By Makereta Komai, PACNEWS Editor in Samarkand, Uzbekistan
The Asian Development Bank (ADB) says it is working with global financial institutions to prevent Pacific economies from being cut off from the international banking system as correspondent banking relationships continue to decline across the region.
Responding to concerns raised at the ADB Annual Meeting in Samarkand, ADB Director General for the Pacific Department, Emma Veve acknowledged that the withdrawal of correspondent banks remains a growing structural challenge for small island economies.
“Given how critical these financial lifelines are, particularly for Pacific development, we are working right across the region in coordination with both the World Bank and the International Monetary Fund (IMF),” Veve said.
She said the World Bank is developing contingency arrangements to help maintain basic banking connectivity where commercial banks exit smaller markets.
“The World Bank is working very closely on a sort of backup system for correspondent banking. Should banks pull out of a country, there will be a system that steps in and carries the country’s banking system through,” she said.
At the same time, Veve said ADB’s focus is on preventing further withdrawals by strengthening regulatory and institutional frameworks across Pacific economies.
This includes supporting countries to meet international anti-money laundering and counter-terrorism financing standards set by the Financial Action Task Force (FATF), and harmonising financial systems across jurisdictions to reduce compliance costs for banks operating regionally.
ADB is also supporting the development of digital identity systems, including work underway in Fiji, aimed at improving customer identification and strengthening trust in financial transactions.
“Having people properly able to identify themselves in a way that is acceptable to banks is a basic building block of a trustworthy financial system,” Veve said.
She said this would improve financial access for Pacific citizens while also giving banks greater confidence to remain in the region.
However, Veve acknowledged the trend is already evident, with fewer banks operating in the Pacific compared to a decade ago, driven by both regulatory costs and broader shifts towards digital banking models.
“There are certainly now fewer banks in the Pacific than there were 10 years ago,” she said.
While development partners are engaging with financial institutions in their home jurisdictions to encourage continued presence in the region, she said commercial pressures remain significant.
Veve said ADB will continue to work with partners to balance regulatory integrity with financial inclusion, as Pacific economies face increasing risks of financial isolation due to global banking consolidation.
