US commits to bolstering financial connectivity in Pacific

The Pacific region is considered strategically crucial to Washington and it has upped its engagement with and boosted efforts to support Pacific Island countries as it aims to curb the growing influence of China in the region.

“We recognise the economic and strategic significance of the Pacific region, and we are committed to deepening our engagement and collaboration with our allies and partners to bolster financial connectivity, investment, and integration,” said Treasury Undersecretary Brian Nelson, who is responsible the department’s office of Terrorism and Financial Intelligence and was speaking at the two-day Pacific Banking Forum that the U.S. is co-hosting alongside Australia.

Pacific Island countries are facing challenges as major banks end long-term relationships with their Pacific counterparts, limiting the countries access to U.S. dollar denominated bank accounts. The banks are de-risking to meet financial regulations but the trend undermines the financial resilience of Pacific Island countries, according to experts.

Nelson told those attending the meeting that the U.S. recognised and is committed to addressing bank de-risking across the Pacific.

“There is a lot to be gained by promoting financial integration around the world. But conversely, when correspondent banking relationships dwindle, the consequences can be substantial,” he added.

Nelson said data suggests that over the past decade the number of correspondent banking relationships in the Pacific had declined at twice the rate of the global average. The World Bank and Asia Development Bank is working on programmes to try and improving corresponding banking relations.

Jane Yellen, U.S. Treasury Secretary said in a virtual address to the meeting that the U.S. focus was on supporting the Pacific region’s economic resilience, including through strengthening access to correspondent banks.

“The United States is committed to an Indo-Pacific that is free and open, connected, prosperous, secure, and resilient. A strong and connected Pacific region has benefits for the United States and for the global economy,” she said.

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