FSCA to investigate banks charging different amounts for the same product

The Financial Sector Conduct Authority (FSCA) is investigating bank charges after observing several variations in the pricing approaches and structures of different banks. Finance Minister Enoch Godongwana also expressed concern about disclosure and how consumers understand these fees.

Godongwana says in a written answer to Omphile Maotwe, an EFF MP, that in some cases there are significant disparities in fees between banks for the same or relatively similar products or services.

Maotwe asked Godongwana, in a parliamentary question, if National Treasury is investigating exorbitant bank charges.

Godongwana says the FSCA is responsible for overseeing the market conduct of banks, including whether the fees and charges banks impose are fair and transparent.

ALSO READ: This is how to beat bank fees

FSCA spotted several variations in bank charges

“Through its ongoing supervisory activity, the FSCA observed several variations in the pricing approaches and structures of banks. Concerns were also identified about some of the banks’ lack of adequate disclosure and customers’ poor understanding of these fees.

“Therefore, the FSCA recently initiated a dedicated project to undertake a deeper assessment of transactional fee practices across registered banks in South Africa to determine whether further regulatory or policy interventions are needed.”

Maotwe also wanted to know if Godongwana found that he and the governor of the South African Reserve Bank (Sarb) have the same policy approach on the role that the Sarb should play in terms of the transformation of the financial sector.

Godongwana says in his answers that FSCA published the Conduct Standard for Banks 3 of 2020 which became effective in July 2021 as the responsible authority for supervising the market conduct of banks. The Conduct Standard was issued in terms of section 106 of the Financial Sector Regulation Act.

ALSO READ: FSCA finds banks do not handle consumer complaints properly

Transparency required for bank charges

“The Conduct Standard introduced requirements for banks to conduct business in a manner that prioritises the fair treatment of financial customers. Section 5(1)(d) of the Conduct Standard stipulates that a bank that provides financial products or financial services must ensure that the terms, conditions and requirements in a contract between the bank and its retail financial customer, relating to a financial product or financial service, including fees and charges, are not unfair.

“Section 5(2) further stipulates that a term, condition or a requirement in a contract is unfair if it would result in an unfair outcome (financial or otherwise) to a financial customer if it was applied or relied on.”

Godongwana says while the Conduct Standard does not prescribe or stipulate what would constitute an unfair or ‘exorbitant’ fee or charge, banks must be able to demonstrate that the basis for their fees and charges are reasonable and that these fees and charges do not result in unfair outcomes for financial customers. The FSCA will conduct the assessment of bank charges on this basis.

ALSO READ: EFF-initiated Private Members Bill a set-up for ANC, says expert

No plans to nationalise the Reserve Bank

In another answer, to Nontando Nolutshungu, an EFF MP, Godongwana says government does not have any plans to nationalise the Sarb. “While 100% ownership of the Sarb by the state would be in line with most countries and jurisdictions across the world, the benefit that would be derived from nationalising the Sarb must be balanced against the likely large fiscal cost that would accompany it.

“The costs would include compensation in terms of section 25 of the Constitution as well as existing bilateral investment treaties. However, the benefits of 100% ownership of the Sarb are minimal, as private shareholders are currently restricted to playing a governance role only and play no role in determining monetary, prudential, regulatory or any other policy, as policy issues are the sole responsibility of the governor and deputy governors of the Sarb who are appointed by the president.”

Godongwana says it is more fundamental for the country that the Sarb ensures that it is allowed to independently pursue its constitutionally enshrined mandate of protecting the value of the currency in the interest of balanced and sustainable economic growth in the Republic and its additional objective of protecting and maintaining financial stability as envisaged in the Financial Sector Regulation Act.