Customers to pay the price for banks’ increased operating costs
LK Hewlett
Customers throughout the region are likely to see additional or increased fees and charges as their banks incur mounting financial burden in the face of FATCA and CRS.
The regional banks have recently had to expand their IT, security and human resources to become compliant with the US’ Foreign Account Tax Compliance Act (FATCA), and will now have the additional encumbrance of the OECD’s Common Reporting Standards (CRS) due to take effect .
According to Chairman of the Caribbean Association of banks (CAB), Joanna Charles, banks will have to offset these additional costs they are incurring in order to stay afloat.
“Somebody has to absorb the cost,” she said.
Donald Thompson, Chairman of the Local Organizing Committee for CAB’s 42nd Conference and Annual General Meeting held in St. Kitts last week, noted that banks are really in a cost recovery situation.
“It’s not that you take a cost and you absorb it, because the bottom line is we are a profit-making institution and while we try to spread the cost as much as possible and while we try to hold the cost at some point, when you have the cost of all these different pieces of regulations I think it will impact on what the end user sees in terms of fees.”
The Eastern Caribbean Currency Union’s Monetary Council has already been expressing concern with regard ‘high’ commercial bank charges and indicated that some action needed to be taken to address this matter.
Chairperson Charles posits however that the Monetary Council is comprised of politicians and often they only see things at one end of the spectrum.
“So they will see the impact the increasing of costs is having on the population, which I think is a concern that the politicians should have, but sometimes I find there needs to be some more balance.
“It is a challenge for banks and I don’t know that it is the role of a government to force a bank to make decisions that are against its own viability , so it requires some kind of discussion and cooperation.”
In May, the Monetary Council agreed to the lowering of the minimum savings deposit interest rate from 3% to 2%.
Charles acknowledged that to their credit, maybe the lowering of the minimum savings rate is probably one way of the Council looking at things with a balanced view.
“The lowering of the interest rate was something that was long in the making. Banks could not sustain any level of profitability with such a high cost of funds, because what we saw, there wasn’t balance between the demand for lower rates on loans and a demand for an increase in interest rates. That’s like you have a fixed cost, that you have to be able to cover that. When you remove that cost of funds, you have salaries you have administrative costs, you have expenses; it was impossible for the banks to make a profit…our whole survival depends on being profitable.”
