www.ifc.org/ThoughtLeadership Note 24 | November 2016 DE-RISKING BY BANKS IN EMERGING MARKETS – EFFECTS AND RESPONSES FOR TRADE Emerging evidence suggests that de-risking is a reality. Increased capital requirements, coupled with rising Know- Your-Customer, Anti-Money-Laundering, and Combating-the-Financing-of-Terrorism compliance costs have resulted in the exit of several global banks from cross-border relationships with many emerging market clients and markets, particularly in the correspondent banking business. A subset of this business, trade finance, is also at risk, with potential consequences for segments of emerging market trade. The emerging market trade finance gap was significant before the crisis and has since likely expanded. Those involved in addressing the de-risking challenge must focus on compliance consistency and effective adaptation of technological innovations. Of all of the components of a financial system, banks are the higher reserve capital and liquidity requirements. And with driving force. They are the actual mechanisms that transmit more capital in reserve, banks generally have less to lend, and money to individuals and businesses that need it to operate and so are allocating increasingly scarce capital to more profitable grow; they provide formal channels to store and invest wealth; products, markets and customers. Relationships that generate and they are integral to monetary policy initiatives. They are lower returns or more challenging risk are more likely to be cut. essential to basic economic function, stability, and growth. Banks also work across borders to provide clients with access Increased Compliance Costs. At the same time, there have to foreign exchange and foreign markets and, in many cases, been greater efforts to combat money laundering and terrorism goods produced outside of their country. Thus, banks are financing. The Financial Action Task Force on Money critical to linking emerging markets to the global economy. Laundering, or FATF, has proposed standards that follow a risk-based approach,2 holding banks to an incident-based Financial Sector De-risking standard as opposed to a process standard. This allows some Yet banks across the globe have had to deal with a surge of flexibility for banks to develop their own processes that monitor regulatory activity in a compressed time period. While many of and assess client risk, but leaves them subject to unspecified and these regulations have increased financial system resilience and potentially large fines should incidents occur. In some cases, helped to identify suspicious client behavior, they have also regulators have aggressively prosecuted global banks and imposed increases in both reserve capital requirements and imposed significant fines.3 For example, HSBC was fined $1.9 compliance costs. As a result, banks find it more difficult to do billion for allowing possible money laundering to occur through business with certain markets and clients. So-called “de- its institution.4 The international standards are then risking” refers to banks terminating or restricting their implemented at the national level, with each country adapting relationships with clients or categories of clients in order to them to local conditions. This has created variance between avoid risk.1 De-risking is of particular concern when cross- jurisdictions for anti-money-laundering (AML), combating-the border links between banks are severed. financing-of-terrorism (CFT), and know-your-client (KYC) Increased Capital Requirements. Financial sector regulatory requirements, often leaving banks to interpret applications. reforms, imposed over the past decade, were intended to reduce As a result, the financial effects of compliance risk have the frequency and severity of financial shocks. Following the become more material for banks. Compliance risk increases 2008 financial and 2010-2011 Eurozone crises, multiple costs for financial institutions in four areas. First, the risk of regulatory reforms by governments and international bodies large penalties for violations raises the potential cost of cross- have sought to quantify systemic risk and promote greater border exposure.5 transparency. Of particular note, the Basel III accord attempted to strengthen financial sector regulation, supervision, and risk Second, the additional scrutiny of banks’ clients dramatically management to increase bank resiliency through additional raises costs, particularly for adding new client relationships or disclosure requirements and guidelines pertaining to leverage markets.6 Banks are unable to execute transactions without ratios, capital requirements, and liquidity. The result has been bearing the costs of putting new processes, procedures, and