CFTC dismisses speculation on interests
The Competition and Fair Trading Commission (CFTC) says it has not yet come across credible information that necessitates an enforcement intervention with regard to alleged collusion in the banking industry.
While acknowledging that it has noted the uniform rates adopted by some commercial banks, the commission said it does not want to speculate on what has led to the convergence of the banks’ interest rates.
CFTC Executive Director, Wezi Malonda, was responding to our questions on the movements in the banking sector following a decision by the Reserve Bank of Malawi (RBM) to trim the policy rate from 18 to 16 percent.
“Suffice to say that uniformity of prices among competitors does not necessarily imply existence of price collusion. The CFTC is, however, aware of concerns regarding interest rates being very high in Malawi and call for the rates to be brought down for the economy to function efficiently.
“The CFTC is also aware that one way interest rates can be brought down in Malawi is through promotion of effective competition in the banking industry. This is why the CFTC is always keeping watch of developments in the industry,” Malonda said.
So far, National Bank of Malawi and Standard Bank Malawi have set their base lending rates at 23 percent from 25 percent while CDH Investment Bank has put its lending rate at 24.5 percent, effective this month.
Malonda said the commission is not only using enforcement to promote competition and compliance among players in the banking sector but also working with RBM to create awareness of relevant laws governing financial institutions.
“Last year, the CFTC and RBM launched an awareness and advocacy programme in the financial sector aimed at encouraging players in the sector to voluntarily comply with relevant laws, including the Competition and Fair Trading Act (CFTA).
“This is among the strategies that the CFTC will continue to apply to achieve compliance in the financial services sector,” Malonda said.
President of the Bankers Association of Malawi (Bam), Paul Guta, earlier said it is not surprising that most banks delayed to review their lending rates as the country joined the rest of the world to observe Christmas and New Year celebrations.
Guta further dismissed claims that banks are colluding when setting interest rates, insisting that there is always independence when setting the rates.
In a separate interview, RBM Director, Communications and Protocol, Mbane Ngwira, said, while setting a time limit in which banks are to respond to monetary policy decisions made by the central bank rates may be desirable for borrowers, such a decision may not bring similar advantages to other stakeholders such as depositors, the payment system and the nationally agreed growth strategy.
But entrepreneur and former President of the Malawi Confederation of Chambers of Commerce and Industry, Newton Kambala, expressed concern over the way RBM is regulating financial services.
Kambala said there is need for all the players to work together to drive growth, where everyone benefits.
High interest rates have been cited as one of the major reasons making the business environment prohibitive and a disincentive to foreign direct investment.