# General Business Category > Business Finance Forum >  The Unused Facility Fee - from Standard Bank

## Dave A

I'm sure most of us see nothing unusual in being charged interest on money we borrow from the bank. But what is the view here on interest being charged on the money that you *don't* borrow?

This email received from my business banking manager at Standard Bank introducing the Unused Facility Fee (UFF) certainly has me pondering the concept.


Dear Valued Customer

A new fee is going to be implemented by the Bank as from 1 July 2014

The unutilised overdraft fee is going to be levied on business accounts that have a history of not utilizing it facilities to capacity. 

This will also assist the owner to manage the business cash flows.


*What is UFF?*
UFF is a fee charged by a lender to a borrower for an unused or underutilised credit line.An Unutilized Facility Fee is generally specified as a fixed percentage of the undisbursed loan amount.The lender charges an Unutilized Facility Fee as compensation for keeping a line of credit opened

*Reasons for the Unutilized Facility Fee introduction:* 
Access to an overdraft facility is provided up to an agreed limitAs a bank, we are obliged to hold capital against the entire overdraft facility, regardless of whether it is used or notUnder the new  international regulatory framework of Basel III, all banks are now required to raise their regulatory capital base to improve the banking sector’s ability to absorb financial and economic stresses in order to protect all depositorsUnlike competitors, Standard Bank have not previously charged a fee, however the new regulatory environment has now necessitated the introduction of this fee 

*How is UFF Calculated?*
Fee charged on the unutilised portion of a customer’s overdraft facilityCalculated on the daily outstanding balance of the facilityRecovered monthlyFee will fluctuate depending on the utilization of the overdraft  over the monthThe fee will be charged at 1.2% of the unutilized portion of the Overdraft in any given day

*Fee to be applicable to accounts based on following rule:

If utilisation is less than the maximum stipulated utilisation rate (i.e. 80%), then Charge applicable fee, else
If utilisation is greater or equal to the maximum stipulated utilisation rate (i.e. 80%) then fee = 0%.
Normal interest on overdraft will be levied.*


Thoughts, anyone?

----------


## Marq

So wrong on all levels.
I am sure one could invoke the CPA.

Reminds me of the Hotel Bill joke. Its time we started invoicing the banks for 
for wasted time and paper dealing with their incompetence. This thing where they
just dip into our accounts for whatever charges they feel like for the month
is so wrong as well. They are entrusted with our life savings and should show more 
respect rather than steal from us under the colour of the law that they have laid
out themselves.

For those who don't know the Hotel Bill joke.... here is one of its many forms:-

A husband and wife are travelling by car from Johannesburg  to Cape Town.
After many hours on the road, they're too tired to continue,
and they decide to stop for a rest. They stop at a nice hotel and
take a room, but they only plan to sleep for four hours and then get back
on the road. When they check out four hours later, the desk clerk hands
them a bill for R 3,500. The man explodes and demands to know why the charge
is so high.
He tells the clerk although it's a nice hotel, the rooms certainly aren't worth
R3,500. When the clerk tells him R3500 is the standard rate, the man insists
on speaking to the Manager. The Manager appears, listens to the man,
and then explains that the hotel has an Olympic- sized pool and a huge
conference centre that were available for the husband and wife to use.
"But we didn't use them", the man complains.
"Well, they are here, and you could have," explains the Manager.
He goes on to explain they could have taken in one of the shows for
which the hotel is famous. "The best entertainers in the world perform 
here," the Manager says.
"But we didn't go to any of those shows," complains the man again. 
"Well, we have them, and you could have", the Manager replies. 
The Manager is unmoved, and eventually the man gives up
and agrees to pay. He writes a cheque and gives it to the Manager.
The Manager is surprised when he looks at the check. "But sir," he says, "this
cheque is only made out for R1000."
"That's right," says the man. "I charged you R2500 for sleeping with
my wife." 
"But I didn't!" exclaims the Manager.
"Well," the man replies, "she was here, and you could have!

----------

adrianh (05-Jun-14), BusFact (06-Jun-14), Citizen X (09-Jun-14)

----------


## Marq

Remove the Reserve Bank for Starters

----------


## Marq

Realise the problem!

