Financial Crime World

International Banks Get Green Light for Branch Office Licenses in Aruba

New Guidelines for International Banks Seeking to Establish a Branch Office in Aruba

The Central Bank of Aruba (CBA) has announced revised policy guidelines for international banks seeking to establish a branch office in the island nation. Effective January 1, 2018, the CBA will only grant licenses to international banks that meet specific criteria.

Eligibility Criteria

To be eligible, the parent bank must have a balance sheet total of at least US$10 billion and an “A” rating issued by Standard & Poor’s or a comparable rating agency. Additionally, the international bank must be subject to comprehensive and effective consolidated supervision by its home country supervisor(s).

Requirements for Applicants

  • Provide certified financial statements for the last three years to demonstrate the parent company’s financial soundness.
  • Demonstrate capitalization, profitability, and liquidity to assess the financial strength of the parent company.

Additional Requirements

  • The international bank must have at least 30 years of experience in banking and an excellent track record.
  • The CBA reserves the right to set additional requirements or attach conditions and restrictions to a license, as deemed necessary.

Parallel-Owned Banking Structures

The policy rule also addresses parallel-owned banking structures, where banks operate in different jurisdictions with the same beneficial owner(s) but are not part of the same financial group for regulatory consolidation purposes. The CBA will reject applications that would result in creating or expanding such structures.

Shareholding Requirements in Credit Institutions

  • A major shareholder must be a financial institution with solid financial strength and reputation subject to comprehensive and effective consolidated supervision by its home country supervisor(s).
  • In case of significant doubts about the adequacy of the solvency or liquidity position of the parent bank, the shares in the Aruban bank must be transferred to a pure bank holding company.
  • The CBA will ensure that shares are not held directly or indirectly by a bank in a country where the condition of comprehensive and effective consolidated supervision is no longer met.

Application Review Process

The CBA has established a 13-week period for reviewing applications, which includes evaluating the required documents, such as:

  • Business plan
  • Opening balance sheet
  • Articles of incorporation
  • Annual reports
  • List of correspondent banks
  • Personal questionnaires for managing and supervisory directors

One-Year Grace Period

Banks whose shareholders’ structure is not in compliance with the condition mentioned above are granted a one-year grace period to comply with the requirements. The CBA may extend this period on a case-by-case basis.

Approval of Shareholder Transactions

In the event that a major shareholder wants to sell all or part of its shares, the CBA will only approve the transaction if the requirements regarding the shareholder structure are met to its satisfaction.

Aims of the Revised Policy Rule

The revised policy rule aims to ensure a stable and sound banking system in Aruba, while also promoting international cooperation and adherence to global banking standards.