The impact of recent regulatory reforms on cross-border correspondent banking: A study of the Nordic markets

• Banks are fundamental to trade between countries and the relationships between banks in different countries are part of the global infrastructure. In recent years this infrastructure has been put under pressure by stricter regulations, both within the Basel III agenda and with regards to money laundering and terrorist financing. The Financial Stability Board (FSB, 2016, p. 3) notes that “A decline in the number of correspondent banking relationships is a source of concern for the international community because it may affect the ability to send and receive international payments, or drive some payment flows underground, with potential consequences on growth, financial inclusion, as well as the stability and integrity of the financial system,”. Still, present analyses of cross-border banking remain anecdotal and tend to focus on dyadic buyer/supplier relationships. In this study, we present empirical results from interviews with the six leading Nordic banks and the Swedish export credit agency. We find that although all six banks have significantly reduced the number of correspondent banking relationships (CBRs), they approach the reduction in different ways. This means that their regulatory responses are similar at an aggregate level but quite different on the individual basis. The results further indicate that compliance costs have risen extensively with potential implications on trade.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business (hsv//eng)

Nyckelord

Correspondent banking

CBR

trade finance

bank regulation

regulatory response theory.

Publikations- och innehållstyp

vet (ämneskategori)

kon (ämneskategori)