The Central Bank of The Bahamas (CBOB) has provided a range of measures to licensees to help manage and mitigate the risks of de-risking in light of the results found in the bank's recently released second correspondent banking survey (CBS 2).

In an effort to mitigate the effects associated with declining correspondent banking relationships, the regulator sought the input of licensees, and in doing so found "interesting proposals/suggestions that went a bit beyond the surface", the regulator noted.

"One suggestion is the establishment of a centralized electronic KYC (know your customer) system that would be accessible by all licensees and which, subject to the appropriate domestic legal provisions, would facilitate the exchange of information with parties both inside and outside The Bahamas."

CBOB said that it is also pursuing domestic financial inclusion policies, which will help to "increase transparency and enhance monitoring capabilities".

The regulator acknowledged that the results of the second survey generally suggested "an increased incidence of correspondent banking withdrawal".

"The incidence of de-risking within the local banking and financial sector is also pronounced, affecting both commercial banks and money transmission firms," CBOB asserted.

The results of CBS 2 showed that a total of 14 financial institutions were impacted by de-risking and/or the loss of a correspondent banking relationship (CBR).

The study had a response rate of 56 percent and covered all regulated licenses.

While pointing out that the majority of licensees appeared to have established well-defined contingency plans, the regulator said most contingencies "include a reliance on establishing new correspondent banking relationships".

The bank warned that this approach "must also be supplemented by trust building within the correspondent relationships".

CBOB said it would "continue to provide guidance to licensees to mitigate the effects, with a strong emphasis on strengthening AML/CFT (anti-money laundering/combating the financing of terrorism) systems."

CBOB added that it is "actively participating in regional and global dialogue on de-risking drivers, impacts and solutions".

Xian Smith, Guardian Business Reporter

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