WILLEMSTAD - It appears now that about 15 percent of the population of Curaçao has an account with the ailing Giro Bank, including small, medium and large companies as well as parties affiliated with the Curaçao government. This means that uncontrolled bankruptcy of the bank would pose a "serious threat" to local financial stability and the local economy.
That is one of the reasons why the Rhuggenaath government, which inherited this problem, considers it its responsibility to resolve it. A problem for which a loan of 170 million guilders from the Netherlands is being taken out and for which the 'license fee' - to be paid on international transactions - will be increased.
"In the event that the Country of Curaçao would not provide liquidity to Giro Bank, all remaining creditors - at least for a long time, but probably definitely - would have lost their money," according to the document 'Toetsingskader Rijksoverheid Risk Regulations: Loan to Curaçao for the benefit of controlled bankruptcy of Giro Bank '.
In a bankruptcy, all assets would have to be used to repay the claim of the Central Bank CBCS on Giro Bank (267 million); the statute of the CBCS does not allow the Central Bank to accept a loss.
"In view of the already precarious economic situation in the Country, this would entail significant risks to economic and financial stability. This may also lead to social unrest on the island, especially since Giro Bank was partly a state bank.”
The latter is only the case for an extremely small proportion, namely 2.1 percent. Most shares are held by Algemeen Pensioenfonds Curaçao (APC) with 39.8 percent, but mainly International Investment Group (IIG) Capital with headquarters in New York, which owns 58.1 percent. At the time, IIG was brought to Curaçao by then banker, Giro Bank director Eric Garcia.
In December 2013, the emergency regulation followed, with the CBCS taking over the helm. The Central Bank also filed a complaint with the Public Prosecution Service (OM), which, however, dismissed the matter.
In connection with the 'involvement' of the government in a solution of the problems at a mainly private banking institution, one of the arguments is also: “The uncontrolled bankruptcy of Giro Bank could lead to wider uncertainty in the financial sector of Curaçao, which possibly lead to problems at other financial institutions.”
This follows on the one hand from the relative size of Giro Bank, one of the larger banks in Curaçao, and also from the fact that the control that CBCS has exercised since 2013 "has apparently been insufficient to ensure orderly settlement," the memorandum reports.
“This can seriously damage confidence in the regulator and the other supervised banks,” the Assessment Framework continues. "All the more now that there are more financial companies in the emergency regulation where the financial situation is not rosy and an acute run on the company - in whatever form - can have a very destabilizing effect."
Minister of Finance Kenneth Gijsbertha, together with the CBCS, is responsible for the stability of the financial system in Curaçao. In addition, the government is responsible for promoting the economy on the island. "Given these responsibilities, it is logical that they want to prevent an uncontrolled bankruptcy of Giro Bank."
The only possibility for Curaçao to borrow this amount, namely a loan for the normal service of the budget, is under the exception on the basis of Article 25 of the Financial Supervision Act (Rft). In addition, the government has estimated that this loan is indeed necessary and responsible given the situation in Curaçao.