The Bank of America has formally told three locally-owned commercial banks in Guyana that it will formally stop doing business with them at the beginning of November as part of moves by American financial institutions to eliminate the risk of financial dealings with them and the wider Caribbean officials said this week.
And had it not been for intense lobbying from government and private sector, Citizens and Demerara banks as well as the Guyana Bank For Trade and Industry would have been cut off at the end of this month. They have been given a reprieve until the end of November Central Bank Governor Gobind Ganga said.
For all three, BOA was one of their main correspondent or counterpart banks, the one they relied on to process wire transfers, credit and debit card payments and to cash checks among other transactions but as is now widely reported, American banks are pulling out of the region like never before.
They blame increasing pressure from new laws passed by Congress in recent months to increase scrutiny of transactions from Guyana and the Caribbean for moving to cut ties with the region. They also complain that while the transactions are many, they are relatively small compared to business with domestic partners so to them it is just not worth the risks to spend more to monitor the region and not make big profits from it.
“Only the local, indigenous banks will be affected. They asked for some more time. BOA responded positively and they have won time for three more months. Those like Bank of Nova Scotia, Republic Bank and Bank of Baroda will not be affected — the foreign banks,” Ganga said Tuesday.
Ganga said Bank of America had originally set the beginning of August to terminate relations with indigenous banks in Guyana but will extend this by three months, giving the locals breathing space to find alternations agencies to cash checks, deal with wire transfers and other transactions.
Industry chatter about what the future holds for banks in the region has led to a mad scramble to find alternative agencies to process transactions from the Caribbean.
Ganga says that so far it looks like the British Crown Agents Bank, which has a relationship with many former British colonies dating back to the colonial era is about to grab the opportunity to fill the void.
All the banks have to do is to open accounts with Crown Agents and their transactions will be processed. We have to find other correspondent banks.
Teams have swept through the region, tying up deals with governments and central banks to become the new place of termination for transactions.
“Only the paper work is left to be completed and this will be done by month end. The representatives have already been here. All the banks have to do is to open accounts with Crown Agents and their transactions will be processed. We have to find other correspondent banks,” the governor said.
The issue with the banks was one of the key agenda items of last week’s Caribbean leaders summit in Guyana as local start up banks in every country are affected by the moves.
And while the preparatory work is in place to replace the BOA, Barbados is leading a regional study to examine whether regional banks are fully compliant with international financial guidelines. Findings are to be handed to governments.