Maldives central bank on Thursday lamented the decision by Banking giant Hong Kong and Shanghai Banking Corporation (HSBC) to cease retail banking in the Maldives from April.
Speaking at the parliamentary finance committee governor Azeema Adam insisted that the Maldives Monetary Authority (MMA) does not wish HSBC to cease retail banking services in the Maldives but said the country still needed the bank’s other services.
Male branch of HSBC had decided to cease retail banking operations from April 28 and is now informing its customers.
An official from the Maldives Monetary Authority (MMA) also confirmed the plans by HSBC’s Male branch to shift to corporate-only operations. The official, however, did not give details.
HSBC was not available for comment.
HSBC operates in Maldives as a trading desk of the HSBC branch in Sri Lanka.
The governor however, pointed out that HSBC’s decision was not limited to the Maldives.
“Every bank has its own standards. Certain services that they offer. Instead of forcing something on them we look to find out how it could prosper as a business. We put in a lot of effort to bring HSBC to the Maldives,” Azeema explained.
“Even when they [HSBC] first came they had sought to serve high net worth customers and individuals. We had given them the operating license knowing that all those years ago.”
Azeema also revealed that several challenges had prompted the bank to adopt cost cutting measures.
“It’s not something we also want. But if we look at the services provided by the banks in Maldives, HSBC is the third largest bank in the country. In terms of deposit size and loan size,” she continued.
HSBC is the second highest banking profit tax payer in the Maldives, she added.
An account in HSBC has to be opened with an initial deposit of MVR 50,000; the highest initial deposit required of any bank that operates in Maldives. The bank also pays the lowest deposit interest rate at 1 – 1.75 percent. Deposit interest rate on US Dollar accounts is 0.10 percent.
As the bank charges a high amount in fees, the bank mainly hosts Maldivian businesses.
In May 2014, complaints mounted over the bank’s decision to close down accounts held by many small and medium businesses citing administrative reasons. The businesses had complained that the move was made without prior notice.
The decision by one of the biggest banks in the world comes a week after it was revealed that the Maldives had lost a major international banker.
President Abdulla Yameen Abdul Gayoom told residents of Gaafu Dhaal atoll Gadhdhoo on February 15 that one of the major correspondent banks had dropped Maldives from its client list, while another one is considering a similar move. The reason, according to the president, is false claims made about Maldives, including threats posed by home-grown jihadists.
“When we make such claims without considering the repercussions, it’s the people of Maldives that has to suffer,” he said, after inaugurating a project to establish a clean water system in the island.
The president did not identify the bank that had dropped the Maldives. Haveeru, however, understands that US-based JPMorgan Chase had terminated its dealings with Maldivian banks in 2013.
A correspondent bank is a financial institution that provides services on behalf of another, equal or unequal, financial institution. It can conduct business transactions, accept deposits and gather documents on behalf of the other financial institution.