BoN ‘won’t steamroll banks’

THE Bank of Namibia (BoN) does not intend steamrolling commercial banks with its stronger powers once the necessary legislation is changed, but it will guard national and consumer interests better when regulating the sector this year, the central bank has indicated.

‘The Bank of Namibia will continue to do what it needs to do,’ Governor Tom Alweendo said at his first monetary policy announcement of 2010 yesterday.On the regulator’s agenda are lower interest rates, lower fees and for Namibians to have bigger ownership in the banks.As expected, the Governor yesterday kicked off the new year by keeping the repo rate unchanged at 7,0 per cent. Economists believe he will keep it there for the entire 2010, and perhaps increase it by 50 basis points in the last quarter.That doesn’t mean that the banks needn’t drop their current prime interest rates of 11,25 per cent, though. Alweendo confirmed that the deadline for a reduced interest rate spread still stands. The Governor wants a spread – the gap between the repo rate and the prime lending rate – to be reduced to 375 basis points by October. That means that banks still need to slice 50 basis points off their prime rates in the coming months. They will also have to give the relief through to their home loan clients.Next on Alweendo’s list are lower banking costs. Proposed amendments to the Payment System Management Act of 2003, tabled in Parliament by Finance Minister Saara Kuugongelwa-Amadhila last week, will give the BoN the power to scrutinise bank fees.This comes after years of Government, non-governmental organisations and the public complaining about the high fees banks charge them.Alweendo said the BoN won’t be ‘overbearing’ or prescribe that fees should be ‘x or y’. However, banks will have to ‘prove’ how they arrived at their fee structure, he said.’In the past, the BoN didn’t have the power to go to the banks and say that the fee structure doesn’t look right,’ the Governor said. If approved, the amendments will give the BoN that power.The banking sector has been tight-lipped since the Minister tabled the proposed changes last Thursday, accusing banks of charging the public ‘exorbitant fees at every stage of their interaction with banking institutions, discouraging lower-income groups from accessing the national payment system’.The Namibian contacted the Bankers’ Association of Namibia (BAN) for comment last Friday already, but they have failed to respond to date.Governor Alweendo furthermore intends to ‘encourage more local ownership’ through the Finance Ministry’s proposed changes to the Banking Institutions Act of 1998, also tabled in Parliament last Thursday.The Amendment Bill will enable the BoN to ‘introduce certain restrictions to the ownership and shareholding structure of foreign-owned banks,’ Deputy Finance Minister Tjekero Tweya said when he tabled it.Alweendo yesterday said the financial sector is of strategic importance to the economic development of Namibia.’Therefore it matters to us who owns what,’ he said.The amendments, if approved, will give ‘the regulator the power to say it doesn’t like’ a particular kind of ownership structure, he said.Asked whether the sentiments of the Amendment Bill will count when the BoN has to consider the proposed deal by South Africa’s Absa Group to buy the majority shareholding in Capricorn Investments Holdings (CIH) – the majority shareholder of Namibia’s only wholly-owned bank, Bank Windhoek – Alweendo said the BoN has not been formally informed about the proposed transaction.He did, however, point out that the latest development has nothing to do with the amendments to the law. The process has been coming for a while, Alweendo said.The Governor didn’t want to comment further on the transaction, as he didn’t have the necessary details on what the two banks are planning.The deal is subject to various conditions and approvals, including the blessing of the BoN.Absa’s announcement Friday that it wants to get its hands on the controlling interest in Bank Windhoek came hours after the amendments were tabled.The Amendment Bill also gives the BoN more power to regulate the restructuring plans of commercial banks. It also contains regulations regarding the appointment of the managing director and the board of directors.jo-mare@namibian.com.na