Is the economy of Belize under dire threat from recent, unprecedented events in the banking sector?
People’s United Party Leader Francis Fonseca replied with an unequivocal YES at a press conference held at Independence Hall on Tuesday.
“The crisis in the banking sector, the crisis in our banking system has potentially devastating consequences for the national economy of Belize,” he claimed.
At the end of April, Belize Bank lost its correspondent bank relationship with Bank of America, and in August, so did Atlantic Bank International.
It’s a process called de-risking which has been threatening domestic banks in the entire region. In a nutshell, new, stricter anti-money laundering regulations have forced international banks to examine their relationships with banks in small jurisdictions.
In some cases, those international banks believe that losing that business is a smaller price to pay than facing sanctions for unwittingly participating in illegal practices and those ties are cut.
In Belize, the offshore banking sector is attractive because of a free flow of foreign exchange currency, primarily US currency through the banks without exchange control. That means that bank business can be conducted in the US, from outside the US.
According to Fonseca, if there is no correspondent bank relationship in the offshore banking sector, there will be no offshore banking sector. But he says that the loss of correspondent bank by domestic banks can have an even more severe impact on our economy .
“Nowhere other than in Belize is the Belize dollar accepted. We can’t pay for imported goods and services with Belize dollars. We need hard currency to buy these things. We need US dollars. And even if we have US dollars, we can’t pay suppliers in cash because of all of the rules of money laundering.”
According to Fonseca, the only way we can pay for imports is through a correspondent bank relationship with domestic banks, which allows for the electronic movement of cash through wire transfers.
Belizean exports are paid through the very same correspondent bank relationship – “If our banks don’t have US correspondent bank accounts, how will they pay for imports and how will we in Belize get paid for exports? Foreigners won’t want to do business with us. They won’t want to trade with us. If we are buying from them there will be uncertainty as to how or when they will get paid or if they will get paid at all.”
Following news that Bank of America had severed its relationship with Atlantic Bank Ltd, Prime Minister Dean Barrow spoke on the new trend of de-risking sweeping small jurisdictions in the region – “That one is inevitable. I think that there is a great deal of hypocrisy on the part of the big countries, but I have made up my mind that that is inevitable. So, I am far more concerned about the domestic banks and when they have their corresponding banking relationships terminated.”
That concern, says PUP leader Francis Fonseca, hasn’t been evident and hasn’t translated into action. He told reporters that we cannot just meekly accept the loss of correspondent bank relations. He claims that the government of Belize and the Central Bank have fallen down.
“It is the government’s obligation, and the Central Bank’s obligation – which they are not doing – to convince the United States and other developed jurisdictions that doing business with Belize is not risky.”
In other jurisdictions, Fonseca said, Central Banks and government officials have been aggressively seeking a solution to this problem which is affecting the region – “something we have not seen in Belize.”