Banks and the Andorran banking system - living in Andorra relocation guide

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Banks and the Andorran banking system

Introduction to Andorra

Standard & Poor's have maintained the rating for Andorra as BBB-/A-3 and with a stable outlook. As far as they are concerned the line has been drawn under the BPA scandal and they note the continuing economic and tax reforms that are resulting in a more optimistic financial future for Andorra.The only risk associated with the fallout from the BPA affair is renewed criticism that there is no central bank or guarantee in Andorra. They also noted the inflation rate for Andorra was 1.1% for 2016, a postive signal of stabalisation in the financial system.

The banks already are policing Fiscal Residency....
The banks are already applying the new taxation and fiscal residency tests and requirements for new and eventually existing residents. That is the way Andorra is heading, the tax office with such limited manpower and scope for any investigations will come to rely on the banks  for the enforcement of fiscal residency rules.

The banks now for new residents and new accounts are requiring proof not only of fiscal residency in a country but also of the payment of tax in that country. If you are applying to Andorra to become a fiscal resident and you have not yet been paying taxes in any other jurisdiction you may have a hard job to explain to compliance those reasons, more than likely the bank will say no to the account. If there is a legitimate reason for not yet being a fiscal resident in any country, and realistically there are still quite a few reasons,  and you have pleaded that you will become a fiscal resident of Andorra the banks may open an account subject to the Andorran tax return for the following year being submitted to them.

That also will carry the proviso that you have declared and paid tax on your worldwide income after any exemptions and allowances as prescribed by the Andorran tax laws. After all during the banks due diligence examination you will already probably have had to "declare" most of your current financial status to them so they wil have a pretty good idea whether you have followed the fiscal rules in making your declaration here. Whereas there is still no compulsion for reporting to Government ( and that will change) they may be quick to close your account which will leave the new resident high and dry in Andorra without an account.

As Andorra moves forward into the tax paying 21st Century ( albeit  low tax) the authorities here are making it now quite clear that they have little time for tax nomads or for those seeking to use passive residency to top up their days in the year to avoid paying taxes in any other country.  The above requirements are already up and running for new residents, it may logically be that they start examining existing account holders and that sooner than anticipated you may be required to become a fiscal resident in Andorra and prove that you are paying taxes. For those who had accounts opened many ions ago with a good old passport and a bag of cash you may wish to start thinking about getting your house in order.

Foreign transfers to Andorra

Accounts here normally operate as multi-currency which means you can transfer any currency such as Sterling or US Dollars to your Andorran bank account and it will be credited in the currency received.

I advise anyone transferring money in Andorra to change the currency here upon receipt and not to change to Euros in the country from which you are sending.

How Do Andorran Banks Compare?

• Capitalisation is high with a “solvency ratio” of about 23% compared with a worldwide legal requirement of 10%,

• Liquidity is good with an “aggregated loan to deposit ratio” below 70% compared with over 100% in most European commercial banks,

• Stress test results in 2010 were as good as any other financial centre,

Local Banks in Andorra

There are 5 main banks in Andorra, but one will notice the absence of the usual array of UK and foreign institutions. However all banks are efficient, online, and subject to due diligence and anti-money laundering directives.

Listed below are the five banks in Andorra together with links to their websites. Please note this list is for the purposes of a guide only and does not constitute advertising in any way:-

  andbanc - Grup Agricol Reig

Providing a personalised service in asset management for customers all over the world for over 120 years.
With an overall good performance, Andbank has proven the fastest growing bank in Andorra. Its net profits have increased by 6.68%, assets have expanded by 15.2% and return on equity reached a remarkable 18.79%


  Morabanc Group

Asset Management Service, Mora Banc offers a personalised solution to customers with a significant volume of assets, requiring active and professional management for their financial assets.                                                                                                                                                              

The new bank in Andorra, the only foreign owned bank ( J C Flowers Group). The bank is still in the opening process and is reported to be progressing well. Thie replaces BPA which was named by FinCEN in USA in connection with alleged money laundering. Please read News Around Andorra for the ongoing saga.

       Banc de Sabadell d'Andorra

Private and commercial banking, plus online banking and other services.

   Crèdit Andorrà

Commercial & Private Banking,
Financial Times places Crèdit Andorrà as the top Andorran Bank in the Top 1000 Ranking (27/07/2015)

Andorra's Banks into 2017
Gone are the days when you could walk in with a passport and be given a numbered account.

The golden rule now is 100% transparency, and if they have any doubt, no matter how remote they will say "no" rather than risking the wrath of the USA and other institutional blacklists, don't get me wrong, this is  a major headache now to open a new account company or personal. Expect a financial rape, a process that is second to none in my and clients experience, but  if you do have anything to hide, or are unwilling to disclose any area of your banking history then do not apply. Each bank  has developed their own interpretations of various regulatory diktats from international organisations resulting in a required analysis before the initial approach is made and I ave guides for you on that at the initial preparation stage.

