Dear Editor:
A STRONG case has been made for the Caribbean Community (CARICOM) member states to collectively pursue at the World Trade Organization (WTO) the issue of the de-risking of their indigenous banks.The case was made by St. Lucian Dr. Jan Yves Remy, an international trade lawyer and former legal officer at the WTO during a panel discussion on correspondent banking held yesterday at the Florida Conference on Current Caribbean Issues: The Diaspora Discussion which formed part of the Florida International Trade Conference and Expo (FITCE).
Dr. Remy put on offer a new perspective on the issue of de-risking: “One that considers the impact of the phenomenon from the vantage point of its effect on the competitiveness of the region’s financial services product, as well as sectors that rely on those services. The complexity of the trade impact of de-risking on Caribbean economies is yet to be comprehensively studied and articulated.
“The World Trade Organization administers the rules upon which trade in services, including financial services, are conducted. It provides a forum both for discussions about the impact of governments’ regulatory policies on WTO members, as well as for the settlement of disputes where countries can bring their grievances against government measures that impact their trade relations. Of course, de-risking results from the actions of private sector actors – correspondent banks – responding to government regulatory incentives, but the trade impact is still real,” she said.
But another panelist, Wayne Shah, speaking on behalf of the Florida International Bankers Association (FIBA) challenged whether the WTO would be a useful forum and instead advanced as a solution, the merger of several small indigenous banks in the Caribbean into a single, or a few larger financial institutions with the capacity to make more efficient allocation of resources and to reduce the cost of compliance mechanisms. He did not endorse as one of the possible solutions to the de-risking problem, the setting up of a Caribbean-owned bank in the United States which was advanced by Mr. Jerry Butler, the current executive director for the Caribbean at the Washington, DC-headquartered Inter-American Development Bank (IDB).
Shah told delegates, made up primarily of business owners and executives, government officials and representatives of chambers of commerce, that fora such as trade and investment conferences would be a waste of time, “if businesses are not able to trade in money, pay their bills and utilize instruments such as letters of credit. De-risking also has serious impact on remittances which are key to Caribbean people and the economies of the countries in the region.”
According to Dr. Remy, “used to maximum effect, the WTO can serve as yet another forum that Caribbean governments should utilize to vent and air grievances about the unfair application of regulatory policies that disproportionately affect financial service providers from the Caribbean. WTO rules inter alia, require that regulations be applied by domestic regulators in a non-discriminatory manner, are not overly burdensome as they seek to pursue legitimate outcomes in the least trade- restrictive way; and are not arbitrary, in the sense that they are applied in an even-handed manner. Given that all Caribbean governments, with the exception of The Bahamas, are all WTO members, they should use this forum as yet another arrow in the quiver of diplomatic and advocacy options for finding lasting and meaningful solutions to the de-risking problem,” Dr. Remy advised.
While accepting the recommendation advanced by Dr. Remy, Jerry Butler pointed out that a solution to the problem of de-risking required a heightened engagement on the part of CARICOM with the United States which should include the Caribbean Diaspora, upon whom several elected officials depend for votes. He also pointed out that the Caribbean region itself has “a responsibility to ensure that we have in place all that is necessary to avoid any dirty business being conducted through our indigenous banks.”
During the discussion session of the conference, several other options were raised by participants, including one that CARICOM peg its currencies to the Euro rather than the U.S. dollar. There was also consensus that the single most restrictive barrier to trade and investment in the Caribbean is the de-risking of indigenous Caribbean banks.
Regards,
Wesley Kirton