have membership on its Board of Directors.

The fund does not follow the voluntary code of good practices known as the Santiago Principles, and Uzbekistan does not participate in the IMF-hosted International Working Group on sovereign wealth funds. The GOU established the UFRD in 2006, using it to sterilize and accumulate foreign exchange revenues, but officially the goal of the UFRD is to provide government-guaranteed loans and equity investments to strategic sectors of the domestic economy.

The UFRD does not invest, but instead provides debt financing to SOEs for modernization and technical upgrade projects in sectors that are strategically important for Uzbekistan’s economy. All UFRD loans require government approval.

Capital Markets and Portfolio Investment

The government generally encourages foreign portfolio investment. The country has two stock markets: the Ho Chi Minh City Stock Exchange (HOSE), which lists publicly traded companies, and the Hanoi Stock Exchange, which lists bonds and derivatives. The Law on Securities, which came into effect January 1, 2021, states that Vietnam Exchange, a parent company to both exchanges, with board members appointed by the government, will manage trading operations. Vietnam also has a market for unlisted public companies (UPCOM) at the Hanoi Securities Center.

Although Vietnam welcomes portfolio investment, the country sometimes has difficulty in attracting such investment. Morgan Stanley Capital International (MSCI) classifies Vietnam as a Frontier Market, which precludes some of the world’s biggest asset managers from investing in its stock markets.

Vietnam did not meet its goal to be considered an “emerging market” in 2020, and pushed back the timeline to 2025. Foreign investors often face difficulties in making portfolio investments because of cumbersome bureaucratic procedures. Furthermore, in the first three months of 2021, surges in trading frequently crashed the HOSE’s decades-old technology platform, resulting in investor frustration.

There is enough liquidity in the markets to enter and maintain sizable positions. Combined market capitalization at the end of 2020 was approximately USD 230 billion, equal to 84 percent of Vietnam’s GDP, with the HOSE accounting for USD 177 billion, the Hanoi Exchange USD 9 billion, and the UPCOM USD 43 billion. Bond market capitalization reached over USD 50 billion in 2019, the majority of which were government bonds held by domestic commercial banks.

Vietnam complies with International Monetary Fund (IMF) Article VIII. The government notified the IMF that it accepted the obligations of Article VIII, Sections 2, 3, and 4, effective November 8, 2005.

Local banks generally allocate credit on market terms, but the banking sector is not as sophisticated or capitalized as those in advanced economies. Foreign investors can acquire credit in the local market, but both foreign and domestic firms often seek foreign financing since domestic banks do not have sufficient capital at appropriate interest rate levels for a significant number of FDI projects.

Money and Banking System

Vietnam’s banking sector has been stable since recovering from the 2008 global recession. Nevertheless, the State Bank of Vietnam (SBV), Vietnam’s central bank, estimated in 2019 that 55 percent of Vietnam’s population is underbanked or lacks bank accounts due to a preference for cash, distrust in commercial banking, limited geographical distribution of banks, and a lack of financial acumen. The World Bank’s Global Findex Database 2017 (the most recent available) estimated that only 31 percent of Vietnamese over the age of 15 had an account at a financial institution or through a mobile money provider.

The COVID-19 pandemic increased strains on the financial system as an increasing number of debtors were unable to make loan payments. Slow credit growth, together with increases in debtors’ inability to pay back loans, squeezed bank profits in 2020. At the end of 2020, the SBV reported that the percentage of non-performing loans (NPLs) in the banking sector was 2.14 percent, up from 1.9 percent at the end of 2019.

By the end of 2020, per SBV, the banking sector’s estimated total assets stood at USD 572 billion, of which USD 236 billion belonged to seven state-owned and majority state-owned commercial banks – accounting for 41 percent of total assets in the sector. Though classified as joint-stock (private) commercial banks, the Bank of Investment and Development Bank (BIDV), Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), and Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) all are majority-owned by SBV. In addition, the SBV holds 100 percent of Agribank, Global Petro Commercial Bank (GPBank), Construction Bank (CBBank), and Oceanbank.

