ARE BANK CHARGES A THREAT OR OPPORTUNITY TO BANKS’ INTERMEDIATION FUNCTION? THE CASE OF SOUTH AFRICA

Charles Nyoka
University of South Africa
ABSTRACT
Conventional theory on the subject of financial intermediation proposes that banking
institutions are the principal conduit between surplus units and deficit units in any given economy.
Additionally, anecdotal evidence from recent research indicates that the majority of banks at
global level are observed as losing value in their role as financial intermediaries due to high level
of bank charges they levy on customers for their services. In the context of South Africa, perceived
high bank charges have led to non-banking sector financial institutions (NBFIs) being observed
as competing with banks in financial intermediation. It is against this background that this
research study has investigated whether bank charges are either a threat or opportunity to banks’
role as financial intermediaries in South Africa. Results derived from the study using chi-square
distribution test indicate no association between bank charges and their financial intermediation
role; thus suggesting that bank charges are not a threat to banks intermediation role in context of
the South African economy.