The hidden challenge facing Pacific banking - and why it matters

Across the Pacific, access to global banking systems is becoming increasingly difficult.

A growing issue known as de-risking has led to a significant decline in correspondent banking relationships — the networks that allow banks in different countries to send money between each other.

According to the World Bank, the Pacific has lost a large portion of these relationships over the past decade:
https://www.worldbank.org/en/news/feature/2025/09/02/safeguarding-financial-lifelines-in-the-pacific

What is correspondent banking?

Correspondent banks act as intermediaries, enabling:

• international transfers
• foreign currency access
• trade and business payments

Without them, countries struggle to connect to the global financial system.

Why are banks leaving the Pacific?

There are several contributing factors:

High compliance costs
Meeting global AML and regulatory standards can be expensive.

Small market size
Many Pacific economies lack the scale to make operations commercially viable.

Perceived risk
Financial institutions often view smaller jurisdictions as higher risk environments.

The real impact

The decline of banking relationships affects more than just financial institutions.

It impacts:

• workers sending money home
• businesses trading internationally
• governments receiving aid
• entire economies relying on financial connectivity

What is being done?

Governments and international organisations are stepping in to address the issue.

Initiatives aim to:

• maintain banking access
• improve compliance frameworks
• support digital payment solutions

Australia has also introduced measures to support financial connectivity in the region. More information is available via:
https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation

A shifting landscape

While traditional banking models face challenges, new approaches are emerging.

Digital payment platforms and regional collaboration are playing a growing role in supporting cross-border transactions and financial inclusion.

This content is for general information only and does not constitute financial advice. It does not consider your personal circumstances.