International Business and Financial Services Conference
Wednesday, March 16th, 2016
Mr Andrew Alleyne, President of BIBA
It gives me great pleasure to join Dr. Worrell and the Hon. Donville Inniss in welcoming you to this year’s International Business and Financial Services Conference.
Each year, BIBA is pleased to support the Central Bank of Barbados in its efforts to bring together representatives from both the public and private sectors that are key to the success of this sector, to dialogue and share views on how to further advance our collective goals.
The theme for this year’s conference Reflecting on the Past: Planning for the Future, is a timely topic in light of the ongoing celebrations of 50 years of Independence. It is important for us to reflect on the history of the international business and financial services sector and its immense economic and social contribution to the Barbados economy. We will hear more about the sector’s contribution from Mr. Downes later.
It is this sector’s level of importance that should drive each and every one of us to continuously examine the business environment, highlight the challenges faced, and work together to find workable solutions.
The issue of banks “de-risking” was raised at last year’s conference and has since developed into a major concern for the Caribbean region. The origin of this problem lies within the enacting of new international regulations intended to address money laundering and the financing of terrorism. It also requires international correspondent banks to be satisfied that their “front line” banks are also undertaking the same level of due diligence and that they know their customers.
As recently as last week, the United States Comptroller of the Currency (Thomas Curry) announced that OCC may create new guidance to deal with de-risking. In his March 7th speech he said the Office of the Comptroller of the Currency is collecting data on banks de-risking decision-making processes. He said “Our goal is to identify current practices and possible gaps in existing policies and procedures for conducting periodic client risk evaluations and for making account termination decisions”. While it is too early to speculate if the OCC’s involvement will improve the decision making process, the Agency might require banks to conduct enhanced due diligence tests that require input from Senior Management before breaking ties with a foreign correspondent.
To further add fuel to the fire, the Caribbean has been unfairly branded as “high risk” and as a result some of these banks have started to withdraw their correspondent relations to the Caribbean. Look at Belize! The larger banks have already severed relationships with banks there, the first being the Belize Bank, and subsequently other indigenous banks. This forced a closure of several indigenous banks leaving many businesses and individuals without a means to receive or make international payments. Western Union has withdrawn its services in the Bahamas, Cayman and the Turks and Caicos. As a result Fidelity Bank has closed its Western Union accounts in the Bahamas and the Cayman Islands.
Closer to home an Antigua bank, CUB recently lost its correspondent banking support when a US correspondent bank terminated its relationship. In Jamaica, Barclays has advised the Jamaica National Building Society that it will be terminating its correspondent relationship on April 1st. In some instances the decision to withdraw correspondent banking services is based on low business volumes or low revenues. However, the focus on the Caribbean is not based on an objective assessment of the region’s risk, but reflects a lack of understanding of the region by risk managers who are largely unfamiliar with the Caribbean’s high regulatory and compliance standards.
Last December, BIBA’s First Vice President, Gregory McConnie, and I attended a roundtable discussion hosted by the Financial Stability Board, the World Bank, the International Monetary Fund and the Central Bank of Barbados. The discussion focused on global initiatives to lower the risks associated with correspondent banking. These included the work international standard setters are undertaking to better measure, understand and address the challenges presented by the reduction of these important banking services.
Another issue of concern to all of us is business facilitation. Unlike the withdrawal of correspondent banking services, this is an issue that is within our power to fix. There is now a greater need to improve our country’s ranking in the World Bank’s “Ease of Doing Business” index, especially given that the international business sector is losing some of its competitiveness due to new and expanding tax transparency laws and regulations in North America and Europe. On a more positive note, the TMF Complexity Index recently ranked Barbados 7th, in terms of “Ease of doing business” a significant improvement from the precious year when we were ranked 22nd. Within the Americas, Barbados was ranked an impressive 4th as a location to conduct business.
Ease of doing business is critical for the sector to grow. We must continue to find ways of improving efficiency within our public and private sectors in order to enhance the attractiveness of Barbados as a jurisdiction from which to conduct business. It is hoped that through this conference, we can find a workable plan of action.
Thank you for your attention.