The Tribune

• Fidelity chief calls for KYC process easing

• Rejects calls for price control on bank fees

• Demand made by ‘uninformed politicians’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must make it easier for customers to switch banks and thereby boost competition, a senior banker agreed yesterday, as he likened the current process to “giving birth”.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business that transferring accounts to another financial institution will be made much easier if it became accepted industry practice that a Know Your Customer (KYC) all-clear provided by one bank was accepted at all others so the process does not have to be repeated.

This would reduce the bureaucracy and red tape, not to mention time, associated with switching a company or individual’s financial services business to another institution, making the transfer more seamless and efficient. And if customers are able to more easily move, it will force the banks to be more competitive in the products and services they offer, not to mention fees, to hold on to them.

Mr Bowe, speaking after the Central Bank yesterday unveiled its first ever industry-wide comparison of bank fee scales, said the initiative has provided greater transparency and consumer protection by empowering Bahamians with the knowledge of which institution may have the lowest rates and best suits their particular needs.

Rejecting the notion that price controls should be imposed on bank fees, and hitting out at “uninformed politicians” who have been calling for such regulation, the Fidelity chief said too many persons ignored the fact that physical in-branch transactions especially incurred costs that have to be covered by the clearing banks.

He added that the Central Bank had “laid the groundwork for a more intelligent and informed debate” on the issue of bank fees, although he acknowledged it was unlikely to end the public controversy surrounding them. Mr Bowe said discussion to-date had centred on an “emotional castigating of the banks and seeking someone to blame”.

The Central Bank’s comparisons found CIBC FirstCaribbean charges the lowest fees for student and retiree savings accounts, with Mr Bowe’s Fidelity Bank (Bahamas) largely leading the field on adult facilities. Scotiabank (Bahamas) was ranked as having the most expensive levies in five out of the eight categories assessed.

And, when it came to fees assessed for missed or late loan payments, the Central Bank found Fidelity Bank (Bahamas) was the most forgiving when it came to late personal loan and mortgage payments with a $22.40 charge for each. Bank of The Bahamas matched it on late credit card payments, with both institutions imposing a $33.60 fee.

“I think what it has actually done is move consumer protection as we know it forwards and advanced it,” Mr Bowe said of the Central Bank survey findings. “A lot of times the view of consumer protection means imposing rules and regulations as opposed to educating consumers and telling them to make informed decisions.

“The regulator has a responsibility to make sure there is no price collusion, price fixing, anti-competitive behaviour and the likes of that. I think the bank fee release, which is to be done on a more regular basis as I understand it - it will be quarterly, if not semi-annually - is more to take away the perception that all banks are alike.

“It also gives the consumer the ability to say which bank offers the products and services that are best-suited for my category or nature of my transactions. It stimulates the personal responsibility of banking customers to say: ‘Now that I have this information, who do I want to do business with and how do I manage my affairs?’” he continued.

“If I feel the fees charged by one institution are not commensurate with the services I am getting, and what the competition is charging, then I have the ability to move... I think the Central Bank has laid the groundwork for a more intelligent and informed debate and discussion.

“It’s laid the groundwork for criticism on the value proposition because it’s been laid bare, put in a comparative format that let’s persons look across and say: ‘What institution provides the best value for money?’”

Mr Bowe conceded, though, that greater consumer empowerment and transparency on bank fees needed to be accompanied by a process that makes it easier for Bahamians to switch their financial services business between different institutions.

“There’s been criticism that people are staying with institutions because it’s like giving birth to move to another institution,” he told Tribune Business. “That needs to be addressed as a country. If a person is verified by a commercial bank or a licensee of the Central Bank, that due diligence should suffice to move to another institution.

“We need to create the regulations and guidance that grant the ease to move your business, and pick the best-suited establishment for you.” The Fidelity chief then asserted that price controls are a non-starter as a method to regulate bank fees.

“I’ve long said to you that I support the retail industry - the automobiles, food and beverage - and the complaints about price controls,” he said. “I do share their sentiments that price controls are an antiquated system. Market forces should dictate prices.

“From that perspective consumer protection is far better served by education than by trying to regulate prices. Competition is a better source of driving prices to an equitable position. It’s no different in banking.

“There have been a lot of cries by uninformed politicians who have been calling for the regulation of bank fees, but in reality the Central Bank has demonstrated a progressive initiative in that persons are more than able to make decisions based on the information put before them,” Mr Bowe continued.

“I think the move by the Central Bank is teaching us to let our feet do the talking and, with the information provided to us, we have no one to blame but ourselves if we are not using that information to make best use of our limited dollars.”

Kenrick Brathwaite, Bank of The Bahamas managing director, told this newspaper that commercial bank fees were determined by the “strategy and philosophy” of each individual institution. Speaking to the results of the Central Bank’s survey, he said: “It’s not going to scare the banks into adjusting their fees.

“They’re going to adjust their fees according to what the overall strategy or philosophy is. I’m curious to see what the result of this will be. I’m sure the talk show hosts will tear into the fees, saying this bank is higher than that bank, but I don’t think it will do anything to anyone’s fees.”

Fees were priced according to a bank’s market, strategy and expected returns, said Mr Brathwaite, who praised the Central Bank’s publication of the fees and their cross-industry comparisons as a move that will foster greater consumer transparency.

However, he added that fees are “not the money maker for the banks” and rarely make the industry’s “top ten” given that most institutions generate the bulk of their profits via lending. And both Mr Brathwaite and Mr Bowe agreed that the Central Bank release will likely do little to change the nature of public debate on bank fees.

“The debate around bank fees was not an intelligent and informed debate,” Mr Bowe said, pointing out that banks need to cover the costs associated with providing multiple services.

Likening bank fees to those charged by plumbers or electricians for providing their services, he added: “It was an emotional debate where people wanted to castigate the banks and were seeking someone to blame. We very often don’t like to take personal responsibility for decisions within our control.

“From that perspective it’s very, very critical that we don’t allow emotional debate to override informative discussion. If I was to believe publishing that information will remove the criticism, I’d be naive because it was never an informed and intelligent discussion,” he added.

“It’s not to say banks should not be criticised. There are areas we need to be criticised on and improve. But it was never a debate on how the fees are assessed, what are the inputs to be assessed, and what are the value adds.”