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More on Banks.

Old 13th Jan 2015, 06:46
  #61 (permalink)  
 
Join Date: Dec 2005
Location: Forest of Caledon
Posts: 212
Capot is right.

If a bank has written a clause into the loan contract giving themselves the right to call in a loan, then they can call in a loan. Simple.

In the days when banks were run prudently the mantra was: lend short; borrow long. An alternative way of observing that prudent practice is to write those clawback clauses into their T&Cs.

They do something similar on the other side of the equation. Nowadays they also grant themselves the right to cling on to depositors money, even if the depositor wishes to withdraw a large sum at the stipulated notice period. eg, try withdrawing 14k in cash from Santander at five working days notice. It may say on the T&C sheet that you can do so, but they always reserve the right to refuse such withdrawals.

I found that out the hard way a few years ago when I wanted to take that sum in cash to get a good deal when negotiating the purchase of a second hand car. Refused. This was in early September and they said that the Christmas rush meant they couldn't keep such large sums available in cash. They claimed the usual "security" bollocks.

I smelt a rat and suspected that there might have been a latent run on the bank so I moved all but 100 into another bank. A fortnight later Northern Wreck suffered the first overt UK bank run in over a century so my nose did not deceive me.

If I was a gambler I'd wager that the next bank in the UK to suffer a run will be Santander. They claim that they are insulated from the woes of Spanish banks, but I don't believe them.
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Old 13th Jan 2015, 07:05
  #62 (permalink)  
 
Join Date: Aug 2011
Location: UK
Age: 51
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well I can see their point on cash, so just get a bankers draft, same as cash and as long as you have the money in your account they can't say no
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Old 13th Jan 2015, 07:20
  #63 (permalink)  
 
Join Date: Dec 2005
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The reason why I wanted it in cash is because I know the great negotiating power of waving a very thick bundle of 20 notes under the nose of a private seller when buying a second hand car, especially when it's wrapped in a bank's paper strips in bundles of a thousand or ten thousand quid. It's a psychology thing.

When haggling price, a bankers draft for a fixed sum just doesn't work.

Sometimes cash is king.
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Old 13th Jan 2015, 07:25
  #64 (permalink)  
 
Join Date: Aug 2011
Location: UK
Age: 51
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well then you can't expect any particular branch to have enough cash on hand to just give out when asked. the reason you get interest on your cash is because they lend your money out to others...so if you want to withdraw a large amount it is only fair for them to say it will take x amount of days.
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Old 13th Jan 2015, 08:08
  #65 (permalink)  
 
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the reason you get interest on your cash is because they lend your money out to others
That statement is so wrong!

The fractional reserve system means that banks create money out of thin air by lending. Nearly all of the money they lend simply doesn't exist until they create it by lending it.

When you borrow money from a bank, you are not borrowing somebody's deposits. The bank simply writes the money into existence by lending it to you. That's the nature of fiat currency. There is no wealth to back a Pound, a Dollar or a Euro. It's nearly all created as if by magic when banks lend money.

Cash, ie banknotes, is a slightly different story. That is created and issued by central banks, but most (more than 97% of) money does not exist until created by the creation of debt.

If you or I were to try that, we'd quite rightly be jailed for fraud, but banksters get away with it every day of the working week.
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Old 13th Jan 2015, 08:18
  #66 (permalink)  
 
Join Date: Feb 2001
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LF Thanks for that rather worrying explanation. I was for many years under the impression that banks took money from depositors at x% and lent it to borrowers at 2x%. Recently, I became aware that this is an over-simplification, but your explanation makes it sound like alchemy, or perpetual motion.

Don't banknotes have to be backed by a reserve, or is that another fallacy? Once upon a time, South Africa was on the Gold Standard and circulating currency was backed by physical gold reserves. I believe that changed in the 1930s, during the great depression.

My question is, what, if anything, backs the currency notes I have in my pocket?
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Old 13th Jan 2015, 08:26
  #67 (permalink)  
 
Join Date: Nov 2007
Location: New Zealand
Age: 74
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My question is, what, if anything, backs the currency notes I have in my pocket?
Confidence.
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Old 13th Jan 2015, 08:26
  #68 (permalink)  
 
Join Date: Dec 2005
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what, if anything, backs the currency notes I have in my pocket?
Nothing. Rien. Nada. Ingenting. Zilch.
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Old 13th Jan 2015, 08:30
  #69 (permalink)  
 
Join Date: Dec 2005
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If you believe in the tooth fairy or any other deity, then that deity is real for you.

It's just the same with your Pound or Dollar or Euro or Rand or Peso.
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Old 13th Jan 2015, 09:20
  #70 (permalink)  
 
Join Date: Aug 2002
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I was for many years under the impression that banks took money from depositors at x% and lent it to borrowers at 2x%. Recently, I became aware that this is an over-simplification, but your explanation makes it sound like alchemy, or perpetual motion.
In simplified terms :
- As Low Flier already pointed out, its an old wives tale that banks use deposits to fund loans
- Banks hold their own assets in various guises (cash, gilts etc. etc.)
- The banks lend, on a leveraged basis on the back of these assets
- The name of the game is to correctly evaluate the risk across your loan book so that you can keep defaults to a minimum, and therefore minimise the risk of recourse to the bank's hard assets, and make money from the interest charged on the loans.
- For larger loans (e.g. funding the purchase of a Boeing), banks will form syndicates with other banks and other sources of money in order to spread the risk.

