Bank fines to 'teach manners'

Sim Tshabalala, head of retail banking SA at Standard Bank, said the banks are forced to impose penalties to discourage undesired behaviour.

According to him the penalties account for less than 3% of banks' total income.

The fines are to penalise the breach of contact between the bank and its client and to ensure that fraudulent and undesirable conduct do not become part of the banking system, Tshabalala said.

Such behaviour could increase the cost for banks, carries legal risks and brings the bank's trademark and reputation into disrepute.

Tshabalala did, however, concede to the Jali Commission hearings into banking costs in Pretoria that the lower income market is being treated unfairly. Steps have been taken to ensure that where the client has no control over what happens in his/her account, the fines would be lowered and more control be given to the client.

Tshabalala, however, said the fines are a natural consequence of the measures put in place for risk management.

He said there are cases where clients for example have debit orders with the full knowledge that they have no money in their accounts. This is a breach of contract with the bank.

However, the task team assisting the Jali Commission in its investigation into banking costs, found that a significant part of banks' earnings come from fines.

The task team also found that there is no relation between the fine being imposed and the cost of the transaction that led to the fine.

Tshabalala pointed out that Standard Bank had cut the fine for the lower income market to R30 from R100.