A local delegation led by Prime Minister Dean Barrow returned home a few days ago after having meetings with the Comptroller of Currency; the FDIC (Federal Deposit Insurance Corporation) and the US Department of Treasury in an effort to see how best the correspondent banking issue can be handled in order to minimize the economic and financial impacts being brought on by the de-risking movements by US Banks. This is a story that we have been following for some weeks now and did speak of the possibility of consumers shifting to one or two banks in Belize that just may not be negatively impacted by the de-risking. Yesterday, Moody’s Service published a report on the Belize’s loss of Correspondent Bank Services and how it will compound existing economic and fiscal challenges. The report echoes what we said in our report last week with Attorney and Financial Expert, Christopher Coye whereby the offshore banks were the sector initially affected in Belize but that has since spilled over into the country’s domestic banking sector and that spill can seep into the tourism, trade and overall economic activity for Belize. The report went on to say that the informal-sector may be expanded if the stresses on the country’s financial system continue. This means that majority of transactions may be made in cash and could lead to a by-pass of tax revenues which in turn would affect Belize’s fiscal performance. According to the report, “In mid-2015, US and European commercial banks began to cut ties with Belizean onshore banks. Although domestic banks appear to be in full compliance with FATCA and international banking standards, large banks with US dollar operations face heavy fines under the Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) initiatives if they are found to be involved in transactions deemed illicit. Their risk/return analysis is stacked heavily against doing business in Belize given the threat of large fines by US regulators. As a result, 80% of Belize’s banking system is likely to lose correspondent and credit card settlement services by mid-year 2016.” End of quote. The report continued, stating, quote, “Of the five domestic banks in Belize, only two smaller banks – Scotiabank and Atlantic – would retain correspondence with other top-tier banks for US dollar transactions, including wire transfers, bank drafts, letters of credit, bank guarantees and credit card transactions.” End of quote. According to the report, the Central Bank of Belize has maintained its correspondent banking relations with the Bank of America and with that relationship still intact, the Central Bank of Belize has agreed to receive and send wires on behalf of its domestic banks but that is as a last resort since it is doubtful, according to the report from Moody’s, that the Central Bank can efficiently process the high level of system-wide transactions required for international banking services. The report, states, however, quote, “that it is unlikely that there will be a collapse of trade finance considering that the Central Bank and one or two foreign subsidiaries will continue to be able to process foreign exchange transactions in Belize. Nevertheless, the potential impact on economic activity could be substantial” End of quote.