The Pacific Banking Forum, co-hosted by the Australian and US Governments, convened on 8-9 July 2024 in Brisbane, Australia. The Forum underscored the commitment of Prime Minister Anthony Albanese and President Joe Biden to collaborate with Pacific island countries (PICs), public-private partners, and multilateral organisations to address the decline of correspondent banking relationships (CBRs) in the Pacific.

The Forum, which supported the Pacific Islands Forum Secretariat’s (PIFS) CBR Roadmap, brought together Finance Ministers, Central Bank Governors, regulators, international financial institutions (IFIs), multilateral development banks, policymakers, and commercial banks. The discussions focused on the critical issues surrounding CBRs in the region, fostering engagement between governments and correspondent banks, and exploring practical solutions for the Pacific.

The Prime Minister of the Cook Islands, Hon. Mark Brown, attended the Forum both in his capacity as Forum Secretariat Chair and in his capacity as Prime Minister and Minister of Finance. He led a Cook Islands delegation featuring Sonny Williams, Assistant to the Prime Minister, Margaret Tangimetua, Deputy Commissioner, Financial Supervisory Commission (FSC), and Tony Fe’ao, CEO, Financial Services Development Authority. Funding for travel and attendance at the Pacific Islands Forum was made available to the Cook Islands delegation through Australia’s Department of Foreign Affairs and Trade.

Prime Minister Brown, during his keynote at the opening session, addressed the impact of the decline of CBRs in the Pacific. “The issues associated with the decline of correspondent banking relationships in the Pacific affect the ability of local banks to connect with International Financial Institutions and access cross-border payment services, thereby affecting the financial systems at a sovereign level, squeezing out government-owned banks’ ability to play in their own backyards, and affecting the ability of Pacific countries to meaningfully participate in global supply chains. In a nutshell, the opposite of financial inclusion.”

He elaborated on the broader implications: “The withdrawal of correspondent banking relationships will become an issue for countries like the Cook Islands, who are doing well with our banking sector, if we do not address the cause of it. Regulators have imposed such high reporting obligations on banks to comply with anti-money laundering, countering the financing of terrorism, that the correspondent banks withdraw their services because of the high cost.”

“And with the low volumes of business that are transacted through the Pacific, in comparison to global transactions, there is very little revenue or profit that can be made, which is one of the reasons why they are withdrawing, leaving some countries with no banks at all.”

Expressing optimism, the Prime Minister added, “I hope this meeting will result in lower compliance costs and reduced money transfer expenses. We also seek support to upgrade our banking infrastructure to modern systems, strengthening our banks globally and reducing transaction costs. This will help strengthen our banks in operating globally, but it’ll also help reduce the costs of finance and cost of transactions.”

Sonny Williams, MP for Titikaveka and Assistant Minister to the Prime Minister, highlighted the withdrawing of banking institutions and its impact on Cook Islanders. 

“One of the major issues discussed here, which will impact Cook Islanders, is the de-risking of banking institutions. We’ve already seen Westpac pull out of the Cook Islands and other Pacific countries. The concern is, what if the other banks pull out too?”

“This would be a significant problem for many Cook Islanders who rely on sending money overseas, purchasing items online, and maintaining financial connections with the rest of the world. If our banking system is cut off, it would be very difficult to conduct these essential activities.”

“Money is the lifeblood of any economy, and enabling its flow is crucial. Some countries in the region are already struggling with limited banking options, relying solely on agency arrangements. Imagine if we were in that position with no banks – it’s not a situation we want to find ourselves in.”

“It’s reassuring to see the region working together to strengthen the banking system.”

Chief Executive Officer of the Cook Islands Financial Services Development Authority Tony Fe’ao emphasised the impact of CBRs on the development and innovation of financial services. “International banks and financial institutions at the Pacific Banking Forum emphasised the importance of adherence to global compliance and best practices to strengthen and continue correspondent banking relationships (CBRs).”

“It was encouraging to note that the Cook Islands, through the Financial Supervisory Commission, has worked diligently to adhere to Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) requirements. We have an established and robust regulatory and compliance regime, are recognised globally as a compliant jurisdiction, and received an outstanding Mutual Evaluation Report from the FATF indicating we have one of the best AML/CFT regimes in the world.”

“Our commitment to regulation and compliance has created a strong foundation for digital innovation in the financial services sector. We have three domestic banks, including the AAA-rated ANZ, and an internationally recognised private bank in Capital Security Bank, which contribute to this enabling environment.”

“The Cook Islands is well positioned to capitalise on opportunities for innovation, development, and economic diversification (especially in the FinTech and digital payments space), as stronger CBRs and access to global markets are established.”

The Forum concluded with all parties agreeing to collaborate to strengthen CBRs in the Pacific region, acknowledging the joint efforts among stakeholders are essential to ensure that Pacific Islands countries have sustainable access to participation and inclusion in the global economy.

Read more about the collaborative efforts to strengthen correspondent banking relationships in the Pacific region in the Outcomes Statement of the Pacific Banking Forum.