IDEAS home Printed from
   My bibliography  Save this paper

Prospects for blockchain-based settlement frameworks as a resolution to the threat of de-risking to Caribbean financial systems


  • Williams, Robert Crane


Caribbean countries have been seriously impacted by the trend toward “de-risking” in the global financial system, and this is damaging to their economic security and the ability of Caribbean businesses to innovate. De-risking is the name given to the tendency of banking institutions to turn away from working relationships and lines of business for which the cost of regulatory compliance—and the risk of non-compliance— is deemed to be too high in comparison to the returns. This is a phenomenon that is affecting developing economies around the world, but the small and vulnerable economies of the Caribbean have been hardest hit. For example, recent years have seen a trend in which banks in major economies are severing their correspondent relationships with banks in the Caribbean, having determined that the profitability of these operations is outweighed by the cost of managing associated risks. Banks in the Caribbean have been left struggling to recover from this abandonment by many of their former business partners, having been reliant on these correspondent banking relationships as a means of access to global financial networks (Boyse and Kendall 2016). Under correspondent banking schemes, a “correspondent bank” – typically a banking institution with a presence in a major developed economy, such as the United States or European Union – holds an account on behalf of a bank located in a smaller, less developed economy. Many Caribbean banks use these correspondent accounts to provide their customers with international money transfer and foreign exchange services. However, institutional and regulatory factors have driven correspondent banks to reduce their exposure to risk. Particular areas of concern include issues surrounding anti-money laundering and combating the financing of terrorism (AML/CFT) and the need to ensure compliance with international trade sanctions. The costs associated with the high level of customer due diligence required to manage such risks are, in many cases, not justified by the low profit margins associated with correspondent banking services. As a result, many Caribbean banks are finding that the correspondent banking relationships that they have relied on in the past are being cut off.

Suggested Citation

  • Williams, Robert Crane, 2017. "Prospects for blockchain-based settlement frameworks as a resolution to the threat of de-risking to Caribbean financial systems," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 41139, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  • Handle: RePEc:ecr:col095:41139

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Barrdear, John & Kumhof, Michael, 2016. "The macroeconomics of central bank issued digital currencies," Bank of England working papers 605, Bank of England.
    Full references (including those not matched with items on IDEAS)


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecr:col095:41139. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Biblioteca CEPAL). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.