AT least two executives at Scotiabank are opening up about the factors which contribute to rising bank fees and charges.

Executive vice-president of Scotia Caribbean, Central America and Uruguay (CCAU) and International Banking, Anya Schnoor and Audrey Tugwell Henry, president and CEO of Scotia Group Jamaica, told the Jamaica Observer that while the issue is universal, some of the charges are relevant because of Jamaica’s unique circumstances.

“Some of the cost we believe are unique to Jamaica and we think there’s an opportunity for us as a country to look at how we can simplify the cost of doing business in the country so that as investors we can pass on savings to our customers,” said Tugwell Henry.

She explained that banks, like other businesses, are faced with operating costs which must be accounted for in some way.

“In terms of the issue of a bank’s service fee, we’re like other businesses. We’re faced with ongoing increases to do business and in Jamaica, in particular, banks have a very high operating cost for doing business.”

Among the issues the Scotia executives pointed out as being unique to Jamaica is the need for significant security.

Schnoor noted that “in other countries I don’t have three and four armed security guards at the entrance to a bank. When we go to Canada there’s no security guards anywhere, that’s just not something we have. So, there are other things, asset tax, etc, that are different. Every country has its own unique circumstances but the most important thing to realise is that we’re looking at this long term.”

Similarly, Tugwell Henry explained that “our security is an ongoing and increasing cost. We see the crime statistics in our country and therefore we have to make sure that we are securing our customers and our employees when they do business with us. We also have costs associated with assets, so as our assets grow we pay an asset tax. Banks pay a higher corporate income tax than most other businesses in this country.”

She further explained that although bank fees and charges appear excessive, it is still not enough to fully cover the bank’s operating costs.

“When we interact and engage with our clients we outlay significant costs in order to provide the service. Our service fees in no way covers the full cost. So, we know that the intermediation of funds is part of our core operation so we do generate revenue from that to provide the service of taking your deposit, there is a significant cost to that and not to mention the cost of handling cash, paying a courier service to load the ATMs, to top them up and maintenance cost for the ATM networks. “

While Jamaica has its unique challenges which largely surround security, Schnoor noted that there are other issues which banks around the world are grappling with. She stressed that Jamaica is not insulated from those issues which also impact bank fees and charges.

“So, today if I want to buy an ATM for Jamaica, if it costs $10 last year. it’s costing $20 today and that’s just a fact. That’s a reality that we all have to face because inflation and a devaluing dollar is affecting our business if you think about what’s going on worldwide, and it’s not just banking. I’m sure you go to the supermarket every day and are seeing what’s happening with inflation, what’s happening around the world in terms of supply chain bottlenecks. So, I think in general what companies are facing and what I know every organisation is grappling with is how they manage the day to day input to their business. We’re not different, I know at times banks are seen as somehow we’re different than every other industry and somehow we don’t face the same challenges, but what I would say is we’re managing this business for the long term and we know we have to continue to invest because our customers are saying to us, what used to be okay 10-20 years ago is not what they want today,” said Schnoor.

In the same vein, Tugwell Henry highlighted that there are certain services which Scotiabank does not charge customers for, including online and mobile services to all customers at all levels, proprietary ABM or point of sale transactions conducted by senior citizens, as well as deposits on any channel.

She also noted that there are costs which Scotiabank must bear, but are seemingly taken for granted in the public domain.

“When we place cash in an ATM — and we have 280 ATMs to stock with cash — that cash is sitting there earning zero. We can’t do anything with that cash but the cash is deployed so our customers have access to that cash, so that opportunity cost of us investing that cash is impacted. We also have reserve requirements with the central bank where for every dollar of deposit that we take we have to place a percentage of that with the central bank as reserve, which is standard banking practice and that’s a global phenomenon but we place that at zero. So these are costs that are almost taken for granted,” she noted.

In the meantime, the Scotia Group president and CEO admitted that there are certain COVID-related costs that the bank took on at the onset of the pandemic which is starting to take a toll on its operating cost.

“We supported over 50,000 customers. For us we are financially sound, well capitalised, we meet all the prudential requirements, we exceed them! But the fact is that we also implemented moratoriums, so we had three months and six months where loan customers didn’t have to make their loan payments. We delayed those payments to give customers breathing room, both retail and corporate and commercial banking customers, and we were able to do that. From a financial impact standpoint, obviously because of the strength of Scotiabank we did that painlessly but, of course, all the other costs associated with COVID — cleaning cost, sanitisation cost, provision of masks — all those costs now are rolling into our operating cost as well.”

In 2020 Scotia Group Jamaica’s fees and commissions totalled $7.2 billion. Scotia’s unaudited financials for the year ended October 31, 2021 highlighted that net fee and commission income amounted to $6.1 billion, a reduction of $1.1 billion or 15 per cent. Scotia said the year-over-year decline noted in fee and commission revenue was primarily attributable to lower transaction volumes stemming from the novel coronavirus pandemic in conjunction with the continued execution of the group’s digital adoption strategy geared towards educating customers about various electronic channels which attract lower fees.

Scotia Group Jamaica has said it will delay the increase of ABM and point of sale fees for six months as the bank spends time to educate its customers about the types of accounts that are more appropriate for them based on their financial circumstances.