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THINK about it: your salary gets paid into your bank account and you trust them to keep it safe for you until you need it. Your debit orders go off and a week or two later you expect the ATM to give you cash.
But that’s not all. You might have savings with the bank, or a credit card. You know the money is there when you need it. After all, you’ve worked hard to get to this point, and managed everything well so that you have a good credit record.
Right, you moan about your monthly bank charges (who doesn’t?) and everyone has a story to tell about admin dramas they had with their bank (mine managed to bounce a cheque made out to a dress shop by someone I had never heard of, from my credit card account in 1991).
But 99% of the time, stuff gets resolved and you get your money, minus the charges.
Money is all about perception and trust.
The collapse of African Bank
And that’s where things went horribly pear-shaped for African Bank last Wednesday.
Read: African Bank expects R6.4bn loss, CEO quits
Actually, it had been coming for years, but Wednesday was sort of D-Day, when their CEO resigned, followed by a dramatic plunge in their stocksto a record low of 20 cents. Then trading was stopped.
Read: Abil rout weighs on JSE, MTN shines
Read: Trade of Abil shares halted on JSE
Investors have lost billions and I can’t see them stepping in to re-invest R8.5bn to keep operations afloat. They did it before, and that didn’t work, did it? So the Reserve Bank came to the rescue to try and stop a knock-on effect. Guys, let’s not forget that’s our money.
Read: Rescue plan for African Bank
So what are the alternatives to banks that could go bang in the middle of the night? Barter trade is not practical in our world (imagine going to the supermarket and trying to exchange goods of similar value for payment at the till: it would take for ever).
Initially people carried blocks of metal around that had a certain value and could be exchanged for goods.
But they were heavy, so rulers began stamping these blocks as a mark of authenticity. Then the blocks were kept in a safe place, and they cut around the stamps, which represented the value of the block. From there came the first coins.
Then there were letters from the bank, stating that you were good for a certain amount. This was followed by standardised notes, which we still use today.
It’s all about trust and attributed value more than real worth. Think about it: the R200 note in your wallet is made of the same paper/fabric as the R10 note. But it buys 20 times as much, purely because of what is printed on it.
The scary thing is that one of the reasons modern banks can collapse is that they no longer have to keep the actual valuable objects/cash in reserve. They are only required to have a certain percentage of it at hand – sometimes as low as 20%.
That’s why banks fear what they call a run. This is when people fear a bank collapse and everyone descends onto the bank to withdraw their money. The bank quite simply doesn’t have it.
What a good bank should do
So what do I expect from my bank in order for me to continue being a loyal and profitable customer?
• I expect them to do what they are supposed to be skilled at doing: managing and investing my money safely.
• I know shareholders are important, but when decisions get made on an ongoing basis purely to keep them happy and to give them returns, my bank is failing me. There needs to be a balance between their interests and mine.
• I expect my bank not to risk my financial security and trust by giving short-sighted unsecured loans to clients they have not vetted carefully. I had to jump through the hoops to get credit, so everyone should. It is for everyone’s safety. A bad debt eventually becomes the problem of all the customers of the bank.
• I don’t think it is wise for a bank to branch out into areas they know very little of, such as the furniture business. Stick to what you are hired to do – managing money.
• I expect my bank’s admin and operations to run smoothly. If I suddenly need to draw money at the only ATM in a small town in the middle of the night, I don’t want to find the ATM offline, or out of cash. I pay for this convenience. As I do for online banking.
• I expect my bank to curb unnecessary expenditure. I don’t want to hear about huge bonuses being paid to executives who have steered a bank to the brink of collapse.
• I expect my bank to change its policies in response to economic conditions or financial results. If unsecured loans have caused a collapse, and your shareholders or the Reserve Bank bails you out, don’t carry on giving out those loans. They push up turnover, but they’re a poisoned chalice.
• I don’t feel that a mere resignation is punishment enough for a CEO who has steered a bank into the abyss. This disaster happened on his beat and he should take responsibility for it. He’s never going to want for anything, unlike many of the bank’s clients, and possibly even shareholders.
Read: Taking the fall for Abil woes
I am still considering what I would regard as a fit punishment.
While I am in this medieval frame of mind, let me go and see how much cash I can actually store under my mattress. Maybe I should opt for gold coins. There’ll be fewer of them, so I would sleep more comfortably.
