The Committee on Payments and Market Infrastructures (CPMI) today issued a consultative report on Correspondent banking.
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.
Until recently, banks have maintained a broad network of correspondent relationships, but there are growing indications that this situation might be changing. In particular, some banks providing these services are cutting back the number of relationships they maintain.
The CPMI consultative 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 reviews certain technical measures relating to (i) know-your-customer (KYC) utilities; (ii) increased use of the Legal Entity Identifier (LEI); (iii) information-sharing mechanisms; and (iv) improvements in payment messages. Following a detailed assessment of the advantages and disadvantages of each of these technical measures, the report puts forward four recommendations for consideration by the industry and authorities.
As a next step before any potential implementation, these measures will be subject to a formal consultation and further analysed by all relevant stakeholders in order to gauge the potential impact of each measure and to avoid unintended consequences. Therefore, the report seeks comments on the recommended technical measures by 7 December 2015, to be sent to the CPMI secretariat.
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