COMMERCIAL banks have seemingly been undermining regulatory authorities in developing countries for a long time now by refusing to be held accountable by regulatory bodies, says outgoing commissioner of the Competition Commission, Tembinkosi Bonakele.
Bonakele cited the example of the rand-manipulation saga where some banks such as Standard Chartered have admitted guilt to rand fixing in the United States, but resist even pleading in their case in South Africa.
Concurring with Bonakele, Cosatu spokesperson Sizwe Pamla, said the federation remained resolute in its call for the creation of state banks to give South Africans alternatives in the sector.
Talking to SABC’s Vuyo Mvoko recently, Bonakele reflected that the banks were among the worst in the world when it came to supporting the economy.
“It is a very powerful industry, a very powerful sector. But also, regulators, traditionally have been quite conservative in their approach to financial services. There is the idea of systemic risk and so on,” he said.
He said those who should be holding the banks to account tend to avoid doing it for the sake of maintaining stability.
“Following its investigation, the Commission found that the banks directly and indirectly manipulated trade of the USD/ZAR currency pair in relation to bids, offers, bid-offer spreads, the spot exchange rate, and the terms and/or margin of executing client orders at the FIX. The banks have also divided markets by allocating customers in the USD/ZAR currency pair,” the Commission said in a statement in June 2020.
Bonakele said following this finding by the Commission, none of the local banks had come forward to defend themselves. “The case has still not been heard on the merits because banks are still resisting even pleading their case.”
He said South Africa has, through the Commission, been one of the very few countries that have at least attempted to force the financial sector to account for its wrongdoings. “So, it is one of those cases that shows the pedigree of South African enforcers because the resilience that you see is the demonstration of our resolve to hold them accountable,” said Bonakele.
However, he acknowledged that financial services were quite important in South Africa and that their importance had grown with the financialisation of the economy.
Bonakele said the power of the banks had come at the expense of other sectors with manufacturing being a good example of this. He said that had the banks been doing what they were supposed to do, such as financing SMMEs and helping black people to participate in the economy, there would be no need for the state bank.
“And it is banks that must finance these sectors. If you think about it, (what) is really the contribution that they make in transforming the economy? Actually, not just transforming it in racial terms but just infusing dynamism, innovation, infusing that participation that would enable it to grow and absorb more and more people,” he said.
But most concerning, according to Bonakele, is that banks are unwilling to finance and expand production. Instead, they finance consumption. “You can easily get a bank to finance a car for R1 million. But when you look at how difficult it is to get it to finance just a house, that just does not happen.
“We need more risk taken, we need banks to back entrepreneurs, entrepreneurs that they don’t know, because black people have not been funded in this country because of apartheid. So, they don’t know these people, therefore, … they must diversify the people that they fund,” said Bonakele.
Backing Bonakele, Pamla said with the lack of manufacturing industries, South Africa remained the warehouse of international suppliers. He blamed the banks and the ANC for this. He said the ANC was sitting with a resolution of creating a state bank, which was taken way before the Nasrec elective conference of 2017. The recent policy conference did not really do anything to implement it.
“We have people in the ANC, who when they get into government, disregard the resolution. It was (at the policy conference) just a question of why are you failing to implement your own resolution? That is the only question the ANC needed to answer,” he said.
Pamla said there was nothing that could be done to transform the existing banking sector, except to create several state banks. “The solution is to come up with the concept of deregulation of the banking sector. You actually have to … allow more banks, meaning you need to have local banks, provincial banks and not-for-profit banks.”
Part of trying to control banks is finding ways of stopping them from buying their smaller counterparts. “No! They must grow by being competitive, offering better service to the people and attracting more customers because that is where they are going to pay serious attention to customer service.”
The Banking Association South Africa (Basa) declined to comment “because this is an operational matter between the Commission and the banks”.