Banks under pressure over rates

COMMERCIAL banks have until the end of next month to drop their prime lending and home loan rates to 11,5 per cent, the Bank of Namibia (BoN) said yesterday.

Speaking to The Namibian, BoN Governor Tom Alweendo said the four banks should have passed on all the interest rate relief initiated by the central bank to consumers by the end of October.This means a difference of 450 basis points between the BoN’s repo rate and the prime lending rate of commercial banks, commonly referred to as the interest rate spread. Alweendo stressed that the interest rate spread must also apply to mortgage loans.Right now, only Nedbank Namibia meets the BoN’s requirement. Both its prime lending rate and home loan rate stands at 11,5 per cent.Although Standard Bank Namibia’s prime lending rate of 11,25 per cent is below the rate spread requirement, its home loan rate is still 11,75 per cent.Bank Windhoek and FNB Namibia’s home loan rates are 11,75. Both banks already offer prime rates of 11,5 per cent.The discussion between the BoN and the banks on the rate spread is still ongoing, Alweendo said, denying reports that negotiations have reached deadlock.The current rate spread, which Alweendo regards as ‘unjustifiable’, has been a bone of contention between the BoN and the banks for some time. Earlier this year, the Governor gave the banks a written ultimatum that he wanted to see the spread narrowed to 375 basis points by year-end.This period has now been extended at the request of the banks, Alweendo said.’But the interest rate spread issue is still very much on the table.’ Alweendo yesterday also reacted to reports that he would retire from the BoN when his current contract expired in 2011.The Governor said he is not considering stepping down before then.He didn’t want to speculate about the possibility of being re-appointed for another term, adding that 15 years as Governor of the BoN is ‘a long time’.