Currently, the total foreign ownership limit (FOL) in a Vietnamese bank is 30 percent, with a 5 percent limit for non-strategic individual investors, a 15 percent limit for non-strategic institutional investors, and a 20 percent limit for strategic institutional partners.

The U.S. Mission in Vietnam did not find any evidence that a Vietnamese bank had lost a correspondent banking relationship in the past three years; there is also no evidence that a correspondent banking relationship is currently in jeopardy.

Foreign Exchange and Remittances

Foreign Exchange

There are no legal restrictions on foreign investors converting and repatriating earnings or investment capital from Vietnam. A foreign investor can convert and repatriate earnings provided the investor has the supporting documents required by law proving they have completed financial obligations. The SBV sets the interbank lending rate and announces a daily interbank reference exchange rate. SBV determines the latter based on the previous day’s average interbank exchange rates, while considering movements in the currencies of Vietnam’s major trading and investment partners. The government generally keeps the exchange rate at a stable level compared to major world currencies.

Remittance Policies

Vietnam mandates that in-country transactions must be made in the local currency – Vietnamese dong (VND). The government allows foreign businesses to remit lawful profits, capital contributions, and other legal investment earnings via authorized institutions that handle foreign currency transactions. Although foreign companies can remit profits legally, sometimes these companies find bureaucratic difficulties, as they are required to provide supporting documentation (audited financial statements, import/foreign-service procurement contracts, proof of tax obligation fulfillment, etc.). SBV also requires foreign investors to submit notification of profit remittance abroad to tax authorities at least seven working days prior to the remittance; otherwise there is no waiting period to remit an investment return.

The inflow of foreign currency into Vietnam is less constrained. There are no recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances.

Sovereign Wealth Funds

Vietnam does not have a sovereign wealth fund.

Capital Markets and Portfolio Investment

In 2004, the PA enacted the Capital Markets Authority Law and the Securities Commission Law and created the Capital Market Authority to regulate the stock exchange, insurance, leasing, and mortgage industries. In 2010, a Banking Law was adopted to bring the Palestinian Monetary Authority’s (PMA) regulatory capabilities in line with the Basel Accords, a set of recommendations for regulations in the banking industry. The 2010 law provides a legal framework for the establishment of deposit insurance, management of the Real Time Gross Settlement (RTGS) system, and treatment of weak banks in areas such as merger, liquidation, and guardianship. It also gives the PMA regulatory authority over the microfinance sector. In 2013, the PA passed a Commercial Leasing Law and in 2015 the MONE finalized a registry for moveable assets, intended to facilitate secured transactions, especially for small and medium-sized businesses. In April 2016, the PA passed the Secured Transactions Law, which established the legal grounds and modern systems to regulate the use of movable assets as collateral.

Notwithstanding this regulatory environment, the World Bank’s 2020 Ease of Doing Business report assigned the West Bank and Gaza a particularly low score for Protecting Minority Investors (114 out of 190) and Resolving Insolvency (168 out of 190). Founders of recently established SMEs complain that loan terms from Palestinian creditors fail to allow the borrower enough time to establish a sustainable business, although the new Moveable Assets Registry, coupled with the Secured Transactions Law and Commercial Leasing Law, led to a substantial improvement in the Getting Credit ranking (25 out of 190) from 2018.

The Palestine Exchange (PEX) was established in 1995 to promote investment in the West Bank and Gaza. Launched as a private shareholding company, it was transformed into a public shareholding company in February 2010. The PEX was fully automated upon establishment – the first fully automated stock exchange in the Arab world, and the only Arab exchange that is publicly traded and fully owned by the private sector. The PEX is registered with the Companies Controller at the Ministry of National Economy and it operates under the supervision of the Palestinian Capital Market Authority. PEX’s 49 listed companies are divided into five sectors: banking and financial services, insurance, investment, industry, and services, with a USD 3.5 billion market capitalization. Shares trade in Jordanian dinars and U.S. dollars. PEX member securities companies (brokerage firms) operations are found across the West Bank and Gaza and authorized custodians are available to work on behalf of foreign investors.

