As cross-border payments continue to grow, the decline in correspondent banking relationships driven by de-risking concerns remains a significant challenge for the sector, according to the U.S. Federal Reserve.
Because there exists no overarching end-to-end system or authority to govern cross-border payments, such transactions are most often based on correspondent banking agreements between financial institutions in various countries, noted Kandie Alter, assistant vice president of the payments policy group for the Federal Reserve Bank of Chicago.
“Correspondent banking remains the most prevalent mechanism for transactions to happen cross border,” Alter observed during a Fed webinar on cross-border payments Monday.
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