In the first major business deal since the United States and Cuba resumed diplomatic relations, Pompano Beach-based Stonegate Bank said Wednesday that it is setting up a correspondent banking relationship with a Cuban financial institution.
Stonegate, a commercial bank with 21 branches in Florida, signed an agreement Tuesday in Havana with Banco Internacional de Comercio. It’s the first correspondent banking deal signed by a U.S. bank with Cuba since President Barack Obama and Cuban leader Raúl Castro announced on Dec. 17 that they planned to work toward normalization of relations and it came the day after both countries resumed diplomatic ties.
BICSA, which was formed in 1993, handles foreign trade financing and foreign exchange transactions and correspondent relationships with banks overseas. Audited annually by Ernst & Young, it has more than 600 correspondent relationships around the world.
“This is another step in terms of normalizing commercial relations between the U.S. and Cuba,” said David Seleski, president and chief executive of Stonegate, which recently began handling the accounts of Cuba’s diplomatic missions in the United States. “The ability to move money easily between the two countries will only increase trade and benefit American companies wishing to do business in Cuba.”
Under the opening with Cuba, there are also more opportunities for U.S. companies to trade with Cuba, although much of the U.S. trade embargo against the island remains intact.
A survey released by Pew Research Center this week found that 72 percent of Americans surveyed said they approved of ending the embargo, six percent more than favored lifting it in a January survey. The survey did not break out Cuban-Americans, but 74 percent of Hispanics said they favored lifting the embargo.
Having a correspondent banking relationship should help facilitate money transfers to Cuba.
“I assume their next step would be to apply for a license to handle remittances so they can compete with Western Union,” said Fernando Capablanca, managing director of Whitecap Consulting Group, which provides services to community and foreign banks. “I’m happy someone has done this. It is a good first step. It’s a new frontier, so I’m not quite sure how Stonegate will use this arrangement.”
Under financial regulations outlined by the U.S. Treasury Department’s Office of Foreign Assets Control in January, American banks are allowed to open correspondent accounts in Cuban banks and U.S. travelers are permitted to use credit and debit cards on the island.
But many U.S. banks have remained wary and said they wanted more regulatory assurances that they wouldn’t run afoul of U.S. law if they did business with Cuba. At a White House briefing Wednesday for business people, academics and others interested in the new Cuba policy, briefers said that the release of revised Cuba regulations is imminent, according to several people who attended.
The briefers said the initial regulations issued in January were written quickly and additional clarification is needed based on feedback received from the business community, said the sources. They said the Miami business community was well-represented at the briefing.
While Stonegate is the first to sign a correspondent banking agreement, so far no U.S. banks are offering support for U.S.-issued credit and debit cards. MasterCard and American Express have said that they are willing to process card transactions by American travelers to Cuba but without support from U.S. banks, the plastic won’t work on the island.
Augusto Maxwell, chair of the Akerman law firm’s Cuba practice, said it’s possible that other banks may now try to work with Stonegate since it has already laid the groundwork in Cuba. “They have really shown leadership,” he said. “I think anyone authorized to do legal transactions with Cuba should benefit.”
Having a correspondent banking relationship, he said, “should go a long way toward lowering transaction costs and making U.S. goods more competitive.”
Since May, Stonegate has been the bank that handles the accounts of Cuba’s diplomatic missions at the United Nations and for the Cuban Interests Section in Washington — now the Cuban Embassy. The missions had been without a bank for more than a year after M&T Bank of Buffalo, N.Y., told them it was getting out of the business of handling the accounts of foreign missions.
One of the reasons Cuba had so much trouble finding a banker was its continued presence on the U.S. list of state sponsors of terrorism — countries deemed to have repeatedly provided support for acts of international terrorism. But the White House announced in April it intended to remove Cuba from the black list and it came off May 29.
Stonegate has assets of $2.27 billion and $1.93 billion in deposits. In Miami-Dade County, it operates offices in Doral and Coral Gables.
Since Stonegate began handling the accounts of Cuba’s diplomatic missions, a group called Cuban American Friends and Patriots has maintained a vigil across the street from Stonegate’s Coral Gables branch every Monday morning.
“The bank is complicit with the tyrant,” Emilio Izquierdo, coordinator of the group, said Monday, the same day the Cuban Interests Section became the Cuban Embassy. As in Vietnam and China, he said, Cuba is beginning a period of “selective capitalism” where the hierarchy and Castro family will get rich and “the Cuban people will continue in misery.”
John Kavulich, president of the U.S.-Cuba Trade and Economic Council, said having a U.S. bank establish a direct correspondent banking relationship will affirm “that the government of the Republic of Cuba’s governance may be trusted; a substantial marketing benefit to the country. Stonegate bank will be rewarded with business — both in the United States and in the Republic of Cuba.”
But with the new arrangement, he said, Cuba will be under pressure to reverse the declines in food, agricultural and healthcare products purchased from the United States under exceptions to the embargo. Having such a correspondent banking relationship, he said, may also increase pressure on Cuba to allow self-employed entrepreneurs to open accounts with BICSA so they can make payments directly to U.S. companies for imports that will be used in their businesses.