CORRESPONDING BANKING is not an issue that matters to most people in Barbados or the Caribbean.
People who send money to or receive funds from abroad don’t think twice about how the system works, and therefore take it for granted.
But this lack of interest must change; and for good reason. The large global banks that are the linchpins of the global financial arrangement are ruthlessly and wrongly reducing their ties to small indigenous banks, including some in the Caribbean.
Correspondent banking relationships provide the method that enables customers across Barbados to send money to a child or business partner overseas, although the local banks do not have a presence outside of the region.
Without corresponding banks the Caribbean could find itself cut off from the global financial system, making it extremely difficult to engage in international trade. Even remittances from abroad would be hit hard.
The alarm bells are already ringing across the region since almost a dozen banks in about five Caribbean countries have already lost their banking relationships in an intensification of so-called “de-risking” or “de-banking” by international banks.
The driving force behind much of the issue are concerns about profitability, pressure from regulators and “reputational risks”. Instead of improving their management of risks, the major banks are avoiding them altogether. This is particularly worrisome, considering Caribbean banks haven’t broken any laws and have lived up to international standards.
A bad situation is made worse, given the hefty fines, often amounting to hundreds of millions of dollars imposed on global banks for breaking international rules or trade sanctions. Banks everywhere are being compelled to know their customers and to adhere to complex regulations designed to curb the financing of terrorism, international drug money laundering and other financial crimes.
The Caribbean has another reason to fear this purge of relationships. We have been wrongfully identified as havens for tax evaders and money launderers despite the evidence to dispute all such allegations.
The real danger for us in the Caribbean is that we could become unbanked or less banked. The upshot would be our economic and social development being stymied by being set adrift from the worldwide financial system.
International Monetary Fund deputy managing director Tao Zhangsait, speaking in Antigua last October, warned of the dire consequences when he said: “If the [de-risking] trend is not arrested, it could damage not only financial stability, but also economic growth, financial inclusion and other development goals.”
That’s why Barbados and other states in the region must develop a common strategy that addresses the issue. We must also step up current efforts to sensitise the European Union, United States, Canada and Britain about the dangers we face. Our campaign at the United Nations must remain robust.
The new UN Secretary General Antonio Guterres must be pushed to keep his promise to help the region address the issue. His office must be provided with the ammunition to help keep the banking lifeline open.
That’s not all. The central banks in Barbados, Jamaica, Guyana, Trinidad and Tobago and the Eastern Caribbean may have to assume the role of counterparts to corresponding banks without putting their assets at risk.
