Makes the banking industry dishonest

The parade of the barons of lies

Under banksters - part 11

Nasty fee rip-off

When it comes to the money of their customers, especially to reduce this with fees, banks are hard to beat in their inventiveness. Unnecessary fees, senseless costs and disproportionate fees have now been declared inadmissible by the courts. Nevertheless, many financial institutions keep cashing in, as many customers do not defend themselves against the rip-off. A special way of asking the customer to pay is a direct debit return. Many banks then charge a fee of up to seven euros. According to a ruling by the Federal Court of Justice in October 1997, banks are not allowed to collect any money for bank orders that have not been executed. It was determined that the checking of the account coverage by a bank is in its own interest. Therefore, a new type of compensation in the form of telephone costs had to be invented. This machination was also prohibited by the Federal Court of Justice in March 2005.

Another popular cash method used by banks is to charge fees for transferring a securities account from one bank to another. These are just as inadmissible as the fees for exemption orders for investment income at the tax office. Furthermore, it is not permitted to charge fees for depositing and withdrawing cash, and inquiries into transfers may not result in any additional fees for the customer. A particularly popular method of withholding fees that have already been paid is with EC and credit cards. Many institutions do not properly reimburse the pro rata annual fees paid in the event of early contract termination. It is worthwhile for many customers to forestall the fees charged by banks, as there is a three-year limitation period for unlawfully levied fees.

You should therefore set a deadline for your bank to reimburse wrongly charged fees or charges. If the bank remains stubborn, the banking association offers an arbitration procedure. If there is still no agreement, the banking association calls in an independent ombudsman who brings about an arbitration. If there is still no agreement, the bank customer can go to a court of law, referring to the clear legal situation.

Expensive off-the-shelf products

In view of the lack of advice with regard to the current credit crisis, it can be stated that customer satisfaction among bank customers has deteriorated significantly. Many banks want to pass the bad business development on to their customers. The trick to cupping the customer is also evident in the individual system advice. Often there are only off-the-shelf products. More and more often, bank advisors urge their customers to have their securities account managed, which, however, in the context of standardized bulk business, leads above all to high transaction costs and thus higher income for the bank. The return on investors becomes a minor matter. The main thing is that the custody account is reallocated more often so that the bank can benefit from the management fee and the transactions.

Only in the upscale variant of private banking are the funds of wealthy customers invested individually according to their wishes and needs. The others pay excessive expenses. With standardized asset management, customers pay 1.5 to two percent commission. If the banks then invest the money in fund units, a management fee of 1.5 percent per year as well as issuing and redemption commissions are added. It happens that a customer already loses three to four percent when buying a fund without the bank having to take any risk. In addition, there is a clear conflict of interest when a bank issues its own funds, as these are often recommended to customers. In particular, Deutsche Bank often invests customer money in fund units of its own subsidiary DWS, which means that its portfolio managers receive an additional commission (kick-back reimbursement).

A particularly popular method to cheat customers is to sell products that the customer does not need at all: the coupling of installment loans with residual debt insurance. For example, when a loan is granted, banks are required to take out an insurance policy that ensures the repayment of the loan in the event of financial problems or the death of the customer. These extra policies increase the effective interest rate on a loan considerably without being communicated to the customer. However, this is nothing more than usury of credit. Consumer advocates warn that such an installment loan can be up to five times more expensive than it would be necessary due to the additional insurance. If the customer does not receive a loan without insurance, the banks would have to state the additional costs in the effective interest rate according to the law. However, since the consumer would then recognize the exorbitant interest rates of over 25%, the banks are deliberately misinforming them. The argumentation of the moneylenders that the additional policies would be taken out voluntarily is of course lagging, otherwise the customer would not get a loan.

Resurrection of the customer

If power is to come from the customers in the future, they will have no choice but to rise up against the banksters. The current form of economic cage management by banks can be broken if many customers close their accounts and turn to new interactive financial intermediaries. The internet will undoubtedly revolutionize the entire banking sector and generate new forms of investing and value retention. A new financial system will say goodbye to big banks and rely on the intelligent networking of the players. The importance of middlemen will increase here, as customers will accept less and less high transaction costs.

