Banking charges too high — World Bank

He was one of the financial stakeholders testifying in front of the Standing Committee of which former premier Hage Geingob is the chairperson.

“The Bank of Namibia is entrusted to administer, amongst others, the Banking Institutions Act, 1998, and the Payment System Management Act, 2003.

These two pieces of legislation would allow the Bank to potentially regulate bank charges in Namibia. But, before we look into this particular concern, it is necessary to give a neutral view on this subject matter,” Hartmann said.

He went on to say that the IMF/World Bank earlier this year carried out a Financial Sector Assessment Programme in Namibia. The mission inter alia said:

“There are concerns that banks in Namibia are charging excessively high fees. It is true that given the sharp decline in interest rate spreads on lending, banks are trying to shift their income base toward fee income.

“It is also true that banks are very profitable and face low competition in some segments of the market. This could explain the high charges. At the same time, the cost of doing business is high in Namibia not least because of the lack of economies of scale. These factors also explain high charges. To assess the concern that fees are excessively high, a thorough analysis of banks’ fees structure would be particularly useful” ‘ quoted from a document.

According to Hartmann, the FSAP report also recommended considerable enhancement of competition in the banking sector by admitting new entrants into the market segment, for instance by allowing NamPost Savings Bank to enter the banking scene and to support the creation of credit unions.

“Moreover, the Bank of Namibia is currently considering amendments to the Banking Institutions Act, 1998, to allow branches of foreign banking institutions to be licensed and set up in Namibia. It is hoped that such branches may instil sufficient competition in the banking sector, should there be an interest in establishing bank branches in Namibia,” he said.

The Bank of Namibia is on record as having admitted that the bank charges are high, confusing and multiple and that they are arbitrarily determined.

“The question arises whether the Bank should intervene by prescribing bank charges or to curb them. To answer this question, we need to look at the different roles that the Bank fulfils. Its primary responsibility, in accordance with the Bank of Namibia Act, 1997, is to promote and maintain a sound monetary, credit and financial system in Namibia and to sustain the liquidity, solvency and functioning of that system; and to promote and maintain internal and external monetary stability and an efficient payments mechanism,” he told the Standing Committee.

According to Hartmann, the Bank of Namibia has the responsibility to administer the Banking Institutions Act, 1998, whereby it licenses and supervises banking institutions, and ensures that these institutions are solvent and liquid and have sufficient and quality capital to support their operations by enforcing specific prudential requirements.

September 2006
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