U.S. and Australian officials pledged on Monday to enhance financial connectivity in the Pacific, as lenders and policymakers gathered to address banking service challenges amid China’s increasing interest in the region.
Pacific Island nations are grappling with the withdrawal of Western banks, which are ending long-term relationships and closing operations, limiting access to U.S. dollar-denominated accounts. This has prompted concerns about financial resilience in the region.
Australian Assistant Treasurer Stephen Jones emphasized Canberra’s commitment to being the partner of choice in the Pacific, across banking and defense sectors. “We would be concerned if there were nations operating within the region whose principal objective was advancing their own national interest as opposed to the interests of the Pacific island nations,” Jones said at the Pacific Banking Forum in Brisbane, hinting at concerns over Chinese banks without explicitly naming China.
The forum, co-hosted by Australia and the U.S., saw Washington reiterate its commitment to countering China’s influence in the Pacific. “We recognize the economic and strategic significance of the Pacific region, and we are committed to deepening our engagement and collaboration with our allies and partners to bolster financial connectivity, investment, and integration,” stated U.S. Treasury Undersecretary Brian Nelson.
Western banks’ de-risking measures to comply with financial regulations have complicated business operations in Pacific Island nations, undermining their financial stability. While specific announcements were not made at the forum, the remarks from U.S. and Australian officials reflect growing concerns over China’s regional influence. Beijing has signed significant defense, trade, and financial agreements in the area, with the Bank of China establishing offices and exploring opportunities, such as a recent agreement with Nauru following an Australian bank’s exit.
Nelson acknowledged the issue of bank de-risking in the Pacific and emphasized the importance of promoting global financial integration. “There is a lot to be gained by promoting financial integration around the world. But conversely, when correspondent banking relationships dwindle, the consequences can be substantial,” he noted, adding that the decline in correspondent banking relationships in the Pacific has been twice the global average over the past decade. The World Bank and Asia Development Bank are actively working on programs to improve these relationships.
In a virtual address, U.S. Treasury Secretary Janet Yellen underscored Washington’s focus on enhancing the Pacific’s economic resilience by strengthening access to correspondent banks. “The United States is committed to an Indo-Pacific that is free and open, connected, prosperous, secure, and resilient. A strong and connected Pacific region has benefits for the United States and for the global economy,” Yellen stated.
