Updated | Corresponding banking: concrete action required to facilitate transactions

Government must find a way to help companies facilitate foreign transactions and should use the Presidency of the European Council to find a way by which the European Union can strengthen its relations with correspondent banks, PN MP Kristy Debono has said.

Prime Minister Joseph Muscat this week held talks in New York, USA, over issues regarding correspondent banking and custodian services, among others, that are affecting Maltese banks and gaming companies.

American banks are limiting their networks to the United States and cutting down channels to the EU, in a bid to render themselves only liable on intra-US transactions.

But the shrinking network is making it harder for European banks to process American payments, and is also affecting Maltese banks, which would have to otherwise rely on other banks.

Debono said the Opposition had raised the issue earlier this year, arguing that correspondent banks were required for commercial transactions with international companies, as well as to allow local banks to negotiate using the U.S. dollar.

“The role of correspondent banks is crucial, especially when considering the role they play in payments made to local companies or foreign companies that are based in Malta,” Debono said.

The MP argued that the Maltese banks’ ability to strengthen relationships with correspondent banks was weakened as a result of the Panama Papers revelations. She urged the government “to address the resignation” of the former director general of the Financial Intelligence and Analysis Unit (FIAU) – Manfred Galdes resigned his position and joined the legal advisory firm Fenech Farrugia Fiott (FFF) Legal.

Debono went on to extend the opposition’s support.

In a reaction, the government said the issue has been going on for years, and efforts by the previous administration to tackle it were not fruitful. “This government is working to achieve results,” the Office of the Prime Minister said.

The government reminded that recent negotiations had resulted in further investment in local banking, following the acquisition of Banif Bank made by the Al Faisal Group.

“The banking sector in Malta is strong; the economy is doing well, further attracting positive results,” it said.

It accused the opposition of making “irresponsible statements”.

“If the opposition is serious enough, it should discuss the matter with the regulator, who was appointed by the previous administration. Once it clarifies matters with the regulator, it should then correct its incorrect statements,” the government said.

In the United States, the Prime Minister and his delegation held long-planned meetings with insurance, fintech companies and others setting new trends in banking.

"Hopefully, as in previous occasions, results will be seen in coming months. The delegation is also meeting decision makers to further diversify Malta’s financial services infrastructure, such as in custodian services and correspondent banking," a spokesperson for the PM told MaltaToday earlier this week.

All banks, especially smaller ones, depend on correspondent relationships with banks in other jurisdictions. After the 2008 financial crisis, US banks particularly ceased to have anything to do with online gambling, tax avoidance or adult entertainment, and transferring their funds. This in itself is a problem for Maltese gaming businesses as well as for online banking software companies specialising in the processing of adult entertainment site payments.

Even the Bank of International Settlements is attempting to introduce a form of acceptable security for banks so that they can carry out transfers for their clients.