According to the study, the number of correspondent banks in Emerging Europe was 14.4 per cent lower in 2016 than in 2011. However, the average value conceals a more differentiated picture: While the number of correspondent banks hardly changed in Bulgaria, the Czech Republic, Hungary and Slovakia, the decline was considerably more pronounced in countries such as Latvia and Moldova, at 14 and 56 per cent respectively.
Export growth declines
Those countries that saw a sharp decline in the number of correspondent banks also suffered greater economic losses. “Here, the growth rate of exports was on average six to eight per cent lower than in countries where correspondent banks had hardly withdrawn at all,” says ZEW banking expert Dr. Karolin Kirschenmann. As the ZEW study further shows, geographical location also plays a role in this context. Export growth declined most in those countries that are furthest away from their trading partners. Accordingly, it is more difficult to establish and maintain correspondent banking relationships over greater distances.
A complementary ZEW survey among 131 banks from 28 countries confirms the negative economic consequences of this development for Emerging European countries. Access to correspondent bank services has become more difficult for local banks from Emerging Europe since the US government significantly stepped up its prosecution of financial crimes related to money laundering and terrorist financing in 2014, Kirschenmann explains: “While only seven per cent of the banks surveyed reported problems accessing the US payment system in 2013, this share rose to 26 per cent by 2019.”
The survey also indicates that the distribution of correspondent banks has changed in recent years. While US and German banks accounted for 75 per cent of all correspondent banks in 2013, their share declined to 54 per cent by 2019. According to the survey results, correspondent banks from Russia and Austria in particular are on the rise.