BoN: Banks charge too much interest

BANK of Namibia (BoN) Governor Tom Alweendo believes there is no reason why local commercial banks should charge consumers a prime lending rate that is so much higher than the repo rate of the central bank.

Commercial banks currently borrow money from the BoN at eight per cent, the official repo rate. They then lend the money to consumers at 12,75 per cent, the current prime lending rate. In most cases, consumers have to pay prime plus a percentage, depending on their client status at banks.’It is our view that the current spread of 475 basis points is not justified, when compared to similar economies,’ Governor Alweendo responded when approached by The Namibian.He said the BoN has spoken to the commercial banks for some time now to express its view on the matter.’We are in the process of convincing the commercial banks and we hope that, sooner than later, the banks will se our point of view,’ the Governor said.He said the BoN realises that it has no legal mandate to dictate to the banks what the prime rate should be, but ‘we believe that we have a duty to promote an efficient banking sector’.The BoN Governor’s statement came after the Governor of the South African Reserve Bank (SARB), Tito Mboweni, last week lashed out at commercial banks in South Africa because the difference between their prime rate of 12 per cent and the SARB repo rate of 8,5 per cent.Mboweni interrupted a presentation at a forum on monetary policy review last Thursday, saying there is nothing automatic that says the spread must be 350 basis points.’I have tried to use moral persuasion. I would like to appeal to private banks to think about the spread. It does not have to be the same between bank to bank – there needs to be some competition here,’ Mboweni said.According to reports by Fin24.com and I-net Bridge, he indicated that a lack of competition is not good and that is why authorities try to break up cartels. Mboweni also said that it is time that South Africans all protest and plead for lower interest rates.His statements had the banking industry up in arms.’We sent a letter to Mboweni to request a meeting to find out if we should hold a public debate on this,’ said Cas Coovadia, Chief Executive of the Banking Association of South Africa (Basa).jo-mare@namibian.com.na