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Are commercial banks out of balance? (commentary)

By Clement Wulf-Soulage

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Clement Wulf-Soulage Clement

Many people rightly attribute the financial crisis of 2008 to “greed”, Wall Street (meaning the banks), and free-market capitalism.

In the absence of effective regulations, the reckless financial practices of both conventional and shadow banks (hedge funds and credit insurance providers, for instance) brought untold misery to millions of people around the globe. Still it’s clear that many banks haven’t learnt much from the Great Recession of 2008 and continue to use shady practices that cost customers substantial sums of money. It seems like customers might be trying to hide from the banks, but the banks keep coming up with creative ways to pick their pockets.

Now if you asked St. Lucians how they view the local banking industry, most people would probably let off steam by deploring the deceptive overcharging practices and account fees imposed on them. Financial institutions are taking their cut with each dip of the debit card by charging ridiculous fees at their own ATMs. Essentially, customers feel that companies involved in the financial industry take advantage of them for financial gain.

I’ll be the first to admit that walking into a commercial bank on the island isn’t often a delightful experience. Retail banking is not what it used to be. The relationship between banks and customers no longer feels personal. Fees and penalties for everyday banking have never been greater. Above all, poor branch access, shoddy customer service and the automation of banking services are representative of how bank-customer behaviour has changed. Perhaps this is one of the reasons why consumers do not have the same kind of loyalty they used to have.

With so much banter in the media about how little people think of the banking industry, it can be easy for individual banks to sidestep responsibility for their less-than-stellar image. Much of the problem has stemmed from an attitudinal shift away from the customer and towards money-making. It has become clear that having an aggressive sales culture which more often than usual rips off customers, has cost banks dearly especially in terms of their reputation and trustworthiness.

For an increasing number of people in our country, financial resources are hard to come by these days in the present economic climate and it’s even harder when everyone has to put up with outrageous and unlawful fees and charges just to operate their bank accounts. Why should any customer have to pay a fee for opening or even operating an account at a bank? Isn’t the notion of operating free customer accounts and accepting deposits for financial value creation the very basis for the existence of commercial banks? Why are local banks short-changing customers in that regard?

Allegations have been made about excessive bank overdraft fees as well. Financial institutions may be manipulating your transactions to charge you an overdraft fee. Some of the tactics being employed by the banks lead to penalty fees such as allowing customers to overdraw on their accounts then charging them, and delaying processing payments to allow accounts to go into the red and incur fees. Some institutions even go as far as putting account holders in overdraft protection programmes they didn’t ask for. Isn’t there a regulatory body that can tell us whether most of these fees are legally enforceable?

Why have some commercial banks placed a maximum limit of 300 euros on foreign cash transactions involving that currency? In a nation where tourism is the biggest service industry and where attracting foreign direct investment has been made an urgent priority, how does this help particularly when there is so much emphasis these days on the “ease of doing business”? What this means is that a visitor who wants to change 500 euros will now need to go to two different banks in order to conduct a simple transaction. Just think of the consequences this can have for restaurants, boutiques and other tourism-dependent businesses.

While many bank branches have disappeared causing much inconvenience to loyal customers, bureaucratic red tape has increased in terms of the processing of transactions, making eventual reforms both imperative and inevitable. We need to start pruning the regulatory forest in order to eliminate superfluous bureaucracy in banking. Take for example the huge amount of paperwork and time required in conducting a transaction at a commercial bank in the island. To be disarmingly blunt, banking bureaucracy in St. Lucia is a suffocating nuisance.

How can you even plan your day productively when you are frustratingly held up at commercial banks and asked to produce all sorts of utterly pointless documents for a simple financial transaction? This is truly an issue of productivity, needless to say that inefficient banks cost consumers and businesses significantly in terms of time and productivity. One would have thought that the advent of technology would fundamentally changed the delivery systems banks use to interact with their customers and would have transformed the banking industry from “paper” banks to digitized and networked banking services. Technology was supposed to reduce the cost of banking for both banks and customers, but as it appears the value impact of technology at local banks is yet to be felt.

For banks as with most other businesses, customer engagement is the true driving force behind financial outcomes. Given the rough patch that banks are going through, I would think that customer service would be seen as an attitude rather than a department. Banks need to change their image as unconscionable institutions whose only concerns are profit maximization and cost reduction. A culture shift back towards putting customers first is needed for trust to be regained; and you can’t simply change that culture by making announcements and pronouncements from the top.

Given all the aforementioned issues confronting local banks, is it any wonder that credit unions have become hugely popular? These member-owned co-operatives now provide customers with a range of useful services at low cost including current accounts, payroll deductions, standing orders and even insurance. On its website, the Laborie Co-operative Credit Union declares, “We are not a bank, we are better. To others you are a risk, to us you are family.”

I believe banks can play a bigger role in addressing the social challenges of our time. Retail banks used to be organisations embedded in communities and played a social role, but now there is a transaction and trading-based culture instead of relationships. One can’t help feeling that there is a culture of “socially useless” banks that have become disconnected from the real economy.

For comments, write to [email protected] – Clement Wulf-Soulage is a former university lecturer, business economist and author.

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18 comments

  1. A local bank stole $5 off my savings account for not having any transactions in te account die a year....really I was not able to save, tied my waist so I won't withdraw from what I had already put away and get penalized by the bank making me $5 poorer. Wow

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  2. This one bank in particular is terrible. Customer service is bad and simple transactions take forever. Then there are so many charges that soon customers will have to put their money in empty paint buckets.