tools in place that link customer due diligence to transaction Downward Pressure on Correspondent Banking monitoring systems that raise flags and investigate suspicious Correspondent banking involves agreements or contractual activity continuously in real time. 7 These costs may not be relationships between banks to provide payment services for recovered if market and client returns are relatively low. each other,19 a function that is essential to cross-border Third, a lack of harmonization in compliance requirements payments, foreign currency settlements, and access to foreign raises costs for banks as they seek to understand and apply local financial systems.20 With more complex regulatory risk, the requirements.8 Banks face a shortage of appropriately skilled typically lower margin correspondent banking business line is people to track and manage various compliance requirements, more vulnerable to supply pressure. There is growing evidence and constant skills development is required. 9 that global banks are terminating or limiting correspondent banking relationships in emerging markets. Fourth, regulations are changing on a monthly or even weekly basis.10 Ongoing changes to and tightening of compliance A 2014 IFC survey, among the first to assess the sentiments of requirements in any single jurisdiction, along with divergence global and regional correspondents, found signs of potential de- in levels of enforcement, require additional time, resources and risking in correspondent banking activity. 21 Rising compliance costs to adapt.11 An analysis of national AML/CFT regulations costs and country or counterparty risk factors were the most found at least nine emerging markets had made one or more commonly cited reasons. Some 70 percent of respondents said significant changes in 2015 alone.12 they saw a rise in compliance costs in the last three years, and 66 percent expected compliance costs to continue to rise in the Surveys of banks conducted since 2014 show a clear trend of next six months. Three-quarters of large correspondent rising spending on compliance. Anti-money-laundering respondents in a 2015 World Bank survey said they had reduced compliance costs have risen 53 percent since 2011, according their correspondent relationships.22 Banks in the United States, to a 2014 KPMG survey.13 That study estimated that the United Kingdom, the European Union, and Canada were expenditures on such programs will exceed $10 billion within responsible for a significant portion of such terminations. Other the next two years. A 2016 survey of financial services surveys noted similar trends. A 2014 British Banking compliance professionals worldwide by Dow Jones and the Association survey of 11 international clearing banks found that Association of Certified AML Specialists found that most since 2011, many thousands of correspondent relationships respondents had increased their AML investment by up to 24 were closed with an average per-bank decline of approximately percent since 2013.14 7.5 percent.23 Most respondents said they anticipated additional increases of SWIFT data analyzed by the Committee on Payments and up to another 24 percent over the coming three years. The Market Infrastructures in 2016 showed that there was at least Institute of International Finance and Ernst & Young’s annual some decrease in the number of active correspondents in over survey of banks in October 2016 found that increased focus on 120 countries, with the decline exceeding 10 percent for some non-financial risks, including money laundering and sanctions, 40 of them. was placing greater financial strain on their businesses.15 Responses from smaller regional and local banks also point to As a result of simultaneous reserve capital and compliance a decline in the number of correspondent relationships. In requirement increases, banks are de-risking from certain roughly half of 91 jurisdictions covered by the 2015 World markets and clients. In the same IIF/E&Y survey, banks said Bank survey, banking authorities and/or local and regional capital, liquidity, and leverage changes under Basel III are banks indicated a decline. An IFC follow-up survey of 210 causing them to rethink their business models.16 Over 48 emerging market banks in 2016 noted a significant increase in percent said they have exited or are planning to exit business pessimism about the availability of correspondent lines. 