What is driving Bank Fees and Charges?
The term Bank Charges/Bank fees/Bank commissions covers all cost associated with bank services that are not interest related. EG: All Bank charges, fees or commissions for the rental of night deposit bags, rental of Safety Deposit Boxes, cheque Book fees, etc.
In recent years Bank charges/fees/commissions have been on the increase. Why is this so? Simply put, it is because of the increased cost of doing business. What has caused the increase in the cost of doing business?
- INCREASED COST OF COMPLIANCE
In recent times we have seen an increase in local and international regulations as the financial world grapples with the issue of money laundering and the financing of terrorism. These threats have necessitated increased supervision by Central Banks, and increased laws and regulations by local and international governments. Banks have had to implement additional policies and procedures, install new systems to monitor and control money movements, attract and retain staff for key positions in the Banks to spot/detect and report dirty money; all in an effort to keep the financial system safe. All of this have increased the cost of the Bank’s operations and reduced their profitability.
- THE COST OF TECHNOLOGY
Banking technology is not cheap. While the technology facilitates increased delivery channels for banking services; (eg: ATMs, online Banking, etc) these conveniences come at a price. Banks must factor the cost of this advancement into their pricing structures. In addition, there is the cost of software to help detect and screen for dirty money in order to be compliant with applicable laws and regulations.
- SIZE DOES MATTER
In our small Caribbean states, and especially Montserrat; with 2,000 banking prospects the cost of doing business with the rest of world will of necessity be high. Foreign Correspondent Banks will only agree to facilitate our business if it is worth their while. As such, we have to pay premium prices, due to our low volume of transactions, to maintain Correspondent Banking relationships in order to facilitate international payments.
EG: A merchant who wants to pay for goods imported into Montserrat must pay local bank fees and the correspondent Bank’s fees (which have increased substantially since 9/11) as a result of the increased regulations and heavy sanctions and fees imposed by their regulators for any infringements found in the correspondent Bank’s transactions.
These are just a few of the major reasons that are driving up bank fees and charges.
