Banking on Fiji

Fiji banks make the headlines

Over the last year, the unexciting topic of banking services in Fiji has made headlines with increasing frequency. Here's a chronological selection:

• "Westpac to maintain Pacific presence, cancels sale of PNG, Fiji banks" (Financial Review, Oct 4, 2023)

• "Australia-US forum aims to solve Pacific banking crisis" (Financial Review, July 7, 2024)

• "Why are Australian banks getting out of the Pacific?" (ABC News, Aug 4, 2024))

• "Bank of China set to open first branch in PNG and gain Pacific foothold" (ABC News, Nov 1, 2024)

• "Australia nears deal with ANZ to stop bank closures in the Pacific" (islandsbusiness.com, Nov 12, 2024)

Fiji five-dollar note Source: Fiji Reserve Bank

I have no expertise in banking whatsoever, but even I can discern a narrative here. The story is not only of business deals in skyscraper boardrooms and ministerial offices, but of harmful impacts on the daily lives of Fijians and other Pacific islanders. I have posted here, here, and here about China's push for influence in the Pacific, mainly through infrastructure aid projects and business investment. Indeed, I set many scenes in Death Beyond the Limit: Fiji Islands Mysteries 3, on a Chinese tuna fishing long-liner. But I was quite unaware of changes in banking in the region which rang alarm bells in Australia, New Zealand and even the United States.

Banking basics in Fiji

The prosperity of small island nations is completely dependent on overseas trade, so without a banking system, economies like Fiji will suffer disaster far worse than the most destructive cyclone. Fiji's Reserve Bank authorises six commercial banks, five of them foreign-owned. The ANZ (Australia & New Zealand Banking Company) and Westpac (also Australian), which both began Pacific operations in the 19th century, dwarf the other four in size, number of branches and range of services.

ANZ educates villagers in money management. Source: University of the South Pacific

What's the crisis?

For some years now, banks in the South Pacific have struggled to comply with strict new international banking regulations as the cost of implementing these in such small markets has proved prohibitive. One by one, commercial banks have closed branches, reduced their range of services or withdrawn from the South Pacific completely. They say business there is no longer sustainable. So concerned is the Australian government that it persuaded Westpac to cancel the planned closure of its Pacific islands network last year. Just a few days ago, the Australian government announced a deal with ANZ bank, by far the biggest bank in Fiji, to continue operating in the South Pacific to ensure islanders were not cut out of the global economy. However, with China poised to fill any banking hole, Australia sees more banks' departure from the South Pacific islands not only as an economic concern, but also as a security threat.

The Bank of China offered to set up a branch in Nauru when Bendigo Bank announced its withdrawal from Nauru next year, now postponed. The Bank of China is also set to open a branch in Port Moresby PNG early next year, when PNG's first casino is also due to open. Expert Bridi Rice said that if the Bank of China did not adhere to the same anti-money laundering regulations that Western banks enforce, it would create increased potential for financial crime in PNG. "For Papua New Guinea, this is not just a geopolitical move, it is a development that will have financial inclusion, criminal and development implications for generations to come."

Help from friends

In July, Australia hosted the first Pacific Banking Forum, also attended by the US. The Australian government pledged an extra $6.3 million to prevent the loss of banking services in the Pacific. Bank closures mean some island nations can no longer access cross‑border payment services and fund national projects. What's more, as Bob Lyon, former managing director of ANZ Pacific pointed out:

"It’s not only the financial services that they provide which would be missed. It’s the skills that have been transferred to local staff who now fill most of the senior positions in each country. There’s now a high number of home-grown bankers filling senior roles in many industries in the Pacific who are critical for the islands operating in an international trading economy." (Australia Pacific Islands Business Council)

The following week in Tokyo, at the Pacific Island Leaders Meeting (PALM10) Japan and the Pacific Island Forum members, endorsed a Joint Action Plan to support the island nations in meeting international banking regulations.

I'm banking on these agreements bearing real fruit. The future of Fijians and all other Pacific islanders depends on banks.

You can find more about Fiji on my website, in the Fiji Gallery and Blog page. As ever, I'd welcome your comments and questions about this post.

Happy reading,

Bernadette (B.M. Allsopp)