Small Middle Eastern banks are facing difficulties providing trade finance despite fulfilling international requirements on supervision and compliance according to a prominent Arab banker.
President of the Association of Banks in Lebanon and chairman of the World Union of Arab Bankers, Joseph Torbey, says the banks are experiencing particular difficulties dealing with US banks.
Cost of compliance
“Despite their adoption of international best practices, some of our Arab banks encounter difficulties in conducting correspondent banking relationships with the US banks,” Torbey told a conference in Beirut on banking regulatory and supervisory challenges.
Some banks and face a gradual decline in transactions – and sometimes even the termination of correspondent relationships – at times due to the assumed high cost of applying compliance procedures, he added.
Trade finance impact
Torbey warned that this policy could threaten the stability of some of these Arab banks and complicate trade finances services.
“That of course threatens the ability of small banks to provide trade finance services, thus putting an end to their business activities, and stops them from playing their role in providing essential services to their markets and economies, at a time where Arab banks need…(support for) their role in providing stability and economic growth in a region where turmoil is feared to spill over other countries in the world,” Torbey stressed.
The conference was organised by the Union of Arab Banks and the US Federal Reserve System in cooperation with the Banking Control Commission of Lebanon.
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