Interest rates down, charges up
The dramatic reduction of interest rates in Jamaica has led commercial banks to impose several charges on customers.
Reginald Budhan, Jamaica’s permanent secretary in the Ministry of Industry, Investment and Commerce, made this point last Monday at the Amaryllis Beach Resort during the opening of the regional seminar on Banking And Credit, Financial Services And Consumer Protection In The Caribbean: Towards A Regulatory Policy Framework.
Budhan said that for years Jamaica had been experiencing very high interest rates influenced largely by high levels of government borrowing.
“Recently, Jamaica implemented a debt-exchange programme which sees the dramatic reduction of interest rate and government debt instruments.
“The expectation is that the interest rates of commercial banks will fall. That has not happened to the extent expected by government and consumers,” he said.
“Arising from the fall in interest rates, the banks are trying to buttress their revenue from a range of charges,” Budhan said.
“These include opening an account, withdrawing from a savings account, accounts that fall below the minimum balance, closing an account, balance inquiry, certification of balance in some cases, transferring of funds between your accounts.”
He said this was creating “a certain amount of tension between government and consumers on the one hand and banks on the other”.
The permanent secretary noted that while they did not want to run banks into financial distress, interest rates needed to come down to facilitate investment and growth and increase consumer welfare.
“We therefore need balance between these two competing interests. I’m of the view that a regional banking code would assist in creating this balance.”
Budhan added that this must be supported by a well-informed public able to read and understand the terms and conditions included in documents relating to financial transactions done with banks.