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September 14, 2022

Pressley Highlights Devastating Impact of Declining Banking Relationships with Caribbean Countries

Disproportionately Impacts Families Who Depend on Remittances

Video (YouTube)

WASHINGTON – Today, in a House Financial Services Committee hearing, Congresswoman Ayanna Pressley (MA-07) highlighted how the decline in correspondent banking relationships—known as “de-risking”—harms working families in Caribbean countries and diaspora communities abroad. These relationships are often used for cross-border payments, including international trade, immigrant remittances, and humanitarian aid flow.

In her line of questioning, Rep. Pressley criticized de-risking, which can accelerate increased poverty, reduced purchasing power, and the potential for regional instability, and noted the disproportionate impact on working class families who rely on remittance flows. She also proposed solutions to help increase access to financial services in the region.

The Massachusetts 7th Congressional District is home to the third largest Caribbean diaspora in the United States.

A full transcript of Rep. Pressley’s exchange with witnesses is available below and the full video is available here.

Pressley Highlights Devastating Impact of Declining Banking Relationships with Caribbean Countries

House Financial Services Committee

September 14, 2022

REP. PRESSLEY: Thank you, Madam Chair. As the representative of the third largest Caribbean diaspora in the United States, this hearing really resonates deeply with the immigrant communities. In my district, the Massachusetts Seventh, many of my constituents, many of my neighbors, send remittances to their families in Haiti and throughout the Caribbean, which have really proven a lifeline amidst the financial hardships of the pandemic, and of course, global inflation as well.

Remittances help working class families stay afloat when they need the most and have demonstratively reduced poverty in several countries.

Mr. Mowla, according to the Atlantic Council Report which you coauthored, the Caribbean has seen a decline in correspondent banking relationships since 2015 with the World Bank citing the region as the most severely affected by this phenomenon from a global perspective. As a result, remittances to my constituents and to their families have become more expensive if they are not denied or delayed entirely.

Can you please expand upon how the decline in correspondent banking relationships is harming working class families in the region? I just wanted to build upon that question from my colleague Congressman Meeks earlier.

MR. WAZIM MOHAMED MOWLA: Thank you for the question. Mostly, as I mentioned to Congressman Meeks, it supplements working class populations incomes. It’s what people use especially when there’s job loss and poverty. I mean, we see we saw this with the pandemic, where 10, you know, 10 CARICOM countries or tourism-dependent economies.

During the pandemic, tourism shutdown which meant that they were unable to go to work where were they able to get income supplement that to buy food to purchase it to access health care, access education? It came from remittances. We see this in Haiti, we saw this in Jamaica. Now, pandemic was just two, three years, still ongoing. But when we think about disasters, extreme weather events, remittances help. They help with taxes. They help across the board.

At the same time, remittances, when it’s delayed, when it is much more costly, it affects the people that are in the US itself. They are then gonna be unable to send remittances. And they themselves, especially in Massachusetts, in New York, and Florida, who already are living in sort of underserved communities are going to have to pay more and more each time.

REP. PRESSLEY: Thank you. And so, again, it’s building upon a little bit more. So for countries like Haiti and Jamaica, we know that remittances accounted for 20% of their GDP in 2020 alone. So if the decline in correspondent banking relationships continues, what will be the impact on these nations economies?

MR. MOWLA: Well, for countries like Jamaica, it’s 20% of the GDP. But then you have sort of tourism, that’s about 25% of GDP, so almost half their GDP has been wiped out during the pandemic. And when there’s limited remittances, what happens is that when you have limited economic stability, it can create political instability.

When people don’t have jobs, when people are impoverished, they have to find other ways of making money. It can lead to sort of petty crime. Women and children are disproportionately affected. They can become victims of human trafficking. So it creates broad political instability when you couple that with other factors such as climate change, such as energy insecurity, high food prices. This creates a very worrisome picture in the Caribbean, especially over the long term.

REP. PRESSLEY: Worrisome. Devastating. And so for a region disproportionately vulnerable to climate disasters and dependent on the tourism industry, finding a solution to this de-risking problem is really critical.

Mr. Mowla, in the report you coauthored, you listed a number of possible solutions to this problem. Specifically, you discuss categorizing correspondent banking as critical market infrastructure due to the important role these relationships play in Caribbean economies. Can you elaborate how this categorization would increase access to financial services in the region?

MR. MOWLA: Yes. So both in the U.S. and globally, it would help identify correspondent banking as a global public good, as a human right basically, as Prime Minister Motley stated in the previous panel. Doing this will give added justification for international financial institutions to incorporate correspondent bank as critical market infrastructure in development packages and development finance and USDA ID assistance after extreme weather events.

It helps also to sort of underscore the vulnerabilities that these countries are facing even as high- and middle-income countries allowing them another justification to be able to access concessional financing and blended finance as well.

REP. PRESSLEY: Thank you. And thank you to our distinguished chair for this historic hearing. This is certainly an issue of critical economic, racial and immigrant justice, and we can’t sit idly by.