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Central Bank de-risked!

The Belize Central Bank, the country’s financial regulator, has now lost two of its correspondent banking relationships (CBR), which may result in yet unknown financial repercussions for the country, according to a new report by the International Monetary Fund (IMF) on Thursday.

In its report, “The Withdrawal of Correspondent Banking Relationships: A Case for Policy Action”, the IMF says in Belize, several banks have lost their CBRs. It says only two of the country’s nine domestic and international banks (representing 27 percent of the banking system’s assets at the end of March 2016) have managed to maintain CBRs with full banking services.

“Other banks have found alternative relationships with non-bank providers of payment services or through nesting arrangements. The Central Bank of Belize has also lost two of its CBRs,” the IMF report reveals.

It adds that while the overall size of deposits and lending in the country has not been affected, international banks’ deposits have decreased significantly, with this decrease partly compensated by an increase in deposits in domestic banks. The report adds that there has also been some displacement of customers toward the two banks that still have CBRs with full banking services.

And while the report does not say which two global banks have cut ties with the Central Bank, a credible source has indicated to The Reporter that HSBC and CitiBank are the two banks that have de-risked from the Central Bank. Our source has also indicated that Bank of America may also choose to de-risk from the Central Bank.

The Reporter made several attempts to contact Central Bank Governor Glen Ysaguirre for comment on the report, however, we were unable to reach him. Financial Secretary Joseph Waight declined to comment on the report but when pressed, did say he believed the IMF’s report was accurate.

In July 2015, the Reporter was the first to report that the Central Bank was at risk of having its CBRs cut as a result of offering nesting services to banks that had already been de-risked.

“… banking insiders have told The Reporter that the Central Bank’s offer can have adverse effects on Belize. While the US legislation governing these institutions has reinforced due diligence measures, it has granted exceptions to foreign Central Banks. But in the face of the assistance offered by Belize’s Central Bank, the financial community fears it too will be targeted,” we reported at the time.

Following that article, the Central Bank had denied offering nesting services and said it was simply trying to facilitate affected banks in re-establishing CBRs with other lower tier banks.

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