Commercial banks are ‘unwilling to finance and expand production’

COMMERCIAL banks have seemingly been undermining regulatory authorities in developing countries by refusing to be held accountable, says outgoing commissioner of the Competition Commission, Tembinkosi Bonakele.

He cited the rand-manipulation saga where banks including Standard Chartered have admitted to rand-fixing in the US, but resist even pleading in their case in South Africa.

Cosatu spokesperson Sizwe Pamla said the federation was resolute in its call for the creation of state banks to give South Africans alternatives.

“It is 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.

Pamla said those who should hold banks to account tended to avoid doing it to maintain stability.

Bonakele said no local bank had come forward to defend itself against the findings of the commission that they had manipulated currency.

“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 few countries that have tried to hold the financial sector to account.

He acknowledged that financial services were important and their importance had grown with the financialisation of the economy.

Bonakele said, however, the power of the banks had come at the expense of other sectors, with manufacturing being an example. Had banks financed SMMES and helped black people to participate in the economy, there would be no need for a state bank, he said.

But most concerning, according to Bonakele, is that banks are unwilling to finance and expand production. Instead, they finance consumption. He said banks would readily finance a car for R1 million, but were hesitant to finance a house.

“We need more risk taken, we need banks to back entrepreneurs they don’t know, because black people have not been funded in this country because of apartheid … they must diversify the people they fund,” said Bonakele.

Pamla said the lack of manufacturing industries meant South Africa remained the warehouse of international suppliers. He blamed the banks and the ANC for this. He said the ANC had resolved to create a state bank, but had not done anything to implement it.

“The solution is the concept of deregulation of the banking sector. You have to … allow more banks, meaning you need to have local banks, provincial banks and not-forprofit banks.”

Part of trying to control banks is finding ways of stopping them from buying their smaller counterparts. “They must grow by being competitive, offering better services and attracting customers.”

The Banking Association South Africa declined to comment “because this is an operational matter between the Commission and the banks”.