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Why banking costs so much

A lot of people wonder, particularly in Ireland: how come the banks make so much money. The question really should be asked: why don’t the banks make far more money than they do? After all, they’re collecting a spread on the interest for all the borrowing in the economy and they’re collecting some sort of transaction fee on every transaction larger than a few hundred euros? Anyway, on to my tale of woe.

I rang Bank of Ireland on 16 May to request a statement. The lady on the phone said it would come out to me that week. Today (7 June, 21 days later) there’s still no sign of it. So I ring them up. It turns out that my request was keyed into the CRM system, but it hasn’t been ‘actioned’. So she promises that the relevant department will now send it out to me.

Now, wouldn’t it have made more sense if lady on the phone had licked an envelope and sent the statement out to me herself the first day, instead of wasting effort keying the request into the computer for someone else to do? It’s silly. But it’s not untypical. Banks are generally pretty inefficient about what they do.

The other thing that’s silly is that I can’t get old statements through Internet banking. I can only check my balance and see transactions since the last statement. Why not just show me everything and let me download it into Excel? Then I wouldn’t have needed to call them at all.

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  1. I’m pretty sure AIB 24 hour used to allow access to 6 months of statement data, and then restricted it. I don’t know why, but I’d bet it’s a combo of (a) reduces data storage overhead and (b) allows them to charge for statements.

  2. Well, it could be. I doubt if they can make any profit from sending out statements. I know it sounds ridiculous, but it really does cost a couple of quid every time you ring them up and ask them to stuff a statement in an envelope for you.

    How much space can it take to store that many transactions? I mean, a million accounts, 50 transactions each, 200 bytes per transaction, it’ only 10 gigabytes.

  3. I used to live outside Denmark and noticed there that my online banking was also basically limited to showing current balance a statement going back a few weeks. I know the same applies for a British bank like Barclays,

    However in Denmark, you can go all the way back. Denmark has alot of laws to protect and make life easier for people and it might be that there’s one that requires Danish banks to let people see past statements online.

    But it is also known that Danish banks earn an incredible amount of money on fees. Actually, I think it’s the biggest income that they have.
    My bank shamefully, charges 25DKR(2.5UKP) for an transaction statement if you show up in person. I know it’s because they want you to use their online banking instead which is free, but still. It’s a big amount of money for a print out.

  4. That’s odd – I use Bank of Ireland’s internet banking, and I can see details of transactions from the last twelve months… (Log in, choose the account you want details for, go to “Account Details”, then “Customise a statement”)
    I find it rather nifty, actually – I can even set the dates I want to see, and the kinds of transactions (credit, debit, PASS, etc). The output isn’t *especially* Excel-friendly, but it’s more so than a paper statement =)

  5. Well, obviously, that’s how it works. Otherwise the banks wouldn’t make that much money.

    They can give out a good bit more than 5 million euros for a 1 million euro deposit. I don’t see why you don’t think it’s fair. If it wasn’t possible, there would be a complete scarcity of capital and you wouldn’t be able to get a loan at all. There wouldn’t be any capital available, except what people could generate themselves. So the rich would have more and more capital to invest, and everybody else would just have to rent.

    I could see your point if the base rate was 25 percent, but the rate is very low and looks like it will stay that way. What do you think would be a fairer way for capital to be distributed through the economy?

  6. Nope, the Federal Reserve is not privately owned. It’s an instrument of the Federal Government. The governors who control it are chosen by the Federal Government. It is true to say it is independent. What’s wrong with the bank being out of the way of political influence?

    The website you refer to points out a few problems, but it doesn’t really come up with many solutions. Do you really think we should go back to metal money, like this site suggests? Have you any idea what this would do to part of the economy that doesn’t trade abroad and isn’t engaged in mining? There’d be no money supply, so there’d be no growth or development. It’s worth reading around

  7. Antoin,
    A few interesting quotes in response to your post:

    “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. . . . The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth.”
    –Alan Greenspan, 1966

    “Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild

    With regard to the Federal Reserve, ownership and other issues you could sit down and study the relevant acts and for six months and still have difficulty in getting a clear picture of what’s really happening.
    In order to help understand some of the issues in the Fed Reserve I suggest you have a look at article by Edward Griffin who has made a detailed study of the Federal Reserve in a book called ?The Creature of Jekyll Island?. He has given a summary of the book in a lecture of which a transcript is given here:

    There is link to an mp3 file of the lecture given.