Bank of Ghana directives will have minimal impact on banking- GCB Boss

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John Kofi Adomakoh.


Managing Director of GCB Bank, Mr. John Kofi Adomakoh, says the suspension of maintenance fees on savings account will have a short-term minimal impact on the industry’s non-interest income.

In addition to savings account maintenance fees, the central bank in its latest directives warned banks to desist from Credit Insurance Premium Overcharges, Over the Counter (OTC) Withdrawal Charges.

Speaking in an exclusive interview with GBC News, Mr. Adomakoh said most banks no longer charge maintenance fees. Maintenance fees on savings accounts, over the counter withdrawal charges, a markup on credit insurance premiums form a part of banks’ revenue streams.

Removal of same means a reduction in the revenue of financial institutions. The Bank of Ghana in a 7-point policy directive on Friday barred banks and specialised deposit taking institutions from charging these fees, which the central bank describes as unfair.

While industry watchers have hailed the latest orders, some industry players are worried about the knock on effect. While admitting that the policy initiatives will affect the bottom line, the Managing Director of GCB Bank, Mr. John Kofi Adomakoh is of the view that the effect will be limited and short-lived.

“When you put it all together, yes we know it’s a challenging time for banks. Some of these revenues are going to slip away but we will have to increase the numbers to make up for the shortfalls. We don’t expect the directives to be a game changer in our business.”

Timing

These directives come on the back of Covid-19 and its disruptive effects on banks, a five percent banking sector levy, and a general increase in taxes. Some bankers are therefore concerned about timing. The GCB Managing Director, however, holds a different view.

“Over the last few years, there has been a changing regulatory environment. It’s been something that has been discussed. Banks have given their views but the Central bank may not agree with them hundred percent. The timing is not a surprise. The focus is what we do going forward.”

Way Forward

The GCB Boss urges banks to re-organise customer value proposition and increase customer base to make up for the limited short falls.

Meanwhile, banking analysts have called on the central bank to penalise banks that fail to comply with the directives.

The Directives

The Bank of Ghana, in a statement on Friday, June 18, observed with concern, a trend where some Banks and Specialised Deposit-Taking Institutions (SDIs) impose certain fees and charges on customers. These practices are deemed to be unfair, inappropriate, and detrimental to the financial inclusion agenda and the protection of customers’ interests.

Accordingly, the apex bank moved to abolish what they term unfair charges on deposits. These charges include, Over the Counter Withdrawal Charges. Some banks impose penal charges on customers who withdraw their own funds from banking halls of affected banks and SDIs.

The reason commonly attributed to this practice is to encourage customers to use digital platforms provided by the banks for such withdrawals, in order to decongest banking halls. These digital platforms are however not offered for free.

While the Bank of Ghana acknowledges the support of banks and SDIs in the digitisation agenda, this action deters some customers, especially those who are averse to the use of digital platforms, from opening and operating accounts.

The practice also negatively affects the financial inclusion drive of the Bank of Ghana. Another unfair practice the central bank is worried about is the Change of Ownership of Collateral Documents. The Bank of Ghana notes that some banks and SDIs require borrowers who secure credit with movable assets to transfer ownership of such assets into the joint names of the borrower and the bank or SDI involved.

In addition, borrowers are made to bear the cost associated with the transfer prior to loan approval and after settlement of loan. This practice of some banks and SDIs is contrary to section 7 of the Borrowers and Lenders Act, 2020 (Act 1052) which does not permit a security interest to operate as a transfer of title from a borrower to a lender.

The practice further denies borrowers the opportunity to secure multiple loans with single collateral duly registered in the name of the respective borrowers. Banks and SDIs are barred from engaging in the practice of changing ownership of collaterals presented by borrowers to secure credit facilities from the borrower to the bank or SDI.

By: Morris Ogbetey.

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