Abstract
This chapter investigates the relationships between banks in different countries through an empirical study based on interviews with the six leading Nordic banks and the Swedish export credit agency. The authors find that although all six banks have significantly reduced the number of correspondent banking relationships, they approach the reduction in different ways. This means that their regulatory responses are similar at an aggregate level but quite different on the individual basis. The results further indicate that compliance costs have risen extensively with potential implications on trade. The topic is interesting in light of the new Basel III regulatory agenda and with regard to money laundering and terrorist financing norms.
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- 1.
See, for example, the Bank of International Settlements (BIS)-sponsored Committee on Payment and Market Infrastructures (CPMI 2016).
- 2.
The Wolfsberg Group is an association founded by 13 multinational banks with the aim of developing “frameworks and guidance for the management of financial crime risks, particularly with respect to Know Your Customer, Anti-Money Laundering and Counter Terrorist Financing policies” (Grolleman and Jutrsa 2017:6).
- 3.
A body of literature has identified and analyzed CBRs related to platforms in which banks are integrated. A discussion of interchange fees between actors in card payment systems is one example (Rochet and Tirole 2002; James and Weiman 2010). There is also a body of literature discussing the role of the Federal Reserve banks as an intermediator in CBRs within the US banking system (McAndrews and Strahan 2002; Stavins 2004).
- 4.
This definition is close to the definition used by the FATF (Financial Action Task Force), which identifies de-risking as a situation “where financial institutions terminate or restrict business relationships with entire countries or classes of customer in order to avoid, rather than manage, risk in line with the FATF’s risk-based approach” (FATF 2016).
- 5.
On June 26, 2015, the 4th Anti-Money Laundering Directive (EU) No. 2015/849 (4th AMLD), which takes account of the FATF 2012 recommendations, entered into force. EU Member States were required to implement the 4th AMLD into national law by June 26, 2017 (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32015L0849, accessed 2018-06-26).
- 6.
http://www.fatf-gafi.org/about/historyofthefatf/, accessed 2018-06-26.
- 7.
Because the interviews could not be recorded and have, in most cases, been translated from Swedish, the results are based not on direct quotes but rather on a representation of what was said during the interviews.
- 8.
TARGET2 is the real-time gross settlement (RTGS) system owned and operated by the Eurosystem. Central banks and commercial banks can submit payment orders in euro to TARGET2, where they are processed and settled in central bank money, that is, money held in an account with a central bank.
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Elliot, V., Lindblom, T., Willesson, M. (2019). The Impact of Recent Regulatory Reforms on Cross-Border Banking: A Study of the Nordic Markets. In: Gualandri, E., Venturelli, V., Sclip, A. (eds) Frontier Topics in Banking. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-16295-5_11
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