Michele Bullock: Remarks - Pacific Banking Forum
Remarks by Ms Michele Bullock, Governor of the Reserve Bank of Australia, at the
Pacific Banking Forum 2024 Dinner, Brisbane, 8 July 2024.
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Good evening, everyone. It's an absolute pleasure to be here. I actually want to just
acknowledge that it is NAIDOC Week, National NAIDOC Week, this week. NAIDOC
Week, for our visitors, is about recognising the history, culture and achievements of
Aboriginal and Torres Strait Islander Peoples, and the theme this year is: 'Keep the Fire
Burning! Blak, Loud and Proud.' In that vein, I too would like to begin my remarks by
acknowledging the Jagera people and the Turrbal people. They are the traditional
custodians of the land on which we gather today. They've cared for it for millennia and I
want to pay my respects to their elders past and present, and I extend that respect to
Aboriginal and Torres Strait Islander Peoples who are here today. I also want to say
thanks to the Wagga Torres Strait Islander Dance performers. That was absolutely
wonderful. I really enjoyed that, so well done to them.
Finally, I'd like to echo Assistant Treasurer Jones' comments and warm welcome, and
I'd especially like to welcome my fellow central bank governors, deputy governors and
assistant governors who are here tonight.
At the Bank, we have a longstanding relationship with our Pacific partners. Many Pacific
Islanders, in fact, call Australia home as you know - a lot of them are in the rugby team
- and we have a deep interest in promoting their welfare and the interests of our Pacific
neighbours more generally. So over the past four decades, we at the Bank have met
annually with central banks from the Pacific Island countries, Timor-Leste and New
Zealand, and, in those meetings, we discuss the challenges that the region is facing
and work together to try to implement solutions. The decline in correspondent banking
relationships is one of the biggest challenges currently facing the Pacific region, and the
situation, I think, as you've heard today in your meetings, has deteriorated in recent
years. It's progressed from a looming threat to an acute issue that some Pacific Island
countries have actively faced in recent years. So it's not out there on the horizon; it's
here. From the data that we've seen, the decline in the relationships is widespread and
the trend appears set to continue, unless we collectively take action to address it.
Now, we know that the situation in the challenge is complex. The decline isn't driven by
one issue or one cause; it's a combination of factors. One important driver is that the
volume of correspondent banking flows is relatively small in this region. It's a
combination of small populations dispersed over far-reaching and diverse geographical
areas, and it often encompasses very remote locations, and that makes it difficult for
correspondent banks, or even potential correspondent banks, to achieve economies of
scale. So that's one driver.
A second important issue is that some countries have found it challenging to meet
international regulatory requirements because they're small, they've got lots of
competing demands on their resources, and that's challenging. And the regulations, we
know that the bar is going up, so it's not easy. But we do need to find a solution to this
issue.
The withdrawal of correspondent banking relationships poses large risks to economic
and financial stability in the Pacific region at the household, the business and the
government level. Remittances, as we know, can be an important source of incomes for
households. Businesses rely on the ability to receive payments for exports, including
tourism flows, which for many countries is very important. And governments also need
to be able to import key supplies for their people and their nations. So maintaining the
ability to send and receive these flows internationally is essential.
I'd have to say, pleasingly, there are some green shoots. We at the Bank welcome the
initiatives by the Pacific Islands Forum secretariat and the World Bank, including the
correspondent Banking Relationships' Road Map and the Strengthening Correspondent
Banking Relationships Project. We at the Bank have met with the World Bank's team
several times to provide comments on the proposal and we're really pleased to hear of
the progress that they've made to date. It's also encouraging to hear of the
wideranging commitment from the Pacific Island countries to participate in the project -
that's really important - and we look forward to future conversations with all of our
Pacific Island counterparts and the World Bank as this project progresses.
Now, in conjunction with development partners, there's also a lot of technical assistance
and capacity-building initiatives underway, and some are planned in the region. At
times, in the past, these projects have tended to be run in isolation and that's led to
duplication of effort. So I think it's really good to have everyone here in the room
because better coordination is going to be essential if we're going to more efficiently
deliver these projects going forward. I think, tomorrow, you're all going to discuss what
sorts of commitments we can make on coordination; I think that's really important.
So this Pacific Banking Forum is a key milestone in addressing the decline of
correspondent banking relationships and facilitating this coordination, so I'd personally
like to thank the governments of Australia and the United States for convening this
forum because it brings together the largest number of stakeholders to date to address
this issue. We've got stakeholders from public and private sectors from over 20 nations,
which is absolutely marvellous. I've been struck tonight meeting regulators, central
banks, governments and private sector; it's been astounding, the buy-in that we've got
here.
I think it's very clear that making progress in arresting the decline of correspondent
banking relationships does require collective action of this wide variety of people that
we've got here today, and we all need to step up to the plate here. This includes
continuing to improve and enforce AML/CFT standards. We need to ensure that Pacific
Island countries are well supported in implementing those standards, and that's going to
require effective collaboration from all of the development partners in this room. Over
and above the AML/CFT standards, the private and the public sectors need to work
collaboratively to stop the full withdrawal of correspondent banking relationships from
any country; that's really important. For our part, the Reserve Bank, the RBA, we will
continue to support development partners and Pacific Island central banks and banking
authorities by providing technical expertise, and we'll be drawing on our long-standing
relationships to try to facilitate coordination and advocate for positive outcomes in this
region.
Finally, I'd just like to highlight something that all of you know: it's a difficult challenge
and it's going to require all of us to be flexible. We need to be ready to change as
initiatives develop, and we need to consider how we can overcome domestic
challenges to move forward towards solutions. I want to thank you all for being here and
for your participation, and I want to encourage you to use this opportunity to agree on
what's required to move forward and to commit to prioritising the changes because we
need to do this to ensure long-term, sustainable correspondent banking relationships in
the Pacific region. So thank you and enjoy the rest of your evening.