New international banks from both the United States of America and Europe have indicated their interest in offering their services to Guyana and could begin doing so as soon as the Bank of America officially pulls out from Guyana next month.
Bank of Guyana Governor, Dr Gobind Ganga told Journalists recently that banks in the U.S., as well as in Europe, could soon replace the Bank of America. He made the disclosure, after he confirmed earlier reports by a section of the media that the Bank of America would be severing ties with indigenous banks here before the end of August.
The Bank of America provides corresponding banking services for some financial institutions in the Region, including those in Guyana. According to Dr Ganga, the reasons for the pullout by the Bank of America are many, including de-risking and the need to concentrate more on larger customers owing to the high level of liquidity.
He said the US financial institution’s move would have no major implications for the country and particularly the indigenous banks.
About a month ago, the Bank of America sent a notice indicating that it was severing its correspondent relationship with “indigenous banks” in Guyana.
Dr Ganga explained that Guyana was in talks with several other banks that were willing to form new corresponding banking relationships with local financial institutions.
“We have had other foreign banks that have shown interest in providing the kind of corresponding banking relationship to fill the void that the Bank of America is causing… These are banks from Europe and North America,” Dr Ganga stated.
When asked how far along were the discussions with these banks, Dr Ganga said that the talks were ongoing and projected that the negotiations should come to fruition shortly.
“So, at this time, there is no cause for concern, because the banks do have corresponding relationships and they are seeking others. The Bank of Guyana is assisting these banks in finding new corresponding banking relationships,” Dr Ganga reassured.
This matter was on the agenda for discussion at the 37th Caricom Heads of Government Meeting held in Guyana from July 4 to 6, as Caribbean leaders looked to tackle the cut-off of regional indigenous banks, in a de-risking phenomenon – that poses dire consequences for the Region, including crushing impacts on the wider economy.
De-risking is when international banks withdraw from their relationships with indigenous banks because of fears of money laundering and questionable sources of funds which would cause the international banks to receive heavy fines from their regulators.
Caribbean banking institutions rely on such relationships to allow residents to conduct international financial transactions. However, since last year, the Region has been facing the impact of de-risking and the issue has been occupying the attention of regional policymakers, following signals by international banks that they were unwilling to continue carrying the business of regional banks.
De-risking in the Caribbean came into the limelight last year when the Belize Bank was cut off by the Bank of America and one of the two banks in Montserrat shared the same fate. Some of the areas that are affected because of de-risking are: transfer of remittances, cheque payments, international trade and the facilitation of credit card settlements for local clients.