Banking Insider Speaks Out
Published on Getoutofdebtfree . com. on June 11, 2012
A very well informed, university educated Bank Manager, agrees to take questions from some equally well informed truthers…
Where does the money come from?
Do you legally have to accept promissory notes?
Do debt collectors legally discharge your debt when they buy it from your bank?
And- Knowing what you know, what are you doing in banking?
He also goes onto explain the root causes of the ‘credit crunch’ and agrees that banks may be routinely committing fraud…
Transcript of Jon Witterick (JW) with fellow ‘truth seekers’ (TS) putting questions to a Bank Manager (BM), who wishes to remain anonymous, along with his bank, for reasons which will become obvious.
I would like to add that this gentleman came across quite sympathetically to our position and appeared to be quiteconscientious and caring, especially for a banker. I was expecting him to stonewall us with the corporate line, however, I was pleasantly surprised…
JW What is the process for passing debts to debt collectors? Because suddenly these debt collectors have them, but we know that they purchase them, their association is called the Credit Services Association which buys and sells debt effectively, so what’s your understanding of that?
BM At branch level we don’t get involved with any of that, however you’re right, debt is effectively sold, so the bank will take a stance on how much time and energy do we invest in trying to reclaim this debt. When it gets to a point, a team, a centralized team will make a decision, there’s a certain set of rules to which they work, I don’t know what they are, the rules of engagement, but they calculate the cost/benefit and decide if it’s going to cost too much to collect this debt, we’ll sell it, we’ll take a loss, we’ll sell it, to an external collection firm who specialize in collecting debt. It’s a simple cost/benefit.
A decade ago, the way that it was structured was that the teams could change (these rules) depending on liabilities and how business was running, you could change your cost/benefit ratio, you could be softer one month, harder another month; we’re no longer allowed to do that, it’s all about treating customers fairly- to do that you have to be consistent, you can’t from one month to another month decide the rules have changed in terms of passing that debt on, so it’s a lot tighter than it used to be, I don’t know what those rules of engagement are.
JW Do you know the current market rate for selling the debt, how many pence in the pound?
BM No I don’t (lol) sorry
How to Get a Bank Account after Bankruptcy/Default
TS What happens to the customer’s standing, do you contact the credit agencies to black mark their account and are they able to bank with you again?
BM So in terms of if they have a bad debt with XXXXXX Bank, (and you’ll have to edit that out- that’s who I work for) you won’t be able to come back to us as a customer, because you’ve defaulted on us effectively. If you did have the same scenario with another bank on the high street, then you would be able to come to us. If the debt was a bad risk, you wouldn’t be able to come back. If say you’re a HSBC customer and you came across that’s another issue. The only way we wouldn’t open you an account is if you had fraud on your credit file, if there was a form of fraud. If you’re bankrupt it’s not a problem.
TS That seems weird because every time I’ve gone to a bank, after my debts have gone into administration, I’m not bankrupt
BM What banks have you gone to, there’s different banks? Ok, so..
TS I covered pretty much all of them
BM There’s two banks on the High Street that will offer you an account, ok, the Co-operative and Barclay’s Bank, theirs are social inclusion..
TS They didn’t
BM In terms of their policies
TS I haven’t committed fraud, there’s nothing fraudulent about it, it’s just non-payment of debt, so I can’t get a bank account at all with anyone
BM The thing you need to do is find out what the social inclusion policy is of that bank and you can effectively demand they open you an account . What you have to bear in mind at a local level that is, there will be certain management practices at local level, to try and dissuade you from opening a bank (account) because of the matrix by which they run their branch and that is something that unfortunately will impact the customer and it’s something you’ve got to be aware of, because if you have so many of a certain type of customer coming into you for whatever reason, it could negatively affect your matrices, then you might instigate a rule in your branch to say don’t encourage that or make it difficult, so first they ID you and verify you to open the account. I know it happens in the industry…
TS Will they use your credit history against you then? Are they allowed to do that?