----------


## Marq

And then stop borrowing form the Banks.
Its the only way to solve these kinds of issues.

----------


## adrianh

I honestly think that we should think of ways to get around the banking system. They simply make up new rules as they go along and we just have to pay whether we like it or not.

----------


## desA

SA banks have no shame.

----------


## Greig Whitton

> I honestly think that we should think of ways to get around the banking system.


You're not alone. Peer-to-peer lending may be the future.

----------


## Dave A

So I went hunting the net to see what popped up. The only serious comment I've found published so far was this - Banks, small businesses and paying for what you dont use by Graeme Codrington. It seems he took the trouble to follow up on the sms sent out at the end of last month. Personally I found it too short on detail to serve as anything remotely like official notification, and was far too busy dealing with the month end joys of being an entrepreneur. 

It seems as well I didn't bother, as this snippet reveals:




> On Tuesday, as business people around South Africa had to deal with the news that the economy had contracted by 0.6% in the first quarter of this year, those that have business banking facilities with Standard Bank also received an sms informing them that the bank would now be charging a fee of 1.2% on all unutilised overdraft facilities. No further information was given, except to phone the business banking call centre if one had queries.
> 
> Those customers who did phone encountered bemused and clueless call centre operators who took a few minutes even to confirm the information with their supervisors. Apparently, no-one in the business banking decision making department had thought to tell anyone else in the business banking division about this interesting new approach to charging customers for services they did not need to use.


And it's not like Standard Bank didn't have time to plan for this announcement - my business bank manager gave me a heads up that this was on the horizon in November last year.

All of which makes the email's lack of clarity on some pretty key specifics even more tragic.

Like that 1.2% - is that per day, per month, or per annum?
Like that 80% threshold you need to get over (or is that under?) - do you get hit with this UFF every day you don't make the 80%, or do you just have to hit the target every month and you're only hit for the months you don't, or what?

And finally, given all that time for careful consideration, to still push out a line like this:



> Unlike competitors, Standard Bank have not previously charged a fee, however the new regulatory environment has now necessitated the introduction of this fee


Did they seriously think no-one would check if this was true?

----------


## Mike C

> Did they seriously think no-one would check if this was true?


Yeah - I think that ABSA has had this for some time now.  They call it a "Commitment Fee".

----------


## Marq

> You're not alone. Peer-to-peer lending may be the future.


The thing is that the money will still be channelled through the banks.
A system needs to be introduced alongside the loans where the p2p parties pay creditors directly and avoid the banking side.
Could be something along a separate debits and credits barter type system where no actual cash is exchanged.

----------


## Dave A

> Yeah - I think that ABSA has had this for some time now.  They call it a "Commitment Fee".


How is that structured, Mike?
And does anyone know if any of the other banks do this?

----------


## adrianh

> The thing is that the money will still be channelled through the banks.
> A system needs to be introduced alongside the loans where the p2p parties pay creditors directly and avoid the banking side.
> Could be something along a separate debits and credits barter type system where no actual cash is exchanged.


Isn't this what Bitcoin is about.

The difficulty is that we need something common to us all to trade with. The problem is when you are transacting over long distances. There must be a way to get around moving money. One way is to pay in airtime (which is exactly what some people do in ZIM) Am airtime voucher can be passed around easily, used by the final recipient or sold for cash. The only thing that one needs to keep in mind is that the voucher expires. One could get around this by trading in small enough vouchers that they can be cashed in by numerous parties.

----------


## adrianh

Imagine if you can get an big airtime vendor in on this.


....its just stuck me, this is exactly what a certain family member must have done elsewhere.....

----------


## roryf

Nedbank have been doing this for sometime.Like Mike said,Nedbank also call it a commitment fee.

----------


## BusFact

> And then stop borrowing form the Banks.
> Its the only way to solve these kinds of issues.


Spot on. Not easy, but certainly the goal.

----------


## IanF

Banks should give us ideas on how to run your business for maximum profit as they just see customers as cash cows and no longer long term relationships. And this seems to be working for them. I just saw today that I am charged 3.30 each time I use the company debit card WTF why do we pay commission each time someone swipes a debit card here.

