How do we explain the current bank fees?

CAPRI’S ASSESSMENT indicates that the international trend of increased profits from heightened bank fees is partially due to a proliferation of relatively large banks, and banks that operate in more than one market. Banks which have been impacted by lowered interest revenues have also been shown to profit more from fees charged, reinforcing a popular perception of such banks as opportunistic.

Other results, however, provide a more nuanced picture. In spite of having relatively low interest revenues, the banks that earn the most from their feebased services tend to be wellmanaged institutions, maintaining high standards of efficiency, solvency and liquidity.

FEE-BASED ACTIVITIES

These banks also seem to have positioned themselves to focus on fee-based activities, as they were shown to spend relatively large sums of money on building the technological capacity needed to offer extensive fee-based services. In addition, where banks incur increased costs in providing services, these costs are typically passed on to consumers through higher fees; how easily these fees are passed on to the consumers is relative to the degree of competition in the financial sector.

CaPRI found that in Jamaica, as it is internationally, the tendency towards higher bank fees also reflects customers’ demands for increasingly sophisticated financial services, and the availability of said services.

In addition, the results indicate that bank fees tend to be higher in financial sectors in which a few large banks control a large share of the total assets of the industry, as in the case of Jamaica.