RBM must stop these lazy banks

So, it has pleased the Bankers Association of Malawi (BAM) to throw away both the baby and the bath water? As usual, our banks have passed on their inefficiencies to us helpless lesser mortals. Again, as usual, they have refused to take a little risk for the sake of loyal and trustworthy customers, who are in overwhelming majority.

For all we know, we are all crooks in the eyes of the selfish local banks and that includes corporate clients and eminent individuals who have maintained clean financial transaction track records for decades.

In a statement this week, BAM informed us that with effect from Tuesday, April 10 2012, their members—commercial banks—will not accept encashment of third party cheques.

According to the association, a third party cheque is one made payable to any person other than the account holder. BAM then says we—as individuals—are all required to hold an account with a bank where such cheques can be deposited. Now that is a boneheaded statement.

What these over-paid bankers are saying is that if you are a poor fellow from the village and have no bank account; and someone writes you a cheque, you cannot get that money.

What gives these bankers the right to order everyone to have a bank account? Opening a bank account is an individual decision that no banker should have anything to do with.

Apparently, what has brought about this misguided decision is that banks say they have been hit by cheque fraud, costing the country’s 12 commercial banks a combined K100 million annually. Now, if you look at the billions of revenue banks make in this country, K100 million is just a drop in the ocean and one wonders what all this overreaction is about.

In fact, on average, it means that one bank loses just around K8 million a year! And that is the amount that should make all of us dance for between three and seven days to access our hard-earned money? What a joke.

And don’t buy BAM’s pathetic spin that they are protecting your money. It has nothing to do with protecting you, but everything to do with protecting their evergreen and fat bottom-lines.

Also, why have banks just calculated their loss? Why have they not talked about the cost that innocent clients have to bear by waiting for, say, three days to get money they would otherwise get in minutes and reinvest it in something that would increase their wealth?

I am sure this cost would run into billions not the paltry K100 million BAM is throwing around as if it is worth all this client victimisation.

The explanations from BAM president John Biziwick are, frankly, out of touch and would have been laughable were the issue not so grave. According to Biziwick, customers should not be worried because cheques within the same city are cleared within three days, inter-city is five days and inter-country within seven working days.

When asked how banks will help those who need their money urgently, the BAM chief said such people can request special clearance at a fee. There are two issues with this so-called special clearance animal.

First, some banks charge as much as K18 000 for special cheque clearance. That maybe small change if you are cashing K1 million, though that is still a lot of money to part with. But what if you have a K10 000 cheque? Will special clearance work for such a person?

Second, what will stop criminals from encashing a K10 million fraudulent cheque through special clearance? He or she will happily part with the fee to lay his hands on the bounty, which is the bigger pie. Will this stop fraud?

What this means is that banks will send Malawi back to the days of strictly cash transactions, which could be highly inflationary and a security risk because most people will demand cash payments, forcing organisations and individuals to withdraw a lot of money to pay suppliers of goods and services.

And believe me, our infuriatingly slow banking halls will get longer and offer even slower services. For what? To save K100 million when hundreds of billions are transacted honestly? Is this the intermediation role banks are supposed to play?

Banks have a responsibility to come up with innovative security measures that save them money while also serving their customers better.

The Reserve Bank of Malawi (RBM), a regulator and supervisor of banks, must step in and stop these lazy bank executives from implementing simplistic measures that only serve their interests and ignoring clients’ needs.

As a monetary authority, the RBM also has a strong stake in this given that it may have to contend with high money circulation.