CASTRIES, St. Lucia, Saturday August 27, 2016 – The Caribbean Association of Banks Inc. (CAB) is strongly supporting IMF Managing Director Christine Lagarde’s proposed approach to dealing with the de-risking/correspondent banking issue that threatens some regional economies. It’s her suggestion that “it is a collective action problem that calls for a collective solution” that is getting her a thumbs up from the CAB.
De-risking is where international banks limit or terminate their relationships with regional financial institutions because of fears that money laundering and questionable sources of funds which would cause them [international banks] to receive heavy fines from their regulators.
The CAB said in a statement issued yesterday that it has been active in raising and advocating on the issue and its effects on the Caribbean region since 2014, when it brought the matter to the attention of Caribbean governments and other stakeholders.
The CAB had requested regional intervention and highlighted that the loss of correspondent banking relationships could render the Caribbean region unbankable and ultimately destabilize all sectors of the economies.
Correspondent banking relationships are critical for the enabling of key economic and financial transactions such as remittances, foreign direct investments (FDIs) and international trade in goods and services which constitute some of the key drivers for sustaining the Caribbean region’s growth and development.
The CAB noted that the average remittance totals for Jamaica and Guyana for the years 2000 to 2013 were 15% and 14% of GDP respectively. Figures from 2009 – 2013 indicate that FDIs account for as much as 15.4% of GDP for smaller states and 8.6% for larger states of the Caribbean. Also, for the developing countries of Latin America and the Caribbean, trade accounted for 58–100% of GDP for smaller states and 83% of GDP for larger states, from 2012 – 2014.
“These figures all demonstrate the extreme susceptibility of the Caribbean to de-risking practices,” the association said.
“As Managing Director Lagarde notes, ‘Correspondent banking is like the blood that delivers nutrients to different parts of the body. It is core to the business of over 3,700 banking groups in 200 countries’. The CAB concurs with these sentiments and wishes to highlight that if the current trend is allowed to continue with no solution in sight, the very livelihoods of Caribbean people will be in danger.
“The CAB supports the work of the IMF towards resolving this issue and commits to continue to work assiduously with its members to ensure that they satisfy any requirements on their part,” it added.