Vanuatu's banking system includes a Central Bank, local retail banks, and a Development Bank that provides loans for agricultural projects, housing, and industrial development. The country's Financial Centre, a tax haven created by the British in 1971, is the third-largest source of government revenue. Favorable regulatory and tax structures have stimulated foreign interest in Vanuatu as an international financial center; more than 600 offshore companies and banks were registered in Port-Vila in 1985. Local banks require no minimum deposits for vatu accounts and a minimum of US $5,000, or the equivalent in major specified currencies, for foreign currency holdings. Vanuatu has no double taxation agreements with other countries, ensuring maximum confidentiality for international financial transactions. In late 1999, a number of foreign bank-including Deutsche Bank, Banker's Trust, and the Bank of New York-banned trading in US with Vanuatu because of suspected illegal activity being carried on through the Vanuatu financial center. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $55.3 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $245.6 million. The money market rate, the rate at which financial institutions lend to one another in the short term, was 5.5%. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 6.5%.
There is no stock exchange.