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International Monetary Fund. African Dept.

, and FDI (millions US$) Source: IMF Staff estimates. Figure 2. Liberia: Banks Operating Income (percent) Source: Bankscope. 2. But the recent loss of CBRs with global banks could unravel these gains and potentially hurt economic activity . Most foreign banks are severing their CBRs with Liberian banks citing overall profitability, reputational risk, reduced risk appetite, enhanced implementation of domestic regulations (e.g., US office of Foreign Asset Control (OFAC) and Foreign Account Tax Compliance (FATCA)), global regulatory standards

International Monetary Fund. Western Hemisphere Dept.

government is still grappling with. 25. While the impact of the loss of CBR to date appears to have been modest, it could dampen the sector’s expansion prospects . The risk of withdrawal of CBRs has been linked to the termination of a number of IBFS clients bank accounts. However, expenditure of the IBFS sector has remained stable suggesting that the risk of withdrawal of CBRs has not been significant such that it has led to a decline in the sector. Notwithstanding, actors in the IBFS are concerned that risks associated with CBR will dampen growth prospects. 12 The few

International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper summarizes recent development in Barbados’s International Business and Financial Services (IBFS) sector and assesses the extent to which the loss of correspondent banking relationships (CBRs) pose a risk to its future. The contribution of the IBFS sector to the local economy has been relatively stable in recent years but its contribution to fiscal revenues has declined. The sector has displayed lower profitability since the global financial crisis. More recently, it suffered from two changes in Canadian tax legislation. Consequently, tax revenues have declined while other expenditures have largely offset such decline. The sector also faces some risks from the loss of CBRs that has affected most Caribbean countries.
Mr. Trevor Serge Coleridge Alleyne, Mr. Jacques Bouhga-Hagbe, Mr. Thomas Dowling, Dmitriy Kovtun, Ms. Alla Myrvoda, Mr. Joel Chiedu Okwuokei, and Mr. Jarkko Turunen
Banks across the Caribbean have lost important Correspondent Banking Relationships (CBRs). The macroeconomic impact has so far been limited, in part because banks either have multiple relationships or have been successful in replacing lost CBRs. However, the cost of services has increased substantially, some services have been cut back, and some sectors have experienced reduced access. Policy options to address multiple drivers, including lower profitability and risk aversion by global banks, require tailored actions by several stakeholders.