By Devon Dick

RECENTLY, A relative of mine graduated from university and wanted to continue with her account at a bank only to be told that her account was dormant and she needs to lodge money to re-activate the account, etc. When the banks declare an account dormant, then they stop paying interest on the principal and an account can be declared dormant after six months!

In addition, some financial institutions are charging you if your bank balance is below $35,000. And there seems to be a fee for every activity. Most financial institutions charge for withdrawing money from ATMs when the banks should be discouraging its clients from entering the business and thereby avoiding long lines. Some charge for lodging money when they should be encouraging a culture of saving. Apparently, financial institutions have decided to use fees to make-up for the loss of interest income on Government of Jamaica paper and to offset losses arising from the Jamaica Debt Exchange.

So successful are financial institutions in garnering revenue from fees that when the International Monetary Fund made provision for impairment it was not necessary. Financial institutions are flourishing. However, this sharp increase in fees is helping to withdraw money from the economy and will reduce purchasing power and, therefore, economic activity will become stagnant. These fees are having the same effect on the economy as excessive taxation on middle- and lower-income persons. It is not sustainable for financial institutions to be doing very well and people and the economy contracting.

THE WIDEST SPREAD

In November 2006, I wrote an article 'Banking sector scandal' in which I quoted a banking director at the Caribbean Association of Indigenous Banks saying banks in Guyana and Jamaica have the widest spread. And previously I wrote an article, 'Financial institutions spread too much' (July 2005) in which I contrasted the Jamaican situation with the United Kingdom (UK) where Chelsea Building Society the sixth-largest in the UK was able to survive on a 1.5 per cent spread.

I am aware that those who defend the Jamaican practices over and against the UK practice claim that some UK companies have a much smaller spread because they have a larger clientele, access to borrow cheaper funds, and possibly larger account balances, small mortgage portfolio as a percentage of the business model, higher yields from other investments and a more efficient operation. However, these possibilities cannot be an excuse for the spread by banks operating in Jamaica, but should motivate the locals to engage in international best practices.

Our financial institutions should follow best practices elsewhere that benefit the clients especially in these rough economic times of negative growth and no growth. A friend of mine, who is on a board of one of the leading financial institutions in Jamaica, recently told me that he had a balance of £450 pounds at Barclays Bank in England. The last time he made a deposit was in 2006. Between 2006 and 2012 Barclays Bank made regular interest payments to the account and it was always designated active although he made no deposit.

In May this year, the bank wrote him to say that they had noticed inactivity and gave him some options to either respond to keep the account open or to reclaim the money and close the account. The time to respond was by August 29 when if there was no response they would close the account and have the money available for him at any time in the future.

In Jamaica, the account would long be dormant getting no interest and without a letter from the financial institution. Banks need to change course and ease up on stressed clients.

Devon Dick is pastor of the Boulevard Baptist Church in St Andrew. Send comments to: columns@gleanerjm.com