The Pacific Islands Forum has intensified its initiatives to safeguard the economies of the region from the detrimental effects of losing Correspondent Banking Relationships (CBR). This essential financial conduit facilitates trade, remittances, and cross-border payments. As global banks, predominantly from the US and Europe, withdraw services, the region faces considerable risks. Denton Rarawa, former Central Bank of Solomon Islands Governor and now Senior Adviser for Economics at the Forum Secretariat, emphasized that this withdrawal poses a significant challenge to trade and financial stability.
The issue was escalated to the Forum Economic Ministers, prompting them to direct the creation of strategies to tackle the problem. A World Bank diagnostic study substantiated the severity of the situation and led to the establishment of a CBR Roadmap, which was endorsed in 2024. This roadmap includes developing a CBR resilience index and a derisking group to gather comprehensive data from various financial institutions in the region.
The heart of the Forum’s efforts is the Pacific Strengthening CBR Project, which includes countries such as Fiji, Kiribati, Marshall Islands, Samoa, Solomon Islands, Tuvalu, Tonga, and Vanuatu, with Papua New Guinea set to join. These nations have collectively raised approximately US$77 million through the World Bank’s International Development Association. The project is divided into two parts: an emergency facility for countries at risk of losing their CBRs and the development of a permanent Pacific Payment Mechanism.
For the emergency measures, international institutions, including two UK banks and a French bank, have submitted proposals to function as regional service providers. Concurrently, a feasibility study for a permanent Pacific Payment Mechanism is underway, with four firms shortlisted for further assessment.
Rarawa highlighted that the project aims to incorporate nations excluded from World Bank or IDA support, such as Cook Islands, Niue, Nauru, Palau, and French territories. A dedicated trust fund has been established, inviting contributions from donors to support these countries.
The project is currently operational, with a management team based at the Forum Secretariat in Suva, and recruitment efforts are underway for experts in CBR, anti-money laundering, payments, and country coordination.
The Pacific Payment Mechanism aspires to provide long-term security, enabling the region to maintain control over critical banking and financial transactions as global banks continue to scale back. This collaborative effort among Pacific nations underscores a proactive approach to tackling historical financial challenges, offering a hopeful outlook for the region’s engagement in the global financial system.
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