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#510602 - 01/13/16 10:49 AM Banking Sector Under Pressure
Marty Online   happy

PM Comments On Banking Sector Under Pressure

Belize's banks continue to be under major pressure, and now it's affecting the business sector. The pressure is rising because presently there is only one bank with a correspondent banking relationship, and that's Scotiabank. So any business which needs to pay an international creditor, or receive payment by foreign currency cheque or wire transfer has to leave their regular bank and funnel it through Scotia. It's sure to cause a bottleneck, and Scotia has its own international standards and corporate culture, which isn't a match for every business - it does not, for example, have a good track record in the productive sector. And then there's the free zone, where all business has to be transacted in US dollars - but now, both the Belize Bank and the Atlantic Bank are being forced to shutter their operations in the zone - because they have lost their correspondent banking relationships. So with only one bank in the entire country which can freely do international transactions - it's a precarious position - and the entire economy is held in the balance. Today, we asked the Prime Minister and Minister of Finance about this near crisis situation:...

Hon. Dean Barrow, Prime Minister
"I've met with the US Ambassador, our Ambassador in Washington is trying to secure me appointments with the state department, with the US Treasury, with the World Bank - with two regulators; the FDIC and the Office of the Controller of the Currency. One of our difficulties is that a part from the tier one banks, smaller banks, community banks, state banks. In the case of credit card settlements, it's a community bank that has agreed to do that for Belize Bank and for Heritage after the corresponding banking relationship was cut off by Bank of America. That bank has now indicated that by the middle of next month it is looking to discontinue even that sort of less comprehensive relationship. So even the question of the credit card settlements, is now in some jeopardy. That's one of the reasons that I want to talk to both FDIC and the Office of the Controller of the Currency, because those are regulatory agencies for the state banks and for the small community banks."

Daniel Ortiz
"Sir, would you describe it as a crisis? Because the person we've talk to - that's the way they describe it that this is a big problem for them that the correspondence banking relationships are coming to a complete close."

Hon. Dean Barrow, Prime Minister
"Well it is potentially a crisis. In fact, I don't want to overstate things but if we don't find a solution one way or another, it is going to be a huge crisis. We are not quite there yet. I hope that my visit to Washington will pay some dividends, although when I had raised it with the President and he had express his willingness to try and have the US help us find a solution - nothing has happened."

For context we should note that the loss of correspondent banking relationships is a region wide problem in Central America and the Caribbean. The source of the problem is the US Treasury Department and its new measures designed to curb money laundering and the financing of terrorism, known as "AML/CFT."

Channel 7


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#510616 - 01/13/16 01:21 PM Re: PM Comments On Banking Sector Under Pressure [Re: Marty]
Katie Valk Offline
This is serious. Ask Cubans what happens when you are amputated from US cc and banking system.
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Belize based travel specialist
www.belize-trips.com
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#510620 - 01/13/16 02:27 PM Re: PM Comments On Banking Sector Under Pressure [Re: Marty]
ragman Offline
Yes, it is very serious and is going to lead to a very difficult situation especially for a small country like Belize as well as many other countries.

All caused by the government's search for more money to feed its insatiable appetite. No one should expect a change in this stance for at least 307 days. The monster is presently out of control and in the end everyone will lose. The businesses who export from the USA and other countries who deal exclusively with USD (virtually everyone at the moment) as well as the countries who will have to make other arrangements with maybe more distant or expensive alternatives.

The only saving grace for some types of businesses is the ease of electronic movements of money which sort of bypass governments for the moment and allow small businesses to continue in certain industries.
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Jim
Somewhere on a beach in Belize

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#510634 - 01/13/16 10:02 PM Re: PM Comments On Banking Sector Under Pressure [Re: Marty]
ragman Offline
Today in the NYT it was announced that cash buyers of luxury real estate in the USA will be tracked by the US Treasury Dept. Real Estate Companies will have to figure out just who is really buying a property by coping their passport and such. Since most real estate in San Pedro by USA Citizens is paid in cash I wonder how long before that becomes a requirement? Just thinking because the transfer of funds for Real Estate is usually done from a USA Bank to a USA Bank. Maybe I shouldn't give them any ideas. wink

http://www.nytimes.com/2016/01/14/us/us-will-track-secret-buyers-of-luxury-real-estate.html?_r=0
_________________________
Jim
Somewhere on a beach in Belize

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#510635 - 01/13/16 10:09 PM Re: PM Comments On Banking Sector Under Pressure [Re: Marty]
Canuk Offline
Does this mean simple wire transfers (<$10,000 BZ) will no longer be possible from US to BZ except through Scotiabank?

