The most cynical statement I have heard from a spokesman of the broader financial services industry in recent times came from Stuart Grobler, general manager at the Banking Council of South Africa, in an interview published in Personal Finance last week.
Grobler was attempting to justify South African banks' record margins. These margins are the difference between what banks pay us when we save money with them and what they charge us when we borrow money from them. This is one of the ways the banks make money.
There is nothing wrong with making a profit but South African banks seem to be over doing the greed bit. Not only are the local banks' margins out of line with those of the foreign banks but they also charge us in every possible way for using their facilities. These facilities are often free overseas while service levels here are often not up to standards obtained abroad.
Groblersaid credit extension was still too high and that even at these high real interest rates, the borrowing sector, in particular the public sector, was over-spending, thereby justifying a high real interest rate.
Grobler, if he was not being cynical, was being ignorant.
His statement is about as air-headed as those from people who suggest that the government should renege on its debt to banks.
High real interest rates are one thing. High margins are something completely different.
High margins only affect bank profits and have little to do with high real interest rates.
For Grobler to play the great patriot in suggesting that the banks are doing their bit to stop borrowing by making enormous profits is trite nonsense.
In fact, if anything, the banks are undermining the economy with high margins. Many people are arguing that the high interest rates are undermining potential growth because companies and entrepreneurs do not have access to reasonably priced capital.
Having high margins only makes the problem worse.
When deposit rates come down by two percent and borrowing rates by only one percent, the banks are contributing to a lack of growth. They are not stopping over-borrowing.
Grobler's statements only fuel many people's suspicions that the banks work as a nice big cartel, moving charges and margins in tandem.
What can we as ordinary people do about the contempt with which we are treated by many banks? The high margins are not the only example. They also charge us ever increasing fees for using ATM's while doing little, it appears, to protect clients. When we make use of safer banking halls they charge us even more.
The best response is to borrow as little money as possible. When you do need to borrow, shop around for the cheapest interest rates. If necessary move your accounts between banks on a regular basis.
On major borrowings, such as a home loan, negotiate for a better rate. This type of lending is grade A, with the banks placing little at risk. They have the security of the house and often a life assurance policy too.
The banks love lending this type of money and will negotiate lower interest rates, particularly if you make use of other services. So negotiate and move lock, stock and barrel to another bank if you need to. Don't accept what you get simply because you have used the bank for x number of years.
Until South Africans learn to use their weight as consumers they will continue to be the suckers of organisations intent on separating them from their savings.