Bank fees and commissions – always straight forward and up
The fee for servicing a payment account will increase by an average of BGN 12 a year
The banking sector performed quite well in 2019 and expectations at the end of January account for record high scores. This is hinted in the Bulgarian National Bank’s data published at the end of November last year. It shows that credit institutions' profits are up 4% on an annual basis to reach BGN 1.5 billion with only net fee and commission income amounting to BGN 1 billion.
Unfortunately, another wave of fees and commissions increase for banking services has started. In fact, for some institutions, this is the third increase since October 2019. Although by little, in the coming weeks some banks are raising fees for their most popular services - for example for maintaining an account and withdrawing from an ATM, as well as other interbank operations. Experts estimate that the fee for servicing a payment account will increase by BGN 12 a year on average.
The explanation for this dynamic is simple-since December 15, there have been changes at European level, according to which cross-border transfers in euros become cheaper. That is, the fees charged by the payment service provider (in this case, the banks) for cross-border transfers must be equal to the fees charged for national payments.
These amendments were also reflected in a bill to amend the Payment Services and Payment Systems Act which was already adopted at first reading by the National Assembly. It stated that banks which do not meet the new requirements in time can be fined up to BGN 50 thousand for the first breach, and BGN 200 thousand in case of another. However, these sanctions cannot be imposed until the bill is approved by Parliament at second reading and subsequently promulgated in the State Gazette.
No surprise in banks’ behaviour. It was said there was a risk of banks attempting to make up for some of their losses by increasing the amount of national transaction fees or account servicing fees. They did just that! The real picture, however, is expected to be shown in the BNB data for the banking sector at the end of December 2019.
The trend of increasing fees and commissions has been observed for several years. This conclusion can be drawn from the latest analysis of the Commission for the protection of competition for banking services in our country. In fact, the growth trend in fees and commissions’ revenue follows the growth in household loans over this period. Fees and commissions income reported as of June 30, 2019 has increased by over 7% compared to the six months of 2018 and slightly below 26% compared to the six months of 2016.
The CPC analysis makes it clear that many banks do not charge a fee for closing a bank account while others charge between BGN 2 and 10 for the services. The average account opening fee, however, has increased from BGN 2.17 in 2016 to BGN 2.61 in 2019. Maintaining a payment account has risen from 2 levs to an average of 2.44 levs as of June 2019. As of this date, almost all of the leading banks charge the same fee for maintaining a payment account - BGN 2.50 per month.
Banking market is "relatively competitive"
Despite deals of acquisitions and mergers in recent years, the CPC concludes that the market is "relatively competitive" in both deposits and loans, with the concentration level being "medium" in the first case and "moderate" in the second. Regarding fees and conditions on accounts, the regulatory framework is uniform.
Antitrust experts also make several recommendations to the BNB. The regulator's recommendations are primarily related to the possibility of creating a "Single Consumer Credit Comparison Portal" and possibly maintaining it on the BNB website. According to the CPC, this initiative will make it easier for consumers to make an informed choice of a servicing bank in connection with household lending.
On January 22, the public discussion of the draft Instruction on the procedure for implementing joint, in situ inspections of persons under Art. 108, para. 6, item 1 of the Law on Measures against Money Laundering is to end. The texts provide for checks to be carried out on-the-spot at banking institutions by the Financial Intelligence Agency of the National Security Agency (SANS) and the Bulgarian National Bank. The procedure for conducting inspections will be determined by the joint instructions of SANS Chairman and the heads of supervisory bodies. We are assured that the ultimate effectiveness of the national system for the prevention of money laundering and terrorist financing will be improved. This, in turn, will enhance the effectiveness of preventive legislation against money laundering and terrorist financing. At the same time the control authorities believe that the inspections will contribute to improving the security of the business environment in Bulgaria in the long run.
In 2019 amendments to the Anti-Money Laundering Act were developed and adopted as part of the commitments made by our country towards the Banking Union and the euro area. They reflected the new requirements of European Directive (EU) 2018/843.
The latest amendments provide for EU Member States to suspend the possibility of opening anonymous bank accounts and anonymous safes renting by 20 January. Lists of positions held by prominent political figures should be prepared and presented separately to the European Commission.