## What Happens When Banks Stop Doing Business With Some Countries

_IMF Blog, June 30, 2016_

## Source details

**Canonical URL:** [What Happens When Banks Stop Doing Business With Some Countries](https://www.imf.org/en/blogs/articles/2016/06/30/what-happens-when-banks-stop-doing-business-with-some-countries)

## Other formats

- [Markdown version](/en/blogs/articles/2016/06/30/what-happens-when-banks-stop-doing-business-with-some-countries/index.md)
- [Structured JSON version](/en/blogs/articles/2016/06/30/what-happens-when-banks-stop-doing-business-with-some-countries/index.json)
- [Bundle manifest](/en/blogs/articles/2016/06/30/what-happens-when-banks-stop-doing-business-with-some-countries/bundle-manifest.json)

## Bibliographic details
- Authors: iMFdirect
- Published: June 30, 2016

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### Overview and key consequences
- When global banks withdraw from banking relationships in particular countries, the global effect so far has been a gentle ripple, but if unaddressed, it may become more like a tsunami for the countries they leave.
- Without cross-border banking services, the flow of money, investment, trade, and foreign payments may stop, affecting:
  - remittances (difficulty for people abroad to send money home);
  - international charities (inability to send donations to fund local organizations);
  - exporters (unable to receive payments);
  - access to financial systems for local residents (possible exclusion from their own financial system).
- Example impact: Samoa is currently in danger of losing the ability to receive formal remittances, which amount to 20 percent of GDP.
- Regions and countries noted as hardest hit: countries in the Caribbean, small island states in the Pacific, and African countries such as Liberia and Angola.

### Drivers: why global banks withdraw
- Changes in regulations since the crisis.
- Unclear or overly complex regulations.
- The cost of doing business in certain countries, particularly if local rules are not up to international standards.
- Economic and trade sanctions.
- Rules to combat money laundering and terrorism financing.
- Tax transparency requirements.
- Banks balance the costs of doing business against risks to their bottom line and to their reputation.

### What countries and stakeholders can do
- The right policies can help fix the problem; both the public and private sector have a role to play.
- A coordinated approach is needed to better understand the phenomenon and identify country-specific approaches.
- The IMF can:
  - help bring countries together with the private sector to create an open dialogue among policymakers, banks, and other key stakeholders;
  - provide policy advice and technical assistance so countries can update or establish rules designed to keep their financial systems safe and up to international standards.
- The Financial Stability Board’s 2015 action plan is cited as a guide to priorities.

### Research and informational resources in the paper
- The paper examines what drives correspondent banking withdrawal and its consequences.
- It includes:
  - details about how particular countries are affected;
  - an explanation of correspondent banking relationships (global banks operating in other countries);
  - measures taken by different countries to respond to these developments.
- An interview with one of the paper’s co-authors is available via the linked audio resource.

### Context about the publication
- IMFBlog is a forum for the views of the International Monetary Fund (IMF) staff and officials on pressing economic and policy issues of the day.
- The IMF is described as an organization of 191 countries, working to foster global monetary cooperation and financial stability around the world.
- The views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board.

*Source: IMFBlog, June 30, 2016 — “What Happens When Banks Stop Doing Business With Some Countries”*

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## Content in this bundle

- **Correspondent banking report to G20 Summit**
  - [Correspondent banking report to G20 Summit (Markdown version)](/wp-content/uploads/Correspondent-banking-report-to-G20-Summit.pdf.md){rel="alternate" type="text/markdown"}
  - [Correspondent banking report to G20 Summit (PDF)](/wp-content/uploads/Correspondent-banking-report-to-G20-Summit.pdf){rel="external" type="application/pdf"}

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## References

- [exclude people from their own financial system](https://blogs.imf.org/2015/01/28/a-big-step-forward-for-bolstering-financial-inclusion/)
- [new paper](http://www.imf.org/external/pubs/cat/longres.aspx?sk=43680.0)
- [right policies](http://www.imf.org/external/pubs/ft/survey/so/SinglePodcastHighlight.aspx?podcastid=405)

_Source: https://www.imf.org/en/blogs/articles/2016/06/30/what-happens-when-banks-stop-doing-business-with-some-countries_