- Fin24
*Susan Erasmus is a freelance writer.
But that’s not all. You might have savings with the bank, or a credit card. You know the money is there when you need it. After all, you’ve worked hard to get to this point, and managed everything well so that you have a good credit record.
Right, you moan about your monthly bank charges (who doesn’t?) and everyone has a story to tell about admin dramas they had with their bank (mine managed to bounce a cheque made out to a dress shop by someone I had never heard of, from my credit card account in 1991).
But 99% of the time, stuff gets resolved and you get your money, minus the charges.
Money is all about perception and trust.
The collapse of African Bank
And that’s where things went horribly pear-shaped for African Bank last Wednesday.
Read: African Bank expects R6.4bn loss, CEO quits
Actually, it had been coming for years, but Wednesday was sort of D-Day, when their CEO resigned, followed by a dramatic plunge in their stocksto a record low of 20 cents. Then trading was stopped.
Read: Abil rout weighs on JSE, MTN shines
Read: Trade of Abil shares halted on JSE
Investors have lost billions and I can’t see them stepping in to re-invest R8.5bn to keep operations afloat. They did it before, and that didn’t work, did it? So the Reserve Bank came to the rescue to try and stop a knock-on effect. Guys, let’s not forget that’s our money.
Read: Rescue plan for African Bank
So what are the alternatives to banks that could go bang in the middle of the night? Barter trade is not practical in our world (imagine going to the supermarket and trying to exchange goods of similar value for payment at the till: it would take for ever).
Initially people carried blocks of metal around that had a certain value and could be exchanged for goods.
But they were heavy, so rulers began stamping these blocks as a mark of authenticity. Then the blocks were kept in a safe place, and they cut around the stamps, which represented the value of the block. From there came the first coins.
Then there were letters from the bank, stating that you were good for a certain amount. This was followed by standardised notes, which we still use today.
It’s all about trust and attributed value more than real worth. Think about it: the R200 note in your wallet is made of the same paper/fabric as the R10 note. But it buys 20 times as much, purely because of what is printed on it.
The scary thing is that one of the reasons modern banks can collapse is that they no longer have to keep the actual valuable objects/cash in reserve. They are only required to have a certain percentage of it at hand – sometimes as low as 20%.
That’s why banks fear what they call a run. This is when people fear a bank collapse and everyone descends onto the bank to withdraw their money. The bank quite simply doesn’t have it.
What a good bank should do
So what do I expect from my bank in order for me to continue being a loyal and profitable customer?
• I expect them to do what they are supposed to be skilled at doing: managing and investing my money safely.
• I know shareholders are important, but when decisions get made on an ongoing basis purely to keep them happy and to give them returns, my bank is failing me. There needs to be a balance between their interests and mine.
• I expect my bank not to risk my financial security and trust by giving short-sighted unsecured loans to clients they have not vetted carefully. I had to jump through the hoops to get credit, so everyone should. It is for everyone’s safety. A bad debt eventually becomes the problem of all the customers of the bank.
• I don’t think it is wise for a bank to branch out into areas they know very little of, such as the furniture business. Stick to what you are hired to do – managing money.
• I expect my bank’s admin and operations to run smoothly. If I suddenly need to draw money at the only ATM in a small town in the middle of the night, I don’t want to find the ATM offline, or out of cash. I pay for this convenience. As I do for online banking.
• I expect my bank to curb unnecessary expenditure. I don’t want to hear about huge bonuses being paid to executives who have steered a bank to the brink of collapse.
• I expect my bank to change its policies in response to economic conditions or financial results. If unsecured loans have caused a collapse, and your shareholders or the Reserve Bank bails you out, don’t carry on giving out those loans. They push up turnover, but they’re a poisoned chalice.
• I don’t feel that a mere resignation is punishment enough for a CEO who has steered a bank into the abyss. This disaster happened on his beat and he should take responsibility for it. He’s never going to want for anything, unlike many of the bank’s clients, and possibly even shareholders.
Read: Taking the fall for Abil woes
I am still considering what I would regard as a fit punishment.
While I am in this medieval frame of mind, let me go and see how much cash I can actually store under my mattress. Maybe I should opt for gold coins. There’ll be fewer of them, so I would sleep more comfortably.
- Fin24
*Susan Erasmus is a freelance writer.
