BOJ to compare local bank fees with region by April
THE Bank of Jamaica (BOJ) will compare fees charged by five banks in Jamaica with their regional counterpart, along with adding credit union information in a final survey on bank fees due April.
The BOJ, which regulates the sector, will complete its survey as requested by Parliament. It's part of a review to determine whether banks are charging to compensate for fall in profits.
"BOJ optimistically anticipates that another 75 days would be required to finalise the report on deposit-taking institutions; obtain outstanding data; resolve possible data integrity issues and produce a report on credit unions; as well as complete comparatives with regional and international affiliated banks," stated BOJ in its Interim Survey on Fees and Charges of Deposit-Taking Institutions released last week.
Currently two of the five have given information, the BOJ indicated. The BOJ explained that the information was unavailable for publication due to time constraints.
"At 31 December 2013, 50 per cent of credit unions had not yet submitted any information to the central bank and regional/international fees and charges information had not yet been provided by three of the expected five banking groups," BOJ indicated.
The BOJ will seek to achieve a common basis for regional comparison of fees.
"This will involve the application of exchange rate conversions as well as distinguishing the impact of various rates of consumption taxes and or value-added taxes which may be included in charges," it noted.
Roughly 23 cents from every dollar earned by local commercial banks are fees, which totalled an estimated $18.5 billion in 2013, according to the survey. These fees increased 12.6 per cent year on year amidst profits dipping by one-third at these institutions.
"This is attributable to a combination of reduced interest income reflective of the lower interest rate environment over the past three years (following Jamaica Debt Exchange in 2010) exerting a downward pull on revenues, as well as an increased level of fee income," BOJ explained.
The JBA indicates on its website that fees are necessary to recover some of the operational costs associated with providing their services, which include staff, location, security, technology, and back-office processing.
In terms of cost recovery, over the five calendar years up to 2012, commercial banks' Fee Income (excluding fees for loans processing) in relation to overhead expenses fluctuated between 26.4 per cent in 2009 and 28.4 per cent in 2008, with year-to-date numbers to September 2013 reflecting a marginal increase to 28.6 per cent "suggesting a relatively stable rate of overhead cost recovery over the period".
In November, the Economy Production Committee of Parliament, concerned about bank fees, put forward a motion requesting a report on the matter from the BOJ. It also asked that the committee meet within 45 days to commence an evaluation of that report and make recommendations to the House on steps to regulate the fees which are currently market-determined.
The BOJ conducts an annual bank fee survey which started some three years earlier following a similar uproar over bank fees.