Pacific Island countries are experiencing the fastest decline in correspondent banking relationships globally. Australia has addressed this challenge through engagement with its domestic banking sector and by supporting regional initiatives with multilateral agencies. A government-backed limited guarantee can help sustain banking presence in the region, while placing minimal demand on Australia’s official development assistance (ODA) budget.
Safeguarding financial access in the Pacific by engaging Australian banks
Abstract
Australia’s Pacific Island partners are experiencing a rapid decline in banking services due to the withdrawal of commercial banks from the region. Since 2011, there has been a 60% fall in correspondent banking relationships in the Pacific, double the global average. Banks cite challenging market conditions, including high compliance costs and low profitability, alongside Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) risks and fragmented regulatory frameworks. Pacific Island country economies are particularly reliant on correspondent banking relationships for cross-border transactions of remittances from overseas workers and for development finance to fund essential services and respond to external shocks. Losing banking services further affects international trade and the ability of Pacific countries to attract investment and grow their economies. In addition to the risks facing Pacific countries, the withdrawal of banks creates a geopolitical challenge for Australia, leaving a gap in the market for other countries to step in.
Australia is addressing debanking in the Pacific through a combination of international collaboration and domestic action:
Whole-of-government steering committee. Australia’s Department of Foreign Affairs and Trade (DFAT) has established a cross-departmental steering committee involving the Department of Finance and the Treasury to address the challenge of debanking. The issuing of a guarantee to an Australian bank required risk assessments and the input of authorising agencies such as the Treasury.
Fostering public-private partnerships. In July 2024, the Pacific Banking Forum, co-hosted by Australia and the United States, along with the support of public, private and multilateral partners, aimed to strengthen commitments to address the decline of correspondent banking relationships. The Forum aligned with the Pacific Islands Forum Secretariat’s (PIFS) 10-year Roadmap to address debanking. Focusing on advancing public-private partnerships, the Forum brought together finance ministers from across the region and major global banks, resulting in strengthened commitments from correspondent banks to collaborate, including with the World Bank.
Building regional and international collaboration to address debanking. Recognising that Australia could not address debanking alone, the Australian government has funded various efforts including: the World Bank’s Pacific Strengthening Correspondent Banking Relationships project and digital identity project; the Asian Development Bank’s know-your-customer infrastructure; and work by Australia’s Attorney General’s Department to strengthen law and justice to bolster anti money laundering efforts across the region.
Supporting regulatory foundations and private sector engagement for inclusive digital banking technologies. Recognising the crucial role that digital banking technologies have in contexts with limited access to physical banking services, the Pacific Digital Economy Programme (PDEP), co-funded by New Zealand and implemented by the United Nations Capital Development Fund, has worked on private sector projects to de-risk the business model and ensure scalability. PDEP has also supported regulatory foundations for digital financial services, including finalising a Digital Financial Services regulatory framework to address remittance and cybersecurity challenges in Vanuatu.
Sustained banking presence: a government-backed 10-year guarantee with the Australia and New Zealand Banking Group (ANZ) has encouraged its sustained presence in the Pacific, strengthening access to financial services in the Cook Islands, Fiji, Kiribati, Papua New Guinea, Samoa, the Solomon Islands, Timor ‑Leste, Tonga and Vanuatu. The interdepartmental steering committee facilitated the process of securing the 10-year guarantee, starting in October 2025, for a maximum amount of AUD 2 billion. The Australian Treasury assessed the guarantee as low risk and ANZ pays an annual fee to the Australian government. The Pacific Banking Guarantee Act 2025 empowers the Commonwealth to issue legally binding guarantees to Australian banks that operate in Pacific Island countries, backed by the Consolidated Revenue Fund. The 2024 Nauru-Australia bilateral treaty led to the opening of a Commonwealth Bank of Australia in Nauru in 2025, addressing the departure announcement of Bendigo and Adelaide Banks.
Strengthened private sector engagement: ANZ is investing an additional AUD 50 million into its Pacific banking operations to support ongoing services and expand its digital banking capabilities. Expansion of RocketRemit - a cross-border remittance platform for digital transfers between Fiji and Vanuatu - is partially funded by Vodafone, alongside the Market Development Facility (MDF).
Reduced costs of remittances: existing fee-free international money transfers into the Pacific are now maintained over the life of the ANZ guarantee, helping support the flow of funds and remittances into the region. This aligns with Australia’s broader work to reduce remittance costs in the Pacific.
Strengthened mobile money services: the deployment of the M-SELEN platform in the Solomon Islands, supported by PDEP, has increased financial inclusion, achieving over 230 000 user registrations and onboarding 1 519 mobile money agents. Almost half of the user registrations are women (46.27% as of December 2024). Services include peer-to-peer transfers, bill payments, and international remittances. PDEP has also finalised a Digital Financial Services regulatory framework to address remittance and cybersecurity challenges in Vanuatu.
Strengthened national and regional regulatory frameworks: regional anti-money laundering regulation has been supported through capacity building from the Australian Transaction Reports and Analysis Centre and DFAT’s Pacific Private Sector Development Initiative (PSDI), implemented by the Asian Development Bank and co-funded by New Zealand. For example, in late 2024, PSDI helped the Cook Islands Financial Supervisory Commission launch a secure international business registry to strengthen AML/CFT compliance.
Increased regional co‑ordination and critical infrastructure: digital identity, payment systems oversight, and data collection including gender-disaggregated financial access data are being supported through the World Bank’s Pacific Strengthening Correspondent Banking Relationships Project.
Guarantees can be a low risk policy tool for engaging the private sector. As the Treasury considered the probability of having to trigger the guarantee as very low, it has the potential to have high returns for development impact, at very little cost to the ODA budget.
Addressing regulatory and compliance barriers requires regional collaboration. By aligning efforts to address debanking in the Pacific with regional priorities, including the PIFS’ 10-year roadmap, Australia supported regionally co-ordinated action. Regional buy-in and action is critical on both compliance and strengthening critical digital infrastructure.
The challenge of debanking cannot be addressed by governments alone. Strong public-private partnerships are required for effective policies that respond to the specific challenges facing banks. These partnerships can secure private sector support for the development priorities of, and challenges facing, Pacific Island countries.
Whole-of-government co‑ordination is vital for success where there are opportunities to leverage other actors for development impact. The interdepartmental steering committee set up to address the challenge of debanking helped convey to stakeholders, including the private sector, how domestic and development interests can work together effectively.
ANZ (2025), “Update regarding ANZ’s Pacific operations”, ANZ media release, https://www.anz.com.au/newsroom/media/2025/march/Update-regarding-ANZs-Pacific-operations/, (accessed on 2 October May 2025).
Parliament of Australia (2025), Pacific Banking Guarantee Bill 2025, https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7303.
Australian Government (2024), Pacific Banking Forum Outcomes Statement, The Treasury, https://treasury.gov.au/publication/p2024-552688.
OECD (forthcoming), OECD Development Co-operation Peer Reviews: Australia 2025.
To learn more about Australia’s development co-operation, see:
OECD, Australia, Development Co-operation Profiles, OECD Publishing, Paris, https://www.oecd.org/en/publications/development-co-operation-profiles_04b376d7-en/australia_b4d74d53-en.html.
More In Practice examples from Australia are available on Development Co-operation TIPs • Tools Insights Practices.
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