CAPSS Just Cleared Another Review. It's Built to Fix the Credit Squeeze Correspondent Banks Left Behind.

By Nicholas Dunkley, Fintech Policy Analyst, Credit Garden | July 28, 2026

Monetary council meetings rarely make headlines. The 113th meeting of the Eastern Caribbean Central Bank's Monetary Council, held on July 10, 2026, at the InterContinental Dominica Cabrits Resort under the chairmanship of Dominica's Minister for Finance, Dr Irving McIntyre, was no different. Its communique was a list of updates, acknowledgements, and fiscal measures taken to cushion the cost of living. Inside it was an update on two projects the Council described as flagship initiatives under The Big Push, the ECCB's programme to double the size of the currency union's economy by 2035. One was the Fast Payment System, the instant, phone-linked transfer rail already rolling out across the Eastern Caribbean. The other was CAPSS, the CARICOM Payments and Settlement System, and its pilot phase reaches well beyond the eight small territories of the ECCU.

What CAPSS Does

CAPSS addresses a specific problem: how does a business in one CARICOM country pay a business in another CARICOM country without both sides first converting their money into US dollars? Under the correspondent banking model that has governed Caribbean cross-border trade for decades, a payment from a Trinidadian importer to a Barbadian exporter typically leaves Trinidad in TT dollars, converts to US dollars at a correspondent bank, clears through that bank's US dollar system, then converts again into Barbados dollars on the other end. Each conversion costs money, each hop through a correspondent bank adds delay, and the whole chain can stop working if one correspondent decides the Caribbean is not worth the compliance overhead.

CAPSS removes the double conversion. Central banks in participating countries hold reserves of each other's currencies, so a Trinidadian importer can pay a Barbadian exporter directly, TT dollars leave one account and Barbados dollars land in the other, with the two central banks settling the difference between themselves. The design is explicitly modelled on the Pan-African Payment and Settlement System, PAPSS, the infrastructure built by the African Export-Import Bank, Afreximbank, and the African Union to let African countries trade with each other without every transaction detouring through a Western financial centre. Afreximbank is also the settlement partner behind CAPSS, extending the same architecture to a region with a similar problem.

The Testing Behind the Pilot

CAPSS has a testing history that predates 2026. From February 19 to 21, 2025, representatives from the central banks of The Bahamas, Barbados, Suriname, and Trinidad and Tobago, working alongside Afreximbank and PAPSS, successfully tested the system's ability to process instant cross-border payments in local currency without an intermediary. That test built on an earlier proof of concept between the Central Bank of Barbados and the Central Bank of The Bahamas. At their 65th bi-annual meeting in November 2025, CARICOM's central bank governors agreed to move beyond proof of concept and open a formal pilot, naming The Bahamas, Barbados, Trinidad and Tobago, and the Eastern Caribbean Currency Union as the initial participating jurisdictions. The July 10 ECCB communique is the latest checkpoint on a project that has been advancing for close to eighteen months.

Barbados Central Bank Governor Dr Kevin Greenidge has advocated moving quickly. Speaking at a Fast Payment System workshop for Caribbean countries, he set out the case in operational terms: national instant payment systems with mandatory participation from core institutions, connected regionally through CAPSS, to lower cost, raise speed, and keep commerce moving during shocks. His argument, echoed in Trinidadian commentary describing CAPSS as "a game changer" for CARICOM trade, is that the sooner the system becomes fully operational across the region, the sooner Caribbean businesses stop paying a currency-conversion tax on trade that happens almost entirely between neighbours.

The Correspondent Banking Problem CAPSS Answers

A payments pilot becomes a credit story once you look at a problem the region has lived with far longer than CAPSS has existed. In the years following the 2008 global financial crisis, large international banks began systematically pulling back from correspondent banking relationships with smaller institutions in jurisdictions they judged too costly to monitor for money laundering and terrorist financing risk under tightening anti-money-laundering and know-your-customer rules. The Caribbean, along with the Pacific Islands and parts of Africa, absorbed a disproportionate share of that withdrawal.

A 2017 survey by the Caribbean Association of Banks, later cited widely in International Monetary Fund research, found that 21 of 23 surveyed banks across 12 Caribbean countries had lost at least one correspondent banking relationship, with eight left operating on a single remaining provider. The Financial Stability Board warned at the time that the trend risked becoming a systemic problem for the region, and it has not reversed. The Bank for International Settlements has reported that the number of active correspondent banking relationships worldwide has fallen by roughly a quarter since 2011, with the steepest cuts concentrated in exactly the small, lower-volume markets the Caribbean represents. The Atlantic Council has argued that the United States should treat correspondent banking access for the Caribbean as a public good, because the market alone keeps producing the opposite outcome.