24 lines, and 27 percent said they are leaving specific countries. Globally, the percentage of bank survey respondents anticipating very near-term decreases rose from 3 percent to 22 In many emerging markets, local banks are also caught in a de- percent year-on-year. In Sub-Saharan Africa this trend is risking cycle. As their cross-border counterparty banks face the greatly pronounced: The percentage of banks with a negative financing challenges outlined above, local banks are finding it outlook increased from 0 percent to 27 percent. According to a difficult to absorb regulatory compliance requirements as 2016 survey by the International Chamber of Commerce, 35 well.17 And in most cases local banks do not receive percent of respondents reported experiencing termination of explanations for terminated correspondent banking correspondent banking lines.25 relationships (CBRs), hindering their ability to respond or adjust.18 The IMF warns that, if not contained, the aggregate decline of correspondent banking threatens to result in negative effects on financial inclusion, stability, growth and development goals. 26 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. And a significant impact on financial inclusion has also been not be possible if exposure constraints exist for the client or the noted.27 country, or the potential return on this exposure does not merit the risk taken. Downward Pressure on Trade Finance In today’s environment, many international banks with trade Trade finance, an important subset of correspondent banking, is finance expertise face increased risk-based capital constraints also at risk. Trade has long been recognized as a key driver of and other regulatory pressures that have an impact on their development, and its importance to a country’s overall emerging market operations (Figure 1). economic performance is well-documented. While individual trade transactions are short-term, the accumulated development impact of trade is significant and long-term. Emerging countries Figure 1. Trade Finance Impediments Identified by Banks that trade successfully tend to have made the most progress in AML/KYC 93% alleviating poverty and raising living standards.28 Openness to the world economy, including trade participation, was one of Low issuing bank credit rating 86% the key elements of sustained high growth identified by the 2008 report of the Commission on Growth and Development.29 Low country credit rating 82% Evidence shows that a one percent increase in a country’s trade share raises income per capita by two percent.30 Furthermore, Regulatory requirements 76% trade supports the availability of goods critical to economic Low obligor or company credit function and life. Some 21 countries in Sub-Saharan Africa rely 70% rating on imports for more than 90 percent of their energy needs.31 And half of the top 20 rice importers globally are from among Source: ICC Global Survey on Trade Finance, 2016. the poorest countries in Africa.32 In addition, domestic producers often require imports of agricultural inputs, such as Trade finance is typically considered to have lower financial seeds, fertilizer, agrichemicals, irrigation, and equipment risk due to a near-zero global loss history and relatively short during pre-planting phases and throughout the crop cycle. tenors, among other factors. Still, it appears to be vulnerable to de-risking. In a 2015 International Chamber of Commerce In many cases, trade in emerging markets would not occur study, roughly two thirds of respondent banks said that the without trade finance, the short-term financial obligations and implementation of Basel III regulations has affected their cost related documentation taken on by banks transacting cross- of funds and liquidity for trade finance. 37 In a similar 2016 border. Bank-intermediated trade finance supported one third survey, increased costs for KYC/AML continued to be a of the $19 trillion in global trade in 2013, according to estimates challenge: 93 percent of respondents said that these factors by the Bank of International Settlements.33 Furthermore, data continue to be a strong impediment to facilitating trade finance collected between 2005 and 2011 indicate that a one percent and 62 percent noted they had seen trade finance transactions increase in trade credit extended led to a roughly 0.4 percent decline due to KYC/AML considerations. 