Banks: Fee Increases Offset By Taxation Rise


Tribune Business Editor


The Clearing Banks Association (CBA) says any industry gains from fee rises have been more than offset by Value-Added Tax’s (VAT) imposition and the multi-million dollar Business Licence fee increases.

Ian Jennings, responding to a Central Bank survey that found some commercial bank fees increased by up to 43 per cent on “a significant number of services” in the 2016 first half, said the income generated paled in comparison to the sector’s increased tax burden.

Mr Jennings, who is also Commonwealth Bank’s president, told Tribune Business that he “took the opportunity to point out that we had a very significant increase in Business License” fees when he met Consumer Protection Commission (CPC) chairman, Jerome Gomez, last week to discuss the latter’s consumer survey on banking fees.

While unable to speak for other commercial banks, Mr Jennings said Commonwealth Bank alone suffered a $5 million hit when the Business License fee rise was imposed on January 1, 2015.

“The increase in [consumer] fees we implemented was $0.5 million, so we were down $4.5 million from that,” he told Tribune Business. And, with the “majority” of banking activities treated as VAT ‘exempt, Mr Jennings said Commonwealth Bank also has to absorb a $1 million annual hit from VAT.

“To say bank fees increased 30-40 per cent, you’re ignoring that license fees went up by several million dollars and VAT was about $1 million,” he added. “If you take the percentage of license fees, they increased more significantly than the amount of revenues.”

Responding to Mr Gomez’s previous suggestion that more competition was required in the commercial banking sector, Mr Jennings refuted this, arguing that competition was “maybe not always seen” as the commercial banks operated in various niches.

The CBA chairman said he had also informed Mr Gomez that the proposed Credit Bureau Bill and legislation to regulate money lenders were “equally as important” as the Homeowners Protection Bill for economic and social stability.

He argued that both pieces of legislation, which the Government appears not to prioritise as highly as the Homeowners Protection Bill, are essential if the Bahamas is to “get on top of the bad credit position” that saw commercial bank loans arrears peak at over $1.2 billion, or more than $1 out of every $5 lent.

Mr Jennings said banks and other lending institutions would be able to better assess borrower risk via the credit histories ultimately made accessible by the Credit Bureau.

And regulating money lenders would also bring the likes of furniture stores and auto dealers into the lending mainstream, enabling banks to be aware of credit they had extended to borrowers.

“We don’t want to get to the position where we have overly burdensome regulation and price controls affecting market forces, but at the same time we have to demonstrate we are offering value for the products and services banks offer,” Mr Jennings told Tribune Business.


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