Netherlands Antilles: Regulatory Requirements for Banks and Financial Institutions Remain in Place

Introduction

The dissolution of the Netherlands Antilles on October 10, 2010, marked a significant change in the region’s governance. However, despite this change, the regulatory requirements for banks and financial institutions in the Dutch Caribbean islands remain largely unchanged.

Maintaining Civil, Corporate, and Banking Laws

The Dutch Caribbean islands of Curacao, St. Maarten, Bonaire, Saba, and St. Eustatius have maintained their civil, corporate, and banking laws, which are substantially similar to those of the Netherlands Antilles before its dissolution. This means that financial institutions operating in these islands must comply with the same regulatory requirements as they did prior to the dissolution.

Regulatory Framework for Banks

The Central Banks of each island territory have enacted ordinances governing the supervision of credit institutions (banks). These regulations prohibit individuals or entities from engaging in banking activities without a license issued by the relevant central bank. Furthermore, these ordinances prohibit anyone other than a licensed credit institution from soliciting funds from the public or extending credit to the public.

Licensing Requirements

In order to comply with these regulations, financial institutions operating in the Dutch Caribbean must obtain the necessary licenses from the Central Bank of their respective island territories. Licenses are geographically restricted, meaning that a license granted by the Central Bank of Aruba, for example, does not permit the licensee to carry out banking activities in Curacao or St. Maarten.

Solicitation and Debt Securities

The concept of “solicitation” is not entirely clear-cut, as there is no case law in the Dutch Caribbean on this topic. However, it appears that solicitation refers to the direct or indirect soliciting of funds from the public or extending credit to the public, including situations where a Dutch Caribbean entity (branch or office) solicits funds outside of its jurisdiction or where a foreign entity solicits funds within one of the Dutch Caribbean jurisdictions.

• Debt Securities and Debt Instruments: Financial institutions should be aware that debt securities and debt instruments issued by a foreign bank may not be offered to clients or potential clients in the Dutch Caribbean, as this could be considered soliciting funds from the public or extending credit.
• Importance of Compliance: In light of these regulations, it is essential for financial institutions operating in the Dutch Caribbean to obtain the necessary licenses and ensure compliance with all relevant laws and regulations.

Conclusion

By understanding the regulatory requirements for banks and financial institutions in the Dutch Caribbean, financial institutions can ensure compliance and avoid any potential penalties. It is essential to stay up-to-date with the latest changes in regulations and laws to maintain a successful business in the region.

Author: Karel Frielink, Attorney (Lawyer) / Partner

Date: May 10, 2011