Money and Banking System

The Palestinian banking sector continues to perform well under the supervision of the PMA. World Bank reports to the Ad Hoc Liaison Committee (AHLC) have consistently noted that the PMA is effectively supervising the banking sector. The PMA continues to enhance its institutional capacity and provides rigorous supervision and regulation of the banking sector, consistent with international practice.

An Anti-Money Laundering Law that was prepared in line with international standards with technical assistance from the International Monetary Fund (IMF) and USAID came into force in October 2007. In December 2015, the PA President signed the Anti-Money Laundering and Terrorism Financing Decree Law Number 20 for the PA to join the Middle East and North Africa Financial Action Task Force (MENA/FATF), a voluntary organization of regional governments focused on combating money laundering and the financing of terrorism and proliferation. Improvements contained in the 2015 law make terrorist financing a criminal offense and defines terrorists, terrorist acts, terrorist organizations, foreign terrorist fighters, and terrorist financing (AML/CFT). The PMA completed a National Risk Assessment (NRA) – an AML/CTF self-assessment – in 2018. The PMA is implementing the recommendations from the self-assessment to strengthen the AML/CTF regime in preparation for a MENA/FATF member review of the Palestinian economy’s AML/CFT safeguards, initially scheduled for August 2020. However, due to the COVID-19 pandemic, the PA asked MENA FATF to postpone its review. The PMA is considered a regional leader in AML/CTF safeguards and its representatives provide training to other Arab governments.

Credit is affected by uncertain political and economic conditions and by the limited availability of real estate collateral due to non-registration of most West Bank land.  Despite these challenges, the sector’s loan-to-deposit ratio continues to increase towards parity, moving from 58 percent at the end of 2015 to 68 percent at the end of 2019. However, in 2020, the loan to deposit ratio slightly declined to 66.6 percent due to reduced lending to businesses because of COVID-19. The increase in the loan to deposit ratio in the past was in part because of the PMA’s encouragement to banks to participate in loan guarantee programs sponsored by the United States and international financial institutions, by supporting a national strategy on microfinance, and by imposing restrictions on foreign placements.  The PA Ministry of National Economy’s enactment of the Secured Transactions Law in April 2016 allows for use of moveable assets, such as equipment, as collateral for loans.  Non-performing loans in 2020 were 4.19 percent of total loans, due to credit bureau assessments of borrowers’ credit worthiness and a heavy collateral system. In addition, in 2020 banks avoided default by restructuring and rescheduling loans to help customers cope with the impact of COVID-19.

Palestinian banks have remained stable in general but have suffered from a deterioration in relations with Israeli correspondent banks since the Hamas takeover of Gaza in 2007, at which time Israeli banks cut ties with Gaza branches and gradually restricted cash services provided to West Bank branches.  All Palestinian banks were required to move their headquarters to Ramallah in 2008.  Israeli restrictions on the movement of cash between West Bank and Gaza branches of Palestinian banks have caused intermittent liquidity crises in Gaza and for all major currencies, including U.S. dollars, Jordanian dinars, and Israeli shekels. An Israeli government decision in late 2018 to increase the deposit transfer amount from Palestinian banks to the Bank of Israel to NIS 1 billion monthly (an increase from NIS 350 million per month) and again in the first quarter of 2021 to NIS 1.2 billion monthly reduced the excess amount of shekels in the West Bank and Gaza.

The PMA regulates and supervises 13 banks (6 Palestinian, 6 Jordanian, and 1 Egyptian) with 379 branches and offices in the West Bank and Gaza, with USD 19.2 billion net assets up from USD 17.2 billion in 2019.  No Palestinian currency exists and, as a result, the PA places no restrictions on foreign currency accounts.  The PMA is responsible for bank regulation in both the West Bank and Gaza.  Palestinian banks are some of the most liquid in the region, with customers deposits of USD 15 billion and gross credit of USD 10 billion as of the end of 2020.