Customers no longer want to be manipulated by banks, but expect win-win situations. Bank managers try to bring people into line and make them financially dependent. So let's shut down as many big banks as possible by clearing our accounts before they shut down customers by canceling their loans. Only by repaying the loans and withdrawing capital is it possible to democratize the economy again and to ensure a redistribution of funds. In the future, the main task of the banks that manage our money should no longer be speculating on high returns, but rather the financing of innovations.

Too many banks, too few customers

If you look at the total assets of the banks, the share of public institutions such as savings banks and Landesbanken is 46 percent, the share of private commercial banks such as Deutsche Bank is 39 percent and the share of the other cooperative banks is 15 percent. It will therefore be inevitable that there will be further mergers, especially among public institutions and private banks, over the next few years. The banking industry in Germany has been shrinking for years and is trying, above all through mergers, to find the way to more efficiency and cost reductions.

In 2005, the Italian banking group Unicredit swallowed HypoVereinsbank, at that time the sixth largest German institute in terms of total assets. In 2008 the French cooperative bank Crédit Mutuel bought Citibank's German subsidiary. With an average of around 40,000 customers per bank compared to 54,000 on average in Europe, many German banks are not of the critical size to generate competitive advantages. Despite many smaller mergers, the costs for individual financial institutions are too high, which is one of the reasons for the excessive fees that German customers have to pay. The merger of Commerzbank with Dresdner Bank and Deutsche Bank with Postbank are a first step towards improving the competitiveness of the large banks.

While most of the mergers have so far taken place at the municipal and regional level, German banks are rather small in an international comparison and, without mergers, could soon become takeover targets from abroad. With the Postbank takeover, Deutsche Bank showed that it is rediscovering private customers in phases when investment banking is in crisis, in order to bridge the crisis with the lending business. Only if the banks succeed in achieving economies of scale in a difficult environment will the fixed cost component of the cost structure decrease significantly and they will succeed in significantly improving their cost structures.

Buying free like in the Middle Ages

When the Mannesmann trial ended in an acquittal for the defendants, despite the fact that managers were being pushed into premiums and severance payments in the millions, it was clear that this verdict raised more questions than there were answers. Who should actually control supervisory boards and board members when there is moral misconduct? Can courts that are unfamiliar with management and corporate governance slip into this role? If so, are regional courts the right body for this category of legal cases? What new rules of the game are necessary to limit the power of boards of directors and managers?

It is like this: Due to the increasing importance of managers, the separation of property and control has progressed further in the last few decades. If Deutsche Bank boss Josef Ackermann believes that there is an increase in value for companies when huge severance payments are paid within the scope of power of disposal, this only proves that he has little knowledge of corporate management. In contrast to managers, entrepreneurs are not delusional about mergers and mergers. Perhaps this has to do with the fact that they are not speculating on large merger premiums, but rather have the welfare and survival of the company in mind. It is a fact that taking millions out of the company's coffers reduces the intrinsic value of a company. Even with regard to short-term shareholder value thinking, such behavior is detrimental as it diminishes the distribution of profits to shareholders.

Of dazzlers and blinded people

A widespread species among bank managers are the blenders, which are mostly set by other blenders. Only really good managers hire people who are better than themselves. Often, in the companies' obsession with conformity, only those who subordinate themselves or who attract as little attention as possible are hired. It is particularly important that blindness and lies have entered into a harmful symbiosis. We have to answer the question of why central bankers and bankers lie all the time. Alfred Herrhausen, for example, did not need to lie because he was no fool. If, however, the backbone is missing and the exceptional talents are rare, the only thing that helps is the beautiful appearance, which can best be maintained through intensive blending with lots of lies.

But what is actually a lie? A lie is commonly referred to as a statement that does not correspond to the truth because it contains a false assertion. Here, conscious lies can be distinguished by faking false facts, unconscious lies by self-deception and white lies. Today the bank managers are playing an ideal business world for us, although prices are rising like a rocket and one bank after another is getting into ever greater difficulties. But whatever lies of bankers we look at, the special phenomenon is that the bigger the lies, the more lasting they are. At the crucial moment, when it comes to the great advantage for the bank manager's own advancement, one can count on everything, except the truth. Only those who lie as bank directors or central bank chiefs with an allegedly clear conscience are good lies. On the other hand, there is the extreme form of not lying described by the English writer Graham Greene:

Sometimes it can be dangerous to be open and honest.

