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The severing of correspondent banking relationships is having a severe impact on the Caribbean region, and Prime Minister Allen Chastanet is recommending that a new approach is taken to address this issue.
Chastanet said correspondent banking wasn’t targeted towards the Caribbean but was aimed at eliminating money laundering and imposing huge penalties.
However,he said no consideration was taken as to how that would have affected the Caribbean.
“The region, economically, is so small that the banks have said that the risk of continuing to do business in the Caribbean makes it impossible for them to do so,” he stated.
But the impact is far reaching, as many Caribbean businesses and individuals are cut off from access to finance and it is difficult for new businesses to establish operations.
Chastanet noted that the issue was discussed in detail at the recent CARICOM Heads of Government meeting held in Guyana, between prime ministers, many of whom are their countries’ finance ministers.
He said the regional leaders have agreed to work more closely to address this issue in a holistic manner, protesting the issue and requesting an audience with the United States on the matter.
De-risking is international banks’ withdrawal from their relationships with home-grown banks because of fears of money laundering and questionable sources of funds which would cause the international banks to receive heavy fines from their regulators.
Regional banking institutions rely on such relationships in order to allow residents to conduct international financial transactions. The issue has been occupying the attention of regional policy-makers, following signals by international banks that they are unwilling to continue carrying the business of regional banks.
Transfers of remittances, cheque payments, international trade and the facilitation of credit card settlements for local clients are among the areas that have been affected by de-risking.
The Caribbean Development Bank (CDB) quoted a November World Bank survey as saying that about 75 percent of international banks have experienced a reduction in correspondent banking services, with the Caribbean being the worst affected.
Reports are that eight financial institutions in Barbados, about seven in Jamaica and five in Belize and others in Antigua and Barbuda, Montserrat and other member states have been affected by a termination of or restriction in correspondent banking relationship.