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Friday 29 July 2022 locAl
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The strong Aruban economic recovery echoed in the

performance of Aruba’s financial sector in 2021

Oranjestad - Today the Cen- through, e.g., increased ital and liquidity buffers in was undertaken by the CBA
trale Bank van Aruba (CBA) costs of doing business, re- place to navigate through Introduction State Ordi- in 2020/2021 to evaluate
publishes its financial sector duced profitability, and unprecedented times like nance Consumer Credit the degree of compliance
supervision report 2021. purchasing power. This, on these. In June 2016, a draft pro- with the revised Basel Core
its turn, may bear upon the posal to regulate consumer Principles (BCPs) for Effec-
This year’s Financial Sec- quality of banks’ loan portfo- Successful closure of the credit was submitted to the tive Banking Supervision.
tor Supervision Report is the lios, resulting in an increase CFATF mutual evaluation of Minister of Finance. The main The outcome of the self-
tenth annual edition, and in nonperforming loans and Aruba’s AML/CFT framework objectives are to (i) ensure assessment indicates a high
provides an overview of the the loan loss provisions that During August 31, 2021 to that consumers receive suffi- level of compliance against
most important develop- need to be formed against September 10, 2021, the cient information before en- these Core Principles. A plan
ments in the supervisory and these loans. The CBA will Caribbean Financial Action tering into a consumer loan of action has been drafted
regulatory landscape in continue to closely moni- Task Force (CFATF) visited agreement, to (ii) place a to address the identified
2021, as well as of the finan- tor the developments in this Aruba to assess in detail the limit on the interest rates shortcomings on short term,
cial performance of Aruba’s area. level of compliance with that lenders are allowed to which are mainly related to
financial sector in 2021, also the Financial Action Task charge to consumers, and the absence of some policy
vis-à-vis the prudential re- Ample capital and liquidity Force (FATF) 40 Recom- to (iii) prevent over-credit- papers in the area of opera-
quirements in the areas of buffers mendations and the level ing. The Government of Aru- tional risk management.
solvency and liquidity. The ample capital and li- of effectiveness of Aruba’s ba submitted a revised draft
quidity buffers accumulat- AML/CFT framework. From to the Parliament of Aruba The increasing importance
Aruba’s financial sector ed over the years, as well March 1, 2022 until March for approval on December of Cyber Security & IT Super-
continued to show resiliency as the CBA’s strict oversight, 8, 2022, virtual face-to-face 7, 2021. This draft state ordi- vision
during the COVID-19 pan- have been instrumental meetings were held to dis- nance was discussed in Par- In consideration of the in-
demic in maintaining a solid and cuss the second draft of liament on March 23, 2022, creased cyber security risks,
In the wake of an unprece- reputable financial sector. the mutual evaluation re- but its treatment was post- the CBA will step up its over-
dented decline in economic A sound and solid financial port (MER). Early April 2022, poned as the government sight efforts in this area. The
activities in 2020, due to the sector is an essential pre- the CFATF shared the final of Aruba wanted to amend existence and effectiveness
COVID-19 pandemic, the condition for economic draft MER with Aruba. This certain sections of the draft. of proper Information Tech-
year 2021 can be character- growth and financial sta- final draft was discussed on Following these amend- nology (IT) (security) related
ized as a year of strong eco- bility, also considering that June 2, 2022, during the vir- ments, on June 3, 2022, the policies, procedures, and
nomic recovery. Although the financial sector’s assets tual CFATF Plenary meeting. revised draft was approved measures at the super-
the pandemic is still ongo- have meanwhile reached The results are positive and by Parliament. vised institutions are critical
ing, the Aruban economy is approximately Afl 13.6 bil- demonstrate a high level of to ensure safe and sound
expected to continue to re- lion (equivalent to USD 7.6 compliance with the FATF Implementation deposit in- operations. The policy pa-
cover in 2022 and return to billion) at end-2021, which is standards, both in terms of surance scheme pers issued by the CBA in
pre-COVID-19 output level more than twice the size of technical compliance and In May 2017, a (revised) the areas of technology
