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Hylton defends NCB fee structure

BY ALICIA DUNKLEY-WILLIS Senior staff reporter dunkleya@jamaicaobserver.com

Friday, March 14, 2014    

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NATIONAL Commercial Bank Group Managing Director Patrick Hylton has defended the institution's fee structure, emphasising that the fees are largely subsidised.

The bank has been named among the five major financial institutions with the highest fees.

While addressing Parliament's Economy and Production Committee on Tuesday, Hylton emphasised that the issue on bank fees "needs to be informed more by facts than by anecdotes".

"We have been actively encouraging customers to use channels which cost both them and us less.NCB's fees are based on the cost to provide particular services, these fees are largely subsidised," Hylton told the meeting

The survey of the fees and charges of financial institutions emanated from a Private Member's Motion by Government Member of Parliament Fitz Jackson last year against the background of "growing concerns by the public regarding the levels of charges being levied by banks and other financial institutions for various inescapable banking services".

Parliament subsequently mandated the Bank of Jamaica (BOJ) to conduct a survey of fees and charges by banks. The BOJ has since provided an interim report and requested more time to produce a full report.

The Consumer Affairs Commission, in an analysis of that report, said a comparative analysis of current fees as at November 2013 showed that the Bank of Nova Scotia (BNS), NCB, First Global Bank, First Caribbean International Bank and the RBC Royal Bank had the most incidence of highest fees.

The CAC said an analysis of data it gathered on the rates and fees charged by commercial banks in Jamaica for 2009 to 2013 revealed that since 2009, with respect to savings accounts, both the withdrawal and deposit fees at BNS have experienced a 115 per cent increase -- moving from $100 to $215. It said for NCB, withdrawal fees were also increased by 115 per cent, moving from $100 to $215 as well.

Responding to concerns on Wednesday, Hylton said that "NCB provides and promotes many options for consumers to lower or avoid bank fees".

"Recent increases in fee income are primarily volume-driven and do not offset losses associated with the National Debt Exchange and Jamaica Debt Exchange. NCB's fees and ratio of fee income to other income are competitive, based on local, regional and international benchmarks," he told the committee.

He said in relation to the bank's responsibility to safeguard customers' financial assets and improve their financial well-being, a number of core and ancillary services are provided at a price which is less than what it costs the bank to provide these services.

"For financial year 2013, our net fee and commission income (bank only) was $6.74 billion, compared to overall expenses of $20.9 billion," he said.

"When we take a cash deposit, we incur costs for the branch premises which are safe and secure and in locations convenient to our customers. We pay the teller that takes the cash. We then pay to process, secure, insure, and transport the cash. For these services, we charge fees which partially cover the costs. It should be noted that we earn nothing on this cash before it is actually deposited in the account at the central bank, another bank or in the case of foreign exchange - overseas in a foreign bank having been shipped there," he explained.

"In the majority of instances, we provide free or lower cost alternatives for our customers to avoid those fees and have been actively encouraging customers to use the alternative channels which costs both them and us less. There has been substantial movement to the alternatives by many of our customers, without which the overall cost structure for the institution would be much higher," Hylton added.

In the meantime, responding to complaints that exorbitant fees were charged for dormant accounts with account holders losing their entire savings in cases, Hylton said "dormant accounts require an enhanced level of monitoring given their susceptibility to fraud and as such additional resources are required to manage this portfolio".

"Within NCB, all transactions that involve a dormant account require the involvement of dual staff custody. One of the persons must be at the supervisory level. The processes around effecting transactions on dormant accounts can take up to 30 minutes given that an enhanced level of verification is required to establish the identity of the customer. At a minimum, the staff costs associated with a dormant account transaction is $612.90 based on per-minute-costing. In addition to the transaction cost," he pointed out.

He added that there are also monitoring and other overhead costs, which include but are not limited to audit reports and audit procedures for dormant account reactivation and special reports to highlight debit transactions to recently activated accounts.

Wednesday, Committee Chairman Karl Samuda said Jamaicans were entitled to an explanation.

"When we had the Bankers' Association [of Jamaica] address us the members were not terribly happy with the response of the association in that the suggestion was made that whilst they are the co-ordinating body that oversees the activities of the bank, they cannot influence to any great extent the policies individual banks will implement," Samuda said.

"Generally speaking we could not deny that the Jamaican people are not right now happy with the level of fees. There are those who feel more aggressively about it than others. But what is certain is that a full explanation is really due if we are to go forward in a spirit of co-operation and based on full understanding of the facts," he added.

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