Banks debate rages on

The Competition Commission is conducting what it refers to as an independent public 'enquiry' (as opposed to an inquiry) into particular aspects of competition in retail banking - including bank charges - and the country's national payment system.

At the same time, Reserve Bank governor Tito Mboweni - bemoaning the relentless growth in consumer credit in South Africa - has cautioned the country's banks that unless they move to stop the "madness', he will consider increasing the amount they are required to hold in reserve with the central bank.

On the latter score, the Reserve Bank noted recently that, at the end of June last year, total credit extended to South African households, which included home and car loans, credit and store cards, stood at R742bn.

The combined demand for credit from businesses and households grew by about 27.5% in the year to September, according to the central bank.

Credit binge

This is likely to have grown exponentially over the festive period.

Mboweni said he had met bank chief executives recently to discuss the proliferation of credit cards and the methods used to get consumers to use them. He even cited personal examples of approaches made to him.

Record growth in private sector credit extension has been one of the reasons cited by Mboweni for recent rate hikes, of which there have been four since June - an increase of a total of 200 basis points from 7% to 9% - with another expected in mid-February.

Pending legislation is expected to curb the proliferation of credit cards as well as the other various forms of household borrowing.

The new National Credit Act, scheduled for implementation in June this year, will make it more onerous to add new borrowers. But until then, the apparent credit binge by banks and retailers to entice more borrowers is likely to continue.

Smoking gun

As for the Competition Commission enquiry into banks: due to the wide terms of reference of the probe, much of the debate thus far has been around issues of improving access to banking for the poor and making banking more affordable for the public - rather than competition per se.

As some analysts have pointed out, perhaps this approach was expected to turn up a smoking gun with regard to anti-competitive behaviour - if there was one.

But so far this has not happened.

On the contrary, some argue that, if anything, the probe thus far has revealed that competition is high between the country's four major banks and even the smaller banks.

Ironically, it also reveals that if the goal is to achieve affordable banking for the poor, then perhaps anti-competitive behaviour rather than competitive behaviour might have to be encouraged.

As analysts point out: market forces are probably insufficient for any one bank to try to go it alone in the lower end segment and provide suitable products and access.