DE-RISKING: Bank Of America to sever ties with local banks

Correspondent banking relationships with international banks are viewed as the umbilical cord of Caribbean countries mainly because these relations allow for the conduct of international trade and investment by facilitating cross border payments.

Cash management services, cheque clearing and settlement, , international wire transfers are most affected by the severing of ties with international financial systems.

At the micro level, research has shown that these relationships help local exporters to receive payments for their goods and services, local businesses to pay for imports, and poor families to receive remittances for their day to day survival.

Guyana is no exception to the threats that de- risking, as it is called brings. Lack of the Anti-Money Laundering and Countering the Financing of Terrorism legislation is playing a role in international banks breaking ties.

And while many local banks that have known ties to Bank of America are tight lipped on their statuses as it relates to corresponding banking relations, bank of Guyana governor, Gobind Ganga during a telephone interview with News Room a few weeks ago hinted that some banks would be affected.

He informed that government is in discussions in this regard.

Affected banks will now have to examine their risk management systems and device suitable alternatives to buffer these effects.

Meanwhile, the Caribbean Development Bank in a recent discussion paper said it has ideas to support regional institutions in common pursuit of the overall goals; the mitigants and solutions to this issue.

It was noted that the CDB’s assistance can aid the development of appropriate approaches to respond quickly and effectively.

The CDB pointed out that “this issue requires robust leadership, a profound sense of urgency from all stakeholders and careful planning to ensure that there is an efficient and strategic allocation of finite resources (human and financial) to the pursuit and implementation of solutions and mitigants.

Regional stakeholders cannot afford to waste any time in finding solutions nor spend scarce resources testing unworkable solutions. Leadership, creativity, courage and support will be required in the conceptualisation, selection, financing and implementation of solutions.”