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Jamaica and Caribbean facing global financial regulations

Damien-King-Jamaica-economist-1From South Florida Caribbean News

KINGSTON, Jamaica – Jamaica and those in the wider Caribbean are feeling the erosion of options to conduct international financial transactions due to tough global banking regulations.

Economist Dr. Damien King said the challenge to banking regulations goes well beyond restrictions on basic transactions such as remittances and wire transfers. Dr. King will be the main presenter at the Roundtable Discussion on Correspondent Banking, to be held at the Jamaica Pegasus Hotel, on January 19.

“Even someone who works as a receptionist at a company which imports raw materials will be affected by the diminished capacity of that company to access trade credit,” the Caribbean Policy Research Institute (CaPRI) Co-Executive Director said. “The implications are severe.”

The growing problem is the result of regulations implemented largely over the past decade intended to tackle money laundering and the financing of terrorism. These onerous regulations pose a threat to the wellbeing financial institutions in smaller economies and therefore to the whole economies that they underpin, The University of the West Indies lecturer explained.

“The increased regulatory burden on financial institutions has increased the compliance cost of carrying out transactions,” he said. “And, the response by the institutions is to end ‘correspondent banking relationships’ with other institutions for which the small volume of transactions does not justify the increased compliance cost.”

Smaller countries are the ones most seriously affected by this “de-risking” process as they generate a smaller volume of business, and are thus less likely to cover the increased cost of doing business with them, he stated. It is thus easier for large financial institutions to stop doing business, or threaten to stop doing business with their counterparts in places like Jamaica. “Therefore,” Dr. King pointed out, “Caribbean countries are among those facing the most severe consequences from this development.”

One direct example of the impact of this “de-risking” was the tripling of cambio closures in 2014, after some local banks, under threat from their overseas counterparts, closed the accounts of cambio operations. Without banking services, many cambios have ceased operating.

Correspondent banking relations can also impact the processing of transactions involving the provision of cash, cheques, and money orders, as well as credit and debit cards by one bank on behalf of another.

The impact of this development on the wider region will be addressed by the Former Prime Minister of Barbados, Owen Arthur, who will share his perspective as a senior regional government leader. Other regional views will come from Mr. Joseph Cox, Assistant Secretary General, CARICOM Secretariat; Dr. Toussant Boyce, Head of Corporate Integrity Division, Caribbean Development Bank, and Ms Joanna Charles, Chair, Caribbean Association of Banks.

Contributions will also be made by Dr. Christopher Tufton, Co-Executive Director  of CaPRI; and, Earl Jarrett, General Manager of Jamaica National Building Society.

Organised by CaPRI, the discussion will be attended by representatives of the Bank of Jamaica; Financial Services Commission; Jamaica Bankers Association; Jamaica Money Remitters Association; the Ministry of Industry, Investment and Commerce as well as financial institutions.

IMAGE: Damien King

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