The withdrawal by international banks of correspondent banking relationships with Caribbean-based banks and money transfer businesses has once again been making headlines in the Caribbean. This week Antigua & Barbuda’s Prime Minister raised the issue at the Fourth Summit of the Community of Latin American and Caribbean States (CELAC), terming it a “clear and present danger”. Last year mere weeks after Prime Minister Barrow of Belize raised the issue in his address at the Summit of the Americas in Panama, the Bank of America severed ties with Belize Bank, the largest bank in Belize.
Correspondent banking relationships are Caribbean countries’ umbilical cord to the international financial system. They allow for the conduct of international trade and investment by facilitating crossborder payments, as well as the receipt and sending of remittances through international wire transfers. At the microlevel these relationships help local exporters to receive payments for their goods and services, local businesses to pay for imports, and poor families to receive remittances for their day to day survival. As I mentioned in an earlier article, the loss of correspondent banking relationships could spell disaster for the small, open economies of the region which are highly dependent on trade and investment flows, with implications for poverty reduction and eradication.