Thursday, July 18, 2024

Our commercial banks have had easy for far too long; and for that we blame the Bank of Botswana

Lackluster regulation by Bank of Botswana spanning almost two decades is behind undue panic blowing across commercial banks.

Our banks are deliberately stirring public fears so that they can once again be allowed to do as the please, the same way that they used to do before Bank of Botswana shortened the leash and enhanced the regulatory framework.

While problems of liquidity as briefed by the commercial banks are not altogether unfounded, they are being deliberately exaggerated and hyped out of context as a pretext to be allowed back to do as they please.

That era, of doing as they pleased, is gone for good. And banks should be told in no uncertain terms. Otherwise we are headed the path that laid America and much of Europe to ruin and waste.

In very explicit terms, commercial banks are telling the public and business that they cannot lend as they want because Bank of Botswana is making it hard for them to do that.

They want to spread public panic and with that resentment against the Central Bank.

It is very easy to blame Bank of Botswana because as we have previously pointed out, the Bank stays too close to its books and so far away from the people.

Bank of Botswana should do more to enhance its human face.

It is our view that this can be achieved without forgoing its fundamental mandate. That however is a debate for another day.

We are wholly behind Bank of Botswana concerns that commercial banks in Botswana have been too casual in their operational behaviour.

Risk management is one area that should be of concern to those concerned about prudent economic management.

For a long time banks almost entirely relied on risk free Bank of Botswana Certificates to rake in millions in profits which they gladly forwarded to their head offices, mainly in London.

During that time anybody could wake up any morning and run a profitable bank in Botswana without having to worry about losing a penny.

No special skill was required to make profits running a bank. And as we say there also were no risks.
That was an era of footloose capitalism.  That is an era that banks are nostalgic about.

Not only were banks raking in easy money, they also were left to their vices to effectively do as they pleased.
Any talk of regulation was nothing but an apology.

And left to their devices, almost inevitably banks behaved liked teenagers when they were left home alone. They ran amok and along the way got spoilt.

The history of banking industry in this country is a long record of runaway profits.

For an institution acclaimed for being discreet, we are wholly unable to explain much less account for Bank of Botswana’s behaviour during that time.

As we have pointed out so many times, you can falter the Bank of Botswana or differ with it as we so often do, but one cannot blame them, not fairly at least, for lacking either depth or intellect.

We are thus totally unable to account for this out of character behaviour by the Bank during that time when greed and opportunism by commercial banks were allowed to not only run amok but also become substitutes for innovation, creativity and acumen.

The decision by Bank of Botswana a few years ago to remove BOBCs from being used as a cover for ineptitude was in our opinion a landmark decision.

But we cannot help but point out that the decision was too little, too late.

For many years BOBCs were the alpha and omega of banking in Botswana.

Once the BOBCs were put under managed control, it immediately became apparent even to banking laymen just how hopelessly mismanaged many of our banks really were.

It became clear just how unschooled these banks were on risk management and even more glaringly clear was just how little they had invested in training of staff.

This week the Governor of Bank of Botswana spoke painfully of the casual manner these banks treat skills development.

At a media briefing she spoke of how it is important for the banks to engender a culture of risk management.
With little prodding, she talked of how she has over the years watched almost helplessly a culture among banks where instead of growing talent they opted to recruit from one another, resulting in a recycling of the same faces which customers have come to accept as normal as they see those same faces always cropping in various banking houses under different guises.

Listening to the Governor was like listening to well composed melodies of orchestra: “Banks are not imparting requisite skills. Instead they are just recruiting from one bank to the other. There is also the issue of externalisation of profits. Too much profits are going outside, leaving no resources locally. They should bring additional money from mother companies. Botswana as a market has over the years provided too much to their Groups.”

And she was not done yet: “Some of the money they are making here needs to be used to demonstrate intent of purpose in Corporate Social Responsibility. I get jealous when I travel in the region to see stadiums and public pools named after banks. That makes me envious.”

Without saying it in so many details, she actually summed up the reasons behind agitation by commercial banks that the Central Bank is throttling them.

Some of these banks thrived at a time when competition was virtually non-existent.

For a long time; in fact until recently there were only four banks in Botswana.

Today there are thirteen. This has left customers virtually spoilt for choice.

We say to Bank of Botswana, please do not miss an opportunity to increase the banks. Customers need more not fewer banks as a way of safeguarding competition. As the English people would put it, “the more the merrier.”

For a long time banks in Botswana did not sufficiently reward deposits.

In fact because they were awash with easy money, deposit mobilisation was alien to them.

Now they find themselves in an alien territory where they literally have to hunt down deposits and already some of them are doing it in an irresponsible and unsustainable way by promising interests that undermine long-term sustainability. How then can we take issue with the Governor when she says risk management is not a subject that comes naturally to our banks?

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