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#510638 - 01/14/16 12:46 AM Re: PM Comments On Banking Sector Under Pressure [Re: Marty]
elbert Offline
Weekly I deposit in Belize Bank an usually it's just a little over the limit so I'm yet again presented with a declaration form to fill out and yet again asked for a photo ID from a person I've know for over 20 years. It's makes me state where the money came from and this week after picking up the pen I paused and asked the clerk how to spell Jihad...The people at the bank have no sense of humor.
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The Dive Shops Daily Blog
http://scubalessonsbelize.blogspot.com/

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#510640 - 01/14/16 01:27 AM Re: PM Comments On Banking Sector Under Pressure [Re: Marty]
Shyboy Offline
The price of success.


Edited by Shyboy (01/14/16 08:28 AM)
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A little known fact... Women who are overweight tend to live longer than men who mention it...

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#510644 - 01/14/16 10:29 AM Re: PM Comments On Banking Sector Under Pressure [Re: Marty]
Marty Online   happy

Atlantic Bank Still Corresponds

Last night in our report about troubles in the banking sector, we reported that Scotiabank was the only local bank still holding unto a correspondent banking relationship. Well that wasn’t accurate – and today Atlantic Bank sent out a release saying that they still have correspondent banking relationships with: the Bank of New York Mellon, Commerzbank and US Century Bank. A press release adds quote, “we continue to facilitate international making transactions, including wire transfers via our entire branch network” end quote. That network still does include a branch in the Corozal Free Zone. So, we stand corrected. Atlantic Bank says it meets local and international regulatory standards – as it has for the past 45 years.

Yesterday the Prime Minister told the press that he is trying to get an urgent meeting with the State Department and the US Treasury because even the smaller banks that have been handling credit card settlements for other banks are threatening to discontinue that service by the middle of next month.

Channel 7


How compliance regulations are hurting the Caribbean’s indigenous banks

The unintended consequences of banking regulations on Caribbean economies

IMAGINE THIS. You, a partner or family member is working overseas. You have been sending money home to support an aging relative or to make a regular payment on a mortgage. You go to the Caribbean money transfer business that you have always used, only to be told your money can no longer accepted because there is no intermediary bank in Europe or the US willing to work with it despite its absolute reliability and positive track record.

Although oversimplified, this scenario is not impossible as changing international regulations and risk aversion are having the effect of disconnecting Caribbean financial institutions from the international correspondent banking services that are necessary for them to clear or transfer money.

In the last year the issue has become a significant problem that potentially threatens to touch significant numbers in the Diaspora who send money home, or small businesses that need to make international payments. It is also a development that has much broader significance for many economies in the region, as Central Banks and Governments for reasons of macro-economic and social stability have come to rely on the a constant flow of remittances.

The origin of the problem lies in relatively new international regulations intended to address money laundering and the financing of terrorism, known as AML/CFT.

This requires that all financial service providers, including the big banks and those working with low-income communities, enhance their internal controls; undertake customer due diligence procedures on all new and existing clients; introduce higher levels of surveillance of suspicious transactions; keep transaction records; and report suspicious transactions to national authorities. It also requires international banks and financial institutions to know that their correspondent bank, for example in Jamaica, the Dominican Republic or Guyana, is also undertaking the same level of due diligence and knows its customers.

This has had the unintended consequence of seeing increasing numbers of international banks withdrawing their correspondent banking facilities either on the basis of the cost of compliance with the AML/CFT rules, or the perceived possibility that they may be placing themselves in jeopardy with their own supervising financial body; with the possibility they may face huge fines.

