## IMF Executive Board Discusses Recent Trends in Correspondent Banking Relationships _IMF News, April 21, 2017_ ## Source details **Canonical URL:** [IMF Executive Board Discusses Recent Trends in Correspondent Banking Relationships](https://www.imf.org/en/news/articles/2017/04/21/pr17137-imf-executive-board-discusses-recent-trends-in-correspondent-banking-relationships) ## Other formats - [Markdown version](/en/news/articles/2017/04/21/pr17137-imf-executive-board-discusses-recent-trends-in-correspondent-banking-relationships/index.md) - [Structured JSON version](/en/news/articles/2017/04/21/pr17137-imf-executive-board-discusses-recent-trends-in-correspondent-banking-relationships/index.json) - [Bundle manifest](/en/news/articles/2017/04/21/pr17137-imf-executive-board-discusses-recent-trends-in-correspondent-banking-relationships/bundle-manifest.json) ## Bibliographic details - Published: April 21, 2017 --- ### Overview - 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: - Further considerations on recent trends in, and consequences of, CBR withdrawal with emphasis on remittances. - Assessment and proposals for responses to CBR pressures. - Seek endorsement of Executive Board on staff engagement with the membership going forward. ### Executive Board Assessment — key findings - 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: - Despite some withdrawal in CBRs, cross border payments have generally remained stable, and economic activity has been largely unaffected. - 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. - 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. - Further monitoring and analysis, with better data, is needed to more fully understand potential impacts on financial sector stability, economic growth, and development. ### Drivers of CBR withdrawal - 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: - More rigorous prudential requirements. - Economic and trade sanctions. - Anti money laundering and combating the financing of terrorism (AML/CFT) measures. - Tax transparency standards. - Directors welcomed efforts by standards setters and regulators to provide greater clarity on international standards and regulatory expectations and encouraged continued efforts where necessary. ### Policy responses, practical measures, and cautions - 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: - Enhance respondent banks’ capacity to manage risks. - Improve communication between correspondent and respondent banks. - Strengthen and effectively implement regulatory and supervisory frameworks in line with international standards, particularly for AML/CFT. - Remove impediments to information sharing. - Other initiatives to consider: - Increase economies of scale and lower compliance costs. - Address correspondent banks’ risk assessment concerns. - Provide alternative arrangements. - Note: these measures tend to have a more limited impact and would still need to comply with AML/CFT standards. - Extreme scenario and public sector options: - 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. - Several Directors urged caution regarding public sector intervention given uncertainties over effectiveness or feasibility and the potential for moral hazard. ### Fund role, collaboration, and recommended actions - Directors welcomed staff efforts in: - Analyzing data, risks, and policy responses related to CBR withdrawal in surveillance. - Assessing implementation of standards. - Building capacity to strengthen regulatory and supervisory frameworks. - Facilitating international dialogue. - Collaborating with Financial Stability Board, Financial Action Task Force, World Bank, G20, and other relevant stakeholders to support efforts while avoiding work duplication. - Directors supported a continued active role for the Fund to: - Monitor risks and advise membership on policies to tackle adverse impacts from CBR pressures. - Endorsed the multipronged approach outlined in the staff paper, including surveillance and data collection, FSAP assessments, and capacity development. - Tailor capacity development assistance to specific circumstances and deliver at national and regional levels to maximize limited available resources and deepen impact. - Specific initiatives noted: - Directors welcomed the recently launched Caribbean Initiative to develop regional responses in collaboration with other technical assistance providers including regional development banks. - Contingency for severe cases: - Directors noted that a severe loss of CBRs stemming from policymaking challenges across a range of areas could require deeper Fund engagement. - 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. *Source: IMF Executive Board Discusses Recent Trends in Correspondent Banking Relationships, April 21, 2017.* --- ## References - [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) _Source: https://www.imf.org/en/news/articles/2017/04/21/pr17137-imf-executive-board-discusses-recent-trends-in-correspondent-banking-relationships_