Purpose

The system of reserve requirements in Suriname is imposed on commercial banks liabilities (1) in domestic currency and (2) in foreign currency. Reserve requirements on domestic currency liabilities were introduced on May 15, 2001, while that on foreign currency became effective as of February 12, 2003. The reserve requirements in domestic currency serve predominantly a monetary control function. They restrict commercial banks capacity to lend, and hence aggregate demand. Reserve requirements in foreign currency are intended to provide protection against liquidity/availability risk, and to enhance the stability of the Suriname dollar. The Surinamese economy is highly dollarized (deposit and credit dollarization of ±50% and 40%, respectively).

Technical issues

Reserve base

The reserve requirements are imposed on the deposit liabilities of the commercial banks, referred to as the reserve base. The reserve base comprises transferable deposits, savings deposits, time deposits and other funds that the public has entrusted to the banks. Public refers to non-bank financial corporations, non-financial corporations and households. The reserve base is calculated on a contemporaneous basis, implying that the exact amount of required reserves of the banks is not known until the end of the reserve maintenance period.

Holding of reserves

Reserve requirements must be maintained in the currency of denomination of the deposit liabilities; reserve requirements in US dollars and in euros are therefore payable in the respective currencies. Under the domestic currency reserve requirements the commercial banks are required to retain reserve balances with the Central Bank of Suriname (CBvS) in the form of non-interest-bearing deposits. Reserve requirements on foreign currency liabilities can be maintained in liquid deposits with correspondent banks abroad, which have a high credit rating. A part of the reserves can also be held in tradable/liquid bonds of high-rated issuers, provided that the CBvS gives prior approval to the bonds as eligible assets. A high rating refers to A rating of Standard and Poor's rating agency or an equivalent rating of a similar rating agency. Foreign currency required serves are thus fully remunerated.

Reserve ratio

The reserve ratio is uniform by bank and by type of deposit liability; i.e. the same rate applies to all banks, and to all types of deposit liability. However, the rate is differentiated by type of currency denomination. The reserve ratio for domestic liabilities stands at 35%, while the ratio for foreign currency liabilities is 50%. The following table summarizes the reserve ratios prevailing from 2001.

(in millions of Suriname dollars)

Source: Statistics Department, Central Bank of Suriname          
¹⁾ M1 = currency outside depository corporations (SRD) + SRD and foreign currency transferable deposits.  
²⁾ M2 = M1 + SRD and foreign currency time and savings deposits + gold certificates.

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