GOB seeks urgent solution to bank crisis

The possibility that Belize may be cut off from doing business with the outside world is a very real problem government officials have, as Prime Minister Dean Barrow and Central Bank Governor Glenford Ysaguirre have both expressed concern over the ‘de-risking’ dilemma.

The loss of corresponding banking relationships poses a great threat to Belize’s banking and business sectors. “We are in a place we don’t want to be. If we don’t find a solution one way or another, it is going to be a huge crisis,” Barrow told the media this week.

The Prime Minister said he intends to meet with officials from the US State Department, the US Treasury, the Federal Deposit Insurance Corporation and the Office of the Controller of the Currency to see if there is a way to resolve the issue. The problem, however, is that the issue is not as clear cut as the government would hope.

Ysaguirre told the Reporter, this week, though the concern is very real indeed, it is important to understand that the issue is one affecting countries all across the region. According to Ysaguirre, he attended a conference hosted by the US Treasury Department in Panama in December and representatives from Mexico, Guatemala, Colombia and other Latin American nations also raised concern over the same issue. He added that Belize, being a smaller economy, will also feel the impacts of de-risking quicker and harder, hence the current urgency.

In effect, strict US and European anti-money laundering (AML) and counter-terrorism financing (CTF) laws have put immense pressure on international banks. These banks face stiff penalities if found in violation of any of these laws and have decided that the cost of penalties versus the margin of profit in doing business with small jurisdictions like Belize isn’t worth the risk, hence the term de-risking.

In a previous conversation with the Reporter on the issue, Political and Economic Section Chief for the US Embassy in Belize, J. Nathan Bland explained that this process of wholesale de-risking is not supported by the US Government. He further explained that the banks which are de-risking are all privately owned entities, so there is only so much to be done.
The nation first heard about ‘de-risking’ last April when the Belize Bank lost its correspondent bank relationship with the Bank of America. In July, Atlantic Bank International also lost its relationship. The impact was immediate. With the loss of an ability to do international banking, including wire-transfer capability, individuals, businesses and even large-scale importers were unable to pay for goods and services sourced abroad. On the flip side, local exporters experienced real difficulties in receiving payment from outside Belize for goods and services sold.

Since then, Atlantic Bank International has managed to re-establish correspondent bank relationships with the Bank of New York Mellon, Commerzbank and the US Century Bank. But there is more bad news on the horizon and this news will be further reaching. According to Barrow, “in the case of credit card settlements, it’s a community bank that has agreed to do that for Belize Bank and for Heritage after the corresponding banking relationship was cut off by Bank of America. That bank has now indicated that by the middle of next month it is looking to discontinue even that sort of less comprehensive relationship, so even the question of the credit card settlements is now in some jeopardy.”

The Belize Bank and Heritage Bank have explored relationships with ‘Tier 3’ banks outside of the US, but Prime Minister Barrow said even that hasn’t worked out particularly well, since pressure from the US remains the pivotal factor in establishing those crucial relationships – “what has happened in certainly one case – a small international bank, the bank from Turkey, engaged in a relationship with Heritage and then after a while said we can’t continue. And it is our fear that because all those banks in turn have to deal with the big banks in the U.S.; that the pressure ultimately continues to come from the U.S.”

The Prime Minister will embark on his round of meetings sooner rather than later, and while he expressed some optimism, he reminded reporters that he had discussed the matter with US President Barack Obama: “he had expressed his willingness to try and have the US help us find a solution. Nothing has happened.”

And while there is concern that credit card transactions may be affected, the Reporter has been able to confirm that the Belize Bank has secured ties with another international bank and its services will remain unaffected, at least for now.

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