Commonwealth warns members risk isolation from global financial system

The Commonwealth Secretariat has warned that many of its member countries faced being cut-off from the global financial system.
Commonwealth Deputy Secretary-General, Deodat Maharaj, gave the warning in a statement issued by Natricia Duncan, Communications Officer, Communication Division of the Commonwealth Secretariat.
The statement quoted Maharaj as regretting what he termed the growing problem of “de-risking” between international and local banks.
The Commonwealth official said, “de-risking” was the growing trend of international banks to curtail relationships with local banks in vulnerable economies.
“These international banks are now avoiding banking customers they deem low profit or high risk, in part because of new regulations that are designed to stop the financing of terrorism and fight corruption.”
Maharaj warned that if “de-risking” continued unabated, it might have negative implications on the economies of the Commonwealth member states.
“This is because, 31 of our 53 Commonwealth countries surveyed in the report described the loss of correspondent banking as one of their top concerns.
“This issue also topped the agenda at the Caribbean Community Heads of Government summit last month, because the implications for money transfers, trade and economic development are really worrying.
“We are already seeing a dramatic rise in the cost of sending money from country to country.
“These remittances are a lifeline for many families and member countries’ economies, but transaction fees have increased to 12 or 13 per cent of the amount transferred in many countries,” he said.
He said that the commonwealth was convening a meeting of banks, financial gurus and global regulators on Aug. 10, 2016 to explore its report on solutions to a problem that was threatening development in vulnerable economies.
The commonwealth official said the meeting would examine the solutions proposed by a report: “The Disconnecting from Global Finance Report.”
The report highlights the deteriorating number of Correspondent Banking Relationships – partnership arrangements between small local banks and major international banks.
Maharaj stressed that the Commonwealth Secretariat was committed to further research and ongoing dialogue and advocacy on the issue, including working more closely with the Financial Action Task Force (FATF).
“Our survey captures the voices of developing countries’ central banks, and their message is clear ‘we need urgent action on this’.
“Our panel discussion will give us the opportunity to define the commonwealth’s role in achieving that delicate balance between protecting our communities from terrorism and corruption.
“It will also ensure that developing economies continue to have access to the relationships and services they need to thrive,” he said.
The commonwealth report proposed measures such as best practice standards for money service businesses to boost their legitimacy and reputation.
It proposed measures to improve guidance and risk-tolerance standards for banks, balancing the need to prevent illegal activity with ensuring smaller institutions in developing countries are not excluded from the global financial system.
The report also proposed building capacity for financial regulators in developing countries and ensuring they are part of global conversations on the setting of these standards and policies. (NAN)