By Alfred Sasako
THE Central Bank of Solomon Islands (CBSI) and the Government are helping Pan Oceania Bank (POB) to find a corresponding bank overseas between now and June, CBSI Governor Denton Rarawa has told Island Sun newspaper.
Mr Rarawa was responding to a hypothetical question on what would happen if POB does not find a corresponding bank by June – the deadline set by the Reserve Bank of New York for CBSI to cease its relationship with POB or face being blacklisted.
Island Sun broke the story this week.
CBSI had been acting as a corresponding bank for all POB transactions in United States’ currency, possibly since 2014 when POB was established in Honiara.
POB was established largely to handle all logging accounts since Westpac ended its operation in Honiara around the same time.
In a brief statement, Rarawa confirmed that CBSI had been assisting POB on a temporary basis, something the Reserve Bank of New York said was a commercial activity.
CBSI risked being blacklisted if it ignored the June deadline. Such a situation would have catastrophic consequences on the nation’s economy. Sixty per cent of government revenue comes from logging.
“Of course we do not want to reach that situation at the end of June, so POB is working very hard to find other correspondent banks.
“CBSI and Government are also working very hard to assist POB find alternative arrangements. We are hopeful that we will come up with a solution and avert this potentially adverse situation,” Rarawa said.
Meanwhile a local logger has questioned the quality of CBSI’s due diligence when it was looking into POB’s application to establish here.
Charles Karaori told Island Sun that the potential catastrophic situation calls into question the ability of CBSI personnel to foresee the likely scenario in the future.
“This whole situation would have been avoided if there’s quality in the type of due diligence being conducted by CBSI.
“I would also call on CBSI to disclose to the public how much money in terms of fees CBSI received over the years for acting as a corresponding bank for all USD transactions,” Mr Karaori said.