Foreign Exchange and Remittances

Foreign Exchange

The PA does not have its own currency. According to the 1995 Interim Agreement, the Israeli shekel (NIS) freely circulates in the West Bank and Gaza and serves as means of payment for all purposes, including official transactions. The exchange of foreign currency for NIS and vice-versa by the PMA is carried out through the Bank of Israel Dealing Room, at market exchange rates.

Remittance Policies

The Investment Law guarantees investors the free transfer of all financial resources out of the Palestinian territories, including capital, profits, dividends, wages, salaries, and interest and principal payments on debts. Most remittances under USD 10,000 can be processed within a week. In addition to the Israeli Shekel (NIS), U.S. dollars (USD) and Jordanian dinars (JD) are widely used in business transactions. There are no other PA restrictions governing foreign currency accounts and currency transfer policies. Banks operating in the West Bank and Gaza, however, are subject to Israeli restrictions on correspondent relations with Israeli banks and the ability to transfer shekels into Israel, which occasionally limit services such as wire transfers and foreign exchange transactions.

Sovereign Wealth Funds

The privately-run Palestine Investment Fund (PIF) acts as a sovereign wealth fund, owned by the Palestinian people.  According to PIF’s 2019 annual report (the most recent available), its assets reached USD 1 billion and net income USD 24.3 million.  PIF’s investments in 2019 were concentrated in infrastructure, energy, telecommunications, real estate and hospitality, micro/small/medium enterprises, large caps, and capital market investments.  90 percent of PIF investments are domestic, but excess liquidity is invested in international and regional fixed income and equity markets.  In 2014, the fund established the Palestine for Development Foundation, a separate not-for-profit foundation managing PIF’s corporate social responsibility initiatives, which are primarily focused on support to Palestinians in the West Bank, Gaza, Jerusalem, and abroad.  Since 2003, PIF has transferred over USD 850 million to the PA in annual dividends, but PIF leadership does not report to the PA per PIF bylaws.  International auditing firms conduct both internal and external annual audits of the PIF.

Capital Markets and Portfolio Investment

Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market. Banking supervision and regulation by the Bank of Zambia (BoZ) has improved slightly over the past few years. Improvements include revoking licenses of some insolvent banks, denying bailouts, limiting deposit protection, strengthening loan recovery efforts, and upgrading the training of and incentives for bank supervisors. High domestic lending rates, a lack of dollar and foreign exchange liquidity, and the limited accessibility of domestic financing constrain business. High returns on government securities encourage commercial banks to invest heavily in government debt to the exclusion of financing productive private sector investments, particularly for SMEs.

The Lusaka Stock Exchange (LuSE), established in 1993, is structured to meet international recommendations for clearing and settlement system design and operations. There are no restrictions on foreign participation in the LuSE, and foreigners may invest in stocks on the same terms as Zambians. The LuSE has offered trading in equity securities since its inception and, in March 1998, the LuSE became the official market for selling Zambian government bonds. Investors intending to trade a listed security or government bond are now mandated to trade via the LuSE. The market is regulated by the Securities Act of 1993 and enforced by the Securities and Exchange Commission (SEC) of Zambia. Secondary trading of financial instruments in the market is very low or non-existent in some areas. As of the beginning of 2021, there were 25 companies listed on the LuSE with a portfolio worth about K24 billion (USD 1.2 billion).

Existing policies facilitate the free flow of financial resources into the product and factor markets. The government and the BoZ respect IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Credit is allocated on market terms and foreign investors can get credit on the local market, although local credit is relatively expensive and most investors therefore prefer to obtain credit outside the country.

