Cape Town - Banks across the globe, including South Africa, are in the firing line for redlining customers “who don’t align with their values” – and that includes views that banks don’t agree with.
Recently, Minister in the Presidency for Women, Youth, and Persons with Disabilities, Dr Nkosazana Dlamini Zuma, said South Africa and the global south in general urgently needed an alternative public banking and finance system because banks don’t serve the interest of their customers.
Delivering the keynote address at the 9th BRICS Youth Summit in Durban, Dlamini Zuma said: “We currently have a structural problem of a banking industry that is not only greatly concentrated and monopolised, but also in many ways does not serve our interests.
Criticising the lack of control in the financing and banking system in South Africa, she said: “For example, in South Africa we are forced to kneel before five banks. This represents some of the most concentrated banking systems in the world.
“The greater concentration of banking to the big five has clearly undermined accountability, hindered development, stifled competition and passed on the cost burden to citizens.”
Dlamini Zuma said that without control over finance and banking, only those projects that converge with private interests would be funded while the interests of the communities would take a back seat.
In the UK, the government has put banks in the spotlight for discriminating against certain customers and closing clients’ accounts with little or no notice
According to reports in the UK, British ministers were drawing up plans to force the banks to give customers more notice, and clearer explanations, before dropping them as clients.
The ministers are reportedly also considering changing regulations so lenders could lose their banking licence if they discriminate against a customer for their political views.
According to the Financial Times, the action by the British ministers came after former UKIP and Brexit Party leader Nigel Farage was dropped by Coutts, a bank which is owned by the taxpayer-backed NatWest Group and is known for its wealthy clients, including King Charles.
Farage was considered a politically exposed person. The British newspaper, the Guardian, reported that those given this designation by the banks are typically political representatives and their family members, whose accounts can be treated with extra due diligence by financial institutions.
The FT reported: “Coutts’ decision, which has also drawn the scrutiny of financial regulators, prompted (Prime Minister) Sunak to tell parliament that it “wouldn’t be right if financial services were being denied to anyone exercising their right to lawful free speech”.
Suella Braverman, the British home secretary, dubbed the decision “sinister”.
In recent times South African banks have also been in trouble over closing client accounts without notice, according to data released by the Ombudsman for Banking Services.
The Ombudsman for Banking Services (OBS) Reana Steyn reported that many of the complaints received and resolved by the OBS related to among other issues closure of bank accounts and repossessions.
In 2021 the OBS opened a record 8 257 complaints, a 7% increase from 2020 and a 28% increase from the number of cases opened in 2019.
In a report issued last year Steyn said: “The OBS dealt with many service-related complaints, maladministration by banks, consumers being debt stressed, account closures by banks and consumers disputing the fees or interest rates applicable to their agreements.”
In the US, the Consumer Financial Protection Bureau (CFPB), a regulatory body, recently ordered Bank of America to pay $150 million in penalties.
Bank of America is a global, systemically important bank serving 68 million people and small business clients, and has one of the largest coverages in consumer financial services in the country.
The US regulator alleges that the bank “harmed hundreds of thousands of consumers over a period of several years and across multiple product lines and services”.