by 2023. The banking sector Aruba’s 2021 gross domes- effectiveness. On July 14, legislative proposal for the risk management, business
withstood the challenges of tic product, as estimated by 2022, the final report was introduction of a deposit continuity management,
the pandemic remarkably the CBA. published by the CFATF on insurance scheme (DIS) for and outsourcing arrange-
well, and remained highly its website (Fourth Round the domestic commercial ments form the benchmark
solid and robust. The ample Mutual Evaluation Report of banking sector was submit- against which the IT (secu-
capital and liquidity buffers, Although the commer- Aruba (cfatf-gafic.org)). ted by the CBA to the Min- rity) policies, procedures,
in combination with the re- cial banking sector has in ister of Finance. The imple- and measures in place at
lief measures of the CBA in meantime discontinued the Important amendments mentation of a DIS will help the supervised financial insti-
the monetary and pruden- COVID-19 related support to the AML/CFT State Ordi- protect small depositors as tutions are assessed by the
tial domains, have helped measures (primarily loan nance well as help preserve trust in CBA, through its offsite sur-
the banks to weather this moratoria) to its clients, the Following the gap analy- the banking system, thereby veillance (inter alia through
storm, and to continue their nonperforming loan ratio of sis conducted vis-à-vis the contributing to financial sta- surveys and interviews with
lending activities uninter- this sector declined from 5.0 2012 FATF Standards, the bility. The legal basis to in- key persons within the super-
rupted. The latter was criti- percent at the end of 2020 CBA drafted a legislative troduce a DIS was adopted vised financial institutions)
cal to preventing a deeper to 4.7 percent at end-2021, proposal to address the by the Parliament of Aruba and onsite examinations.
economic impact from the evidencing the strong eco- identified, mostly technical, in December 2021 through
COVID-19 pandemic, and nomic recovery. Also, the fi- deficiencies in the AML/CFT an amendment of the State To conclude, also in 2021
played a key role in Aruba’s nancial performance of the State Ordinance. This pro- Ordinance on the Supervi- the financial sector under
swift economic recovery. commercial banking sec- posal was submitted to the sion of the Credit System (AB the supervision of the CBA
tor bounced back in 2021, Minister of Finance in August 1998 no.16). Currently, the remained highly solid and
Despite the ongoing eco- even above pre-pandemic 2018. Based in part on this draft state decree regulat- reputable, thanks to the am-
nomic recovery, downside levels, while the capital and proposal, a draft amended ing the DIS is in the legislative ple solvency and liquidity
risks have increased con- liquidity buffers reached re- AML/CFT State Ordinance process. A foundation, to be buffers and the CBA’s strict
siderably, due to the war cord highs, thereby remain- was sent by the govern- incorporated by the CBA, oversight. Nevertheless, the
in Ukraine and the ensuing ing far above the required ment of Aruba to the Advi- will be tasked with the man- CBA remains vigilant of any
sharp rises in the prices of minimum levels. Addition- sory Council in 2020. Subse- agement of the guarantee adverse developments with
gas and oil, putting ad- ally, the insurance and pen- quently, with due regard to fund. The required prepara- the purpose to keep the fi-
ditional pressure on an al- sion fund sectors continued the comments made by the tory work has already com- nancial sector sound and
ready relatively high infla- to comply with the minimum Advisory Council, a revised menced. reputable, thereby contrib-
tionary pace, related to required coverage ratio, draft was presented to the uting to maintaining finan-
global supply shortages and and, thus, their ability to Parliament of Aruba for its Compliance with the Basel cial stability.
higher transportation prices. meet their future insurance review and approval. On Core Principles for Effective
This adverse development and pension obligations August 19, 2021, the Parlia- Banking Supervision
also may affect the bank- stayed intact. The COVID-19 ment of Aruba approved As part of its ongoing efforts The FINANCIAL SECTOR SU-
ing sector in Aruba, as both pandemic has undeniably the amended AML/CFT to meet the international PERVISION REPORT 2021 is
companies and individuals shown the importance of State Ordinance, which en- standards in the supervisory available on the website of
are negatively impacted banks and other financial in- tered into force on Septem- and regulatory domains, an the CBA www.cbaruba.org
by the steep rise in inflation, stitutions having ample cap- ber 8, 2021. extensive self-assessment as of today.q