The withdrawal of Correspondent Banking Relationships (CBR) in the Pacific is a widely recognized global issue impacting many emerging markets and developing economies, particularly the Forum Island countries.
Pacific Islands Forum (PIF) chairperson Mark Brown highlighted this issue during his address at the inaugural Pacific Banking Forum in Brisbane, Australia, last week. He criticized the double standards imposed on Pacific local banks.
Brown noted that many local banks in the Pacific had their CBRs terminated due to “de-risking” by correspondent banks. This termination has hindered local banks’ access to cross-border payment services for trade and investments, increased remittance costs among Pacific nations, and affected the availability of development aid and global financial systems.
“The reduction of correspondent banking relationships in the Pacific hampers local banks’ ability to connect with international financial institutions and access cross-border payment services, thus affecting the financial systems at a sovereign level and restricting government-owned banks’ capabilities in their own regions,” Brown said.
He added that this situation adversely affects Pacific countries’ participation in global supply chains, calling it a case of regional financial exclusion rather than financial inclusion.
Australian Treasurer Jim Chalmers emphasized Australia’s commitment to ensuring all Pacific countries have access to safe, secure, and stable banking. “You can bank on Australia to work with you to keep the Pacific connected to the global financial system,” Chalmers said.
PIF Secretary General Baron Waqa mentioned that they have been collaborating with the World Bank on the ‘Pacific Strengthening Correspondent Banking Relationships’ project to maintain continuous access to correspondent banking services in the region.
The Forum was organized by Australia and the US in partnership with the PIF. The outcomes of the event will be presented at the upcoming Forum Economic Ministers meeting in Suva this month. The event was attended by Pacific Heads of State, treasury officials, financial stakeholders from central banks, global financial institutions, regional and local banks, and international development partners.