@ Dave thanks I will have a  careful look at the bank charges now.

----------


## Mike C

> How is that structured, Mike?
> And does anyone know if any of the other banks do this?


I haven't got the foggiest idea ... and to try and find out on their website is like looking for a needle in a haystack - if the needle is even there.  I don't even have any specific correspondence on the matter.  I remember that when I asked about it (some time back), I was told by the boss that it has to do with having an overdraft whether we use it or not, and that was that.

----------


## Houses4Rent

Only somewhat related here:

I get call from my Standard Bank requesting teh ourpose of R27k coming in from outside RSA. This is standard routine as per the Reserve Bank. I gave her the answer and she was happy. Before she went she had to point out that conversations are recorded and my info is deemed accurate and please note that such transactions may be recorded to SARS and FICA bla bla. The latter sounded new and I questioned what she wants to report as to my knowledge only CASH transactions abve R25k need to be reported to FICA and this is not CASH. She tried to repeat what she rattled off before and I stopped her. She clearly had no clue what it meant what she rattled off. She even admitted it when I asked her. She was just told to say that she replied. I had to laugh and suggested to her that she challenges her trainer (if there is one) to teach her what it is about she is telling people about to empower her and spare her this embarrasment and I think it got into her head. Maybe not, at least I had a laugh. Although its sad really.

----------


## Dave A

> and to try and find out on their website is like looking for a needle in a haystack - if the needle is even there.


My starting point was hunting around the various banks' websites too. They're all thin on specifics (at best) on this sort of fee.

----------


## Justloadit

> My starting point was hunting around the various banks' websites too. They're all thin on specifics (at best) on this sort of fee.


Not surprising, when you steal from your customers, you do not want to make them aware of it if you can, or make it as difficult as possible to find. Something like the online T & C's they change it when ever they want, so after you have read it the first time, you think you have yourself covered, but it changes on the fly and next thing you supposedly agreed to the change.

----------


## IanF

Biz news has a critical article on the fee Biznews article




> Standard Banks current advertising campaign asks: When last did you feel this excited about banking?  The honest answer is: before I became a small business owner.  But actually, honestly: probably never.  Certainly not when they treat business people like they have this week.  Maybe its advert is directed at shareholders, and not customers.
> ....
> For businesses, the action steps are obvious:
> 
> Review your overdraft facilities and reduce them to the levels you absolutely need.
> Look for alternative methods of funding cash flow requirements.
> Move your business to another bank, or at least threaten to do so.  
> Like most banking facilities, it is likely that if youre a good customer this additional fee might be negotiable.
> Buy more banking shares.  
> It looks as if theyre going to continue their glorious tradition of making money no matter what happens to their customers or the economy.

----------


## Alice Rain

:Mad:

----------


## Alice Rain

Banks are NOT HERE to help us, they are BUSINESSES and need to make HUGE profits, out of us!   I could've paid R42.00 instead of R99.00 for two prior years, but of course they don't tell you those things.  I hardly ever go into a bank because I normally end up shouting at whoever's available to be shouted at!  And if it just a poor employee, I say sorry and tell them not to take it personally ....

----------


## Newretailer

Banks are nothing but legalized theft. I am in the process of closing all my overdrafts and living within what I can afford to pay for outright. I have an overdraft with FNB and looking at all the monthly charges under various different names are sickening. I will close it before the end of the year and stick with my Capitec account.

Somewhere along the line, big business but especially banks have started to confuse making more profit by providing better and more services and growing business by getting more customers, with making more profit by inventing new charges on existing services. It is sickening and we don't seem to have a say. They just add what they feel like adding. When and where will this stop?

----------


## Blurock

As much as I agree that banks are ripping us off, I have to side with the banks on the commitment fee or utilisation fee.

Imagine that Grandpa has to hold R100,000 in reserve for Johnny's study fees. He can not invest it and earn interest, as the fees may be required at any time. he can also not charge interest, as it has not been paid out yet. So in other words, he is out of pocket for the interest that he could have earned.

The reason for a "commitment fee" is that the Basel 111 accord forces banks to hold more capital reserves in order to protect investors. This increases bank liquidity and reduces bank leverage (debt) and risk. These reserves are "non-performing assets" in the sense that they do not generate an income. 

