Eight gone

Details are beginning to emerge of the stunning impact on the financial services sector of the de-risking strategy being employed by global banks.

A leading international tax negotiator today revealed that eight financial institutions here had lost accounts in the ongoing termination of correspondent baking relations by the international banks.

In addition, the Organization of American States (OAS) said Caribbean Community (CARICOM) countries stood to lose up to US$10 billion in remittances each year as a result of the practice.

The OAS Permanent Council convened a special meeting today to discuss Finance and Banking Services Challenges to Development in the Americas.

There, Bruce Zagaris of the firm Berliner, Cocoran and Rowe painted a vivid picture of the negative impact that Barbados and the Caribbean were already feeling.

Bruce Zagaris & Henderson Holmes
Bruce Zagaris & Henderson Holmes

“Five out of seven banks in Belize have had their correspondent bank relationship terminated by the US; two domestic commercial banks and four international banks in the Bahamas have been directly impacted by the loss of correspondent bank relationships; eight domestic financial institutions in Barbados have had accounts terminated by primarily Canadian and US correspondent banks, as well as a few in the Netherlands, UK and Germany,” Zagaris said.

The tax negotiator added that both Jamaica and Mexico were also feeling the pinch.

Executive Director of the Barbados International Business Association (BIBA) Henderson Holmes confirmed the termination of the bank accounts, but could not say which ones had been affected.

He explained that while they were not deemed to be risky, these financial institutions did not fit the profile of the international banks’ low risk businesses.

“Yes there are some international business firms that are affected; there is no question about that. There are also some new firms that are looking to establish operations and are having difficulties getting a bank account. That is the reality that is happening on the ground now,” Holmes told Barbados TODAY this evening.

Meantime, Chairman of the CARICOM Caucus Patrick Andrews explained that in 2015 the situation significantly impacted a number of products and services widely used by CARICOM financial institutions, including cheque clearing, settlement cash management services, international wire transfers and trade finance.

He pointed to a recent World Bank survey which showed a decline in foreign exchange services and foreign currency banknote services in the region between April and September last year.

“The survey also indicated the clients segments most affected are money services operators and remittance companies,” reported Andrews.

“Such declines were reported in particular in small jurisdictions with low volumes of business transactions as well as those with significant offshore banking activities,” he added.

In his presentation, former Bahamian Minister of Finance Services Ryan Pinder said a recent World Bank survey revealed that more than 50 per cent of the local banking institutions experienced a decline in correspondent banking relationships, and 75 of the banks that provided the correspondent banking services had reduced their relationships.

The policy advisor said the de-risking initiative had the potential to “wreak severe damage on our Caribbean economies”.

Warning of irreversible economic impacts on Caribbean people, Pinder said the new development could also result in transactions and currency flows being driven to “less transparent and more risky alternatives”.

He also stated that the region’s dependence on inbound trade from the US would not only be put at risk but could be “eliminated entirely”.

Meantime, Chairman of the Permanent Council Sir Ronald Saunders said more than half of the 35 member states of the OAS were adversely affected. He described the issue as “a creeping cancer” that will affect many more countries.

He announced that a number of countries had proposed a draft declaration for possible adoption by the Council. However, at the end of today’s discussions the draft proposal failed to receive the backing of all the members states, including the United States and Canada, where most of the international banks are located.

Other countries asked for more time to review the proposal and seek clarification, Sir Ronald reported. (MM)

5 Responses to Eight gone

  1. jrsmith March 31, 2016 at 5:37 am

    What would islands like Barbados expect to happen ,in the real Politically Corporate Corrupt financial world, some one must pay to protect the ( developed world establishments) which is under threat if the Donald becomes the US President. The 2 British protectectorates , Bermuda and the Cayman cannot be exposed

  2. Rawle Maycock
    Rawle Maycock March 31, 2016 at 6:47 am

    The heat is on.

  3. seagul March 31, 2016 at 7:27 am

    Barbados government officials are not prohibited from accepting gifts of any value—from land developers or companies that receive government contracts…. Freedom in the Caribbean is the freedom to be taken advantage of by government-supported plantation type hotels and big business, the freedom to be jobless and destitute. We are dancing in the dark.

  4. Richard Johnston March 31, 2016 at 8:40 am

    Why worry about the loss of “correspondent baking relations?”

  5. Andrew Rudder March 31, 2016 at 9:29 am

    The financial giants are now trimming away its hedges of unwanted sprigs of sprouting leaves. One thing to be consciously noted is U.S.A agriculture out-look which also combines forestry does not look so bright for 2016.


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