BY HARRY RUSSELL

BANKS have over the years neglected very profitable ways of boosting their income for reasons that are debatable.

With the Central Bank being more stringent in its "moral suasion", banks should be looking for ingenious ways to make money. They are loath to lend "through being as according to how" the financial meltdown is affecting us all.

There has been a general outcry about the banks charging $10 per month when the balance of a savings account drops below $1 000. I believe that such a policy is wrong, but it goes to show the extent to which a bank will go.

Next thing it will want to charge just to keep a deposit.

Credit card dissemination has become popular and like cellphones everyone now has a card which can be used for both local and foreign purchases. Credit cards earn good income since people spend without knowing how they are going to repay.

Thus they incur high interest charges.

A computer is almost as normal as a watch and there is at least one in every home or every home has access to one. Banks should go after this business aggressively.

They should establish a full access system to the bank by computer.

One should be able to remain at home and access one's account at the bank at any time. One should be able to go into a store and transact business debiting one's account and crediting that of the merchant at the same time.

It is not very difficult technically to establish the platform. The major difficulty is the charge back.

I know that is done, but the service can be more widespread.

With the acceptance of simple credit card transactions it may open the way for an enterprising businessman to approach banks and guarantee the risk inherent in "charge backs".

In any case, banks are supposed to be experts at assessing risks as that is their core business. Or should be.

Minister George Hutson raised the question of reverse mortgages. In this day and age a pension becomes inadequate after five years of retirement.

Many people, after they reach the age of 70, are forced to find an extra source of income so as to make ends meet. The reverse mortgage, which is popular in other countries, would help.

Mr Tony Marshall recently gave an excellent explanation of the reverse mortgage on the radio to an interested caller.

The reverse mortgage gives the mortgagor an opportunity to enjoy some of the equity in a property for which he had spent maybe 20 or so years in an effort to own.

He or she can take out that equity in a lump sum or in suitable tranches. It makes the golden years even sweeter because there is no repayment by the mortgagor.

There is a slight drawback which makes the banks hesitate in considering reverse mortgages. Repayment comes when the mortgagor can least afford it. When the mortgagor is dead!

Of course, an interested party can clear the loan, but that takes the fun out of the deal.

Banks usually are short-term lenders. They lend primarily on the strength of their deposits which are mainly short term. It is called matching funds.

Therefore, to estimate repayment on the projected death of the mortgagor is a risk that is hard to assess. (Unless, of course, the bank has a private arrangement!)

Banks do not want to be saddled with real estate as they are not in that market. An accumulation of deaths at a particular time might just leave the banks with many properties to handle at a cost that they are unable to estimate both in the state of the property and the state of the market.

Mortgage companies might be interested in this type of lending since their loans are for a longer term. Here again the eventual state of the property is a consideration and a risk factor.

New legislation would have to be put in place if these mortgages are to be considered. It will be necessary to protect the mortgagor and the mortgagee.

* Harry Russell is a retired banker.