Financial Crime World

Enhancing Supervision: Better Reporting and Analysis of Large Exposures

The Central Bank of Aruba (CBA) has been assessed on its compliance with the Basel Core Principles (BCPs), highlighting areas for improvement in strengthening its financial regulatory framework.

Areas for Improvement

  • Better Reporting: The CBA’s ability to supervise banks would be enhanced by improving the quality of data, allowing for more meaningful financial analysis of banks’ financial results.
  • Analysis of Large Exposures: Loans to companies with significant insider interest should not be granted on more favorable terms than non-related parties.
  • Risk Management Practices: The CBA needs to ensure that banks have acceptable liquidity risk management strategies and policies in place, including contingency planning.

Recommendations

To address these areas for improvement, the CBA has been recommended to:

  • Issue a draft proposal to give the authority to impose administrative fines on banks, management, and board members.
  • Clarify that any combination of acquisitions resulting in a 5% or more position requires prior approval.
  • Enhance its ability to conduct risk-based supervision.

Additional Recommendations

The CBA also needs to:

  • Improve reporting requirements to better reflect risks in banks.
  • Enhance supervisory techniques to provide a more risk-oriented approach.
  • Consider imposing fines on banks that act in an unsafe and unsound manner.

Authorities’ Response

The authorities have acknowledged the report’s findings and intend to follow up swiftly on the recommendations made. They will:

  • Prepare a detailed action plan for furthering compliance with the BCPs.
  • Submit a request for technical assistance from the Dutch Central Bank in areas such as risk management and risk-based supervision.

Commitment to Strengthening Regulatory Framework

The CBA has expressed its appreciation for potential technical assistance from the Fund to conduct a stress test on the resilience of the financial system. Overall, the authorities have shown commitment to strengthening their regulatory framework and ensuring the stability of the financial sector.