Abstract
Cost-management is essential and highly specific sphere, which requires applying adequate decision- making approach as a part of the bank’s internal value creation process. Correspondent banking is a dynamically growing area of management and controlling methods applied in banks on the one hand and high risk financial segment of the regulators’ measures and expectations around the world on the other. The purpose of this research is to outline the main challenges for cost-management development in correspondent banking relationships (CBRs) around the world with recommendations for Ukraine. The paper explains the key reasons and essential components of cost-management system for managing risks and costs in CBRs based on the analytical results of transactions volume, comparing drivers of restriction of CBRs, rapidly growing number of different types of compliance and operational costs. As a result, the study highlights the cost-cutting measures based on digital assets solutions and blockchain technologies that can help banks to eliminate and lower costs of customer on-boarding, due diligence and money laundering prevention, foreign exchange and currency hedging, treasury and payment operations, liquidity and capital raising.
Highlights
INTRODUCTIONThe author concluded that quality The methodological basis of the study is a comparof cost benefit analyses in correspondent banking ative analysis of the modern issues of regulation has a significant positive impact on the compli- correspondent banking services regarding the inance regulations in global and regional applicabil- ternational compliance requirements on Customer ity to maintain safety and stability of the financial Due Diligence, Know Your Customer (KYC) prosystem
Modern global payments infrastructure moves money from one payment system to another through a series of internal book transfers between financial institutions, especially banks. These money transfers have a high level of business risks and rapidly growing compliance costs as a consequence of the low level of coordination of transfers across different systems, slow funds settlement, error prone during client onboarding, due diligence and transaction period and high volume of system-wide costs for global crossborder transactions
According to the respondents tor entities, which include relevant customer the Anti-Money Laundering (AML) compliance costs increased by 40% and due diligence information; more in 2016 (Figure 4)
Summary
The author concluded that quality The methodological basis of the study is a comparof cost benefit analyses in correspondent banking ative analysis of the modern issues of regulation has a significant positive impact on the compli- correspondent banking services regarding the inance regulations in global and regional applicabil- ternational compliance requirements on Customer ity to maintain safety and stability of the financial Due Diligence, Know Your Customer (KYC) prosystem. She identified and classified types of cesses and Anti-Money Laundering (AML) prevention. The vital reasons of these identified issues include the following obligatory conditions on establishing and maintaining CBRs:
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