What are correspondent banks and why are they important to us in Jamaica and the Caribbean?

Correspondent banks provide the Caribbean with vital access to the international financial system.
Simply, correspondent banks, which are mainly large banks in the United States and Europe, provide services to usually smaller, domestic banks and financial institutions located in developing regions of the world, such as the Caribbean and Latin America.

The arrangements with correspondent banks are essential for people and businesses to complete international payments. They facilitate the movement of funds across borders, and provide access to foreign currencies and foreign financial systems so that we can, for example:

  • Make purchases online using our credit cards or debit cards
  • Wire funds from banks overseas; or
  • Purchase goods and raw material from overseas for our businesses

In a correspondent banking relationship, the correspondent bank provides the respondent bank (smaller, domestic, local bank or financial institution) with a deposit account or other liability accounts and services. The products and services most frequently used by financial institutions in the Caribbean include:

  • Cheque clearing
  • Clearing and settlement
  • Cash management services
  • International wire transfers
  • Financing for trade

The financial services sector plays an important role in facilitating trade, commerce and investment in the Caribbean, across our region and with the wider global community. For the Caribbean, the sector is the second largest contributor to Gross Domestic Product (GDP), or what we earn from producing, after tourism.
The growth of our economies in the region and continued inflows of remittances depend heavily on access to the international financial system through correspondent banking services. Therefore, if trade is restricted due to the withdrawal of correspondent banking services, then the economies of Jamaica and the Caribbean will be severely impacted.