BM So say you came in and you wanted to open a bank account and you didn’t specify what type of account you opened, the first thing we would do is run a credit check on you, ok, to open a bank account, if your credit search revealed that there were issues and we found or we decided those issues meant you were high risk to us, we may not offer you a full bank account, we may offer you what we call a cash card account, we would offer you that, HSBC wouldn’t, but they operate a different banking model, they focus on a mass affluent market, that’s a conscience decision they’ve made, we would offer you but we wouldn’t score you to open a full bank account that offers you things like overdraft facilities, cheque book facilities, credit facilities, you would only be able to have a cash card account, in the Co-op they offer you a debit card facility, now if you understand the debit card payment platform, that platform allows you to make guaranteed transactions up to £10 so even with that you can still go into the red effectively, even though the account is designed for you to not get into any trouble.
TS When you are checking someone credit record, credit history and there are some issues, do you actually see it or is it that you are not allowed to see anything really, is there any more detail you can see?
BM The scoring is done obviously by a computer system centrally, we will not get any details down at branch level for instance, ok? So it will give us a yes or no answer for a specific product we’re applying for, whether it be a credit card, bank account whatever it might be, however, the system’s a little bit cleverer than that, what it will provide you with, this is across all banks, they use the same system, it will give you a code, those codes give you an indication of what it might be, it might be default, it might be CCJ, it will give you an indication, however it says on the screen, you must not share this information with the customer, we can’t share that information with you, all we can do is give you the details for Experian and Equifax and ask to look up your credit file. Because we don’t own that information, we could be giving you the wrong information, the wrong impression, we’re not qualified to give
TS and their records may not be right
JW Their records, yeah it’s a third party holding the records and it’s on the website, if you want to have a look at the website for challenging it; I’ve rebuilt my credit history twice now from really bad.. I’ve got a bank account with the Co-op and they’ve been, it’s perfect, you’re not allowed to go overdrawn with it, but if you do make a mistake and you see you’ve gone overdrawn, if you give them a call on the day (any pay in some money) often they won’t even charge you, but if you get on the wrong side of they will chase you like any other will and by the way, the Co-operative bank are not a co-operative, the Co-operative supermarket is a co-operative, the Co-operative bank is just trading with the Co-operative name and it is a corporation and I think that’s misleading, however, they have a better record in their investments than Barclays, they’re very careful where they put their money
BM Yes they have a long standing ethical stance which is well adhered to, it’s not adhered to letter for letter, but it’s much better adhered to than most of the high street banks.
‘Jam Jar’ Accounts
TS The Credit Union are currently charging £1.30 a week for a current account
BM You’re talking about the ‘jam jar’ accounts now
TS They also charge 28% on their lists
BM We’re very aware of this…
TS I need that to be challenged by the high street banks…
BM Typically the charges, we’ve done some modelling of national projects where the credit unions and the accounts they offer, a typical fee is between £11-15 per month, now in 2013, you’re probably aware that the legislation is going to change how people’s benefits payments are paid and the credit unions are going like this, ‘cos they are thinking it’s going to be one lump sum, it’s not going to be lots of separate payments and they’re going to start championing their ‘jam jar’ accounts, they’re still going to be charging substantially. We are looking at creating a fee free ‘jam jar’ type account, ready for 2013, I don’t know whether it’s going to happen.
TS What do you mean by ‘jam jar’?
BM Ok, so it’s effectively your lump sum of money will come in, ok, you find it very difficult to balance or manage your money for whatever reason, automatically you have separate wallets/folders where the money goes into, the direct debit is set up for whatever bill, whether it’s housing, utility bills from those individual wallets to go off and it’s to help individuals manage their money. We don’t do it at the moment, obviously there is a massive cost associated with it, we reckon we can do it for an additional cost of £120 to open a bank account and then about £7 a month running it, we reckon it would only cost an additional £1.30 a week to do this, whereas the credit unions, they don’t have the infrastructure in place like we do, so we can do it much cheaper . I’m not going to lie, 90% of branch managers don’t know about this sort of stuff
TS Would they be thinking more about their profit margins?
BM Well at branch level, you are not thinking necessarily about your profit margins necessarily, you’re thinking about performance matrices, because we no longer have separate profit and loss on a branch, whereas with performance matrices, it’s all peer group comparisons, so how many widgets have you shifted this month compared to every other branch in the area region, that’s the way effectively.
Where does money come from?
JW I would like to get to the ‘heart of the beast’, now if I come to you and you don’t know me and I come to you and I have a good credit rating with Experian and Equifax, whoever and I come to you and I would like to ‘borrow’ £10, 000 and you’re going to loan me that money
Where does that money come from?
