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CDB to strengthen transparency with US$250,000

Mar 19, 2017 News

The Board of Directors of the Caribbean Development Bank (CDB) has approved funding of US$250,000 to strengthen financial transparency, and assist in preventing the pulling out of Correspondent Banking Relationships (CBRs) from the Region.
This would come less than one month after Heads of the Government of the Caribbean Community (CARICOM) participated in the 28th Inter-Sessional Meeting of the Conference of Heads of Government of CARICOM. The pulling out of CBRs was high on the agenda.
During that meeting, also, Heads of Government under the Chairmanship of Guyana’s President, David Granger, considered the Strategy and Action Plan submitted by the Committee of Central Bank Governors.
The Committee of Ministers of Finance with responsibility for Correspondent Financing was tasked with assuming the oversight of the plan’s roll-out.
Correspondent banking is a bilateral arrangement, often involving a mutual cross-border relationship in multiple currencies. A correspondent banking arrangement involves one bank (the correspondent) providing a deposit account or other liability accounts, and related services, to another bank (the respondent), often including its affiliates.
The arrangement requires the exchange of messages to settle transactions by crediting and debiting those accounts. Correspondent banking enables the provision of domestic and cross-border payments.
These relationships facilitate a range of transactions and services, including the execution of third-party payments, trade finance, the banks’ own cash clearing, liquidity management and short-term borrowing or investment needs in a particular currency.
In the Guyana context, Bank of America, the largest correspondent bank in the United States of America dealing with local banks, severed ties with several commercial banks last August.
Based on previous reports, additional problems have surfaced, with commercial banks and citizens both coming out with allegations of a foreign currency shortage. The nation has also seen rapid fluctuations in the exchange rates, specifically as it relates to the United States Dollar.
According to the CARICOM website, the CDB-funded project will be a pilot initiative, and will include The Bahamas, Barbados, Belize, Jamaica, and members of the Organisation of Eastern Caribbean States.
The project has three components: strengthening the implementation of, and compliance with, international financial integrity standards by governments in the Region, including updating laws and regulations as required; increasing the technical capacity of banks and credit unions in the Caribbean to conduct customer due diligence, and adopt anti-money laundering best practices; and improving public-private sector coordination with regulators to more effectively address de-risking and develop a mechanism for on-going dialogue between this group and external regulators and foreign banks.
The project will be implemented over three years in partnership with the Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank Group. MIF will also manage the project. Components two and three will be executed by the Office of the Secretary of the Association of Supervisors of Banks of the Americas.

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