Three Major Issues In Banking

1
Three Major Issues In Banking

• ffice of the Banking Adjudicator
• Botswana 2009

2
Background Botswana Banking Services

• Central Bank (Bank of Botswana)
• Commercial banks (6)
• Offshore banks (3)
• Statutory banks (3)
• CIUs
• I FSC

3
Functions of Central Bank

• - Licensing of Banks (Banking Act Regulations)
• - Ongoing Supervision and Regulation
• - Statutory banks (shared with MFDP)
• - CIUs and IFSC

4
Issues

• Bank Charges and fees
• Consumer Protection Banking Public
• Role of Central Bank
• Recommendations Conclusions

5
Bank Charges and fees

• Botswana banks considered the most profitable in
  Africa despite perennial concerns about high
  charges
• Wide interest rate spreads and access issues
• Resentment, suspicion and dissatisfaction

6
Bank Charges and fees

• An overview of the banking industry in Botswana
  complied by Capital Securities
• Statistics from an IMF working paper show that on
  average, Botswana banks accrue a Return on Assets
  (RoA) of 4.2 percent. The figure for South Africa
  is at 1.4 percent while the average for Africa is
  at 2.7 percent.

7
Bank Charges and fees

• The figure for other emerging markets excluding
  Africa is 1.4 percent.
• On Return on Equity (RoE), Botswana banks still
  lead the pack by a long way at 40 percent.
• The figure for South Africa is 30 percent, Africa
  27 percent while that of emerging markets
  excluding Africa is 15 percent

8
Bank Charges and fees

• Available research on bank charges in the region
  suggests that banking in Botswana is very
  expensive.
• Based on a survey in 2000, the Bank of Botswana
  concluded that bank charges in Botswana are
  higher than in South Africa and Mauritius.
• It is unlikely that statutory price controls on
  bank charges will be introduced, "moral suasion"
  can apply to the banks by both the Bank of
  Botswana and the Government to restrain the
  growth of bank charges.
• The bulk of bank income comprises net interest
  income, which accounts for a consistent 65
  percent of the total with little trend variation.
  The remaining 35 percent comprises fee income of
  various kinds.

9
Issues Addressed With Regulators

• Wide national and international survey to
  establish equity in application of charges/fees
• Submissions from banks, consumers, formal bodies
  and other stakeholders
• Focus to be on personal and SMME accounts
• To verify whether
• - charges and fees are justly applied
• - charges and fees are adequately disclosed
  to consumers in advance

10
(conti)

• - Proper disclosure of information and consumer
  education
• - Improved transparency and communication with
  customers

11
Consumer Protection-Public

• Statutory
• - Acts of Parliament
• - Concept of ombudsman neglected
• - Consumer Protection Unit -branches
• - Public Protector/Ombudsman
• - Govt Vision 2016 encapsulates new schemes
  for various establishments
• - OBA participated in the preliminaries

12
Consumer Protection-Financial Services

• Banks
• - Scheme voluntary (insistence by BOB)
• - OBA established 2002
• - 7 commercial banks
• - 2 offshore banks
• - Review of scheme recommended, benchmark and
  international practice to Bankers Association
• - Central Bank concurs, a task group to be set
  

13
Guidelines for the OBA Review

• Accessibility
• Independence
• Fairness
• Accountability
• Efficiency
• Effectiveness

14
Consumer Protection-Financial Services

• Banks
• - Statutory
• - 3 banks
• - No scheme in place, complaints escalated to
  BOB and MFDP (deficient).
• - Govt Vision 2016 encapsulates new schemes
  for various establishments

15
Issues Addressed With Regulators

• Establishment of complaints handling schemes at
  the level of ombudsmen
• Establishment of Non Bank Financial Institution
  Regulatory Authority
• OBA office and structures to be reviewed
• BOB role to be enhanced so as to regulate CIUs
  and IFSC entities and to create specialised
  structures.

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Recommendations and Conclusions

• Establishment of Financial Services Authority
  equivalent to NBFIRA to regulate Banks.
• Review Banking, Financial services Acts and
  policies to enable institutions better serve
  customers
• Regulate Credit Grantors e.g ITC
• Enact Promotion of Information Act
• Constitute a Board Structure within the OBA

17
Contacts Details

• Office of The Banking Adjudicator
• Plot 767 Tati Road
• Life and General Building
• Address Private Bag 00404 Gaborone Botswana
• Tel [phone] Fax [phone]
  
• Mobile [phone]
• E mail address bankadjud_at_info.bw
  
• website www.banking-adjudicator.org.bw