Belize Outranks Most G20 Countries on Banking Liquidity Requirements

Following the Silicon Valley Bank (SVB) collapse, it is not hard to guess what happens next. Driven by the fear of contagion, depositors are frantically reassessing the market to determine where their savings might be the safest. Naturally, the sheer size of G20 economies makes that a sensible start for many, however the popularity of offshore banking is on the rise amidst uncertainty.

The OECD may have had many suggestions in the past but is in no way playing a role in guaranteeing bank deposits. This just means that record numbers of foreign investors and corporations will do their own homework to benefit from the perks of offshore banking instead of traditional domestic banking. Which is the best country for offshore banking and where is your money the safest? Starting with liquidity is key.

Bank Liquidity Requirements

Considering the SVB collapse and how a bank’s liquidity reserve requirements may impact your financial security, it is expected that this will become an essential factor for those seeking lucrative offshore banking locations. With this in mind it is not surprising that a popular choice for most foreigners remains Belize.

Stakeholders in Belize were quick to respond to the SVB saga by assuring depositors of a more prudent approach to liquidity. This was one of the reasons for an important meeting which took place during with the Governor of the Central Bank of Belize, Kareem Michael, and the President of Caye International Bank, Luigi Wewege. The meeting was held on the sidelines of The Annual Meeting of the Boards of Governors of the Inter-American Development Bank and IDB Invest, which took place in Panama City.

Luigi Wewege said: “We want Belize to be a safe haven during global economic turmoil. Even though Belize has the smallest economy in Central America and is mainly considered a private enterprise economy, compared to some of the countries on the G20 list, Belize still possesses one of the most attractive offshore banking legislations, particularly when it comes to liquidity requirements”.

Safety and reassurance are the main influencing factors to consider here, which is why it is good to know that in comparison to other banks in the world, banks in Belize are required to maintain a significantly high reserve requirement, that is, at least four times higher than some local banks in the US. For example, in Belize, all banks must keep their liquidity at a minimum rate above 24%, which is surprisingly attractive considering the country’s size and economy.

Why are an offshore bank’s liquidity requirements important?

Liquidity is one of the most critical metrics for anyone but even more so for offshore banks, this due to the deposit inflow of money that is coming in. It is possible that funds can easily reach significant amounts of dollars and a bank’s liquidity policy needs to reflect the correct percentage of these funds.

A bank’s liquidity reserve requirement refers to the minimum amount that a financial institution must hold to meet the expected demands of its customers. For instance, a bank with high liquidity will have greater control of its assets, unexpected emergencies, coverage of expenses, changes in demand, and more.

The more easily a bank can access these funds, the better it can serve clients and grow its investment portfolio. An efficient bank will also ensure that it has enough liquid assets to meet withdrawals by depositors and other obligations. When deciding where to engage in offshore banking, the liquidity requirement of the bank is an important aspect to consider, as it could safeguard your well-earned wealth.

Let’s have a look at some of the top G20 countries and their liquidity reserve requirements:

United States

With a GDP value of over 23 trillion, it is understandable why the United States has one of the world’s largest and most thriving economies. Separated by their high level of individualism and work ethic, it is no wonder how they became such a powerhouse.

However, with only an approximate 13.8% central bank liquidity reserve requirement, it may be risky for your banking, especially considering the recent Silicon Valley Bank collapse, which has showcased the fragility of the current U.S. banking system.

China

Next to the world’s economic giant is the Republic of China, with a GDP value of nearly 18 trillion. Undoubtedly, China is a booming economy, so many people are looking to invest in the Chinese market, hoping for lucrative returns on their investments.

China did, however, experience an economic downfall due to the COVID-19 pandemic and was one of the worst hit countries. As a result, the Chinese government has consistently tried to fix and get the economy back up and running.

Such efforts can be seen in China’s central bank’s effort to support economic recovery by cutting the bank’s liquidity reserve requirement to 7.6%. This may, however, be great for banks but may not necessarily be great for people seeking a sense of security and stability where they store their money. Yet with alarming Ponzi schemes and millions of citizens unable to withdraw their money at times, would the average Westerner really trust China with their banking?

Japan

Among the G20 countries mentioned thus far, Japan is one of the most attractive places for offshore banking, with its high liquidity reserve requirement of approximately 43.2%. It is also predicted that Japan is one of the G20 countries that will be the least affected by the recent SVB collapse. It looks promising for those interested in engaging in offshore banking in Japan.

Germany

A country with the highest GDP value in Europe just over 4 trillion, Germany is well-renowned for its thriving economy and diligent work ethic. In recent financial news, German analysts have said that the SVB collapse should not impact the German economy but that it is advised to keep an eye out for indirect impact.

Even though Germany has quite an impressive central bank liquidity reserve requirement of 29.7%, it is probably a good idea to halt any investment or banking decisions made within the country for the time being. This largely due to Germany being perceived as high risk if one considers the EU bail-in regime.

India

With the highest GDP value among developing countries of just over 3 trillion, India has become an attractive option to those looking for tax benefits and cost-effective banking. However, it has been predicted that India is among the countries that are expected to be negatively impacted by the SVB collapse.

It is estimated that startups and exporters within India are mainly dependent on the U.S. market. So, if the American economy begins to falter, then they could expect a stunt in economic growth plus challenges with paying their debts. With only a liquidity reserve requirement of 18%, India is considered by most a risky place to invest your funds.

United Kingdom

Considering all the issues surrounding the Brexit move that happened in the early stages of 2020, the United Kingdom has done considerably well in terms of its GDP value of just over 3 trillion and an impressive liquidity reserve rating of 37.5%. Caution is, however, still advised as experts continue to weigh in on the extent to which the SVB collapse has impacted the UK’s economy and banks.

Key Takeaways:

United States Treasuries are not a risk-free asset - as SVB has just proven to the world. When comparing the above listed countries and economies, it would appear that Belize could be a strong contender as an attractive place to secure one’s hard earned wealth.

Besides Belize’s prudent liquidity reserve requirements which beats many G20 countries, it is also well-known as an excellent offshore banking location due to its specific banking laws, account holder privacy, and favorable tax benefits.

It has also proven itself a perfect option for those desiring asset protection in the unfortunate circumstances of economic uncertainty in their home countries. If the SVB collapse and its consequences are anything to learn from, now is the time to think strategically about where to keep savings. Finally, considering the risk of EU bail-ins, it is not just Americans that are looking offshore, but indeed also Europeans.

Nelson Alves is the accomplished editor of Newstrail.com and a respected authority on economics and technology. Recognized for his precise analysis and ability to inject a touch of humor during moments of tension, Nelson's insightful commentary continues to captivate audiences and elevate the discourse surrounding the latest developments in his fields of expertise.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes