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CORRESPONDENT BANKING: IS IT
Almost three years later, this trend continues, with an estimated 25 per cent cumulative reduction in correspondent relationships from 2009-17.
Despite a seemingly dark picture, I believe there is light emerging, as some banks are starting to build relationships in markets where they previously scaled back.
But first, what has been driving de-risking?
ASSESSING THE SYMPTOMS
De-risking by correspondent banks has been studied, measured, analysed and reduced to three primary drivers: strategy, cost and risk.
Strategy
Following the 2007 financial crisis and subsequent capital constraints, businesses needed to make some hard decisions about their future investments in products, markets and client relationships. This was a sign of good discipline and sound business management.
Unfortunately, this had the consequence of some firms deciding
TIME FOR
RE-RISKING?
We hear a lot about de- risking, but some banks are now starting to “re-risk”. Tod Burwell, President
and CEO of the Bankers Association for Finance and Trade (BAFT), explains what has been going on
A
World Bank report published in November 2015 established that 75 per cent of large international
banks acknowledged a decline in correspondent banking relationships.
The same month, the Financial Stability Board (FSB) outlined a four-point plan to curb the decline, which affected mostly lesser developed economies and left some virtually excluded from the global financial system.