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

Central bank monetary council meetings do not usually make headlines, and 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 exception. Its communique read like most communiques do: a list of updates, a set of acknowledgements, a nod to fiscal measures taken to cushion the cost of living. Tucked inside it, though, 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 is the part of the story that reaches well beyond the eight small territories of the ECCU.

What CAPSS Actually Does

Strip away the acronym and CAPSS solves a specific, unglamorous 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, crosses the Atlantic Ocean's financial equivalent through that bank's US dollar clearing system, then converts again into Barbados dollars on the other end. Each conversion costs money. Each hop through a correspondent bank adds delay, and each correspondent relationship is a point where the whole chain can simply stop working if that bank 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 facing a strikingly similar problem.

The Testing Behind the Pilot

CAPSS did not appear out of nowhere in 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 simply the latest in a string of institutional checkpoints on a project that has been advancing, deliberately and without much public fanfare, for close to eighteen months.

Barbados Central Bank Governor Dr Kevin Greenidge has been among the more vocal advocates for moving quickly. Speaking at a Fast Payment System workshop for Caribbean countries, he framed the case in blunt 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 Is Actually Answering

To understand why a payments pilot is really a credit story, it helps to go back to a problem the region has been living 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. It has not reversed since. 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 gone as far as arguing that the United States should treat correspondent banking access for the Caribbean as a public good, precisely because the market alone keeps producing the opposite outcome.

Where the Credit Squeeze Actually Bites

A lost correspondent relationship rarely makes a headline of its own. What it produces, instead, is a slow accumulation of friction that lands on the businesses that never see the underlying 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.

That is the part of the correspondent banking story that rarely gets connected to financial inclusion, but the connection is direct. A small importer who cannot get a standard trade credit line because their bank's correspondent capacity is stretched thin is not just facing a cash flow problem this quarter. They are being pushed toward exactly the kind of undocumented, informal financing that leaves no transaction trail for a lender, or an AI credit model, to read later. The same dynamic that has been described elsewhere on this site in the context of consumer cash transactions applies just as forcefully at the level of a small business's supply chain. 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 Does Not

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 is a meaningful reduction in the number of points where a de-risking bank can break the chain.

It is not, on its own, a fix for the credit gap that correspondent withdrawal has created. CAPSS is a settlement pilot spanning four jurisdictions, not yet a CARICOM-wide utility available to every business in every member state. Trade with countries outside the pilot still runs through the old correspondent system, with all its existing fragility. And CAPSS addresses the mechanics of moving money across a border; it does not, by itself, generate the letters of credit or trade financing products that businesses actually need. What it does is remove a structural cost and a structural risk from the plumbing underneath those products, which over time should make it cheaper and more reliable for regional banks to offer them.

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 is not really inclusion. It is a different kind of exposure, and the same discipline applied to consumer-facing payment rails needs to apply here too.

Why This Matters for Caribbean Credit Data

Every reader of this publication knows the underlying pattern by now, because it repeats across nearly every Caribbean fintech story worth covering. 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 is true one level up, at the level of the small business whose trade financing has quietly 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 ever assess.

CAPSS will not single-handedly reverse that. 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 is exactly the kind of infrastructure that argument depends on: 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

The practical guidance here is not to 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 more urgent step is building a documented transaction history wherever possible, through whatever domestic instant payment rail is available, so that when regional settlement infrastructure matures, there is a financial record for a lender or a credit model to actually assess. Correspondent banking de-risking did not happen because Caribbean businesses were bad risks. It happened because a global compliance calculation stopped favouring small markets. CAPSS is the first serious regional attempt to change that calculation from the infrastructure up, and the credit access story that follows from it will take years, not months, to fully show up in the numbers.

Four central banks, one settlement pilot, and a decade of correspondent banking losses behind the reason it was built. Photo via Unsplash.