29 November 2016
London, United Kingdom

SWIFT on Compliance

De-risking – Too Risky to Bank?

Removing corresponding banking relationships from seemingly ‘too-risky-to-bank’ countries and clients in Latin America, Africa and South Asia – known as de-risking – is presenting banks with a new paradox that needs to be resolved.

The picture in these jurisdictions is bleak as widespread de-risking and withdrawal of banking services from whole regions may result in an unsolvable crisis. An increasing number of countries and clients are finding themselves excluded from global trade and without the proper means to transfer money or receive foreign direct investment.

The situation in some regions has become so extreme that banks are now being challenged to address financial inclusion and the focus has moved from a commercial issue to one of social crisis. In her July speech to the Federal Reserve Bank of New York, IMF Managing Director Christine Lagarde remarked: “I am concerned that not all is well in this world of small countries with small financial systems. In fact, there is a risk they become more marginalised.”

Against this backdrop: How can banks maintain profitable correspondent banking portfolios whilst meeting the expectations of regulators, shareholders and the international financial community? How can you know if a jurisdiction or client is ‘too-risky-to-bank’? And are they truly ‘unbankable’?

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