Discussions between the government, other role-players and heads of banks on how the financial crisis should be approached are on the right path, declared Sim Tshabalala, chief executive of Standard Bank SA, on Tuesday. The discussions related to what banks' lending polices should be in the current difficult conditions.
Tshabalala says the bank chiefs "firmly and thoroughly" communicated the message that their primary function is to pay back depositors' money and ensure shareholders of a decent return.
In the process it is necessary for them to satisfy the needs of existing and new clients.
The discussions took place at Nedlac under the leadership of Ebrahim Patel, Minister of Economic Development. The heads of all four major banks - Absa, First National Bank (FNB), Nedbank and Standard Bank - were present, which indicates the seriousness of the issue. Further discussions are planned.
Trade union members have proposed that a fund be created to help consumers who are unable to repay their loans.
Concern has also been expressed that job losses in several sectors, in particular in mining and manufacturing, will place consumers under even greater pressure from banks.
The banks have been requested to avoid aggravating clients' debt problems.
"The perception being created that banks are putting thousands of consumers on the street is totally misplaced," declares Tshabalala.
He stresses that business considerations always play a decisive role when granting a loan.
On Tuesday Standard Bank announced it would again relax the criteria for granting loans and advances, after having raised them last year. This applies in particular to home loans.
At the same time a more lenient approach is being adopted to issuing credit cards and granting vehicle finance.
Credit cards were previously issued against a background of three out of every 100 clients defaulting; these defaults have now risen to 11.
Non-collectable loans amount to R29bn of Standard Bank's R316bn total loan book.
Non-collectable loans, previously referred to as non-performing loans (NPLs), are those where clients have made no payments in three months.
Of loan products, such as loans and overdrafts, non-collectable loans represent R2.2bn of R40bn worth of advances. In vehicle finance bad debts are running at R1.19bn in a loan book of R52bn.
