Extortion by commercial banks – Part II
Editor: The much publicized withdrawal fees, ATM fees and miscellaneous monthly service charges which were imposed by the foreign-owned commercial banks that operate in SVG continue to have a deleterious effect on Vincentians. The banks have once again found a means by which they could appropriate even more of our hard-earned money onto themselves. The anticipated annual unfair gains for the offending financial institutions, as a result of these fees amount to millions of dollars.{{more}} In other words, millions more of our national wealth will be siphoned off from our accounts every year and placed in the coffers of financial institutions, which in some cases have roots in slavery and which should therefore be thinking about making reparations payments rather than consolidating their stranglehold on our economy.
The nature of a bankâs ownership is paramount. Scotiabank, RBTT and CIBC First Caribbean (which seems to be experiencing a crisis of branding) all have extra-regional ownership and are the worst offenders. The Bank of St Vincent and the Grenadines (BOSVG) by contrast, with its indigenous roots, is no party to the extortion. The BOSVG has shown itself to be a horse of an entirely different colour (and I dare say character) and stands out like a beacon for its refusal to participate in an exercise geared at scoring cheap profits. This demonstrates the utter desirability of local and regional shareholders in our principal financial institutions.
The fees and charges which are the subject of this article have already been described for what they are â a fine against the use of personal resources. A friend of mine showed me his CIBC FirstCaribbean bank statement after my initial article on this topic appeared and the statement proved beyond the shadow of a doubt that interest rates which are effectively negative are not so much a theoretical prospect as they are a concrete reality. CIBC First Caribbean deducted $5 per month from his account under the guise of “service chargesâ until the account was totally depleted â down to the very last cent. The interest accrued was negligible in comparison to the magnitude of the deductions and the net effect was the equivalent of a negative interest rate. We might need to revert to storing money under our pillows.
About 80 per cent of savings accounts contain less than $500. An account with $500 therein would earn $15 in interest per year if the interest rate is three percent, but would be charged $60 if the CIBC First Caribbean terms and conditions as described above apply. This translates into an effective interest rate of negative nine per cent. This is impossibly absurd and would result in the account being depleted (assuming no new deposits) almost overnight. What madness!
How could we tolerate this kind of financial travesty? Why should the commercial banks be allowed to operate like this with impunity? They have lowered the effective interest rate on savings accounts through the backdoor. These selfsame banks persistently and relentlessly lobbied the Eastern Caribbean Central Bank (ECCB) for a reduction in the minimum interest rate on savings deposits from its current level of three per cent to no avail. The Central Bank, in its wisdom, turned them down. So, the banks in response devised clever new fees in order to beat the system and circumvent the authority of the ECCB all to our detriment. Is the ECCB as the regulator now going to stand idly by and allow them to get away with it? Are we as depositors going to allow them to get away with this most brazen act of highway robbery? Who would have thought that a recession and then negative interest rates would be the great gifts that we received from banks in the 21st century?
These institutions keep pushing the envelope and are now taking things too far. They were not satisfied with the fact that in one fell swoop in the 1990s the government of SVG granted them considerable relief from the interest levy in the vain hope that it would lead to an increase in lending on their part and therefore provide some sort of economic stimulus. That didnât happen â the public did not benefit from any greater access to credit even though the levy was lowered from two per cent to one per cent of deposits (with further favourable tax provisions). If anything, loans may have dried up even further. This policy has obviously done nothing to curb the financial appetite of the insatiate institutions that are on a profit-seeking rampage.
I raised the issue of the discrimination against small account holders in preference to large corporate clients in my initial article, but I subsequently discovered that the banks have in fact also moved against their large institutional clients. The withdrawal fees are but one facet of a multi-pronged and all-encompassing strategy to earn revenue and push down costs, whether or not the economy can bear it. The commercial banks are no respecter of persons and I am convinced that they would even try to trample on elephants. They have waged war against big and small customers alike and are taking a very clinical and scientific approach to the extermination of all our savings and disposable income, which presumably constitute our weapons of mass destruction, while they add to their stockpiles of wealth.
Specifically, the banks have exploited the fact that whereas the ECCB has controls on the minimum interest rate on savings deposits, there are no similar controls on the interest rates on fixed deposits. Scotiabankâs first hostile step in this regard was to deny noble institutions like credit unions and social security organisations permission to hold savings accounts and force them instead to open fixed deposit accounts with ridiculously low interest rates and current accounts that attract no interest whatsoever and are subject to their own set of fees.
Whereas the minimum interest rate on savings is three per cent, Scotiabank and RBTT offer a mere 0.75 per cent on fixed deposits. CIBC First Caribbean is even worse with rates of one-quarter of one per cent. These facts on the low interest rates may come as a surprise to those of you who, like me, once upon a time thought that fixed deposits had better interest rates than regular savings accounts. The thousands of Vincentians who have bank accounts and also have shares in a credit union would be hit twice as a result of the hostile bank practices which would result in less income for the credit unions and a corresponding reduced ability on their part to pay dividends.
The foreign banks function according to a model that may be appropriate for developed countries. What we need is a different kind of banking that suits the local economy. The banks and financial institutions in general are too important to be either left up to chance or in the hands of foreigners who may be seeking to perpetuate our economic dependence to their advantage.
The banks have adopted a broad and very aggressive strategy geared at boosting their profits and we must respond in kind. Accordingly, I plan to write to the Governor of the ECCB to ask him and the Monetary Council to intervene to stop the banks from this rapacious conduct. That letter would be copied to all the heads of government in the Eastern Caribbean Currency Union. Surely, someone must be able to safeguard our deposits. We must fight these fees with all our might. We have no choice but to protect at all costs the national interest. No pun intended.
R. T. Luke V. Browne
lukebrowne@yahoo.com
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