Stephen Cotton went to his local HSBC branch this month to withdraw £7,000 from his instant access savings account to pay back a loan from his mother.
A year before, he had withdrawn a larger sum in cash from HSBC without a problem.
But this time it was different, as he told Money Box: "When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved."
Mr Cotton says the staff refused to tell him how much he could have: "So I wrote out a few slips. I said, ‘Can I have £5,000?’ They said no. I said, ‘Can I have £4,000?’ They said no. And then I wrote one out for £3,000 and they said, ‘OK, we’ll give you that.’ "
He asked if he could return later that day to withdraw another £3,000, but he was told he could not do the same thing twice in one day.
Okay, if you ever want to start a run on your own bank, this is the kind of shit you do.
The banking system is based on trust. If you ask me a question, any question, on why I need my own money, and actually deny me my money if you don’t like what I have to say, then I do not trust you. What I will do then is to move my money out of your stupid bank, and to some other bank that has no such bullshit strategy.
While HSBC has said they will tell their customer facing staff to not deny withdrawals (but continue to ask for reasons), the shit has already hit the fan, and by now customers will be creating accounts in other banks and in the next few days, will transfer money over.
What about India?
India has seen instances, in the past, when banks didn’t allow withdrawals. When Global Trust Bank was in trouble, the RBI limited withdrawals to Rs. 10,000. The bank was later merged and depositors lost nothing, but obviously they were furious.
In 2003, there was a mini-run on ICICI Bank when weird rumours went around, and customers stood in long lines in Gujarat at ATMs to withdraw money.
But now, things are very different. With IMPS and NEFT and inter-linked ATMs, customers can withdraw money both in currency and electronic forms. Taking money out as currency does end up hurting the banking system. In India, taking out just 4% of all deposits as cash will bring the system to its knees.
How to avoid an HSBC-like Situation
As a customer it is important that you maintain two accounts, with different banks. I have accounts with HDFC Bank and Yes bank, and regularly move money between the two. If either of these banks decide to do an HSBC on me, I will move the money to the other immediately!
I would recommend everyone does this, because it will keep banks on their toes if we will vote with our feet.