Basel: Decline in Global Correspondent Banking Relationships Accelerates

The number of worldwide correspondent banking relationships continues to decline, according to new figures released today by the Basel, Switzerland-based Financial Stability Board. Relying on data released twice annually by the Swift network, the FSB found that active correspondent relationships declined by 15.5 percent across all currencies from 2011 to the end of 2017, and by 4.1 percent in 2017 alone. The decline in active correspondents was more pronounced for U.S. dollar transactions (23 percent over 2011-17) and euro transactions (20.8 percent).

This rapid decline in correspondent relationships continues even as the total volume and value of payments processed through Swift continued to rise — although volume of Swift messages could reflect a longer and more cumbersome payment chain, which is itself a result of declining correspondent pairs. The FSB also noted growing concentration of correspondent business which “could affect competition, raise costs, and especially lead to more fragile networks since failure of a participant could have larger effects on the market and the economy.”

The FSB has a long-term project to assess and address the decline. Further action steps, beyond the periodic reports on the status of correspondent banking, include clarifying guidance from the Financial Action Task Force and the Basel Committee on Banking Supervision; domestic capacity-building and stronger due diligence tools for correspondent banks. The FSB said it would issue a progress report on the long-term project this month.