American and Cuban bankers hold historic meeting

American and Cuban bankers hold historic meeting
BY MIMI WHITEFIELD
mwhitefield@miamiherald.com

When South Florida banking consultant Fernando Capablanca recently spoke
about the Cuban banking system — the pre-1959 Cuban banking system — he
was surprised at the compliments he received.

That the perspective of someone with his long years in international
banking might be appreciated isn't too surprising. But the venue was
Havana and the compliments were coming from Cuban bankers.

Shortly after the United States and Cuba announced they were working
toward normalizing relations on Dec. 17, 2014, Capablanca thought it was
also time that Cuban and U.S. bankers, banking regulators and government
officials from both countries sit down and get reacquainted. It was a
long-shot to be sure, but Capablanca, the president of the Cuban Banking
Study Group, persisted.

The result was a two-day, invitation-only workshop, held in Havana in
mid-July that was attended by about 100 people.

Even though the Federal Reserve Banks of Atlanta and Boston operated
branches in Cuba at one point, J.P. Morgan established the Trust Company
of Cuba — the largest Cuban bank at the time of the 1959 revolution, and
U.S. banks once flourished on the island, there hasn't been such a
cordial meeting between U.S. bankers and their Cuban counterparts in
well over half a century.

The U.S.-Cuba banking relationship was severed on Sept. 17, 1960, when
Cuba confiscated Chase, National City Bank of New York and Bank of
Boston branches on the island.

But Capablanca said that "when things started improving [with the
rapprochement], I thought it would be a good idea to get to know the
banking system in Cuba better." Many U.S. bankers didn't know much about
how banking in Cuba is structured, whether Cuban banks did consumer
lending or who the main players were. On the flip side, Cubans bankers
also had plenty of questions about banking in the United States.

"It's been a closed door, and there really weren't interactions between
Cuban and American bankers in so long that you almost had to start over
with the basics," said David Seleski, president and chief executive of
Pompano Beach-based Stonegate Bank, the one U.S. bank that has taken
advantage of new opportunities for the U.S. financial sector opened up
by the Obama administration.

"The real logic for the workshop is we have a lot of Cuban Americans in
South Florida and one day the embargo will go away, so banks are
exploring future options," said Seleski, who attended the Havana workshop.

Already, U.S. regulatory changes allow U.S. banks to support credit and
debit cards used by U.S. travelers to Cuba, permit U.S. financing of
some authorized exports to the island, and allow Cuban nationals in Cuba
to have U.S. bank accounts for authorized transactions.

The Obama administration would like U.S. banks to act on this opening,
but so far they've been reluctant to engage. Organizers said the
get-acquainted workshop was a necessary first step in the process.

To get to the point where Cuban and American bankers were listening to
presentations on the history of banking in both countries, cybersecurity
and anti-money-laundering measures, as well as sharing perspectives at
coffee breaks, was the culmination of a nearly18-month odyssey through
both U.S. and Cuban bureaucracies.

Capablanca and David Schwartz, chief executive of the Florida
International Bankers Association, sat down with the Miami Herald to
talk about the historic workshop and how it came about.

It meant coordinating with the State Department and the Office of
Foreign Assets Control, which administers and enforces the embargo
against Cuba, but first Capablanca had to determine if the Cuban
government was even interested in the idea.

When he talked with José Ramón Cabañas, now the Cuban ambassador to the
United States, Capablanca said Cabañas told him he thought it was a
"great idea." But "approval from Cuba's central bank was critical,"
Capablanca said. About a year ago, he traveled to Havana to meet with
executives from the Banco Nacional de Cuba.

"They asked me, 'Why do you want to do this?'" said Capablanca, managing
director of Whitecap Consulting Group. "I said I'd like to see private
banks flourish again alongside Cuban banks. Cuba had a very robust
banking system in 1958 — perhaps the strongest in Latin America."

When he got the green light from the Banco Nacional, he went to the
board of the Cuban Banking Study Group. The board gave its approval, but
it was skeptical about pulling off the workshop. With board approval,
Capablanca recruited the Florida International Bankers Association as a
partner.

Then began the process of coordinating with U.S. officials and sending
agendas and revised agendas to Havana for approval. Last spring
Capablanca and Schwartz traveled to Havana to finalize the agenda in
hopes of holding the workshop in the fall. But federal officials told
Capablanca the only dates they had open for such a meeting were July 14
and 15.

Finally the stage was set for the workshop at the Hotel Nacional that
included 15 members of the federal government, including representatives
from OFAC, the Federal Reserve, the State Department, Treasury and
Commerce; around two dozen Cuban government officials from various
agencies, Cuban bankers, U.S. bankers — mainly from Florida, and a few
representatives of international banks with offices in Cuba.

"The interaction was probably better than anyone expected," Schwartz
said. "They had a lot of questions because we have a dual banking
system. There were a lot of things they didn't understand about our
banking system and we didn't know a lot of things about their banking
system either. It was pulling back the veil."

