Central Bank plays down loss of another correspondent banking relationship

Posted July 1st 2016, 6:29 p.m CST

By Aaron Humes: Belize has lost another correspondent banking relationships (CBR), between the Central Bank and Citibank of the United States.

But according to Central Bank Governor Glenford Ysaguirre, Belize’s financial stability continues unaffected and, as with the previous departures, Citibank cited as its reason that Belize does not do sufficient business that would allow the larger bank to keep it as a client, due to the increased diligence in reporting transactions required by U.S. regulators.

Citibank issued three months’ notice which terminated recently.

The information that two CBR’s had been lost was first reported in the International Monetary Fund’s (IMF) report: “The Withdrawal of Correspondent Banking Relationships: A Case for Policy Action”, released this week, which states that only two of the country’s nine domestic and international banks (representing 27 percent of the banking system’s assets at the end of March 2016) have managed to maintain CBRs with full banking services.

Citibank follows Commerzbank, which left Belize as of last year, while Bank of America continues to do business with the Central Bank according to Governor Ysaguirre, HSBC, which has been cited in other local media as another bank leaving a relationship with the Central Bank, had in fact done so years ago. Bank of America did sever ties with several local banks here for the same reasons.

The IMF’s report states that other banks have found alternative relationships with non-bank providers of payment services or through nesting arrangements.

While the overall size of deposits and lending in the country has not been affected, international banks’ deposits have decreased significantly, with this decrease partly compensated by an increase in deposits in domestic banks. The report adds that there has also been some displacement of customers toward the two banks that still have CBRs with full banking services.

Ysaguirre also told us that despite persistent beliefs otherwise, no bank withdrawing from a correspondent banking relationship with Belize has indicated that it has to do with corruption or related issues.

The IMF, however, proposes stronger Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) regulations; and a review of banks’ capital buffers with weaker banks being made to raise more capital. Because local and international banks play important roles in mobilizing savings for domestic investment and facilitating external trade, losing CBR’s may not be reversed and affect banks’ balance sheets, leading to higher financial transaction costs and a weakened economy, including inability to repay debt and a reduction in banks’ ability to lend.

Advertise with the mоѕt vіѕіtеd nеwѕ ѕіtе іn Belize ~ We offer fully customizable and flexible digital marketing packages. Your content is delivered instantly to thousands of users in Belize and abroad! Contact us at mаrkеtіng@brеаkіngbеlіzеnеwѕ.соm or call us at 501-612-0315.

© 2016, BreakingBelizeNews.com. Content is copyrighted and requires written permission for reprinting in online or print media. Theft of content without permission/payment is punishable by law.