Basseterre, St. Kitts, July 28, 2016 (SKNIS): The threat to the region’s banking system by way of de-risking continues to be addressed, as it could have serious implications for the Caribbean.
The threat relates to the possible loss of access to international financial markets by mainly the regional indigenous banks. Several international banks, mainly in the United States and Europe, have signaled to client banks in the region an unwillingness to continue carrying their business.
During his monthly press conference on Wednesday, July 27, Prime Minister of St. Kitts and Nevis and Minister of Finance, Dr. the Honourable Timothy Harris, said that a number of suggestions have been put forward to assist countries such as St. Kitts and Nevis to deal with the issue of de-risking.
“The Monetary Council has agreed to the implementation of a four-pillar approach to address the correspondent banking issues facing the commercial banks operating in the currency union,” said the Finance Minister. “We have to pursue a concentrated diplomatic/political approach for high level advocacy with the major capitals, particularly the United States of America (USA), Canada and the United Kingdom. A global conference is being planned to bring all the stakeholders together including correspondent banks, respondent banks, Governments, the US Treasury.”
Prime Minister Harris explained that the second pillar is designed to encourage national banks to register on the SWIFT Know Your Customer (KYC) Portal which was launched in December 2014.
The other two pillars include fast-tracking the consolidation and amalgamation of national banks, and consideration for establishing a correspondent Caribbean bank in the USA.
Dr. Harris reminded the nation that fast-tracking the consolidation and amalgamation of national banks was “part of the Eight-Point Plan that the former Eastern Caribbean Central Bank (ECCB) Governor, Sir. K. Dwight Venner, had brought forward to deal with the economic difficulties that ensued after the financial crisis. This matter then, continues to have validity as we face the drama and the difficulties associated with correspondent banking and their associated problem of de-risking.”
He noted that having correspondent banks are of significant importance.
“Of course, unless we have correspondent banks, we will not be able to effectively engage in international trade in any matter involving the use of foreign currency,” he said. “We will not be able to have access to remittances in the way in which we now do. We will have problems utilizing our credit cards because all of these depend upon our having access to correspondent banking relationships. Without correspondent banking relationship we are in effect, then blockaded from participation properly, in international trade and doing international business.”
To this end, Christine Lagarde, Managing Director of the International Monetary Fund (IMF), has been engaged to weigh in on the way forward for countries in the region. A suggestion has also been made for CARICOM Member States to consider engaging a lobbying group to provide access to key international stakeholders.