Bank fees stir passions at CAPRI forum
The poor and those earning low incomes are vulnerable to bank fees, but that should not be allowed to disrupt investments in cheaper online banking options, says economist and executive director of think tank CAPRI, Dr Damien King.
"You cannot stop the investment in the banking sector because of a man with a cow," said King at the 'Bank Fees Debate' forum convened by CAPRI on Wednesday.
King indicated that bank fees should remain unregulated. He made the comments within the context of customers being given more choices to bank online, allowing them to avoid some charges imposed by the banks for in-branch transactions.
As more customers migrate to online banking, it means that the cost of doing such transactions manually in-branch rises, said King. He argued that regulating bank fees would result in lower charges to customers in-branch initially, but create a disinvestment in technology going forward.
"But we have a problem with the poorest and weakest," King acknowledged, while insisting that the solution cannot include a blanket regulation of fees. His concern is that regulating fees would result in banks shifting charges to other interest-bearing services, such as loans, or removing the service all together.
Bank fees currently represent annual income of $31 billion for Jamaica's two largest banking groups, which control the majority of the market. There have been years of public outcry against the fees, and parliamentarian Fitz Jackson has tried unsuccessfully to get legislation passed to regulate the charges.
"Bank fees are not an academic question; it is people's lives," declared Jackson, an opposition member of parliament (MP), at Wednesday's forum.
In his scenario to counter Dr King, Jackson cited a gardener taking a $500 taxi ride to the bank, then being hit with the $1,385 charge to cash a $2,000 cheque. The MP said those on the margins of society were largely given little or no option for their cash transactions.
The fee he referenced is charged by Scotiabank Jamaica to cash a cheque in-branch for 'non-Scotiabank customers', according to the bank's November 2017 fee schedule. The same charge amounts to $385 for Scotia customers.
Jackson also challenged the motivation of the banks in charging fees on dormant accounts, saying that by the time the 15-year timeline relapses for those funds to be transferred to the Accountant General's Department, there was hardly any monies left to hand over.
"Is it coincidental?" he asked.
Scotia Group Jamaica President and CEO David Noel said his bank, which is the second-largest behind National Commercial Bank, would have no objection were the 15-year timeline to be reduced dramatically. Maintaining those accounts came at a net loss to the bank last year, he added.
"We would comply with the law," said Noel, who was also a panellist at the forum.
It's estimated that about $45 billion is locked away in dormant accounts at various financial institutions. Some of these accounts are reportedly government-held accounts.
Last March, Scotiabank suspended its fee for dormant accounts. At the time, it was the fourth commercial bank to do so amid public pressure.
King, in his presentation, discussed a 2014 CAPRI study which analysed fees at 700 banks globally. The findings are still pertinent today, he said, but noted that, unfortunately, the study did not cover dormant accounts - which most of the audience at the forum wanted details on.
By the end of the night, King received the bulk of the verbal criticism from the audience even when compared against Noel, who represented an institution that charges fees. King's statement about the "man with a cow", for example, resulted in an audience eruption for 10 seconds.
King also found himself defending CAPRI against a charge of lobbying for the banks. He said the think tank does not conduct funded studies for interest groups.