26 June 2008
The Financial Sector Campaign Coalition (FSCC) welcomes the recommendations of the Banking Enquiry Panel in its Report to the Competition Commissioner. We are pleased that several of the FSCC`s recommendations to the Enquiry, including the capping of penalty fees, linking bank charges to the cost of providing these services, ATM fees, simplifying consumer information and increasing access to the National Payment System, have been included in the Panel`s 28 recommendations.
The FSCC endorses the Report`s conclusion that bank charges in South Africa are higher than they would be at competitive levels, with banks using information asymmetries and product complexities to abuse their market power. We commend the Panel for recognising that "the legacy of discriminatory laws and practices of the past remains a challenge for the South African banking sector" and that "the South African banking landscape continues to reflect the fact that the majority of South Africans only enjoy limited access to banking facilities, with poor communities being neglected."
The report has uncovered information that will enhance our national debate on financial sector transformation. We are shocked to learn that in 2006, banks generated a third of their income, a total of R34, 5 billion, from transaction fees. They generate more than R1 billion in revenue annually from penalty fees on 24 million rejected or dishonoured transactions. There can be no doubt that consumers, and in particular the poorest bank customers, will benefit if the Panel`s recommendation to cap penalty fees on rejected debit orders at R5 is implemented.
The Coalition calls on the banks and the Banking Association to immediately and voluntarily implement the Report`s recommendations such as capping; amending the Code of Banking Practice to develop a minimum set of standards for disclosure of product and price information; standardising terminology; reviewing the Mzansi offering; and creating a switching code and other measures aimed at improving comparability such as creating generic customer profiles and a banking fee calculator. We also call on other stakeholders mentioned in the Report, including government agencies, to implement the Report`s recommendations.
In our submissions to the Enquiry in 2006, we stated our concerns that its terms of reference, limited to examining the level and structure of bank charges and access to the National Payment System, were too narrow. We were concerned that not being able to investigate all aspects of competition in banking, the Panel would not be able to make the comprehensive recommendations necessary to improve competition in banking and access to banking by the majority of South Africans.
The limitations of the Panel`s recommendations, and the over-reliance on the goodwill of the banking industry to implement a number of them, confirm our view that further intervention by government is necessary to bring about real competition that will result in affordable, appropriate banking for all our people.
We will study the full report when it is released in due course and consider recommending that the Commission should embark on a full investigation into all aspects of Competition in Banking. We commend the Commission for undertaking the Enquiry and for the pioneering work it is doing to promote and protect the rights of South African consumers.
Dr Blade Nzimande
Chairperson, FSCC
For further information contact:
Tshepo Nkwe
082 753 9339