38 Seven in ten increase in a country’s real imports.34 Reductions in the respondents to the 2015 survey said that implementation of availability of trade finance have been found to affect trade. It KYC/AML regulations was already resulting in their bank's is estimated that credit shocks related both to working capital decreased support for trade transactions. and trade finance accounted for between 15 and 20 percent of the decline in trade during the 2008 crisis.35 The gap between trade finance demand and supply was sizable pre-crisis, and many are concerned that it will continue to Trade finance instruments, intermediated by commercial banks, expand, impeding economic growth. Studies by the World are designed to address the risks rising from the lack of Trade Organization, the Asian Development Bank, and the familiarity between buyers and sellers, the timing differences of African Development Bank show a large, unmet demand for cash needs and cash flows, and other risks—real or perceived— trade finance. The WTO estimates a global trade finance gap of of a country or counterparty. Trade finance instruments are $1.4 trillion,39 with significant shortfalls in emerging regions premised on an existing credit relationship between like developing Asia, where trade finance demand exceeds counterparty banks.36 International banks, which are often supply by up to $425 billion.40 In Africa the value of unmet required to “confirm” the payment to the exporter if documents demand for trade finance is estimated to be $120 billion, fully conform to that required by the letter of credit, take on the one third of the continent’s trade finance market.41 Because reimbursement risk related to local emerging market banks. bank-to-bank relationships represent a key element in cross- Thus, in order for goods to be shipped, a confirming bank must border transactions, declines in correspondent banking be willing to take the payment risk of the local bank. This may relationships put trade finance, and thus trade, at risk.42 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Smaller Markets and Firms Are Vulnerable financing gap for them was estimated by IFC and McKinsey to be as much as $2.6 trillion (Figure 2). De-risking affects sectors and stakeholders across emerging markets, with some correspondents terminating over 60 percent of their correspondent banking relationships.43 Data collected Figure 2. Capital-Constrained SMEs by Region (% of Total) in the World Bank’s 2015 survey of national regulatory bodies and local banks showed the global de-risking footprint and its Africa 55% resulting financial exclusion have especially affected smaller MENA 55% developing economies in Africa, the Caribbean, Central Asia, Europe and the Pacific. 44 The IMF has noted a similar impact South Asia 39% in nations in the Middle East and North Africa region and that East Asia 38% the limited number of banks operating in small Pacific states amplifies the risk and impact of the loss of correspondent LAC 33% banking. At least 16 banks across five countries in the ECA 29% Caribbean region have lost all or some of their correspondent relationships as of May 2016, according to the IMF.45 Total EM SME financing gap: The Caribbean region, which relies heavily on cross-border up to US$2.6tn funding for trade, offers a telling example of de-risking.46 The Source: IFC and McKinsey, 2014. region’s capacity to conduct cross-border payments is being put at risk from the pressures that reduce correspondent banking. According to the Caribbean Development Bank, external trade Addressing De-Risking for the export-oriented and oil-importing Caribbean countries Multiple institutions, including at least 16 multilateral bodies, accounted for approximately 94 percent of GDP in 2014. have engaged to support the clarification and consideration of Countries in the region import a significant portion of their broad guidance on compliance, application of said guidance by essential food, energy, and medical supplies and are individual regulators, and the implications on participants in the beneficiaries of significant remittance inflows. Hence, a lack of formal financial system.51 In the absence of systematic, access to cross-border payment systems could have ruinous comprehensive data, many of these bodies have attempted to consequences. quantify de-risking from multiple, often complimentary, perspectives. They have contributed to the evidence gathering De-risking in the Caribbean has been closely examined and effort, typically via surveys of national regulators and financial monitored by a cross-functional group that includes the institutions. And many national regulators are continuing to Caribbean central banks, the Financial Stability Board, the evolve their application of the risk-based approach, clarifying World Bank, the IMF, and the Caribbean Community. The and further developing their national AML/CFT strategies in World Bank’s 2015 survey found financial institutions in the conformity with international standards. Bahamas, Guyana, Haiti, Jamaica, and Trinidad and Tobago have experienced reductions in correspondent relationships.47 The Financial Stability Board is following a four-point plan In nearby Belize, only two banks have managed to maintain which includes further examination of the issue, clarification of such relationships with full banking services.48 Each country in regulatory expectations, capacity building in jurisdictions this region is currently facing specific challenges due to de- where respondent banks are affected, and strengthening of tools risking, and most are also losing new business since available for correspondent banks to perform due diligence checks. The correspondent banks refuse to enroll new customers from this Financial Action Task Force also recently provided additional region, constricting new sources of economic growth. guidance on correspondent banking services52, among other topics, and it plans to provide guidance on best practices for Smaller Firms. Small and medium-sized enterprises, or SMEs, customer due diligence to facilitate financial inclusion. 