The Caribbean Community (CARICOM) will be contracting a lobbyist to help make its case against the withdrawal of correspondent banking services within the region even though leaders have acknowledged that there is a virtual stay on the implementation in recent times.The decision was arrived at on Thursday during CARICOM’s 28th Inter-Sessional Meeting of the Conference of Heads of Government at the Guyana Marriott. CARICOM has long argued that the threat by banks in developed countries to withdraw correspondent banking services would exclude the Region from the global finance and trading system with grave consequences for maintenance of financial stability, economic growth, remittance flows and poverty alleviation.

Correspondent banking with global banks allows smaller banks access to the international payments system, facilitating money transfers through transactions such as wire transfers, check clearing, and currency exchange. Without these banking relationships, businesses are cut off from international trade and financing, families are unable to collect remittances from relatives working abroad, and foreign investors may be unwilling to invest, if there is a risk they will be unable to repatriate their profits.

The threat to Caribbean economies from large-scale withdrawal of correspondent banks was high on the agenda of policymakers attending the 2016 High Level Caribbean Forum in Port of Spain, Trinidad and Tobago, on November 2, 2016. “The withdrawal of correspondent banking relationships presents a clear and present danger to the Caribbean,” declared IMF Deputy Managing Director, Tao Zhang, in opening remarks at the forum, which was co-hosted by the IMF and the Government of Trinidad and Tobago.

A survey conducted by the Caribbean Association of Banks last year had showed banks in 12 countries in the region had experienced loss of correspondent banking, among them The Bahamas, Belize, Guyana, Jamaica, Suriname, Trinidad and Tobago, and countries in the Eastern Caribbean Currency Union.

Lobbyist
On the sidelines of the high-level regional meeting, Prime Minister of Antigua and Barbuda, Gaston Browne, in his capacity as Chair of the Committee on Correspondent Banking, told reporters that the lobbyist will assist in managing the existential threat currently facing the region. He said in arriving at the decision to employ the services of the lobbyist, the Heads of Government would have first reflected on the progress made over the last year. A presentation was also made by the Governors of the Central Bank Committee.

The Region, Prime Minister Brown said, has managed to gain the attention of a number of multilateral financial institutions, such as the World Bank, Inter-American Development Bank (IDB) and International Monetary Fund (IMF), through its active advocacy initiative to bring awareness on the issue of de-risking. De-risking is the decision taken by financial institutions to exit relationships with and closing the accounts of clients considered “high risk.”

“Our advocacy would have helped to bring the issues, the consequences, potential, intended and unintended consequences to a number of stakeholders globally. Even within the US, the Office of the Comptroller would have issued certain guidelines for Corresponding Banks to deal with the issue of de-risking and to avert the type of willy-nilly de-risking that we would have seen in the past,” Prime Minister Browne pointed out.

He noted, however, that there is an apparent “stay” on the decision to further de-risk. “There is no formal agreement to that effect but in terms of the actions, since they would have given notice to certain institutions to de-risk, we have not seen or heard of any such notice for further de-risking, so it would appear as though there is a stay,” the Antiguan Prime Minister explained.

According to him, if the process of de-risking domestic banks continues, the consequences can be severe. “If this process continues then we may end up with the cartel of foreign banks literally operating within the region and you know the consequences of that…You saw the situation with Royal Bank of Canada in which they increased their fees. They have no sympathy for our people, and as far as I am concerned their motive is profit-based, and they are not concerned about the reasonableness of the fees,” he pointed out.

Prime Minister Browne emphasised that if the trend continues the social and economic fabric of the region would be severely affected, explaining that if the region becomes “totally de-risked,” CARICOM nations will not be able to conduct simple financial transactions, plunging the entire region into poverty. “This is an issue we must fight,” he emphasised.

However, he said there is hope that the issue will be resolved eventually. “Well, I think ultimately it will, because you see correspondent banking is a global public good, it is just like providing water, Internet services, electricity; if you do not have correspondent banking then clearly we will end in a situation which we cannot even buy basic goods such as medicine, food, etc..”

It was further pointed out that many of the countries in CARICOM import food, with many of them depending heavily on the US currency. “Sixteen per cent of our receipts and payments are in US Dollars, so it is a very significant service that is required to ensure the continued development of the region, and I am pretty sure that at some point it will (be) resolved,” Prime Minister Browne said.

For its part, CARICOM has been making significant strides in meeting the requirements of the international standards that have been set by the Financial Action Task Force and the Global form of the Organisation for Economic Co-operation and Development (OECD).