It hasn’t been a particularly good year for banks across the globe.

Many are still being downgraded by credit ratings agencies. Standard & Poor’s, addressed in the last post here, upset leading European figures when it issued a threat of widespread sovereign downgrades on the eve of the European summit.

Many banks and governments alike are struggling to raise funds or to find manageable rates at which to borrow. Those that can, on the other hand, are exploiting every drop of political advantage they can muster.

Many banks are commiting various kinds of atrocities. Many are simply finding ways – even unwittingly – to frustrate their customers.


A number of UK banks have been caught up in scandals involving the elderly. As reported on our sister blog in the UK, a succession of banks have been caught and fined for mis-selling risky investment products to vulnerable consumers. Pensioners of 83 years on average were pressured into investing six-figure sums of their inheritence into long-term risk-heavy products, often when they were not even expected to survive the investment term. Collectively, banks have faced compensation payments approaching £150 million ($233 million).

Banks were also accused of pushing for sales of packaged accounts, which, in many cases, provided extras that consumers didn’t need. Meanwhile, bank charges are increasing, with tax-payer owned RBS charging £60 ($93) per day for insufficient funds in an account.

Australian banks have also pushed for the hard-sell on fee-driven products. Concerned staff members at different organisations turned whistleblower to reveal the weekly quotas they were expected to meet by coercing customers to sign up to credit cards, loans and insurance policies.

The Financial Services Union warned that confidence in banks’ advice would crumble if consumers couldn’t be sure whether advice was in their best interests or for an advisor’s job security. The UK’s Financial Services Authority, meanwhile, hopes that a voluntary code for UK banks, plus more explicit guidance about savings protection, will help to rebuild consumer confidence in banking.

Interest, Outrest, Unrest

Australian banks have come under intense scrutiny in recent months after showing considerable reluctance to pass on the benefits of federal rate cuts designed to boost the economy. Delays in responding to the recent December cuts saw the largest banks save themselves a cool $7 million per day.

While home loan rates have been passed on in full in most cases, banks have compensated by altering savings rates and maintaining higher credit card rates. Struggling retailers have remonstrated that federal cuts have not been passed on to credit cards.

Further unrest, for consumers and retailers alike, has been caused by a succession of connectivity and security failures. Commonwealth Bank suffered outages in August and December, when networking problems saw customers unable to use debit or credit cards at ATMs or EFTPOS for 5-6 hours.

If other banks dared to stifle a snigger, ANZ was alerted to a security flaw with its online banking which allowed access to statements through a browser’s history. The problem could take weeks to fix, the bank says.

Such security and connectivity issues inspire little confidence in the technology that banks hope to introduce, such as CommBank’s mobile ‘Ka-Ching’ app, which uses Near Field Communication technology and relies heavily on secure networks.

End of all Hope?

Consumers are becoming more aware of the furtive world of banking finance, and understand that the downgrading of major banks across the world makes it more expensive for banks to operate.

But banks cannot rely on sympathy while their actions test consumer patience. If consumers turn their backs on particular banks and the flow of retail funds begins to dry up, the problems will swell and increasingly fewer people will care about the outcome.

 Keith McDonald

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