Mon | Sep 25, 2017

CaPRI advises against regulating banking fees

Published:Monday | June 12, 2017 | 6:44 PM

Local think tank Caribbean Policy Research Institute (CaPRI) is advising against any move to implement regulations that would force banks to cap user fees.

Writing in today's edition of The Gleaner, CaPRI suggests that competition is what is needed if bank fees are to be lowered on a sustained basis.

According to CaPRI, a cap on fees is likely to push banks to increase lending rates in a bid to maintain overall returns, which will in turn result in higher borrowing costs.

The University of the West Indies-based think tank says banks are driven to impose higher fees due to demands for increasingly sophisticated services by customers.

It says where banks incur increased costs in providing services, these costs are typically passed on to customers through higher fees.

CaPRI says, based on its research, fees levied by local banks are in line with similar fees by banks overseas.

Importantly, the think tank says banks that earn the most from fee-based services tend to earn less from interest charges and turn out to be well-managed institutions, meaning they maintain high standards of efficiency, solvency and liquidity.

There has been much public outcry lately over the level of fees levied on customers by local banks.

South St Catherine Member of Parliament Fitz Jackson has been leading a campaign in the House of Representatives to introduce regulations that would force local banks to offer a minimum service package to customers, as well as eliminate certain fees such as the ones levied on dormant accounts.

He has also threatened to hit banks with a class-action suit.

Five of the island's main banks have since suspended the fees charged on dormant accounts.

However, Jackson says he will not relent in his efforts to have regulations put in place to restrict the amount and types of fees charged by financial institutions.