The Financial Stability Board, the international body that monitors and makes recommendations about the global financial system, has identified the problem of correspondent banking facilities being withdrawn in one of its two new priority focus areas.
In a letter to G20 finance ministers and central bank governors the FSB outlines two new risks and vulnerabilities: risks stemming from market-based finance and conduct risks.
The focus on conduct risks looks at the ‘debanking’ impacts of tougher actions and large fines imposed by regulators on financial institutions found in breach of anti-money laundering (AML) and countering financing of terrorism (CFT) regulations.
The FSB notes that the response of several financial institutions has been to withdraw from correspondent banking facilities.
The letter from FSB’s chairman, Mark Carney, also recognises that the severance of correspondent banking ties by some major dollar clearing banks has had a substantial impact on the availability of international trade finance.
This reduces financial inclusion says the FSB, which has put forward what it describes as a full and challenging agenda to build a global financial system that is not just safe, simple and fair, but also diverse, trusted and open.
Categories: Trade Based Financial crimes News