ABA: Reg Burden Key to Correspondent Banking Declines

ABA in a comment letter yesterday to the Bank for International Settlements voiced its support for three of the four recommendations made by BIS’ report on correspondent banking to improve the cross-border payments marketplace, but said that the report ultimately failed to address the central issue of excessive regulatory burden leading to the termination of correspondent banking relationships.

The recommendations, the letter said, focus on “limited corrective actions that will have minimal impact on the stated problem of decreasing correspondent/respondent bank relationships,” adding that the challenges of complying with heightened anti-money laundering and know-your-customer obligations will continue to be responsible for the termination of correspondent relationships.

Recommendations supported by ABA include standardizing templates and data forms to facilitate the use of KYC utilities; promoting the use of legal entity identifiers to facilitate the use of KYC utilities and information-sharing arrangements; and requesting the Financial Action Task Force and the Basel Committee provide clarity on the due diligence recommendations for upstream banks.

ABA opposed a provision calling for a review of whether the payment message used for cross-border wire transfers should be discontinued. Ending use of the message would resurrect the issues it had been originally designed to address, ABA said. For more information, contact ABA’s Steve Kenneally.