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‘DON’T INCREASE CHARGES’

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MBABANE – Banks have been ordered not to increase their charges for the next 18 months.

This directive has been issued by the Central Bank of Eswatini governor Majozi Sithole through legal notice number 47 of 2019. “A bank shall not impose upward adjustments on tariffs (bank charges, commissions and other non-interest fees) for a period of 18 months,” reads the gazette in part. Sithole said in the case of any new product or service to be availed during the 18 months period, the related fee or charge should not exceed the fee applicable for existing similar products. it was emphasised that such fees would also be subject to the central bank’s approval. Eswatini Bankers Association Chairman Dennis Mbingo said the freeze was a tough call to make, but they fully understand its basis. He mentioned that there was an affordability problem, especially with retail customers (individuals) in the short-term. Mbingo said aid banks had taken an individual position on the matter and because they were not permitted by law to discuss specific pricing proposals. The chairman said one ought to note though that this does not resolve the underlying issue.

Literacy

“There is a lot of work we all need to contribute to around financial awareness for individuals through financial literacy programmes for our customers. While it’s true that wages may not be catching up with basic needs in some sectors and some people may be losing jobs, there is also the big issue that many of us may be living beyond our means and are over-borrowed, and may be funding our lifestyle aspirations through expensive debt that we are not monitoring. That’s the elephant in the room,” Mbingo explained. Asked what challenges the latest decision presents to the banking industry especially in terms of profitability, Mbingo stated that banks pay salaries, suppliers, fund tech development and other infrastructure needs.

Reassess

“This will hit banks hard - and it will add more pressure to all banks to reassess whether current business models are sustainable in the long-term. We cannot sustain a large cost base when revenues are being challenged left, right and centre, said Mbingo. 
In terms of how the banking industry plans to mitigate effects of the upward adjustment freeze over the next 18 months, the FNB CEO said all options were on the table. “Individual banks will make calls on how they will manage themselves through this period. But all options are likely to stay on the table until some form of sustainable model is worked out by everyone. others may not need to change a thing, no one knows for sure,” advised Mbingo.

 

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