How the withdrawal of global correspondent banks hurts Emerging Europe

Correspondent banks allow local banks in emerging markets to access the international payments system. This helps local banks to make cross-border payments, clear currencies, and provide trade finance. The recent retrenchment of global correspondent banks following the increased costs of financial crime compliance may therefore disrupt international trade. This policy brief shows that the withdrawal of correspondent banks from Emerging Europe has negatively and substantially affected the exports of this region. Exploiting an unexpected change in the U.S. regulator’s enforcement of financial crime legislation we compare industry-level bilateral trade flows of countries experiencing a high withdrawal with those that maintain their correspondent bank relationships. We find that the decreased availability of international payment and trade finance services has considerable negative effects on exports. This negative effect is stronger for trading partners that are geographically more distant. A survey of 93 local banks confirms that banks face growing difficulties in performing cross-border payments and in clearing currencies. In particular, access to the U.S. financial system is severely inhibited and local banks can only imperfectly substitute lost correspondent bank relationships with new partners from Russia and Austria

Socio-economic status is inversely related to bed net use in Gabon

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Broken relationships: De-risking by correspondent banks and international trade

We exploit proprietary information on severed correspondent banking relationships (due to the stricter enforcement of financial crime regulation) to assess how payment disruptions impede cross-border trade. Using firm-level export data from emerging Europe, we show that when local respondent banks lose access to correspondent banking services, their corporate borrowers start to export less. This trade decline occurs on both the extensive and intensive margins, and firms only partially substitute these foregone exports with higher domestic sales. As a result, total firm revenues and employment shrink. These findings highlight an often overlooked function of global banks: providing the payment infrastructure and trade finance that enables firms in less-developed countries to export to richer parts of the world

No rebound of morbidity following intermittent preventive sulfadoxine-pyrimethamine treatment of malaria in infants in Gabon

In the context of a trial studying intermittent preventive sulfadoxine-pyrimethamine treatment of malaria in infants in Lambaréné, Gabon, children aged 18-30 months were followed up after having received their last dose at an age of 15 months. In the intention-to-treat population, the protective efficacy against all malaria episodes was -18.0 (95% confidence interval, -97.4 to 29.5; P = .529). The protective efficacy against first or only anemia episode was -45.3 (95% confidence interval, -234.5 to 36.3; P=.375). The protective efficacies were negative and were not statistically significant. These results do not appear to support the concept of a rebound effect after intermittent preventive sulfadoxine-pyrimethamine treatment of malaria in infants. Clinical trials registration. NCT0016784