The Pacific Islands Forum Secretariat and the World Bank are accelerating efforts to stabilise correspondent banking relationships (CBRs) across the Pacific, as a multi-year regional project begins to deliver early results amid persistent global financial pressures.
The initiative—formally approved in August 2024 and operational since April 2025—marks a coordinated response to a decade-long contraction in correspondent banking services that has left many Pacific Island economies exposed to disruptions in trade, remittances and cross-border payments.
Secretary General Baron Divavesi Waqa underscored that correspondent banking is “fundamental to economic resilience and global connectivity,” particularly for small, geographically dispersed economies that rely heavily on external financial linkages.
Declining banking links trigger systemic risk
The number of active correspondent banking relationships available to Pacific financial institutions has declined sharply since 2011, reaching what policymakers describe as “unsustainably low levels.” This trend—often driven by global banks’ risk-reduction strategies, rising compliance costs and stricter regulatory expectations—has disproportionately affected small island developing states.
The consequences are material: higher remittance costs for overseas workers, reduced access to financial services for vulnerable communities, and increased friction in trade and tourism-related transactions.
Pacific economies, which depend on stable inflows such as remittances and development finance, face heightened vulnerability when access to global banking networks is constrained.
Regional project moves into implementation phase
The Pacific Strengthening Correspondent Banking Relationships Project, valued at $68 million and funded through a mix of grants and credits, is now entering a critical implementation phase across seven countries, including Fiji, Samoa and Tonga, with expansion expected to larger economies such as Papua New Guinea.
The programme is structured around two core pillars:
- safeguarding continuous access to correspondent banking services;
- strengthening regulatory, supervisory and compliance frameworks.
Under the first pillar, procurement is underway for a dedicated service provider that would offer temporary correspondent banking access to countries at risk of losing critical financial channels. Four institutions have been shortlisted, with negotiations ongoing toward a framework agreement.
This mechanism is designed as a contingency buffer—effectively a regional safety net—to prevent sudden disconnections from the global financial system.
Data, compliance and payments reform advance
Parallel progress is being made on structural reforms aimed at addressing the root causes of “de-risking.”
A regional data initiative is underway to develop a CBR Resilience Index, intended to benchmark financial institutions’ readiness and risk profiles. Pilot data collection has begun in four jurisdictions, while engagement with SWIFT is expected to enhance transaction-level insights.
Regulatory upgrades are also advancing, with anti-money laundering and counter-terrorism financing (AML/CFT) action plans being rolled out in coordination with the Asia Pacific Group on Money Laundering. These reforms aim to close compliance gaps that have contributed to international banks’ withdrawal from the region.
At the infrastructure level, discussions on modernising payment systems are gaining momentum. A regional workshop in Fiji in late 2025 brought together central banks and development partners to explore fast payment systems tailored to small island economies, alongside plans for a potential Pacific Payments Mechanism.
Strategic shift toward regional coordination
The project reflects a broader strategic shift: moving from fragmented national responses to a coordinated regional framework anchored by the Pacific Islands Forum Secretariat.
Through mechanisms such as the Pacific De-Risking Group, the Secretariat is aligning national reforms with regional priorities while facilitating dialogue between Pacific institutions and global banking partners.
The World Bank, for its part, is providing financing, technical assistance and global expertise to support implementation and maintain engagement with international financial institutions.
Waqa said the initiative demonstrates a “shared regional commitment to preserving financial linkages,” adding that strengthening compliance frameworks and transparency will be critical to rebuilding confidence with correspondent banks.
Outlook: rebuilding trust in global financial links
While early progress is evident, officials acknowledge that reversing the long-term decline in correspondent banking relationships will require sustained reforms and continued engagement with global partners.
The project’s six-year horizon to 2030 reflects the scale of the challenge: restoring trust, improving regulatory credibility and ensuring Pacific economies remain connected to international financial markets.
For the region, the stakes are clear—without stable access to correspondent banking, the foundations of trade, remittances and economic development remain at risk.