However, this form of honesty should not interest us so much in managers, but rather the one that has to do with rewarding performance. Hardly any bank manager realizes that excessive salaries or severance payments dilute the banks' equity. This widespread form of dishonesty also has a lot to do with the concept of infidelity. For many managers whose power has risen to their heads, the anti-maxim to Kant is: Act in such a way that the maxim of your will can at any time also serve the principle of maximizing your salary.

The bank customers as milking cows

Banks that have promised their customers a fairytale increase in money are a dime a dozen. But the great increase in money turned out to be a nightmare for most customers, which many had to pay for with the total loss of their investments. No wonder bank advisors feel the anger of the people. Bank managers have exceeded tolerable levels of incompetence and greed to such an extent that it is now up to the courts to put the fraudsters behind bars. There can be no leniency here, since they ruthlessly robbed people of their belongings who were desperately dependent on the money. The really scandalous thing about the Lehman debacle, however, is that many bank advisors had to see with open eyes that Lehman would go bankrupt.

The madness of seeing customers as dairy cows and generating ever higher returns with them reveals a corrupt financial system that is not about increasing customer performance, but solely about achieving the banks' return targets - should it cost whatever it may. Many consultants were put under massive pressure by their superiors to sell bankruptcy certificates even to conservative customers. Of course, such a purchase always includes a customer who also wants higher returns based on the greed principle, but the whole thing becomes criminal where the risks have simply not been clarified. Here the bank advisors bear full responsibility and therefore they have to reimburse the difficulties that the customers have suffered.

BAWAG AG's penthouse socialism

The banking scandal at BAWAG made the Austrians aware that billions in the Caribbean can be destroyed not only by storms but also by the mismanagement of bankers. In March 2006, BAWAG, the Austrian Bank for Labor and Economy AG (BAWAG), had to admit considerable losses. Red nepotism between the Austrian trade union federation and the SPÖ almost led to the bankruptcy of Austria's fourth largest bank, which was owned by the ÖGB. While the red bosses were having a good time in penthouses, the bankers in the Caribbean gambled away billions. In its risky business, especially in the form of interest rate and currency speculation in considerable amounts, the bank gambled away a lot of money, which was supposed to be concealed by letterbox companies in the Caribbean.

According to a report by the Austrian news magazine News in the June 22nd 2006 issue, the loss that is said to have arisen from this was put at 1.9 billion euros. Between 1995 and 2001, this amount was sent to the experienced portfolio manager Wolfgang Flöttl for assessment, who allegedly led to the total loss of the money entrusted to him. From 1998 to the summer of 2005, the billions in losses were not reported in BAWAG's annual reports, but rather, scattered around the world, hidden in letterbox companies and foundations. So far, despite all research, the whereabouts of these BAWAG funds has not been clarified, although it cannot be ruled out that they have flowed to third parties. In the best American mortgage fashion, BAWAG's losses were sold as bonds to companies that were founded especially for this purpose in the vicinity of BAWAG and ÖGB. So that the companies could buy them from BAWAG, they received loans from BAWAG, which made it possible to disguise the losses as valuable receivables on BAWAG's balance sheet.

In order to disguise the origin of the cash flows, foundations were repeatedly interposed for transfers. BAWAG's risk management was systematically circumvented by the Board of Management. The former general director Helmut Elsner called for general silence on all sides in the boardroom, expressly also to the supervisory board and the shareholders. The BAWAG affair ultimately led to the resignation of ÖGB President Fritz Verzetnitsch and BAWAG Supervisory Board Chairman Günter Weninger. The new union leadership decided to sell BAWAG to Cerberus Capital Management for around 3 billion euros. The biggest constellation was that the bank was sold to a private equity company stigmatized as a grasshopper by the ÖGB and the SPÖ. On October 25, 2006, the public prosecutor submitted the BAWAG indictment to the court, accusing the former BAWAG top managers of embezzlement, serious fraud and falsification of accounts. On Friday July 4, 2008, all nine defendants were found guilty. The former general director Helmut Elsner was sentenced to 9.5 years in prison and a fine of 6 million euros in damages. The investment banker Wolfgang Flöttl got off comparatively lightly with 2.5 years imprisonment.

