Minister of Finance Peggy Serame has dispelled concerns from her colleagues about the perceived astronomical rise of non-interest bank charges.
In a question posed by Member of Parliament for Gaborone Central Tumisang Healy, the Minister was asked to state the processes used to assess and approve requests by commercial banks to increase charges, and how Bank of Botswana (BoB) ensures that banks are not trying to maximise profits through exorbitant non-interest charges.
In his submission, Healy said since the lifting of the two year moratorium by BoB on bank charges in 2016, commercial banks have been increasing their charges for the last six years.
The MP said there seem to be a shift in commercial banks’ business strategies to increase profitability through non-income charges instead of interest income from disbursing loans which is their core business.
Healy also asked the Minister how lack of foreign exchange controls and price transfer contribute to external spillage of funds that could have been used in the domestic economy for further investments.
In her response Minister Serame said the country has a framework for the regulation and monitoring of bank charges in line with the BoB Act.
“Under this framework, prior to imposing any new bank charge, upward adjustment of existing bank charge, a licensed bank is required to submit the proposed banking tariff schedule, that is fees, commissions and service charges for assessment, fairness and reasonableness in relation to the cost of provision of the service,” said Serame.
She further said there’s also consideration on the general price movement and the likely impact on financial inclusion and financial sector development.
“Therefore, the Ministry of Finance is satisfied that the framework adopted by the BoB as it ensures an appropriate balance between profitability of banks and fair inequitable pricing of banking products and services,” she said.
She further dispelled the argument of leakages as as result of lack of foreign exchange controls, stating that management fees paid to parent companies are closely monitored by BoB on a bank by bank basis.
Serame revealed that in total dividends paid out by all commercial banks excluding BBS Limited Bank in the last 10 years (2012-2021) amounted to P8.6 billion.
“There has not been any observed external spillage or capital flight that could be directly attributed to lack of foreign exchange controls. To the contrary, major trading currencies continue to be readily available in the market to warrant any concern about the unintended consequences of not having in place exchange controls,” Serame said.
