Consultations over proposed banking sector regulatory measures on: BAZ

Presenting the 2013 national budget, Finance Minister Tendai Biti said Government was stepping in to regulate the banking industry because banks had failed to make reforms in terms of corporate governance, low capitalisation levels, high interest rates and bank charges, and low or no interest on savings.

As a result, he proposed a framework for determining interest rates and bank charges that would see any bank deposit of at least $1 000 held over 30 days attracting an interest of 4 percent per annum.
He said because most of ordinary workers were earning salaries below the Poverty Datum Line (PDL), fiscal authorities were directing that no bank charges should be levied on any deposit of $800.

The PDL is presently pegged at $568.
Minister Biti said the large discrepancy between deposits and lending rates as banks failed to award positive incentives for savings deposits mobilisation while lending at sustainable rates, was a clear demonstration of market failure.

He said moral suasion efforts to have banks cultivate a saving culture among depositors and to price their loans and advances at sustainable rates had failed.
BAZ chief executive officer Mr Sij Biyam told this paper last week that parties to the tripartite consultations involving officials from the Ministry of Finance and the central bank were working towards reaching a consensus.

“We have been consulting and we are continuing that exercise. Some of the issues may have far reaching effects but we are working towards a consensus.
“Each party may have its own position but the consultative process has so far been constructively held,” he said.

Mr Biyam would not be drawn into revealing the issues the parties have agreed on saying that would be announced by the Finance Minister.
“I cannot say we are closer or far from concluding the consultations.
“The final position will be announced by the Minister when he feels he should indicate the position to take,” he said.

Some of the proposed regulatory issues if approved would work in favour of the depositors that have in the past cried foul over bank charges and interest rates.
Of late, concerns have been raised that the proposed regulatory reforms could cripple the banking industry.