Cut bank fees to foster savings – Nene

October 21 2011 at 05:00am
By Donwald Pressly

THE Government was still in discussions with the banking sector to encourage it to reduce transaction fees to foster savings, particularly among the poor, Deputy Finance Minister Nhlanhla Nene said yesterday.

His remarks were made after he addressed a co-operative financial institutions’ indaba in Cape Town. After the conference he remarked that in the context of encouraging savings, it was important to draw people – including the poor – into the banking system.

He said some institutions – without naming them – were “coming into the (banking) market with lower fees”.

It was a hint that co-operative banks might be the mechanism to promote competitive banking charges, especially among the poor, many of whom felt excluded from the commercial banking system.

In Pretoria, Solidarity released a report in which it argued that the most expensive commercial bank’s fees were “now even higher”. The union’s deputy general secretary, Dirk Hermann, said banking giant Absa, which was one of the two most expensive banks, had increased its charges by 8 percent in the last year.

Citing research by the Solidarity Research Institute, Hermann reported that Standard Bank and Absa were still “overall the most expensive of the five banks” with FNB and Capitec the cheapest.

The report compared the bank charges of the various personal bank accounts of the five large commercial banks – Absa, FNB, Standard Bank, Nedbank and Capitec – with each other. It did not study business bank accounts.

Hermann noted that Capitec had not increased its charges at all and its “global one” account was the least expensive.

The average bank charges of this account, over eight different user profiles, amounted to R67.35 a month and had not increased since 2010, according to Paul Joubert, a senior researcher at the institute.

Joubert reported that Absa’s cheapest account had average monthly charges that were more than double those of the Capitec account. The charges also rose by 8 percent from R140.90 to R152.15 between 2010 and 2011.

Noting that the cost was calculated as an average of the eight profiles, excluding minimum balances and the effect of interest or forgone interest, Solidarity Research Institute said Capitec had the least expensive transmission account, but if a client wanted an overdraft, a chequebook and a credit card directly linked to the account, FNB offered the cheapest current accounts.

Nedbank, it reported, offered the third cheapest rates.

Hermann said it was important for consumers to shop around for bank accounts.

Meanwhile, Nene announced the launch of the Treasury’s financial co-operative retail savings bond, which he said was an ideal instrument for co-operative financial institutions.

“These one-year, two-year and three-year co-operative retail bonds will provide financial co-operatives with a safe instrument to invest and to earn a competitive return on their members’ investments with no charges”.

He said the bonds also had some unique features, which took into account the uniqueness of the financial co-operative model “through top ups and early withdrawals”.

Nene looked forward to when all co-operative financial institutions would be registered as co-operative banks.

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