BELIZE CITY, Thurs. Apr. 23, 2015–Bank of America, the second largest bank in the US, has severed its correspondent banking relations with the Belize Bank, our largest commercial bank, which means that unless the Belize Bank can find another bank partner overseas, it will (as of April, 30) no longer be able to provide wire transfer services to its customers.
Roughly two weeks ago, Prime Minister Barrow used the platform of the Summit of the Americas held in Panama to highlight a potential financial crisis unfolding in the Caribbean, where, he said, US banks were de-risking by cutting off correspondent banking relations with banks in the region.
Without providing details, Barrow said that, “…even as we speak, there is a crisis in my own country and in several others in the Eastern Caribbean, where the big US banks are ‘de-risking’ by terminating their correspondent relationships with our domestic banks. Indeed, even our Central Banks are being cut off; and our financial and trade architecture cannot survive this phenomenon.”
At the time, there was no report of any bank in Belize being severed by their correspondent bank; however, Lyndon Guiseppi, chairman of the Belize Bank, has confirmed to Amandala that Bank of America has decided to sever its correspondent banking relations with the Belize Bank.
What is the reason for this decision?
“We have been advised that this event has been prompted by a change in business model. We are not in a position to comment on Bank of America’s decision to discontinue the relationship,” Guiseppi said.
He explained that the change is expected to have a temporary and limited effect on clients that use US dollar wiring services only.
“We are contacting clients who use this service regularly to provide them with alternative options,” he said.
“We are in advanced discussions with several US, European and Asian banks and are confident that we will establish a new correspondent banking relationship within a reasonable timeframe,” he added.
The Belize Bank chairman said that de-risking is a phenomenon that has a limited and contained effect in the domestic banking and International Financial Services sectors, which the Belize Bank International also offers.
“Most of our valued clients will experience no changes whatsoever in the level of service which they have come to expect from the Belize Bank over the years. For those limited customers who may be affected, we are working closely with them in collaboration with the Central Bank to provide them with alternative solutions. Clients conducting regular banking business such as deposits, withdrawals, credit card payments or loan applications will not be affected whatsoever. For the vast majority of our clients it will be business as usual,” Guiseppi said.
Caribbean columnist Sir Ronald Saunders, a senior fellow at London University and a consultant on international affairs, had penned his thoughts in a column appearing in Caribbean papers around the same time that Barrow made his statements in Panama. Speaking of the much celebrated US-CARICOM summit held in Jamaica, Saunders noted that, “The Caribbean region has been categorized as a ‘high risk area’ for financial services and this is resulting in indigenous and offshore banks losing vital correspondent-bank relationships in the US.”
Saunders said that many of the US banks are unwilling to take risks with banks located in a ‘high risk’ area, particularly when the earnings from the relationships are small.
He added, though, that “…for Caribbean banks, the relationship is vital to transacting international business. If they lose their relations with correspondent-banks, they will be forced to close their doors with consequential effects on employment. The only banks that would be left standing are subsidiaries of established foreign-owned banks that have a relationship with their headquarters’ institutions.”
Belize is one of the countries listed by the US as a jurisdiction of primary concern for money laundering—a listing which prompted the Prime Minister’s recent comments at the Summit of the Americas.