Intelligent CXO Issue 13 | Page 48



Big bank de-risking threatening to undermine financial inclusion

According to new research commissioned by Payments Bank , Banking Circle , big bank de-risking is significantly hampering the efforts of many financial Institutions to deliver services that empower financial inclusion . The root cause appears to be the riskaverse strategies adopted in response to the financial crisis of 2008 and subsequent money laundering fines imposed on several big banks .

While the big banks have been forced to protect themselves , their actions are leaving many smaller banks and Non-Bank Financial Institutions ( NBFIs ) without correspondent banking partners . And this means they are unable to access fair and affordable international banking solutions , the consequence of which is that already financially vulnerable societies and businesses are further excluded and put at a greater disadvantage than ever . and keep serving diverse customer requirements , many also report that they had found themselves let go by their banks , some with less than a month ’ s notice .
The survey also asked respondents about the current correspondent banking offering , to examine how , coupled with bank derisking , the current solution is compounding financial exclusion for many customers . Less than half of the respondents believe there are any good alternatives to traditional cross-border payments although 71 % feel that an alternative would benefit the global economy .
“ It ’ s no industry secret that some banks have been de-risking for decades ,” said Mitch Trehan , UK Head of Compliance and Money Laundering Reporting Officer at Banking Circle . “ However , this has intensified in recent years and our latest research reveals the impact this is having on smaller financial institutions across Europe . For example , banks and Non- Bank Financial Institutions , with fewer correspondent banking relationships , reported having difficulty offering international payments and that their costs have increased .
“ It is a spiral that the financial industry has a responsibility to address . Individuals and businesses should have fair access to the banking solutions they need to prosper . Banking Circle ’ s mission is to build a new tech-based approach that improves processes and lowers costs for banks and non-bank financial institutions of all types and sizes .” x
Banking Circle surveyed 700 cash managers and corporate treasurers in the UK , Northern and Southern Europe .
Key findings :
• Two in three said their bank ended their relationship because they no longer met the bank ’ s eligibility criteria
• 77 % have more banking relationships now than they did 10 years ago
• 80 % have seen correspondent banking costs rise
• 44 % stopped offering international payments because their bank ended the relationship
Banking Circle ’ s survey found that 65 % of respondents believe they currently have too many banking relationships . However , while most have had to take on additional relationships to remain competitive
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