Wed | Aug 23, 2017

JBA: If fees reduced, banks may increase lending rates

Published:Wednesday | February 1, 2017 | 2:00 AM
President of the Jamaica Bankers Association, Nigel Holness.

Jamaica's bankers say they may seek to recover lost revenue by charging higher interest rates on loans if the proposed amendment to the Banking Services Act is maintained in its current form.

Fees represent a multibillion-dollar enterprise for the banks.

The bill currently before Parliament aims to increase customer protection via the regulation of fees and charges, provision of information, and a mandatory minimum service package to customers.

"We are deeply concerned that the effective price-fixing, which the bill's mandatory minimum service package would introduce, is inconsistent with free-market principles and sends a wrong signal to private-sector investors at a time when Jamaica is seeking to attract new local and foreign investors as part of the Government's aggressive growth agenda," said the Jamaica Bankers Association (JBA) in a release issued Tuesday.

"Furthermore, competition is increasing with the addition of at least two new commercial banks expected to begin operations in 2017," the bank lobby said.

Jamaica's top two banks, both of which are listed companies, netted $18 billion in fees and commissions for 2016 - National Commercial Bank Jamaica netted $10.9 billion of fees and made $14.4 billion of profit, while Scotia Group Jamaica netted $7 billion from fees and made a net profit of $11.56 billion.

The bankers argued that the banking industry needs to be able to price services based on operational costs and business objectives.

"If banks are not able to recover the real cost of providing services from the persons utilising the services, this could lead to unintended consequences such as increased inefficiency, restriction of services, reduced capital in the banking sector and lack of further investment in technology/systems to improve service delivery to consumers," said the JBA.

"This will be detrimental to the consumers in the long run. Alternatively, banks may try to recover those costs through higher lending rates to consumers and the private sector. This is counter to the country's growth agenda," it added.

Debate on the private member's bill piloted by Fitz Jackson opened in Parliament on January 24.

Referring to correspondence with Finance and Public Service Minister Audley Shaw and a meeting on Monday with Jackson, the JBA said it advised them that several banking services are offered at alternate channels - online, automated teller machines, point-of-sale and mobile - that not only attract low or no fees, but are widely-distributed and provide greater convenience for customers.

"We believe that proper consideration or analysis of the likely operational, commercial and economic impact of this type of regulatory intervention needs to be done," said the JBA.

"Such consideration and analysis would be important, as Jamaica can ill afford to impair productivity and efficiency within the sector and the wider economy ...," the group added.

mcpherse.thompson@gleanerjm.com