Fiji inquiry condemns

local banking practices

TWO dominant banks in Fiji maximise their profits in a mar ket that lacks sufficient competition, a Fiji inquiry into banking practices has found. It says the big two - ANZ and Westpac - make far greater profit margins in Fiji than they do worldwide.

“There is scope for banks to reduce their interest rates, spreads and margins as well as fees and charges, yet still enjoy adequate returns,” the inquiry report says.

The inquiry stops just short of suggesting a cartel but says in its report there is evidence of “price leadership” where banks dupli cate charges and fees. The report also highlights declining quality of service by banks in recent years and their apparent insensitivi ty and indifference. “There are grave reservations concerning the quality of services. This is particularly evident in the long queues that are a regular feature at the major banks, as well as excessive

waiting time for services and indifferent attitudes by staff to con sumer concerns,” the report said. The inquiry committee recom mends the establishment of a Banks Commission to address cus tomer complaints.

It says that if there is no immediate improvement, the govern ment may have to implement controls. The report says it is diffi cult for smaller banks to be aggressive towards the larger banks as they do not have the market power to take a strong stance to change existing practices.

“The committee considers the banks’ high level of profitability also reflects the high interest rate spreads and margins and high levels of fee charges,” it says. The banks did not provide the com mittee with any basis for costing to support new fees and charges and to prove they were not arbitrarily determined.

The banks also deny there is any cross-subsidisation in their charges, but the committee notes from the banks’ promotional packages that the practice exists. The committee concludes that the move to a user-pays regime harms low-income earners as they are faced with charges for bank services that represent a relative ly high proportion of their income. ■