History

Vanuatu achieved its political independence from Great Britain and France on July 30,1980 five months after the birth of the new nation, Parliament approved the Central Bank Act, which marked the formal establishment of the Central Bank of Vanuatu. “There is hereby established a bank to be known as the Central Bank of Vanuatu which shall be a body corporate under that name..” (Central Bank of Vanuatu Act)

The Central Bank of Vanuatu was created as public institution, with the Government of the Republic of Vanuatu controlling 100% of the shares. The authorized capital of the Bank was fixed at Vt200 million; however, the Central Bank Act states that the capital may be increased. In November 1985, by resolution of the Board of Directors and with the approval of the Minister of Finance, the authorized capital was increased to Vt400 million.

On its establishment, the Bank issued capital stock of Vt50 million, which was taken up by the Government. The capital  stock was later increased to VT100 million. The ownership of the Bank by the Government means that the Government has the right to the profits; the Central Bank Act states that 90% of the profits of the Bank will be paid to the Government and 10% to the General Reserve Account of the Bank.

The Central Bank of Vanuatu began operations on January 1, 1981 when it took over the relevant  assets and liabilities of the Institute d’Emission and eventually to the Central Bank.

One of the first tasks of the Bank was to implement the monetary reform announced by the Minister of Finance on December 16,1980. Therefore, on January 1, 1981 the New Hebrides Franc was renamed Vatu (from the local language name for stone).

During the first two to three years, the activities of the Central Bank were limited to the issue and exchange of currency. In February 1981, the Central Bank of Vanuatu began making arrangements for the design and production of the new Vatu currency which would replace the FNH and Australian currency that were in circulation.

Meanwhile, the Banque de L’Indochine et de Suez was appointed to act as the Central Bank’s agent to issue currency. On March 22, 1982, the Central Bank issued the new Vatu notes and from April 1, 1983, the FNH notes and the Australian currency ceased to be legal tender, although the Central Bank continued to give value for FNH notes.

In August 1985, the Central Bank opened the new Port Vila clearinghouse on its premises  and took over the cheque clearing operation from the Banque Indosuez Vanuatu. The commercial banks participated in the cheque  clearing system that was now organized and supervised by the Central Bank of Vanuatu. From November 1, 1999, the cheque clearing operation rotates among banks.

To fulfill its duties as a banker to the commercial banks, the Central Bank also closed its own Vatu account with  the Banque Indosuez Vanuatu and opened Vatu accounts for commercial banks in its premises. In return, the Central Bank also provided other services, such as Advance Facilities, and acted as a ‘Lender of last resort’ to the commercial banks.

One of the reasons for the establishment of the Central Bank of Vanuatu was to act as an advisor to the Government on banking and monetary matters.

As banker to the Government, in 1985 the Bank also opened  accounts on behalf of the Government and accepted the bulk of the deposits of the Government that were previously held with the Banque Indosuez  Vanuatu. The Bank can provide advances to the Government limited by law.

At the end of 1987, the Central Bank of Vanuatu assumed all the activities of a central bank that were previously performed by the Banque Indosuez Vanuatu.

In May 1989, Parliament approved an amendment of the Central Bank of Vanuatu Act. The ‘Central Bank of Vanuatu’ then became the ‘Reserve Bank of Vanuatu’ (RBV). The amendment also gave the RBV greater authority over and responsibilities for the supervision and regulation of Vanuatu’s banking system. The designation of the Chief Executive Officer was changed from General Manager to Governor.