Money and Banking System

The financial sector is comprised of three sub-sectors according to financial sector supervisory authorities. The banking and financial institutions sub-sector is supervised by the BoZ, the securities sub-sector by the SEC, and the pensions and insurance sub-sector by the Pensions and Insurance Authority. The Banking and Financial Services Act, Chapter 387, and the Bank of Zambia Act, Chapter 360, govern the banking industry. Zambia’s banking sector is considered relatively well-developed in the African context, but the sector remains highly concentrated. There are currently 19 banks in Zambia with the largest four banks holding nearly two-thirds of total banking assets. The dominance of the four largest banks in deposits and total assets has been diluted by increased market capture of smaller banks and new industry entrants, an indication of growing competitive intensity in this segment of the banking market. Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market. There continued to be a steady increase in electronic banking and related services over the last few years.

The BoZ’s current policy rate, as of February 2021, was 8.5 percent. Commercial lending rates range between 23 and 30 percent, among the highest in the region. The persistence of high interest rates led the government to urge commercial banks to reduce their lending rates in order to stimulate private sector growth and the economy as a whole. One factor inhibiting more affordable lending is a culture of tolerating loan default, which many borrowers view as a minor transgression. Non-performing loans (NPLs) remain elevated, with some estimates as high as 15 percent. The government contributes to this problem, as it has arrears of about USD 1.3 billion to government contractors who reportedly hold a high percentage of the NPLs.

Banking officials acknowledge the need to upgrade the risk assessment and credit management skills of their institutions to better serve borrowers, but note widespread financial illiteracy limits borrowers’ ability to access credit. Banks provide credit denominated in foreign currencies only for investments aimed at producing goods for export. Banks provide services on a fee-based model and banking charges are generally high. Home mortgages are available from several leading Zambian banks, although interest rates are still very high.

To operate a bank in Zambia, the bank must be licensed by the Registrar of Banks, Financial Institutions, and Financial Businesses (“the Registrar”) whose office is based at the BoZ. The decision to license banks lies with the Registrar. Foreign banks or branches are allowed to operate in country as long as they fulfill BoZ requirements and meet the minimum capital requirement of USD 100 million for foreign banks and USD 20 million for local banks. According to the BoZ, many banks in the country have correspondent banking relationships; it is difficult to assess how many there are or whether any bank has lost any correspondent banking relationships in the past three years. It is also difficult to analyze if any of those correspondent relationships are currently in jeopardy as the daily management of those relationships are carried out by the individual banks and not by the BoZ.

Generally, all regulatory agencies that issue operating licenses have statutory reporting requirements that businesses operating under their laws and regulations must meet. For example, the Banking and Financial Services Act has stringent reporting provisions that require all commercial banks to submit weekly returns indicating their liquidity position. Late submission of the weekly returns or failure to meet the minimum core liquidity and statutory reserves incur punitive penalty interest, and may lead to the placement of non-compliant commercial banks under direct supervision of BoZ, closure of the undertaking, or the prosecution of directors.

All companies listed under the Lusaka Stock Exchange (LuSE) are obliged to publish interim and annual financial statements within three months after the close of the financial year. Listed companies are also required to disclose in national print media any information that can affect the value of the price of their securities. According to the Companies Act, Chapter 388, company directors need to generate annual account reports after the end of each financial year. The annual account, auditor’s report or reports on the accounts, and directors’ report should be sent to each person entitled to receive notice of the annual general meeting and to each registered debenture holder of the company. A foreign company is required to submit annual accounts and an auditor’s report to the Registrar.

The Non-Bank Financial Institutions (NBFIs) are licensed and regulated in accordance with the provisions of the Banking and Financial Services Act of 1994 (BFSA) and related Regulations and Prudential Guidelines. As key players in the financial sector, NBFIs are subject to regulatory requirements governing their prudential position, consumer protection, and market conduct in order to safeguard the overall soundness and stability of the financial system. The NBFIs comprise eight leasing and finance companies, three building societies, one credit reference bureau, one savings and credit institution, one development finance institution, 80 bureaux de change, one credit reference bureau, and 34 micro-finance institutions.

Private firms are open to foreign investment through mergers and acquisitions. The CCPC reviews and handles big mergers and acquisitions. The High Court of Zambia may reverse decisions made by the Commission. Under the CCPA, foreign companies without a presence in Zambia and taking over local firms do not have to notify their transactions to the Commission, as it has not established disclosure requirements for foreign companies acquiring existing businesses in Zambia.

