By LR Liburd
The St. Kitts-Nevis Observer
It is the belief of a few individuals that the decision taken by management of the Royal Bank of Canada (RBC) may be a strategy to purge the financial institution of its small depositors.
Since last week a situation had arisen in the Federation that saw long lines of citizens and residents within and outside the RBC on Fort Street and its Wellington Road branch in St. Kitts, as well as its subsidiary branch, RBTT, in Nevis.
Investigations by The Observer had revealed that the people in those lines, which began on Tuesday (May 17), were there to withdraw their savings from the bank.
Those interviewed declared that they heard the bank had imposed a monthly service fee of $25, plus VAT, on their savings accounts and it would have taken effect from Monday, May 23, 2016. They also declared that the bank did not inform them of its intention, and while some claimed to have heard about it through the ‘grapevine’, others stated that information was gleaned from the Internet.
Since then, no official statement was made by the bank. However, when contacted by The Observer on Wednesday (May 18), Country Manager Chad Allen claimed that he was extremely busy dealing with clients but promised to provide a comment on the issue later that day.
He was provided contact numbers and even an email address but, to date, he has failed to honour his promise while his superiors also remain silent on the matter.
This media house learned that not only those clients in the Federation had withdrawn their savings from the bank, but also other in a number of OECS member states including St. Lucia, St. Vincent and the Grenadines and Antigua and Barbuda.
There was a public outcry and in its criticisms on the imposition, the Dr. Denzil Douglas-led Opposition stated that the Government of National Unity should intervene.
In response Prime Minister and Minister of Finance Dr. the Hon. Timothy Harris declared that the role of the Eastern Caribbean Central Bank (ECCB) is to supervise and regulate all banking activities in the Eastern Caribbean Currency Union.
He also declared in a communiqué issued by his Press Secretary that Governments in the sub-region do not have the authority to regulate bank charges and fees, but that they are all aware of the increase charges since 2014 during the 80th Meeting of the ECCB Monetary Council.
The communiqué also stated that the Council had expressed concerns surrounding proposed commercial bank charges, which the members declared that “some action needed to be taken to address this matter”.
“My Government has been made aware that banking fees have now been increased and/or new fees introduced at some commercial banks operating within St. Kitts and Nevis and the wider Caribbean region. These increases and those proposed have led to unease among the population, and some customers are exercising their right to withdraw their funds.
“The fee structures being proposed in St. Kitts and Nevis are similar to those also being proposed in other territories of the Caribbean, and customers in some of those jurisdictions have responded also with unease,” the Prime Minister said.
He pointed out that the fees charged by banks are contractual matters between them and their clients and they are determined market conditions.
The Opposition insinuated that the RBC may not have imposed the charges on its customers if the Government had ratified the Banking Act which was passed in the Parliament in July 2015.
But Dr. Harris is however assuring the populace that the local banking sector is healthy and that the Government intends to bring the Banking Act into force shortly.
The ECCB had also pronounced on the issue.
In a statement, the ECCB expressing its concern in the matter but indicated that it has no authority to regulate banks in the sub-region. It also confirmed that banks determine their own fees and charges and is encouraging depositors to carefully weigh the banking options that best suit their needs.
It also called on the banks to explain the rationale for their actions.
The statement indicated that the ECCB could only sanction on the minimum rate on savings accounts.
“Article 34 of the ECCB Agreement permits the ECCB to regulate the minimum savings rate, that is, the minimum interest rate paid on savings deposits.”
The ECCB also confirmed Dr. Harris’ statement on Governments in the sub-region being aware of the fee increase, noting that the Ministers of the Monetary Council who sat at the meeting in 2014 had made several recommendations related to proposed bank fees and charges.
The eight-member body had recommended the establishing of an Office of the Ombudsman for Financial Services and a Working Group to review commercial banks’ fees and charges, as well as to encourage the ECCU Bankers Association to use moral suasion to establish a defined range of fees.
The Observer spoke with two certified accountant who strongly believe that the bank’s imposition of the fee resulted from a number of factors, including FATCA.
“I saw the long lines and on inquiring I learnt what was happening. That bank treated its clientele in a very uncouth manner by not notifying them of the impending increase in fees. Things like this only happen to the masses, which is the poorer class.
“It is my belief that Royal Bank has taken this step to combat the effects of the Corresponding Banking Relations that continues to affect the many offshore domestic banks in the Caribbean region. But on the other hand, it is known that all the banks in St. Kitts and Nevis are flooded with money, so there is no need to continue accepting small depositors,” one accountant said.
The older accountant, who is a retired banker, agreed with the opinions but added another analogy for the purging of customers.
“It is a fact that the vaults of banks in this Federation are overflowing with money. But the truth of the matter is that many people are not applying for loans because the interest rate is too high and the savings rate is atrocious.
“Secondly, because of their strong financial position, banks are no longer interested in the poor man’s small deposit. When a bank has a very large clientele of small depositors, it has to employ a large staff. But with the advancement of technology where money has now become plastic, there’s no need for many tellers when you have the Internet banking system and the ATMs. Therefore, the next issue we’ll soon have in the sub-region is an increase in unemployment.”
The Observer will provide more on this saga in next week’s edition.