Prime Minister Dean Barrow is expected back in the country on Sunday. He is in Washington to discuss the issue of correspondent banking with authorities in the US. As promised in yesterday’s newscast, here is the continuation to our feature on the banking sector in Belize.
RENEE TRUJILLO REPORTING
“In part one of our story on the banking sector of Belize, we spoke about the Prime Minister being away with a delegation in the United States attending meetings in an effort to see what measures can be taken to stabilise our financial sector and economy when it comes to the area of correspondent banking. We also spoke on what possible repercussions can be had if the talks are unsuccessful and how consumers would most likely be shifting their accounts to the international bank in order to have use of the international financial services. In this part of our segment we will look at the offshore sector and foreign reserves. With the severing of relations with Bank of America on the offshore sector, about one hundred and seventy five million dollars left the country and as is, the country’s offshore banking industry is on life support. Several persons who were employed in offshore banking have been either laid off or have moved on to other jobs; one of the effects of the de-risking movement. Attorney Christopher Coye who once headed the Belize Bank International and up to recently, was the Chairman of the Belize Offshore Practitioners Association in our interview said that other affected areas may be the citrus industry which has been known to borrow funds from the offshore accounts as well as EPZs (Export Processing Zones) and the CFZs (Commercial Free Zones). As we mentioned, all this is a result of the de-risking movement which simply means that the banking institutions in the US are simply taking action to reduce the risk of being penalized for doing business with countries sanctioned by the United States. Coye further explained.”
CHRISTOPHER COYE: “Over the past decade and a half I would say that, especially since 2001, 911, new laws were implemented, I am speaking specifically of the US. New laws were implemented; the Bank Secrecy Act; to attack terrorist financing and tie that in large part to money laundering or anti money laundering efforts. Overtime that has evolved. With the financial crisis in 2008, these laws became a lot more aggressively enforced. Coupling those two together, the regulatory authorities have become more aggressive, more intrusive, more comprehensive in their regulation and monitoring of banks on a whole. Following from that, in more recent years you can see in the news reports, a number of large fines, very large fines. I think Commerce Bank, one of the banks that provide correspondent services to the Belize Banking institutions was fined earlier last year almost one and a half billion dollars and that in large part has to do with conducting business activities with sanctioned countries like Iran or Sudan; those types of sanctioned countries. Previous to that, I think the year before, BMP Parabas was fined almost nine billion dollars. I think that is one of the largest fines ever but again by the US authorities for conducting business with sanctioned countries. When these banks start looking at the risk reward and the exposure to that level of penalty compared to the reward, I think the prime minister spoke of six million dollars was the extent of the benefit that they were getting in Belize. That’s not even one percent of those penalties so when you look at that risk rewards, obviously the banks from a business standpoint would consider whether or not to do business. Derisking is not a management of risk, it is simply the avoidance of risk so that phenomenon having regard to these kinds of risk rewards analysis and the penalties they have to look at, the actual cost of compliance, not just the risk but the actual cost of compliance, have led a lot of these large banks to decide simply to avoid the risk and to derisk from these small banks or even small jurisdictions that do not provide much benefit relative to the risk and cost they’re taking on.”
RENEE TRUJILLO REPORTING
“Coye went on to say that not only will the offshore sector create issues but without improvement of the current situation, Belize’s foreign reserves can also be affected. One way is with exporters and importers opting to open a US bank account where there money used for trade will be held as opposed to enduring the possible high rates being implemented. Prime Minister Dean Barrow is currently in Washington DC with a local delegation, meeting with the FDIC (Federal Deposit Insurance Corporations) and the Head of the Office of the Controller of Currency. Prime Minister Barrow spoke on the issue in the House of Representatives, prior to his leaving for the US.
DEAN BARROW: “Let us talk about what we in Belize have done and are doing, not what we will do. I took up this issue with President Obama at the summit in Panama, from as early as then. IN consequence of that, the president set up a meeting for the Governor of our Central Bank with US Treasury Officials. After that meeting that the governor of our Central Bank had with the US Treasury in Washington, the Treasury Department, because we continue to make noise, I just asked the US Ambassador to come to see me two weeks ago as part of the continuing full court press. The US treasury convened a meeting in Panama in mid-December with the so called tier 1 banks people like Bank of America and City and Bank of New York and Central Bankers of this region, the small countries including those in Central America that have been affected and there the Belize position was articulately and comprehensively laid out by the governor or our Central Bank. I am going to Washington, leading a team to make calls on all the key officials with respect to this issue. While it is true that ultimately we can’t guarantee the successful outcome of my visit to the United States we can at least make plane that we are doing everything that we can possibly do and we can make plain that we will continue to do everything that we can possibly do until we find a solution to the problem.”
RENEE TRUJILLO REPORTING
“Prime Minister is expected to return home on Sunday, January 31. Accompanying him on his trip are Ambassadors Mark Espat, Central Bank Governor, Glen Ysaguirre as well as Financial Secretary, Joseph Waight. They are in the company of Belize’s Ambassador to the US, Pat Andrews. Reporting for Love News, I am Renee Trujillo.”