Antillean commercial banks fairly healthy

From a global point of view, Antillean commercial banks have had a good year. During the presentation of the annual statistics of 2007 last week, president chief executive Emsley Tromp of the Bank of the Dutch Antilles (BNA) said the local banks to be ‘healthy’.

The liquidity position and capitalization have improved. Simply said, it means that the banks have enough cash in hand to fulfill their day to day operations. With an average of 7.2 percent the banks have exceeded the 4 percent norm with regard to capitalization. And the 1.44 billion guilders these institutions make up on liquid assets – 100 million more than in 2006 – entails that the local banks are continuing their tradition of being in flush of money.
Another norm which has easily been surpassed is the profit norm. While the BNA puts the target on 0.6 percent for the return on assets, local commercial banks scored 1.8 percent last year. The appropriate marginal note here is that it is the third time in a row showing a decline: in 2005 the profit score was 2.3 percent and in 2006 it was 2,2 percent.

Problem credits
Another aspect needing attention is the development of private loans. For the third year in a row the percentage of bad loans has increased. In 2005, 2006 and 2007 the score was successively 2.5, 3.6 and 4.6 percent. “The rapid increase of credit authorizations to the private sector seems to go hand in hand with a less strict evaluation of the credit worthiness, seeing the increase in the amount of problem-credits”, comments the BNA in her annual report. For the bank such developments gives reason to look for more measures and caution in the authorization of credit.
This tallies with the vision of the International Monetary Fund (IMF) which said about the Antillean credit market that ‘when the government debts are eradicated by the Netherlands and commercial banks will lose that source of (interest) income, it will be tempted to do business where there’s more risk involved’. According to the IMF the BNA should therefore be ‘especially alert to combat the decline in loan norms’.

The BNA is already alert. Tromp knows the local banks to be responsible in their policy and believes that for example ‘moralsuasion’ (moral persuasion, to bring to the attention the social-moral duty of the banks) of the commercial banks could be enough to keep things in order. Other possible driving instruments for the BNA could be the provision of instructions and implementing a tightened monetary policy making it more expensive to take on a loan. In such cases, the BNA strives to prevent loaners coming into serious amortization problems. An indication that corrective action should be taken is for example when the authorization of private loans significantly runs ahead of the growth of the economy. But now this is not the case.
(Source: National Newspaper Amigoe)

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