WILLEMSTAD, PHILIPSBURG - The Centrale Bank van Curaçao & Sint Maarten (CBCS) presents the Financial Stability Report (FSR) for the monetary union of Curaçao and Sint Maarten. With the FSR the CBCS has added a new report to its yearly publications. The CBCS aims to transparently communicate insights and share knowledge, to better inform the community, the governments, and the financial sector on the state of the financial system. The financial system of the monetary union of Curaçao and Sint Maarten remained resilient throughout the pandemic shock.
The FSR gives a broad view of the risks and vulnerabilities that affect the financial sector of the monetary union. In-depth analyses and stress-testing shed new light on strengths, risks, and challenges for the domestic financial intermediaries. Through open exchanges with stakeholders in the financial sectors of Curaçao and Sint Maarten the findings in this FSR were reviewed and fine-tuned.
A range of developments that are considered an existing or potential risk to financial stability in the monetary union of Curaçao and Sint Maarten, are discussed in the FSR. These include: increased macroeconomic risks persist regardless of economic recovery during 2021, tilting the economic outlook towards the downside; high public and household debt accompanied by high unemployment rates can fuel existing vulnerabilities; global supply chain disruptions and rising energy prices further exasperate inflation; geopolitical risks increase the probability of financial market corrections; and overall profitability of the financial sector remains under increased pressure. Other risks include de-risking by correspondent banks, latent credit risk and interconnectedness.
As a result, the CBCS’ outlook for the financial sector of the monetary union remains cautious to slightly negative. Financial institutions are warranted to continue monitoring developments and implement sufficient measures to build resilience against a possible protracted economic downturn. Upcoming projects geared toward promoting financial stability include implementing a Deposit Guarantee Scheme, adopting of a more realistic actuarial interest rate framework, constructing metrics for the housing market, and reviewing the investment rule. The CBCS aims to update its macroprudential policy instruments on an ongoing basis, working at improving institutional resilience, reducing leverage, controlling cyclicality, and limiting concentration risks.