Correspondent Banking Relationships: Strategic Withdrawal Impact on Banks in Palestine رسالة ماجستير

Abstract

This study aims to highlight the impact of the withdrawal of correspondent banking business on the Palestinian banking sector, therefore, it highlighted the importance of existence of potent correspondent’s network that provides various services to Palestinian banking sector and through it to several business and social components, as a vital driver that ensures inclusive financial inclusion. However, to ensure obtaining of sufficient information about the status quo of the correspondent banking network in Palestine, the study enrolled various tools like questionnaire and interviews with the regulator and banks’ key personnel to investigate the compliance of banks to the international standards required to counter and mitigate as possible, the drivers of correspondent banking withdrawal. The study reveals volatility and weaknesses in cooperation between agencies within the same bank, who are entrusted to manage the compliance to the international standards to preserve correspondent banking networks, it also reveals a limited correspondent banks network, whereas most investigated banks keep one correspondent in the USA, and some even does not have a correspondent in the USA, therefore, it manages its USD operations through a correspondent bank in Europe, which make it volatile to lose this privilege as the European bank eventually, is procuring a third party operations in US Dollars. The study also prevails fragile policies by the PMA towards identifying, articulating and managing the correspondent networks; the study finds no circulations and instructions designated to fortify the monetary and financial stability by ensuring and regulating the existence of strong correspondent banking network. The study also prevails the adherence and compliance of the Palestinian banking sector to major policies and standards required by the international community like anti-money laundry and countering the financing of terrorism. VI The study recommends deep cooperation between main stakeholders of the process of corresponding like the PMA, banks, government, and universities, it also recommends that the financial inclusion strategy include and indicate the importance of a wider and strong correspondent banking network; nevertheless, it recommends on the stakeholders to start considering employing contemporary technologies like the blockchains, the fintech, and 3D printing as potential substitutions to any correspondent banking withdrawal.