Bank of Ghana warns universal banks to stop paying facilitation fees to help reduce interest rates on loans

Bank of Ghana wants banks to stop paying facilitation fees.
The fees are paid to attract deposits.
But the central bank says the fee tends to rather increase interest rate on loans.

The payment, according to the central bank tends to increase the cost of funds of the lender institutions, which is then passed on to loan customers through higher than normal interest rates.

“The Bank of Ghana has observed, during the banking industry clean up exercise, a practice whereby facilitation/business development fees or some other payments are made to agents who assist in the mobilization of Wholesale Deposits, particularly from the public sector,” it said.

Adding that “The practice had the tendency to increase the “Cost of Funds of institutions, which invariably was passed onto customers through higher lending rates.”

BoG made the revelation in a public notice it released on Thursday, August 15, 2019, and was signed by the Secretary to the bank, Frances Van-Hein Sackey."

It further noted that any institution which fails to comply with this notice shall be severely sanctioned.

“The Bank of Ghana wishes to draw the attention of Banks and SDIs to Section 16 (1) (f) of the Banks and Specialized Deposit-Taking Act, 2016 (Act 930) which gives the Bank of Ghana authority to revoke the licence of any institution which in the judgement of the Bank of Ghana, is deemed to be engaged in unsafe or unsound banking practices,” the bank noted.

“All Banks, SDIs and the general public are to take note of the above and be guided accordingly,” the bank concluded.