International Compliance Association Fellow and Former Vice President of the Bahamas Association of Compliance Officers (BACO) Emmanuel Komolafe has asserted that The Bahamas’ financial sector
should pay more attention to the “dire” consequences of losing correspondent banking relationships.
“The importance of correspondent banking relationships to financial institutions within the Bahamian financial services industry cannot be emphasized enough,” said Komolafe. “As an international financial center (IFC) and premier tourist destination with an international clientele of individuals and companies across the globe, it is vital that we keep a watchful eye on developments incorrespondent banking,” he said.
Komolafe, a member of the Institute of Risk Management and an approved trainer in ISO 31000 Risk Management Standard spoke to Guardian Business to raise awareness about the matter. “An important part of this discussion that is often missed or ignored is the dire consequence of the withdrawal and contraction of correspondent banking,” said Komolafe. He explained that financial regulators such as the World Bank are paying close attention to the amount of Caribbean banks that are losing their correspondent banking relationships. “The potential disruption and dire consequences of the restriction and termination of correspondent banking relationships in recent times seem to justify why the World Bank/IFC, Basel Committee on Banking Supervision, FATF and Financial Stability Board have taken a keen interest on the matter,” said Komolafe.
He referenced the recent World Bank survey on derisking and withdrawal from correspondent banking, which showed that 69 percent of banks surveyed in the Caribbean reported a decline in correspondent banking relationships with the U.S. being home to the highest number of financial institutions terminating such relationships.
The report also revealed that small and medium domestic banks, small and medium exporters and money transfer operators have been impacted by the decline in correspondent banking relationships, according to Komolafe. “This becomes relevant to the discussion as it relates to The Bahamas because a number of our local banks are likely to fall into the category of small and medium banks in a global context… This reality was confirmed following the Central Bank of The Bahamas’ survey on the impact of derisking measures by large internationally active banks,” said Komolafe.
“The results of that survey revealed that derisking by global correspondent banks has mainly impacted local commercial and standalone international banks,” he added. Komolafe is also a former policy officer in the Bank Supervision Department of the Central Bank of The Bahamas, who was involved in the 2006 CFATF Mutual Evaluation.