PHILIPSBURG – International banks ending their corresponding banking relationships with Caribbean banks is a major threat to St. Maarten, explained Minister of Finance Richard Gibson.
Speaking at Wednesday’s, May 4, Council of Ministers meeting, Minister Gibson said the issue was discussed at a recent Caribbean Development Corporation Commission (CDCC) meeting he attended in St. Kitts. International banks have signaled their intention of ending corresponding banking arrangements with Caribbean banks due to stringent banking requirements in the US.
Minister Gibson explained this will have an impact on money remittances services and other cross border financial transactions.
The Minister noted that the advent of Foreign Account Tax Compliance Act (FACTA), has put banks under more scrutiny with its transactions with foreign banks and to avoid having to pay these exorbitant fines, these banks have decided to end their corresponding arrangements with Caribbean banks.
“FACTA has been the forefront of setting rules and regulations to combat terrorism financing and money laundering and since 2008 when we had the global financial crisis, there were certain rules that were adopted, which should make banks more resistance to run on banks if there is a crisis,” Gibson said.
Additionally, these international banks are no longer required to have deposits as liquidity requirement, but now have to find additional capital. “Deposits are no longer counted for liquidity…now you have to reserve 100% of your capital and deposits are no longer counted as such…it means that banks will have to find additional capital in order to supply for that 100% liquidity,” the Minister explained.