Banco de Cabo Verde (BCV)

Overview

Confidence: 93%

Currency: Cape Verdean Escudo (CVE)

Exchange Rate Regime: Fixed Peg (CVE 110.265 = EUR 1)

Peg Duration: Established January 4, 1999 (uninterrupted)

The Banco de Cabo Verde (BCV) is the monetary authority and chief financial regulator of the Republic of Cape Verde, an island nation in the Atlantic Ocean off the coast of West Africa. The BCV operates under a fixed exchange rate arrangement, maintaining an uninterrupted peg of the Cape Verdean escudo (CVE) to the euro at a rate of 110.265 CVE per EUR since January 1999.

The BCV's primary mandate is preserving price stability through the fixed euro peg, which constrains independent monetary policy but ensures full currency convertibility and anchors domestic monetary conditions to Eurozone policy. The central bank also supervises the financial services sector, oversees payment systems, manages foreign exchange reserves, and enforces AML/CFT compliance. Its governance structure includes a Board of Directors and professional management ensuring institutional independence and technical competence in monetary and financial regulation.

Basic Identity

Classification

Inclusion Justification

What This Entity Oversees

The BCV exercises comprehensive regulatory authority over the financial services sector, including banks, insurance companies, reinsurance firms, and brokerage entities. Supervision operates under a prudential framework ensuring financial stability, depositor protection, and regulatory compliance.

Supervisory Functions:

• Licensing and Authorization — Approval of new financial institution establishment and service expansion

• Capital Adequacy Review — Enforcement of minimum capital requirements and prudential capital ratios

• Prudential Standards Enforcement — Loan classification, provisioning, large exposures limits, connected lending restrictions

• Risk-Based Supervision — Comprehensive assessment of capital adequacy, asset quality, management effectiveness, earnings, and liquidity

• Onsite Inspections — Regular examinations of financial institutions for soundness and compliance

• Offsite Surveillance — Continuous monitoring through regulatory reporting and financial analysis

• Enforcement Actions — Remedial directives, administrative fines, cease-and-desist orders, and license suspension/revocation

Supervisory Scope:

The BCV supervises approximately 5–7 commercial banks and various non-bank financial institutions, with supervisory focus on maintaining prudential standards, managing systemic risk, and protecting depositors.

Current Supervisory Priorities:

• Capital adequacy and liquidity management

• Asset quality and loan loss provisioning

• Digital banking and fintech regulation

• Cybersecurity and operational resilience

• AML/CFT compliance and sanctions screening

• Macroprudential risk assessment

The BCV enforces a comprehensive anti-money laundering and counter-terrorist financing framework under applicable AML/CFT legislation, aligned with Financial Action Task Force (FATF) standards and international best practices.

AML/CFT Requirements:

• Customer Due Diligence (CDD) — Mandatory KYC procedures at account opening; identity verification and beneficial ownership documentation

• Enhanced Due Diligence (EDD) — Intensified scrutiny for high-risk customers, politically exposed persons (PEPs), and high-risk jurisdictions

• Suspicious Activity Reporting (SAR) — Mandatory reporting of suspected money laundering or terrorist financing to Financial Intelligence Unit

• Sanctions Compliance — Integration with UN Security Council and national sanctions lists; customer and transaction screening

• Record Retention — Maintenance of transaction records for minimum five years

• Staff Training — Regular compliance training on AML/CFT procedures

Financial Intelligence Cooperation:

The BCV cooperates with the Financial Intelligence Unit and law enforcement agencies on AML/CFT investigations and sanctions enforcement.

Regulatory Powers

The BCV possesses comprehensive enforcement authority to ensure compliance with monetary, banking, and financial sector regulations. Enforcement actions escalate from supervisory guidance to formal sanctions and license revocation.

Enforcement Powers:

• Administrative Fines — Monetary penalties for regulatory breaches, proportionate to violation severity

• Remedial Directives — Formal instructions requiring corrective actions within specified timeframes

• Cease and Desist Orders — Prohibition of specific activities or service lines

• Capital Injections — Directives to increase capital in response to solvency concerns

• Management Actions — Authority to remove or replace directors and senior officers

• License Suspension/Revocation — Withdrawal of financial institution license

The BCV publishes enforcement actions and supervisory updates to maintain transparency and accountability.

Regulatory Role and Function

Legal Foundation

The Banco de Cabo Verde operates under the Central Bank Law (Lei da Instituição de Crédito Central de Cabo Verde), which establishes its legal status, governance structure, operational mandate, and independence from political interference. The Law confers upon the BCV exclusive authority to issue and manage the national currency, formulate and implement monetary policy consistent with the euro peg, and supervise the financial sector.

Supporting legal and regulatory frameworks include:

• Law on Credit Institutions — Licensing, regulation, and supervision of banks and financial institutions

• Prudential Regulations — Capital adequacy, asset quality, provisioning, and risk management standards

• Financial Services Oversight Law — Regulation of insurance companies, brokerages, and non-bank financial services

• Anti-Money Laundering Law — AML/CFT requirements and financial intelligence authority

• Payment System Regulation — Oversight and regulation of payment and settlement infrastructure

Governance Structure:

The BCV Board of Directors, chaired by the Governor, sets institutional policy. The Monetary Policy Committee ensures coordination between monetary policy implementation and exchange rate parity maintenance.

