SA banks to fill global gap
SOUTH Africa’s major banks look set to fill a growing gap created by their global counterparts, which in widespread “derisking” are cancelling correspondent banking relationships in Africa and threatening the continent’s access to the global economy.
Among other functions, correspondent banking enables crossborder payments between banks, which ensures businesses can transact in foreign currencies.
“There are two or three markets where we’ve had to engage quite intensely with our dollar-clearing banks . . . because they consider [these markets] to be higher risk from an anti-money laundering point of view,” Standard Bank’s deputy chief executive of corporate and investment banking, Kenny Fihla said.
Angola, a country with considerable growth potential, risked being shut out of the dollar-clearing market, he said.
In a post-financial crisis crackdown on commercial crime, global regulators have levied fines against banks that do not have adequate “know your customer” and antimoney laundering processes in place.
In addition to having their own controls in place, correspondent banks must be confident the respondent banks with which they do business, also have these controls in place.
Rather than risk fines and reputational damage, international banks are simply “de-risking” by exiting banking relationships in countries perceived to have inadequate controls.
Standard Bank had been affected by de-risking in Angola, Lesotho, Malawi, Mauritius, Swaziland, Tanzania, Zambia and Zimbabwe, the bank said recently in court papers.
Higher capital charges and compliance costs since the financial crisis had made it more difficult for banks to maintain profitable relationships, resulting in many focusing on core activities, Citi country officer for SA Peter Crawley said.
The IMF has called for a coordinated effort to tackle the decline in correspondent banking, citing regional arrangements to process transactions as a possible solution with South African banks the obvious choice. — TMG