The Tribune

With a recent increase in various fees by CIBC First Caribbean, Bahamians and residents are once again asking why the Central Bank of The Bahamas and successive government have failed to adequately and clearly address the variety of outrageous fees bank customers endure on a broad range of services.

This is added to the feeling by most Bahamians that we are often gouged and taken advantage of by various commercial interests, including various grocery stores.

The consumer regulatory regime in The Bahamas is considered a joke with little regulatory teeth, and a complacent political elite afraid to take on certain interests who regularly contribute to political parties and candidates, who are in turn reticent to take broader regulatory actions.

Indeed, some commercial enterprises scoff at government ministers and advocates pressing certain consumer interests.

Some years ago, a leading political figure was bluntly told by a senior expatriate banker that there were things that foreign commercial banks could get away with in The Bahamas that they could not get away with in the banker’s home country of Canada.

A recent former senior employee of the Central Bank believes that this remains the case. This individual remarked that the need for the government to borrow from certain local banks made the cabinet more reluctant to request certain structural changes.

Canadian institutions have dominated commercial banking in The Bahamas from the inception of this economic sector. Even before it opened branches in parts of what was then considered the boondocks of Western Canada, the Royal Bank of Canada (RBC) opened its first branch in Nassau in 1908.

Almost 50 years later, three other Canadian banks arrived in The Bahama Islands over a three-year period. In 1956, Scotiabank opened a small branch in Nassau, followed in 1957 by the Canadian Imperial Bank of Commerce (CIBC).

Wikipedia reports that in “1958 Bank of London and South America [ BOLSA], an affiliate of Lloyds Bank, and Bank of Montreal established Bank of London and Montreal as a 50-50 JV with headquarters in Nassau in The Bahamas”.

There have been significant changes in the banking sector in the ensuing decades. The Bank of Montreal was purchased by the government of The Bahamas in 1988, becoming the Bank of The Bahamas. Commonwealth Bank is a fully-owned Bahamian entity.

The Canadian commercial banks have contributed to the national and economic development of The Bahamas. Canadians and Canada are generally well-regarded by Bahamians.

Still, there have been times over the many decades that these banks could have been better corporate citizens. There is a view by various informed observers that public officials, including the Central Bank, have often been less than vigorous, and at times complacent, in pressing for necessary reforms and changes in commercial banks, including in lending practices in terms of commercial loans.

Various banks, domestic and foreign, are engaged in the dollar equivalent of the nickeling-and-diming of customers with the imposition of various fees, a practice also under scrutiny in other locales.

Certain fees may be understandable given the nature of services provided. Still, consumers and regulators need to be vigilant about the range of fees imposed locally and the possible greed and potential gouging involved in certain fees.

An egregious and ridiculous example is the story of a bank customer paying off a loan. To help facilitate the repayment, this customer wrote and sent to one of the commercial banks post-dated checks for dates the bank proposed.

Because it took the bank some days to process the post-dated checks, the customer was fined a late fee, despite the bank having proposed the date on the check in the first instance. The late fee was subsequently reversed after considerable effort.

Another story: A certain bank has repeatedly called a certain customer on a matter. The customer notes that every time he returned the call for a period of a year, he has never once gotten someone on the phone from the bank.

Customer service by telephone is a notorious problem in many jurisdictions. Combine this to the natural slackness and indifference of many Bahamian employees, which further frustrates bank customers.

Many Bahamians have swallowed or reluctantly accepted the range of fees to use debit cards, credit cards, and ATMs, including the fee every time one uses an ATM card at a bank machine where one has an account.

While ATMs are convenient for customers, they save the bank from even more customers on bank lines, which are typically slow to move here at home, especially on certain paydays.

It is ridiculous that a recipient of a cheque cannot cash a cheque at certain banks if one is not a customer of that bank, though one can deposit that cheque to an account one has at another bank.

Other Caribbean jurisdictions appear more proactive in reining in certain fees and protecting consumers than the Central Bank of The Bahamas and both major political parties.

A story last year in the Amandala newspaper in Belize, entitled “Central Bank clamps down on bank fees/charges” reported: “A significant upcoming change announced by [Central Bank] Governor [Kareem] Michael is the regulation of bank fees and charges, set to take effect on January 2, 2024. ‘All banks must reduce or limit ATM withdrawal fees to a maximum of 25 cents per transaction,’ he stated, with the goal of eliminating these fees for in-network transactions in the future.

Note: One Belize dollar is worth Bahamian 50 cents.

“The Central Bank is also addressing other fees, including those for dormant accounts, account closures, and early loan payouts. Additionally, they have committed to stop charging banks for electronic and instant funds transfer on online apps, with reductions for customers expected to fall below $1.00, also effective January 2nd.”

The Governor observed: “Evidence has shown that it drives positive financial inclusion and therefore enhances the financial stability mandate.”

Yesterday’s Tribune reported: “In January, the Central Bank of Barbados mandated that no fees could be charged for electronic transactions including Automated Clearing House (ACH) and real-time payments (RTP) transfers.

“The Bank also requires all commercial banks to offer at least one savings account free from fees or charges. Guidelines introduced in July require banks and finance companies to seek a non-objection from the Central Bank at least 60 days before implementing or increasing fees.”

The story continued: “They must also notify customers at least 30 days before a fee takes effect, although no notice is required for fee reductions. Additionally, there are to be no fees for electronic transfers and no cash management fees for transactions under $10,000 per day.”

Last year, NationNews in Barbados reported: “The Central Bank of Barbados has confirmed that Bajans opening new bank accounts can do so free of controversial maintenance fees. The monetary authority revealed that from June, Barbadians have been able to open a bank account free from maintenance fees at any of the six commercial banks operating here.

“The news comes as commercial banks have increased their profits, with the Central Bank urging them to focus on growing their earnings via lending, and less from maintenance fees.”

To help serve certain customers, the Government of Canada forged an agreement some years ago with commercial banks for low-cost accounts. These accounts “cost a maximum of $4 per month in banking fees. The Government of Canada and certain financial institutions have an agreement to provide low-cost basic banking services.”

These accounts offer the following services: “at least 12 debit transactions per month, including at least 2 in-branch transactions where available; ability to write cheques; a debit card; unlimited deposits; monthly printed statements; ability to set up pre-authorised payments; cheque image return or online cheque image viewing.”

Why can’t such a regime be set up in The Bahamas?

Yesterday’s Tribune reported: “In July, the Royal Bank of Canada (RBC) announced a 50-cent decline in debit card transaction fees for ATM transactions involving other banks in the country and purchases at local points of sale.”

This should be welcomed. Correspondingly, if RBC was able to reduce these fees, how much were they originally making from these fees and why did it take so long to reduce these fees? Moreover, what other actions can other banks take to reduce certain fees?

The government should cause the issuance of a consumer report detailing the full range of fees by the commercial banks and the amount of money made from these fees so that consumers can compare the fee structures. Further, how much VAT or other taxes is the government earning from these fees?

Again, why do the Central Bank and both major parties appear so out of touch and out of tune with consumers who feel taken advantage of and gouged by the commercial banks?