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Big banks' bad habits resurface
Rangarirai Mberi, The Standard (Zimbabwe)
October 10, 2004

http://www.thestandard.co.zw/read.php?st_id=751

THE sight of depositors queuing to retrieve what little savings they have in locally owned banks must have been a real worry to many of the indigineous banks.

On the other hand, the big banks - most of them multinationals - should be rubbing their hands in sheer glee.

They are like that wife standing in the doorway, arms akimbo, staring down at the errant husband, back from a long night of sampling the passion, freedom and close attention he could no longer find at home.

There is no question about it, and the big banks have got to admit it - they had grown ugly, and it's not by choice that the depositor, like the hen-pecked husband, is reluctantly trudging back home to renewed abuse.

It is hard to imagine - particularly after Trust Bank was sent into curatorship - locally owned banks ever again getting swamped by hoards of prospective depositors, tellers beating them away with a stick.

The big old banks are back in fashion, but they are right back where everyone left them - still big, still old and still drowning clients up to their eyeballs in charges.

RBZ chief Gideon Gono has said indigenous banks have been ill disciplined, and that banking needed a shakeout to prune it of rotten apples. The IMF said in March that the country needed only seven banks, and Gono apparently agrees.

However, Trust's closure broke any remaining public confidence in new Zimbabwean banks, and experts now worry about the possibility of a return to the old big bank monopoly.

Gono believes a smaller industry will be easier to manage, but he will know how hard it has been for other central banks to discipline mega banks operating in an economy they dominate.

There is risk in handing control to foreign banks, an economist said last week, acknowledging though that some financial sector restructuring had been overdue.

"If they (British banks) misbehave, Gono can't touch them. They will know he has no alternative and depositors don't have one either," the economist said, requesting anonymity.

Once big banks become so dominant that their activities make up the bigger portion of an economy's payments system, the RBZ would become increasingly reluctant to act against them for fear of systemic effects on the financial system. The big banks become "too big to fail".

For instance, it was Trust's size that delayed RBZ action, Gono admitted earlier this year.

The case of the Hurungwe farmers and Royal aptly illustrate another fear. Once they monopolise deposits, big banks begin to control the majority of lending. By nature, big banks do business with big business, not SMEs or farmers with ambition and seed as their only collateral.

South Africa is currently battling with rising bank charges from the "Big Four" banks, which control 95% of the retail market after the demise of several second tier banks. Authorities there are looking to Barclays' take-over of ABSA as the only solution to break the oligopoly.

Branch closures are big banks' favourite pastime - Barclays is still selling some offices - and this increases the distance between a client and the bank, which new players had sought to reduce.

And the prospect and consequences of British banks just quitting on Zimbabwe has long scared many.

"What happens if Barclays or Standard Chartered decide, from London, that their brand is no longer served well here?"

But Barclays CEO Charity Jinya has denied any suggestions that Barclays could pull out of Zimbabwe. But if Barclays plc does take over ABSA, major owner of Jewel Bank at 26 %, it could deepen its hold on Zimbabwe.

Others fear that if any more banks are forced under, there will be a return to the "cartel banking" that was Zimbabwean banking before William Nyemba set up NMB in 1993. Rates and services become uniform as competition disappears.

Many question whether the big banks have changed during the time that depositors left for Zimbabwean banks. New banks followed a simple strategy - avoid the mistakes that old banks make. This saw them chip away at the imposing dominance of the big banks.

In Trust's case, a mix of aggression and tenderness helped it grow into the largest bank by assets by December 2003.

Large black companies and individual savers were prised away from older banks with promises of more personalised and fast service, something that the likes of Barclays, Stanchart or Stanbic had long forgotten about.

New banks won by doing simple things like tearing down the old, stuffy banking hall décor. Out went the paranoid tradition of putting the teller in a little cube behind a thick glass, with the little opening at the bottom through which slips and cash were exchanged.

Images of spooky, hooded villains sitting around a table in a dark room setting rates and bank charges are perhaps rather drastic. But it is fair comment to say that customers, charged senseless by the big bank cartel of old, had grown to see big bank executives in some really dim light.

Writer Peter Taylor, in The Canadian Revolution, quotes a bank chairman as saying: "Bankers are so unpopular these days, that in response to complaints from the animal rights people the University of Regina has decided to use big bank executives instead of white rats in all future biological experiments.

'There are three reasons for this new policy: there is an unlimited supply of bank executives; the researchers don't get attached to them; and there are some things that rats just won't do."

OK, so it's rather unkind to place common rodents ahead of learned bankers. Still, as clients troop back to the big old banks, they are caught between the devil and the deep blue sea, between the instability of the new banks and the bureaucracy of the old.

Greed and inefficient risk management have closed down many of the new banks. Few Zimbabweans will risk their savings with them now.

But on the other side, the old impersonal, aloof treatment and diabolic charges that clients thought they had escaped from with the emergence of the new banks, remain well in place.

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