The Jamaican Gleaner is reporting that Montserrat may lose its corresponding bank in the United States within 30 days.
Governor of the Central Bank of Belize, Glen Ysaguirre, who participated in the CARICOM Heads of Government summit held in Belize this week said Montserrat, which has only two commercial banks, has been given notice by Bank of America that within 30 days they will terminate the relationship.
“That will be very devastating for that small economy. Without a correspondent banking relationship, that would do what even the volcano in Montserrat couldn’t have done, which is to have those people evacuate that island under the threat of that volcano,” said the CCBG chair.
“Without correspondent banking, being cut off from access to the international financial system, it will certainly force them to look otherwise for economic survival. And the story is the same throughout the Caribbean,” Ysaguirre added.
The Bank of Montserrat, the Royal Bank of Canada branch and the St. Patrick’s Credit Union are affected by this decision. Similar notices have been received by the Bank of Nevis and other indigenous banks across the region.
The threats to the Region’s banking sector was a major point of discussion at the CARICOM Heads of Government summit. A Committee of Ministers of Finance on Correspondent Banking, chaired by Antigua and Barbuda’s Prime Minister and Minister of Finance Hon. Gaston Browne will lead the response to this issue. The Committee is supported by leading Regional institutions including the Committee of Central Bank Governors (CCBG), the Caribbean Association of Banks (CAB) and the Caribbean Financial Action Task Force (CFATF)
The threat relates to the possible loss of access to the international financial markets by mainly the Regional indigenous banks, such as the Bank of Montserrat. Several international banks, mainly in the US and Europe, have signalled to client banks in the Region an unwillingness to continue carrying their business. The so-called ‘de-risking’ by the global banks threatens to impact several critical services including remittance transfers. International trade, the facilitation of credit card settlements for local clients could also be threatened.
One of the suggestions Prime Minister of Belize, the Hon Dean Barrow put forward for consideration on Monday evening, was for respective country banks to get together across jurisdictions and, as a bloc, approach target banks in the United States for pooled correspondent services. It is his view that the Region should be able to leverage the critical mass needed to make its business volume worthwhile in terms of risk/reward equation.
“Meantime our campaign, and I speak now of CARICOM, continues. And it cannot be other than relentless in the face of the possible correspondent banking Armageddon that we face. It is therefore a matter that looms extremely large on our Agenda over the next two days, and has already been the subject of a dedicated Finance Ministers meeting this morning,” he told the ceremony.
CARICOM Secretary-General, Ambassador Irwin LaRocque, who made remarks at the ceremony, also addressed the correspondent banking relationship issue and referred to it as an immediate existential threat. The Caribbean, he pointed out, was “inarguably one of those most adversely affected by these de-risking strategies and our people have already begun to feel the consequences of such arbitrary decisions”. He sought collective action to deal with matter.
“This situation threatens the financial and economic stability of our Region. It is having an impact on the ability of our people to receive their remittances and transfer their funds for trade and investment transactions. This state of affairs demands that we act collectively to address this issue with the relevant regulatory authorities and the international community,” the Secretary-General said.