Purpose

The system of reserve requirements in Suriname is imposed on commercial banks’ liabilities in domestic currency and in foreign currency. Reserve requirements on domestic currency liabilities were introduced on 15 May 2001, while that on foreign currency became effective as of 12 February 2003. The reserve requirements in domestic currency (SRD) 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 given the high dollarization of the Surinamese economy (deposit and credit dollarization of ±80% and 55%, respectively in 2023).

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.

Holding of reserves

Reserve requirements must be maintained in the currency of denomination of the deposit liabilities. Therefore, reserve requirements in US dollars and in euros are held in the respective currencies. Commercial banks are required to keep the SRD required reserves balances with the Central Bank of Suriname (CBvS) in the form of non-interest-bearing deposits. As for US dollars, 40% of the reserve requirements must be held with the CBvS in a USD reserve account and 60% is held directly with foreign banks in deposits and negotiable bonds. Of the reserve requirements in euro, 70% must be held with the CBvS in a EUR reserve account and 30% is held by the commercial banks at foreign banks in deposits and negotiable bonds. 

Reserve ratio

The reserve ratio is uniform for all the banks and all deposit liabilities, i.e. the same rate applies to each bank and to each type of deposit liability. However, the rate is differentiated by type of currency denomination. The reserve ratio for SRD liabilities stands at 44% since 5 April 2023, while the ratio for foreign currency liabilities is 50% since 18 September 2013. The following table summarizes the reserve ratios prevailing from 2001.

Maintenance period

On 14 July 2021, the CBvS introduced the required reserves averaging system for domestic currency to support short-term liquidity management of the banks. The reserve maintenance period for SRD required reserves is two weeks (14 days), and starts on the Wednesday and ends on the second following Tuesday. Every two weeks on the Wednesday, the required reserves are calculated based on the four-weeks moving average of the reserve base.

The reserve maintenance period for foreign currency liabilities is one week (7 days). Averaging of reserve requirements in foreign currency liabilities during the maintenance period is not permitted. Every Wednesday the required reserves are calculated based on the four-weeks moving average of the reserve base. The reserve base is calculated on a contemporaneous basis, meaning that the exact amount of the required reserves of the banks is known at the end of the reserve maintenance period.

Penalty

A commercial bank that fails to meet the reserve requirements in SRD, i.e. holds less deposits with the CBvS than required, is subject to financial penalty. The penalty shall be imposed in the form of interest on the amount of the shortfall during the 14-day maintenance period. The interest rate applied is equal to the interest rate on the five-day lending facility of the CBvS plus a premium of three percentage points. The CBvS is allowed to debit the fine amount from the SRD working account of the non-compliant bank held at the CBvS. There are no financial penalties if a bank fails to hold sufficient reserve balances in foreign currency. However, moral suasion is used by the CBvS to ensure compliance. 

Financing from reserves

On 12 February 2004, the CBvS in consultation with the commercial banks set up a housing facility funded through the SRD required reserves. The principal objective of this facility is to offer mortgages at affordable interest rates to middle-income household and help alleviate the housing problem in Suriname. Banks can only extend loans to build or buy a new house, or to repair, renovate, expand and complete an existing house. Households are also allowed to purchase a plot under the strict condition that a house will be built on the land for private residence.  

Under this facility, commercial banks are allowed to use a maximum of 10% of their reserve base to on-lend for the housing loans. The interest rate on these loans is fixed at 7% per annum. Eligible households must have an income of maximum SRD 50.000 per month and the maximum that each household can borrow is SRD 1.600,000. The mortgages have a maturity of up to 30 years. With these loans, new residential houses with a total floor area of 40 m² up to 150 m² can be built. Existing houses can be repaired, renovated and expanded up to a floor area of 275 m².  

Click here for more data on required reserve for the Surinamese currency in Excel-format.

Click here for more data on required reserve for the foreign currency in Excel-format.