Curaçao and Sint Maarten

The IMF Caribbean Regional Technical Assistance Centre (CARTAC) conducted a technical assistance (TA) mission in Curaçao and Sint Maarten from October 3 to October 12, 2023. The mission aimed to support the Central Bank of Curaçao and Sint Maarten (CBCS) in enhancing its Financial Stability Report (FSR) by improving financial stability assessments, strengthening the analytical framework, and refining credit risk modeling. The mission reviewed the latest available FSR and provided recommendations to improve its structure, analytical depth, and communication strategy. A key focus was on developing sectoral credit risk models to assess the impact of macroeconomic conditions on non-performing loans (NPLs) and overall financial stability. The mission also introduced the Bayesian Model Averaging (BMA) approach as a methodology for addressing model uncertainty and provided an initial estimation framework for sectoral credit risk modeling. In addition, discussions covered broader aspects of financial stability, including stress testing, interconnectedness, emerging risks such as climate and cyber risks, and the integration of financial stability indicators with regulatory frameworks. Several recommendations were made to further enhance the FSR and its underlying framework. The text of the report should be streamlined to avoid repetition and focus on key financial stability risks and vulnerabilities. The analytical toolkit should be made more forward-looking by incorporating stress testing results based on macroeconomic scenarios. The report should provide clearer communication of regulatory frameworks and financial stability indicators across all segments of the financial system, including banks, insurance companies, and pension funds. The CBCS should also strengthen its data management framework by consolidating all financial stability-related data into a centralized data warehouse and exploring the feasibility of establishing a credit register for more granular risk assessment. To ensure more effective communication, the FSR should be actively promoted as the CBCS’s flagship financial stability publication, supported by cross-departmental discussions during its development. The external communication strategy could be enhanced by organizing press briefings, media interviews, and online dissemination efforts. Additionally, emerging risks such as climate change and cybersecurity should be consistently covered in future reports. These enhancements will help improve the quality, transparency, and forward-looking nature of financial stability assessments in Curaçao and Sint Maarten, strengthening macroprudential oversight and risk management in the region.