Banks have been asked to implement too many policies in a short period, Managing Director of Societe Generale Gilbert Hie has said, warning that the direct consequence is a rise in industry costs.
From new foreign exchange transaction rules to additional reserve requirements, implementation of a financial services value added tax as well as the recent directive to deploy e-zwich cards and machines to all their branches, banks feel overwhelmed by the multiple directives issued barely six months into the year, he said.
“The banking sector is very much pressured by the Bank of Ghana, and it is costing a lot to the sector. I know that it is driven by macroeconomic priorities, but it is still asking a lot. I don’t have the figures to quantify it right now, but all these [directives] are definitely additional cost to the sector.”
Mr. Hie’s comments, expressed in an interview with the B&FT, come as the banking industry adjusts its systems and pricing to incorporate a 17.5 percent value added tax on 32 services which banks provide for a fee. Among others, customers will from next month pay value added tax on payment orders, debit and credit card usage, cheque book replacement, and the processing of their loans.
Banks have been complaining that the Ministry of Finance did not consult the industry before enacting the VAT Amendment Act last year to extend coverage to financial services. As a result, implementation of the amendment had to be delayed for six months to enable the industry and GRA sort out the type of financial services that are VAT-applicable.
“It is important that regulators and policymakers continually engage those in the banking industry because of the peculiar nature of our business, which deals with business confidence and trust,” said Dr. Kwame Amoah Baah-Nuakoh, Head of Strategic Planning, Research and Corporate Affairs of The Royal Bank.
“Policy formulation should be done in such a way that it engages industry rather than it being seen as an imposition.”
Nana Otuo Acheampong, a banking analyst and lecturer, also criticised handling of the VAT on financial services.
“There was very little consultation before the act was passed. It is a very high cost. You are going to ask small banks and microfinance institutions to collect tax on your behalf. It is an extra cost and a proper cost-benefit analysis should have been done to identify which sectors of the financial system should be included in administration of the tax,” he said.
On the latest directive to banks to issue the e-zwich card to every customer by June 30 -- which apparently is to help government eliminate so-called “ghost” names from its payroll -- Mr. Acheampong said one of the reasons the e-zwich has not been successful is that it creates a situation whereby the regulator competes with the regulated. The lack of patronage from the banks is because they see e-zwich as a product competing with their own, he said.
“The government should find a more ingenious way to get rid of ghost-names rather than forcing banks to give e-zwich cards to customers. It is not ingenious to ask the banks to police the government’s ghost-names; the banks are there to make profit, and not for a social need.”
He added that “Where we have failed as a nation is that the Bank of Ghana still controls the e-zwich; meanwhile, it was supposed to be ceded to the private sector”.