BM OK so you’re talking about the sponge, what is a bank? Where do we get the money from?
JW That’s right, where does that money come from? Because we are given the idea that everyone has a little bit of savings and I come along and want to borrow £10, 000 off you, then it’s everyone else’s money that you actually lending me; is that correct?
BM It’s a little bit more complicated than that
JW HaHaHa I thought it was…
BM If we reverse all the way back, where did banking start? It started basically as the Italians funding the crusades, that’s where banking comes from. What happened, you started to get these emerging classes from the industrialised nations found they had extra wealth additional wealth, what do they do they take it to the goldsmiths, the silver merchant, and the silver merchants says I’ve got £100 there, they’ve only taken out £10, so what am I going to do with the extra money that’s sat there.
Well Mrs Miggins down the road needs an extension on her house so I’ll loan her that, so that is basically ‘the sponge’, that’s the fundamentals of our business and that’s kind of how it works and then you’ve got all the icing on top which is all the additional stuff all the insurance and investments, however the reality is we over expose ourselves as organisations, we take massive risks, so we will have a scenario where at the end of the month, we get a lot of deposits coming into our accounts as people are getting paid, talking tens of billions of pounds flooding into our coffers, most of that isn’t on deposit and it’s going to leave quite quickly, so for a period our books are looking very healthy, we’ll be lending a lot of money on that, however, when all that money flows back out which it will, where do we get out money from? Because all of a sudden we’ve run out and that’s what the LIBOR (London Interbank Offered Rate) is.
That’s where we go and other financial institutions; we trade, ‘cos we need money back in our coffers immediately and that’s what it is effectively, you’re just trading money all the time
TS That’s promissory notes?
BM No it’s the London Interbank Offered Rate, that’s the rate that we lend to each other, because all different financial institutions will have throughout a month are going to have ups and downs purely to have the funds available to us. Things are run so tightly, there are such vast amounts of money this is happening on an hourly and a minute by minute rate, just to keep that sponge in place, just to keep that money there
TS The fraction on the reserve meets the quota set by the FSA or whatever it is
BM To be honest with you, we are so far away from what the reality is that
TS As far as I can understand The London Interbank Rate ???
BM If the banking system stopped lending to each other the system would collapse because the money isn’t there
TS That’s why this lending is happening
JW Basically the central bank will create a bond, keeping it really simple here, I know it’s obviously a little bit more complicated, but for everyone’s basic comprehension here, the central bank creates a bond, they can then fractionalise the bond and give a little bit to all the high street banks which then fractionalise them again probably each time between 8-10 to one, is that correct?
BM Yeah, that happens all the time
JW So effectively you’re creating money on a computer keyboard?
BM Yeah- It’s not real money-Yeah
TS So what is the ratio at the moment, some countries have 1 to 30, or 1 to 10, or 1 to 8?
TS Is it not one to infinity?
BM In the UK I don’t know, you can look it up. They quote various figures, I can’t remember…
TS They are different for each bank?
BM Oh yes every bank is different, very different, yeah
TS This is where America was screwed, because they were leveraging too high, far too high
JW The thing is when the amount of debt and that’s government debt it’s not our debt, we’re paying for it, it’s nothing to do with us, it’s a private corporation’s debt. However, if you go to the Bank of England money supply, I just want you to concur this, because otherwise I want to make sure I’m not mad because I’m going around talking to hundreds of people and going on television, I might be mad, but; but if you look at the M2 and the M3 money supply which you can look up on the Bank of England website, it is nowhere near enough to actually pay it off, so what it is basically the money supply is growing exponentially, the amount of debt is growing exponentially, the money supply is also growing exponentially but at a fraction of the amount so we can never pay this debt off- so this system is unstable, so it means it’s either going to crash or we’re going to have to do what Iceland did (basically Iceland got away with not paying the IMF a lot of money, reneged on their debt, what’s your views on that?
