CBSI escapes blacklisting over engaging in commercial dealings with Pan Oceania Bank
By Alfred Sasako
THE Central Bank of Solomon Islands (CBSI) has escaped being blacklisted by the international financial community after it was found engaging in commercial activities involving the nation’s third commercial bank, Pan Oceania Bank (POB).
Governor Denton Rarawa confirmed that CBSI has reached an agreement with the Reserve Bank of New York to terminate the arrangement by June this year.
Mr Rarawa’s confirmation follows written inquiry by Island Sun last Friday. The newspaper was tipped off that the CBSI “is being put on notice unless it terminates its commercial relationship with POB”.
Island Sun sent the CBI Governor an email requesting confirmation on:
- CBSI has been put on notice to cut its commercial ties with POB immediately or face being blacklisted;
- Such action would impact heavily on the nation’s economy in terms of Government revenue from logging (60 percent or so), the logging industry would be forced to lay off workers as no revenue would be coming for their logging operations (through export receipts); and
- Logging entities are only allowed 5 percent of the banking share.
In response, the CBSI issued a statement confirming that it “has been assisting POB on a temporary basis to facilitate its US-dollar transactions through its account with the Federal Reserve Bank of New York (FEDNY) while waiting for POB to establish USD corresponding bank relationships (CBRs).
“Since POB transactions are commercial in nature, the FEDNY and CBSI have reached an agreement to cease this arrangement by June 2018. By then POB is expected to find corresponding banking relationships to facilitate its US dollar transactions,” the statement said.
The statement adds that being a small bank, POB, among other small banks around the globe, including the Pacific is facing the phenomena of de-risking.
“In recent years US banks have cut off banking relationships with smaller banks. This means smaller banks are finding it very difficult to facilitate international payments for their customers in USD.
“The Central Bank is mindful of the potential negative impact this matter could have on the economy and is working with Government to address the short term implications of this problem as well as find more long term permanent solutions to the issue. Efforts are ongoing to assist POB to find alternative corresponding bank relationships.
“As a bank, POB is prudentially safe and sound. It is well capitalised and its domestic activities continue as normal,” the CBSI statement said.
A logging industry leader told Island Sun on the weekend that blacklisting the CBSI would have been catastrophic for the industry, the government and the nation.
“About sixty percent of government revenue comes from the logging industry. Just imagine what the consequences would be in the event the Central Bank of Solomon Islands is blacklisted.
“We would not be able to pay our workers as there would be no money coming through for our exports. You know what that means – laying off workers,” the industry leader said.
“I just hope that the government and the CBSI convince the Americans that smaller countries such as Solomon Islands whose economy depends almost entirely on logging should be given some leeway in matters like this,” the industry leader said.
POB which could not be contacted for comments yesterday was established in 2014.
Since then it has used the CBSI for all its overseas transactions as it has not been able to establish a corresponding bank relationship with any overseas banks.
