U.S. Banking regulators issue a “Joint Fact Sheet on Foreign Correspondent Banking”: Is this a response to global fears of US “DeRisking”? And if so, does it go far enough?
This summer, “de-risking” has become a hot topic. De-risking is the term used to describe the process many banks have taken to cancel bank accounts and correspondent banking relationships with customers whom they deem to be too risky, or not worth the cost of ensuring compliance. Losing a bank account relationship can be devastating for small businesses and many emerging payments companies have found it increasingly difficult to obtain banking service due to perceptions that providing banking services for “fintechs,” blockchain companies and other innovative payments companies would be “high risk”.
The concerns about derisking are not limited to its impact on small businesses; it has also impacted on small countries. IMF President Christine LaGarde noted in July 2016 that “regulators in key financial centers need to clarify regulatory expectations …and global banks need to avoid knee-jerk reactions and find sensible ways to reduce their costs.”