Correspondent banking

Against the background of strengthened supervision regarding duties of due diligence, an increasing number of banks are choosing to dismantle their network of correspondent relationships with foreign banks.

As correspondent banking is one of the cornerstones of the global money transfer system, this trend could have an adverse effect on the stability of the financial system. Furthermore, restricted access to the international payment system could divert some capital flows to illegal channels. The Financial Stability Board working group lead by Switzerland, which was given the responsibility of coordinating international work in this area, has been making significant progress since 2016. In particular, the working group conducted and published a study in 2017 which is unique worldwide and investigated the factors and consequences of de-risking in correspondent banking. Since then, this data has been updated annually by the Committee on Payments and Market Infrastructures (CPMI).

The working group concentrates on various aspects as de-risking factors are closely linked with each other. The profitability of such business relationships is particularly dependent, for instance, on the nature of due diligence duties and risk management. Other works cover the clarification of regulatory expectations, the coordination of technical support and the development of specialist instruments to reduce operational costs, etc. These are carried out in close cooperation with the private sector. The money transfer companies which are mostly used by migrant workers who encounter difficulties accessing banking services are also confronted. The working group addresses this issue by means of an analysis and recommendations for improving the situation. Previous trends show that an internationally coordinated approach is decisive and that there is an urgent need to find a solution which will allow good cooperation to return to this business sector.

Further information

Last modification 26.08.2019

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