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HSBC Demands “Explanation of Spending” to Let UK Customers Withdraw Their Own Money

It seems HSBC in the UK has been found, by BBC News, to be asking customers making large cash withdrawals to explain why they need it. (HT @AndySwan)

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A year before, he had withdrawn a larger sum in cash from HSBC without a problem.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.

  • Px says:

    Yes , i agree keep ur eggs in multiple baskets.
    generally it is a bad idea, when banks make such arbitrary rules.
    But here is a counterpoint , they should put limits or bars on large atm withdrawals at least like the system we have in India. But customers should be profiled and catagorized. Sadly banks have sold senior citizen customers high risk pms services even after knowing their risk profiles.
    There is a 90 yr old gentleman i know in Germany, who lives alone, who has been defrauded of 100000 Euro +, Who was, i guess, brainwashed into wdrawing money from ATMs by a lady who called from pcos and took it as loans. The police there say that there are Romanian gangs operating using this mechanism in europe and that is fairly common.

    • But for the stupidity of one man, why should we inconvenience all those people? If a bank thinks something is wrong, it should create a system of “triggers” – when an instant action team will quickly call or locate a customer and say that we’re not going to stop you but is everything okay, maybe we can help etc.
      Large atm withdrawals are not allowed in any country AFAIk, because the ATMs don’t have space to store that much cash 🙂

  • raviteja02 says:

    Such a protective bank caring so much for depositors. They must be worried that people might spend cash and so acting like a father by denying

  • Px says:

    More than stupidity, Senility to miss out the obvious !
    I agree with u, and would say that the central bankers should be more vigilant about triggers but i dont think there are such rules in big banks in Germany.
    It depends upon the culture, as it is rude for kids to audit parents accounts.
    His son/ daughter who live in another city realized far to late, he had maxd out his atm wdls multiple times and finally had a negative balance.
    In this dept , even though RBI is authoritarian, systems like sms alerts are good.

  • raviteja02 says:

    Hi Deepak, Comments are getting truncated if we place a smiley in the comment. Any text after the smiley is lost. I have observed this last time I have commented.

  • Sushila says:

    I have had difficulty in depositing cash of Rs. 2000/- in a family members account, a written note had to be given by me, that I was not depositing this money as commission for job seeking.

  • gaun says:

    I have been asked many times as to why I am withdrawing or closing an account. Note that this should not be mistaken for customer service or concern for the customer. Even moving out money out of my investments will trigger questions as to why I would want to do that.