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Friday, February 02, 2007

Fiji Times picks on banks profits story blogged earlier

The Fiji Times has today picked up on a story we had provided earlier on this blog with regard to banks profiting from the Reserve Bank of Fiji's monetary policy and its interest rates hikes over the last two years. More on our story is provided at and

Here is the Fiji Times story in full.

"PROFITS made by the two largest foreign banks operating in Fiji are at the expense of the people, says retailers head, Himmat Lodhia.

The Fiji Retailers Association president was commenting on profit figures released by the Australia and New Zealand Banking Group Ltd and Westpac Banking Corporation Ltd last month.

Mr Lodhia said uncontrolled and unnecessary increases in fees and the introduction of new fees and charges had been a hall mark of the semi-monopolistic banking system in Fiji.

He said the interest rate increase factors suggested by the Reserve Bank of Fiji were applied by banks with a multiplying factor.

"This has broken down a lot of small and medium business. Most small and medium businesses are digging into their own resources to survive," said Mr Lodhia.

He said the ousted Government had planned to impose stricter conditions, regulations and having a full-time banking ombudsman.

"It is high time these things were put in place," he said.

Mr Lodhia said the business community would like to see the appointment of a banking ombudsman or at least a committee under the ministry of finance that could scrutinise bank fees and charges.

A former manager/advisor at the Reserve Bank of Fiji, Gilbert Veisamasama Junior, said RBF's interest rate increases had resulted directly in the banks gaining.

He said this had happened at the expense of consumers who paid higher interest rates for basic necessities including a roof over their heads.

Mr Veisamasama, who worked at the central bank for 16 years, said RBF's reasons for its hikes were to contain consumption and to protect foreign reserves.

However, he said the measures had contributed more to financial hardships for ordinary citizens.

He said the same foreign reserves the RBF wanted to protect would be further depleted when the two banks remitted their entire profits of over $73million to their head offices abroad as was their usual practice being branch banks.

Westpac made an after tax operating profit of $30.15million for the year to September 2006.
ANZ recorded a net profit after tax of $42.9million for the same period.

Westpac general manager Fiji David Evans said the bank continued to re-invest in Fiji and had not repatriated all of its profits as suggested.

Mr Evans said the bank had increased the amount of capital it has re-invested in Fiji from $59million in 2005 to $81million in 2006, an increase of $22million.

"Furthermore, total income taxes paid and payable by Westpac for the year was $13.4m in 2006 and $10.8m in 2005," said Mr Evans.

He said banking services were provided through the depositing and re-lending of money from customers either individuals, commercial or government organisations.

"To operate a bank profitably and securely for the economic soundness of the country, a margin must be earned between deposits and loans," said Mr Evans.

"Over the past year, tight liquidity has meant an increase in both deposit and lending interest rates which the banks have worked hard to absorb as much as possible resulting in a narrowing of net interest margins," he said.

ANZ general manager Fiji, Robert Bell said the 18 per cent growth in the bank's underlying profit was the result of credit growth, the strength of the Fiji economy in 2006 and market shares in a number of areas.

Mr Bell said the bank continued to develop its business for the benefit of customers, staff and the community.

He said the bank had invested profits to improve its service in Fiji by extending branch opening hours, refurbishing existing branches and installing more Automated Teller Machines."

We expect to see more writeups on this subject matter after this. Let us hope that the authorities take up the recommendations made in our earlier story.

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