Remarks at the Pacific Banking Forum 2024 Dinner

Speech

Michele Bullock

Governor

Brisbane

–

8 July 2024

Audio

3.71MB

Watch video: Remarks by Michele Bullock, Governor, at the Pacific Banking Forum 2024 Dinner, Brisbane

Transcript

Michele Bullock

Good evening, everyone. It’s an absolute pleasure to be here. I actually want to just

acknowledge that it is NAIDOC Week, National NAIDOC Week, this week. NAIDOC Week, for our visitors,

is about recognising the history, culture and achievements of Aboriginal and Torres Strait Islander

Peoples, and the theme this year is: ‘Keep the Fire Burning! Blak, Loud and Proud.’ In that

vein, I too would like to begin my remarks by acknowledging the Jagera people and the Turrbal people.

They are the traditional custodians of the land on which we gather today. They’ve cared for it

for millennia and I want to pay my respects to their elders past and present, and I extend that

respect to Aboriginal and Torres Strait Islander Peoples who are here today. I also want to say

thanks to the Wagga Torres Strait Islander Dance performers. That was absolutely wonderful. I really

enjoyed that, so well done to them.

Finally, I’d like to echo Assistant Treasurer Jones’ comments and warm welcome,

and I’d especially like to welcome my fellow central bank governors, deputy governors and assistant

governors who are here tonight.

At the Bank, we have a longstanding relationship with our Pacific partners. Many Pacific

Islanders, in fact, call Australia home as you know – a lot of them are in the rugby team –

and we have a deep interest in promoting their welfare and the interests of our Pacific neighbours more

generally. So over the past four decades, we at the Bank have met annually with central banks from the

Pacific Island countries, Timor-Leste and New Zealand, and, in those meetings, we discuss the challenges

that the region is facing and work together to try to implement solutions. The decline in correspondent

banking relationships is one of the biggest challenges currently facing the Pacific region, and the

situation, I think, as you’ve heard today in your meetings, has deteriorated in recent years.

It’s progressed from a looming threat to an acute issue that some Pacific Island countries have

actively faced in recent years. So it’s not out there on the horizon; it’s here. From the data

that we’ve seen, the decline in the relationships is widespread and the trend appears set to

continue, unless we collectively take action to address it.

Now, we know that the situation in the challenge is complex. The decline isn’t

driven by one issue or one cause; it’s a combination of factors. One important driver is that the

volume of correspondent banking flows is relatively small in this region. It’s a combination of

small populations dispersed over far-reaching and diverse geographical areas, and it often encompasses

very remote locations, and that makes it difficult for correspondent banks, or even potential

correspondent banks, to achieve economies of scale. So that’s one driver.

A second important issue is that some countries have found it challenging to meet

international regulatory requirements because they’re small, they’ve got lots of competing

demands on their resources, and that’s challenging. And the regulations, we know that the bar is

going up, so it’s not easy. But we do need to find a solution to this issue.

The withdrawal of correspondent banking relationships poses large risks to economic and

financial stability in the Pacific region at the household, the business and the government level.

Remittances, as we know, can be an important source of incomes for households. Businesses rely on the

ability to receive payments for exports, including tourism flows, which for many countries is very

important. And governments also need to be able to import key supplies for their people and their

nations. So maintaining the ability to send and receive these flows internationally is essential.

I’d have to say, pleasingly, there are some green shoots. We at the Bank welcome the

initiatives by the Pacific Islands Forum secretariat and the World Bank, including the correspondent

Banking Relationships’ Road Map and the Strengthening Correspondent Banking Relationships Project.

We at the Bank have met with the World Bank’s team several times to provide comments on the proposal

and we’re really pleased to hear of the progress that they’ve made to date. It’s also

encouraging to hear of the wide-ranging commitment from the Pacific Island countries to participate in

the project – that’s really important – and we look forward to future conversations with

all of our Pacific Island counterparts and the World Bank as this project progresses.

Now, in conjunction with development partners, there’s also a lot of technical

assistance and capacity-building initiatives underway, and some are planned in the region. At times, in

the past, these projects have tended to be run in isolation and that’s led to duplication of effort.

So I think it’s really good to have everyone here in the room because better coordination is going

to be essential if we’re going to more efficiently deliver these projects going forward. I think,

tomorrow, you’re all going to discuss what sorts of commitments we can make on coordination; I think

that’s really important.

So this Pacific Banking Forum is a key milestone in addressing the decline of

correspondent banking relationships and facilitating this coordination, so I’d personally like to

thank the governments of Australia and the United States for convening this forum because it brings

together the largest number of stakeholders to date to address this issue. We’ve got stakeholders

from public and private sectors from over 20 nations, which is absolutely marvellous. I’ve been

struck tonight meeting regulators, central banks, governments and private sector; it’s been

astounding, the buy-in that we’ve got here.

I think it’s very clear that making progress in arresting the decline of

correspondent banking relationships does require collective action of this wide variety of people that

we’ve got here today, and we all need to step up to the plate here. This includes continuing to

improve and enforce AML/CFT standards. We need to ensure that Pacific Island countries are well supported

in implementing those standards, and that’s going to require effective collaboration from all of the

development partners in this room. Over and above the AML/CFT standards, the private and the public

sectors need to work collaboratively to stop the full withdrawal of correspondent banking relationships

from any country; that’s really important. For our part, the Reserve Bank, the RBA, we will continue

to support development partners and Pacific Island central banks and banking authorities by providing

technical expertise, and we’ll be drawing on our long-standing relationships to try to facilitate

coordination and advocate for positive outcomes in this region.

Finally, I’d just like to highlight something that all of you know: it’s a difficult challenge and it’s going to require all of us to be flexible. We need to

be ready to change as initiatives develop, and we need to consider how we can overcome domestic

challenges to move forward towards solutions. I want to thank you all for being here and for your

participation, and I want to encourage you to use this opportunity to agree on what’s required

to move forward and to commit to prioritising the changes because we need to do this to ensure

long-term, sustainable correspondent banking relationships in the Pacific region. So thank you and

enjoy the rest of your evening.