Andorra has and continues to evolve from a secretive tax haven to a more open and accepted financial system, at least enough to be removed from the list of fiscal paradises. So with pressure from the OECD, EU and the global community Andorra and its banking system has yielded to pressure and strictly enforces due diligence. This due diligence requirement has again been strengthened in the light of the BPA scandal which remains an ongoing investigation, and the story can be followed on the page headed News Around Andorra.

In fact the compliance departments in in all of the banks are being difficult, particularly where company accounts are involved. It is easier for a bank here to say no rather than having any shade of doubt whatsoever in opening a new account ( and the same goes for personal accounts). Andorran banks are primarily interetsed in private banking, the average retail high street bank is not their main concern. If you are willing to show commitment both to Andorra AND to the bank itself ( in the form of active investments) then they will  be more symapthetic, to the inactive account holders whose sole  purpose for residency is tax avoidance or tax evasion ( dare I say?) you may well be turned away. For company accounts, the same criteria applies, you need to show commitment to Andorra, and not just a convenience company.

In fact, due diligence now forms a major role in the residency process, far more so than before. To this end I do have a guide for potential residency applicants who must have a local bank account to proceed with residency. Theoretically it is possible to continue with residency after being denied a local account but in practice this is extremely difficult and complicated. I now recommend two bank accounts in separate banks which I can arrange for you. Two separate bank accounts does not insinuate a specific risk to account holders but there is always the old adage of not having all eggs in one basket, particularly now after the BPA scandal. By having two bank accounts it gives residents choices, and each bank offers different products and services.

In general, the banking system here remains  secure, BPA was an isolated incident and the Government was quick to react. It is noted in Credit Rating Agencies that there is no central bank or bank or last resort and that Andorra's GDP is dwarfed by private banking investment. Fitch recently removed the negative outlook for Andorra at BBB but this is still far below the former A- before the European crisis and BPA. Solvency ratios in each of the 4 remaining functioning banks here remain well above the globally recommended ratios, indeed some of Andorra's banks are within the top ten most solvent banks in Europe.

If you do intend to open a bank account and some banks still do offer services for non-residents or whether you intend to become a resident please contact me to discuss in the first instance, you need to be prepared and things can go wrong without the correct advice. Please scroll down for a further overview of the banks here.

New Andorra Euro
Operating a Bank Account in Andorra

Andorra is probably one of the few countries in the world where bank employee liability runs parallel with corporate liability. there is a maximum prison sentence for a bank employee of seven years and a fine of € 500,000 if he is proven to be acting negligently in accepting funds from a fraudulent or criminal source. For that reason, importing money to Andorra may require further proof of the source of funds before the transfer is accepted.

Operation of non-resident accounts are now becoming increasingly restricted in most banks here, there is a quarterly fee and as Andorra has signed up to the exchange of financial information all will be sent to your country of fiscal residence.

Foreign company accounts also can be opened subject to presentation of proof of ownership of the company with the power to open accounts on behalf of the company. Copies of such documents will require to be Apostillised, and once again the more documents to prove legitimate company business the more the chance of successfully opening a company account. I can provide further information on this on request.

You must be here in Andorra and in person with your passport to open an account (there are few exceptions involving representative overseas offices), I have read on the internet offers to open an Andorran bank account by filling in online forms with your personal details. I can assure you that under no circumstances will you be the proud owner of an Andorran bank account, so beware!
The view of FITCH after the BPA revelations

