Funding injection to help keep banks in Pacific

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An extra $6.3 million (US$4.24 million) in Commonwealth funds will go toward bolstering banking infrastructure in the Pacific, the federal treasurer will announce at a forum in Brisbane.

The talks are focused on banking closures and financial security in the Pacific, with the federal government encouraging Australian banks to stay in the region.

“Australian banks like Westpac and ANZ provide vital banking services to the region, and have been in the Pacific for more than a century,” he will say on Tuesday.

“We know how critical these services are for local communities, which is why we have been actively talking to all the major Australian banks, to let them know how important a continued Australian banking presence in the region is to the government.”

The extra funding announced on Tuesday will go toward developing digital identity infrastructure in the Pacific and enhancing compliance with anti-money laundering and counter-terrorism financing requirements.

Dr Chalmers will update economic ministers on progress to reverse the decline in banking services when he attends the Pacific Islands Forum Economic Ministers meeting in Suva later in the year.

The Pacific Banking Forum, held in Brisbane over two days, was a key outcome of the meeting between U.S President Joe Biden and Prime Minister Anthony Albanese last year.

Co-hosted by Canberra and Washington, 300 people – Pacific leaders as well as representatives from commercial banks and international organisations, such as the International Monetary Fund – are taking part in the event.

Discussions will focus on causes of withdrawing correspondent banking relationships.

A correspondent banking relationship involves financial institutions providing services on behalf of another bank, typically in a foreign country.

Security concerns have also been linked to the decline in bank services, with China’s moves in the region ever-present in the background. Last April, Nauru, which uses Australian dollars as its currency, signed a memorandum of understanding with state-owned Bank of China, after Bendigo & Adelaide Bank announced it was pulling out by December this year.

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