CBB launches pioneering service on consumer banking service charges

The Central Bank of Bahrain, accordingly, directed all retail banks to apply the "Code of Best Practice for Consumer Credit and Charging", issued in July 2007, in which a minimal set of rules and regulations should be followed while grating loans providing any other banking service. Banks are also required to provide copies of the Code to customers so that they may take note thereof and adequately assimilate the practices mentioned therein.

Furthermore, the CBB issued a host of new rules relating early settlement of loans and refund of insurance premium in case of early settlement or topping up of loans. These rules are in line with the new amendments made to the CBB's Rulebooks updated in April 2008. Consequently, the fees for early settlement were set at 1% of the outstanding consumer loan or BD100- whichever is lower- and 0.75% of the outstanding loan or BD200 - whichever is lower - in cases of early payback of mortgages.

On the other hand, banks are required, under the new rules, to refund the remaining part of insurance charges paid by clients in cases of early repayment or adjust the unused amounts of the insurance charges with the new facilities being offered, based on a specified formula for this purpose.

Until recently, banks used to charge excessive fees to customers willing to settle their debts before maturity date. Also, banks did not refund any insurance charges paid for the whole period of the loan in case of early settlement. Instead, they were charging new insurance premium for the new facilities or top ups.

According to the new rules, all retail banks are asked to publish their banking fees, charged on their banking services, in schedules so that customers may be able, to compare the level of charges across all banks and thereby help them choose appropriate banks to deal with. These rules took effect in the last quarter of 2007.

"The idea behind this pioneering service is derived from the need for more transparency in relation to service charges for the protection of consumers and that such service will enhance competition among banks,"

said Mr. Khalid Hamad, Executive Director, Banking Supervision, at the CBB.

The availability of such information also helps enable consumers to make informed decisions about the services offered by banks.

The Banking Services Charges schedule is designed to enable consumers to easily compare the fees charged or interest rate levied by various banks for the same service or product, said Mr. Yousif Hassan, Director, Retail Banking Supervision, at the CBB.

The Loans category of the schedule, for example, lists the Annual Percentage Rate (APR) charged by each bank on a consumer loan, as well as the administration fees Consumer Loans, Mortgage Loans, Early Settlement, Loan Restructuring, Installment Postponement, besides several other loan-related services.

The schedule also contains an Account Charges category which lists the Minimum Balance required for savings and current accounts and the bank's charge in case of failure to maintain that balance. Other information included in this category relates to fixed deposit accounts and the charge for breaking such a deposit, cheque book issuance fees.

The Banking Services Charges schedule can be accessed through the main menu bar on the CBB website, under Consumer Information.