Source courtesy of  

March 23 2015 Fitch Ratings has placed Andorra Banc Agricol Reig's (Andbank), Credit Andorra's and Mora Banc Grup, SA's Long- and Short-term Issuer Default Ratings (IDRs) of 'A-' and 'F2', respectively, and their Viability Ratings (VRs) of 'a-' on Rating Watch Negative (RWN). A full list of rating actions is available at the end of this commentary. The RWN reflects Fitch's view that the operating environment and franchises of Andorra's domestic banks need to be reassessed in light of potential spill-over effects from the resolution of Banca Privada d'Andorra (BPA; 'Restricted Default'). KEY RATING DRIVERS - IDRs AND VR The RWNs indicate likely rating downgrades from the 'A-' levels for all three Andorran banks. The extent of the downgrades will depend on our re-assessment in particular of aspects related to the operating environment (including the regulatory framework and the economic outlook), company profiles (business models and franchises) and funding and liquidity profiles. The extent of downgrades will also depend on developments in the coming weeks, especially with respect to deposit outflows and, potentially, how the resolution of BPA affects other banks. While the U.S. Department of the Treasury's Financial Crimes Enforcement Network's (FinCEN) allegations are specific to BPA, the escalation of events at BPA has underlined more uncertainty around access to funding and liquidity than was previously factored into the Andorran banks' ratings, in particular in view of their relatively high dependence on non-residential customer deposits and the absence of a lender of last resort. On 10 March 2015, the FinCEN named BPA as a foreign financial institution of primary money laundering concern and proposed the imposition of special measures. Subsequently, BPA and its subsidiaries were intervened by the relevant authorities, the Spanish subsidiary applied for insolvency proceedings and temporary precautionary measures were implemented by BPA's administrators, among other developments (see Fitch's rating actions on BPA in its commentaries dated 13 and 18 March 2015 and available on All three Andorran banks' 'A-' ratings have so far reflected the development of their private banking franchises, sound management, healthy profitability, strong capitalisation and ample liquidity. The ratings also take into account the weak operating environment in Andorra, which has put pressure on asset quality indicators, and the banks' high single-name risk concentrations. RATING SENSITIVITIES - IDRs AND VR The operating environment is a constraining factor for these banks' ratings and Fitch's assessment is sensitive to a potential downward revision of domestic economic growth prospects and a possible recalibration of its view on aspects related to the effectiveness of the regulatory framework in Andorra. Fitch's assessment of the banks' company profiles is primarily sensitive to the evolution of confidence in the Andorran banking system. Despite a swift and strong response to BPA's crisis by all parties involved, the reputation of the system and therefore the banks' franchises may be damaged, potentially affecting growth prospects and the stability of their businesses models. Fitch will also review the stability of banks' deposits and funds under management, in particular in view of the high proportion of non-residential customers, which exposes them to flight risk. In this context the lack of a lender of last resort in Andorra is a disadvantage versus international peers. Fitch will carry full reviews of IDRs and VRs of Credit Andorra, Andbank and MoraBanc in the coming weeks. KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR The banks' Support Ratings (SRs) of '5' and Support Rating Floors (SRFs) of 'No Floor' reflect Fitch's view that the probability of Andorran banks receiving support in case of need is low. Although Fitch does not publish a rating for Andorra, the banking system's large size relative to the Andorran economy means that while the authorities' propensity to provide support may be high, it cannot be relied upon given limited resources at their disposal

