Economist highlights 'major factor' causing banks to rely on high fees
Economist John Jackson says the Government’s usurping of capital held by banks is one of the major factors causing banks to rely on high fees to make profits.
The issue of high banking fees has again been thrust into the spotlight with the start this week of debate in Parliament on a private member’s bill on the matter.
The bill proposes amendments to the Banking Services Act to protect depositors from incurring costly banking fees.
However, the Private Sector Organisation of Jamaica (PSOJ) says adoption of the amendments would be a retrograde step as they place the power to set fees in the hands of Parliament.
Jackson agrees with the PSOJ’s position that the government should not interfere with this aspect of the market.
He argues that the largest potential for profits lies in interest rates from loans, but the government borrows most of the available capital at discounted rates.
He says when the government begins to reduce its indebtedness, the country will begin to see reduced reliance on banking fees.
Jackson says he does not support an imposition by Parliament of rules regarding fees.
He says he’s particularly concerned about the proposal becoming law given how long it takes to change laws when they are no longer useful.