Naf 3 Million Loss Central Bank St Maarten Curacao
Centrale Bank van Curaçao en Sint Maarten ends 2021 with approximately NAf 2.9 million loss
The Centrale Bank van Curaçao en Sint Maarten (CBCS) closed 2021 with a loss of approximately NAf 2.9 million. This is an improvement of NAf 1 million compared to the result of 2020. The approximately NAf 2.9 million loss will be compensated by the remaining balance of the retained earnings of 2019. This can be concluded from the CBCS’s 2021 Annual Report, which was published today. In contrast to previous years, in which the institution’s financial report was often published together with the Annual Report, starting this year, a yearly financial report, entitled Annual Report 2021, will be published in full and as a separate document.
Effects of the COVID-19 Pandemic
In 2021, as in the year before, the COVID-19 pandemic also affected the developments in the international interest rate. Due to the relatively low prevailing interest rates, the CBCS’s interest income from foreign exchange investments fell again in 2021, this time by approximately NAf 8.8 million compared to 2020.
Due to, among others, the rising interest rate trend on the international market in the second half of 2021 and the effect hereof on the market prices of the financial instruments, CBCS recorded a net “unrealized loss on investments” of NAf 3.5 million in its income statement for 2021. Also, its “realized gains on investments“ dropped by over NAf 9.8 million, compared to 2020.
The decrease in the CBCS’s 2021 income was partially offset by:
• an increase in the interest income from the local investments of approximately NAf 2.6 million, due to the repurchased Sint Maarten Harbour Finance (SMHF) bonds, following the revoke of the repurchase arrangement on February 24, 2021, which allowed holders of the respective SMHF bonds to sell these bonds to the CBCS at par value at any time;
• a decrease in the interest expenses of the certificates of deposit by approximately NAf 0.8 million as a result of a decline in the interest rates paid on these certificates (in line with the low international interest rates);
• an increase in “other income” due to an increase of more than NAf 0.8 million in supervisory costs charged to supervised financial institutions, as well as the write-off of several time-barred items, which resulted in the release of over NAf 3.0 million; and • a decrease of more than NAf 7.9 million in the expenses of the CBCS due to a decline in
the reorganization costs recorded under Personnel Costs.
The CBCS also conducted a gold transaction in 2021, whereby a limited portion of the gold reserves was traded via a simultaneous sale and purchase transaction. The transaction did not affect the total gold stock but did result in the realization of the market value increase of the traded gold for the amount of over NAf 8.5 million.
The CBCS’s balance sheet as of December 31, 2021, shows an increase of over NAf 254 million compared to December 31, 2020. This increase is the result of, among others, the funds received from the Netherlands in connection with (1) liquidity support provided to the countries of Curaçao and Sint Maarten to deal with the negative consequences of the COVID-19 pandemic and (2) the resolution of the Girobank issue.
Moving Forward to Recovery
In 2022 and forward, the CBCS will continue to work on restoring its financial position through improvement of its income. The CBCS will work to further increase revenues, while implementing further cost control measures.
International interest rates are expected to rise again in the coming years, which in the mid-long term will have a positive impact on the CBCS’s interest income. The CBCS has analyzed its foreign exchange reserves, whereby a more optimal allocation of the reserves is determined. The investment policy has also been adjusted to allow for more flexibility in the investable financial instruments. The proposed amendment to the Bank Charter to provide for this flexibility has already been presented to the Ministers of Finance of both Countries. By allocating the investable
reserves more profitably, the CBCS expects to achieve additional interest earnings increases.
Regarding supervision, the aim is to make these operations self-supporting over time. With that in mind, the CBCS would need to be able to fully pass on its supervision costs to the supervised financial institutions. This is also a key aim, as it will allow the CBCS to continue guaranteeing the quality of its supervision and safeguarding confidence in the financial sector of the countries of Curaçao and Sint Maarten.
The Annual Report 2021 is available on the CBCS-website www.centralbank.cw/publications.
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