THE ROLE OF THE CBA IN THE AREA OF CONSUMER PROTECTION WITH RESPECT TO FINANCIAL SERVICES Presented by: Prakash Mungra, Executive Director CBA Aruba, March 16, 2012

CONTENTS PRESENTATION 1. General framework consumer protection – financial services 2. Mandate CBA 3. Sectoral supervisory laws and objectives 4. Activities CBA in the area of consumer protection with respect to financial services 5. Consumer protection agenda CBA 6. Concluding remarks 2

1. GENERAL FRAMEWORK CONSUMER PROTECTION – FINANCIAL SERVICES Consumer protection with respect to financial services covers many aspects, including but not limited to: Protection of small depositors, policyholders, and investors via an effective supervisory regime Disclosure of information on the financial services offered (including pre-contractual information) Effective complaint handling procedures Fair industry practices Access to lending on a non-discriminatory basis 3

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2. MANDATE CBA Maintain the value of the Aruban florin (vis-vis the US dollar) Promote a sound development of the supervised financial sectors / oversight compliance with the AML/CFT laws Advise the Minister of Finance on financial matters Other tasks (managing Aruba’s F/X reserves, circulation of bank notes and coins, banker of the government, et cetera) 5

Sectors currently supervised by the CBA: Banking sector 4 commercial banks 2 offshore banks 3 bank-like institutions 2 credit unions 6

Sectors currently supervised by the CBA: Insurance sector 7 life insurance companies 13 general insurance companies 11 pension funds Other 4 money transfer companies 15 trust service providers 7

According to the preliminary figures available the total assets of the banking and insurance sectors amount to approximately Afl. 8.5 billion as per end 2011 (+/- 186% of GDP) 8

3. SECTORAL SUPERVISORY LAWS AND OBJECTIVES a. Sectoral supervisory laws: State Ordinance on the Supervision of the Credit System (AB 1998 No 16) State Ordinance on the Supervision of the Insurance Business (AB 2000 No 82) State Ordinance Company Pension Funds (AB 1998 No GT 17) 9

State Ordinance on the Supervision of Money Transfer Companies (AB 2003 No 60) State Ordinance on the Supervision of Trust Companies (AB 2009 No 13) 10

b. Objectives sectoral supervisory laws Sectoral supervisory laws aim at promoting the financial soundness and/or integrity of the sectors supervised by the CBA. Although supervision does not provide a guarantee that a financial institution cannot fail it mitigates the risks of unsafe practices (excessive risk-taking) Note: the supervisory laws do not contain (explicit) market conduct provisions. 11

4. ACTIVITIES CBA IN THE AREA OF CONSUMER PROTECTION WITH RESPECT TO FINANCIAL SERVICES Supervising of the financial sector : amongst others via periodic on-site examinations and offsite surveillance. Overseeing compliance with the supervisory directive on the disclosure of effective interest rates (true cost of lending). Overseeing that the financial institutions have effective complaint handling procedures in place. 12

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Complaint handling procedures: the CBA requires that complaints from customers regarding the financial institutions supervised receive proper follow-up. Note however that the CBA only functions as an intermediary between the financial institution and the customer and that in case no resolution is found the customer may need to consider legal steps. 14

Two surveys were conducted recently by the Research Department of the CBA. One on the financial position of households and one on the level of financial literacy of the Aruban population. The first survey shows that a relatively high percentage of the households in Aruba is highly indebted and the second that further efforts are needed to promote financial education. These surveys provide a good point of departure for further policy actions by GOA, but also for the CBA (especially in the area of financial education) and the NGO’s active in this area. 15

5. CONSUMER PROTECTION AGENDA CBA Actions underway : Re-introduction of regulation of pawnshops on the basis of section 48 of the State Ordinance on the Supervision of the Credit System Strengthening of Section 48 of the State Ordinance on the Supervision of the Credit System Drafting of a proposal for the introduction of a law regulating investment business 16

Drafting of a proposal for the introduction of a deposit insurance scheme in consultation with the Aruban Bankers’ Association (to protect the interest of small depositors of the commercial banks). Advising the GOA on the steps that could be considered to enhance consumer protection with respect to financial services (e.g. introduction of a law on consumer credit). A survey is planned this year to assess the level of customer satisfaction with respect to the financial services provided by the commercial banks. 17

6. CONCLUDING REMARKS Further efforts are necessary to further the area of consumer protection with respect to financial services, notably the legislative part. Conferences like these are highly beneficial to increase public’s awareness. Informed consumers tend to take more rational economic decisions, which is also beneficial to the stability of the financial system. 18

THANK YOU FOR YOUR ATTENTION 19