by Padmanabha Mishra, Head of Institutional Clients Group, Abu Dhabi Commercial Bank
One of the key customer segments at Abu Dhabi Commercial Bank (ADCB) is our Institutional Clients business, which has flourished to become a sophisticated, highly integrated offering across both correspondent banking and solutions for non-bank financial institutions. Over the past year or so, the future of correspondent banking has become a key discussion topic amongst the financial community, including in the UAE. As this article outlines, ADCB is a key participant in this ongoing debate. The approach we are taking to secure our clients’ cross-border business is becoming widely recognised as a valuable means of addressing some of the risk and uncertainty to which banks, and the institutions that they support, are increasingly subject.
Correspondent banking at the crossroads
Correspondent banking is critical to global trade, facilitating the cross-border flow of goods and services, and connecting banks and their customers worldwide. As the range of organisations involved in cross-border trade continues to grow, and supply chains become more widely distributed, the ability to make and receive international payments has never been more important. Banks cannot – nor would they wish to - build and maintain a global network to support every international payment from end to end. Consequently, banks work together to leverage their products and geographic footprint by establishing correspondent banking networks that enable their clients to trade across the world.
Although the correspondent banking model is not perfect in every respect, particularly as banks have their own systems, formats and service models, which can create some inconsistency in cross-border payment processing, the model has proved robust and capable of supporting cross-border trade. Furthermore, there are initiatives underway, such as the global payments innovation initiative co-ordinated by SWIFT, and emerging fintech solutions, including those based on blockchain, that aim to accelerate cross-border payments, and give payment users better visibility over the status and cost of these payments.