Pay gap threat to banks

2012-07-04 00:00

WHILE South African banks and financial services companies possess strong and enviable leadership and corporate governance structures, the growing pay gap between top executives and employees and the exorbitant bonuses paid to executives pose significant threats to the wellbeing of the sector and the economy.

The keynote speaker at the first conference of the KwaZulu-Natal Financial Literacy Association held in Pietermaritzburg yesterday, Finance Minister Pravin Gordhan, told The Witness that the pay gap and substantial bonuses contributed to greedy behaviour and endangered the wellbeing of the financial system at large.

He said the the euro zone debt crisis and the ongoing interest rate-fixing scandal involving Barclays Bank were examples of a bankruptcy of leadership at major international companies.

International financial companies and banks were in crisis, and this lack of ethical leadership had resulted in “undisguised and unquenchable greed”.

Gordhan said profiteering at any cost had led to a disregard for people and a shameless disregard for the economic destruction caused by the actions of powerful financial actors.

He praised South African regulators and the leadership of major financial sector companies as they had ensured that the country’s financial system was not severely impacted by the recent global financial crisis.

But he expressed concern at the high costs associated with some financial products in South Africa, particularly retirement savings products.

Gordhan urged delegates to deliberate over the lack of financial inclusion for many ordinary citizens, particularly the urban and rural poor.

He said the global financial crisis of the recent past, which continued to haunt the global financial system, had illustrated the impact of global events on local economies like South Africa.

“Financial literacy is very connected to economic literacy, financial inclusion and household and business financial management.

“It is important that citizens have an understanding of what is happening around us and how ordinary communities are affected.”

He said South Africa had not yet recovered from the loss of one million jobs during the recession and that the country lost about R60 billion in revenue in this period.

He urged ordinary citizens to learn about and keep abreast of the developments in financial markets such as the share market and currency movements as these developments ultimately had an impact on the lives of all South Africans.

He stressed the importance of protecting consumers from unsuitable offers and sales practices, as well as fraud and abuse.

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