Banks must account for the value of outstanding loan commitments so that funds are available should the borrower request them. They represent a future obligation in full, even though a percentage of the notional loan amounts will never be utilized by the borrowers themselves. This is also a guarantee that the money will be available to the borrower when required, although the fine print allows banks to get out of this commitment very quickly, as an overdraft is essentially an "overnight facility" and can be called up on short notice.

*Definition of 'Commitment Fee'* 

A fee charged by a lender to a borrower for an unused credit line or undisbursed loan. A commitment fee is generally specified as a fixed percentage of the undisbursed loan amount. The lender charges a commitment fee as compensation for keeping a line of credit open or to guarantee a loan at a specific date in future. The borrower pays the fee in return for the assurance that the lender will supply the loan funds at the specified future date and at the contracted interest rate, regardless of conditions in the financial and credit markets. (Wikipedia)

----------


## Justloadit

What is not mentioned is that the over draft facility is a secure loan, in other words there is no risk to the bank for lending it. This alone ensures that there is no risk and in principle does not require securing funds too meet the obligation.

Getting clients to secure overdraft limits ensures the bank has a client in which the bank makes money from the transactions processed by the client using the banking facilities. This in it's own right is income for the bank, using the Basil agreement to substantiate the 'robbery' IMHO is a farce in which they use to fleece the client even more.

My bank makes between R4 and R9K a month from my patronage, this is more than enough profit for allowing me an over draft facility.

I think that Stranded Bank may lose a number of corporate clients, who have OD facilities. 
Just remember Stranded bank was the first to start charging for Cheque deposits.
Could this be a future trend from Stranded bank, making other banks follow their fleecing ways?

----------


## Houses4Rent

> What is not mentioned is that the over draft facility is a secure loan, in other words there is no risk to the bank for lending it.


I know nothing about overdrafts, but wonder why its secure loan? What is the colateral? I think its an unsecured loan as they may or may not get the loan back and will have to sue for it.

Why don't you use your access bond as facility to borrow (and save for that matter)?

----------


## Marq

> As much as I agree that banks are ripping us off, I have to side with the banks on the commitment fee or utilisation fee.
> 
> Imagine that Grandpa has to hold R100,000 in reserve for Johnny's study fees. He can not invest it and earn interest, as the fees may be required at any time. he can also not charge interest, as it has not been paid out yet. So in other words, he is out of pocket for the interest that he could have earned.
> 
> The reason for a "commitment fee" is that the Basel 111 accord forces banks to hold more capital reserves in order to protect investors. This increases bank liquidity and reduces bank leverage (debt) and risk. These reserves are "non-performing assets" in the sense that they do not generate an income. 
> 
> Banks must account for the value of outstanding loan commitments so that funds are available should the borrower request them. They represent a future obligation in full, even though a percentage of the notional loan amounts will never be utilized by the borrowers themselves. This is also a guarantee that the money will be available to the borrower when required, although the fine print allows banks to get out of this commitment very quickly, as an overdraft is essentially an "overnight facility" and can be called up on short notice.
> 
> *Definition of 'Commitment Fee'* 
> ...


See post #4 - thats how it really works, not like they would like you to believe it works. :Wink: 
The banks are not out of pocket at all.
If you discuss the commitment fee with your banker, chances are as I have found out, they cannot tell you much more that the basic letter and do not know anything about the things you mention in this post.
Baffled by BS.

----------


## desA

I've recently trimmed all bank facilities into a single savings account with internet banking. Tired of the milking process.

Have no need for overdraft.

----------


## Justloadit

> I know nothing about overdrafts, but wonder why its secure loan? What is the colateral? I think its an unsecured loan as they may or may not get the loan back and will have to sue for it.
> 
> Why don't you use your access bond as facility to borrow (and save for that matter)?


The bank will not give a business an overdraft, unless there is collateral that can back up the loan. In many instances, it is a life policy with a residual value, which has to be ceded to the bank, or it my be property. With out collateral the bank will not give you an over draft. So effectively the OD is secured by collateral, that is why when the bank pulls the OD, most business go under, and the owner has notinhg left, as the bank grabs the collateral.

