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 FROM
BERRY EVERITT
There has been a lot of debate recently about whether
the fixed difference between the repo rate and the prime rate of
interest is too large at 3,5 percentage points, and whether government
should move to shrink it, but on the whole, we don't think that
would be a good idea.
For one thing, banks have to maintain large capital
reserves to provide a hedge against bad debt. Under current rules
banks have to hold at least 4% of their balance sheets in reserve
but in terms of this month's Basel III international banking agreement,
this percentage will have to be steadily increased to 6% by 2019,
and banks will also be required to hold a further 2,5% of their
balance sheets in "emergency reserves".
And we should not forget that it is having such
reserves that has enabled the banks to be much more accommodating
towards borrowers in distress and default during the most recent
economic downturn than was possible in the late 1990s, when soaring
interest rates resulted in thousands of people losing their homes.
In addition, the banks have only recently begun
to show more confidence in lending again, and we don't think that
should be discouraged in any way as it is critical to the full recovery
of the property market - and the economy in general.
Talking of which, we would also like to add our
voices to those in favour of maintaining a strong rand. The currency
has been strengthened by foreign capital flowing into SA, which
is never a bad thing, but even more importantly, a strong rand means
lower inflation and lower interest rates. This benefits every consumer
and especially those who are trying to pay off any kind of debt.
Meanwhile, we would just like to assure all our
clients that although the implementation of the new consumer protection
legislation has just been postponed for six months, all Chas Everitt
staff have already been trained on its implications, and all the
necessary changes have been made to our documentation, in line with
our longstanding commitment always to do all we can for the protection
of the consumer.
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