Five recommendations to ease correspondent banking costs and concerns - CPMI

13 July 2016

Press release

Five recommendations to help alleviate some of the costs and concerns affecting correspondent banking activities were set out in a report released today by the Committee on Payments and Market Infrastructures (CPMI).

Until recently, banks have maintained a broad network of correspondent relationships, but there are growing indications that this situation might be changing. This implies a threat that cross-border payment networks might fragment and that the range of available options for these transactions could narrow.

Correspondent banking is an essential component of the global payment system, especially for cross-border transactions. Through correspondent banking relationships, banks can access financial services in different jurisdictions and provide cross-border payment services to their customers, supporting, inter alia, international trade and financial inclusion.

The Correspondent banking report provides some basic definitions, outlines the main types of correspondent banking arrangement, summarises recent developments and touches on the underlying drivers. The report then develops recommendations on certain measures relating to (i) know-your-customer (KYC) utilities; (ii) use of the Legal Entity Identifier (LEI) in correspondent banking; (iii) information-sharing initiatives; (iv) payment messages; and (v) use of the LEI as additional information in payment messages.

The report was issued for public consultation in October 2015. Based on the comments received and further interactions with relevant stakeholders, some changes have been made to strengthen the analysis and sharpen the message and the recommendations. In addition, the report now contains a quantitative analysis using SWIFT transaction data on correspondent banking activities. The data set comprises more than 200 countries and territories, and the analysis shows a trend towardsconcentration in correspondent banking activity as measured by payment traffic.

CPMI believes that, as the next step towards implementation, these measures should be further analysed by all relevant authorities and stakeholders in order to gauge the potential impact of each measure and to avoid unintended consequences. The CPMI expects that the relevant stakeholders will initiate any necessary reviews or investigations in the light of the five recommendations as soon as possible.


Notes

  1. The CPMI promotes the safety and efficiency of payment, clearing, settlement and related arrangements, thereby supporting financial stability and the wider economy. The CPMI monitors and analyses developments in these arrangements, both within and across jurisdictions. It also serves as a forum for central bank cooperation in related oversight, policy and operational matters, including the provision of central bank services. The CPMI is a global standard setter in this area. It aims at strengthening regulation, policy and practices regarding such arrangements worldwide. The CPMI secretariat is hosted by the BIS. More information about the CPMI, and all its publications, can be found on the BIS website.

  2. The report on Correspondent banking was prepared for the CPMI by a working group comprising representatives from CPMI central banks. The working group was chaired by Jochen Metzger (Director General, Directorate General Payments and Settlement Systems, Deutsche Bundesbank).