ATM fees and other bank rackets

The banking industry is one of the most lucrative enterprises in the world, next only to a few others like organized gambling and the telecommunications business. Banks are present in urban centers everywhere. That’s because where there’s money to be made, the banks are sure to be there.

Actually, the origin of the banking business is something industry bigwigs prefer to avoid discussing in public.

Banks started in Europe as establishments which provided secure facilities where the general public could store their money, safe from robbers. Patrons were charged regular “storage fees” by these banks.

When the banks began lending the money in their care to businessmen needing capital, they charged hefty interest rates for the loan. Put together, the interest and the “storage fees” create a windfall for bank owners, who became greedy.

In time, the public got wind of the banks’ racket and protested the “storage fees.” Public opinion compelled the banks to abolish the “storage fees” system and, ultimately, pay interest to their depositors as compensation for the bank’s use of depositors’ money in the banks’ lending business.

Because the early banks were not subject to state regulation, they became abusive. Their notoriety reached its peak in America during the administration of Andrew Jackson, the seventh President of the United States. Jackson saw banking institutions as exploitative enterprises.

Even when the banking industry in America was already subject to state regulation, there were establishments that charged usurious interest rates. Many families in the American Midwest who borrowed from the banks to improve their farms, with the farms as collateral, failed to pay their loans on time and eventually lost their land.

In the 1930s, the greed of bank owners triggered mobsters like John Dillinger to make bank robbery a career. Dillinger was known not to rob farm folk of their money whenever he encountered them in his bank heists.

Today, there are theories suggesting that money in the Vatican Bank has been embezzled by its officers, and that Pope John Paul I did not die of an illness but was killed to stop him from conducting an investigation of the bank’s operations. John Paul I was in office for just 33 days.

Last week, workers in the government service and the private sector protested the plan of banking establishments in the Philippines to increase the fees they charge for each use of an automated teller machine (ATM) to as much as P30 for each cash withdrawal made by anybody who happens not to be a depositor of the bank which owns the ATM being used. That’s a 50 percent increase on the existing ATM withdrawal fee of P15, which translates to a further diminution of workers’ already meager wages.

The protesters have good reason to be upset. As it is, the banks are already enjoying a windfall from the present ATM transaction fees they are collecting. A look at the financial statements banks are required to publish regularly in newspapers of general circulation indicates that banks are already wallowing in profit. From that information alone, it appears that the banks of today are no different from the greedy banks of the past.

Banks require their depositors to maintain an average monthly balance of at least P10,000. Depositors are charged at least P300 for each month they fail to maintain that balance.

That rule is akin to highway robbery.

Requiring a bank depositor to maintain an average monthly balance of say P10,000 simply means the depositor can never use that P10,000 for as long as he is a depositor of the bank. So, if the depositor expects to be a long-time client, it’s virtually goodbye to that P10,000. That is a clever way the bank confiscates the money of its supposedly “valued” client.

To repeat, banks already wallow in profit. That “average monthly balance” requirement is a racket designed to add to the gargantuan profits of greedy banks dominating the Philippine economy.

Since banking is a trade attended with a high degree of public interest, the threatened increase in ATM fees and the “average monthly balance” racket is something for the Bangko Sentral ng Pilipinas to investigate, and for Congress to legislate against.

“Requiring a bank depositor to maintain an average monthly balance of say P10,000 simply means the depositor can never use that P10,000 for as long as he is a depositor of the bank.

“Banks are already enjoying a windfall from the present ATM transaction fees they are collecting.