Independent Senator Andrew Mallalieu said changes to the Financial Institutions Act read more like an “unnecessary” consumer protection bill than a regulation of the banking community, suggesting there was “ample free competition” among banks for consumers.
Lecturing fellow lawmakers on the role of the Central Bank in providing a safe banking environment for the country by ensuring that the banks offering services are well regulated, well capitalised and can facilitate required transactions, the business owner then challenged government minister Senator Shantal Munro Knight who said the legislation also targeted banks that were making large sums from fees.
He suggested that the banks’ 31 per cent in income from fees and commissions comes from foreign currency transactions and not simply from bank-imposed fees.
Senator Mallalieu recalled that in 2021, Parliament passed a bill on the National Payments System governing electronic bank transfers which speaks to the charging of fees. He said that legislation also provided for the establishment of a ten-member national payment system council to “advise the Central Bank (on) the setting of fees”.
He said by October 2023 there was new legislation on the council and its composition was determined to include five members nominated by the minister, two Central Bank appointees, one person each from the FSC (Financial Services Commission), credit unions co-operatives and the bankers association.
The senator queried the status of the national payments system council and whether that body advised the Governor of the Central Bank on the January directive and why was there a need to bring an amendment that appeared to bypass the council.
Senator Mallalieu noted there are six banks in Barbados competing for business: “We have choices within the market. They compete for our business whether it is a mortgage, a credit card, they compete regularly for our business. There is ample free competition amongst these banks.”
Referring to a directive issued by the Central Bank last month that ordered banks not to charge a fee for electronic interbank transfers, Senator Mallalieu said there was a bank that had been making those charges for over a year.
“I don’t quite understand why they had to step into this,” he declared. “What really should they be focusing on?”
The independent senator suggested that focus be placed on consumers saving for retirement or first home and car purchases who, he declared, lose money every day with inflation running high and a 0.2 per cent interest regime in place.
He said Barbados has a very low borrowing rate which affects banks’ return on loans, further telling the senators that banks “rent” money from depositors which they lend out and the difference between what they pay in interest and what they get from lending is their “margin.
“Their commodity is cash. They take money from those who have and lend to those who don’t, and they make a margin.”
The senator said the Central Bank should instead investigate the current liquidity crisis in the market to see how the banks could be encouraged to lend more.
(SP)
