The Banking Executive Magazine - Issue 150, June 2021

The Seventh Annual Arab – Cypriot Forum SPEECH BY DR. SHADY KARAM, CHAIRMAN OF THE BOARD OF DIRECTORS, ASTROBANK Good morning Ladies and gentlemen, I would like to thank the World Union of Arab Banks, in particular Mr. Wissam Fattouh, its Secretary General and through him, its Chair- man, Sheikh Mohamed El Jarrah El- Sabbah and Secretary General, for inviting me, and I would like to wel- come them to Cyprus. I am thankful for the opportunity to participate in this meeting organized on what I consider a crucial theme today for small and midsize banks especially those in smaller markets like Cyprus. As you will most certainly hear from the distinguished speakers in the fol- lowing two days, correspondent banking is the cornerstone of the global payment system. It is designed to serve the settlement of financial transactions across borders. It allows companies and individuals to safely move money around the world and supports and encourages global trade. It is mapped by using corridors, i.e. flows of cross-border messages and correspondent banking relationships with given money-center banks. Over the last seven years, active re- lationships in the global correspon- dent-banking network have declined by about 20% and the number of ac- tive corridors has fallen by roughly 10%. All the research demonstrates that since the 14th century in Venice to the second wave of globalization in the late 20th century, correspondent banking and global trade cross-fertil- ize each other’s growth. It is as though one is the condition of suc- cess for the other. Then, the de-risking tsunami struck. Correspondents panicked. Over the past decade, correspondent banks have been retreating. Cost-ef- fectiveness and risk were used as ar- guments to justify the retreat. After the financial crisis, tighter reg- ulations (increasingly costly to imple- ment) and regulatory penalties (USD 220 Billion paid since 2018. BoA alone paid 76 Billion. Great source of revenue for US Treasury and NYC) have discouraged correspondent banks from pursuing their operations in many markets considered as insuf- ficiently aligned with international compliance standards and insuffi- ciently lucrative to warrant the risk. Overall, research shows that there is a significant fall in global correspon- dent banking relationships since the crisis. Closer to us: Minus 34% in Cyprus by 2018 with a decrease in value of 71% and a fall in the number of payments of 40%!!!! Minus 22% in Saudi Arabia! Minus 20% in the UAE! If we want to be in line with the FATF (Financial Action Task Force, a watchdog) standards, “De-Risking” should never be an excuse for the private sector to avoid implementing a risk-based approach, This has been emphasized by the FATF on a number of occasions, clar- ifying that the Standards require the application of a case-by-case risk- based approach, as opposed to wholesale de-risking. ISSUE 150 JUNE 2021 the BANKING EXECUTIVE 47 Dr. Shady Karam, Chairman of the Board of Directors, Astrobank