So serious has this matter become, that the World Bank recently asked banking authorities and banks worldwide about the extent to which there had been a withdrawal from correspondent banking, what was driving this trend, and what the implications were for financial exclusion and inclusion.

Its subsequent November 2015 report, ‘Withdrawal from Correspondent Banking – Where, Why and What to do about it’, makes clear that the Caribbean is the region most severely affected.

The report observes that about half the banking authorities it surveyed, and slightly more local and regional banks, indicated they were experiencing a decline in correspondent banking relationships, with a much greater number, some 75 per cent of large international banks, saying the same.

Particularly affected are the clearing (typically by cheque) and the settlement of payments, cash management services, international wire transfers, and according to banking authorities and local and regional banks, trade finance. The issue was particularly serious when it came to transactions denominated in US dollars, Euros, the Pound sterling, and the Canadian dollar.

According to the World Bank, the banking authorities surveyed indicated that those most affected were money transfer operations, followed by small and medium domestic banks and then small and medium sized exporters.

Uncertainty about regulatory obligations, the World Bank said, was leading large banks to err on the side of caution with the consequence that correspondent relationships with financial institutions in regions like the Caribbean were being abandoned, sometimes with no notice period. This then led to a situation where indigenous banks were finding that it was increasingly difficult to locate correspondent banks, and that the business costs for all involved had become significant.

The report also showed that the situation was particularly acute in the locations where the majority of the Caribbean Diaspora reside: the US and the UK.

It also made a number of recommendations, some of which are internal to the way correspondent banking operates, while identifying a number of hard-to-address issues relating to the way in any commercial enterprise can decline to undertake business on the basis of cost, policy or risk.

AML/CFT rules are a classic example of regulation with unintended consequences.

De-risking by correspondent banks is not only driving illegal money to less transparent channels, but if not addressed will have the effect of damaging the contribution that remittances make to GDP, and touch social stability by excluding the unbanked at the poorest levels of society.

Few would oppose rules that halt money laundering, funding for terrorists, or tax evasion; yet it seems that these well intended international objectives have led to a situation that particularly discriminates against the Caribbean, enabling either the nervous, bureaucratic or cost-conscious who run international banks to end their relationship with indigenous banks and financial institutions.

During 2015, the issue was raised by Caribbean Central Banks with the IMF, and by private sector bodies in countries from Belize to Guyana. More recently such concerns were incorporated into the final communiqué of the annual meeting between Britain and its overseas territories, with the UK agreeing to work to maintain viable banking and financial sectors there.

However much more needs to be done, and in a coordinated way by Government, Central Banks and the private sector, as the matter is at the interface between international relations, government regulation, the commercial, the individual and the criminal.

The issue has the capacity to diminish the regional private sector, and restrict the flow of remittances which provide liquidity, consumer led growth and stability in many Caribbean economies. It is also an issue on which the Diaspora requires leadership and direction to articulate politically the region’s case in Washington, London and elsewhere.

The issue of correspondent banking for small nations needs addressing rapidly at the highest levels of the World Bank, the OECD and the G20, if regions like the Caribbean are ever to develop strong indigenous financial institutions and not see their economies marginalised.

David Jessop is the Executive Director of the Caribbean Council. In a forty-year career, he has provided high level support and advice to industries, associations, governments and companies on investment, trade policy and political issues in the Caribbean, the UK and continental Europe

Source


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#510677 - 01/15/16 10:23 AM Re: PM Comments On Banking Sector Under Pressure [Re: Marty]
elbert Offline
Atlantic Bank maintains Correspondent Banking Relationships; read full Press Release below.
_________________________
The Dive Shops Daily Blog
http://scubalessonsbelize.blogspot.com/

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#510689 - 01/15/16 11:53 AM Re: PM Comments On Banking Sector Under Pressure [Re: Marty]
Katie Valk Offline
Scotia fine
_________________________
Belize based travel specialist
www.belize-trips.com
info@belize-trips.com

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