May 29, 2019

FSB published two reports on its work to assess and address the decline in correspondent banking relationships. One report describes progress toward implementation of the FSB action plan to assess and address the decline in correspondent banking relationships. The other report is focused on progress in implementing the FSB recommendations on remittance service providers’ access to banking services.

Progress report on implementation of FSB action plan. The report shows that decline in the number of correspondent banking relationships remains a source of concern for the international community, as the number of active correspondent banks declined by 3.4% in 2018, bringing the cumulative decline since 2011 to 19.3%. Concentration in this sub-sector increased as fewer correspondent banks are handling payments. Access to correspondent banking relationships remains a critical issue in some regions and jurisdictions. On May 27, 2019, CPMI published a full set of data on the latest developments on the number of correspondent banking relationships. With international components of the FSB coordinated action plan largely in place, attention has turned to the monitoring of implementation, which revealed that

  • There is a growing evidence of the concrete implementation of regulatory clarifications by national authorities, following the guidance provided by the Financial Action Task Force and BCBS.
  • To support domestic capacity building in jurisdictions that are home to affected respondent banks, official sector technical assistance still requires ongoing coordination. Industry initiatives are gaining traction in that field, especially the additional guidance developed by the Wolfsberg Group to implement their Correspondent Banking Due Diligence Questionnaire.
  • The technical measures recommended by CPMI to improve the efficiency of due diligence procedures and reduce compliance costs are now generally available for use, but their concrete implementation still requires continued focus by industry and the official sector, such as the use of the Legal Entity Identifier in payment messages and practical steps to support effective information sharing.

Monitoring of the FSB recommendations on remittance service providers’ access to banking services. The reduction in correspondent banking relationships has had a significant impact on remittance service providers’ ability to access banking services, particularly acute in the developing countries where remittance flows are a key source of funds for households. The monitoring report assesses implementation of FSB’s March 2018 recommendations to address problems that remittance service providers have in accessing banking services. The report finds that, while positive steps have been taken in a number of areas, further work by national authorities, international organizations, remittance firms, and banks is needed. Jurisdictions have adopted or implemented a number of good practices and procedures to improve their supervisory frameworks for remittance firms and enhance coordination. Authorities are responding to and accommodating innovative technology approaches in their regulatory frameworks. Significant technical assistance is being directed at the issue both at a global level and directly to affected jurisdictions. Dialog between remittance firms, banks, and authorities responsible for supervision of the remittance sector has been useful, but has not led to tangible next steps. To make further progress, it is important to have a common understanding of issues facing remittance firms in their access to banking services and banks’ expectations concerning remittance firms’ anti-money laundering compliance. The remittance report will be delivered to the G20 Finance Ministers and Central Bank Governors meeting in Fukuoka on June 08–09.

 

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Keywords: International, Banking, Correspondent Banking, Progress Report, Monitoring Report, Action Plan, CPMI, FSB

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