WILLEMSTAD - The resolution of the Girobank crisis has revealed that inadequate oversight by the Central Bank of Curaçao and Sint Maarten (CBCS) and the bank's Supervisory Board (RvC) was a significant factor in the bank's downfall. This was disclosed by the CBCS during a presentation to the Parliament of Curaçao on December 4.
Girobank’s financial collapse necessitated a 170-million-guilder loan from the Netherlands to compensate 98% of depositors. Despite intervention measures such as a 2013 emergency regulation and a 2019 moratorium, the CBCS admitted that its initial oversight failed to prevent or mitigate the worsening crisis.
Key Oversight Failures
In 2010, Girobank was acquired by the International Investment Group (IIG). The CBCS acknowledged that the acquisition process lacked proper scrutiny of critical aspects, including the source of capital, conflicts of interest, and the reliability of new executives. Weak vetting allowed conflicts of interest involving Girobank's CEO to go unnoticed initially. Furthermore, it was later discovered that IIG was financially weaker than assumed at the time of acquisition.
Post-acquisition, the CBCS failed to monitor the bank’s operations adequately. Girobank continued unprofitable activities and issued high-risk loans without sufficient risk management. These practices led to mounting credit losses and liquidity problems. The CBCS’s delayed intervention exacerbated the financial issues, culminating in a full-scale crisis.
New Measures to Prevent Future Failures
To avoid similar incidents, the CBCS has introduced stricter vetting and oversight procedures. A new independent unit within the central bank will evaluate all future acquisitions, focusing on:
Source of capital: Ensuring investment funds originate from legitimate sources.
Conflict of interest: Identifying any personal interests of executives that could impact decision-making.
Financial and managerial reliability: Assessing the financial strength and credibility of new leadership teams.
Additionally, new corporate governance guidelines have been established to strengthen internal oversight within financial institutions.
The CBCS emphasized that these measures are critical to rebuilding trust and safeguarding the financial system from similar crises in the future.