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Gordhan: Financial literacy important

Jul 04 2012 17:45

Johannesburg - Becoming financially literate is important in today's world where financial institutions have turned into greedy monsters chasing profits, Finance Minister Pravin Gordhan said.

He said recent events involving Barclays Bank in the UK highlighted the importance of being financially literate and showed the profiteering in financial institutions.

Gordhan was speaking at a conference on financial literacy in Pietermaritzburg on Tuesday,

"What it shows us, ladies and gentleman, is when we talk about financial literacy in terms of what ordinary people and members of our community need to be aware of and the skills they need to learn... they need to be aware of the kind of world we are living in," Gordhan said.

" institutions at the moment have turned into really greedy monsters who want to chase profit at any cost. And who don't want to get the right balance between earning profits and making sure that they do it with the right set of ethics and morality, and the right principles."

The conference was held by the KwaZulu-Natal Financial Literacy Association in Pietermaritzburg.

Part of the problem was the complexity of financial products, Gordhan said. He questioned whether people selling the products were explaining them properly.

South African consumers were vulnerable to unsuitable offers in terms of buying inappropriate products, and being victims of fraud and abuse.

"In today's world, which is not that simple, it's very important that we teach ourselves these skills," he said.

Financial literacy was not just about how household and business finances were managed. It was about empowering families to demand truth, and to have transparency on fees and costs.

The conference took place at a time when the financial sector generally, and banks in particular, "are in utter crisis, morally and ethically, and with a bankruptcy of leadership", Gordhan said.

"For the Barclays saga of the past few days illustrates brilliantly the fault lines in the banking sector. It illustrates dishonesty, manipulation of prices and information, profiteering at any cost, little regard for ordinary people and the cost to them of all of these shenanigans, and the shameless disregard for the economic damage that is done."

The Treasury is in the process of producing a policy document that would contribute to a "safer financial sector", he said.

Through this, the SA Reserve Bank would be responsible for financial stability and prudential regulation, and the Financial Services Board and the National Credit Regulator would take greater responsibility for consumer protection and consumer regulation.

According to a Financial Services Board study conducted in the second half of 2011, Gordhan said 24% of those surveyed had personally experienced income shortfall.

To cope, 57% borrowed from family and friends, and 36% cut back or did without.

Forty-eight percent found it difficult to cover bills or expenses in a typical month, 36% experienced lack of food , 39% went without necessary medication or treatments and 38% had no energy source to cook their food.

Barclays chief executive Bob Diamond and Barclays chief operating officer Jerry del Missier resigned over alleged fixing of the London Interbank Offered Rate and the Eurozone equivalent, the Euribor, the rate at which banks lend each other money.

The bank's chairman Marcus Agius resigned on Monday.

Absa is a subsidiary of Barclays.

absa  |  barclays  |  pravin gordhan  |  banks


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