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 2010-01-07 09:43 pm Back to NEWS
Barclays welcomes govt’s decision to close most accounts with commercial banks

GOVERNMENT’S decision to close most of its accounts with commercial banks this year will level the playing field among banks in the country, Barclays Bank Southern Africa region managing director Zafar Masud has observed.

The government this year plans to cut borrowing from the banking sector and introduce a single treasury account to help bring down interest rates and encourage banks to mobilise savings.

Commenting on the development, Masud said huge government money made some commercial banks get unfair advantage over others in terms of mobilising savings.
Masud said Barclays Bank welcomed the government’s decision.

“…Eventually, government is the one that uses that fund as well. So, it’s okay if the government needs to…in fact, that will be good for industry because then it gives even playing field to everyone,” Masud said in a recent interview. “Right now, what’s happening now is that there are some banks who get more government funding more than the others. No it won’t affect liquidity in the market as long as Central Bank will manage the liquidity well which I am very sure they will.”

The government which currently borrows an average of K620 billion in treasury bills and government bonds per month had announced plans to reduce borrowing from the banking sector in 2010 and introduce a single treasury account to help bring down interest rates and encourage banks to mobilise savings.

The Ministry of Finance said commercial banks did not need to take risks by lending money to the private sector when the government was borrowing at high interest rates and offering risk-free investment.

“The government will retire a substantial amount of maturing bonds and treasury bills next year. This, I hope will enable commercial banks to lend to the private sector," stated the Ministry of Finance recently. “As a response to this, the government has decided to establish a single treasury account next year. This means that most government accounts in commercial banks will be closed.”

Treasury observed that commercial banks relied on government deposits rather than trying to lure savings and that the government was also concerned about the increasing spread between lending and savings interest rates.


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