THE Central Bank of Belize said it is considering new laws which will give credit unions in that country greater leeway to compete with commercial banks, as people in that nation complains that dwindling rivalry is hurting consumers.
Kareem Michael, governor of the Central Bank of Belize, opened up on the plan at the 54th Annual Monetary Studies Conference held at the Bank of Jamaica recently. The push to make credit unions more competitive with banks in the country comes as consumers complain about rising fees and charges to access their funds.
"My bosses want us to do more of the draconian type of measures and it is important that I am able to explain to them why these things shouldn't apply," Michael told attendees at the conference. He didn't give details about what those 'draconian' measures were, but said other policies are coming in place which he hopes will have an impact on competition among deposit-taking institutions in Belize.
"My approach has always been to find a way to create competition and what I think is the best route is to bring up the other deposit-taking institutions, the credit union sector, for example, which is of good size, and if we can bring into law a new Credit Union Act and start engineering the changes that we want to see from that sector, I think we [would] then inject competition to the banks which would certainly help. That's how we want to address it. We have received a first draft for a new Credit Union Act, and hopefully I'm able to go to my bosses and say, this is the route, let's back off the more draconian measures a bit."
There are eight credit unions in Belize with assets totalling BZ$1.3 billion at the end of June. At the same time, the country has four banks, but two, Belize Bank and Atlantic Bank, operate as a virtual duopoly with over 83 per cent of the commercial banking assets which amounted to BZ$4.6 billion. Scotiabank, which operated in Belize up to 2021, sold its operations in that country to Belize Bank and exited.
"So its a very consolidated system and if you look at interconnectedness from a financial stability point, it gives me high blood pressure," Michael highlighted.
"What's also happening in this consolidated system is now oligopolistic type of behaviour on fees and charges. You are charging at every point of access to hold the public's money from ATM charges to ridiculous online fees and charges. That sort of thing is what is really irritating the public. Of course now it's being passed on to the central bank to address."
He told the audience that he does not want to start to dictate fees and charges. "That could be a slippery slope, because it would be passed on in such a system through some other service or product," he said adding that he has resorted to a high level of moral suasion to deal with the situation through a what he called "practice direction" for fees and charges which Michael said was "unfair and excessive" at the central bank's first-ever press briefing in September. The policy, which is set to take effect from December 2023, mandates commercial banks to follow new rules as they relate to the fees depositors must pay to access cash and services.
The move in Belize has caught the eye of Fitz Jackson, the Opposition Member of Parliament in Jamaica who has been pressing the Government to deal with a similar issue with regards to bank fees and charges.
"The initiatives being pursued by the Belizean central bank to curb the unreasonable and unconscionable fee charges by banks in Belize is commendable. This represents an acknowledgement by the central bank that the integrity of the banking sector requires fairness on the part of the banks, which is licensed by the central bank. Regrettably, our central bank has elected to play a blind eye to cruel fee charges by banks in Jamaica," Jackson told the Jamaica Observer.