The Bankers Association of Malawi (BAM) has said it cannot draw any conclusions from the findings of a report that alleged that commercial banks are colluding when setting their interest rates as the Association is yet to be formally presented with the said report.<\/p>\n
BAM has further dismissed the findings of the study and insists that there is no collusion between banks in setting interest rates.<\/p>\n
Over a year ago, the Competition and Fair Trading Commission commissioned a study to assess competition and banking industry regulation in Malawi.<\/p>\n
And results of the study which was done by Professor of Economics, Ben Kalua and Gowokani Chirwa, suggest that commercial banks are following price leadership collusion when setting interest rates where one firm serves as an industry leader and sets prices, while other firms raise and lower their prices to match.<\/p>\n
The findings suggest that policies being advanced by the Reserve Bank of Malawi (RBM) and an environment that does not promote competition are some of the factors that have contributed to the conduct of collusive pricing.<\/p>\n
In an emailed response, BAM First Vice President, Andrew Mashanda, said the report was presented at a policy conference but was never formally presented to the Association for action.<\/p>\n
But Mashanda said it is wrong to suggest that lending rates are the same across all banks.<\/p>\n
According to Mashanda, banks have different balance sheet structures and different strategies that are taken into consideration when setting interests.<\/p>\n
\u201cThere are also a number of inputs that affect our pricing. Some banks are asset led, others are liability led. The cost of funding is taken into account, inflation, risk premiums, cost base, credit loss ratio, the credit appetite differ for each bank,\u201d he said.<\/p>\n
In a separate interview, Head of Mergers and Acquisitions at the Comesa Competition Commission, Willard Mwemba, said the Commission has not yet received a complaint on collusive behavior in the banking sector.<\/p>\n
He, however, said in a market situation where there is indeed a price leader, the main challenge for competition authorities is to distinguish between conduct that is lawful and allowed to a certain extent and conduct that can be classified as uncompetitive in nature.<\/p>\n
\u201cIt is normal for firms in the market to take into account the actions or reactions of their competitors; however there is a limit as to the type of information that firms publish in the market pl ace, since some types of information may lead to situations of tacit collusion,\u201d he said.<\/p>\n
Mwemba said it is necessary to conduct a careful assessment of the practice referred to in the paper, which will take into account the extent of the conduct, the structure of the relevant markets and the anti-competitive effects of the conduct.<\/p>\n
\u201cThere are many considerations that a competition authority addressing tacit collusion must factor into its assessment of the conduct. Such considerations include an assessment of the market structure, the possibilities of the firms to divert from the \u2018market norm\u2019 [in this instance the price set by the dominant player] and the characteristics of the market that make it possible for there to be a price leader in the first place,\u201d he said.<\/p>\n
Kalua and Chirwa\u2019s study analysed the conduct and performance of six licensed banks over a period of nine years from January 2005 to March 2014.<\/p>\n
Kalua said in their investigations, trends in the Malawi banking context indicate collusive behavior in lending rates and foreign exchange transactions.<\/p>\n
Recently, the Reserve Bank of Malawi (RBM) announced a cut in the policy rate from 24 percent to 22 percent following an improvement in inflation. Following the decision, banks have since adjusted their base rates with most pegging their rates between 30 and 31 percent.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Bankers Association of Malawi (BAM) has said it cannot draw any conclusions from the findings of a report that alleged that commercial banks are colluding when setting their interest rates as the Association is yet to be formally presented with the said report. BAM has further dismissed the findings of the study and insists […]<\/p>\n","protected":false},"author":3,"featured_media":32191,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-44691","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/archive.times.mw\/index.php\/wp-json\/wp\/v2\/posts\/44691","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/archive.times.mw\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/archive.times.mw\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/archive.times.mw\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/archive.times.mw\/index.php\/wp-json\/wp\/v2\/comments?post=44691"}],"version-history":[{"count":1,"href":"https:\/\/archive.times.mw\/index.php\/wp-json\/wp\/v2\/posts\/44691\/revisions"}],"predecessor-version":[{"id":44707,"href":"https:\/\/archive.times.mw\/index.php\/wp-json\/wp\/v2\/posts\/44691\/revisions\/44707"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/archive.times.mw\/index.php\/wp-json\/wp\/v2\/media\/32191"}],"wp:attachment":[{"href":"https:\/\/archive.times.mw\/index.php\/wp-json\/wp\/v2\/media?parent=44691"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/archive.times.mw\/index.php\/wp-json\/wp\/v2\/categories?post=44691"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/archive.times.mw\/index.php\/wp-json\/wp\/v2\/tags?post=44691"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}