Novel approaches to correspondent banking relationships in the context of de-risking trends

Posted: Oct 28, 2025

• Prof. Leo Kowalski
• Prof. Liam Rossi
• Prof. Lucas Ricci

Abstract

The global financial landscape has undergone significant transformation in the post-financial crisis era, with correspondent banking relationships facing unprecedented challenges. De-risking, defined as the strategic decision by financial institutions to terminate or restrict business relationships with entire categories of clients or jurisdictions to avoid regulatory scrutiny rather than manage associated risks, has emerged as a critical concern for international financial stability. This phenomenon has particularly affected emerging economies, remittance-dependent nations, and sectors such as non-profit organizations and money service businesses. The traditional correspondent banking model, which facilitates cross-border payments and access to international financial markets, has become increasingly strained under the weight of escalating compliance costs, regulatory complexity, and fear of enforcement actions. This research addresses the fundamental tension between regulatory compliance and financial inclusion by proposing a comprehensive framework that reimagines correspondent banking relationships through technological innovation and collaborative risk management. The conventional approach to de-risking represents a failure of risk management systems to effectively distinguish between legitimate financial activities and illicit transactions. Our investigation reveals that current compliance methodologies rely heavily on static risk assessments and manual processes that are ill-suited to the dynamic nature of modern financial crime threats. The consequences of de-risking extend beyond individual institutions to affect entire economic systems, with reduced correspondent banking relationships correlating with decreased trade finance availability, restricted remittance flows, and limited access to global payment systems. The novelty of our approach lies in its integration of emerging technologies with redesigned operational processes that transform risk management from a defensive cost center to a strategic enabler of secure financial connectivity. By leveraging distributed ledger technology for transaction transparency, artificial intelligence for adaptive risk assessment, and consortium-based governance for shared compliance responsibilities, we demonstrate that financial institutions