{
  "title": "IMF Executive Board Discusses Recent Trends in Correspondent Banking Relationships",
  "publication": "IMF News, April 21, 2017",
  "sourceUrl": "https://www.imf.org/en/news/articles/2017/04/21/pr17137-imf-executive-board-discusses-recent-trends-in-correspondent-banking-relationships",
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  "summary": "Press Release No. 17/137",
  "publishDate": "2017-04-21",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Press Release No. 17/137\n- Date: April 21, 2017\n- On April 12, 2017, the Executive Board discussed the staff report: “Recent Trends in Correspondent Banking Relationships-Further Considerations.”\n- The staff report follows up to a Staff Discussion Note on the withdrawal of correspondent banking relationships (CBRs) issued in June 2016.\n- Report focus:\n  - Further considerations on recent trends in, and consequences of, CBR withdrawal with emphasis on remittances.\n  - Assessment and proposals for responses to CBR pressures.\n  - Seek endorsement of Executive Board on staff engagement with the membership going forward."
    },
    {
      "heading": "Executive Board Assessment — key findings",
      "content": "- Directors welcomed discussion of recent trends and consequences of CBR withdrawal and emphasized the importance of CBRs in facilitating global trade and remittances, and supporting economic growth and development.\n- General observations:\n  - Despite some withdrawal in CBRs, cross border payments have generally remained stable, and economic activity has been largely unaffected.\n  - In a limited number of countries, particularly small and fragile states, there has been a concentration of cross border flows through fewer CBRs or alternative arrangements.\n  - Concentration could accentuate financial fragilities, pose financial stability risks, and undermine long run growth, development, and financial inclusion prospects by increasing costs of financial services.\n  - Further monitoring and analysis, with better data, is needed to more fully understand potential impacts on financial sector stability, economic growth, and development."
    },
    {
      "heading": "Drivers of CBR withdrawal",
      "content": "- Drivers are multiple, inter related, and vary case by case.\n- Core driver: individual business decisions of correspondent banks based on assessment of profitability and risks of CBRs, including concerns with respondent banks’ capacity to effectively manage risks.\n- Contributing regulatory and enforcement factors:\n  - More rigorous prudential requirements.\n  - Economic and trade sanctions.\n  - Anti money laundering and combating the financing of terrorism (AML/CFT) measures.\n  - Tax transparency standards.\n- Directors welcomed efforts by standards setters and regulators to provide greater clarity on international standards and regulatory expectations and encouraged continued efforts where necessary."
    },
    {
      "heading": "Policy responses, practical measures, and cautions",
      "content": "- Overarching view: no one size fits all solution; responses need to be tailored, prioritized, and sequenced by country or region and will take time.\n- First “port of call” measures for countries concerned with CBR pressures:\n  - Enhance respondent banks’ capacity to manage risks.\n  - Improve communication between correspondent and respondent banks.\n  - Strengthen and effectively implement regulatory and supervisory frameworks in line with international standards, particularly for AML/CFT.\n  - Remove impediments to information sharing.\n- Other initiatives to consider:\n  - Increase economies of scale and lower compliance costs.\n  - Address correspondent banks’ risk assessment concerns.\n  - Provide alternative arrangements.\n  - Note: these measures tend to have a more limited impact and would still need to comply with AML/CFT standards.\n- Extreme scenario and public sector options:\n  - In the extreme event of a complete loss of CBRs by all commercial banks in a country, the public sector could consider as a last resort temporary mechanisms, including public backed vehicles, to provide payment clearing services.\n  - Several Directors urged caution regarding public sector intervention given uncertainties over effectiveness or feasibility and the potential for moral hazard."
    },
    {
      "heading": "Fund role, collaboration, and recommended actions",
      "content": "- Directors welcomed staff efforts in:\n  - Analyzing data, risks, and policy responses related to CBR withdrawal in surveillance.\n  - Assessing implementation of standards.\n  - Building capacity to strengthen regulatory and supervisory frameworks.\n  - Facilitating international dialogue.\n  - Collaborating with Financial Stability Board, Financial Action Task Force, World Bank, G20, and other relevant stakeholders to support efforts while avoiding work duplication.\n- Directors supported a continued active role for the Fund to:\n  - Monitor risks and advise membership on policies to tackle adverse impacts from CBR pressures.\n  - Endorsed the multipronged approach outlined in the staff paper, including surveillance and data collection, FSAP assessments, and capacity development.\n  - Tailor capacity development assistance to specific circumstances and deliver at national and regional levels to maximize limited available resources and deepen impact.\n- Specific initiatives noted:\n  - Directors welcomed the recently launched Caribbean Initiative to develop regional responses in collaboration with other technical assistance providers including regional development banks.\n- Contingency for severe cases:\n  - Directors noted that a severe loss of CBRs stemming from policymaking challenges across a range of areas could require deeper Fund engagement.\n  - In such cases involving balance of payments difficulties, a Fund supported program could be considered to help restore external and domestic imbalances and would be expected to take place within existing lending frameworks.\n\nSource: IMF Executive Board Discusses Recent Trends in Correspondent Banking Relationships, April 21, 2017.\n\n---\n\n\n References\n\n- Recent Trends in Correspondent Banking Relationships—Further Considerations\n- IMF Surveillance -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/04/21/pr17137-imf-executive-board-discusses-recent-trends-in-correspondent-banking-relationships"
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    "Published: April 21, 2017",
    "Press Release No. 17/137",
    "Date: April 21, 2017",
    "On April 12, 2017, the Executive Board discussed the staff report: “Recent Trends in Correspondent Banking Relationships-Further Considerations.”",
    "The staff report follows up to a Staff Discussion Note on the withdrawal of correspondent banking relationships (CBRs) issued in June 2016.",
    "Report focus:",
    "Directors welcomed discussion of recent trends and consequences of CBR withdrawal and emphasized the importance of CBRs in facilitating global trade and remittances, and supporting economic growth and development.",
    "General observations:",
    "Drivers are multiple, inter related, and vary case by case.",
    "Core driver: individual business decisions of correspondent banks based on assessment of profitability and risks of CBRs, including concerns with respondent banks’ capacity to effectively manage risks.",
    "Contributing regulatory and enforcement factors:",
    "Directors welcomed efforts by standards setters and regulators to provide greater clarity on international standards and regulatory expectations and encouraged continued efforts where necessary.",
    "Overarching view: no one size fits all solution; responses need to be tailored, prioritized, and sequenced by country or region and will take time.",
    "First “port of call” measures for countries concerned with CBR pressures:",
    "Other initiatives to consider:",
    "Extreme scenario and public sector options:",
    "Directors welcomed staff efforts in:",
    "Directors supported a continued active role for the Fund to:",
    "Specific initiatives noted:",
    "Contingency for severe cases:",
    "[Recent Trends in Correspondent Banking Relationships—Further Considerations](https://www.imf.org/en/publications/policy-papers/issues/2017/04/21/recent-trends-in-correspondent-banking-relationships-further-considerations)",
    "[IMF Surveillance -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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