By Irwin Angiki

The Leader of Opposition has called for the government to create a national bank for the country.

Matthew Wale made the statement in parliament on Monday concluding deliberations on the impact of the Bank of South Pacific’s (BSP) controversial policy which charged 1 percent on customers doing cash transactions $20,000 and above.

The policy, which took effect on June 28 this year, has since been revoked by BSP under directions by the Central Bank (CBSI), finance minister Harry Kuma told parliament.

BSP’s ‘greedy’ action to burden its own customers with such as costly fee is being seen as – going against the interest of Solomon Islanders and businesses, and a threat to banking in the Solomon Islands.

Solomon Islands is one of the lowest in the Pacific in terms of banking – only 30 percent of its population do banking, Minister Kuma told parliament, and cash handling is the main form of transaction.

Member of parliament for Small Malaita, Rick Hou told parliament he was concerned that BSP’s action will discourage people from engaging in banking, jeopardising “[all the efforts that Central Bank has done to educate and encourage the populace to bank their money]”.

Mr Wale said the lesson that can be taken from the BSP fee saga is that Solomon Islands needs its own local bank.

“This matter raises the need for this country to have its own national bank. Where we Solomon Islanders work in it, we run it, we are the biggest shareholders in it. BSP is majority owned by PNG.

“We must own a bank. Maybe DBSI to administer it. We must make it accessible in every province. We do need a national bank.

“The loss of a national bank has tied our hands as a government and our public policy responses. Of course, we must learn from the lessons of DBSI in the past.

“But that is not an argument to say we cannot have our own national bank. We must have our own national bank. It is very important, if we are going to be taking decisions to really grow this economy and make our ordinary people commit,” Wale told parliament.

Wale urged government to make a ‘legislative response’ to ensure such issues as BSP’s fee saga do not happen again.

“It does call for some legislative response. What will be government’s legislative response so that we don’t end up with the same situation.

“In the bank, they deal with money, and greed is the number one thing, they will charge you anything to erode your money that you put in the bank. We need to guard against that greed. Already it’s frustrating, just opening an account is so difficult. It has become so difficult to do banking now. And then they just charge you an arm and a leg,” Wale said.

“The level of profits of the bank is very high, has been for all these years, there is no justification whatsoever for these increases,” he added.

Of two locally owned banks which used to operate in the Solomon Islands – the National Bank of the Solomon Islands (NBSI) and the Development Bank of the Solomon Islands (DBSI) – only DBSI remains.

The retail bank NBSI, founded in 1951, underwent changes of ownership before it was wholly owned by Solomon Islanders after the Bank of Hawaii gave its 51 percent shares to the government in 2002. However, in 2007, NBSI was taken over by BSP. Before the BSP-takeover, NBSI was owned by – NPF (49 percent), NBSI Health and Welfare Trust (17 percent), NBSI Education Trust (17 percent) and NBSI Employees Trust (17 percent). BSP later expanded by acquiring the Westpac operations in the country.

The DBSI was established in 1977, and by 2003 it was insolvent due to ‘institutional and governance weakness’. Also, ‘development bank loans and credit repayment were plummeted by the ethnic tension’, a CBSI national financial timeline said. In 2020, following the DBSI Act of 2018, DBSI was relaunched.

Background to the BSP fee issue:

On June 28, 2025, BSP began charging one percent on cash deposits and withdrawals $20,000 or more, per day, per account.

The bank did not give any reason for this hefty fee. A notice on its website on May 28, 2025, simply told customers to expect this new rate along with other changes to take effect June 28.

Opposition Leader Wale criticised this move by BSP in a media statement on July 3.

The following week, several businesses reported feeling the pinch on their profits, with many complaining that they were not aware of BSP’s new fees.

One major local Honiara-based business told Island Sun that BSP’s new fee was eating away around $4,000 per day via cash deposits.

This was nearly half of their profit per day, the business owner told Island on condition of anonymity.

The company told Island Sun that it was considering laying off workers in response to BSP’s fee.

Other businesses also reportedly made similar ‘inconvenient’ adjustments to counter BSP’s new fee.

Some businesses reportedly responded by factoring the cost of BSP’s fee into their service and goods prices.

“We have marked up our prices for our products and service to cover this new BSP fee,” one business owner, who requested anonymity, told Island Sun.

Another business owner said they had begun depositing below the $20,000 minimum mark to escape the ‘one-percent penalty’.

“We now deposit below $20,000 to avoid BSP’s one-percent penalty. But, this is inconvenient since we have left-over cash takings and this accumulation will soon force us to consider a second account or bank,” the business owner told Island Sun, also on condition of anonymity.

In the Solomon Islands, transaction using hard cash is the norm. Digital exchanges is still far behind.

BSP’s new fee was projected to hit hard on people and businesses.

Wale, in his July-3 statement, described the increase as an unreasonable charge that will penalise legitimate economic activity of everyday Solomon Islanders.

“This is an unjustifiable fee on people simply trying to access or manage their own money. Many Solomon Islanders, particularly those in the villages, those running small businesses, schools, or churches, are forced to operate in cash. This fee punishes them for circumstances they did not choose.

“Many customers of DBSI are ordinary Solomon Islanders who repay their loans in cash. DBSI, who banks with BSP, will then be charged one percent for its deposits. If DBSI deposits $300,000 per day, it will be charged $3,000 per day. It is not hard to imagine how this will then affect DBSI interest rates. CBSI must clamp down on this,” Wale said.

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