The psychology of the crisis

Instead of Porsche, some bank managers will now switch to Smart and instead of luxury call girls, they will now be treated by a therapist.The omnipotence is suddenly turned into the feeling of being a failure. The upper-class snobs with their pinstripe suits, having fun in luxury clubs or at coke parties, have compensated for the emptiness in their lives by killing their customers' fortunes. As part of the securitization of everything that can be securitized, there was a credit frenzy, with many bank managers no longer able to differentiate between reality and fiction. But the Wall Street party ended in a crash. Because the "American Nightmare" occurred there in October 2008. Instead of getting rich and leading a carefree life, it all ended up in the biggest one-week price crash of all time. The amoral materialism from which the Wall Street bankers drew their strength has collapsed like a house of cards. The era of showmanship and power shows its evil grimace in a crash and drives hosts of investors into ruin.

The greed for money, which can never be enough, has resulted in the value of money for many only in the virtual and in status symbols bought on credit. This special form of decline in value runs parallel to the decline in value, which is only expressed in the amount of the account balance. Now that there are no more profits, many bank managers have fallen into a deep hole. You have a crisis of meaning. Now only praying helps. The Pope also emphasizes that money has no value, but that other values ​​are important. That is probably why the Vatican bought a ton of gold shortly before the crash.

The Lesson from Mary Poppins

Instead of a political shock, the collapse of the CDS market acted as a catalyst for the crash in October 2008. It was not an exo, but an endo crisis that hit the financial markets with full force. One feels reminded of the 1964 musical film "Mary Poppins" by Walt Disney. Mary, the magical nanny of the Banks family, starring Julie Andrews, manages to persuade Mr. Banks, a bank executive, to go on an excursion to see the children’s working life. Mr. Dawes, the bank's senior manager, recommended that Bank's son Michael put his pocket money in the bank. But he would rather give the money to a poor trader, which is met with complete incomprehension among the bankers. That's why Michael demands his money back, whereupon he triggers a bank run and the bank stops all payouts. Mr. Banks is fired without notice. The film is a fable about the international banking system that only works as long as nobody actually wants to withdraw the virtual money on a large scale.

But when it does, the financial system will collapse completely. What started with Northern Rock remains the inherent risk of a system that hides in the world of simulation before the ultimate payday. Every bank manager should watch the film because Mary Poppins shows them that there are more important things than making money. Mary shows the children that work can be fun and that helping those in need can be fulfilling. Eventually, Mr. Banks realizes that the most important thing in his life is his family. He succeeds in convincing his former bank boss of the importance of non-monetary values.

Ultimately, banks are about trust, and if children don't trust banks, then adults shouldn't do it three times. Banks cheat, banks lie and banks destroy assets. The film shows that the general public has an inherent suspicion of bank managers. Every banker should therefore watch this film and realize that it is not bonuses that are the most important thing at work, but responsible behavior for the benefit of customers. The moral of the story is that those who rob small children of their pocket money do not deserve trust and will do bad business in the long term because they piss off the customers of the future. Pippi Longstocking didn't trust a banker either and preferred to put her money in the form of gold coins in a large suitcase rather than on the bank. Children have a seventh sense that anything that can go wrong will also go wrong, something that adults often ignore as they get older.

Dipl.-Ing. Artur P. Schmidt studied aerospace engineering in Stuttgart and Berlin. For his doctorate, he developed a cybernetic market analysis method using the example of strategic planning at Airbus Industries. After consulting at Anderson Consulting and as head of strategic analysis at Ruhrgas AG, Dr. Schmidt scholarship from the foundation for the promotion of system-oriented management theory and student of Prof. Hans Ulrich, the founder of the St. Gallen management approach. During this time, Dr. Schmidt started his journalistic career, from which books like "Endo-Management" and "Der Wissensnavigator" as well as business books like "Wohlstand_fuer_alle.com" or "Crashonomics" emerged. Today the economic cyberneticist develops steering cockpits and is the publisher of the online news portal www.wissensnavigator.com as well as financial portals such as www.bankingcockpit.com and www.wallstreetcockpit.com.

literature

(Artur P. Schmidt)

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