Correspondent banking cutbacks claim new victim
The Central Bank of Seychelles has taken full control of one of nine banks on the Indian Ocean archipelago, in one of the clearest examples yet of the impact of global banks exiting correspondent banking relationships.
BMI Offshore Bank, a tiny institution with links to the Bahraini royal family and governments of Oman and Dubai, was forced into the arms of the central bank after its correspondent bank, Bank of China (Johannesburg), exited the relationship in October – several months after JPMorgan did the same.
With Bank of China no longer facilitating BMIO’s main business of foreign currency customer transfers, and BMIO unable to find a replacement, the central bank was forced to take control on November 11.
BMIO’s business model is focused entirely on banking with nonresidents in foreign currency, so its transactions need to be carried out through a correspondent bank. Without one, it cannot accept deposits of BMIO’s customers from foreign banks, or make any customer payments.
The central bank says BMIO is financially sound in terms of capital and liquidity and there’s no indication that depositors’ money is in danger, but “access to the deposits will only be enabled upon resolution of the issue [a new correspondent bank or alternative solution]”.
BMIO’s problem is not an archipelago-wide problem, the central bank says, as none of the remaining eight banks in the Seychelles are exclusively offshore banks.