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Date: 6/30/2016
Author(s): Central Bank Of Barbados
De-risking, the severing of correspondent banking relationships, has affected the Caribbean in a major way. In many instances, the terminations being experienced in the region are not based on any wrongdoing on the part of businesses, but rather are the result of the increasingly high cost of compliance with the regulatory framework outlined by Basel, the Foreign Account Tax Compliance Act (FATCA), the Global Forum and other bodies. Correspondent banks are also challenged by guidelines that are unclear or inconsistently applied. Many of these banks have weighed the marginal profits earned from doing business against the potential large fines and penalties due to lack of compliance as well as the reputational damage that could result and deemed it too much of a risk to continue to pursue business in certain jurisdictions.
The consequence of this is that many businesses and individuals have been cut off from their money and new businesses are finding it difficult to establish operations. Cognizant of this growing threat, the CARICOM Central Bank Governors Group has assembled a working group to fully assess the impact of de-risking on the region. The CARICOM Central Bank Governors Technical Work Group recently published a working paper that examines this. This working paper can be downloaded here: De-Risking and its Impact: The Caribbean Perspective