Progress report to G20 on the FSB action plan to assess and address the decline in correspondent banking
This report submitted to the G20 Leaders’ Summit in Hangzhou on 4-5 September 2016, follows a request by G20 Finance Ministers and Central Bank Governors in their communique following their July 2016 meeting in Chengdu.
The FSB established in March 2016 a Correspondent Banking Coordination Group (CBCG) to coordinate and maintain impetus in the implementation of the action plan. The CBCG and its members have made substantial progress towards implementing the FSB action plan:
- Following consultation, the Committee on Payments and Market Infrastructures (CPMI) has published in July 2016 the final version of its report on correspondent banking, with recommendations relating to (i) know-your-customer (KYC) utilities; (ii) use of the Legal Entity Identifier (LEI) in correspondent banking; (iii) information-sharing initiatives; (iv) payment messages; and (v) use of the LEI as additional information in payment messages.
- The CPMI report includes an analysis using an extensive SWIFT data set. These data show that in recent years, although overall transaction volumes in correspondent banking have grown, the number of active correspondents has decreased across most regions, which suggests that there has been increased concentration in correspondent banking relationships.
- An International Monetary Fund (IMF) staff discussion note further discusses the evidence of a withdrawal in correspondent banking relationships and actions needed to address the issue.
- CBCG has designed a survey to address remaining data gaps, including the effects of the decline on specific categories of customers and the extent of the concentration of correspondent banking in specific markets.
- CBCG has proposed areas where regulatory expectations should be clarified; the Financial Action Task Force (FATF) has made substantial progress towards issuing in October 2016 guidance on the application of its standards to correspondent banking, to be followed by further clarification by the Basel Committee on Banking Supervision (BCBS) of its own existing guidance.
- CBCG is assisting in the coordination of resources available to address technical assistance needs to support affected jurisdictions in conducting risk assessments and developing effective anti-money laundering and countering the financing of terrorism (AML/CFT) frameworks; CBCG is also encouraging private sector initiatives and supporting dialogue between the public and private sectors, for instance with roundtables and other events organised by FSB Regional Consultative Groups and the IMF and the World Bank.
A more comprehensive progress report will be published by end-2016. Work under the action plan will continue in 2017 to address these issues, including continuing to monitor changes in correspondent banking to assess whether the plan is having the intended impact.