Foreign Exchange and Remittances

Foreign Exchange

There are currently no restrictions or limitations placed on foreign investors converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, and lease payments) into freely usable currency and at a legal market-clearing rate. Investors are free to repatriate capital investments, as well as dividends, management fees, interest, profit, technical fees, and royalties. Foreign nationals can also transfer and/or remit wages earned in Zambia. Funds associated with investments can be freely converted into internationally convertible currencies. The BoZ pursues a flexible exchange rate policy, which generally allows the currency to freely float, though it intervened heavily to support the local currency, the kwacha, in 2014 to 2016. Currency transfers are protected by IMF Article VII.

In March 2014, the government announced the revocation of SI Number 33 (mandating use of the kwacha for domestic transactions) and SI Number 55 (monitoring foreign exchange transactions). The government experienced challenges implementing these statutory instruments and – along with problems of fiscal management and weakening global copper prices – the SIs were perceived as undermining confidence in Zambia’s economy and currency, leading to sharp depreciation of the kwacha. The decision to revoke the SIs was widely praised in the business community. The kwacha, however, has remained weak in historical terms and continues to depreciate against the dollar. As of early April 2021, the kwacha was trading at more than 22 to the dollar.

Over-the-counter cash conversion of the kwacha into foreign currency is restricted to a USD 5,000 maximum per transaction for account holders and USD 1,000 for non-account holders. No exchange controls exist in Zambia for anyone doing business as either a resident or non-resident. There are no restrictions on non-cash transactions. The exchange rate of the Zambian national currency is mostly determined by market forces; because the volume and value of exports from Zambia are overwhelmingly related to the extractive industries sector, mining companies’ financial transactions play a major role in exchange rate determination.

Remittance Policies

There are no recent changes or plans to change investment remittance policies that tighten or relax access to foreign exchange for investment remittances. There are no restrictions on converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, or lease payments) into freely usable currency at the legal market clearing rate. Foreign investors can remit through a legal parallel market, including one utilizing convertible, negotiable instruments such as dollar-denominated government bonds issued in lieu of immediate payment in dollars. There are no limitations on the inflow or outflow of funds for remittances of profits or revenue and there is no evidence to show that Zambia manipulates the currency. Zambia is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which in 2018, conducted an on-site assessment of the implementation of anti-money laundering and counter-terrorist financing (AML/CTF) measures in Zambia. ESAAMLG coordinates with other international organizations concerned with combating money laundering, studying emerging regional typologies, developing institutional and human resource capacities to deal with these issues, and coordinating technical assistance where necessary. In June 2019, Zambia adopted the recommendations. Zambia has demonstrated commitment to establish an AML/CTF framework. The enactment of the Prohibition and Prevention of Money Laundering Act and the Anti-Terrorism Act, establishment of the Anti-Money Laundering Investigations Unit and the Financial Intelligence Center as the sole designated national agencies mandated to handle AML/CTF and other serious offences, and its September 2018 accession to the Egmont Group reflect this commitment.

Sovereign Wealth Funds

The GRZ had planned to launch a Sovereign Wealth Fund (SWF) following the 2015 reincorporation of the Industrial Development Corporation (IDC) as the parastatal holding company, but has yet to establish the fund.

Capital Markets and Portfolio Investment

Zimbabwe has two stock exchanges in Harare and Victoria Falls. The Zimbabwe Stock Exchange (ZSE) in Harare currently has 56 publicly listed companies with a total market capitalization of USD 5.2 billion on March 19, 2021. Stock and money markets are open to foreign portfolio investment. Foreign investors can take up to a maximum of 49 percent of any locally listed company with any single investor limited to a maximum of 15 percent of the outstanding shares. With regard to the money market, foreign investors may buy up to 100 percent of the primary issues of bonds and stocks and there is no limit on the level of individual participation.