July 1st 2015, Fitch Ratings has downgraded Andorra Banc Agricol Reig's (Andbank) and Credit Andorra's Long-term Issuer Default Ratings (IDRs) to 'BBB' from 'A-'and Mora Banc Grup, SA's (MoraBanc) to 'BBB-' from 'A-'. The Short-term IDRs of all three banks have been downgraded to 'F3' from 'F2'. The ratings have been removed from Rating Watch Negative (RWN) and the Outlooks on the Long-term IDRs are Stable. A full list of rating actions is at the end of this rating action commentary. The IDRs of the three banks have been downgraded following a reassessment by Fitch of the operating environment in Andorra. This reassessment includes Fitch's view of the stage of development of Andorra's financial market, which is characterised by a lack of direct access by the banks to a lender of last resort, and of its regulatory framework. In its assessment Fitch has also taken into account individual developments at the three banks. This revision completes the review started on 23 March when Andorran banks were placed on RWN due to spill-over effects from the naming of Banca Privada d'Andorra (BPA) as a foreign financial institution of primary money laundering concern by the U.S. Department of the Treasury's Financial Crimes Enforcement Network's (FinCEN). KEY RATING DRIVERS IDRS AND VRS Fitch views the operating environment as a constraint on the banks' VRs and therefore of high importance for the ratings. We consider the regulatory framework as developing compared with some of the more advanced frameworks in Europe and financial reporting as less transparent than at many international peers. We, however, expect that transparency and comparability with international peers and counterparties will improve with the pending implementation of IFRS and Basel III by 2017. The limited development of financial markets in Andorra, among other aspects, is reflected in the lack of a lender of last resort. Central bank access can only be achieved through the banks' international subsidiaries, which we view as less reliable and a major shortcoming versus international peers, thus affecting the banks' funding and liquidity scores. The funding and liquidity scores are reflected in the lower of the two possible Short-term IDRs for banks with a Long-term IDR of 'BBB' for Andbank and Credit Andorra. At the same time Fitch acknowledges the authorities' swift measures to manage the fallout from BPA, to the extent of isolating the impact on the economy and on the rest of the financial system. Fitch also recognises that the country is adopting all EU directives for the financial system as per the monetary agreement, a process that is expected to be completed by 2017. Fitch expects GDP growth to slow in 2015, due to the large size of the banking sector in the economy and the challenges that this sector faces, particularly in terms of profitability pressure from low interest rates, asset quality, assets under management outflows (AUMs) and capacity to attract new business in Andorra. Fitch expects the bank's domestic loan books to continue to deleverage in view of limited opportunities. The three banks focus on private banking/wealth management activities and they also maintain a retail presence in Andorra. All banks have been growing their assets under management in recent years, particularly Andbank and Credit Andorra as they have been expanding internationally through a combination of organic and inorganic growth, while MoraBanc has a more limited international presence. Nevertheless, their franchises in international private banking are still small. Fitch expects some spill-over effect from BPA on the banks' business growth prospects, particularly in Spain (where Andbank and Credit Andorra have banking subsidiaries) and Andorra. Net new money outflows since FinCEN's announcement have been limited and are now stabilising. The banks have been actively managing their balance sheet liquidity and maintaining them at fairly stable levels. The recently implemented law on mechanisms for restructuring and resolution of banking institutions will enable the Andorran authorities to resolve banks according to international practices. The resolution plan for BPA includes the creation of a new bank, which will inherit all of BPA's legitimate assets and liabilities after an independent review of anti-money laundering (AML) of all customers. The aim is to regain access to correspondent banks and resume operation under normal circumstances before the bank is sold off via an auction. Under the resolution law, a EUR30m resolution fund has been set up, provided by the Andorran banks. In addition, Andorra also has a deposit guarantee fund, which at end-2014 totalled around EUR112m. The banks' contributions to these funds are accounted for as non-distributable reserves, which could affect their capital ratios if the funds are utilised. Andbank's ratings further reflect risks related to the fast expansion of the bank's activities, particularly following the acquisition of Banco Inversis in 2014. This transaction had a negative impact on capital ratios, but Fitch assumes that capital will be restored to historical levels within a fairly short timeframe. The ratings also take into account Andbank's diversification and strong earnings generation capacity. Credit Andorra's ratings also reflect its proportionally larger exposure to the domestic economy, which has suffered from a long recession, and continued weakening of asset quality (including foreclosed assets). The ratings also consider the bank's strong earnings generation, adequate capital and a balanced approach towards international expansion. MoraBanc's ratings also take into account a more limited and concentrated franchise than peers and the failure to complete its first acquisition in Spain, which would have provided it with AUM of about EUR3bn. They also consider increased risk appetite underlined by growing exposure to equity investments and diversification away from the core banking business in 2014. The low interest rate environment and limited lending demand has led the bank to look for alternative earnings opportunities, including in syndicated loans and alternative investments. Fitch views the increased exposure to equity investments, arising from the use of the bank's balance sheet to develop new investment product offerings, as carrying higher risk than its core business. The ratings also reflect strong earnings generation capacity and capital levels. The Stable Outlooks on the banks' ratings reflect our expectation of stabilising key credit factors despite remaining uncertainties related to the resolution of BPA. Fitch assumes that incremental risks related to BPA will be manageable for the banks and the ratings do not capture the potential involvement of the Andorran banks in corporate transactions resulting from BPA's resolution. SUPPORT RATING AND SUPPORT RATING FLOOR The banks' Support Ratings (SRs) of '5' and Support Rating Floors (SRFs) of 'No Floor' reflect Fitch's view of a low probability of the Andorran banks receiving support in case of need. This in turn reflects limited resources at the authorities' disposal as well as the progress made by Andorra to implement a framework for resolving banks in accordance with the EU's BRRD. CREDIT ANDORRA'S PREFERRED STOCK Credit Andorra's preferred stock is rated five notches below the bank's VR to reflect higher loss severity than the average for senior unsecured creditors and the higher-than-average risk of non-performance given discretionary coupon payments. The preferred stock has been downgraded in line with the VR. RATING SENSITIVITIES IDRS AND VRS In view of Fitch's revised assessment of the operating environment in Andorra, near-term rating upside is limited. In the medium-term, the bank's IDRs and VRs are sensitive to a change in Fitch's assessment of the operating environment in Andorra, which may for example benefit from further alignment of its financial markets and regulatory framework with other European countries. The ratings are also sensitive to progress on the resolution for BPA and the impact that this may have on the confidence in the banking system and the financial profiles of these three banks, including the evolution of AUM, deposits and liquidity. Fitch's base case assumption is that potential additional costs for the system will be manageable. The ratings also assume continued sound capital ratios, supported by an ability to generate capital internally through earnings. A weakening of capital ratios could therefore put pressure on the ratings. Andbank's ratings are also sensitive to the bank's ability to restore capital after the Inversis acquisition and the execution of its growth strategy. Credit Andorra's ratings are also sensitive to the bank's ability to stabilise asset quality; further deterioration of the loan book could therefore put pressure on the ratings. Morabanc's ratings are also sensitive to developments in the bank's risk appetite, such as increasing exposure to equity investments and other sources of diversification away from its core banking activities, which could negative affect the ratings
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