GREAT BAY--The Central Bank of Curaçao and St. Maarten (CBCS) will receive international technical support to better understand how stronger storms, droughts, rising temperatures and other effects of climate change could impact the economies, banks and wider financial systems of St. Maarten and Curaçao.
In practical terms, CBCS wants to be able to measure what could happen to the economy and financial sector if climate-related events become more severe. The Central Bank has been selected for the first round of a capacity-building initiative organized by the Network for Greening the Financial System (NGFS), an international network of central banks and financial supervisors.
CBCS said small island economies such as St. Maarten and Curaçao are particularly vulnerable to climate-related risks, including stronger storms, longer droughts and rising temperatures. These events can affect businesses, government finances, households and financial institutions, which is why the Central Bank wants to improve how it measures and prepares for those risks.
Starting in 2027, CBCS staff will work with a climate scenario expert appointed by the NGFS to develop models specifically suited to St. Maarten and Curaçao. These models will help the Central Bank examine different possible climate situations and estimate how they could affect economic growth, financial stability and the ability of the financial sector to withstand major shocks.
The work will also allow CBCS to include climate risks more directly in its economic forecasts, financial monitoring and supervision of financial institutions. In simple terms, the Central Bank wants to be better prepared to answer questions such as how banks and the wider economy would cope if a major hurricane, prolonged drought or other climate-related event caused significant economic disruption.
CBCS has also appointed a Climate Coordinator to oversee its climate-related work, including research, scenario analysis and the development of a broader framework for supervising climate-related financial risks. The coordinator will also represent CBCS in regional and international climate-related financial discussions.
“The CBCS is pleased to have been selected for this important opportunity,” said Paloma Abbad, Climate Coordinator at the CBCS. “This support will help us strengthen our climate scenario work. The resulting climate scenario models can provide a better understanding how climate change could affect the economies and financial sectors of Curaçao and Sint Maarten. It will also help us further integrate climate-related risks into our economic research, financial stability monitoring, and supervisory activities.”
The NGFS brings together central banks and financial supervisors from around the world to improve understanding of climate and environmental risks within financial systems. Its current capacity-building initiative is intended to help central banks move from discussing climate risks to actually using practical tools and models in their day-to-day financial oversight.