When you start requesting OD of R100K up, then things change dramatically with respect to collateral.
Access bonds are for personal bonds, and if you still have this facility it is usually a long standing bond, and is is no longer offered to home owners.

----------


## Houses4Rent

Hi Justloadit

Thanks, lucky that I never had any need or desire for an OD then.

I have 2 access bonds which I use at will. What do you mean they are personal bonds? One of mine is in the name of my trust. It could equally be in the name of a compnay if that compoany owns a property.

I would be surprised if one cannot get a brand new access bond anymore obvioulsy subject to a long list of conditions.

----------


## Blurock

> The bank will not give a business an overdraft, unless there is collateral that can back up the loan. In many instances, it is a life policy with a residual value, which has to be ceded to the bank, or it my be property. With out collateral the bank will not give you an over draft. So effectively the OD is secured by collateral, that is why when the bank pulls the OD, most business go under, and the owner has nothing left, as the bank grabs the collateral.
> 
> When you start requesting OD of R100K up, then things change dramatically with respect to collateral.
> Access bonds are for personal bonds, and if you still have this facility it is usually a long standing bond, and is is no longer offered to home owners.


Agreed, access bonds are not available to businesses due to some agreement with SARS or the Reserve bank (not sure exactly which).

Wrong; banks do give unsecured overdrafts. Not easy, but it does happen and they are totally irrational in their criteria for allocating facilities. Yes, they do normally ask for collateral, because the banks are actually pawnbrokers. Very few bankers understand or know anything about business.

I know of instances where banks have granted substantial overdrafts based only on the turnover and conduct of the account. In at least one instance they did not even ask for financials and granted R180k without any collateral. The irony of it all is that only 5% of the deposits in the account was due to the account holder!

----------


## Justloadit

I suppose it depends on the bank managers, and lately, it is a battle to get hold of a decent manager. I would suspect that granting of overdrafts in the current climate may be a tadd more difficult than in the past.

I have been granted a personal OD  years ago with no collateral, however it may not be a norm now.

----------

IanF (16-Jun-14)

----------


## Houses4Rent

> Wrong; banks do give unsecured overdrafts. Not easy, but it does happen and they are totally irrational in their criteria for allocating facilities. Yes, they do normally ask for collateral, because the banks are actually pawnbrokers. Very few bankers understand or know anything about business.


Is a trust not classed as a business then? I.e. are there no more access vonds for trusts?

----------


## BusFact

I agree with Blurock's earlier explanation in post #26. I understand why they would have this fee. Basically their customer's are asking them to keep stock exclusively for the customer, without any promise of the customer eventually buying the stock in future. That comes at a cost, even if its only an opportunity cost. I know banks can generate some of their assets out of fresh air, but not all of them.

I don't however have any sympathy for them and they deserve the backlash. They advertise a wonderful, supportive partnership relationship. Then when the customer runs into trouble and can't repay, the vicious and clinical monster shows its true colours. They also provide an over draft facility as a service to customers, which is a convenient way to conduct a business account. They provide this service in the hope of getting more customers. They created this form of service and sell it as a wonderful business tool that can be used to cover short term cash flow shortages. They keep quiet about these new charges (nothing happens over night in banking), because it might scare away potential customers. That's their choice, but they must expect people to get upset when they feel manipulated.

Another example is their insistence on a nominal monthly "service fee" on a bond account for example. It just irritates and screams arrogance to their customers. How many of you bill your customers a monthly fee for the privilege of receiving a statement from you and for the honour of being able to buy from you?

There is nothing wrong with charging their customers for the various services they provide, but if they choose to market themselves as everyone's best buddy and a helping hand, then people will become resentful when these expectations are not met. Damn, we should expect the banks to be mean and aggressive, as we invest our hard earned money with them for safe keeping.

The day I realised that the bank didn't give a continental about me and only wanted my money (just like most other businesses), was the day my stress levels caused by my bankers, reduced drastically. It a cold unemotional relationship I have with my bankers. That's not trying to be mean, that's just the true nature of their business.

Only thing I resent about the bankers is how they lie, sorry I mean market themselves.

