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The function & role of the Central Bank

The CBCS's most important objectives are to maintain the external stability of the Netherlands Antillean guilder (NAf.), and to promote the efficient functioning of the financial system in the Countries Curaçao and Sint Maarten. To realize these objectives, CBCS - as supervisory authority -  has frequently recurred to credit control measures and/or to changing the discount rate. The functions of the CBCS, as explicitly summed up in the Bank Charter, are;

First, CBCS is the only institution entitled by law to issue paper money in the Countries Curaçao and Sint Maarten. The Bank also is charged with the circulation of coins.

Second, CBCS supervises banking and other credit institutions to primarily promote the stability, integrity, efficiency, safety, and soundness of the financial sectors of the countries Curaçao and Sint Maarten in general, and to safeguard the interest of the depositors and other creditors of the banking and other credit institutions in particular.

Third, CBCS manages the foreign exchange reserves of the Countries Curaçao and Stint Maarten, which includes regulating of the transfer of payments between residents and nonresidents of the both countries.

Finally, CBCS acts as the government’s treasurer by receiving and making payments from and to the public through the tax collector’s accounts at the central bank.

To strengthen the CBCS’s independent position as central bank vis-à-vis the government, the Bank Charter limits the monetary financing of budget deficits to 10% of the central government’s revenues in the previous year. This limitation must be seen in the context of an overdraft facility to meet liquidity deficits of the public sector that result from seasonal variations in government revenues.

Monetary and banking supervision

Two of the CBCS’s basic tasks are to control the amount of liquid assets in circulation (monetary supervision), and to act as the supervisory body for credit and banking institutions operating in the Countries Curaçao and Sint Maarten (prudential supervision). Furthermore, CBCS is one of the government’s main advisors on financial and economic affairs.

The monetary policy of the CBCS during the last two decades has been geared toward promoting a stable value of the NAf with respect to the US dollar. Since 1971 the official NAf/$ rate of 1.79 has been firmly supported by the monetary authorities. The main reason for pegging the NAf to the US dollar is that over the years, more than 60% of its international trade relations have been conducted with the United States or in US dollars. To maintain the dollar standard, CBCS must ensure a sufficient supply of foreign exchange. To manage the foreign exchange reserves of the Countries Curaçao and Sint Maarten, CBCS in the past has exerted control over the credit extended by commercial banks.

The prudential supervision of banking and credit institutions is aimed at controlling the soundness of the financial system in the Countries Curaçao and Sint Maarten and at safeguarding the deposits of creditors at commercial banks. This supervision is pursued mainly through CBCS's analysis of the solvency and liquidity development of banking and credit institutions.

Last updated: 28.01.2021 06:01