The region is being urged to look into the feasibility of establishing a Caribbean bank in the United States to address the loss of correspondent banking services being experienced by banks in the Caribbean.
Deputy governor of the Eastern Caribbean Central Bank (ECCB) Trevor Brathwaite said that’s an option that can’t be ignored, WINN reported.
“In London there are a number of banks that are owned by foreign nationals from other countries and so it’s doable. The feasibility study ought to say once you look at the terms of reference for the feasibility study the modality for establishing a Caribbean bank let’s say in New York, it could be an outright purchase or maybe a second tier bank or the establishment of a bank by private interest collectively,” Brathwaite said.
ECCB governor Timothy Antoine said the option is not a far-fetched one.
Caribbean governments, indigenous banks and offshore banks located in the Caribbean are extremely concerned about the withdrawal of correspondent relations from Caribbean banks by banks in the US.
Their concern arises from the fact that, if all correspondent banking relations are withdrawn, the region will be isolated from the rest of the world and will be unable to carry out the most basic of bank transactions.
According to Antigua and Barbuda’s ambassador to the US, Sir Ronald Sanders, what has caused the withdrawal of correspondent relations to the Caribbean and the other regions identified above is the huge penalties that US banks would have to pay if any incidence of money laundering, terrorism financing, or tax evasion passed through them from their respondent banks.
Regulatory and enforcement agencies have dealt harshly with such incidents, creating a strong deterrent to taking risks. The simplest form of “de-risking” is to terminate correspondent banking relations.
“Establishing a Caribbean-owned agency in the US to provide correspondent relations for regional banks is not impossible, though it is difficult and will require investment in time, money and professional advice,” Sanders said earlier this year.
“But, there is no swift or easy solution to the present problem. If Caribbean banks believe that there is no risk to US banks in the provision of correspondent relations, then they should be prepared to take the risk themselves by setting up their own agency to facilitate their business,” he added.Caribbean News Now