Banking System

Banks and other financial institutions in Andorra are regulated by the Andorran National Financial Institute (INAF) under the Law Regulating the Financial System of 1993.  Andorran banks are all members of the Agrupacio de Bancs Andorrans, which operated a system of self-regulation until the regulatory law was passed in 1993. The banks have very conservative policies, and high solvency ratios: depositors’ funds are guaranteed under a 1997 law, but no Andorran bank has ever defaulted on its depositors.
There are currently only 7 banks in Andorra. Foreign banks are prohibited from opening branches and this is unlikely to change. Banking in Andorra is very efficient and Andorran banks have ties to Swiss banks. The banking entities established in the Principality basically offer traditional universal banking services. Over the last few years, some of the entities have started to progressively integrate new technology into the service they render to customers. At present, all entities in the country offer the possibility of customers carrying out certain banking transactions on the internet. The Andorran banking system is made up of the following entities:
• Andorra Banc Agrícol Reig, SA
• Banc Internacional, SA
• Banca Mora, SA
• Banca Privada d’Andorra, SA
• Crèdit Andorrà, SA
• CaixaBank, SA – is subsidiary of Credit Andorra, SA
• BancSabadell d’Andorra, SA
Banca Mora, SA and Banc Internacional, SA. operate jointly and present consolidated financial statements and other data. These two banks are known as INTER-MORA, whereas Andorra Banc Agrícol Reig, SA appears as ANDBANC. BancSabadell d’Andorra, SA started operations in June 2000 and the Government authorized its creation on 15 December 1999 in accordance with the Law regulating new Andorran banking entities dated 30 June 1998. The above mentioned banking entities operate in all the main urban areas of the country through an extensive network of branches.
The banking practices are very advanced and it is possible to open an account (in person only) within an hour. A minimum deposit is required and this ranges from bank to bank. For example an account can be opened with $ 100. Funds can be transferred to the account in any currency and an account can be numbered as opposed to named. It is possible to write a cheque in any currency irrespective to the currency of the account. Major debit and credit cards are issued by all banks. Andorran banks can also offer a mailbox and address facility, where all the customers mail can arrive. This can expedite mail delivery and can keep private address confidential. Also some individuals prefer to increase their privacy by having an account and mail facility with the bank in the capital Andorra la Vella while residing in another Parish or abroad. This can be inconvenient at times, but it can enhance anonymity.
There are no restrictions on money transfer. All banks implement procedures to deter money laundering. The days of individuals arriving to Andorra with suitcases full of money are long gone. Banks ensure that they undertake “due diligence to know their clients”.
Banks in Andorra also offer more sophisticated services for the high net worth individuals. Additionally, they will also offer mortgages for property purchase in Andorra. There are no withholding taxes at the present. However, OCED pressure to Andorra may change this in the future. This point should be regularly monitored by individuals who reside there or who have substantial cash deposits in Andorran banks.
The Andorran banks maintain complete financial secrecy. The development of the Andorran legal regulations on the basis of the principles enshrined in the Constitution of 1993 has been one step more in the recognition of the institution of bank secret, which benefits from explicit protection. In this way bank secret is structured as a duty or obligation imposed on bankers and their servants. This duty or obligation constituted by bank secret is defined as a form of professional secret as is clear from a systematic interpretation of article 226 of the Andorran criminal code. This article 226 of the criminal code provides for sentences of up to 7 years’ imprisonment for bank administrators or employees who reveal confidential information relating to customers.
In June, 2004 Andorra was obliged to accept the EU’s Savings Tax Directive, and as from July, 2005, imposed a withholding tax of 15% on returns on savings paid to citizens of Member States of the EU, of which 75% will be remitted onwards to the States concerned.
The Andorran financial system is, contrary to appearances, highly regulated. Several laws have been introduced to provide a solid legal framework for the system.
Various legal documents regulate the system, such as the « law on payments made by financial institutions » of 27 November 1993, the « law on the regulation of the coefficient of mandatory investments» of 22 August 1994, the « law on the protection of banking secrecy and the prevention of money-laundering or products derived from crime » of 11 May 1995 or the « law on the regulation of criteria for the solvability and liquidity of financial institutions » of 29 February 1996.