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Our View: Finance ministry was right to issue decree on bank charges

When the Bank of Cyprus sent a circular to all its customers, in the last quarter of 2019 about the introduction/increase of charges – including for withdrawing cash over the counter – there was a general outcry with the politicians leading the way. Political pressure caused the bank to rescind its decision temporarily while the finance minister asked the Central Bank to carry out a study of the charges to establish whether these were ‘reasonable’.

According to the law, banks are entitled to set charges, but in the event the Central Bank found these not to be ‘reasonable’, it submits a documented study to the finance minister, who could set charges by decree. After many months of studying the matter, taking into account national levels of income and the average level of bank charges in other states the Central Bank concluded the total charges imposed by banks in some cases were ‘not reasonable’. As a result, the finance minister issued a decree on Friday setting a limit on the total charges a bank can impose in a calendar year for certain transactions.

The decree is primarily aimed at protecting the elderly, who still use a bank teller for cash withdrawals and deposits because they are unfamiliar with online banking. When the new and higher charges were announced last year, most of the politicians complained that these would penalise impoverished pensioners accustomed to carrying out their transactions at the bank, and they had a point.

After all, the imposition of charges for every transaction carried out by a bank teller was clearly aimed at discouraging customers from visiting the bank, with the generation of extra revenue as a bonus. All the banks are pushing customers to use online banking as this would significantly lower operating costs – fewer staff and branches – at a time of shrinking profits and increasing competition from electronic money institutions.

The move to online banking, or e-banking, cannot be stopped by the few pensioners and members of rural communities that cannot use computers or mobile phones and insist on visiting their branch. The high charges would not have deterred them from visiting a bank branch, which is why the finance minister was correct in issuing the decree setting ‘reasonable’ charges. It would have been wrong for the banks to penalise people with higher charges because they cannot carry out online banking. There will still be charges, but at least these will not be as high as the banks had originally planned.

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