PRESS RELEASE:-St. Lucia, Fri. August 26, 2016: The Caribbean Association of Banks Inc. (CAB) strongly supports the recent remarks and proposed approach of IMF Managing Director Christine Lagarde, regarding the de-risking/correspondent banking issue. As she states, “It is a collective action problem that calls for a collective solution”
The CAB has been active in raising and advocating on this 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 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.
Among the many negative impacts anticipated from the disturbing trend of de-risking on small nation states are: the promotion of financial Exclusion rather than Inclusion, shrinkage of the financial sector, thriving underhand economies, increased use of unregulated payment options and a barrier to attaining the Millennium Development Goal 10.cii.
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 regional relevance of remittances is indicated by the following: Jamaica and Guyana’s average remittance totals; 15 and 14 percent of GDP respectively, for the years 2000 – 2013iii. 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 Caribbeaniii.
Also, for the developing countries of Latin America & the Caribbean from 2012 – 2014, trade accounted for 58 – 100% of GDP for smaller and 83% of GDP for larger statesiv. These figures all demonstrate the extreme susceptibility of the Caribbean to de-risking practices.
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 countriesv” 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.