Financial Stability Board chronicles the demise of correspondent banking
The Financial Stability Board says half of the 91 regulators that took part in a World Bank survey have seen a decline over the past three years
A report from the Financial Stability Board, an arm of the Bank for International Settlements, said half of the 91 financial regulators that took part in a World Bank survey have seen a decline in correspondent banking over the past three years.
Correspondent banking is the business that banks do with one another and is an essential link in cross-border payments, cheque clearing and remittance.
Among the 20 large banks surveyed, two-thirds reported a reduction in business with other banks ranging from a fall of 5 per cent to half at one bank between 2012 and 2015.
A barrage of regulation aimed at stemming money laundering and terrorist financing has led to billion-dollar fines for major banks since 2012, most notably HSBC's US$1.9 billion fine in 2012 and BNP Paribas's record-setting US$9 billion fine last year. Penalties like those have driven a wholesale retreat from some countries deemed high-risk, with many large banks culling the accounts of thousands of clients across entire markets.
Standard Chartered last year surprised thousands of small business customers in the United Arab Emirates when it sent letters notifying them that their accounts would be shuttered within a month.
In September, Deutsche Bank announced that it would close most of its operations in Russia as part of a bigger drive to reduce complexity, costs and risk.
