Coverage: weekly note · Information to 8 April 2025
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TGB Weekly Research Note · 8 April 2025
Correspondent banking relationships fell by about 30% worldwide between 2011 and 2022, and the steepest sub-regional losses in CPMI data have fallen on the Pacific islands and the Caribbean.
The desk view
The global correspondent banking network lost about 30% of its relationships between 2011 and 2022, even as transaction volumes rose by 61% over the 12 years to 2022. In the CPMI's sub-regional data for 2011–2022, Melanesia, Polynesia and the Caribbean recorded the three largest falls in active correspondents, and the Pacific's US dollar relationships fell furthest. Official responses differ: the Pacific now has a $68 million World Bank project to keep the last correspondent link open, while in the Eastern Caribbean IMF staff point to AML/CFT reform to protect what they call thin relationships. Our view is that public backstops can buy time, but only scale and supervisory credibility are likely to bring correspondents back.
A shrinking network that carries more traffic
Analysis by the Reserve Bank of Australia (RBA) puts the global decline at about 30% between 2011 and 2022, including 4% in 2022 alone. Over the 12 years to 2022, the volume and value of transactions processed through these networks rose by 61% and 37% respectively. Fewer relationships are carrying more traffic.
Official sources point to the economics of the business rather than to any single shock. The Pacific Banking Forum's outcomes statement identified limited profitability, higher costs, lack of scale, difficulty in mitigating financial crime risks and uneven anti-money laundering and counter-terrorist financing (AML/CFT) effectiveness as key drivers of de-risking. Small economies with low payment volumes are exposed on each count, which helps explain why the decline is steepest at the edges of the network.
Where the losses are concentrated
Across the CPMI's 22 sub-regions, Melanesia, Polynesia and the Caribbean recorded the largest falls in active correspondents over 2011–2022, at 62.6%, 54.0% and 52.1%. Northern America lost 19.4%, the smallest fall of any sub-region. The Caribbean lost 10.1% in 2022 alone, its steepest annual fall in the series. In US dollars the Pacific losses are sharper still: active dollar correspondents fell by 76.0% in Melanesia and 65.5% in Polynesia, against 50.7% in the Caribbean.
The average Caribbean country dealt directly with 18.8 counterparty countries in 2022, against 34.7 in 2011; for Melanesia the figure fell from 59.2 to 29.0.
Change in active correspondents by sub-region, 2011–2022
| Sub-region | All currencies | US dollar | Relationships, 2022 |
|---|---|---|---|
| Melanesia | -62.6% | -76.0% | 564 |
| Polynesia | -54.0% | -65.5% | 292 |
| Caribbean | -52.1% | -50.7% | 1,596 |
| South America | -50.5% | -53.8% | 2,330 |
| Australia and New Zealand | -28.8% | -44.4% | 3,788 |
| Northern America | -19.4% | -19.1% | 8,709 |
The Pacific: thinner links in every country
The RBA found that active correspondents in the South Pacific fell by about 60% between 2011 and 2022, a decline almost twice as severe as the global one. Every member country of the South Pacific Central Bank Governors' Meeting in its sample lost between 49% (Tonga) and 78% (Timor-Leste) of its relationships. Pressures are most acute in US dollar and euro services, and industry reports cited by the RBA suggest local banks have been hit harder than regional and international banks. In Tonga two small banks lost their US dollar accounts, while domestic banks in Vanuatu and Samoa face continuing pressure. The relationships that remain are costlier and may carry restrictions on the customers or transactions they can process.
Change in correspondent relationships, %
Source: Reserve Bank of Australia, Correspondent Banking in the South Pacific (Bulletin, June 2023), 15 June 2023; US Department of the Treasury, Outcomes Statement of the Pacific Banking Forum (statement and press release), 15 July 2024; World Bank, World Bank Works to Ensure Pacific Island Countries Stay Connected to Global Financial System (press release), 6 September 2024.
Australia and the United States co-hosted the Pacific Banking Forum in Brisbane on 8–9 July 2024, and its outcomes statement said the region had experienced the fastest withdrawal of key correspondent relationships in the world. On 6 September 2024 the World Bank announced a $68 million project covering Fiji, Kiribati, the Marshall Islands, Samoa, Tonga, Tuvalu and Vanuatu. It will subsidise a provider to serve institutions facing the loss of their last correspondent relationship in a key currency, while preparing a regional aggregation of transactions to build scale.
The Caribbean: thin relationships and policy risk
In the Eastern Caribbean Currency Union (ECCU), IMF staff described correspondent banking relationships as thin in the April 2024 Article IV report, and said stronger AML/CFT frameworks, amid scrutiny of citizenship-by-investment programmes, would help address perceptions of regional risk. CPMI country data show relationships falling by 61.3% in Antigua and Barbuda, 56.8% in St Lucia and 55.1% in Grenada over 2011–2022. All three are among the five Caribbean countries that operate such programmes, and the IMF described the ECCU outlook as heavily dependent on uncertain inflows from them. It rated its earlier advice to protect local banks' correspondent relationships as only partly implemented, with designation of the Eastern Caribbean Central Bank as AML/CFT supervisor of banks still pending in two jurisdictions. The levers the IMF identifies are supervisory, so the burden of restoring correspondents' confidence rests largely with the authorities.
What this means for banks and supervisors
The World Bank backstop addresses continuity rather than profitability, and its own design treats regional aggregation as the lasting fix. For respondent banks in small jurisdictions, the main risk is reliance on a single remaining correspondent in a key currency. The G20 cross-border payments targets set the timetable: more than 90% of individuals who wish to send or receive remittances should have access to an electronic cross-border means by end-2027, and the global average remittance cost should be no more than 3% by 2030. Meeting them in the Pacific and the Caribbean will depend on whether the remaining correspondent links hold.
What to watch
- End-2027: G20 target for more than 90% of individuals who wish to send or receive remittances to have access to an electronic cross-border means.
- 2030: global average remittance cost of no more than 3%, with no corridor above 5%.
Primary sources: Reserve Bank of Australia, Correspondent Banking in the South Pacific (Bulletin, June 2023), 15 June 2023; Bank for International Settlements, Committee on Payments and Market Infrastructures (CPMI), CPMI correspondent banking chartpack (end-2022 data), 31 May 2023; World Bank, World Bank Works to Ensure Pacific Island Countries Stay Connected to Global Financial System (press release), 6 September 2024; International Monetary Fund, Eastern Caribbean Currency Union: 2024 Staff Report for the 2024 Article IV Consultation on Common Policies of Member Countries (IMF Country Report No. 24/93), 25 April 2024; US Department of the Treasury, Outcomes Statement of the Pacific Banking Forum (statement and press release), 15 July 2024; Financial Stability Board, G20 Roadmap for Enhancing Cross-border Payments: First consolidated progress report, 13 October 2021.