The threat of de-risking and the continued loss of correspondent banking relationships are "retarding" regional development and alienating regional economies from international commerce, despite the best collective efforts of international financial institutions, said Minister of Foreign Affairs and Immigration Fred Mitchell.

Mitchell asserted that the facilitation of banking services is the "lifeblood" of any economy, particularly in the Caribbean region. In The Bahamas, financial services stands as the second-largest revenue generator.

While speaking at the Permanent Council of the Organization of American States (OAS), he stressed that it is important for the OAS to recognize that the severing of correspondent banking relationships with commercial banks in some member states by global banks poses a severe threat to economic growth, social development and political stability, particularly in small economies.

Unintended consequences
Mitchell said Caribbean states like The Bahamas are committed to full and continued participation in the evolving rules-based system of global financial governance.

He added that there is an urgent need for action to ensure that banking regulations designed to foster transparency and accountability and prevent money laundering and terrorism financing do not facilitate unintended consequences of financial exclusion and economic decline of small economies by cutting their access to international correspondent banks.

"Across the Caribbean region and in many Latin American countries, we have seen a surge in the phenomenon of global financial institutions terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, perceived risk around such concerns as profitability, prudential requirements, anxiety after the global financial crisis, and reputational risk," said Mitchell.

He explained that correspondent banking is essential for customer payments, especially across borders, and for banks' ability to access foreign financial systems.

"The ability to make and receive international payments via correspondent banking is vital for businesses and individuals. Correspondent banks are private sector institutions that, pursuant to recommendations issued by the Financial Action Task Force (FATF), are required to evaluate risks when doing business with other banks and jurisdictions," he said.

Xian Smith, Guardian Business Reporter

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