Finance ministers from the Eastern Caribbean have undertaken a commitment to tackling the “existential threat” of de-risking. The disclosure came on the heels of the just-concluded Eastern Caribbean Central Bank’s Monetary Council meeting here on Friday.
The finance ministers expressed concern about the negative impact that de-risking would have on their respective economies.
De-risking refers to the process of financial institutions closing accounts of clients that are believed to be high risk for money laundering or terrorist financing. A June 2016 International Monetary Fund publication—“The Withdrawal of Correspondent Banking Relationships: A Case for Policy Action”—said at least 16 banks in the region across five countries have lost all or some of their correspondent banking relationships (CBRs) as of May 2016.
According to the IMF, several institutions in Barbados, The Bahamas, the Eastern Caribbean Currency Union, Guyana, Haiti, Jamaica, and Trinidad and Tobago have had corresponding banking relationships terminated. The document notes that many of these jurisdictions have reportedly been able to find replacement CBRs or have been able to rely on their remaining ones.
“The full extent of the impact has yet to be quantified, but the unmeasured effect has been a loss in business confidence and in the ease of some basic transactions. The main CBR providers in the Caribbean are located in the United States, Canada, and to a lesser extent Europe and the Caribbean,” the document stated.
Antigua & Barbuda’s Prime Minister Gaston Browne, who assumed chairmanship of the Council, spoke extensively on the subject during the one-day meeting. He said while several regional banks would have been de-linked from the international payment system, he is not aware that any country has been totally de-linked.
“We’re saying that we cannot sit on our laurels and allow it go get that far,” Browne said. “It is a serious threat to the region and we have to fight it and to make sure that there is no further such de-risking.”
The Antiguan leader told reporters that the ECCB Governor, Timothy Antoine, has written several of the corresponding banks requesting a hold on any further de-risking as the Monetary Council seeks to convene a stakeholder conference later this year. After calling it a “worrying development” during the opening ceremony, he later told reporters that even though member states have not yet seen serious effects of de-risking, the governments are keen on implementing preventative measures to eliminate this “existential threat.”
“It is really an existential threat, but if it continues unabated, then the implications are very clear,” Browne said, adding that there could be implications for remittances and other areas. He noted that there are other serious human consequences including difficulties paying for education, medicines and healthcare in general and even in terms of importing food.
“In Antigua and Barbuda’s case, 90 per cent of what we consume is actually imported and 80 per cent of that comes from the United States. So if we’re unable to settle our bills in US currency, then it has implications even for imports. Again, what we’re doing, we’re fighting the issue before it gets to that stage,” he said at a press conference.
According to a communiqué issued upon the conclusion of the sub-regional meeting, the Council was updated on recent of de-risking by global banks and noted that correspondent banking relationships are critical for enabling key financial and economic transactions like remittances, foreign direct investments and international trade in goods and services. According to the document, such services contribute significantly to the region’s growth and development.
“Council therefore agreed that urgent and ongoing discussions on correspondent banking relations geared towards promoting financial inclusion, trade facilitation in the global market and monetary policy in general is required,” Browne said as he read from the communiqué.
He told reporters the finance ministers approved the ECCB’s assumption of full responsibility for anti-money laundering and combating the financing of terrorism (AML/CFT) regulation of all institutions under the Banking Act.
They also agreed, where applicable, to recommend to governments within the jurisdiction that necessary regulations be issued to confer authority on the ECCB for AML/CFT regulation. Earlier, during the opening ceremony, outgoing Chairman, Anguillian Chief Minister Victor Banks said —the Council, being aware of de-risking’s potentially negative impact, agreed to a joint approach in addressing the matter.
Such an approach would include advocacy through political and diplomatic channels, use of SWIFT registry by indigenous banks, consolidation of the banking sector and, possibly, the establishment of a Caribbean Bank in United States.
As published in Trinidad Guardian