Done right, it works well. Done incorrectly or try to be too clever and you see the sort of stuff seen in 2008 with the US mortgages backed by fluff.
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Old 13th Jan 2015, 10:03
  #71 (permalink)  
 
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........... I'd wager that the next bank in the UK to suffer a run will be Santander. They claim that they are insulated from the woes of Spanish banks, but I don't believe them.
I worry about Santander. I have a pension fund in Santander (Spain) and am trying to find a way to get it out before they and/or the Spanish economy crash. It's not enough to be life changing if I lose it, but I will still be aggrieved if the worst happens.
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Old 13th Jan 2015, 10:40
  #72 (permalink)  
 
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I worry about Santander. I have a pension fund in Santander (Spain) and am trying to find a way to get it out before they and/or the Spanish economy crash.
You do realise Spain only accounts for 15% of Santander's customer base don't you ? They're more active in Germany, Italy, Poland, UK & Latin America. Only 25% of their loan book comes from Spain.
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Old 13th Jan 2015, 10:45
  #73 (permalink)  
 
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I don't profess to understand much about banking and pensions, but I am quite sure that if Santander de Pensiones, which is where my money is, in Spain, goes tits up, my money is lost.
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Old 13th Jan 2015, 11:07
  #74 (permalink)  
 
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Only 25% of their loan book comes from Spain.
I remember when the RBS crooks were claiming at press conferences that their exposure to the US sub-prime market was "miniscule" and I remember them saying "we are just not in that space".

Bloody liars! The same liars who claimed that they did not need to boost the bank's capital "inorganically", ie with a bond or share issue, just before they did exactly that.

Santander is massively more exposed to the PIIGS than RBS ever was. There's a lot about Santander that smells of incipient bank failure.

When Santander goes tits up, I really don't think the Spanish government will bail UK savers or creditors out. Neither will the UK government. I think the template was set with the two Cypriot banks. There will be a bail in, not a bail out. Small savers with less than 85k will be OK, but everyone else will be raped.
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Old 13th Jan 2015, 11:30
  #75 (permalink)  
 
Join Date: Aug 2002
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Small savers with less than 85k will be OK, but everyone else will be raped.
The words eggs and baskets come to mind !
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Old 13th Jan 2015, 11:48
  #76 (permalink)  
 
Join Date: Dec 2005
Location: Forest of Caledon
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The trick is not to spread one's surplus cash across apparently different banks which actually trade under a single banking licence as the 85k thing is per customer per banking licence, ie multiple subsidiaries of a parent bank don't necessarily have separate 85k compensation schemes.
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Old 13th Jan 2015, 16:17
  #77 (permalink)  
 
Join Date: Sep 2008
Location: South Africa
Age: 84
Posts: 1,326
An ATM swallowed my Credit Card today!

What a bugger up.

Living out in the sticks, as we do, SWMBO and I occasionally drive about 120KM to a large shopping mall to purchase goods not readily or economically available in the local shops.

Yesterday I filled the car with petrol, that was the good news. As a full tank gives me at least 500km, with only only local, short journeys of start stop motoring.

After raiding two shops, I suggest that we return to the car to empty the trolly and then have lunch, but because I was getting low on cash, I would use the ATM by the door to the car park to replenish my money clip.

The ATM accepts my card normally and asks for my PIN, before I could hit the 1st key the screen changes to one that asks if I want more time!!!

So I hit 'Yes'.

The result is that the ATM now displayes the normal start screen, saying, 'Please Insert Your Card'!

Fortunately, the ATM is one of 4 situated outside of a branch of my bank. Not wishing to leave the machine for some bad guy, to somehow extract my card, I persuaded the security guard to have a member of the bank staff to come out to me.

I was taken into the branch, and spent an hour going through the bureaucratic nightmare that has to be endured in these circumstances. All done while SWMBO is sat outside of the bank because the supermarket trolly won't fit through the bank's doors!

The net result is that my Credit Card is now stopped, I cannot use an ATM and I have lost access to Internet Banking, as my credit card number was my 'login id'. I can expect my new credit card 'in about a week'.

They at least did let me draw some cash out of my account, and lunch started with half a litre of cold beer.
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Old 13th Jan 2015, 17:38
  #78 (permalink)  
 
Join Date: Aug 2002
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as my credit card number was my 'login id'
Sometimes you wonder what goes through the minds of software developers....

Credit cards ... as login ids ... on a public website .... what could possibly go wrong....
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Old 13th Jan 2015, 17:42
  #79 (permalink)  
 
Join Date: Feb 2001
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Age: 68
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Sounds like Standard Bank - mine's the same. Stupid, because anyone who knows your card number is already a third of the way through the login process.

My experience with Standard Bank is that their service is head and shoulders above any other bank I've dealt with anywhere in the world.
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Old 13th Jan 2015, 18:01
  #80 (permalink)  
 
Join Date: May 2007
Location: Europe
Posts: 1,420
I was for many years under the impression that banks took money from depositors at x% and lent it to borrowers at 2x%.
So was I, and then one glorious day when the banks were running unchecked by reality or anything else, I think in the early noughties, maybe late nineties, Barclaycard sent me a round robin begging me to borrow up to 6,000 at 0% for the first year. The catch was, of course, that monthly repayments were needed, and missing one meant that interest at an extortionate rate would be applied to the whole loan from day one, and added to the loan, and that if you didn't repay at the end of the year the rate would become extortionate.

They were targetting the vulnerable and stupid, of course, waving 6,000 under their noses and saying "It's yours, just sign here" in the certain knowledge that many would fail to meet the conditions, and end up owing the bank their souls. The back street loan shark business model,of course.

I took the 6K, set up an SO from my Barclays current account for the minimum monthly payment (20? - something like that) 5 days before the due day, and placed the 6K in a savings account with Barclays at 5%. I sent the balance back to them 2 weeks before the year was up, and kept the interest they had paid to me.

A tiny triumph of turning the tables, but a satisfying one.
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