My bank – a global behemoth with Asian origins – refused to honour my transaction. This was despite multiple attempts, and an agent on the telephone telling me everything was okay at their end.
The six-hour round trip to view, test drive, negotiate, and buy a car had failed because my bank would not release my money. Money that I had held with them for years… A relationship we held for over 40 years…
Through the red mist of a lost day, a lost vehicle, and a rather annoyed salesman, I have been reflecting. I have made these types of transactions before – several times in fact – and never had problems. Something has changed. That which I thought I could rely upon in the future is no longer so certain today. My bank not releasing my money when I need it is something else entirely.
The warm words of my relationship manager over the years have turned out to be platitudes. I am no longer me anymore; in the moment of that failed transaction it was my bank that decided who I was, and, more worryingly, who I could be. My four-consonant named bank has decided to blame the retailer for the failed transaction. So, off to the Ombudsman I will go. It’s a matter of principle above anything else, but oh boy, what a principle. It goes to the very heart of banking.
I am not the only one disgruntled with my bank of course. We have all read of the recent problems a famous politician has had being “de-banked” here in the UK; events which subsequently led to the removal of two apparently well-regarded bosses, and the overnight destruction of the reputation of the chairman and individual members of the board.
Banks can only exist in our society if we believe that they can be trusted. Trust keeps the banking system going; trust that when I give my asset to the bank it becomes their liability to honour, and to give back to me when I ask them to. A few days ago, they failed that most basic of tasks.
Trust, of course, is a concept that is under pressure these days. We now routinely question our trust in government, in institutions, in charities, and in our education system to name a few. My view is that the weakening trust in banks can be seen in the light of President Nixon’s decision in 1971 to break the dollar link with gold. Until then, the holder of a dollar note had the right to demand the equivalent value in gold at their local bank branch. Bretton Woods went out of the window that day and debt has spiralled ever since. Said debt is now backed by… err… promises?
Banking is central to our world. Indeed, it might be said that bankers rule the world. Banks have been around for thousands of years; in their more modern form, from the 15th Century or so. They have had time to grow up. Central Banks set our interest rates, influence inflation and control the money supply. Merchant banks decide our corporate futures. Retail/commercial banks decide whether we are in good credit or not. They print money from nothing and withdraw liquidity when they see fit. They decide whether they want you as a customer and can remove you at will, though that might be about to change. They also decide whether to honour their liabilities, as I have learned to my cost and embarrassment.
It was alleged to me the other day that President Biden has signed an Executive Order which allows the US government to “review” individual personal bank accounts. Of course, all governments have been able to do this for years, but until now, they need to have “cause” to do so. Apparently, the new order allows this, cause or not.
Suddenly I find myself remembering Argentina in 2001, when the government stopped a countrywide bank-run by freezing billions of dollars in deposits. I wondered back then if those poor individuals ever got their money back? Much closer to home, in 2013, I watched the European Union, supported by the IMF, seize approximately half of the uninsured deposits in the largest commercial bank in Cyprus, completely closing the second largest bank in return for a bailout. I noted that no insured deposits of Euro 100,000 or less in Cyprus were affected, but again I wondered if honest account holders who had their money confiscated got it all back. In the moment of my failed transaction, I had a taste of what it might have been like to have been Argentinian in 2001, and I didn’t like it.
The distress of my failed car purchase has not subsided as my stock in trade, the ability to bring a cold, hard, and hopefully rational analysis to most situations, has left me more than less worried about where this could all lead. My bank might be too big to fail, but it is not too big to fail me.
Whether we agree or not, inflation might stay stubbornly high for some time, interest rates might not come down with the speed that many of us would hope. Corporate earnings might roll over and multiples might come down. Liquidity and credit might stay extremely tight. The proportion of government budgets that go to serve their ever-increasing debts will probably only grow. It is not a recipe that I like at all.
Governments are very short of money, and independent or not, banks do their bidding. We need to question whether these parties can be trusted in the way that we used to trust them. Reading one analysis of the Cyprus bailout suggested that the crisis was due to declining competitiveness, increasing public and private debt, exacerbated by a banking crisis. Oh dear; I had forgotten to list declining competitiveness in my list of possible woes.
The analyst in me says that it might be time to give up the relationship manager, the gold card and the so-called personal service, and become anonymous. If I were ever lucky enough to have short term deposits that could exceed our UK insured deposit limits (£85,000 at the time of writing), I might suggest that this is spread widely to sit comfortably below the insured limits in each account.
By the time you read this, my bank will have a few pounds less on its balance sheet. Now that I have looked, I can look forward to earning more than double the rate of interest on my rainy-day savings. It won’t matter to them, at least not yet, but I will sleep just a little more soundly at night. I lost a day and a car, but the lesson might just have been one of the most important for some time.
