Financial Crime World

Traditional Merchant Banking Experts Decline by 12% Over Two Years

Despite a strong showing in terms of growth, traditional merchant banking experts in the Netherlands Antilles have experienced a decline of 12% over the past two years. While this decline is somewhat mitigated by the buoyant levels seen in 2001, the industry has still faced significant challenges.

Government Debt and Bank Credit

  • One key factor contributing to the decline is the continued high level of public debt, which stands at 75% of GDP.
  • This has led to decreased confidence in government paper, resulting in increased bank deposits as a perceived safer investment.
  • However, investment in government securities was boosted by their attractive yield compared to foreign alternatives, with growth reaching 11¾% over 2002.

Banking System Shows Improvement

  • The banking system itself has shown some signs of improvement, with non-performing loans decreasing somewhat and the level of provisions against such loans increasing.
  • A more flexible on-site inspection schedule has also been introduced, and special administration has been imposed on one undercapitalized bank.
  • Despite these improvements, vigilance remains necessary in light of banks’ high exposure to the real estate market, continued slow growth, and potential spillover effects from the situation in Venezuela.
  • The Netherlands Antilles boasts a well-developed and well-functioning legal and regulatory framework for financial sector supervision.
  • The Bank of the Netherlands Antilles (BNA) is responsible for oversight of banking, insurance, pension funds, and mutual funds, and only accepts applications from reputable banks.
  • The country’s laws and regulations are largely compliant with international standards on banking supervision, insurance supervision, anti-money laundering/counter-terrorism financing, and investment institution supervision.

Business Environment Evolves

  • Traditionally, the business environment in the Netherlands Antilles has operated under a regime of relatively little disclosure.
  • However, recent years have seen increased pressure from international efforts to combat drug trafficking and money laundering, anti-terrorism efforts, and greater awareness of the importance of better quality financial sector supervision.
  • As a result, the authorities and private sector are now aware that more disclosure is needed to comply with growing international standards.

OECD Commitment

  • In August 2001, company service providers were placed under supervision of the Supervisory Board for Fiduciary Business, which will oblige them to apply Know Your Customer (KYC) rules and report unusual transactions to the authorities.
  • The country has also committed to eliminating harmful tax practices through its membership in the Organization for Economic Cooperation and Development (OECD).

FSF Classification

  • The Netherlands Antilles was classified as a jurisdiction “generally perceived” by the Financial Stability Forum in April 2000, indicating that it is considered to be a stable financial system with low risk of instability.
  • However, this assessment may need to be reevaluated in light of recent developments and challenges facing the industry.

Conclusion

Overall, while traditional merchant banking experts in the Netherlands Antilles have faced significant challenges over the past two years, the country’s strong legal framework and commitment to international standards suggest that it is well-positioned to address these challenges and maintain its status as a stable financial system.