Former PM warns of threat to Caribbean banks

KINGSTON—Caribbean stakeholders, including former Prime Minister of Barbados Owen Arthur, say there is a need for unified Caribbean efforts to combat the growing move by large, mainly US-based international banks, to sever relationships with smaller Caribbean-based financial institutions, including money services businesses. 

The calls were made during a Roundtable Discussion on Correspondent Banking in Kingston, Jamaica, organised by the think tank, the Caribbean Policy and Research Institute (CaPRI) in partnership with the Jamaica National Building Society (JNBS), amid concerns about the implications for trade-dependent Caribbean economies and societies. 

Addressing participants at the forum, Arthur acknowledged that while Caribbean countries are not the only ones being affected by the move by large banks to “de-risk” their operations, they must form strategic alliances and add their voice to the cause as well as commit the resources necessary to strengthen their position to resist any unfair application of global regulations and standards. 

According to the former Barbados Prime Minister, the practice of de-risking, which involves closure of accounts of categories of financial institutions deemed high-risk for money laundering and terrorism financing, diminishes the Caribbean’s access to global financial markets and impacts the flow of nearly US$10 billion in remittances to the region, annually. 

“The wholesale cutting loose of clients, without evaluating their risks, was not intended to be a substantive part of the fight to combat global financial crime and terrorism,” Arthur argued, “But, this is precisely the direction in which the de-risking exercise is taking the global financial community.”

He says although the Caribbean cannot shirk global efforts to reduce financial crime, fight terrorism and strengthen financial systems, it must advocate for fair application of the rules. 

“The Caribbean cannot profess to wish to stand askance from this global initiative,” he declared. 

“What it can and must do is to add its voice to those who are insisting that where rules and standards are set which are intended to be applied fairly and uniformly, this should be observed in practice.”

Arthur called for Caribbean countries to ensure their standards and compliance mechanisms meet global requirements which, he stressed, could be achieved through implementation of the second phase of the Caribbean Single Market and Economy (CSME). 

“The plan to move to a single economy called for the putting in place, for example, of a Regional Financial Services Agreement and a Regional Investment Code, which, if brought into existence, would have been designed to govern and bring order to the operation of the regional financial sector, and set out clear guidelines concerning that sector’s relationship with the global economy,” he said.