BM You’ve got quite a few things going on there, the simplest way of looking at it is, as a government, you are going to be constrained by the amount of money you can put into the economy not getting the money supply right, you’re going to have disastrous effects, inflation, you would crash the economy, however, to keep it really simple, it goes back to human nature, we run a capitalist society and were always going to have boom and bust, boom and bust cyclical because of the way human nature runs and we run our banking system the same way and that’s why we are always chasing the risk and speculation, in banking and unless you go back and scrap the fundamental basics of banking and you change it so human nature can’t take over then that’s always going to be the case and you’re always going to over speculate
TS Human nature is about greed
BM Yes I suppose
TS When we go in (a bank) and you sign basically a contract that they’re going to pay you a certain amount of money, some people believe that that paper with a signature is an asset to the bank? Which they can then have someone promise to pay that money, so if you want a ten thousand pound loan, here’s a ten thousand pound promissory note you have from the individual, if you’re giving the bank something of value and they get something valuable to use on the market, then you have to pay back that plus interest , so one way of looking at it is you are both giving something of value, but the bank is getting a bit more and is that how it works?
JW What I’m asking, is the application form being monetized and being sold on effectively? So I sign a form, is it effectively being turned into a Bill of Exchange?
BM Not at a personal level no it isn’t ok, because that documentation is held at branch level, it’s not sent off, it’s not centralised, however, we know we can look at our lending book and we can say that every single person, all that lending we got out, they all had to sign the paperwork or documentation, so we know, we can effectively trade that as a commodity and we can sell it on…
And we can bundle lending and we can create risk products and they can be sold on and sold on again and we can effectively be buying back into debt we have sold on three times over! And we can be exposed and buying into our debt twice and that’s one of the major causes of the credit crunch.
TS I’ve just done the process I’ve ‘borrowed’ £5000 to get a car which was fine and the bank just puts a couple of digits on my internet banking and then I go to work and give my time and labour to deposit real funds into the account. You can just hop into your system a go there’s £5000. Sweat equity versus just balancing books.
Too big to fail and the credit crunch
BM This is the problem with banks too big to fail, the second you bail out an organisation that has overexposed itself to such an extent, the whole capitalist system is pointless, it just falls apart, you undermine it; I would class myself as a neo-liberal, in so far as let them fail, let ‘em fail; because that’s the only way you’ll get the industry to self regulate, the problem is the governments, organisations, regulators they’re too scared to regulate as they should do and they never will, they won’t be able to regulate effectively so; you have to be able to allow an industry in an open capitalist market to self regulate, but why would you self regulate when you know you can’t fail?
TS We can see you understand how everything works and you don’t live in that closed bubble, working in a banking system, where they don’t educate you and they don’t see the outside and how it actually works, so tell me working in a bank, working in a system of money, do other people who work there in the banks, or people you know working in the financial institutions, do they realise, do they know as much as you do? Do they know how the system works and how false is it?
BM Head office yes, branch network no. It’ll be the same with most banks maybe at senior level, but I would say our bank manager in our city centre branch in XXXXXX, wouldn’t have a clue, that’s a senior banking role
JW Why are you so well informed then? You seem to be more informed than most banking people
TS It’s quite surprising really, because when I was coming here I thought you were going to be clueless, because many people we talk to on a daily basis they are not exposed to things like that, they don’t know where the money comes from
BM Put it this way, I don’t have a passion for banking, I fell into banking when I left uni and didn’t know, what I was told this amazing vision of going into banking, it was ?? I got the job and two weeks later Lehman Brothers collapsed and I had this revelation kind of what the hell am I getting myself into here. I’ve just been massively interested in what is banking and what is going on..
BM Do you all know what the trigger was for the credit crunch, what triggered it? What exposed it? So America’s funding an expensive war in the Gulf, all of a sudden money’s getting a bit tight, the US dollar is devaluing, interest rates have been low for quite a long time, so George W Bush decides to hike interest rates up, to get more people investing in the dollar, to bring more money in, great we got fresh money we can continue to fund this incredibly expensive war in the Gulf, however, what happens when you put interest rates up? Is that everyone’s borrowing becomes more expensive and all of a sudden all these subprime mortgages that were floating around where ½% they can afford it, when you’re living on the edge of any subprime lending when interest rates go up almost 5%, woof!, it just took the whole belly out from it, people started defaulting and that’s what unravelled everything; and that was the trigger point.
Knowing what you know, what are you doing in banking?
TS Knowing what you know, what are you doing in banking?
BM I’m a retail banker, ok and I pride myself that my branch, we genuinely help our customers as best we can, within the restraints we’re set, I’m not a City banker.