53 are among the clients that are likely severely affected by de- risking. Anecdotal evidence suggests the reason for this may be Some development finance institutions are actively engaging as a so-called flight to quality. Globally, over half of trade finance well. Among other areas of engagement, the World Bank has requests by SMEs were rejected in 2015.49 This is of executed a survey on correspondent banking and plans to assess consequence, as SMEs in emerging markets contribute 80 the effects of de-risking on real sector banking clients. It is also percent of total employment and almost 40 percent of total bringing financial sector participants, standard-setting bodies, exports, both of which are critical to economic growth.50 SMEs and regulators to address the effects of de-risking on access to already face significant capital constraints, as the global finance for more vulnerable parts of the financial system. The IMF has evaluated other market forces that affect de-risking; it has made recommendations to clarify, strengthen, and align This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. regulatory and supervisory frameworks; and it has identified Technological Innovation. The emergence of new best practices in national policy responses. The IFC has a client technologies from the private sector has significant potential to network of over 500 financial institutions worldwide, which in contribute to a reduction in compliance costs and an increase in turn hold approximately 10 percent of emerging market risk assessment precision. There is a shift toward a customer- financial sector assets. The IFC continues to help clients centric infrastructure that takes advantage of multiple disruptive improve AML/KYC processes. It also supports the availability technologies in the areas of enhanced identity verification (such of trade finance in emerging markets by enhancing existing as biometric and legal entity identifiers); transparency emerging market trade finance channels and also investing (distributed ledger technology such as the block chain, for directly. It continues to interact with its clients to better example), interoperability (open-sourced, real-time global understand the implications of regulatory changes and cross- payment systems); and the use of big data for enhanced border de-risking. security. For instance, several of the largest global banks (including Barclays, Citigroup, UBS, Santander, and Deutsche The Way Forward Bank) are independently experimenting with different Despite the efforts of multilateral standard-setting boards, applications of block chain technology and smart contracts that global task forces, multilateral agencies and national regulators, might help resolve AML/CFT issues. 55 Multilateral and there remains a need to balance the prevention of access to national regulatory engagement with advanced technology is financial services by illicit actors with the expansion of access also important. to finance to companies, small businesses, households and individuals. The continued existence of variance and ambiguity Conclusion with regulatory applications drives compliance costs to levels As banks adapt to simultaneous increases in both reserve capital that make legacy compliance approaches unfeasible. An requirements and compliance costs, the feasibility of doing effective effort to address this will focus on clarifying and business with certain segments is expected to further diminish. making consistent regulatory requirements across jurisdictions, Thus, the de-risking trend will likely continue, if not accelerate, as well as exploring and applying emerging technologies to in the near term. This separates people, businesses, and improve efficiency and enhance risk assessments. potentially entire countries from access to critical aspects of cross-border finance. In some cases it puts trade finance —and Clarity on Regulatory Application. While regulatory thus the goods and growth enabled by trade—at risk. authorities note the importance of a risk-based approach to anti- money laundering