|BANKS ABANDON THE CARIBBEAN|
Aruba, July 22, 2016 - Banks abandon the Caribbean, local bitcoin exchange experiences 33% increase in users every month since February.
Smaller, poorer countries are being abandoned by big banks in an exodus commonly referred to as “de-risking” or “de-banking.” In the Caribbean, where many small countries with poorer populations reside close to each other, the problem is getting so bad that local businesses regularly have a hard time receiving remittances and paying suppliers outside of their own country, even when their trading partner is just the next island over.
The growing trend in the Caribbean is the topic of a recent report by the IMF, and the subject of a talk by IMF director Christine Lagarde on Monday, at the US Federal Reserve.
According to Madame Lagarde, at least five Caribbean countries were ‘de-risked’ as of this May, with 16 or more international banks withdrawing their correspondent banking relationships.
This land-locks the money on some of these island nations, cutting residents and businesses off from foreign trade. Belize is most affected by the trend, but most of the Caribbean is deeply affected.
Compounding the problem is that these smaller, poorer countries depend on international trade the most.
Madame Lagarde mentioned that such countries are “especially vulnerable,” with citizens in them often depending on remittances from family members who work abroad. These citizens already had minimal access to financial services under the best of circumstances, now they are completely cut off in some areas.
The poorer a country is, the more likely that banks will leave due to low profits. The more banks that leave, the less trade that can be done there, and the poorer the country becomes.
It’s a vicious cycle that, so the theory goes, can spread like cancer from neighbor to neighbor in regions like the Caribbean.