December 7th - will there be a run on the banks?

[I1L2T3]

What do you mean by switching the system off?

 

ATMs running out of money is not switching off the system - it's a logistics issue of making sure that there is enough cash about to repeatedly fill the ATMs for one day. If banks deem it OK for cash machines to run out of money over bank holiday weekends, they will also deem it acceptable for them to run out for ONE DAY mid week. Particularly as customers caught out will be able to still get cash from supermarkets.

 

The ATM system for any given bank (or group of banks) is remotely controlled. The ability of machines to dispense money is not just dependent on then containing money but also the ability to communicate with central servers. If a bank decides to stop the central servers authorising withdrawals it's a bad sign. A very bad sign.

[I1L2T3]

Why do you think it would be fun for people to be unable to spend their hard earned wages, a couple of weeks before Christmas?

 

Where did I say it would be fun?

[Rupert_Baehr]

 

Most current accounts pay zero interest. Even many savings accounts pay only a laughable amount of interest.

 

When I got my first Bank Account (in the 1960s) I had to pay 2d ('stamp duty' AFAIR) for each cheque. There were also charges when cheques were presented. Overdrafts (for people like me) were almost unheard of.

 

If you spent (or tried to spend) more money than you had in your account, then - at the very least - your bank manager was going to be very annoyed - and you could be prosecuted for 'issuing a false instrument'.

 

(If the bank screwed up, the boot was on the other foot ... on one occasion they did - and I enjoyed kicking:hihi:)

 

I moved my account to Cox's and King's in 1971. They didn't charge me anything to operate the account (but then again, they didn't have to. - They were the 'Pay Agents'. They received my salary and that of some thousands of my colleagues on the first day of the month and they paid it to me on the last. They had one month's free use of the money.

 

Nowadays, not only do most current accounts pay zero interest, they have zero charges (provide you remain in credit.)

 

If you interest rate after tax is less than the (fraudulent) rate of inflation, you're losing money.

 

Are you really? Have you considered the services which the banks provide for you?

 

If you didn't have a bank account, then your employer could always pay you in cash. That would involve an extra cost for the employer - which would [almost certainly] be passed on to the employee asa reduction in salary.

 

You aren't obliged to pay your bills by cheque or by electronic fund transfer - you could pay them in person. If - for instance - your telecomms provider is BT, then you may be interested to know that their head office is in Bolton.

 

"Despite our Bolton postal address, the nearest mainline train station to our offices is Wigan North Western. A taxi from Wigan station to BT Business Direct in Westhoughton takes approximately 10-15 minutes and should cost around £10."

 

Easy, really. Turn up at the office, stand in a queue (could be a long queue) and pay in cash. Save yourself the bank charges (which you probably weren't paying anyway.) ... Oh BTW, because the company to whom you are paying(in cash) will have to hire additional staff to receive the payment, you may find that the bill is bigger.)

 

I've made far more by buying gold and silver over the last year than I would have by keeping the same amount of money in a bank.

 

Last January I bought a couple of Lunar Mice (minted by the Perth Mint) for £713 each, each one has earned me £200 over the year.

 

I don't doubt that. Those are, however, highly speculative investments. if you can afford the risk and if you like the odds - go for it. (I was a 'Registered Representative' on the NYSE for some years ... I could tell you a few success stories, but rather more horror stories.)

 

Many people would be far better off taking their money out of the bank that it's in and looking for accounts that pay higher rates. Banks rely too much on inertia by their customers.

 

Banks do indeed rely on inertia and many of the complaints made against banks are justified.

 

BUT:

 

It's not all 'doom and gloom'. I banked with Cox's and King's for a few years then transferred my account to Lloyds in Uphill, Lincoln. (I was in the Lincolnshire Air Force and was going to be there for ever ...which was about 10 years at that age.)

 

I had an excellent relationship with my Bank Manager. Whenever I called in at the Bank I was offered coffee or a glass of sherry (Well, the branch was in Uphill ) I banked there until I retired - which coincided (more or less) with the retirement of the manager. Then I moved my account back home.

 

There were a number of managers and I had (and have) an excellent relationship with most of them. (I had a really good relationship with one of them, but that was very many years ago and we won't talk about it here:hihi:)

 

I have a 'Premium' account. - Not because I'm rich (I'm not) but because I need to be able to bank in a number of currencies and I may need to be able to talk to somebody who knows me [somebody who knows what I'm up to and who recognises my voice] at very short notice from any part of the world.

 

I have to keep a balance of £5k in the Sterling part of that account, so it costs me (allowing for the time value of money and inflation) about £250 a year.) I have to balance that against the benefits and 'freebies'. How much does world-wide travel insurance cost for your family for a year? What fee do you pay for currency exchange? (those are two benefits included with the account which I use frequently... there are many more and my account suits me - It would not suit everybody.)

 

I've had a look at these articles but can someone please explain what 'a bank run' is and what it is expected to achieve?

 

Historically, a 'run on the bank' - usually accompanied by a long queue of investors standing outside hoping to be able to withdraw their money while the bank still had some - occurred when people lost faith in the bank's ability to safeguard their assets.

 

Banks provide services. if they don't charge account holders (particularly current account holders) for those services, then they have to make the money elsewhere.

 

Banks receive money 'on deposit' from depositors (including people like you and me, who have their pay deposited in the bank and who use the bank to handle our transactions.)

 

If the banks were required to keep all that money in a safe and not do anything with it, then you and I - and a lot of other people - would have to pay a lot of money to have the banks conduct our financial transactions.

 

Banks are allowed to loan money, both on long-term loan and on very short term 'overnight' loans. They're not allowed to loan every penny they have; they are required to maintain a degree of liquidity (cash in the safe) to meet customers' needs.

