admin
Guvamatanga said ordinarily the bulk of revenue for commercial banks is supposed to come from interest income but the present state of affairs meant that banks had to charge punitive interest rates and high service charges to meet operating costs.
Resultantly, banks had now become “soft targets” for consumer advocates, politicians, business and community service leaders, workers’ representatives and other lobby groups and this did not go down well with the banks.
“The advent of dollarisation in 2009 resulted in banks being heavily constrained to fully assume their traditional role of lending as deposit levels continue to be low and short term in nature. Banks thus are not generating enough interest income to cover operating costs.
“This has closed the avenue for cross subsidisation resulting in banks moving towards fully charging for bank services which the transacting public was not used to,” said Mr Guvamatanga.
Zimbabwe adopted the multi-currency regime in 2009 to ameliorate the turmoil that had ravaged the economy as a result of hyperinflation. This system is expected to remain in place until the economy stabilises to levels where it can sustain its own currency.
Mr Guvamatanga said the need for convergence of operating standards and services in the global village meant that banks would need to spend large amounts of money on infrastructure and system costs, and staff development. Structural issues such as high labour costs, telecommunications and utilities costs also resulted in high bank charges.
President Mugabe, the Minister of Finance Tendai Biti, RBZ Governor Dr Gideon Gono and the general banking public have bemoaned high bank charges which were said to be constricting borrowers and yet deposits did not attract meaningful interest.
Thus, there have been calls for a statutory instrument to regulate bank charges and interest rates as depositors bemoan maltreatment by banks.
But Mr Guvamatanga said this was all because the banking public was not familiar with the matrix within the sector.
“It is appreciated that the community at large does not perhaps fully understand the economics of charging fees and that they are traditionally not accustomed to paying fees. This reflects that customers are not aware of the level of costs that banks have to incur in order to provide the extended variety and quality of banking services offered in Zimbabwe.”
Such costs as buying generators and water for most branches formed “an integral basis of calculating charges in relation to the cost of providing various services”. Over the past three years, the banking sector had implemented such initiatives as retrenchment and closure of branches to contain operating costs while low-cost Internet and mobile banking facilities had been introduced.
In a letter that sought to clear the air in terms of the largely criticised high bank charges, Mr Guvamatanga — who is also Barclays chief executive — said it was unfortunate that some stakeholders were making international comparisons of fees and charges and yet there was a difference in banks’ approaches to charging for services in different countries that had their own respective socio-demographics.
The banks implored RBZ Governor Dr Gideon Gono not to institute any regulation on bank fees and charges saying this would be counter-productive.
“While concerns are raised by some sections of the community on the level of charges levied by commercial banks for various services, it must be recognised and noted that regulation and pricing control is not the best way to contain banking costs. It has been seen in many instances that price controls usually do not produce the intended results.
“The use of competitive pressures and disciplines of the market economy would obviously be considered as more appropriate and acceptable, and it makes commercial sense to do so. Ensuring greater competition amongst the banks would give customers the option to “acquire the best services at the cheapest price”.
Furthermore, Mr Guvamatanga recommended that his association and the central bank develop a standardised format of disclosure requirements to ensure that banks clearly disclosed all their fees and charges in a uniform manner.
On interest rates, Mr Guvamatanga said it was unfortunate that depositors were expecting to earn interest on transactional accounts. He urged depositors to opt for investment products offered by banks from which they could earn interest. Lending rates remained high as a result of the risk premium placed on Zimbabwe where funds from international markets were concerned.
The risk profile was determined by the economy’s performance and the ease and certainty with which foreign investors could enjoy returns on their investments, said the BAZ president. Immense debate presently centres around the high charges by banks at a time confidence was beginning to creep back into the banking sector. However, the BAZ insists the charges, described as punitive, are normal in an economy such as Zimbabwe’s as indicated by submissions by Mr
Guvamatanga to the central bank.
Online Reporter
dyton mupawaenda