IMF report ‘Contingency planning crisis management and bank resolution’
To increase the resilience of the financial sector, the Central Bank of Curaçao and Sint Maarten (CBCS) has drawn up an extensive reform package. Technical assistance from the International Monetary Fund (IMF) was used in the analysis and design of the program.
For example, the CBCS informs the Antilliaans Dagblad when asked about an explanation of the remark made by the outgoing State Secretary for Kingdom Relations at the end of March. “In the recent period, the IMF has drawn up two reports, in which the financial sector of the monetary union Curaçao-Sint Maarten and the system of supervision of the financial markets were examined,” Knops had written. CBCS president Richard Doornbosch said: “The reform plan covers several functional areas of the CBCS and aims to further increase its analytical capacity in the area of financial stability and systemic risk analysis; to tighten up supervision; and strengthen the safety net for the financial sector. ”
At the end of 2020, the CBCS analyzed the situation in the financial sector on Curaçao and Sint Maarten and identified important financial risks and shortcomings in legislation and regulations. The IMF has provided technical assistance in this regard. The IMF report entitled “Contingency Planning for Crisis Management and Bank Resolution” was released in February 2021. “The report will not be made public due to confidential supervisory information contained in the report.”
Ten priorities from the reform program have also been included “in consultation” in the Implementation Agenda as agreed in the framework of the Country Packages.
In order to strengthen so-called prudential supervision – primarily in the field of liquidity and credit risk management – the CBCS conducts thematic studies into the liquidity position supervision and the quality of the liquidity risk management of financial institutions.
Furthermore, the CBCS has planned investigations into the quality of the loans and investments of institutions, at least “as soon as the long-term financial and economic consequences of the Covid-19 pandemic can be more reliably estimated.”
This analysis also showed that legislative and regulatory reforms are necessary with regard to intervention, enforcement and resolution. Doornbosch emphasizes that these changes are essential to expand the range of instruments of the CBCS and to improve the effectiveness of its actions.
In addition, the IMF underlines the importance of a more data-driven and pervasive approach to supervision, increased efforts to improve the formal governance structures of the supervised institutions and more attention to the long-term viability of certain business models. < / p>
An important part of this is the quality of the data received by the CBCS to perform its supervisory task. This should be improved as a matter of priority in a number of areas.
Finally, the initiation and institutionalization of a structured dialogue between the CBCS and the Ministries of Finance was also discussed to enable effective coordination in the field of financial stability and, in particular, crisis management.
A formalized dialogue is preferable to ensure that both parties are informed about (potential) risks to financial stability. Such regular consultation also provides for informing the government of intended policy (changes) and mobilizing support for the necessary reforms of the financial sector, with the aim of minimizing the potential harm to the taxpayer should the financial sector come under pressure. “That is why it is strongly recommended to set up a financial stability committee,” said Doornbosch.
Categories: Central Bank Curacao Sint Maarten