When a Minister of Finance takes a populist stand against banks raising interest rates "in the interests of the country" the knee jerk reaction of the banks should not be one of shock and horror that a government minister is interfering in a free market mechanism. They should rather consider what has led to this unfortunate situation.
Four weeks ago (before the current crisis developed) Personal Finance published a report by the bank analyst at financial services company, Fleming Martin. The gist of the report was that South African banks have a greater difference between the interest rates they charge you to borrow money and the interest rates they pay you when you deposit money with them (the margin) than banks in many foreign countries.
Fleming Martin also said margins had increased during the year with deposit rates dropping by two percentage points while the prime overdraft rate had only come down by one percentage point.
The response from the Banking Council was fatuous and did not deal with the accusations.
When Personal Finance criticised and rejected these arguments we were met by accusations of "bank bashing". Few figures were provided to disprove the Fleming Martin claims.
The row over the margins led to numerous complaints to Personal Finance about other bank charges. Attempts were made by some banks to mislead Personal Finance when investigating the issues, sometimes using selective information and in one case providing incorrect information.
The problem for the banks was while the row was at its peak they reported huge increases in profits, from 28 percent to almost 50 percent year on year.
With the attack on the rand suddenly the pressure changed from reducing to increasing lending rates and did Absa and NBS/Boland move with alacrity. An alacrity that they did not show when the pressure was on to reduce rates.
The interest rate issue is extremely complex and includes many factors. It is these factors that should be debated, but the banks, by their reaction so far, do not seem prepared to engage in debate.
It may be time for the Parliamentary Finance Committee to step in and get a proper explanation about what is going on so that a real debate can take place.
In the meantime, let us hope that this time the other banks don't join the first two like sheep, to confirm what many suspect, that the banks are not that interested in competition.