Banks have been leaving at an alarming rate, with most deciding that these countries’ economies are too small, and compliance is too costly. This has reduced the Caribbean’s access to the global financial system which heavily depends on correspondent banking relationships.
Mia Mottley, at COP27 said that much of the economic challenges faced in the Caribbean are inflicted by banks from the US, the UK and EU and Australia. She stated boldly that de-risking is the “most nonsensical thing” the region has “seen in public policy” and that it will lead to the very money laundering and financing of terrorism that the US and Caribbean governments want to avoid.
While de-risking may be in the best interest of the institutions, it causes significant difficulties in the economies, including in the areas of international trade, on a commercial and personal level. The growing effects of de-risking can be seen on a socio-economic level as it has made it more difficult for the diaspora to support their families with remittances. Tourism is also affected.
De-risking has also stagnated economic growth in nations who are struggling to stabilize from the effects of climate change crisis and the Covid-19 pandemic. Furthermore, foreign direct investment has been affected.