For 111 years, the Banco Nacional Ultramarino was the leading banking institution in Cape Verde, having indelibly marked local commercial activities. Indeed, as Cape Verde was a colony of Portugal until July 5, 1975, the Kingdom of Portugal granted the Banco National Ultramarino the exclusive privilege of issuing banknotes in the entire territory of the colonies in a law letter passed on May 16, 1864. The first paragraph of article two of the above mentioned letter further determined that a Cape Verdean branch of this agency would be established within a year.
According to the Order of October 4, 1865, reported by the Marine and Ultramarine Ministry to the colonial government of Portugal, the Banco Nacional Ultramarino would begin its banking activities with a subsidiary in Praia, which opened in October of 1865 under the charge of Clarimundo Martins. This subsidiary modestly began its operations with a capital of 30.000 escudos, taking deposits at interest rates ranging from 3% to 5% depending on the duration, taking letters, and selling withdrawals across the country with variable rewards also in accordance with the payment terms. It progressively continued to expand its operations.
In addition to the city of Praia, the Banco Nacional Ultramarino opened a São Vicente Island agency in 1894 and another on Sal Island in 1948, in addition to representative offices in all of the provincial capitals.
In 1973, in order to address the vacuum resulting from the fact that the Banco Nacional Ultramarino did not conduct medium and long-term credit operations, such as credit for agriculture, livestock, industry and property, and due to the reduced activity of the Caixa de Crédito of Cabo Verde, the Banco de Fomento Nacional set up an office in Cape Verde so as to stimulate productive activities.
Besides the aforementioned credit institutions based in Portugal, the “Caixa Económica Postal” also existed, having been created in 1828, but was integrated into the Postal and Telecommunications Services Organization, with the objective of financing consumer loans and attracting small investors. There also existed the Caixa de Crédito de Cabo Verde, which was established in August of 1962 with the aim of granting credit for agriculture, animal husbandry, industry, and real estate for the development of Cape Verde.
In the political and administrative execution of national economic integration, in 1963, the Banking Trade Inspectorate was created in order to ensure the smooth functioning of the foreign exchange markets, establish the exchange rates that the representatives of the Banco Nacional Ultramarino should observe, and monitor compliance with laws and regulations on foreign exchange trade, etc.
With the advent of national independence, it was important that Cape Verde fully assume all the attributes of its sovereignty, namely, the exercise of its inalienable right to issue currency through an exclusively national institute. Thus, through the decision in Force of Law No. 25/75 of September 29, 1975, the Bank of Cape Verde was created and was attributed, on an exclusive basis, the functions of central bank and issuer, foreign exchange authority, treasury and commercial bank.
On June 30, 1976, with the decision of Force of Law No.13/76 of June 26, the first Organic Law (legislation) of the Bank of Cape Verde was approved, maintaining the original purpose of the institution as defined in its law of creation and attributing it a set capital of one hundred million escudos (100,000,000$00 CVE). This amount was raised to four hundred million escudos (400,000,000$00 CVE) in 1981.
On July 1, 1976, with the transfer of all responsibilities, assets and liabilities of the local departments of the Banco Nacional Ultramarino and the Banco de Fomento Nacional in Cape Verde to the BCV, agreed upon in bilateral negotiations between the two Governments, the Bank of Cape Verde initiated its public activities as a multi-function bank. In this way, the Bank of Cape Verde directly succeeded Cape Verde’s dependencies on the Banco Nacional Ultramarino and the Banco de Fomento Nacional.
On March 1, 1977, following a sharp devaluation of the Portuguese escudo decreed by the Portuguese authorities, the Government of Cape Verde decided to depeg the CVE from the PTE. The Cape Verde Escudo was then linked to a group of currencies representative of the countries with whom Cape Verde held closer economic relations.
On July 1, 1977, to commemorate the first anniversary of full funcionality, the Bank of Cape Verde began to circulate its first banknotes, the Cape Verde Escudo (CVE), at parity with the Portuguese Escudo, thus replacing the notes that the Banco Nacional Ultramarino had been circulating.
Until March 1981, the Governor of the Bank had been singlehandedly managing the Bank of Cape Verde, which flagrantly violated the Organic Law which attributed the Board of Directors the overall responsibility for all acts necessary to achieve the purposes of the Bank. Thus, with the intention of enhancing the management capacity of the Bank, in March 1981, the first Board of Directors of the Bank of Cape Verde was appointed and these managers were recruited from among the institution’s employees.
During the 1980s, the Bank of Cape Verde maintained an intense and ambitious agenda, composed, in essence, of implementing the following programs:
Reorganizing and restructuring of services:
• Adoption of a statute for the Bank of Cape Verde’s personnel;
• Initiation of the digitalization of various central services;
• Implementation of a banking system in the country by creating a network of branches in almost every county capital, thus substantially improving the coverage of banking services in the national territory;
• Developing programs to support the productive sector, through the creation of special incentives for emigrants as well as for the various activity sectors prioritized by the government; for this purpose, the Investment Department was created in order to manage these programs as well as those that had been the responsibility of the Caixa de Crédito de Cabo Verde, already defunct by 1984.
In August 1985, the Organic Law of the Bank of Cape Verde was revised in order to improve its operation, and it abolished the post of Vice-Governor, which would be reinstated in the Organic Law of 1993.
In 1990, a new Organic Law of the Bank was approved in order to strengthen the central bank function of the Bank of Cape Verde. With this law, the Bank of Cape Verde came to have as its principal function the management of monetary and exchange rate policy and the role of banker to the State, although it continued to carry out, on a transitional basis, the functions of commercial and development bank. This Organic Law was a transition point for the bank as it entered the modern global market.
During the period between 1991 and 1993, all of the Board’s activities were directed toward creating the technical and material conditions for decommissioning the commercial and development aspects of the Bank of Cape Verde.
Thus, in August of 1993, as part of a broad economic and financial reform program initiated by the Government resulting from the democratic elections of 1991, a new Organic Law of the Bank of Cape Verde was approved, attributing it the exclusive function of central bank.
On September 1st of the same year, the commercial and development sectors of the Bank of Cape Verde were officially decommissioned, thus resulting in the creation of the Banco Comercial do Atlântico, SARL (BCA), a public, limited liability company with exclusively public capital, and ending a 17-year-long single-bank regime.
With the decommissioning of its commercial and development components, the Bank of Cape Verde’s activities have since focused exclusively on empowering and strengthening its role as the central bank. Indeed, the economic reform process initiated in 1991 has emphasized the market as the central mechanism for regulating the economy, which has led to a gradual liberalization of the financial sector, requiring major changes in how the monetary and exchange policies are managed.
As it was considered desirable to concentrate all supervision of the entire financial system in a single institution, the Bank of Cape Verde has been assigned the duty of supervising and controlling all institutions operating in the monetary and financial markets, including credit and parabanking institutions, the insurance sector, as well as the capital markets.
Under the Foreign Exchange Cooperation Agreement and its Additional Protocol, signed between the Portuguese and Cape Verdean Governments, the Cape Verde Escudo (CVE) was pegged at fixed parity as of April 1, 1998 to the Portuguese Escudo (PTE), and, consequently, to the Euro.