Major global banks’ elimination of correspondent banking relationships (CBR) could threaten growth and financial stability in some small countries, the IMF said in a report released on Thursday.
IMF researchers found that smaller states in Africa, the Caribbean, Central Asia and the Pacific islands have been among the most affected by global banks’ decisions to withdraw some of these relationships.
Among reasons for the moves, the researchers cited banks’ desire to reduce risks associated with money-laundering or terrorism financing, comply with international sanctions or reduce regulatory compliance costs that had made such business unattractive.
The reductions in CBRs could lead to fewer channels for some countries to receive remittances from overseas workers and for business transactions in US dollars or other reserve currencies, and could ultimately hamper lending and economic growth.
In Belize, the IMF study showed that only two of the nine domestic and international banks serving the country have managed to maintain full correspondent banking relationships, forcing others to turn to non-bank providers of payment services. Even Belize’s central bank has been cut off by two global banks, it said.
Termination of money transfer services in small Pacific states due to anti-money laundering and anti-terrorism finance compliance has hurt foreign remittances, undermined financial inclusion and increased the hand-carrying of cash, the IMF study said. In some countries, such as Samoa, remittances amount to one-fifth of GDP.
The IMF researchers said that regulators in major economies should pursue greater outreach to banks to make clear their expectations for anti-money laundering compliance and address legal impediments to continuing CBR arrangements. Regulation in smaller jurisdictions should be strengthened and brought in line with international standards, which would help reduce risks.
The IMF said industry initiatives can help mitigate compliance costs associated with CBRs. It said one potential solution would be for global banks to bundle other financial services, such as credit card clearing, letters of credit and wealth management products with CBRs to spread compliance costs over more services.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
ARTIFICIAL INTELLIGENCE: The chipmaker last month raised its capital spending by 28 percent for this year to NT$32 billion from a previous estimate of NT$25 billion Contract chipmaker Powerchip Semiconductor Manufacturing Corp (力積電子) yesterday launched a new 12-inch fab, tapping into advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to support rising demand for artificial intelligence (AI) devices. Powerchip is to offer interposers, one of three parts in CoWoS packaging technology, with shipments scheduled for the second half of this year, Powerchip chairman Frank Huang (黃崇仁) told reporters on the sidelines of a fab inauguration ceremony in the Tongluo Science Park (銅鑼科學園區) in Miaoli County yesterday. “We are working with customers to supply CoWoS-related business, utilizing part of this new fab’s capacity,” Huang said, adding that Powerchip intended to bridge
Microsoft Corp yesterday said that it would create Thailand’s first data center region to boost cloud and artificial intelligence (AI) infrastructure, promising AI training to more than 100,000 people to develop tech. Bangkok is a key economic player in Southeast Asia, but it has lagged behind Indonesia and Singapore when it comes to the tech industry. Thailand has an “incredible opportunity to build a digital-first, AI-powered future,” Microsoft chairman and chief executive officer Satya Nadella said at an event in Bangkok. Data center regions are physical locations that store computing infrastructure, allowing secure and reliable access to cloud platforms. The global embrace of AI
Qualcomm Inc, the world’s biggest seller of smartphone processors, gave an upbeat forecast for sales and profit in the current period, suggesting demand for handsets is increasing after a two-year slump. Revenue in the three months ended in June will be US$8.8 billion to US$9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be US$2.15 to US$2.35 a share. Analysts had projected sales of US$9.08 billion and earnings of US$2.16 a share. The outlook signals that the smartphone market has begun to bounce back, tracking with Qualcomm’s forecast that demand would gradually recover this year. The San