Competition and Fair Trading Commission monitoring banks


The Competition and Fair Trading Commission (CFTC) has indicated that it will continue monitoring banks for any indications of anti-competitive behaviour.

This comes barely a few weeks after the Monetary Policy Committee of the Reserve Bank of Malawi (RBM) reduced the policy rate from 22 to 18 percent. Banks have since started reacting to the policy move with reductions in interest rates.

But CFTC says it does not expect banks to set uniform rates but demonstrate the competitiveness of the market and the diverse products that the players are offering on the market.


“Naturally, we expect the banks in response to the regulatory to adjust their rates downwards. It would be unfortunate if the banks do not demonstrate some flexibility in response to the central bank rate cut,” CFTC Executive Director, Wezi Malonda said.

However, our desk research shows that most banks have set their base lending rates at between 27 and 28 percent.

Some of the banks that have announced changes to their base rates include Nedbank at 27.5 percent, Standard Bank at 27 percent, National Bank of Malawi 27.5 percent, FDH Bank 27.5 percent, LFC 28.5 percent and CDH at 29 percent.


An economic analyst speaking to us on condition of anonymity has observed that banks need to do much more to reduce the spread between the deposit rate and the lending rate to ensure that policy interventions also benefit consumers.

He said as inflation is going down, the level or difference between the policy rate and base lending rates, is also expected to continue going down but he said of importance would be to see this translating into a reduction in the gap between deposits and lending rates.

Calls have been rife for authorities to investigate the banking sector over the possibility that some banks are colluding when setting interest rates.

Collusion is a non-competitive agreement between rivals that attempts to disrupt the market’s equilibrium.

Results of a study done by Chancellor College professor of economics, Ben Kalua and Gowokani Chirwa, suggests that commercial banks are following price leadership collusion when setting interest rates where one firm serves as an industry leader and sets prices, while other firms raise and lower their prices to match.

According to findings of the study, policies being advanced by the RBM and an environment that does not promote competition are some of the factors that have contributed to the conduct of collusive pricing.

But Bankers Association of Malawi (BAM) has since dismissed the findings of the study and insists that there is no collusion between banks in setting interest rates.

BAM First Vice President, Andrew Mashanda, earlier said it is wrong to suggest that lending rates are the same across all banks.

According to Mashanda, banks have different balance sheet structures and different strategies that are taken into consideration when setting interests.

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