Treasury, banks discuss unsecured lending

Tuesday, August 28, 2012

Pretoria - Discussions around the spike in unsecured lending, global challenges and infrastructure growth formed the crux of the meeting held on Monday between Finance Minister Pravin Gordhan and the banking industry.

"The representatives of banks and the minister noted the rapid increase in unsecured lending. The meeting agreed that poorer households were at risk of getting caught in a debt spiral. Although some of this lending was by non-bank financial institutions, including retailers, banks could do more to ensure that they lend responsibly and do not contribute to household over-indebtedness," said Treasury in a statement issued after the talks.

The meeting also noted and supported the renewed attention unsecured lending was receiving from the Reserve Bank.

"There will be further engagement with financial and non-financial institutions on this issue so that South Africans are not over-indebted."

Gordhan noted progress that banks had made in meeting some of the recommendations of the Banking Inquiry released in 2008.

Among others, the inquiry had recommended that more had to be done to ensure that all South Africans had access to fair and cost-effective banking services.

The services offered to middle- and low-income South Africans must be guided by simplicity, comparability, transparency, accessibility and competitive costs, the inquiry had said.

At the meeting, banks indicated their strong support for the vision of the National Development Plan, and noted that they could play a role in both the financing of the key infrastructure projects, as well assist in providing the technical capacity to speed up the delivery of infrastructure.

Constraints to a smoother working relationship between the financial sector and government were identified, and the meeting agreed that the minister would coordinate attempts within government to remove blockages.

The theme of the meeting was the role of banks in the South African society and highlighting the positive role banks could play in meeting the country's socio-economic challenges.

"The meeting also agreed to establish a standing committee made up of representatives of banks and National Treasury officials to take forward the issues identified at the meeting," said Treasury.

The meeting followed a similar one held in May 2010.