Morning Briefing for July 03, 2012 – Standard Capital

Karachi, July 03, 2012 (PPI-OT): CCP Imposed Rs. 770 mn fines on 1-Link and 28 Banks

The Competition Commission of Pakistan (CCP) has imposed a penalty of Rs770 million on the ATM service provider and the banks for uncompetitive behaviour and deciding the uniform service rate.

According to Standard Capital, the penalties of Rs. 50 mn has been imposed on 1-Link Ltd and Rs. 50 mn each on its 11 founding member banks and Rs. 10 mn on each of its 17 non-founding member banks for imposing uniform customer charges for Off-Us ATM cash withdrawal transactions in violation of Section 4 of the Competition Act 2010.

A CCP bench passed an Order in respect of the proceedings initiated against 1-Link and its member banks for imposing uniform customer charges for Off-Us cash withdrawal transactions, which amounts to violate Section 4 of the Competition Act.

A fine of Rs.50 mn each has been imposed on founding members namely, National Bank, Allied Bank, Habib Bank, Bank Alfalah, Askari Bank, Soneri Bank, NIB Bank, United Bank, Standard Chartered Bank, Faysal Bank and Bank Al-Habib Limited.

In addition to this, Rs.10 mn fine has been imposed on each non-founding members namely Albaraka Bank Pakistan, Burj Bank, Meezan Bank, BankIslami, KASB Bank, Habib Metropolitan Bank, Bank of Khyber, Dubai Islamic Bank Pakistan, JS Bank, Silkbank Limited, Bank of Punjab, Samba Bank, Sindh Bank, Barclays Bank Plc Pakistan, Tameer Microfinance Bank, Kashf Microfinance Limited and Summit Bank.

However no penalty has been imposed on Citi Bank which has not followed the collective behavior of charging uniform fee for use of ATM transaction from the facilities of these banks.

The CCP on its own took notice of the uniform rates implemented by the banks for ATM cash withdrawal transactions. To assess the matter, CCP approached the State Bank of Pakistan (SBP) to enquire whether it has fixed the ATM charges.

The SBP in response stated the banks are free to determine these charges. Moreover, in response to letters sent to various banks seeking rationale for uniform rates, two member banks of 1-Link confirmed that they have to comply with the schedule of charges devised by the 1-Link.

“Given facts and circumstances raised a suspicion that 1-Link and its member banks may be engaged in any suspected collaborative activity to fix the rates of ATM transactions”, the CCP has said.

However, the CCP observed that ‘Price fixing agreement may be considered under rule of reason when parties collaborate like a joint venture for creating significant and beneficial efficiencies that could not otherwise be accomplished.”

Standard Capital therefore believes that it would put strain on performance of banking sector at least in short term. Currently, banking sector provided investors with comparatively satisfactory returns with cumulative 18% of Return on Equity and 1.64% Return on assets, based on last annual financials.

Off us transactions means that the bank that issue your card is the different as the one which owns the ATM.