The Financial Stability Board (FSB) published a progress report on the implementation of its plan to address the decline in correspondent banking relationships.
The report cites the decline in the number of correspondent banking relationships over the years. The number of active correspondent banks declined by 3.4 percent in 2018. Since 2011, the number has declined by 19.3 percent. This is partially because concentration increased, as fewer correspondent banks are handling payments.
There have been several industry initiatives to support capacity building, including guidance developed by the Wolfsberg Group to implement their Correspondent Banking Due Diligence Questionnaire.
Also, the technical measures recommended by The Committee on Payments and Market and Infrastructures (CPMI) to improve the efficiency of due diligence procedures and reduce compliance costs are now available for use. However, continued focus by industry and the official sector is still required, the report says. If the situation deteriorates further, the FSB and other international bodies would consider the possibility of future actions.
The FSB also published a report on implementing its recommendations on remittance service providers’ access to banking services. It says the reduction in correspondent banking relationships has had a significant impact on remittance service providers’ ability to access banking services in some countries.
The report assesses the implementation of the FSB’s March 2018 recommendations to address these problems. It concludes that while positive steps have been taken in several areas, further work by national authorities, international organizations, remittance firms and banks is needed. The remittance report will be delivered to the G20 Finance Ministers and Central Bank Governors meeting in Japan on June 8-9.
“The data shows that concentration in correspondent banking is increasing further, with countries and banks relying on fewer correspondent banks. We will continue to monitor the data and to coordinate the effective implementation of the agreed action plan to clarify regulatory expectations, provide technical assistance, and make due diligence more effective. We stand ready to adopt further measures as necessary, as we did last year for remittance firms’ access to banking services, to preserve the smooth processing of cross-border payments,” said Alexander Karrer, chair of the FSB’s Correspondent Banking Coordination Group and Deputy State Secretary at the Swiss Federal Department of Finance.
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