and know-your-customer regulations, it is Enhanced collaboration among multilateral institutions, important that a clear set of policies, procedures, and standards regulators, and private-sector financial institutions will need to are developed and enforced through an aligned agreement achieve end-to-end transparency, efficiency, monitoring, and among banking regulatory bodies: multilateral, national and controls that effectively restrict the access to finance for illicit subnational. Collaboration would include standardized due actors while reducing the limitations on access to finance for diligence processes to assess risk for a particular customer or legitimate ones. The way forward will entail a concerted effort by actors along the payment process, including the trade finance to enhance clarity on regulation and expedited technological supply chain, remittance flows, and others. Risk assessment innovation. criteria could include the establishment of identification and verification requirements for customers and businesses that Susan Starnes, Strategy Officer, Financial Institutions Group, track their use of funds. IFC (sstarnes@ifc.org) Among the 333 bank respondents to IFC’s 2014 survey, the Michael Kurdyla, Strategy Officer, Financial Institutions most commonly identified initiatives that would help manage Group, IFC (mkurdyla@ifc.org) rising compliance costs were: (1) developing a central registry of respondents’ data to facilitate due diligence, (2) harmonizing Alex J. Alexander, Chairman and CEO of CashDlite regulatory requirements across jurisdictions, and (3) providing (alex.alexander@CashDlite.com) guidance on how to meet regulatory requirements. 54 In parallel, banks remain responsible for ensuring consistent and adequate levels of customer monitoring via bank operations to verify those identities and relationships.  This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. 1 Corazza, Carlo, 2016. “The World Bank’s Data Gathering Effort.” the Wolfsberg Group for FATF. http://pubdocs.worldbank.org/en/953551457638381169/remittances-GRWG-Corazza- https://classic.regonline.com/custImages/340000/341739/ G24%20AFI/G24_2015/De- De-risking-Presentation-Jan2016.pdf.; see also Galat, Bonnie – Ahn, Hyung, “The risking_Report.pdf. World Bank Group’s Response to the Crisis: Expanded Capacity for Unfunded and 24 IFC, 2016. Annual survey of GTFP issuing banks. Sample included 210 GTFP Funded Support for Trade with Emerging Markets”. In: Chauffour, Jean-Pierre – member banks from 68 countries. Malouche, Mariem (eds.), Trade Finance during the Great Trade Collapse, 2011, pp 25 ICC, 2016. “Global Survey on Trade Finance: Rethinking Trade and Finance.” 301-317. Sample included 357 banks in 109 countries. 2 Available at http://www.fatf-gafi.org. http://www.iccwbo.org/Data/Documents/Banking/ General-PDFs/ICC-Global-Trade- 3 The Economist, 2014. “Poor correspondents.” http://www.economist.com/news/ and-Finance-Survey-2016/. finance-and-economics/21604183-big-banks-are-cutting-customers-and-retreating- 26 IMF, 2016. “The withdrawal of correspondent banking relationships: a case for markets-fear. policy action.” https://www.imf.org/external/pubs/ft/sdn/2016/sdn1606.pdf. 4 Financial Times, 2012. “UK banks hit by record $2.6bn US fines.” 27 Oxfam, 2015. https://www.ft.com/content/643a6c06-42f0-11e2-aa8f-00144feabdc0. 28 WTO, 2016a. “Building Trade Capacity.” http://www.wto.org/english/tratop_e/ 5 Schwartz, David, “Is de-risking Sounding a Death Knell for Foreign banking?” devel_e/build_tr_capa_e.htm. https://fiba.net/blog/2016/07/15/de-risking-sounding-death-knell-foreign-banking/ 29 Commission on Growth and Development, 2008. “The Growth Report: Strategies 6 John Howell & Co., 2016. “Drivers and Impacts of De-risking.” for Sustained Growth and Inclusive Development.” https://www.fca.org.uk/publication/research/drivers-impacts-of-derisking.pdf http://www.growthcommission.org/ 7 Thomson Reuters, 2016a. “The Client Onboarding Challenge.” index.php?option=com_content&task=view&id=96&Itemid=196. 30 http://www.risk.net/operational-risk-and-regulation/advertisement/2439806/the-client- Frankel, Jeffrey A., and David Romer, 1999. "Does trade cause growth?" American onboarding-challenge-getting-to-grips-with-2016-s-aml-and-kyc-compliance-risks. Economic Review. FATF recommended real-time monitoring for “higher risk scenarios” in its October 31 WTO Direction of Trade Statistics, 2013. 2016 “Guidance on Correspondent Banking Services.” See section 5.B.30, page 13. 32 The top rice importers include Burkina Faso, Cote d’Ivoire, Ghana, Guinea, Kenya, 8 Oxfam, 2015. “Understanding Bank De-risking and its Effects on Financial Mali, Mauritania, Senegal, and Uganda. Inclusion.” https://www.oxfam.org/sites/www.oxfam.org/files/file_attachments/rr- 33 Bank of International Settlements (BIS). 