Working Papers

Working Papers

De-Risking and its Impact: The Caribbean Perspective

CARICOM Central Bank Governors Technical Working Group on De-Risking
Allan Wright

The Caribbean Project on De-Risking involves the compilation of information to document and analyze the impact of de-risking strategies on Caribbean financial systems, and to prepare a position that will inform a Caribbean perspective on this matter. Our efforts serve to complement reports by the World Bank (WB), International Monetary Fund (IMF) and the Financial Stability Board (FSB). So far we have compiled surveyed information from the jurisdictions of Barbados, Belize, the Cayman Islands, The Bahamas, Turks and Caicos, the Eastern Caribbean Currency Union, Guyana, Haiti, Jamaica and Trinidad and Tobago and complemented this information with insights gained from discussions with local regulators, central bankers and sector specialists.

The goal of our research is to facilitate discussions among all stakeholders, including global banks, their regulators and law enforcement representatives in globally systemic countries. Our research recognizes that de-risking decisions are taken by private banks, and that their decisions are based on a complex of factors, including the cost of compliance with laws and regulations, and is an unintended consequence of decisions taken by the official sector in globally systemic countries.

Our paper includes the impact of de-risking throughout the Caribbean; this is outlined in section II, and preceding this is a background section on what exactly is correspondent banking and de-risking, along with what are the primary reasons for international banks applying a de-risking strategy within the Caribbean. Given the release of the Committee on Payments and Market Infrastructures (CPMI) Consultative Report - Correspondent Banking, October 2015 report, we briefly examine the technical measures proposed as recommendations in section III and conclude by discussing what are the next steps and the way forward.

The Caribbean Centre for Money and Finance
Trinidad and Tobago