----------

Blurock (14-Jul-14)

----------


## Justloadit

@BusFact,

Whilst I agree in principal that the banks hold reserves on the amount of your overdraft, the plain fact is not everyone uses their overdraft at the same time. So in the past, their bean counters made the calculations, of exactly how much finance was required to be placed in reserve to manage the overdraft. It is the same game they play with the amount of "CASH' that is available on reserve. If all the account holders approached the bank on the same day to withdraw cash, then the bank would close as they do not have the "CASH" to cover all the deposits in the bank.
The Banks are just getting greedy cos they want to make more money to expand into Africa, it has cost them a bundle in opening in other African countries, because in the other countries they are not allowed to add charges as they do in RSA.

It's all BS, what about the measly cents they give me when my account is in credit? Some times longer than what I use the overdraft facility, so now because I am in credit, I must pay for the overdraft facility as well.

----------

Dave A (23-Jun-14)

----------


## BusFact

Victor, you're dead right. The change doesn't really make sense. Although the Basel changes may have changed their calcs significantly, or perhaps not, I don't know and I'm pretty sure most of their customer's don't know either. Bankers created this "problem" and are now trying to fix it. The logical way to do so, well for me anyway, would be to discontinue overdrafts and phase them out or to have this charge on all new overdrafts. That would be a more customer service was of going about it, but that is not what banks are about. That would be a more expensive route, so they choose the more profitable one.

I see the logic I'm afraid. It is money grabbing and greedy, I agree. But for investors and savers (and employees), this is a good thing. For some customers, its bloody irritating. Again it comes down to the false image they create in their marketing. They are not here to make us feel warm and fuzzy inside, or to give our families a better life. We can maybe use the banks to achieve these goals, but need to realise the ruthless corporate we are dealing with.

They give you measly interest on your credit because they don't want it. They want you to rather borrow.

I grew up thinking a bank was a place where you could store and save your money. Nonsense, that's a miniscule part of a bank. Their main focus in the public market is to lend.

----------


## Blurock

> Another example is their insistence on a nominal monthly "service fee" on a bond account for example. It just irritates and screams arrogance to their customers. How many of you bill your customers a monthly fee for the privilege of receiving a statement from you and for the honour of being able to buy from you?


The banks also ask a "service fee" on installment sales. You pay an additional amount for the privilege of placing your car finance with bank A,B or C.
Ask any banker to explain the monthly service fee and you will get any number of bullshit answers. It is only there because we, the consumers, allow it the be there! :Rant1:

----------


## Justloadit

> It is only there because we, the consumers, allow it the be there!


Do we really have a choice following this route?
All the financial institutions charge the same type of fees.
Some people can only afford an installment solution, and the financial institutions know this, and make it their prey.

----------


## Dave A

Well, I got my bill, and the actual figures explain a lot.

It seems the charge rate is 1.25% per annum calculated on daily balance.
It's a service fee, so it includes VAT.
It's calculated on every day that your OD balance is under 80% of your overdraft limit (effectively a daily balance calculation).

----------


## Blurock

> Do we really have a choice following this route?
> All the financial institutions charge the same type of fees.
> Some people can only afford an installment solution, and the financial institutions know this, and make it their prey.


Should we maybe join a consumer body and start a class action? An individual can never do it on his own.
The problem with all these additional charges is that it attracts VAT, which makes it even more expensive and unbearable!

----------


## Newretailer

Another thing that is wrong with the system. The banks and other listed companies want above all else to improve their profits so the shares can go up. In true capitalism, they would improve their profits by getting more customers and getting those customers to use more services/products. As this is hard work, they choose the easy route by simply adding more charges to existing services. The profits look better and the shares go up. Or they decrease the weight of the coffee in the bottle and still charging the same prices.

I have watched banks come up with new charges year after year after year. I wonder what a world would look like where customers and employees are the most important, rather than shareholders?

----------


## callen

I think we are skinning the wrong buck here. While banks are busy trying to respond to the regulatory environment to keep afloat or if u like to keep an important and necessary bolt of the economy alive, real culprits of this mess are watching from a distance. In my book its the same regulators who had all of us in a false sense of security when the global financial system was getting eroded. Now they know better they just raise the cost for everyone without fully taking responsibility. Tough luck guys !

