The Bank of Namibia (BoN) has lowered the repo rate, a record of three times in the last four months since March 2020, in a bid to provide a much-needed relief from the adverse economic effects of the coronavirus pandemic. When the repo rate is adjusted, the central bank, as the regulator of the banking industry, provides banks and financial institutions a grace period of two weeks within which to make the necessary adjustments to their interest rates. A repo rate reduction results in a decrease in net interest income, with interest rates decreasing for both advances and deposits.
New Era recently received several queries from bank customers claiming unfair and incorrect interest rates, with some going as far as to demand a refund from their respective banks.
“Even though the regulator gives commercial banks a grace period of two weeks to make all the necessary adjustments, on all three occasions, Nedbank Namibia has ensured that all the lending products were adjusted with the new rate by the first weekend after the announcements were made, and passed the entire benefit to our clients. Adjustments to investment products usually occur within two weeks of the announcement,” explained Nedbank Namibia’s Chief Financial Officer JG van Graan.
He added that Nedbank Namibia takes every precaution to ensure the rate changes are adjusted correctly, including automated and manual verification.
“Even so, and while unlikely that a customer rate has been incorrectly allocated, our absolute commitment is to immediately adjust any incorrect customer rate upon discovery. Our business principles demand this and our clients are fully entitled to the benefit,” said Van Graan.
He continued that all rates are reflected on statements, noting that clients should be able to see reductions on their monthly debit orders and the applicable interest portion on certain statements, as it relates to lending products.
Said Van Graan: “Our digital channels such as Nedbank Online Banking and Nedbank MoneyApp can also be utilised to calculate the rate and debit order amounts, as well as the interest accrual or interest portion on a month-to-month basis”.
In addition, if a customer falls within the Nedbank Retail space, they are advised to contact the Nedbank Customer Contact Centre or visit their nearest branch. If the customer falls within the Nedbank Private Banking, Nedbank Private Wealth, Nedbank SME Banking, Nedbank Business Banking or the Nedbank Corporate and Investment Banking space, they are advised to contact their relevant relationship manager, upon which the matter will be escalated to the correct channels for detailed investigations – and if at all required subsequently, any interest rate correction will be effected immediately.
“With reference to revenue impact, the repo rate reductions will have a material impact on the bank’s bottom line. The fact that liability (deposit) products, due to the nature of the products, do not decline in the rate at the same tempo as the lending products, the resultant effect is inextricably a negative impact on the bank’s bottom line,” Van Graan stated.
According to Bank Windhoek’s spokesperson André Le Roux, the bank aims to adjust its interest rates as soon as practically possible after the announcement by the central bank.
“The date, which is widely communicated to the public, is implemented at a later date as that of the BoN’s announcement to ensure that all accounts are adjusted at the same time. If customers feel that they may not be paying the correct and adjusted interest payments, they should contact their relationship manager,” Le Roux advised.
Bank BIC, the local arm of the Angolan banking giant, also responded to this publication’s questions, noting that global rate changes take effect with the start of each new interest cycle.
“Bank BIC has not overcharged. All rates are variable and linked to prime. Rate changes are global in the event of a change in the repo rate. We can’t speak on behalf of other banks, but if a Bank BIC client is overcharged with interest, they will be refunded accordingly,” stated Mauro Rogerio, Executive Director at Bank
BIC.
He added that clients should monitor their accounts and that Bank BIC statements detail the interest rate charged on accounts. Rogerio also advised clients to lodge a formal complaint with the bank should they suspect being overcharged. He further noted that clients have the option to lodge a complaint directly with the Bank of Namibia if their bank does not satisfactorily address their problems.
Meanwhile, Trustco Bank Namibia told this publication that they normally make the necessary adjustments the following day or as soon as system changes can be affected. While advising clients to contact them directly to verify any interest rate charges, Trustco Bank’s Chief Executive Officer, Thomas Slabbert, explained that a reduction in the repo rate compresses net interest margins as the result of a low-interest cycle and such places more pressure on revenue. – ebrandt@nepc.com.na