emsley tromp : the policy challenges in the monetary union of curacao and sint maarten speech by dr emsley tromp, president of the central bank of curacao and sint maarten, at the inauguration of the simpson bay causeway, sint maarten, 25 january 2014. * * * good evening ladies and gentlemen, first, allow me to congratulate the people of sint maarten on the inauguration of the simpson bay causeway. for many years, traffic congestion in this area was a major obstacle ; it had an increasingly negative impact on the quality of life on the island and was an impediment to economic growth. we are convinced that the completion of this infrastructure project will remove an obstacle to growth in sint maarten. authorities now have to direct their policy actions to other complementary measures to put sint maarten ’ s economy on a higher and sustained growth path. as you know, the centrale bank van curacao en sint maarten was involved in the financing of this important project. the bank ’ s involvement, as i will elaborate on later, was motivated by our desire to help further the development of the capital market in sint maarten and, as with the aqualectra loan, to broaden our instruments to conduct a more market - based monetary policy. however, it would be a remiss if i do not mention here the motivation and dedication with which my colleague drs rob reijnaert put into this endeavor to make our participation possible. a heartfelt thanks is at the order. thank you rob! i ’ d like to use this opportunity to discuss the main economic developments in the monetary union during 2013 and the economic prospects for 2014. my focus today will be on the economy of sint maarten. as mentioned, i will also elaborate on the reasons why, from a monetary perspective, the bank was actively involved in the process of financing the causeway project. ladies and gentlemen, preliminary figures reveal that economic developments in the monetary union were mixed during 2013. on the one hand, sint maarten recorded an economic expansion of 1. 1 %, which was a slowdown compared to the growth of 1. 5 % registered in 2012. on the other hand, the economy of curacao shrank by 0. 5 % in 2013, following a contraction of 0. 1 % in 2012. both countries benefited from the lower international

provide 3 - year financing, via a collateral swap, for assets that had become illiquid as a result of the crisis. 20 how the facilities can work in extremely stressed conditions monthly, wide - collateral repos for a 3 - month maturity and typically of fairly modest size, together with a continuously available window for 30 - day collateral swaps, are now permanent features of the bank of england ’ s regime. various parameters can be adapted in the face of extremely stressed conditions of the kind we have been facing. thus, the widecollateral repos have been held fortnightly rather than monthly, and for very large sizes. and the dwf currently offers a 12 - month swap option, as well as the standard 30 - day facility. in summary, by providing liquidity insurance the bank aims effectively to give essentially sound banks and others time to address the problems created by stress, and for the authorities to develop remedial plans, without creating perverse incentives or exposing itself to risk. given those aims, banks must avail themselves of these facilities. we believe, for example, that all qualifying banks and building societies should sign up for the discount window facility ; that they should pre - position with us a range of eligible collateral, so that they avoid operational stumbles when they seek to use the window ; that they should use it regularly in meaningful size as part of testing and making a reality of their contingency plans ; and that they should share those plans with the bank, which, amongst other things, would help us assess applications to draw. in that way, the dwf can truly help to underpin the system ’ s liquidity in the future. see tucker pmwt ( 2008 ), “ the structure of regulation : lessons from the crisis of 2007 ”, a speech to the lse ’ s financial markets group conference ; and the committee on the global financial system, paper no. 31 ( july 2008 ), “ central bank operations in response to the financial turmoil ”, cgfs papers, bank for international settlements. the sls was introduced in april 2008 and was open until end - january 2009. it enabled banks to swap legacy illiquid securities ( principally rmbs and covered bonds ) for uk treasury bills for a period of three years. the bank announced in early february that it lent £185bn of tbills, against £287bn ( nominal ) of collateral. prudential regulation of banks ’ liquidity : how it relates