Decline in Correspondent Banking is Universal – CPMI

Over the last seven years, active relationships in the global correspondent banking network have declined by about 20%, and the number of active corridors has fallen by roughly 10%.

CPMI (the Committee on Payments and Market Infrastructures) has published new analysis that shows the number of correspondent banking relationships has shrunk by 20 percent over the past seven years.

Correspondent bank networks account for a large share of cross-border payments.

“Many families and small businesses rely on remittances to make ends meet but often face a choice between tolerating high costs or risking uncertain delivery of payments, ” said CPMI chair Benoît Cœuré.

“The shrinking correspondent banking network is adding to these concerns. It may push people to use ‘shadow’ payment services such as cryptocurrencies that put the most disadvantaged at risk,” he added, speaking on the sidelines of the High-level Meeting on Financial Inclusion hosted by the BIS (Bank for International Settlements).

“Collectively, our efforts can enhance financial inclusion by making payments more efficient and by lowering their costs,” Cœuré said.

The current analysis builds on the 2016 CPMI report on correspondent banking, and is based on payment message data from over 200 jurisdictions provided by SWIFT.

The data shows that over the last seven years, active relationships in the global correspondent banking network have declined by about 20 percent and the number of active corridors has fallen by roughly 10 percent.

“The decline in correspondent banking relationships is universal, yet it is more pronounced in some regions than others.”

In affected jurisdictions, this may impact the ability to send and receive international payments, which could push people into using unregulated and potentially unsafe “shadow payments”, with further consequences for growth, financial inclusion and international trade.

Despite the decline in the number of active correspondent banking relationships, total message volumes have been rising, resulting in an increase of concentration in the network.

CPMI acknowledges there are idiosyncratic and complex factors at play, such as the emergence of “new and diverse methods” for cross-border payments.

The international community has already put in place an action plan to address the decline of correspondent banking, and that attention has now turned to monitoring its implementation, CPMI said.

The FSB (Financial Stability Board) released its last update on measures to address the decline in correspondent banking in November 2018.

CPMI’s analysis is available here.

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