    Imagine banks charging customers for frequent teller transactions. What about the average man who has no has no choice....

    After PAYE so high, VAT 15%, water raise, the bit of money left has to be shared with the bank. No wonder people are so frustrated in our society.

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  3. Classic...you take a loan...you pay interest on the loan. the interest is supposed to represent the cost of the loan to you. so why do banks have to charge a 1% administrative charge on the loan. so if you take a loan of 90000.00 you are on the hook to pay them 900..and if that pertains to a car loan...you also have to pay for comprehensive insurance and have a lawyer do a bill of sale assigning vehicle to bank. All these things cost money...why not give the customer a reprieve on this ridiculous administrative fee...so they can pay their car insurance!

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  4. Ignorance Is Bliss

    The banks are one of these institutions allowed to legally steal from their clients. Only when it gets out of control do you hear of investigations and billion dollar fines, which apparently they pass on to the customers. Once that knowledge is clear to us, the onus is on us to MANAGE our finances. While we may not be able to stay away from banks, knowing what their charges are can inform us in controlling the number and type of transactions we conduct. Also, research what the charges at the various banks are and don't be afraid to switch to a better situation. Keep credit unions as an option. They may not have all the conveniences of a bank but do a fairly good job. BANKS WITH MONTHLY FEES FOR HAVING AN ACCOUNT THERE SHOULD BE AVOIDED. In the final analysis, the decision is that of the customer. If you continue to complain and take no action, then you're just making noise.

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  5. The banks also place undue strain on customers and always say, 'as per Eccb guidelines', however these guidelines are not published. They use this as a disguise to deprive clients of improving their financial position. As far as I am concerned they are all about making profit. Government or Eccb should do a better job at regulating the banks. They need to put their ears to the ground. This has a lot to do with advancement of locals who no where to go but St. Lucia.

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  6. Imagine I paid over $18k in mortgage interest for 2014 and still have to pay $20. For a statement from the very bank I paid all that money to just to get a tax refund .....smh. You are charged for all transactions ... The banks are nothing but a rip off institution !!!!

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  7. Well said

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  8. The ECCB, as central bank for lots of countries is very weak as a regulatory stakeholder. That is even more so, when it is considered that not all of the banks are headquartered extra-regionally.

    We also need a very strong regulatory body to overseer the insurance and retail industry mergers and acquisitions. The PAC-Man mentality of largely failing businesses that spread their financial laxity over the best performing assets in the region when they acquire them is disgusting. The potential impact on the propensity to save seems to escape study and concern.

    Surely, the continued march regarding the concentration of business in conglomerates with no competition is NOT at all in the consumers' interests. That is ignored. But we in these parts have a focus only on whether or not our party remains in power to hand out NICE jobs like THOSE in the STEP giveaways. Even more disconcerting is that those financially and party determined redistributions are just debt-supported government expenditures.

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  9. Man i agree with all that was said yes the ppl who made certain point about we don't know how the banking system work are the one who steal our money and take a flight over seas. They know how to screw up your money and disappear. Bounch of thieves.

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  10. I know right how the banking systwm works. imworked there and got disillusioned. Soulage is right I'm afraid

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  11. "customers feel that companies involved in the financial industry take advantage of them for financial gain." I'm 100% in agreement with statement.

    Had it not been for thieves, unless I have a large enough sum to place in a fixed deposit account, I'll save my money the way our foreparents did, because the banks don't give interest on small savings these days, anyway.

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  12. And we take unnecessary risks and lose your money, then is another story...smh. tell me what the point of your commentary really was please

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    • Ikr. THESE PEOPLE JUST DO NOT UNDERSTAND HOW THE BANKING SYSTEM WORKS. SMH.

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    • If you don't have an account at some banks, they charge you for changing a cheque. You get charged for having below a certain amount of money in your savings account. You get charged for withdrawals. You get no interest on your savings, yet the bank uses your money to lend to others and you can't charge them for using it. You steal from them, you get jailed. They steal from you ("pick your pocket"), there's little or nothing you can do about it.

      The point is that banks need to stop stealing poor people's money. DON'T YOU GET IT????

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      • what is changing a cheque? its called CASHING a cheque. further more you people complain about interest rates on ur savings. do u know what other countries offer on savings and investments? open ur eyes and read! if anyone is making banks fail its the ignorance of sum of u mixed with a few crooked managers

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        • YES, I change the cheque. I give it to the bank, the bank gives me cash, so it changes hands :). If only we had another place to deposit our funds, the ignorant lot of us should remove our money from the bank and you would see what happens.

          Greed on some people's part is what makes them fail. The majority of us are just honest people looking for a safe place to secure our money until we're ready for it.

          I'M SO IGNORANT THAT EVERY TIME MY BANK SENDS ME A LETTER ABOUT A PRE-APPROVED LOAN, I IMMEDIATELY JUST THROW IT IN THE TRASH.

          My money is too ignorant to be paying interest charges. The bank is 'interested' in my money, but hey, so am I!

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    • From my understanding, it was about the abuse of customers. (1) the ridiculous charges for even making a deposit (2) the excessive amount of time spent on line and to process transaction which results in production loss (3) the disconnect between service providers and customers (4) The apparent manipulation by foreign entities, which results in limitations in foreign exchange and (5) the general recklessness in their operations in their quest to boost profits and disregard for the economic conditions where they operate.

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