Editorial | Bank fee debate

Given the UK’s new policy that banks cannot charge their customers for withdrawing or depositing personal cash, it would be timely for the Holness administration to provide Jamaicans with a status report on the promised initiative by the central bank to enhance protection for consumers of banking services. Five and half years is long enough for the Bank of Jamaica to have delivered.

Further, as this newspaper has recommended several times, Parliament must revise its rules, the Standing Orders, to make it easier for private members’ bills, or those that are not tabled by ministers – such as Fitz Jackson’s on banking service standards – to reach the floor of the House. As it now stands, such bills, especially those from opposition members, have less chance of being debated than a guilt-riddled confessant transiting purgatory.

In that respect, Mr Jackson, an MP for 27 years and a long-standing campaigner against high bank charges, was lucky in 2018 to get a shot at a debate which ended – as is usually the case with legislation that does not start on the government’s side – with the defeat of his bill. His re-tabled bill has languished since then. However, the recent developments in Britain have perhaps given his proposal new relevance and an opportunity to be looked at through fresh lenses.

FREE CASH ACCESS SERVICES

Under Britain’s updated Financial Services and Markets Act, passed by the Commons in May, the Treasury is obligated to periodically publish policy guidelines for regulators, including, according to the act, “about the provision of cash deposit and withdrawal services” offered by banks.

Although Britons do 85 per cent of their payment transactions digitally and 95 per cent live no more than three miles (in urban areas it is within a mile) from cash facilities, “the government’s view is that ‘reasonable provision of cash access services’... means free cash access services”, with respect to personal current accounts, the Treasury’s August 18 policy statement said.

“Given the overall reduction in cash use experienced in the UK, in the absence of government intervention the provision of services to access cash may decline in a disorderly way which is detrimental to users,” it noted.

It added: “This does not preclude the provision of pay-to-use services. However, the government does not consider it appropriate for pay-to-use services to contribute towards ‘reasonable provision’ in relation to such accounts.”

This position is, broadly, akin to the posture on bank fees Mr Jackson has adopted since the mid-2000s, when he began his campaign on finance charges and proposed legislation on minimum services standards.

MINIMUM SERVICE STANDARDS

Maybe it was the manner of the articulation of the issues, in the context of a febrile political environment, that caused Mr Jackson’s proposals to be discussed with such deeply partisan timbre – an accusation from bankers that his bill, if passed, would preclude the charging of reasonable fees for their services, to the detriment of their businesses. Yet, Audley Shaw, the finance minister at the time, argued during the 2018 debate that the majority of the provisions in Mr Jackson’s bill were already in the Bank of Jamaica’s (BOJ) Code of Conduct for deposit-taking institutions.

The difference, however, was that while the Banking Services Act made it optional for the regulators to establish a code of behaviour for banks and determine what should be in that code, Mr Jackson’s bill would plant minimum service standards firmly in law.

Although in the parliamentary debates he accused Mr Jackson of politicising the issue, Mr Shaw indicated that the Government, too, was “concerned about certain fees and excessive charges in the banking system”.

“The question is how you deal with it in a manner that is internationally acceptable and transparent,” he said. His answer: the central bank was working on a conceptual framework, which should have been completed by June 2018.

CALM ANALYSIS

If the BOJ completed the report in the promised timeframe, the document has not had the benefit of wide public review. And it is unclear if any element of it has been implemented. And bank charges remain a periodic hot-button issue.

We suggest two approaches to dealing with the matter.

First, Fitz Jackson’s bill, or regulations dealing with minimum service and access standards, including what, if any, costs these attract, should be disentangled from, and discussed separately, from other service fees.

Maybe with the passage of time, and against the backdrop of what has happened in the UK, perhaps there can be a more measured and informed review of the substance of Mr Jackson’s bill and determine whether, like Britain, there should be no charge for personal withdrawals of cash from banks. That, of course, also requires a focus on, and calm analysis of, the pace of Jamaica’s transition to digital transactions and the place of cash in the economy.

The question of enhancing market transparency and improving competition by making it cheaper and less difficult for consumers to transport their business across institutions is clearly a related matter, but can be dealt with separately.

Strong banks are necessary for strong economies. The provision of banking services comes with costs. But banks cannot be profitable and strong if their customers cannot afford to use them.