Every sustainable banking relationship is based on utmost trust and integrity, and banks are tasked to maintain a high level of trustworthiness in all their customer dealings.
Clive Mphambela
Veritably, the trust-building process does not just begin when a customer or potential customer initially walks through the bank’s doors for service, but is in fact, a continuous process that must subsist, throughout a bank’s whole existence.
Banks by the nature of their mandate are institutions that all stakeholders, not just their own customers, must trust, even before they open their doors to the public. That is why all banks, whether or not they are privately-owned and run, are at law deemed to be public institutions, so that all stakeholders, be they customers, regulators, competitors and so on, must place a certain level of trust in banking institutions.
How do banks protect the interests of their customers?
One of the ways in which banks build and maintain the confidence of their stakeholders is building adequate safeguards to protect their customers.
The banking industry in Zimbabwe has undoubtedly faced many challenges in the recent past and one of the areas of introspection has seen players in the banking industry asking themselves the question: Are we protecting our customers enough?
In this regard, as part of a self-regulatory mechanism that has been in place for almost 20 years, the banks in Zimbabwe have put in place a functional code of conduct, which the industry calls “The Code of Banking Practice”.
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This document embodies a set of rules of behaviour that bind member banks, as a collective body of responsible institutions, to act in a certain way towards their customers.
The bankers’ code, which must in the first instance, be understood as a covenant by the banks, to serve and to protect their customers, is an important document. Otherwise it would not be useful to have one.
The Code of Banking Practice largely reflects the following client protection principles that underline sound customer protection and responsible banking. It is the adoption of core client protection principles which assist banking institutions in practicing good ethics and therefore lay the basis for smart profitable and sustaible business. What are client protection principles?
Some of the customer protection principles discussed below, are the minimum standards that clients should expect to receive when doing business with a banking institution.
These principles have been distilled from the work by financial service providers, international networks, and national banking associations to develop pro-client codes of conduct and practices for banking institutions. There is thus a consensus within the banking industry that providers of financial services should adhere to these core principles.
The duty of transparency
Chiefly, the practice of responsible banking requires that a bank is fully transparent in the pricing, terms and conditions of all its financial products that are on offer. Responsible banking practices mean working with clients so they do not borrow more money than they can repay or use financial products that they do not need.
In the same regard, responsible banking employs respectful debt collection practices and adopts high ethical standards in the treatment of all clients.
A responsible bank will give its clients a way to address their complaints and grievances so they can be served more effectively. Responsible banking also ensures client data remains private thus protecting clients, businesses, and the industry as a whole.
Banks must put mechanisms for complaint resolution Banks will have in place timely and responsive mechanisms for complaints and problem resolution for their clients and will use these mechanisms both to resolve individual problems and as a feedback mechanism to improve their products and services.
Appropriate product design and delivery capabilities
Banks and indeed all financial services providers are tasked to take adequate care in designing products and delivery channels in such a way that they do not cause any harm to their clients. Products and delivery channels should thus be designed with client characteristics taken into account. Therefore, adequate research and analysis and testing should be done before a financial product is launched.
Prevention of customers from over-indebtedness
Banks should take adequate care in all phases of their credit processes to determine that clients have the capacity to repay loans advanced without becoming over-indebted.
In addition, banks should implement and monitor internal systems that support prevention of over indebtedness and will foster efforts to improve market level credit risk management (such as credit information sharing).
This is the reason why our banking industry is working with relevant stakeholders and advocating for the creation of a robust credit referencing framework in the economy. This framework will protect, all borrowing clients and the industry.
Transparency and Communication
Banks will commit at all times to communicate clear, sufficient and timely information in a manner and language clients can understand so that clients can make informed decisions. The need for transparent information on pricing, terms and conditions of products is highlighted in the code.
Responsible pricing
Banks commit themselves to responsible pricing terms and conditions that will be set in a way that is affordable to clients, while allowing for the banking institutions to be sustainable. Banks will strive to provide positive real returns on savings and products that promote a savings culture in the economy. Fair and respectful treatment of clients
It goes without saying that the new banker’s code should commit banks and their agents to treat their clients fairly and respectfully at all times. Their services will not discriminate on any basis whatsoever.
In this respect, banks will play a big part in driving financial inclusion in the economy.
The new bankers’ code will also beseech banks to ensure adequate safeguards to detect and correct corruption as well as aggressive or abusive treatment by their staff and agents, particularly during the loan sales and debt collection processes are in place.
Privacy of client data
The privacy of individual client data should be respected in accordance with the laws and regulations of the country. Private client data will only be used for the purposes specified at the time the information is collected or as permitted by law, unless otherwise agreed with the client.
Provisions for protection of client data will also seeks to promote the protection of clients from crimes such as frauds and scams as well as to ensure that clients are compliant with international and local laws, especially as regards the prevention of money laundering and financing of terrorism.
It is important to note that in the event of criminal activity on a customer account, banks are mandated by law to divulge certain client data and may do so in the normal course as compliance institutions.
In conclusion, it is important for us to note that Code of Banking Practice is not cast in stone. Even when published, it will remain a working document, and comments from stakeholders are encouraged to keep it alive and current. This will ensure that banks live up to the letter and spirit of the code, which is to make sure that clients are protected.
●Clive Mphambela is a Banker. He writes in his capacity as advocacy officer for the Bankers Association of Zimbabwe. BAZ expressly invites stakeholders to give their valuable comments and feedback related to this article to him on [email protected] or on numbers 04-744686, 0772206913
