03-15-2008, 04:31 PM
15/03/2008 12:47:41 p.m.
Something is not right. When the ATM machines were down, customers were inconvenienced but they were understanding because IT systems do breakdown even if they are operated by one of the biggest multinationals in the Southern Hemisphere.
What was more astonishing was the restrictions on withdrawals to only $50 per customer. This is akin to third world banking systems just before a “bank-run” or when serious problems are affecting the bank.
It took nearly one full week for the ATM machines to be fixed and this is very uncommon in an age where banking IT systems are amongst the best in the world.
Are there other more serious problems in the bank that customers do not know about or was it a simple case of IT system breakdown?
Westpac Banking Corporation, which is the majority shareholder of Westpac Tonga, recorded a massive 35% net profit margin for 2007. Westpac Bank of Tonga is similar in size to one of the small suburbs in Sydney and recorded a net profit of over $6 million in 2007.
Now, how can a bank with a huge parent company with the most brilliant IT systems in the world fail for nearly one whole week? Something is not right and the fact they limited peoples drawings to $50 through the manual process makes this more discerning.
Limiting withdrawals means the bank is able to maintain more cash in their vaults and earning interest on it instead of giving it to customers who legitimately try to withdraw it.
A bank that cannot release customers money on demand is not a solvent bank, whatever the reason. A more recent example is the UK bank Northern Rock which could not release deposits on demand. This caused a bank run because depositors lost faith in the bank and demanded to withdraw all their money and the Bank of England and the Government had to step in and bail it out.
Banks operate on trust. Westpac must have millions of deposits but these are lent out long term and it only keeps a small proportion, say around $1 to $2 million to meet daily withdrawal demand. If more or all depositors decide to remove their funds, the bank cannot comply and will fold due to a bank run. This is the bank's (and the Reserve Bank's) worst nightmare.
The bank's customers must be among the most long suffering in the pacific. Not only must they put up with high fees and charges, high interest margins, but last week they could not get their money on demand. How can businesses pay staff under these conditions, which has knock on effects? Not only is this an inconvenience, but it is also costly for customers.
Westpac’s fees have come under scrutiny along with the other major banks in Tonga because they are amongst the highest in the Pacific region. For example, some people making monthly payments of $1,500 for a $150,000 mortgage may only have $370 go towards the principal and the $1,130 will go on fees, interest and other charges. This was an example given by a customer based on their monthly mortgage bank statement.
Westpac’s General Manager is also involved in the local politics, as Chair of the Public Service Commission, so this is drawing unwanted attention to the bank and dissatisfied customers can use this as a reason to criticise the bank even if the ATM disruption was genuine. The General Manager is a high profile and abled leader and she will be put under the spotlight by customers.
This is a difficult period for the nation economically and any problems in the banking system has major ramifications so the latest incident should send a warning to the other banks to get their internal and IT systems into the gear because customers are edgy and they could move their banking elsewhere if the level of service continues to deteriorate.
The other major issue that has not been addressed by all the banks is the level of fees and charges and this needs to be comparable to other developing nations. For some reason, Tonga’s fees and charges are at a premium which is making the banks abnormal profits. To make matters worse, some in the banking sector are hinting at further interest rate hikes and this will not go down well with customers.
Tonga needs to assess the profit level of its banks and to give customers confidence that they are paying “normal” fees and charges on a similar level to other developing countries. This is an important task for the Government and maybe they should even consider the idea of having a Banking Ombudsman similar to what is available in New Zealand and Australia. This will provide a watch dog with teeth to keep the banks in check.
Source: http://www.tongareview.com/Article.aspx?Mode=1&ID=5415
Something is not right. When the ATM machines were down, customers were inconvenienced but they were understanding because IT systems do breakdown even if they are operated by one of the biggest multinationals in the Southern Hemisphere.
What was more astonishing was the restrictions on withdrawals to only $50 per customer. This is akin to third world banking systems just before a “bank-run” or when serious problems are affecting the bank.
It took nearly one full week for the ATM machines to be fixed and this is very uncommon in an age where banking IT systems are amongst the best in the world.
Are there other more serious problems in the bank that customers do not know about or was it a simple case of IT system breakdown?
Westpac Banking Corporation, which is the majority shareholder of Westpac Tonga, recorded a massive 35% net profit margin for 2007. Westpac Bank of Tonga is similar in size to one of the small suburbs in Sydney and recorded a net profit of over $6 million in 2007.
Now, how can a bank with a huge parent company with the most brilliant IT systems in the world fail for nearly one whole week? Something is not right and the fact they limited peoples drawings to $50 through the manual process makes this more discerning.
Limiting withdrawals means the bank is able to maintain more cash in their vaults and earning interest on it instead of giving it to customers who legitimately try to withdraw it.
A bank that cannot release customers money on demand is not a solvent bank, whatever the reason. A more recent example is the UK bank Northern Rock which could not release deposits on demand. This caused a bank run because depositors lost faith in the bank and demanded to withdraw all their money and the Bank of England and the Government had to step in and bail it out.
Banks operate on trust. Westpac must have millions of deposits but these are lent out long term and it only keeps a small proportion, say around $1 to $2 million to meet daily withdrawal demand. If more or all depositors decide to remove their funds, the bank cannot comply and will fold due to a bank run. This is the bank's (and the Reserve Bank's) worst nightmare.
The bank's customers must be among the most long suffering in the pacific. Not only must they put up with high fees and charges, high interest margins, but last week they could not get their money on demand. How can businesses pay staff under these conditions, which has knock on effects? Not only is this an inconvenience, but it is also costly for customers.
Westpac’s fees have come under scrutiny along with the other major banks in Tonga because they are amongst the highest in the Pacific region. For example, some people making monthly payments of $1,500 for a $150,000 mortgage may only have $370 go towards the principal and the $1,130 will go on fees, interest and other charges. This was an example given by a customer based on their monthly mortgage bank statement.
Westpac’s General Manager is also involved in the local politics, as Chair of the Public Service Commission, so this is drawing unwanted attention to the bank and dissatisfied customers can use this as a reason to criticise the bank even if the ATM disruption was genuine. The General Manager is a high profile and abled leader and she will be put under the spotlight by customers.
This is a difficult period for the nation economically and any problems in the banking system has major ramifications so the latest incident should send a warning to the other banks to get their internal and IT systems into the gear because customers are edgy and they could move their banking elsewhere if the level of service continues to deteriorate.
The other major issue that has not been addressed by all the banks is the level of fees and charges and this needs to be comparable to other developing nations. For some reason, Tonga’s fees and charges are at a premium which is making the banks abnormal profits. To make matters worse, some in the banking sector are hinting at further interest rate hikes and this will not go down well with customers.
Tonga needs to assess the profit level of its banks and to give customers confidence that they are paying “normal” fees and charges on a similar level to other developing countries. This is an important task for the Government and maybe they should even consider the idea of having a Banking Ombudsman similar to what is available in New Zealand and Australia. This will provide a watch dog with teeth to keep the banks in check.
Source: http://www.tongareview.com/Article.aspx?Mode=1&ID=5415