The Future of the Belize’s Banking Sector – Part 1

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Updated: January 25, 2016

Prime Minister Dean Barrow led a delegation over the weekend to look at how and if the current banking situation in Belize can be remedied as it relates to Corresponding Banking Relations.  While PM Barrow stated that we are not in crisis mode, I took a more in-depth look into the situation as it relates to the possible future of the banking sector in Belize.

RENEE TRUJILLO REPORTING

“If you have transactions done with business associates or relatives from the United States you may understand how vital it is for the banks in Belize to have a stable relationship with corresponding banks in the United States.  April 2015 saw the Bank of America sever ties with the banks in Belize, leaving the Commerce Bank as the US financial institution that still entertains our banking relations with our local facilities.  Belize, however, is not in a unique position as is stated in the World Bank Report of November 2015.  In the regional breakdown, the report states that Latin America and Caribbean appears to be the region most affected by a decline in foreign Corresponding Banking Relations adding that the Europe and Central Asia region has experienced a significant decline in its foreign corresponding banking relations.  In an effort to get a comprehensive analysis of what this all means for our local economy and banking sectors, we turned to Attorney-at-Law, Christopher Coye who once headed the Belize Bank International and up to recently, was the Chairman of the Belize Offshore Practitioners Association.  Having correspondent banking relations is critical for trade, imports, exports and foreign relations thus the economy, on a whole and with the situation as it currently stands, we asked Coye if he feels that our country is in a crisis.”

CHRISTOPHER COYE

“I think you have to look at what is transpiring on a macro level and on a micro level. I don’t know that you can look at it so much as just a political issue. It is an economic issue. If people get fear you could have a bank panic and that could have a severe impact on an economy; so you always have to be careful in terms of how you present the position as it relates to the banks and not in any way to mislead people so far as what the status of the situation involving correspondent banking is concerned. This is a phenomenon not limited to Belize. It is occurring throughout the world, dozens upon dozens of countries are being impacted, and hundreds of banks are being impacted in many countries all over the world. With respect to the efforts of the Government I think Government has no other choice; there is no choice but to make these efforts. I’m not sure whether they would be successful, like I said the reports from the World Bank is clear evidence that many countries are doing exactly what we are proposing to do at this point and have been doing that for over the past year or more.”

RENEE TRUJILLO REPORTING

“A delegation led by Prime Minister Dean Barrow left the country on Saturday, January 23 to attend meetings in the US with an objective to address the current banking issue; but Coye was pragmatic in saying that should those talks not be fruitful, we should prepare and look at how the landscape of banking and the economy will be.”

CHRISTOPHER COYE

“I’d be pleased that we’d be successful with that effort but we also still have to look at what if we don’t succeed and if we don’t then what will the banking landscape look like? I think for the foreseeable future if these relationships are terminated it doesn’t appear that it will be all the banks but the indigenous banks are the ones that are impacted the most. The landscape I think you would see would change if the government is not successful in its efforts. You’re shifting to these international banks if you look again statistically, these banks have not been as focused on productive sector lending but more on consumer and residential mortgage lending. So if you are going to see a shift what will that mean? Does that mean that the cost of doing business will increase and will that mean an impact on pricing for the consumer ultimately?”

RENEE TRUJILLO REPORTING

In a Wall Street Journal article published on January 18, 2016, it spoke of the Bank of Nova Scotia, which is the third largest bank in Canada, looking to capitalize on the current situation and expand its facilities and acquisitions since the US regulations are leading many banks to scale back in the Latin America region.  Coye told Love News that it is from a business perspective that such moves are being made and in a worst case scenario, it could lead to a monopoly in the banking sector. 

CHRISTOPHER COYE

“We do have banks from outside or at least one bank that’s an international bank and they have maintained and the expectation is that they will continue to maintain their corresponding banking relationships.  So you would expect that there would be a shift from indigenous banks to the international bank. You have Scotia and Atlantic Bank, to some extent, would be a regional bank but I would say more Scotia Bank that you’d see as an international bank.”

RENEE TRUJILLO REPORTING

Coye also stated that it would be wise for the Central Bank of Belize and the Government to start looking at regulating rates and adjustments in policies for the banking sector should talks go unsuccessful in the US.  Meanwhile, he advises consumers to begin preparing themselves to undergo a heightened level of due diligence and additional requirements when seeking loan facilities if the situation doesn’t change.  As for the offshore sector, about one hundred and seventy five million dollars have been withdrawn from offshore accounts.  In our other segment, we will look at how that will affect the economy and we’ll also take a look at the country’s foreign reserves and how that, too can and may be affected.  Reporting for Love News, I am Renee Trujillo.