According to BOE Securities, banks' interest margins have been restored, but the margin on funding mortgage bond portfolios remains under pressure. Banks say they, and the economy, cannot afford lower margins. We have always had good bank regulation, which means we have a stable financial and payment system - a vital part of any properly functioning economic system. Absa group GM for corporate affairs and communications, Thys McLean, says interest rate margins form part of managing the total balance sheet of the business and the long-term viability of the banking sector. A lack of supervision and some regulatory and government controls were partly responsible for the problems experienced by banks in Asia in the recent crisis, he says.
Banks argue that interest rates are led by monetary policy.
McLean says banks are experiencing a reduction in credit demand, lower savings, and a potential increase in bad debts. We have been driven by what has been happening in the macro-environment. We are driven by world events and the net withdrawal of capital from emerging markets, so costs must go up. In theory, the market requires higher rates, but we realise this would only exacerbate the problem. We try to cushion the consumer and ask any customer with problems to come and talk to us.