Licensing and Authorization Relevance

The Banco de Cabo Verde (BCV) is a key licensing authority in Cape Verde's financial system:

The licensing process typically involves assessment of capital adequacy, fitness and propriety of management, business plan viability, AML/CFT compliance frameworks, and IT systems readiness.

Payments and Money Movement Relevance

The BCV conducts monetary policy under a fixed exchange rate arrangement, maintaining the Cape Verdean escudo at a conventional fixed peg of 110.265 CVE per EUR. Established on January 4, 1999, this peg has been maintained without interruption and is fully convertible, anchoring Cabo Verde's monetary conditions to Eurozone monetary policy and limiting independent interest rate adjustment capacity.

Fixed Exchange Rate Framework:

• Official Parity: CVE 110.265 = EUR 1 (uninterrupted since January 1, 1999)

• Full Convertibility: Unlimited conversion of CVE to EUR at official parity

• Inflation Target: Medium-term inflation objective of 2% to ensure price stability

• Reserve Management: International reserves maintained in the range of 5 to 5½ months of prospective imports

Monetary Policy Constraints and Tools:

The fixed peg eliminates independent monetary policy options such as exchange rate adjustment or independent interest rate determination. Instead, the BCV manages:

• Interest Rate Policy — Adjustment of policy rates to maintain exchange rate stability and manage capital flows

• Reserve Requirements — Minimum reserve ratios on deposits to influence money supply

• Liquidity Management — Open market operations to manage domestic money supply

Recent Monetary Policy Actions (2022–2026):

In response to post-pandemic inflationary pressures and global tightening by the European Central Bank, the BCV raised its key policy rate cumulatively by 525 basis points between 2022 and 2023. This rate increase was necessary to narrow the interest rate differential to safeguard international reserves and maintain the euro peg's credibility amid external pressures.

The BCV operates and oversees Cabo Verde's national payment system, ensuring safe, efficient, and secure functioning of payment and settlement infrastructure. The central bank provides banking services to commercial banks, government entities, and other authorized participants through its payment system facilities.

Payment Infrastructure:

• Large-Value Payment System (LVPS) — Real-time gross settlement for high-value, systemically important payments

• Automated Clearing House (ACH) — Check clearing and lower-value electronic fund transfers

• Bank Settlement Accounts — Central bank accounts for authorized banks and government

• Card Payment Networks — Debit, credit, and prepaid card schemes

• Payment Service Providers — BCV-licensed payment service providers including money transfer operators

• Digital Payment Services — Emerging modalities including mobile money and digital wallets

Regulatory Framework:

The BCV has issued comprehensive guidelines governing:

• Payment system participant licensing and operational standards

• Cybersecurity requirements and incident reporting

• Consumer protection and dispute resolution

• AML/CFT compliance requirements for payment operators

Cabo Verde's foreign exchange regime is anchored to the fixed euro peg at 110.265 CVE per EUR. The BCV manages official foreign exchange reserves primarily in EUR, USD, and other major currencies to maintain the peg and ensure full convertibility.

FX Reserve Management:

• Reserve Custodianship — Holdings maintained to support balance of payments solvency and reserve adequacy (5–5.5 months of prospective imports)

• EUR Holdings — Primary reserve composition to support CVE-EUR parity

• Full Convertibility Guarantee — Commitment to convert CVE to EUR at official parity on demand

• International Liquidity Management — Reserve deployment to manage external pressures and maintain peg credibility

Authorized Dealer Supervision:

• Licensing of banks and authorized dealers for FX transactions

• Interbank market surveillance and regulation

• Import/export financing approval and FX allocation licensing

• Cross-border payment administration

Correspondent banking relationships with major international commercial banks and central banks facilitate cross-border settlement and foreign exchange operations.

Payment Systems Governed or Overseen

The BCV operates and/or oversees the national payment and settlement infrastructure of Cape Verde. Specific systems include:

[Further detail on specific system names requires verification from official sources]

Relationship to Other Regulators

The BCV actively participates in regional financial stability frameworks and international regulatory coordination:

Regional Engagement:

• WAEMU Cooperation Framework — Participation in West African Economic and Monetary Union coordination

• ECOWAS Central Banks Network — Regional cooperation on monetary policy and financial stability

• African Central Banks Coordination — Participation in peer networks and standard-setting forums

International Participation:

• IMF Article IV Consultations and periodic technical assessments

• World Bank and African Development Bank cooperation on financial sector development

• BIS participation in central bank peer networks and standard-setting forums

• FATF Mutual Evaluation Reviews and AML/CFT compliance assessments

The BCV is advancing regulatory modernization through technical assistance from international financial institutions and cooperation with peer central banks, particularly regarding Basel III implementation and emerging financial risks.

Geography and Jurisdiction Notes

Important Departments and Divisions

Key Public Resources

Head Office:

• Banco de Cabo Verde

• Praia, Cabo Verde

Telephone: +238 2605-1000

Email: [email protected]

Website: www.bcv.cv

Key Departments:

• Banking Supervision Division

• Monetary Policy Department

• Payment Systems Unit

• International Relations and Cooperation

Governor: João Tasso Correia da Veiga (2015–present)

Notes on Naming and Language