October 22, 2007, 7:00 am

The Bank Debate Is On ; Another Response to Customers Revenge.

by: The Financial Blogger    Category: Banks and You
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After Customers Revenge’s answer back to my post, I really feel like a lawyer defending a dangerous criminal. I must admit that I smiled when I read his answer. He tries to make me say that banks are offering”bottom-of-the-barrel standards.” In fact, what I was saying is that banks are not more responsible in term of client service than another company.


find also interesting that he gives more importance to financial services than to what he eats. I think there is a much bigger ethical issue going on in our grocery store than with our banks but this is another story (I can’t write about evertyhing; we are here for finance, right?).

In fact, banks are making huge effort behind the scene to provide us with the most stable economy. CR was complaining about the spread Banks are making on loans compare to what they give in return to the customers (a very small 2-3% on bank accounts, 4% if you have a savings account). Welcome to the real world, the world of capitalism. When you only look at the primary resources (the money in the case of banks) compare to the final products (loans and other financial services), you will definitely be concerned about how easy it seems to make money. Well it’s not! Do you really think that the cost of $200 for a pair of jeans is related to cotton and manpower? It’s the same think with banks. In order to create an equilibrium, banks are divided into three big sections; the sales force, the risk management and the compliancy department. Customers basically deal only with the sales force and do not appreciate what is done on the other two sides of this pyramid.

If you think that banks are making big money while charging you fees, you are wrong again. While I can not motivate the decision of changing the fees and offer of products in branches (I work in a head office), I can tell you that it is not the main source of their profit. In fact, they make much more money from the market and their investment operations with other institutions which is far from us, mortals ;-). The risk management and compliancy department are a huge sources of expenses for banks. However, they have no other choice but to provide us with this invisible service in order to guarantee that our money exist when we need it. Worst than that, imagine that the bank would call you and call back your mortgage as they need more liquidity. They would have the right to repossess your house in order to reimburse the debt on the spot. Don’t you think it would make our economy crashes faster than the popularity of Britney Spears? A major role of the banks is to maintain this stability in our economy. We all take for granted that banks are banks and they owe us this to us, but the weight of this responsibility is huge on their shoulders.

I would like to get back on the spread made by banks on money they lend. Banks are working as any other company. While Customers Revenge claim they sell a product they don’t even own, I say it’s completely wrong. They actually pay the customer 3% to gain access to this money, the primary resources in their business. You think it is a dirty cheap cost that they are paying? Well you are the one who’s putting the money there. So where is the problem?

Another theory advanced by Customers Revenge was the fact that he thinks that bankers are paid or rewarded on new accounts. In fact, for the past few years, bankers’ objectives are made in net amount. Which means that we take what you have at the beginning at the year and we look at what comes in and what comes out. What’s left at the end of the year, this is your net. Bankers have a set of tools (rates, promotions, different products) that they can use to keep their clients. However, they are limited to their latitude and every banks have their own promotion. So don’t be surprise when the banker does nothing when you leave, there is just no point trying to offer the same thing or better. It’s like asking for having the Huggies at rebate when the store is advertising the Pampers. You just can’t have it at this time.

Regardless, clients that you lose for a rate or a fee, if you don’t lose them today, you will lose them tomorrow. The real key to keep our clients within the bank is a good client service. As being a client myself, my first experience was really bad. However, when I changed banker, I was totally pleased. My parents are also dealing with a credit union with a very competent women. All this to say that somewhere, good bankers exist! I would suggest Customers Revenge to switch bankers instead of leaving his bank as we will not have much choices left (He already cancelled BMO and both RBC and CIBC are about to be banned as well). I wish him good luck then 🙂

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