Namibia: Banks Investigated for Home-Loan Discrimination

THE Namibian Competition Commission (NaCC) is demanding an explanation from commercial banks on why they are charging customers who don’t normally bank with them higher interest on home loans.

Also in question is why the banks, through the Payments Association of Namibia (PAN), are fixing fees charged between banks on the usage of credit and debit cards by their customers.

These questions form part of a twofold investigation launched on Namibia’s most powerful entities, which have a combined asset value of N$144 billion. The investigation covers what the NaCC calls discriminatory practices, and possible price fixing and collusion between 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, Bank BIC Namibia, Bank Windhoek, Letshego Bank Namibia, NamPost Savings Bank, Nedbank Namibia, Standard Bank Namibia, and Trustco Bank Namibia.

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

The NaCC earlier this month asked that the banks explain their practices in terms of Section 33 of the Competition Act.

Section 33 gives the commission the authority to interrogate anti-competitive behaviour within an industry or by a company.

It also makes reference to companies considered to be dominant in a certain sector and aims to ensure that such companies do not overextend their power and push for anti-competitive behaviour.

According to the NaCC, the intent to investigate originated in 2018 when it was approached by the PAN to issue an opinion on a possible collaboration by commercial banks on interchange fees.

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

To avoid this, the NaCC reportedly asked the PAN to apply for an exemption.

In its application for exemption, “PAN accepted that the interchange model, adopted by its members, fixes interchange fees agreed on between Namibian banks through its Payment Clearing House Card Schedule,” reads an NaCC statement.

Because the PAN accepted this, and although the exemption was only granted in October 2020, the NaCC said the banks were in contravention of competition laws for all the years during which they operated without the exemption.

“Such practice by the commercial banks amounts to a possible contravention, and to that effect, the commission has resolved to initiate an investigation into the alleged historical conduct in the relevant market,” the commission says.

Banks make millions through interchange fees.

The second aspect of the investigation relates to several allegations that FNB Namibia, Bank Windhoek, Standard Bank Namibia and Nedbank Namibia have been discriminating against clients in terms of some of their products.

Complaints around banks acting anti-competitively are not new.

Over the last five years, the BoN has received 5 880 complaints about commercial banks regarding unfair fees, high fees and charges, the incorrect listing of customers at credit bureaus, credit applications, and declined payment holiday applications.

In the statement issued by the NaCC, the watchdog’s director for the department that cracks down on cartel practices, Paulus Hangula, says there were allegations that the four dominant banks charge home-loan clients an additional rate apart from interest, which is determined by the client’s financial profile if the client’s main transactional day-to-day account is with a competing banking institution.

He says it has reached the NaCC that the dominant banks charge unreasonably high and unfair prices for the provision of additional services, such as home-loan preapproval and bank confirmation letters.

It has been noted that the four banks are not only dominant, but also have different conditions for similar transactions in the provision of fire cover to home-loan clients.

Hangula says this alleged conduct amounts to a possible contravention of Section 23 of the Competition Act.

The watchdog says the four banks have been abusing their dominant position in the market.

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

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

Standard Bank Namibia chief executive officer Mercia Geises said they conduct their business to the highest international governance standards and in compliance with all regulations governing the banking sector.

“We aim to make banking easy, equitable and affordable for all. Standard Bank Namibia therefore will welcome the outcome of any potential investigation and will extend its full cooperation to the Namibian Competition Commission in order for it to accomplish its investigation,” she said.

Bank Windhoek’s executive for communications, Jacquiline Pack, said: “Bank Windhoek is lending its full support and cooperation to the commission until the investigation is concluded and therefore cannot comment on the matter.”

Efforts to reach PAN, FNB Namibia and Nedbank Namibia proved futile yesterday.