Not only exchange rates but also foreign exchange transactions had to be controlled in order to regulate the external value of the guilder. Although the Bank van de Nederlandse Antillen had become the central foreign exchange bank in 1961 under the terms of its Charter, the Foreign Exchange Commission with its office continued to exist as a separate entity
it was in fact no longer so separate, as the Management and Directors of the Bank together constituted the Foreign Exchange Commission. It was only in December 1971 that the ten members of the staff of the Foreign Exchange Commission's office were transferred to the service of the central bank. Their activities changed in character to some extent: the system of licences in advance for foreign exchange transactions was replaced by post hoc registration of the activities of the recognized foreign exchange banks (all com- mercial banks operating within the Netherlands Antilles). A licence
was now required only for a limited number of foreign exchange transactions.
Under the new system, the Bank could compile more accurate balances of payments; until then these balances had been more illustrative than exact.
When the Bank van de Nederlandse Antillen was put in charge of supervising foreign exchange transactions in
and banking and credit in 1972,
its responsibilities became so onerous that a strengthening of its position was essential. At the end of 1972 its capital was increased from NAfl 4 million to NAfl
10 million, its reserve fund also being raised to NAfl IO million. For the rest the Bank's Charter was not amended although the need for changes was already being felt at the time and their necessity has since only increased.
As the Bank's monetary functions became more extensive, its operations in the field of credit declined in importance. The little agricultural credit still outstanding was paid off and no new advances were granted in this sector. Credit for hotel construction, which had been correctly entered in the mortgage account from 1962 onwards, reached its peak of NAfl
2.9 million at the end of 1962. After this, all that was advanced under this
heading was NAfl 3.6 million in 1973 for a hotel project on St. Martin, but this
amount had been borrowed abroad on precisely the same conditions; the
transaction was put through the books of the Bank van de Nederlandse Antillen only pro forma. Other loans were granted only incidentally and for short periods, where they served Government policy and finance could not be obtained elsewhere.
The most important items of credit, as regards both volume and monetary significance, were the advances to the Central Government. The 1961
Charter allowed these to continue in order to help smooth out the irregularities
in the timing of tax collection and Government expenditure. Consequently, the
balance fluctuated, the greatest increases always coming around the middle of
the year. However, the balance at the end of December remained positive for the Government every year, until 1967. After this deficits occurred, small at first, but increasing sharply from 1970 onwards when the Island Governments of Curaçao and Aruba ceased to pay over certain revenues to the Central Government pending new revenue sharing arrangements. The Bank van de Nederlandse Antillen opposed a call by the Central Government on its credit but was unable to prevent the monetary financing of Central Government expenditure from substantially increasing, especially in and after 1972.
At first, creation of liquidity by the Central Government was offset by a reduction in primary liquidity due to the fact that Island Governments invested
the money they failed to hand over in time deposits, both with the private banks
and with the central bank. It was only in 1977 that recourse was had to these
balances and that the latent inflationary effect of the advances to the Central Government became manifest. The central bank then began to urge the Government to consolidate its short-term interest-free credits by the issue of long-term loans, so that the liquidity created would thus be recovered from the open money market.
With the Charter of 1961, the Bank van de Nederlandse Antillen was possessed of a basis which, while far from perfect, nevertheless offered ample opportunity for expansion of the Bank's activities. Furthermore, it laid down a form of organization in which - for the first time in the Bank's history - there was scope for professional day-to-day management. In the sixties, the latter proved difficult to achieve, and this inevitably had consequences for the former. The old Secretary of the Curaçaosche Bank, who was appointed as the first Managing Director for reasons of continuity, left the institution after only a year. From February 1963 to July 1967, the Secretary, or in his absence the acting Secretary, had to perform the function of acting Managing Director. It
was an anachronism, but the Government, which had the
casting vote in the Bank's personnel policy, was unable
to fill the vacancy with an acceptable person of local
origin who possessed the necessary expertise and the right political complexion; it also refused to appoint an expert from the Nederlandsche Bank to this office. From 1967 to 1970, the office of Managing Director was nevertheless held by a Dutchman - a man who had already been associated with the Bank as Government Director.
Matters took a favourable turn in 1970 with the engagement of an energetic native of Curaçao as Managing Director and the appointment of a Secretary who was thoroughly familiar with the business of the Bank. Various matters which had remained in abeyance for nine years were now dealt with in quick succession: the transfer of foreign exchange control, introduction of the supervision of banking and credit, and the establishment of Rules of
Procedure for the Board of Directors, of Ministerial Instructions for the
Government Director, and of a number of general instructions for the Management and Directors.
Among the provisions of the latter was the possibility of appeal
refused in 1961
should the Management and the
Directors fail to agree on the compilation of the annual accounts. The research department of the Bank set up in 1969 grew rapidly, and penny wisdom also ceased to be the most prominent feature of staff policy for the other departments. The Charter was subjected to critical examination, amendments being proposed with a view to making the Bank's position more independent.
With the retirement of V. Servage as Managing Director, in 1977, the Bank van de Nederlandse Antillen had gained a momentum it had lacked for several decades. To his successors it remains a challenge not to let this impetus be lost. There is still an enormous task waiting to be accomplished by the institution which in 150 years has gradually become the trustee of the Netherlands Antilles.