Namibia: Banks under investigation for discrimination in home loans

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THE Namibian Competition Commission (NaCC) is demanding explanations from commercial banks as to why they charge higher interest on home loans to customers who do not normally do business with them.

There are also questions why banks, through the Payments Association of Namibia (PAN), fix the fees charged between banks on the use of credit and debit cards by their customers.

The questions are part of a dual investigation launched into Namibia’s most powerful entities, which have a combined asset value of N$144 billion. The investigation focuses on what the NaCC calls discriminatory practices, as well as possible price fixing and collusion among the country’s commercial banks.

Nine commercial banks are registered in Namibia and regulated by the Bank of Namibia (BoN): FNB Namibia, Banco Atlantico Europa, Namibian Branch, BIC Bank Namibia, Windhoek Bank, Letshego Bank Namibia, NamPost Savings Bank, Nedbank Namibia, Standard Bank Namibia, and Trustco Bank Namibia.

The four largest banks are Bank Windhoek, FNB Namibia, Standard Bank Namibia and Nedbank Namibia, covering over 90% of the market.

Earlier this month, the NaCC asked banks to explain their practices under Section 33 of the Competition Act.

Section 33 gives the commission the power to investigate anti-competitive behavior within an industry or by a company.

It also refers to companies that are considered dominant in a certain sector and aims to ensure that these companies do not overextend their power and incite anti-competitive behavior.

According to the NaCC, the intention to investigate arose in 2018 when it was approached by the PAN to issue an opinion on possible commercial bank collaboration on interchange fees.

It was then determined that if the country’s commercial banks were allowed to collaborate in setting interchange fees, such a practice would give rise to potential price fixing.

To avoid this, the NaCC would have asked the PAN to apply for a waiver.

In its waiver request, “PAN agreed that the interchange model, adopted by its members, sets the interchange fees agreed between Namibian banks through its payment clearinghouse card schedule,” reads a statement from the NaCC.

Because the PAN agreed to this, and although the exemption was only granted in October 2020, the NaCC said the banks had breached competition laws for all the years they operated without the exemption.

“Such a practice by commercial banks amounts to a possible contravention, and to this effect, the commission has decided to open an investigation into the alleged historical behavior in the relevant market,” the commission said.

Banks make millions from interchange fees.

The second aspect of the investigation concerns several allegations that FNB Namibia, Bank Windhoek, Standard Bank Namibia and Nedbank Namibia discriminated against customers with respect to some of their products.

NOTHING NEW

Complaints against banks acting anti-competitively are not new.

Over the past five years, the BoN has received 5,880 complaints from commercial banks regarding unfair fees, high fees and charges, incorrect listing of customers at credit bureaus, credit applications and suspension requests. payment refused.

In the statement released by the NaCC, the director of the department’s watchdog that cracks down on cartel practices, Paulus Hangula, says there have been allegations that the four dominant banks are charging home loan customers a additional rate on top of interest, which is determined by the customer’s financial profile if the customer’s primary day-to-day transactional account is with a competing banking institution.

He says he has come to the NaCC that mainstream banks are charging unreasonably high and unfair prices for providing additional services, such as home loan pre-approval and bank confirmation letters.

It was noted that the four banks are not only dominant but also have different terms for similar transactions in providing fire cover to home loan customers.

Hangula claims that this alleged conduct amounts to a possible breach of Section 23 of the Competition Act.

The watchdog claims that the four banks abused their dominant position in the market.

If found guilty, the NaCC could impose penalties of up to 10% of the said commercial banks’ turnover.

The banking sector has generated over N$50 billion in revenue over the past five years.

Standard Bank Namibia Managing Director Mercia Geises said it conducts its business in accordance with the highest international governance standards and in compliance with all regulations governing the banking sector.

“We aim to make banking easy, fair and affordable for all. Standard Bank Namibia will therefore welcome the outcome of any potential investigation and will cooperate fully with the Namibian Competition Commission so that it can carry out its investigation,” she said.

Bank Windhoek’s communications manager, Jacquiline Pack, said: “Bank Windhoek gives its full support and cooperation to the commission until the end of the investigation and therefore cannot comment on the matter.”

Efforts to contact PAN, FNB Namibia and Nedbank Namibia proved unsuccessful yesterday.

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