Coming To A Bank Near You: “Have A Note From Your Doctor?”

Banks are inherently bankrupt institutions. They claim that customers “have money” in them when, at the same time, they lend out that money. Supposedly they are required to keep a percentage of what they loan out. But, even so, they still owe many times their real assets.

This scam has worked out well for the bankers up to a point. But as abuse gets compiled with abuse, banks are finding their situation getting more risky. Ultimately, it is a Ponzi scheme. They only way they can deal with this risk is by putting constraints on their customers in order lessen the risk. But, of course, every time they put more constraints on their customers they also risk degrading the trust that their customers are willing to place in them.

Thus, BBC reports, “HSBC imposes restrictions on large cash withdrawals.”

Listeners have told Radio 4’s Money Box they were stopped from withdrawing amounts ranging from £5,000 to £10,000.

HSBC admitted it has not informed customers of the change in policy, which was implemented in November.

The bank says it has now changed its guidance to staff.

New rules

Stephen Cotton went to his local HSBC branch this month to withdraw £7,000 from his instant access savings account to pay back a loan from his mother.

A year before, he had withdrawn a larger sum in cash from HSBC without a problem.

But this time it was different, as he told Money Box: “When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved.”

Mr Cotton says the staff refused to tell him how much he could have: “So I wrote out a few slips. I said, ‘Can I have £5,000?’ They said no. I said, ‘Can I have £4,000?’ They said no. And then I wrote one out for £3,000 and they said, ‘OK, we’ll give you that.’ “

He asked if he could return later that day to withdraw another £3,000, but he was told he could not do the same thing twice in one day.

[…]

Mr Cotton cannot understand HSBC’s attitude: “I’ve been banking in that bank for 28 years. They all know me in there. You shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.”

Cotton is wrong. Legally the bank may owe him a debt, but they don’t hold money that is really “his.” People are encouraged to think of banking as if it is the same as wheat storage or some other warehouse operation. But that is not the real situation. The bank merely owes a debt to the customer, it has no obligation to actually store his money and it doesn’t have to produce the requested amount on demand.

The story tells of other customers who were treated in a similar fashion when they tried to withdraw money.

By doing this, HSBC is actually hurting themselves. Fewer people are going to be willing to hold deposit accounts with the bank.

But banks are desperate. I suspect we will soon find American banks following their example.