This policy brief examines the relationships between the European Union (EU) and its neighbouring countries in financial services, with a particular focus on trade finance. Historically, European banks have played a prominent role in this region, providing capital for business investments, and acting as intermediaries for financial services. They have been essential as correspondent banks, facilitating the trade finance necessary for international trade. Correspondent banking supports cross-border transactions and financial inclusion by enabling banks to access financial services in various jurisdictions.
However, following the financial crisis, the EU reformed its financial services regulations, weakening these relationships in trade finance. In consequence, the role of EU correspondent banks and their provision of trade finance in neighbouring countries has declined. European banks have since withdrawn from the EU’s eastern rim and reduced their exposure in southern neighbouring countries.
To better understand developments in financial services integration and the ability of operators in neighbouring countries to utilise financial services in the EU, this policy paper explores their access to EU correspondent banking and trade finance. Additionally, it reviews current trade agreements related to financial services between the EU and its neighbouring countries and concludes with policy recommendations for European policymakers to facilitate financial integration with the EU and mitigate risks of neighbouring countries distancing themselves further from the EU.
