The cor­re­spon­dent bank cri­sis is sud­denly news

Malta Independent - - NEWS -

Undis­cussed up till some days ago, the cor­re­spon­dent bank cri­sis is now the talk of the town. The con­tem­po­ra­ne­ous visit to New York by the prime min­is­ter, the fi­nance min­is­ter, the MFSA chair­man, and the Cen­tral Bank deputy gover­nor raised public alarm, es­pe­cially when this was broad­cast in an alarmistic way.

The gov­ern­ment had is­sued a small press re­lease, which we car­ried, about a meet­ing with busi­ness­men in New York but then peo­ple tend to be­lieve the worst in most cases.

The Op­po­si­tion is­sued its own state­ment yes­ter­day to which the gov­ern­ment replied with its own state­ment, touch­ing, for the first time, on the cor­re­spon­dent bank cri­sis. What is this cri­sis? In short, it is that banks in Malta have been find­ing it dif­fi­cult to keep cor­re­spon­dent banks in the US. Some peo­ple in Malta, in­clud­ing the PN spokesper­son, as­cribed this to rep­u­ta­tional problems, in view of the Panama Pa­pers is­sue and re­lated sub­jects. But when Prime Min­is­ter Muscat an­nounced his com­ing trip when he was speak­ing at the

Edi­tor’s pick

launch of the Malta Stock Ex­change’s strate­gic plan for cap­i­tal mar­kets he an­nounced he would be meet­ing rep­re­sen­ta­tives of top banks to en­sure that the ser­vices now in force are not with­drawn.

The al­ter­na­tive ex­pla­na­tion to what is hap­pen­ing is that cor­re­spon­dent banks have been scal­ing back their ser­vices in an at­tempt to cut down on the huge com­pli­ance costs and risks re­sult­ing from their deal­ings with banks in other ju­ris­dic­tions. In re­cent years it has been found eas­ier to sever re­la­tions than to man­age the risk of be­ing in­ad­ver­tently em­broiled in money laun­der­ing or ter­ror­ist fi­nanc­ing.

This is­sue has been on the ta­ble for a num­ber of years (the gov­ern­ment state­ment goes back to PN times too) but it has re­cently be­come stronger and, as the prime min­is­ter said, it is crit­i­cal for the fu­ture of our econ­omy.

Bank of Val­letta used to have a whole net­work of in­ter­na­tional cor­re­spon­dent banks, one of which is Deutsche Bank and its heads say they are not un­duly wor­ried but at the same time it says it is try­ing to di­ver­sify its in­ter­na­tional sources and in fact it has re­cently made con­tact with a num­ber of banks who are in­ter­ested in es­tab­lish­ing a cor­re­spon­dent re­la­tion­ship.

This is an area where bank­ing and in­ter­na­tional pol­i­tics meet (or cross each other). There are risks, but there are also op­por­tu­ni­ties.

A re­cent ar­ti­cle on the Wall Street Jour­nal said: “With ma­jor UK and US banks still strug­gling to find re­as­sur­ances from regulators to resume busi­ness with Iran nearly 10 months since im­ple­men­ta­tion day, a hand­ful of Euro­pean banks are forg­ing ahead and seal­ing trans­ac­tions with the oil-rich na­tion.

“I’ve re­cently found a new sport, which is hunt­ing for small banks who want to do busi­ness with Iran,” said An­dreas Sch­weitzer, se­nior manag­ing part­ner at Ar­jan Cap­i­tal Ltd., a Malta-reg­is­tered in­vest­ment and ad­vi­sory firm that fo­cuses on do­ing busi­ness with Iran. “And we won’t waste our re­sources look­ing for large banks; we will do busi­ness with medium sized banks–in Italy, Liecht­en­stein,” he said last week at the Ira­nian Trade Con­fer­ence in London.

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