THE HAGUE, WILLEMSTAD – The Dutch Undersecretary of Kingdom Relations Raymond Knops has requested the International Monetary Fund (IMF) to research the financial system in Curaçao and the possibilities of dollarization. The undersecretary wants to use this to map out measures to improve the financial and monetary system in a sustainable way. The Minister of Kingdom Relations explained this to the Second Chamber of the Dutch Parliament in a letter.
The Kingdom Council of Ministers (RMR) has agreed to a loan of 170 million guilders, which is needed for the settlement of the problems surrounding the Giro Bank. The government of Curaçao had requested a solution (a “controlled bankruptcy”) to be possible for the Giro Bank, which had been “in serious financial difficulties” for years.
Knops has received a mandate from his party colleague, Minister of Finance Wopke Hoekstra, to provide the loan for the Giro Bank “as soon as Curaçao meets the associated conditions”. An important condition is that it becomes clear how things could have come this far and how new problems can be prevented.
The course of events will be investigated by “a reputable accounting firm,” said the letter to the Second Chamber. This concerns the period prior to and also during the emergency regulation that the Central Bank of Curaçao and St. Maarten (CBCS) instituted at the end of 2013 with regard to the Giro Bank.
“Should this reveal indications that lead to further steps, for example in the context of criminal law, they will of course be brought to the attention of the relevant authorities.” In other words: then a complaint will be filed with the Public Prosecution Service.
Knops has already expressed his concern about the supervision that the CBCS exercises on financial institutions in Curaçao and Sint Maarten. He has the IMF, “as an independent and expert party”, review the financial system and its supervision.
“This concerns the solidity of the financial institutions present in Curaçao and the effectiveness of the supervision by the Central Bank of Curaçao and Sint Maarten on those institutions.”
The operation of the monetary union between Curaçao and Sint Maarten, which came into effect since the dismantling of the Country of the Netherlands Antilles in 2010, is now also added to this research assignment. This also includes the option to switch to another currency, such as the US dollar.
For the loan “for the benefit of controlled bankruptcy of Giro Bank”, the so-called assessment framework is enclosed with the letter from the undersecretary. It reports on the events since the bank came under the emergency regulation of the CBCS in December 2013.
During that period 267 million guilders in emergency liquidity was provided, which must be repaid by Giro Bank. Since the moratorium in December 2019, which allows depositors to withdraw a maximum of 10,000 guilders, the search for a solution has been accelerated.
A takeover of the loan portfolio failed in August 2020, partly due to the deteriorated situation caused by Covid-19. The new solution is that the government will compensate the 267 million to the CBCS. For this, the ‘license fee’ will be increased.
A new Special Purpose Vehicle (SPV) to be set up will then take over the portfolio from Giro Bank. The SPV is coordinated with the Netherlands. Depositors are expected to be partially compensated.
The loan from the Netherlands is needed to start this quickly. Curaçao has requested 170 million guilders, which will be diverted to the SPV. Giro Bank will then be liquidated. The Netherlands wants to agree to this because an uncontrolled bankruptcy will lead to destabilization of the local financial system and the economy.