 

I wonder how many people are going to withdraw all their money only to be hit with bank charges because they forgot they had some direct debits due before they have chance to put it back again.

 

You miss the point entirely. This is a test of the liquidity of the banks. They either pass or they fail. If they have to shut down the ATM system they fail (massively) because it's a relatively crude and simple stress test of just one part of the system that the banks should be able to pass with flying colours.

If they fail then the real run will start.

 

I'm not the one missing the point. - But I'm not so sure that you understand much about banks.

 

If the ATM system shuts down (and the most likely reason for that is that the machines would be empty) it won't hurt the banks at all. - It may well inconvenience some of the customers. (Actually -and perversely -some banks would make money out of it. Some banks make a small (or not so small) charge against the accounts of customers of other banks who withdraw money from their ATMs. As the machines run low, more customers will be tempted to use an ATM which levies such a charge - more money for the bank.)(We're talking small sums, but 'every little helps' )

 

The alleged planned 'run on the banks' is not a test of liquidity. Liquidity tests can be conducted (by those with a need to carry them out) in microseconds using a computer. This 'run on the banks' has nothing to do with 'tests' but seems to be a mischievous attempt by certain people to damage the banking system.

 

I'm no champion of banks, nor am I happy about the mess they helped to get the economy into, but I'm not so blinkered that I can't see that we - nearly all of us - need banks and if somebody manages to screw them up, we will all pay.

 

I don't know what the relevant law in the UK says and I don't know how difficult/how easy it is to open an acount. (I haven't had a bank account there for over 20 years.)

 

In the US, there is a law called 'The Federal Equal Credit Opportunities Act' (FECOA) which is designed to protect people against banks which decline to offer credit on grounds which might be considered to be discriminatory.

 

If you were to go into a branch of a UK bank, clutching in one sticky mitt the minimum deposit and in the other your ID Card some proof of identity which the bank couldn't reject and you were to ask to open an account, could the bank refuse you? (Serious, question, I don't know)

 

If you had an account with the bank and you failed to comply with the terms of that account then they could almostr certainly close it (and probably pass the word around.)

 

If you were a bank manager and a number of your customers tried to make life really difficult for you (by instigating a run on the bank) and if you were a right Richard (like me ) would you be tempted to close their accounts?

 

After all, if you run a shop and a customer comes in and you refuse to serve that customer (other than on the list of grounds covered by the laws detailing prejudice) you would be entitled to do so.

 

Do banks not enjoy the same protection and rights that are enjoyed by other traders?

 

(I'd take great delight in telling somebody who tried a run on my bank: "Your account is closed. Here's the balance. BTW, if you're going to Bolton to pay your BT phone bill in cash, the train leaves at 0745.)

 

Cantonana can do what he likes.

 

The banks won't get mad ... but they might get even.

[Swan_Vesta]

I agree with protesting against the banks but as a poster on the Grauniad's website put it "It's like hacking off your knackers to treat testicular cancer"

[sccsux]

Withdrawing all your cash in many savings accounts will result in a serious loss of interest

 

Savings accounts at NatWest don't get interest any more:(.

 

Why do you think it would be fun for people to be unable to spend their hard earned wages, a couple of weeks before Christmas?

 

I suggest you re-read what was posted;) (run, not fun).

[altus]

The ATM system for any given bank (or group of banks) is remotely controlled. The ability of machines to dispense money is not just dependent on then containing money but also the ability to communicate with central servers. If a bank decides to stop the central servers authorising withdrawals it's a bad sign. A very bad sign.

Why do you think people withdrawing all the cash from ATMs would prompt banks to do that? ATMs regularly run out over bank holiday weekends and banks don't stop authorising transactions then.

[I1L2T3]

Banks are allowed to loan money, both on long-term loan and on very short term 'overnight' loans. They're not allowed to loan every penny they have; they are required to maintain a degree of liquidity (cash in the safe) to meet customers' needs.

 

I'm not the one missing the point. - But I'm not so sure that you understand much about banks.

 

If the ATM system shuts down (and the most likely reason for that is that the machines would be empty) it won't hurt the banks at all. - It may well inconvenience some of the customers. (Actually -and perversely -some banks would make money out of it. Some banks make a small (or not so small) charge against the accounts of customers of other banks who withdraw money from their ATMs. As the machines run low, more customers will be tempted to use an ATM which levies such a charge - more money for the bank.)(We're talking small sums, but 'every little helps' )

 

I'm not sure you fully understand fractional reserve banking (FRB) correctly. I'm not sure you understand the difference between the ATM system running out of cash and the ATM system being set to not authorise any withdrawals.

 

As for tests of liquidity every customer turning up at the bank (or at a bank's ATM) and requesting money on the same day is a good test of the way a bank uses FRB and it's ability to service those requests based on whatever reserve (above and beyond central bank requirements) it has deemed necessary to meet normal demand. The idea of the action on Dec 7th is to create abnormal demand.

[I1L2T3]

Why do you think people withdrawing all the cash from ATMs would prompt banks to do that? ATMs regularly run out over bank holiday weekends and banks don't stop authorising transactions then.

 

It they were facing demand they could not meet from cash reserves they would either

 

1. have to stop ATMs authorising withdrawals

2. Increase reserves to meet demand

 

The ATM is not the bank

[HeadingNorth]

The idea of the action on Dec 7th is to create abnormal demand.

 

 

Taking action that will, at best, do absolutely nothing, and at worst will inconvenience millions of ordinary people but still have no impact on the banks, is hardly a good idea.

[HeadingNorth]

It they were facing demand they could not meet from cash reserves they would either

 

1. have to stop ATMs authorising withdrawals

2. Increase reserves to meet demand

 

3. Close the counters. Far the most likely option.