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The Andorran Financial System

Financial System

The Andorran financial system is one of the main pillars of Andorran economic activity and its contribution to GDP is estimated to be about 16%. The sector has a very good reputation and it is characterized by the high ratio of solvency and liquidity of its banking system compared to other financial places, this being the result of a policy of strong capitalization from its beginnings. This fact, combined with conservative and prudent management, have allowed it to stand up well to the difficulties that have resulted from the recent international financial crisis and this has helped the sector to obtain very satisfactory results compared to the country’s European neighbours.

Furthermore, the Andorran banking sector has known how to diversify and transform itself in order to prepare for future challenges and its international expansion in particular. A good example of how it has done so is the fact that all Andorran banks have been certified as qualified intermediaries by the IRS (Internal Revenue Service) of the United States.

Unlike the vast majority of countries, the Principality of Andorra does not have a central bank entrusted with issuing currency.

The technical executive organ of the financial authority is the Andorran National Finance Institute (INAF), a body that is independent of the general Administration, which supervises and regulates financial entities. Its powers are comparable to those of the supervisory bodies of other developed countries. On 30th June 2011 the Principality of Andorra signed a Monetary Agreement with the European Union to make the euro the country’s official currency.

With the ratification of this Agreement, the Principality of Andorra will have the right to issue euro coins from 1st July 2013, for both circulation purposes and for collectors, and there will be an obligation to accept euro notes and coins issued by the euro system and the Member States that have adopted the euro as legal tender.

The banking system is at the heart of the Andorran financial system and the country has five banking groups, which have more than 13,000 million euros in assets and a network of 56 offices —one for every 1,518 inhabitants— and 151 ATM machines —one for every 563 inhabitants.

All together, Andorran banking entities manage more than 10,000 million euros in deposits, a credit portfolio of more than 7,000 million euros and total resources of almost 28,000 million euros, and their solvency and profitability ratios are high by European standards. Insurance companies and other entities dedicated to consumer credits and wealth management also operate in Andorra. Andorra has maintained its banking secrecy by regulating it by law and by applying very strict rules to prevent these entities being used for the laundering of money from criminal activities.

The Financial Andorran Intelligence Unit (UIF) is the independent organ whose mission is to promote and coordinate measures for the prevention of money laundering and the financing of terrorism.