Guidelines

What is de-risking in banking?

What is de-risking in banking?

Share. De-risking refers to the phenomenon of financial institutions terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, risk.

What is a de-risking strategy?

What is De-Risking? De-risking is a strategy that firms may employ when they cannot, or can no longer, manage the money laundering risk that a given business relationship presents. In these contexts, de-risking may disproportionately affect the work of charities or legitimate businesses’ interests.

Could Cryptocurrencies alleviate the de-risking issues that banks face?

Blockchain technology can help with de-risking by reducing regulatory compliance costs while increasing the transparency of transactions. In particular, blockchain has the potential to reduce compliance costs associated with “Know Your Customer” requirements.

What are the biggest risks for banks?

The three largest risks banks take are credit risk, market risk and operational risk.

What does it mean when a bank is de-risking?

Nov 2015. “De-risking” refers to financial institutions closing the accounts of clients perceived as high risk for money laundering or terrorist financing abuse, namely money service businesses, nonprofit organizations, correspondent banks, and foreign embassies.

Who are the proponents of de-risking money?

The proponents: Proponents for de-risking are usually large banks and financial institutions. They will argue that they must de-risk to remain secure, and to minimise the risk of money laundering and the financing of terrorism.

What was the World Bank survey on de-risking?

At the request of G20, the World Bank Group conducted two surveys on de-risking in 2015, undertaken in cooperation with the Financial Stability Board, CPMI, and the G20 Partnership for Financial Inclusion. One survey covered remittances companies (money transfer operators – MTOs) and the other examined correspondent banking relationships (CBRs).

How does de-risking affect the global financial system?

De-risking practices by global financial institutions threaten to cut off access to the global financial system for remittance companies and local banks in certain regions, putting them at risk of losing access to the global financial system.