In most complaints that the Ombudsman for Banking Services (OBS) received concerning the closure of customers’ bank accounts, complainants alleged that their accounts were closed without providing them with any notice or reasons for the closures.
The OBS received a total of 227 complaints from bank customers about their accounts being closed from 2022 to date.
There was also a 134% increase in cases from 67 in 2022 to 160 cases in 2023 to date.
“In most of the complaints received by the OBS, the complainants alleged that their banks closed their accounts without providing them any notice or without providing the reasons for the closure. Some of the complainants who were provided with the reasons questioned the validity of the reasons given,” Ombudsman for Banking Services, Reana Steyn said.
According to Steyn, some of the reasons that banks say inform their decision include fraud; reputational damage or no risk appetite to continue a business relationship with the customer; conduct on the account such as the account constantly being overdrawn; account being dormant and accounts being used for other than their intended purpose, for example, using a normal cheque account for business purposes such as crypto trading.
The OBS noted its role was to ensure that, when banks terminated their relationship with a customer, they complied with the applicable laws which in summary, “require that the bank seeking to terminate their relationship with their customer, to provide the consumer with adequate notice of termination stating the reasons for the termination”.
However, Steyn added: “It is important to bear in mind that our law and the Conduct Standards for banks also allow for the closure of an account and termination of the business relationship without the issuance of a notice and reasons, in instances where the bank has reasons to believe that the account is being used for illegal purposes.
“Until our law and acceptable banking practice changes, the banks have the discretion to choose whom they want to continue doing business with. Should the banks decide to exercise their right, which is wholly within their discretion, to close an account and/or terminate the relationship with the customer, our law has clearly set the parameters within which such decision/discretion would be regarded as valid and acceptable in law.”
Bank closures have come under scrutiny following Standard Bank’s decision to shut down accounts belonging to Sekunjalo-related companies, including Independent Media.
Despite none of these companies having never been found to be invloved malfeasance, Standard Bank continued to forge ahead with its decision, which has now been labelled political.
This has since raised questions around whether un-banking was fair, and whether banks had too much power, leaving room for abuse in how they chose whose accounts to close as well as the reasons for proposed account closures. For now, the bank agreed, “for the time being”, to hold off on implementing its decision, as the Sekunjalo Group had since filed an application to the Constitutional Court for leave to appeal a decision by the Competition Appeal Court.
The ANC in the Western Cape was the latest calling for Standard Bank to reconsider its decision in the name of media freedom and the livelihoods of thousands that would be affected by the move.
Fight Inequality Alliance South Africa national coordinator, Wafaa Abdurahman, called for banks to be more accountable to the public.
She said: “The financialisation of our economy is so big, not only in South Africa but right across the world, where big banking institutions run countries, they decide what needs to happen. While we, ordinary people put our money there which is how they make their money.
“Like other monopolies and corporations government has given them lots of power without any accountability. When they increase their charges to do transactions, we are not consulted but it’s our money that makes banks operate.
Ordinary people don’t even sit on these boards, and decisions are always in the interest of capital. People with money are getting more power to do to people without money what they want. Government has given them too much power to decide over our lives. There should be better regulation and banks should also comply with public participation in the way they run these institutions.
It’s our money we should have a say because if nobody puts money in the bank, the bank will close.”
Reacting to Standard Bank’s decision recently, EFF leader Julius Malema had also confirmed that he too had his bank accounts closed and his teenage son was struggling to have an account opened. He accused the country’s banks of bullying, calling for a state bank.
“That’s why the need for a commercial state bank is more urgent than ever before. It’s extremely urgent; we are being harassed by the banks and we are being harassed by Afrikaner males who are owning these banks,” he had said.
This echoed remarks by the Minister in the Presidency for Women, Youth, and Persons with Disabilities, Dr. Nkosazana Dlamini Zuma, who criticised the dominance of five banks and advocated for an urgent shift to an alternative public banking and finance system, citing the New Development Bank as a step in the right direction.
“In South Africa, we are forced to kneel before five banks. This represents some of the most concentrated banking systems in the world. The greater concentration among banking to the big five has clearly undermined accountability, hindered development, stifled competition, and passed on the cost burden to citizens,” she had said.
Cape Times