Bahrain banks 'must stop hidden charges'
Manama, May 25, 2014
A call has gone out to banks in Bahrain to maintain low interest rates and support the economy, following an announcement by His Royal Highness Prime Minister Prince Khalifa bin Salman Al Khalifa last week.
The Premier urged banks to monitor loan interest rates and serve customers fairly, insisting that the money raised from the gap between the interest a bank pays on deposits and the rate it charges for loans - which can be as high as 20 per cent - should serve the interests of customers and not just the bank, said a report in the Gulf Daily News (GDN), our sister publication.jpg
Bankers Union head Khalil Zainal told the GDN that financial institutions in the country were exploiting consumers through "hidden charges" and confusing terms and conditions as well as unfair interest rates.
"We cannot say that bank interest rates are fair," said Zainal, whose union represents bank employees and safeguards their rights.
"Banks are also collecting money through late fees, fines and other penalties - which the customers are clearly not aware of.
"There are hidden charges and also the terms and conditions are written in English, which sometimes Bahrainis do not fully comprehend."
The union official said that low interest rates would provide immediate relief to customers struggling to meet loan repayments and in the long-run would also help businesses as more people avail themselves of financial services.
Another concern was the sky-high bonuses that some boards of directors awarded themselves, he added.
"What we have found is a trend for boards of directors to take the lion share of profits as rewards for themselves," he said.
"The chief executives and top management take home a good percentage of the bank's profits as bonuses, while other staff get peanuts."
"I think the Central Bank of Bahrain (CBB) as the main financial regulator should look into this issue and set a limit on bonuses."
Entrepreneur and businessman Hameed Fakhro reinforced Zainal's point out about low interest rates helping the economy, highlighting the rate drop to around five per cent following the unrest in 2011, "which was low and helped all parties."
"Our economy is still recovering after those events but the interest rates have gone up," said Fakhro, welcoming the Premier's announcement.
"We are the oldest banking sector in the region - but are relatively young on the global scene and require proper regulatory measures."
However, when questioned by the GDN, the banking community had a different view on the issue - with Bahrain Association of Banks chairman Abdul Razak Al Qassim claiming that the country's banking sector was already highly competitive.
"Bahrain's commercial banking industry has been seeing intense competition fuelled by a quest for market share in a relatively small marketplace," said Al Qassim.
"Banks are competing on pricing and service offering and while prices are being driven down, service levels are going up."
No one from the CBB, which was allocated a monitoring role in the Premier's announcement on interest rates, was available for comment when contacted by the GDN. - TradeArabia News Service