Business

Calls for BOJ to be more aggressive in bank fee probe

Friday, February 07, 2014    

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THE Bank of Jamaica (BOJ) has countered criticisms that it is not aggressive enough as a regulator in the current debate over the high fees charged by financial institutions under its watch.

This, in response to several observations made Tuesday by members of Parliament's Economy and Production Committee which led to Committee Chair Karl Samuda for BOJ to "step up more aggressively to the plate".

"I get the feeling that the Bank of Jamaica is either powerless or disinclined to be more assertive in insisting that you get proper analysis and the methodologies used to come up with these fees. Is that asking too much within the present limit of your authority?" Samuda asked.

"Or, we just go sailing merrily along and accept whatever is done without any reference to what is reasonable or without being guided by some philosophy that is common to all of the banks in the community," he added.

Responding, Gayon Hosin, BOJ's deputy governor of financial institutions in the Supervisory Division, said the central bank was "not ambivalent about fees and how banks are structured".

"The regulatory focus predominantly is on safety and soundness, ensuring that whomever people bank with they can feel confident that they are doing business with safe and sound institutions, and secondly with regards to consumers our aim is to ensure that the banks treat fairly with the consumers," Hosin told the committee.

"So if they are going to be imposing a fee they have to give that consumer notice of what they propose and allow the consumer to make his or her decision. What we do at the Bank of Jamaica is we publish the data on banks," she noted.

She further argued that Jamaica was one of the few jurisdictions in the region that publish financial data on each entity.

"That is part of the transparency and what enables consumers to be empowered in their decision making. In 2008 we added the survey of fees and charges which we started publishing in 2010. It allows persons to do some comparisons, it's not comprehensive... what we seek to do is a complementary role because our focus is on the viability of banks," she said, adding that there was still an invaluable role for consumer bodies.

"The roles do differ in a lot of regards so there is not a lot we can take up in regulating fees. On the matter of regulating fees, we know that there are indeed countries that do have regulation of fees and that is usually in controlled environments where there is exchange control and other types of market controls," Hosin pointed out.

In the case of Jamaica, she said the difference was the free market economy context.

"In the free market infrastructure, what usually happens is that the consumer must be empowered with information and exercise those powers to ensure that the competition is there and they get reasonable services at reasonable prices," she explained.

"So it's not that we are ambivalent. We are people who use banks ourselves, we are conscious of the issues, we are also conscious in terms of the complaints we receive and we are trying to ensure that we offer services from the regulatory perspective that is complementary to the role of entities that have the expertise for dealing with consumer issues," she noted.

In the meantime, Samuda suggested that the BOJ do a comparison of the fees of the two most dominant banks, the National Commercial Bank and Scotia Bank.

"Because, at just a cursory glance, there is some degree of synergy (in the fees charged). Is it that the rest of them are following the leader?" he asked.

"It occurs to me that, quite frankly, we have a situation here where instead of being coerced in the most aggressive manner to look inward at the cost of administration, they simply rely on fees to make up any incompetence which may exist within the management of the banks".

"And that is where I say the Bank of Jamaica should be examining those elements of the banking community and satisfy the consumers that the banks are operating efficiently," he contended.

"You can't be buying a vehicle of £260,000 for the head of a bank when the average Jamaican can't even afford to take the bus," he said in a veiled reference to a BMW motorcar purchased by the Canadian-based Bank of Nova Scotia for its former head of local operations, William 'Bill' Clarke.

The BOJ, in response to a request by Parliament last November that it produce a full report on its survey of fees and charges by banks, has provided an interim report and requested additional time to produce a full report.

The Consumer Affairs Commission, in a review of that interim report which it presented to the Committee, said a comparative analysis of current fees as at November 2013 showed that the five major banks: the Bank of Nova Scotia, the National Commercial Bank, First Global Bank, First Caribbean International Bank and the RBC Royal Bank had the most incidence of highest fees.

— Alicia Dunkley-Willis

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