Page 13 - ARUBA TODAY

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Tuesday 10 July 2018

Centrale Bank van Aruba (CBA) publishes its Financial Sector

Supervision Report

ORANJESTAD ― The CBA This policy paper sets out
is the sole supervisory au- risk management principles
thority of the financial sec- and best practice stan-
tor in Aruba. In this legally dards on the management
mandated report, the CBA of technology risks. The final
provides an overview of policy paper was released
the main activities it carried in March 2018 and entered
out and the principal policy into force on July 1, 2018,
decisions it took in 2017 to with a transitional period of
implement the supervisory twelve (12) months to com-
ordinances, including the ply with this policy guide-
laws to prevent and com- line.
bat money laundering
and terrorist financing. The tives were issued to remedy shocks. the CBA continued its ef- 4.Issuance of a cross-sec-
report also describes the the identified deficiencies forts to strengthen the regu- toral policy paper on Risk
main actions the CBA took in three (3) cases. With a view to further latory framework by issuing Management for Outsourc-
to further strengthen the strengthening the AML/CFT new or revised guidelines. ing Arrangements
legislative and regulatory The CBA implements a risk- framework and preparing Below follows a brief over- In July 2017, a draft cross-
framework. In addition, the based approach, whereby for the upcoming assess- view of the main changes sectoral policy paper on
report outlines the recent it allocates the largest part ment by the Caribbean Fi- made or initiated in 2017 risk management for out-
developments in the inter- of its supervisory resources nancial Action Task Force with regard to the regula- sourcing arrangements was
national supervisory archi- to the institutions with the (CFATF) in 2020, the CBA tory framework. distributed for consultation.
tecture, as well as the most highest risk profile (based conducted a gap analy- This draft policy paper con-
salient developments in the on the CBA’s own risk as- sis vis-à-vis the 2012 FATF 1.Increase of the minimum tains a set of standards
domestic financial sector. sessment). This approach, recommendations that fall solvency requirement for on sound practices on risk
together with the CBA’s within its domain to iden- credit institutions management for outsourc-
As in previous years, the strict enforcement policy tify any shortcomings and As of January 1, 2017, the ing arrangements.
CBA’s core supervisory ac- and its ongoing commit- established a plan of ac- CBA increased the mini- The extent and degree to
tivities in 2017 consisted of ment to comply with the tion to address the defined mum solvency requirement which an institution imple-
periodic onsite examina- highest standards and best shortcomings. for banks from 14 percent ments these standards
tions conducted at the practices in the area of fi- The exercise revealed some to 16 percent. should be commensurate
supervised institutions to nancial sector regulation weaknesses that need This increase was consid- with the nature of the risks
assess key risks and com- and supervision, has been to be addressed, partly ered necessary in light of in, and the materiality of,
pliance with the prevail- conducive for maintaining through the strengthen- the one-sided economy of the outsourcing arrange-
ing laws and regulations, a very solid and reputable ing and broadening of the Aruba, as well as the Ba- ments. The final policy pa-
and ongoing offsite surveil- financial sector in Aruba. AML/CFT State Ordinance sel III standards issued by per was issued in March
lance. and related laws and regu- the Basel Committee on 2018 and became effec-
Offsite surveillance includes The financial sector super- lations in this area. Banking Supervision setting tive on July 1, 2018, with a
reviewing the mandatory vision report also shows higher capital and liquidity transitional period of twelve
periodic financial and reg- clearly that in 2017 the do- The broadening of the su- requirements for banks. (12) months.
ulatory reports that the su- mestic financial sector re- pervisory net also contin-
pervised institutions file at mained robust, profitable, ued in 2017 with the en- 2.Increase of the minimum To conclude, the strict and
the CBA and the bilateral and highly resilient to exter- actment of the State Ordi- prudential liquidity ratio for consistent enforcement of
meetings held with the su- nal shocks. The aggregat- nance on the Supervision credit institutions the supervisory and AML/
pervised institutions. If and ed prudential ratios of the of the Securities Business In line with the Basel III stan- CFT laws and regulations
where deemed necessary, supervised sectors stayed and the amendment to the dards, the decision was over the years has contrib-
the CBA applies its supervi- within sound ranges. The State Ordinance on Money made by the CBA to grad- uted to maintaining a sta-
sory toolkit to enforce com- nonperforming loan ratio Transfer Companies ex- ually increase the minimum ble, reputable, and healthy
pliance with the prevailing of the commercial banking tending the scope to mon- prudential liquidity ratio financial system in Aruba.
laws and regulations. If the sector was kept within ac- ey exchange offices. In ad- from 15 percent to 20 per- Also, much work has been
CBA identifies a situation of ceptable ranges, standing dition, some other legisla- cent over a period of three done to strengthen the fi-
noncompliance with the at 4.0 percent at end-2017. tive proposals that also will years, starting January 1, nancial sector supervision
supervisory laws and regu- Furthermore, the stress tests expand the CBA’s supervi- 2018. architecture, also with a
lations, formal measures conducted on the domes- sory mandate in the area view to meeting on an on-
are considered. The deci- tic banking sector dem- of market conduct are in 3.Publication of a policy going basis the internation-
sion to apply formal mea- onstrate that this sector’s the legislative pipeline, in- paper on Technology Risk al standards in the area of
sures depends, among oth- risk-weighted capital ratio cluding but not limited to a Management for Credit In- financial sector supervision.
er things, on the seriousness and prudential liquidity ra- legislative proposal to regu- stitutions
of the case. In 2017, twelve tio, amounting to 30.7 per- late consumer credit and a In December 2017, the The FINANCIAL SECTOR SU-
(12) formal measures were cent and 28.6 percent, re- proposal to introduce a de- CBA issued for consulta- PERVISION REPORT 2017 is
taken: an administrative spectively, at end-2017 are posit insurance scheme. tion a draft policy paper on available on the website of
fine was imposed in nine more than adequate to technology risk manage- the CBA www.cbaruba.org
(9) cases, and formal direc- absorb significant external In 2017, as in previous years, ment for credit institutions. as from today. q