----------


## Alice Rain

And then they wonder why so many people do a duck! When I was watching that thing about the R699 pm vehicles, the one guy said that banks are giving people loans etc that cannot afford them and they had proof too.  I got a call from Standard Bank offering me more money on my credit card to which I replied I can't afford it.  I needed some money a while later and phoned back, I gave the guy [from call centre] my details and he said no you don't qualify but we'll just adjust some figures and of course I got the money!  I should also have not qualified for the overdraft but because I trust people and didn't read the documents, months later when filing papers I noticed that my bank manager had actually put in a higher amount for my salary when in fact I had just been locked out of my work-place and thus needed the money and the manager was well aware of this.  I went and asked her why she put that amount as I do not tell lies and she said she just wanted to help me but I would rather have been honest and not gotten the money.  Now I don't want to report it because I don't want her to get into trouble but where does it end.  Perhaps we all, and I mean all of us, need to toy toy and burn down a few banks!

----------


## Houses4Rent

African Bank is burning already. Their focus is on micro lending, serves them right in my view as its exploiting the poor.

----------


## callen

@ alice Rain this is the sort of thing that got the global financial system burning in 2008-2009. Started on wallstreet subprime morgage securities were sold world over to banks and investors with their values overinflated (bubble). So when the underlying assets showed their thrue colors the global financial system buckled everyone including innocent taxpayers were burnt. Now in your case you were sold credit when your credit profile was saying no. Yes the bank will make a profit from that transaction especially if u somehow pay up and the employee gets her compansation. It is the ordinary tax payer who suffers. We can't let standard bank fail coz its too impotant to the economy so we will have to take tax payers money to cushion standard bank from failing while holding that toxic asset. Also the toxic asset raises costs for everyone as the bank will make an attend to earn capital to cover that loss. Just tryed to simplify the complex.

----------


## Dave A

> We can't let standard bank fail coz its too impotant to the economy so we will have to take tax payers money to cushion standard bank from failing while holding that toxic asset.


Erm... Are you sure you really meant *Standard* Bank there?  :Confused:

----------


## callen

This is the thinking that regulators world over have that even saw bailing out of banks en mass! And today Portugal has just done it. Some big banks (Standard bank is one of the biggest bank in Africa by assets and lending book . So its systemically important not only to south Africa but to Africa). So its collapse will certainly get regulators animated ready to spent taxpayers money - and agreeably so because they 'watch' these banks getting too big to fail through accumulating very risky assets and yet they are supposed to be on the watch on our behalf.

----------


## callen

"Serves them right" I don't think so! The loser here is the economy of south Africa! World over (the Asian tigers, Germany etc) economic turn around was  built on the foundations of  micro lending to SMMEs. the Germany Economy has been resilient from the European debt turmoil partly because more than 30% of the economy is controlled by SMMEs in Asia 53%. "exploiting the poor" certainly not, infact its absence if allowed to happen will certainly lead to the exploitation of the poor. your sentiment is based on the high interest rates they charge for these loans. research has consistently proven that if the poor a given smaller loans (micro) to invest in micro enterprises (not consumption) they can meet the risk return payoffs and earn extra to advance their welfare hence the success of these models. in the case of our environment the micro consumer is more into consumption and I cannot blame them for that ! the education has not empowered many for businesses.

----------


## Dave A

Could we get off Portugal and generic "too big to fail" stuff for a moment and snap back to what you have implied - 

*Do you believe that Standard Bank is on the verge of failing and requiring a government bail out?*

Houses4Rent has mentioned African Bank facing a challenge right now, which seems fair comment. But Standard is looking rock solid with absolutely no prospect of needing a government bailout anytime soon, or ever a.f.a.i.k.

----------


## callen

Hey Dave A you got me wrong there. I never implied that standard bank are on the verge of failing how can that be they are doing well. The best bank in Africa from (simple, better, faster) to moving forward!  I was trying to interpret the complex web of toxic assets using Standard Bank as an example of how regulators thinking is if a bank like standard bank gets on the verge of failing.

----------

Dave A (08-Aug-14)

----------


## Dave A

Thanks for clearing that up, Callen  :Smile:

----------

