De-risking in the Caribbean
As the Caribbean continues to explore ways to counter the impact of foreign banks, particularly United States banks, cutting their ties with regional banks over money laundering concerns, St Lucia Prime Minister Allen Chastanet believes that a collective and broad effort is needed to address the situation.
Speaking at the opening ceremony of the 37th Meeting of the Caribbean Community (Caricom) Heads of Government Conference on Monday in Guyana, Chastanet outlined that while the Region has had a very successful campaign with the United Kingdom in which an incredible lobbying effort was put together, he is of the view that it is time for the Caribbean to put together a more effective lobbying approach towards addressing the issue of de-risking.
De-risking is when international banks withdraw from their relationships with indigenous banks because of fears of money laundering and questionable sources of funds which would cause the international banks to receive heavy fines from their regulators.
Caribbean banking institutions rely on such relationships in order to allow residents to conduct international financial transactions. However, since last year, the Region has been facing the impact of de-risking and the issue has been occupying the attention of regional policy-makers, following signals by international banks that they are unwilling to continue carrying the business of regional banks.
This matter will come up for discussion during the Heads of Government Conference meeting happening today and Wednesday, as Caribbean leaders try to tackle the cut-off of regional indigenous banks – a situation that poses dire consequences for the Region including crushing impacts on the wider economy.
But according to Prime Minister Chastanet, the Region must stop thinking that it has to solve this problem alone. He pointed out that there are a number of multinational companies in the US such as airlines, cruise industries, suppliers and individuals who own their homes – who have a vested interest in the Region and who know exactly how to lobby their Government.
In this vein, the St Lucian Head of State posited that the Caribbean should get more persons from abroad, especially those who will be affected, involved in efforts to address the region-wide problem that threaten their economies.
“The idea of us going to Washington, DC by ourselves is a tried and tested failure. We must be able to bring more people to the argument and we must do it urgently,” Chastanet pointed out.
De-risking in the Caribbean came into the limelight last year when the Belize Bank was cut off by the Bank of America and one of the two banks in Montserrat shared the same fate. Some of the areas that are affected because of de-risking are: transfers of remittances, cheque payments, international trade and the facilitation of credit card settlements for local clients.
The Caribbean Development Bank (CDB) quoted a November World Bank survey as saying that about 75 per cent of international banks have experienced a reduction in correspondent banking services with the Caribbean being the worst affected.