2014,”Trade Finance: Developments and bank-de-risking-181115-en_0.pdf. issues” http://www.bis.org/publ/cgfs50.pdf 9 Thomson Reuters, 2016b. “Impact of KYC Changes on Financial Institutions.” 34 Auboin, Marc, and Martina Engemann, 2014. "Testing the trade credit and trade http://www.risk.net/operational-risk-and-regulation/advertisement/2439806/the-client- link: evidence from data on export credit insurance." Review of World Economics onboarding-challenge-getting-to-grips-with-2016-s-aml-and-kyc-compliance-risks. 150.4. 10 Ibid. 35 BIS, 2014. “Trade Finance: Developments and Issues.” 11 Thomson Reuters, 2016a. http://www.bis.org/publ/cgfs50.pdf. 12 PriceWaterhouseCoopers, 2016. “KYC: Quick Reference Guide.” 36 CPMI, 2016. https://www.pwc.com/gx/en/financial-services/publications/assets/pwc-anti-money- 37 ICC, 2015. “Global Survey on Trade Finance: Rethinking Trade and Finance.” laundering-2016.pdf. http://www.iccwbo.org/Data/Documents/Banking/General-PDFs/ICC-Global-Trade- 13 KPMG, 2014. “Global AML Survey 2014.” Sample included 317 financial services and-Finance-Survey-2015/. providers in 48 countries. https://assets.kpmg.com/content/dam/kpmg/pdf/2014/02/ 38 ICC, 2016. global-anti-money-laundering-survey-v5.pdf 39 WTO, 2016b. “Trade Finance and SMEs: Bridging the Gap in Provision.” 14 Dow Jones and ACAMS, 2016. “Global AML Survey Results 2016.” Survey of 812 https://www.wto.org/english/res_e/booksp_e/tradefinsme_e.pdf. ACAMS members. http://files.acams.org/pdfs/2016/ 40 ADB, 2014. “ADB Trade Finance Gap, Jobs, and Growth Survey.” Dow_Jones_and_ACAMS_Global_Anti- https://www.adb.org/sites/default/files/publication/150811/adb-trade-finance-gap- Money_Laundering_Survey_Results_2016.pdf. growth.pdf. 15 IIF and E&Y, 2016. “Seventh Annual Global Bank Risk Management Survey.” 41 AfDB, 2015. “The Trade Finance Market in Africa.” Sample included 67 banks from 29 countries, including 23 of 30 global systemically http://www.afdb.org/fileadmin/ important institutions. https://www.iif.com/publication/regulatory-report/iifey-annual- uploads/afdb/Documents/Publications/AEB_Vol_6_Issue_2_The_Trade_Finance_Mar risk-management-survey. ket_in_Africa-03_2015.pdf. 16 Ibid. 42 CPMI, 2016. 17 Chartis, 2014, “Competing on Risk and Compliance: A New Path for Emerging 43 Caribbean Policy Research Institute, 2016. Market Banks.” http://www.chartis-research.com/research/reports/chartis-competing- 44 WBG, 2015. on-risk-and-compliance-a-new-path-for-emerging-market-ban. 45 IMF, 2016. 18 Caribbean Policy Research Institute, 2016. “The Correspondent Banking Problem – 46Caribbean Policy Research Institute, 2016. Impact of Debanking Practices on Caribbean Economies.” http://www.capricaribbean. 47 IMF, 2016. com/sites/default/files/public/documents/report/the_correspondent_banking_problem. 48 Ibid. 49 pdf ICC, 2016. 19 ECB, 2015. “Ninth survey on correspondent banking in euro.” Sample included 22 50 WBG, 2013. “Evaluation of the WBG’s targeted support for SMEs.” 51 banks across eight Eurozone countries. The G20, WTO, World Bank, IMF, IFC, FSB, Basel Committee on Banking www.ecb.europa.eu/pub/pdf/other/surveycorrespondentbankingineuro201502.en.pdf. Supervision, ACAMS, CPMI, Payments Market Practice Group (PMPG), FATF, 20 CPMI, 2016. “Correspondent Banking.” http://www.bis.org/cpmi/publ/d147.pdf. Wolfsberg Group, Basel Institute on Governance, Bankers Association for Trade and 21 IFC, 2014. “Market Survey: Global Trends in Trade Finance.” Sample included 333 Finance (BAFT), BBA, ICC, and IIF, among others. member banks of the Global Trade Finance Program (GTFP) network from 107 52 FATF, 2016. “Guidance on Correspondent Banking.” http://www.fatf- countries. gafi.org/media/fatf/documents/reports/Guidance-Correspondent-Banking-Services.pdf. 22 WBG, 2015. “Withdrawal from Correspondent Banking: Where, Why and What to 53 FATF, 2016. “Guidance for a Risk-Based Approach for MVTS. http://www.fatf- Do About It.” Sample included 110 banking authorities, 20 large banks, and 170 gafi. org/media/fatf/documents/reports/Guidance-RBA-money-value-transfer- smaller local/regional banks across 91 jurisdictions. services.pdf. 54 http://documents.worldbank.org/curated/en/ 113021467990964789/pdf/101098- IFC, 2014. revised-PUBLIC-CBR-Report-November-2015.pdf. 55 Barclays, 2016. “Trading Up: Applying Blockchain to Trade Finance.” 23 BBA et al., 2014. “De-Risking: Global Impact and Unintended Consequences for https://www.barclayscorporate.com/content/dam/corppublic/corporate/Documents/p Inclusion and Stability.” Prepared by BBA, BAFT, the Basel Institute, ICC, IIF, and roduct/Banks-Trading-Up-Q1-2016.pdf. This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group.