The Bank of Zambia’s (BoZ) decision to abolish bank charges will only cripple the financial services industry and may result in some banking staff getting laid off, warns the Bankers Association of Zambia (BAZ).

BoZ recently notified financial institutions, including commercial banks of its intention to abolish unwarranted bank charges, such as ATM charges, among others.

The central bank last week announced that it has completed phase one of a review of unwarranted charges by commercial banks, which look set to be abolished.

But BAZ chief executive officer Leonard Mwanza said that there was a justification as to why commercial banks slapped such charges on clients.

He also warned that members of staff face getting sacked as a result of commercial banks who may choose to downsize.

“So, as the central bank is proposing to reduce income on non-interest income via the fees and charges, it’s very important for to ensure that we protect the stability of the banking sector from worsening because once we start having a stressed banking sector, I think the implications of the economy are much wider. We really don’t want to see a tomorrow where we start seeing re-structuring processes in the banks and you know that whenever there is a hit on income, the first line, which is always looked at is staff cost. So, we don’t want a future where tomorrow, banks are restructuring, we don’t want to see banks laying off people. We don’t want staff in banks to be laid off because of a decision that has been given on a populistic demand position,” Mwanza cautioned in an interview with News Diggers!

He did, however, confirm that commercial banks received the BoZ notification on their intention to abolish unwarranted bank fees and charges.

“I wish to confirm that the central bank has indeed given notification to all the commercial banks on what they deem to be unwarranted charges. And the only issue I need to speak to you is that at this stage the information was for notification purposes only to allows commercial banks and the central bank to discuss in detail so that banks are given an opportunity also to try and pull to the central bank that for some of those charges they highlighted where the fees are on a cost recovery basis, needs some kind of justification because there is a lot of infrastructure banks have to put in place to conduct those charges and in the process the discussion is about banks being able to bring out their point of view in as far as the justifications to certain lines of charges. So, at this stage, what we would say is that, what the central bank did was to compare charges across the industry and where they felt a particular charge may be is not applicable to a number of banks they deemed may be unwarranted,” Mwanza, a former Natsave chief executive officer, narrated.

“But then, banks have different costs of structure, they have different strategies and investments that drive their businesses, so you cannot expect every bank to be at the same level. There are those banks that are into retail and have various channels and that point of charges are to deliver some of this service. There is a justification that they need to at least recover the cost in order to ensure that, that service is continues to be provided. So, all I can say at this stage is that, there are some engagements in terms of trying to ensure that the views that are being expressed by the central bank, obviously which is maybe review of a number of people in the market who are complaining that the bank charges are relatively high, but on the other side, the banks have a reasonable justification why certain costs and certain charges are there.”

He added that BAZ would liaise with the central bank to abolish just a few of the unwarranted charges.

“So, I’m confident that in the very near future, a proper communication in terms of what will be the way forward in terms of what charges the central bank might agree that they should not apply and the future in terms of charges and fees in the market. So, it’s all the banks through the Bankers Association of Zambia (BAZ) that will engage the central bank. And then once the common position that would have been agreed, definitely, there will be an official communique that will come through where the central bank will notify the public in terms of which charges are valid. But we throw caution because, for us, the interest is that these fees and charges are the ones that [are] making the banking sector to be fairly stable in terms of performance, and that’s quite a big line,” Mwanza added.

He charged that the BoZ had neglected the interest of the commercial banks by abolishing the charges.

“So, we need to ensure that we protect the business of banking in Zambia so that the current jobs that are there in Zambia can be protected. So that the current investments that are in the market can be protected because it’s very easy to say we will remove this particular line of income and everyone is happy, but what will it do to the economy if the banks at the end of the day come back and say, ‘it’s not profitable to deploy ATMs, it’s better we don’t deploy them?’ We will be reverting the gains that we have made over these years. So, we should all work towards ensuring that as we made these decisions, the interest of the banking sector is taken into account,” said Mwanza.