Mboweni to engage with commercial banks

Tuesday, May 19, 2009

Vanderbijlpark - Reserve Bank Governor Tito Mboweni will engage with the country's commercial banks on Wednesday to discuss the large difference between its repo rate and their prime lending rate.

The repo rate is the rate at which the Reserve Bank lends money to commercial banks.

Speaking on Tuesday at a Road Freight Association conference, Mr Mboweni said he noted the 3.5 percent difference between the repo rate charged by the Reserve Bank and the prime lending rate charged by commercial banks.

The central bank's repo rate currently stands at 8.5 percent while the commercial banks' prime lending rate stands at 12 percent.

"I am meeting with them (commercial banks' representatives) tomorrow for dinner," the Governor said.

According to recent media reports, the Banking Association of South Africa had asked to meet with the Governor regarding comments he made earlier relating to the commercial bank's lending rate.

The governor expressed concern over employment being lost in the private sector, adding that stakeholders needed to work together to sail through the global economic storm.

He said the negative trends experienced in last year's final quarter seemed to have continued in the first quarter of 2009, adding that the manufacturing sector remained under pressure.

Referring to the recent G20 summit in April, the Governor said: "In an environment where consumer confidence is low, there is a need to revive the global economy ... led by provision of large amounts of fiscal and monetary stimuli."

On the issue of power utility Eskom's request for a nominal 34 percent tariff increase, the Governor said nobody wanted to experience power cuts such as those experienced in 2008.

He said in order for the country to survive the current global financial crisis, structural reforms were necessary.

The National Energy Regulator of South Africa (Nersa) is expected to make a decision regarding the matter on 25 June, while the Reserve Bank's Monetary Policy Committee will make its decision whether to cut the interest rate further when it meets next week.

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