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12714439_10205648484159403_1741705349_nAt the opening ceremony of the Twenty-Seventh Inter-sessional Meeting of the Conference of Heads of Government of CARICOM that was held last night in Placencia, Prime Minister Barrow, Chairman of CARICOM focused a great part of his address on the correspondent banking situation that has been affecting indigenous banks in many CARICOM member states.

The threat relates to the possible loss of access to the international financial markets by mainly the Regional indigenous banks. Several international banks, mainly in the US and Europe, have signaled to client banks in the Region an unwillingness to continue carrying their business The so-called ‘de-risking’ by the global banks threatens to impact several critical services including remittance transfers. International trade, the facilitation of credit card settlements for local clients could also be threatened.

Honorable Dean Barrow – Prime Minister of Belize

“I am talking, of course, about the phenomenon of so-called de-risking. Under pressure from their regulatory authorities in Europe and Especially the US, banks in those jurisdictions have been closing their correspondent relationships with our indigenous financial institutions. This deprives our banks of the ability to keep US deposits, do wire transfers, facilitate credit card settlements for their local clients and our economy. The implications of this for our international trade, for our remittances, for our structures of production, consumption and investment, are so obvious as to require little further elaboration. It is therefore no hyperbole to say that, especially in an environment where the value of our imports and exports taken together equal r exceeds our GDP, any attenuation, not to say complete cut off, respecting our trade and remittance flows, constitutes a clear, present and compendious danger.”

Prime Minister Barrow who was recently in Washington DC to work on the matter of correspondent banking relationships directly with the regulators in the United States reported that while he received sympathy from US regulators, he pointed out that they would to indicate to their banks that Regional jurisdictions such as Belize were AML/CFT compliant. The US regulators, he added, placed the matter squarely at the feet of sovereign US banks.

Honorable Dean Barrow – Prime Minister of Belize

“It is in this context of Belize, like so many others of us, being so fundamentally threatened, that I went to Washington two weeks ago for the express purpose of taking up this matter directly with the US Regulators. And, truth to tell, I received much tea and sympathy. The former, in the aftermath of the historic blizzard Washington had just experienced, was welcome. But it was not immediately clear that the latter, politesse apart, sufficiently advanced matters. The regulators all agreed that, absent a solution, our economies, our societies would go belly up; and conceded that could be in no one's interest, including theirs. The sticking point, though, was their proclaimed inability to oblige their private sector banks to engage or re-engage with ours. So the highest expression of that sympathy unguent I earlier mentioned, was no more than an undertaking by the US Regulators to say to their banks that our jurisdictions have done and are doing everything we can to be fully AML/CFT compliant; and that there was therefore no in principle objection to those banks doing business with us. But ultimately, the Regulators  insisted, it was strict a decision for those sovereign US banks to make. They would have to decide whether it was in their financial interest to deal with us, assume the full transactional weight of the resulting monitoring and reporting requirements, and run the risk of nevertheless paying huge fines if anything went wrong. Or, the US banks could simply continue to take the path of least resistance on the basis that our minuscule margins were not worth the trouble. It could not be supposed, of course, that any thought as to the catastrophe waiting to overtake our countries would enter into those banks' straightforward risk/reward calculus. Despite, then, verbal emollients and undoubtedly sincere protestations of concern, the limitations on action stated by the Regulators seemed, in our circumstances, to pose an uncuttable Gordian knot. Then, as though to assist my digestion of real politik101, a certain article appeared in the Financial Times just after my Washington meetings. It was a report on how developed country

banking regulators were actively assisting Iranian banks to re-enter the global financial system following the lifting of economic sanctions. So the barriers on regulatory intervention are apparently far less constraining for a big country than for a small one, even when that big country has been dubbed a pariah and demonized these last few years. To be fair, the .Authorities have been as good as their word and have now spoken to at least one potential correspondent bank that Belize has approached. The outcome of that is still pending."

Prime Minister Barrow also makes mention in his address that while he will respect and work diligently on all recommendations made by Committee of Ministers of Finance on Correspondent Banking, chaired by Antigua and Barbuda’s Prime Minister and Minister of Finance Hon. Gaston Browne that met earlier in the day yesterday, he believes CARICOM states can come together to help resolve this regional issue that has become a key item on the agenda of the two-day Summit between the heads of Government of CARICOM states.

Honorable Dean Barrow – Prime Minister of Belize

“Meantime our campaign, and I speak now of CARICOM, continues. And it cannot be other than relentless in the face of the possible correspondent banking Armageddon that we face. It is therefore a matter that looms extremely large on our Agenda over the next two days, and has already been the subject of a dedicated Finance Ministers meeting this morning. Without prejudice to any other recommendations that will come to us from that meeting, I signal now that Belize will offer the following for consideration. Surely our respective country banks can get together across jurisdictions and as a bloc approach target banks in the U.S. for pooled Correspondent  services. That way we should be able to leverage the critical mass needed to make our business volume worthwhile in terms of the risk/reward equation. The modalities and logistics will take some working out but clearly are not beyond our skills.”

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