Redemption beckons for BoB

Mmegi Editor | Thursday January 21, 2016 11:54

For years, local banks enjoyed super-profits – often higher than their regional peers – and in many cases the local entities were crowned the highest performing in their respective banking groups.

For years, much of this was as a result of the economic boom enjoyed in Botswana before the recession in 2009. In those years, a credit bubble emerged as banks aggressively expanded their loan books to all tiers of customers, benefiting from high interest rates and the traditionally benign deposit rates.

The recession, however, knocked banks’ interest income and many began ramping up their non-interest activities, which essentially are revenues from the fees and charges associated with the provision of banking services.

From account maintenance, ATM use, printing of statements, to chequebook issuance, virtually any service a client may require from a bank has a charge or fee attached to it and after the recession, banks found that increasing these tariffs met with surprisingly facile resistance from the BoB.

In vain, the banking public, media and other watchdogs raised alarm on the matter, pointing out its impact on access to banking and national savings. Meanwhile, the introduction of cellphone and internet bank allowed for a whole new generation of fees and charges, whose levels were difficult to gauge due to the services’ novelty.

In all this, the BoB was characteristically cautious in its response. Statutorily, the BoB is concerned with banking system stability for which it has a number of instruments. For the actions promoting banking access, national savings or consumer rights, the BoB relies primarily on “moral suasion” or an appeal to the banks’ good sense. The central bank did eventually enforce a 2014 – 2016 moratorium on bank fee and charge increases and during that period, audited the tariff structures of banks. As reported in our edition yesterday, four audit firms uncovered several violations by banks, in which they would charge clients higher than their own published tariffs.

This represents a moment of redemption for the BoB, an institution that is, fairly or unfairly, viewed by the general public as unsympathetic, aloof and even arrogant.  The audit results represent an opportunity for the BoB to gain goodwill in the public eye, by publicly taking stern action on errant banks in the fees and charges affair. As the moratorium ends, the central bank needs to create accessible channels for Batswana to alert it about possible violations, thus transforming each bank customer into an empowered watchdog. The BoB may be focussed on banking system stability, but an empowered, knowledgeable banking public is key to the sustenance of responsible profits in the sector.

Today’s thought

“I sincerely believe... that banking establishments are more dangerous than standing armies.”

 

-Thomas Jefferson