The number of worldwide correspondent banking relationships continues to decline, according to new figures released yesterday by the Basel, Switzerland-based Financial Stability Board. Relying on data from the SWIFT network and a survey of 300 banks in 50 jurisdictions, the FSB found that active correspondent relationships declined by 6 percent across all currencies from 2011 to 2016. Western Europe, Eastern Europe and Oceania were all most affected, with double-digit declines during that period.
Although the number of correspondent relationships has fallen, the total volume and value of payments processed through SWIFT have risen. “Against this background, the decline in correspondent banking relationships appears to lead to a greater concentration, where countries and banks rely on fewer correspondent banks, and may lead to longer payment chains, which means that a higher number of intermediaries are involved in processing the same payment,” the FSB said.
The FSB said that several factors are causing the decline in correspondent relationships, including anti-money laundering “derisking” by financial institutions, industry consolidation and reduced profitability from correspondent activities. The FSB has taken several steps to stem derisking in the face of heightened regulatory expectations from national-level supervisors that is driving the trend.