Global regulatory reforms to counter money laundering and terrorist financing could make it harder for businesses to grow and create jobs in emerging markets, according to a global survey of banks released by the International Finance Corporation (IFC).
The private sector arm of the World Bank Group says that the reforms are causing international banks to cut back on the networks they maintain in developing countries.
Globally, 27 per cent of banks surveyed noted declines in their correspondent banking relationships, forcing them to reduce vital services.
The challenge is most critical in Sub-Saharan Africa where 35 per cent of banks reported a decline in these essential relationships, which the IFC says is a major risk for import-reliant countries.
The IFC is concerned according to its CEO, Philippe Le Houérou. “In emerging markets, the business environment has often been challenging for banks and their customers, but a decline in correspondent banking disrupts the financial connections that countries and businesses need.”
The survey, IFC Insights, De-Risking and Other Challenges in the Emerging Market Financial Sector, is the first extensive study of banks in emerging markets on the issue, and polled 300 banks active in 92 countries.
The institutions surveyed have a total of US$5 trillion in assets, roughly 10 per cent of all emerging-market banking assets. Some 78 per cent expected the costs of regulatory compliance to continue to rise, further pressuring their ability to serve their customers with essential services.
The survey, IFC Insights, De-Risking and Other Challenges in the Emerging Market Financial Sector, can be found here.
Categories: Trade Based Financial crimes News