Schwartz said he was surprised to learn that there was a Cuba bank that
did lending for consumer purchases such as washers and dryers, that
there was a savings bank that offers term accounts and that 70 to 80
percent of bank workers and executives are women.

Raul Valdes-Fauli, president of Coral Gables-based Professional Bank,
said he attended the workshop to gain a better understanding of the
Cuban banking system, meet some Cuban central bankers in person, and see
how Cuban banks are working with private Cuban entrepreneurs.

He said he learned a new Spanish acronym on the trip, TCPs, short for
trabajadores de cuenta propia, the Cuban term for those who work on
their own and don't hold state jobs. "There is some financing available
for their businesses," he said. And more surprising to him, the Cuban
bankers "were speaking proudly of them," he said.

"I'm really glad I went," Valdes-Fauli said. "There was a lot of good
talking going on during the coffee breaks and at the closing reception.
And those conversations were probably as important as what was going on
in the formal sessions. This is how relationships begin."

He said he's unclear what next steps his bank might take. "I'm still
trying to get my head around what I heard there," he said.

"It was really an educational opportunity and we also reviewed all the
regulatory changes since December 2014," Capablanca said. Armed with new
information from the workshop, he said, the Cuban Banking Study Group
plans to update its 1995 book, "Cuba: Past, Present and Future of its
Banking and Financial System."

Those who attended said the sessions really weren't about the Cuban
economy or the nitty-gritty of how Cuba and U.S. banks might do
business, but rather broad brush strokes of how both countries' banking
systems operate.

Capablanca said there may be a follow-up meeting early next year. In
terms of next steps in the fledgling banking relationship, Schwartz
said, "A lot will depend on our election."

Rich Daily, president of Miami-based Apollo Bank, said he'd like to see
a follow-up as soon as possible. "The workshop definitely was not a
waste of time. It was a meeting that had to be held," he said. "We're
not ramping up to do any business was Cuba at this point, but we do want
to keep on top of things."

Most bankers are still on the fence when it comes to Cuba. After the
workshop, Capablanca said that "no one is taking the next step of trying
to enter the Cuban market, but they did want to learn more. There's
still only one U.S. bank operating in Cuba."

And that is Stonegate, which not only serves as the banker for the Cuban
Embassy in Washington, but also offers MasterCard debit and credit cards
that can be used in Cuba by authorized U.S. travelers and has signed a
correspondent banking deal with Cuba's Banco Internacional de Comercio

San Juan-based Banco Popular de Puerto Rico has announced plans to offer
MasterCard services in Cuba soon, but so far other banks have been
reluctant to follow suit, saying currently the potential risk of doing
business with Cuba outweighs the potential monetary benefits.

"It's going to have to be the two governments that will get the doors
open. As the Cuban market opens up more and more, I can assure you that
every major credit card provider will want to be there," Dailey said.
But he said there's still a "bumpy road" ahead before that day arrives.

But Stonegate has been willing to tread that road. "I'm very happy we
entered the market. I think it's going very well," Seleski said.
"Because it's a very structured rules-based system, we almost take the
opposite tack from other banks — that [Cuba business] is less of a risk."

If Stonegate has a question, he said, "We call OFAC and it's either
permissible or it is is not."

Since June, when Stonegate began offering its Cuba credit cards, it has
received close to 850 card applications, Seleski said. But it's
difficult to tell if all of the applications are Cuba-related, he said.

The bank only recently began to issue the cards and many applications
are still in the pipeline. "I have one and it has been working just
fine," Seleski said. There are currently about 10,000 points of sale
that accept credit cards in Cuba and 600 ATMs, he said.

Unlike other credit cards, when customers apply for a card that will be
used in Cuba, they must attest to falling into one of 12 categories of
travel currently authorized by the U.S. government. "We rely on the
traveler [to be truthful]," Seleski said. "The liability is with the
individual."

Stonegate's Cuba business also is moving ahead on other fronts. Although
it still must work through third-party banks, "We are making transfers
to Cuba regularly for our corporate customers," Seleski said. "We also
have a lot of Cuban entrepreneurs who bank with us."

At this point he said it's mostly Cuban artists who sell their work at
U.S. galleries, musicians and some owners of private businesses on the
island who are opening the accounts. "We're getting a lot of feedback
that are other banks also are interested in doing this too," Seleski said.

"We feel very strongly about what we're doing. It's been because it's
the right thing to do, not about making a whole lot of money. It's about
building a relationship," Seleski said. Because Stonegate agreed to bank
the Cuban Embassy, it got something of a head-start and "we've gotten
comfortable dealing with the Cubans," he said.

Right now, Seleski said, "it's important for U.S. banks and Cuban banks
to increase the dialogue. Hopefully there will be more of these events
both here and in Cuba."

Source: Workshop in Havana put Cuban and U.S. bankers and regulators
together for the first such event since Cuba confiscated U.S. banks in
1960 | In Cuba Today - http://www.incubatoday.com/news/article93981267.html