President Obama's surprise decision to restore economic ties with Cuba will reverberate throughout the U.S. banking industry, as Cuban-Americans send more money to their relatives back home, American companies do more business in the island nation, and banks grow less fearful of sanctions violations.
The changes will likely be felt most acutely in Florida, which is home to more than two-thirds of all Cuban Americans, but where doing business in Communist Cuba remains politically fraught.
Obama announced Wednesday that individuals in the United States will be able to send $2,000 to Cubans each quarter, which is a four-fold increase from the current maximum, and that money transfers for the development of private businesses and humanitarian projects in Cuba will no longer require a special license.
In addition, U.S. banks will be allowed to open correspondent accounts at Cuban financial institutions, and travelers to Cuba will be able to use their U.S. credit and debit cards. The list of products that U.S. businesses can export to Cuba will be expanded to include telecommunications devices, agricultural equipment for small farmers, building materials for home construction, and other private-sector goods.
The Obama administration's decision to loosen financial restrictions is part of a larger plan to restore full diplomatic relations with Cuba more than five decades after Fidel Castro rose to power.
"I believe that we can do more to support the Cuban people and promote our values through engagement," Obama said during a speech at the White House. "After all, these 50 years have shown that isolation has not worked."
(Obama finalized the agreement after a 45-minute with Raul Castro, Cuba's leader, on Tuesday.)
One forthcoming change that will impact many banks is a revision of the Cuba sanctions program by the Treasury Department's Office of Foreign Assets Control. Recent sanctions cases against BNP Paribas and the Royal Bank of Scotland have reportedly involved transactions with Cuba.
Amid the negative headlines, banks in south Florida have been shying away from doing business with U.S. firms that have any connection to Cuba, said David Schwartz, chief executive officers of the Florida International Bankers Association. He said those decisions are part of the larger trend of so-called de-risking by banks in the face of tighter regulatory scrutiny.
"One error can lead to a rather significant fine from the federal regulators," Schwartz said.
Following Wednesday's announcement, Schwartz said that he's "cautiously optimistic" that the new policies "will help alleviate concerns" that banks have about doing business with certain customers.
The details of the looser economic rules will be finalized by Treasury and the Commerce Department in the coming weeks.
"Until we see the regulations, we can't really say how this will go," said Schwartz.
Schwartz also argued that the looser rules on money transfers and exports to Cuba represent a "tremendous opportunity for banks in Florida."
Others have a much dimmer view of the business opportunities in Cuba.
"Cuba in its current condition doesn't have the money for anything," said Alex Sanchez, president of the Florida Bankers Association. "I don't know what banks are going to be going down there, and who they're going to bank."
For Sanchez, U.S.-Cuba relations are deeply personal. He said that he was four years old when his family fled Cuba after the Communist government confiscated their home in the suburbs of Havana.
Sanchez spoke passionately about the lack of political freedom in Cuba and said banks that do business there could be stigmatized in the Cuban-American community.
"How can anyone commercially go down there under those conditions?" he asked.
Sanchez said that he'd spoken to Florida bankers who hold differing views on the Cuba embargo, and they all agree that business opportunities in Cuba are scarce.
"The cold, factual reality is, Cuba doesn't have any money," he said.
Although Americans will be allowed to travel to Cuba for various purposes, tourism will still be barred, as the decades-old embargo, which can only be lifted by Congress, will remain in place.
Government officials took a more optimistic view of the changes.
"The steps we are taking will increase travel, commerce, communications and private business development between the United States and Cuba and promote positive change for Cuba's citizens," Treasury Secretary Jacob Lew said in a press release.
In an interview, a senior administration official said that he doesn't have an estimate of the size of the nascent Cuban private sector, where more U.S. investment will soon be allowed.
"It's hard to predict at this point what the market potential is," the official said. "This is something new in Cuba."
Kevin Wack is a California-based reporter for American Banker who covers the U.S. consumer finance industry.
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