Eliminate cash, not transparency

By Blerta Hoxha
Two years ago, the government decided to introduce a new and apparently emancipating practice regarding the relation between state institutions and employees of the public administration. A decision taken by the administration stated that from now onwards state institutions would pay salaries to their dependents only via the banking sector, thus distributing the wages to their bank accounts. No more cash! In order to apply this rule, each institution chose a bank and reached agreements freely. Hence, institutions indicated to the employees in which bank their personal account (and their monthly salary too) was.
Certainly, different advantages were introduced by the new procedure. Channelling a significant amount of cash to banking sector testifies for increasing credibility of the latter. Considering what the trauma of the ’97 crisis had done to the reputation of any credit institution, the challenge was obvious. Bringing salaries to banks meant bringing people to them as well. The trust-inspiring move of the administration helped to increase the number of loans, doubling the profits for the banking sector which soon bloomed.
Going back one step though, one wonder at how was this move accomplished and what were the procedures involved in choosing the most appropriate banks for the civil servants. After all, banks representatives admit that the services they offer are quite similar. If they all offer the same services, why not distributing each an equal number of clients (employees of the public administration) in order to respect the market’s balance? Why not paying civil servants by a state institution which can work as a bank (e.g. Albanian Post)?
The official reply to any curiosity on the way certain banks were selected is by organizing honest and transparent tenders. Truth is, we know very little about any tenders organized. No information was released as to the timing of these procedures, the participating bids in the process and the evaluating committees that took the final decisions. Some claims can be made that serious banks with capacities to handle the process were preferred and the allegation can be quite true. In the case of Raiffesien Bank the matter was easy. The branch distribution that the bank took over when it privatized the Savings Bank, gave it a competitive advantage as far as territorial presence was concerned. Later on, this particular bank created a customer-friendly relationship with civil servants offering them options such as overdrafts and facilitated loans. Given the hardships Albanian civil servants and all those on budgetary payrolls face, with their minimal financial rewards, all these should be applauded. This factor though does not guarantee that initially the bank offered the most profitable commissions.
But even in the case of a complete transparent procedure, a philosophical question pertains to a free market economy: May the state, in a free market system, decide the bank which citizens should become clients of?
The lives of thousands employees of central and local administration, education and health sector and others were tied to banks in a resolute way. Once employees of public administration find themselves with an account on which the state pays them their salary, it is unlikely for them to seek another bank in the market for other operations. The move hurts competitively and intrudes upon fair competition rules.
In every western democratic country, employees of the public administration can freely choose in which bank they wish to have an account and indicate it to the institution they work for in order for their salary to be transferred each month.
May this democratising procedure be based on the principle “One step forwards, Two steps backwards”?