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Our View: Government cannot dictate the charging policies of banks

Banks have come under pressure from different groups over their plans to increase charges in the new year. The Consumers’ Association, the bank borrowers’ protection group Syprodat, trade unions and political parties expressed their indignation over the banks’ “unacceptable and provocative” charge hikes and called on the Central Bank and the government to intervene and stop this “greed”.

There was a similar backlash against increased bank charges for 2021 and the intervention of the political parties persuaded the banks to reconsider. The hope that the same would happen for 2022 is probably the reason so many different groups have decided to unite their voices in applying pressure on the banks, but it is doubtful there will be a climbdown this time. Banks cannot allow their pricing policy to be determined by protesting pressure groups and politicians. To its credit, the finance ministry made this clear on Wednesday, saying it has no say over the way banks charges were decided.

The political pressure works, however, which was why the central bank felt obliged to issue an explanatory announcement in response to the calls for its intervention. As it pointed out it had granted the protection it could to bank customers with its package of proposals to the finance ministry in February. These proposals were enshrined in a decree issued by the finance ministry in August and set a maximum charge of €36 per calendar year on what is defined as a ‘payment account with basic features’. Only this type of account, which is without any credit facilities, was subject to the ‘reasonable fees’ policy of the central bank, it was pointed out.

In short, there was nothing the central bank could do now, as the banks had complied with the provisions of the finance ministry decree on ‘reasonable charges’. The central bank can provide guidelines, which have to be observed by the banks, but it cannot dictate the pricing policies of profit-making businesses in a market economy and neither can the finance ministry. Such considerations do not enter the thinking of the pressure groups, which believe that by making a noise they will bully the banks into reversing their decisions on higher charges. They are encouraged by the support of the populist parties.

That the banks caused big problems to the economy in the past with their reckless lending policies and irresponsible investment decisions cannot be disputed. Yet an economy’s health depends to a large extent on having sound, profitable banks that can fund investment and growth. And a bank, like any profit-making business, is perfectly entitled to decide its pricing policies in a way to ensure its profitability, without any outside interference.

 

 

 

 

 

 

 

 

 

 

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