There is a 1.48 percent withholding tax on the sale of marketable securities, while the tax on purchasing stands at 1.73 percent. Totaling 3.21 percent, the rates are comparable with the average of 3.5 percent for the region. As a way of raising funds for the state, the government mandated that insurance companies and pension funds invest between 25 and 35 percent of their portfolios in prescribed government bonds. Zimbabwe’s high inflation has greatly eroded the value of domestic debt instruments and resulted in negative real interest rates on government bonds.

Zimbabwe launched the Victoria Falls Stock Exchange (VFEX) in September 2020 after the government suddenly suspended trading on the ZSE for five weeks between June and August following a rapid depreciation of the Zimbabwe dollar. The government blamed instability of the Zimbabwe dollar and rising inflation on the behavior of stock trading counters dual-listed on foreign exchanges, and suspended trading on the ZSE from late June to early August. When trading resumed, the authorities suspended trading of dual-listed counters on the ZSE, advising them to list on the VFEX where they trade in foreign currency and benefit from generous incentives meant to attract foreign investment. To date, only one company is listed on the VFEX.

The country respects IMF’s Article VIII and refrains from restrictions on payments and transfers for current international transactions provided there is sufficient foreign exchange to finance the transactions. Depending on foreign currency availability, foreign companies with investments in Zimbabwe can borrow locally on market terms.

Money and Banking System

Three major international commercial banks and several regional and domestic banks operate in Zimbabwe, but they have reduced their branch network substantially in line with declining business opportunities. The central bank (Reserve Bank of Zimbabwe (RBZ) maintains that the banking sector is generally stable despite a harsh operating environment characterized by high credit risk, high inflation, and foreign exchange constraints. Most Zimbabwean correspondent banking relationships are in jeopardy or have already been severed due to international bank efforts to reduce risk (de-risking) connected to the high penalties for non-compliance with prudential anti-money laundering/counter-terrorism finance guidelines in developed countries. As of December 31, 2020, the sector had 19 operating institutions, comprising 13 commercial banks, five building societies, and one savings bank. According to the RBZ, as of December 2020, all operating banking institutions complied with the prescribed minimum core capital requirements. The level of non-performing loans fell from 1.75 percent in December 2019 to 0.31 percent by December 2020 largely reflecting the banks’ low appetite to lend to high-risk clients. The RBZ reports that the total loans to deposits ratio rose from 36.6 percent in December 2019 to 39.5 percent as of December 31, 2020.

According to the central bank, the total deposits (including interbank deposits), rose from ZWL$34.5 billion in December 2019 to ZWL$208.9 billion by December 2020, an increase of 19 percent in US dollar terms.

Foreign Exchange and Remittances

Foreign Exchange

A large share of the economy operates using U.S. dollars for day-to-day transactions. The RBZ takes 40 percent of foreign currency earned from exports at the official exchange rate while exporters retain the other 60 percent in foreign exchange. The authorities change these levels periodically without notice depending on the severity of the foreign exchange constraint. Additionally, businesses selling domestically in foreign currency must surrender 20 percent of the receipts to the central bank in exchange for local currency.

Weak investment inflows and poor export growth have resulted in a perennial shortage of foreign exchange. Consequently, investors cannot freely convert funds associated with any form of investment into foreign currency. Although the situation improved after authorities adopted an auction system to allocate foreign exchange, businesses still rely on a black market for foreign exchange to make external payments.

Remittance Policies

Foreigners can remit capital appreciation, dividend income, and after-tax profits provided the foreign exchange is available. Firms may find difficulty in accessing foreign exchange at the auction rate.

Sovereign Wealth Funds

The government set aside USD 1 million toward administrative costs related to the setting up of a SWF in its 2016 Budget. Although the government proposed to capitalize the SWF through a charge of up to 25 percent on royalty collections on mineral sales, as well as through a special dividend on the sale of diamond, gas, granite and other minerals, it has not done so. In 2021, state media listed the SWF as a shareholder of a new major mining company in Zimbabwe.