Where the Credit Squeeze Bites

A lost correspondent relationship rarely makes a headline of its own. It produces friction that lands on businesses that never see the cause. A regional bank left with a single correspondent provider has less negotiating leverage on fees, less capacity to process the volume its clients need, and far less room to absorb the loss if that last relationship also ends. That friction shows up directly in the tools importers and exporters rely on to trade: letters of credit, trade guarantees, and short-term financing that lets a business pay a supplier before its own goods are sold. When those instruments become slower, costlier, or simply unavailable through a bank's usual channel, the businesses that depended on them get pushed toward informal financing arrangements, personal loans from family, supplier credit extended on trust rather than paper, or cash advances that never generate a bank record at all.

Correspondent banking connects directly to financial inclusion. A small importer who cannot get a standard trade credit line because their bank's correspondent capacity is stretched thin faces a cash flow problem this quarter and a longer one after it: they are pushed toward undocumented, informal financing that leaves no transaction trail for a lender, or an AI credit model, to read later. The dynamic described elsewhere on this site for consumer cash transactions applies to a small business's supply chain too. A credit system cannot assess activity it cannot see, and correspondent de-risking has spent a decade pushing more Caribbean trade activity into the dark.

What CAPSS Changes and What It Leaves Alone

CAPSS attacks one specific piece of that chain. By letting participating central banks settle trade directly in local currency, it removes the US dollar correspondent bank from the middle of a transaction that never needed to touch New York or London in the first place. A trade payment that used to require a working correspondent relationship, in both the paying country and the receiving one, now only requires two central banks that have already agreed to hold reserves for each other. That removes several points where a de-risking bank can break the chain.

CAPSS does not fix the credit gap that correspondent withdrawal created. It is a settlement pilot spanning four jurisdictions and is not yet a CARICOM-wide utility. Trade with countries outside the pilot still runs through the old correspondent system, with all its existing fragility. CAPSS also covers only the mechanics of moving money across a border, and it does not generate the letters of credit or trade financing products that businesses need. It removes a cost and a risk from the plumbing under those products, which over time should make them cheaper and more reliable for regional banks to offer.

This is also where the Caribbean AI Risk Management Council has a legitimate stake in how this infrastructure gets built. A regional settlement system that reduces reliance on one point of failure, correspondent banking, only helps if it does not simply create a new single point of failure in its own governance, security, and interoperability with domestic systems like BiMPay and the ECCU's Fast Payment System. Financial inclusion built on infrastructure nobody has stress-tested for fraud, outage, or bad actors creates a different kind of exposure, and the discipline applied to consumer-facing payment rails needs to apply here too.

Why This Matters for Caribbean Credit Data

The pattern repeats across Caribbean fintech coverage. Traditional credit scoring can only assess financial behaviour that leaves a formal, structured trail. Consumers who transact mostly in cash are functionally invisible to a conventional bureau, no matter how reliably they actually manage money. The same holds for a small business whose trade financing has moved from a bank's standard credit line to an informal arrangement between two owners who trust each other but keep no paper trail a lender could assess.

CAPSS will not reverse that alone, but every trade payment that moves through a functioning, direct local-currency settlement rail instead of a strained, single-provider correspondent relationship is a transaction that stays inside a system banks can actually see, price, and eventually lend against. StarApple AI, the Caribbean's first AI company, founded by Adrian Dunkley, has long argued that AI credit models built for the region need to be built around the region's actual payment infrastructure rather than imported wholesale from markets with entirely different banking conditions. CAPSS fits that argument: a system built by Caribbean central banks for Caribbean trade that produces the transaction record alternative credit models are designed to read.

What Caribbean Businesses Should Do Now

Businesses should not wait for CAPSS to reach every CARICOM member state before acting. Importers and exporters operating in or near the four pilot jurisdictions, The Bahamas, Barbados, Trinidad and Tobago, and the ECCU, should ask their banks directly whether CAPSS settlement is available for their trade corridors and what it costs relative to the correspondent route they currently use. Businesses outside the pilot should watch the CARICOM governors' upcoming meetings closely, since expansion beyond the initial four jurisdictions is the next milestone that will determine how much of the region's trade this system can eventually touch.

For any business still relying on informal, undocumented financing arrangements because a formal trade credit line has become too slow or too costly to secure, the next step is building a documented transaction history through whatever domestic instant payment rail is available, so that a lender or credit model has a record to assess when regional settlement infrastructure matures. Correspondent banking de-risking came from a global compliance calculation that stopped favouring small markets. CAPSS is the first serious regional attempt to change that calculation from the infrastructure up. The credit access that follows will take years to show up in the numbers.

Four jurisdictions are in the settlement pilot, built in response to a decade of correspondent banking losses. Photo via Unsplash.