Australia pledges more funds for Pacific banking amid China interest (updated)

Bendigo and Adelaide Bank

09/07/2024 04:19

(Adds ANZ CEO comments paragraphs 8-10)
    By Lewis Jackson and Renju Jose
       BRISBANE, July 9 (Reuters) - Australia on Tuesday
pledged to boost investment in Pacific Island countries to
support their financial systems, as banks cut ties to the region
citing risk at a time when China is looking to increase its
influence there.
    Some Western banks have ended long-term relationships with
their counterparts in small nations in the Pacific, while others
have looked to close operations, limiting access to U.S.
dollar-denominated bank accounts.
    "We know the Pacific has seen the fastest withdrawal of
correspondent banking services of any region in the world,"
Australia's Treasurer Jim Chalmers said in a speech at the
Pacific Banking Forum in Brisbane.
    "At stake here is the ability of the Pacific to engage with
the world," he said, adding that large parts of the region
risked being cut off from the global financial system.
    Between 2011 and 2022, the Pacific region lost around 80% of
its correspondent banking relationships in services denominated
in U.S. dollars, Australia's Assistant Treasurer Stephen Jones
told the forum, co-hosted by Australia and the United States. 
    Australia will provide A$6.3 million ($4.3 million) more for
the Pacific to develop secure digital identity infrastructure
and enhance compliance with anti-money laundering and
counter-terrorism financing requirements, Chalmers said.
    Western banks are de-risking to meet financial regulations,
which has made it harder to do business in Pacific Island
nations that are sometimes behind in compliance standards, in
turn undermining financial resilience in these countries,
according to experts.
    Australian bank ANZ  ANZ.AX  is in talks with the government
about ways to make its business in the Pacific Islands more
profitable, as the exodus of Western financial services fuels
concern about rising Chinese influence, its CEO said on Tuesday.
    ANZ is the biggest lender in the Pacific, with operations in
nine countries, though some of those businesses are not
financially viable, Shayne Elliott said in an interview.
    "If we were there purely commercially we would have just
shut it down," he said on the sidelines of the forum. 
    U.S. Treasury Secretary Janet Yellen said on Monday that
Washington's focus was on supporting the Pacific's economic
resilience, including through strengthening access to
correspondent banks.
    Western nations that traditionally have held sway in the
Pacific have become increasingly concerned about China's plans
to increase influence there after Beijing signed key defence,
trade and financial deals in the region. 
    Bank of China  601988.SS  signed an agreement with Nauru to
explore opportunities there this year after Australia's Bendigo
Bank  BEN.AX  said it would pull out of the country.
    Chalmers said Australia was working with Nauru to ensure
ongoing banking services in the country.     
    In recent years, ANZ exited retail operations in Papua New
Guinea, while Westpac  WBC.AX  considered the sale of its
operations in Fiji and Papua New Guinea but decided to keep
them.
    
($1 = 1.4826 Australian dollars)

 (Reporting by Lewis Jackson in Brisbane and Renju Jose in
Sydney; Additional reporting by Lucy Craymer in Wellington;
Editing by Jamie Freed and Miral Fahmy)
 ((renju.jose@thomsonreuters.com;))