Published On: Thu, Jun 5th, 2014

IMF: CBCS must discard loan portfolio public companies

IMFWILLEMSTAD - The Central Bank of Curaçao and Sint Maarten (CBCS) has done well to stop the financing of state enterprises and would have to divest its portfolio of bonds as planned, as market conditions permit.

This can be read in the provisional findings of the International Monetary Fund (IMF) in the 'Kingdom of the Netherlands - 2014 Article IV Consultation'.

The fact that the CBCS indicates to the IMF that it has stopped its policy to finance public companies is an indication that the policy of the bank has changed radically.

In January last year, the chairman of the Committee for Financial Supervision (CFT), Age Bakker, said that the policy of the CBCS to provide loans to public companies like Aqualectra and the port of St. Maarten and in the latter case even to stand as a guarantee for refund, is no "common practice" in the rest of the world when it comes to monetary policy. CBCS director Emsley Tromp spoke against the statements made by Bakker.

Tromp pointed out that Article 13 states that the bank’s jurisdiction is to issue bonds by public and private entities established in the Netherlands Antilles.

Also the new bank statute empowers the CBCS to issue bonds by public and private companies established in one of the two countries, based on adequate collateral.

The Curaçao members of the Supervisory Board pointed out that in the explanatory memorandum of the Act, however, that this Article refers to situations where the bank acts as a ‘lender of last resort’.

The bank may, for example, may feel compelled to issue a guarantee for the benefit of small savers, with a troubled credit.

The commissioners indicate that neither in the case of Aqualectra, which in fact is bankrupt, nor in the case of loan and guarantee for repurchase for the port of St. Maarten, the bank acted as the lender of last resort.

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