WILLEMSTAD, THE HAGUE - The island of Curaçao has already repaid 100 million guilders of the 170 million guilder loan provided by the Netherlands in 2020 to resolve issues related to the troubled Girobank.
The original agreement stipulated that Curaçao would repay the (interest-free) loan over a period of 15 years, with annual installments of 11.33 million guilders until 2037. However, due to more positive developments in the Girobank's settlement, over half of the loan has already been repaid, according to a statement by Secretary of State Alexandra Van Huffelen of Kingdom Relations to the Dutch Parliament.
Van Huffelen’s letter to the Dutch Parliament:
As previously shared with your Parliament at the end of 2020, the Netherlands provided Curaçao with ANG 170 million for the Girobank settlement. Girobank had been facing financial difficulties for an extended period at that time. Since December 2013, Girobank had been under the emergency regulation of the Central Bank of Curaçao and Sint Maarten (CBCS). Subsequently, CBCS took actions to restore Girobank's financial position, but these efforts did not yield sufficient results. Consequently, in December 2019, CBCS was forced to institute a moratorium, limiting depositors to a maximum withdrawal of ANG 10,000 from their accounts.
Since then, Curaçao and CBCS have been actively seeking a definitive solution to the Girobank's problems. The Curaçao government felt compelled to intervene because approximately 15% of the population had accounts with Girobank, and the country lacked a deposit guarantee system. This situation placed depositors at significant risk of being unable to access their funds for an extended period or even losing a portion of them. Without government support, significant societal issues could have arisen. The ANG 170 million loan provided by the Netherlands to Curaçao was made available to facilitate immediate payouts to depositors.
Curaçao has also assumed the Girobank's debt to the CBCS and the security rights on Girobank's loan portfolio as part of the settlement. Therefore, Curaçao is required to repay a loan of ANG 267 million to the CBCS. The security rights are held by the Giro Settlement Holding (GSH), which has been managing them since then.
The loan of ANG 170 million had the following terms at the time. I will provide an update on the status of each condition:
The loan of ANG 170 million has a term until 2037 and was provided at a 0% interest rate because the Netherlands could also borrow at that rate at the time. Starting in 2022, the loan should be repaid in 15 annual installments, approximately ANG 11.33 million each. The minimum repayment is based on the GSH's results. If, unexpectedly, the results fall short, Curaçao will make a provision for it in the budget.
The GSH's results have been positive, and as a result, nearly ANG 100 million has already been repaid. The outstanding debt currently stands at ANG 72.0 million.
A parliamentary mandate for a revenue source to cover the obligations was required. It was proposed to increase the foreign exchange bank license fees.
The Curaçao Parliament (Staten) approved this on December 23, 2020, during the discussion of the 2021 budget. The fee increase was budgeted to generate ANG 25 million annually. However, the increase in the license fee has not been implemented. Nonetheless, Curaçao is fulfilling its obligations.
Investigation into the circumstances of Girobank leading up to and during the emergency regulation. If indications arise that warrant further action, such as in a criminal context, they will naturally be brought to the attention of the relevant authorities.
An independent agency, commissioned by the CBCS (Central Bank of Curaçao and Sint Maarten), conducted a fact-finding investigation and follow-up research. This was supervised by an advisory committee to ensure the objectivity, impartiality, continuity, and transparency of the research. The report was completed in July 2023 but has not been made public. The CBCS will internally discuss the report to determine the next steps.
The IMF (International Monetary Fund) conducted a review of the financial system and its supervision. This includes assessing the soundness of financial institutions in Curaçao and the effectiveness of the Central Bank of Curaçao and Sint Maarten's supervision of these institutions.
The IMF review of the financial system and supervision was completed in 2021, but the report is not public. Based on the findings and recommendations from that study, reforms are being implemented and monitored within the framework of Curaçao and Sint Maarten's country packages. Progress reports on these reforms are shared with your Parliament.
The IMF provided advice on the functioning of the monetary union between Curaçao and St. Maarten (one central bank for two islands) and the possibility of transitioning to another currency, such as the US Dollar. The IMF published a note on this matter in 2021, emphasizing that it is not policy advice but considerations based on international literature and practice. The CBCS later published a position paper on this subject.
The absence of a deposit guarantee system (DGS) prompted the inclusion of DGS development in the Country Package for each of the countries, Aruba, Curaçao, and Sint Maarten. The necessary legislation is currently being prepared to protect account holders up to a certain amount in the event of an unforeseen banking crisis.
