This morning I watched this video on YouTube, and it got me thinking about bank incompetence and stupidity in general. My guess is that anyone who has had a bank account for more than a year has experienced bad service or errors by their bank. Here are some examples that I know about.

Deutsche Bank

Someone that I know has an account with Deutsche Bank. Maybe twice a year she needs to send money to one of her bank accounts in the USA, to pay her American credit card bills. The last time she did this, in May 2024, the €800 that she sent went missing. When the funds didn't arrive in the destination account, she asked Deutsche Bank what had happened to her money, and was informed that they would charge her to investigate, but they were unable to tell her how much the charge would be. I find it outrageous that they would charge to investigate a clear case of breach of contract by the bank, and equally outrageous that they couldn't specify the amount. Eventually she managed to speak to someone at Deutsche Bank who was able to tell her what it would cost to investigate; sensibly, she wouldn't agree to the charge before knowing how much.

The investigation showed that her funds had been transferred to an account with the same account number (but a different account holder name) at a different bank in another state. The details that she entered in the online banking form were correct (in fact, she didn't type in the data, because the details of her last transfer to her US account were provided automatically), but Deutsche Bank had supplemented this with incorrect data.

It is now mid-September, and her €800 (about $890) has still not been refunded.

American Cheque

In the USA most banks are local to a particular area (town, county or state), so it is often necessary to open a new account when you move. Someone opened an account in the town where she was going to university, and eventually there was a dispute about her balance, because the bank had paid the wrong amount on a cheque (check, to any American readers). The bank tried to blame the customer, claiming that the number had been written unclearly. She pointed out that, by law, in cases of ambiguity, the bank are required to use the amount in words over the number amount. The bank refunded the disputed amount.

Online Access to US Account

A friend recently (about a year ago) gained access to a bank account in the USA containing an inheritance. She has constant problems accessing the account online, and has to change her password almost every time that she logs in. According to the bank, this is due to the fact that she has a German phone number, which the online banking portal can't deal with. Don't they know that there is a world outside of the US?

Irish Banks

While living in Ireland, a friend and neighbour asked me for advice about a banking issue. His account had been unexpectedly credited with some funds (a couple of thousand). He was sure that the bank had made a mistake, but they denied this. He wanted to know whether he could spend the money, and what he should do to ensure that he was in the right. I told him to go to the bank and get written confirmation that the credit was correct and that the money was his to spend, which he had already done, so he spent the money by buying a new TV and paying off a long-standing debt with another bank (on my recommendation, paid with a bank draft - cannot be cancelled).

Inevitably, his bank eventually realised their error, and asked for the money back. He told them that he had spent it, so they asked on what, and he told them. They agreed to write off the cost of the TV. The bank manager then went down the street to the other bank where my friend had paid off the debt, and got the money back, which, in the case of a bank draft, should be impossible. Then again, in rural Ireland, all the bank managers know each other (typically they play golf with each other).

Interestingly, when my friend went to the bank holding his debt to find out exactly how much he owed, the bank manger looked for the account in a filing cabinet, couldn't find it, looked in second filing cabinet, again couldn't find it, but eventually found it in a third filing cabinet. explained to him that the first cabinet was active loans, the second was loans in default and going through the collections process, and the last was debt that had been written off. When he went back after the funds had been returned to the paying bank, the manager confirmed that the debt had been written off, and thanked him for at least trying to pay it off.

Anti-Money-Laundering

I was recently contacted by my Swiss bank about activity that they felt suspicious and potentially in breach of anti-money-laundering regulations. I was told that, unless I could provide adequate explanations, my account would be frozen.

The suspicious activity was:

• A credit from the executors of my father's will. The transfer clearly specified what the funds were, and the executors have a web-site and are duly registered with the New Zealand government. Why did they need to ask?
• A transfer to purchase an annuity bond. The first attempt failed, so the funds were returned, and then I made a new transfer which was successful. The recipient has a web-site which describes their investment products, and are registered with the US SEC; it took me 30 seconds to find this information on Google. The company operates from the Cayman Island, but that, in itself, is not suspicious, so I, again, do not understand why they had to ask.

3 Days to Pay Credit Card Bill!

Through my Swiss bank, I have a credit card. Whenever I make a payment from my bank account to my credit card account, it takes 3 working days for the funds to arrive, even though it is the same bank. It is actually quicker for me to transfer money to my German account. There is no good reason for this.

Available Funds Less Than Balance

This is a problem that many people will have experienced. When checking one's account, it often shows that the available funds are less that the balance; this happens with both bank accounts and credit card accounts. This makes no sense. I assume that the issue is that the funds have not yet cleared, but in that case couldn't the statement show these as funds in transit (not yet cleared) and not credit the balance until they are cleared?

This weekend Sheryl had some trouble with her US bank: BMO Harris Bank. She was furious, and very disappointed.

She had everything set up to operate smoothly. Her bank was able to automatically fetch her two US credit card bills, and to make the minimum payments. This had been working smoothly for a few years. Then suddenly, the bank were unable to fetch the bills, so she logged on to the BMO Harris Bank banking web-portal to make the payments manually.

Upon logging in, she was presented with an information pop-up, with new Terms and Conditions, with an "I agree" button. The new Ts & Cs basically say that customers must now have an address in the USA; without this address, virtually all the services which she needs are not available, including paying her credit card bills, whether manually or automatically.

She phoned customer services, and after several failed calls and ages on hold, the agent told her that she needed a US address. Sheryl therefore changed her address to her parents' address. The changes didn't take effect immediately, despite the agent's assurances that they would, so she still doesn't know whether she will be able to make the payments or not.

There are many things wrong with what happened:

• If there is a contract (in this case, between the bank and a customer), if one party to the contract unilaterally changes the Terms and Conditions, the other party must be informed at the time the change takes effect, if not before. Informing the customer the next time they log-in is not compliant with the law.
• What were the bank thinking, taking away service from a bunch of customers just because they have non-US addresses? There is likely to be a significant number of customers, and these customers probably have higher than average net worth and income. It just seems to be bad business. I suspect that the root cause is recent US legislation to prevent money laundering.
• The customer service was so diabolically bad. The phone system doesn't work properly, the agents are overloaded and have a bad attitude, the "facts" they give out are simply not true and the promises they make are not fulfilled.

This is not the first time that Sheryl has had trouble with this bank. When she first moved in with me, it took almost a year to get her new address correctly stored on their system. She wrote letters and sent faxes (yes, it was a while ago, before Harris Bank had online banking). Amazingly, despite seriously incorrect addresses, her bank statements arrived at our flat, until the bank finally had the address right, at which point the German Post Office decided the letter was undeliverable (despite a correct address).

Normally, after such bad service, Sheryl would have closed her BMO Harris Bank account, and opened an account with another bank, but in most cases you cannot open a bank account unless you are resident in the country where the bank operates. She needs a US bank, to pay her US bills, but she lives in Germany.

It wouldn't be so difficult if the USA complied with anyone else's standards, for anything at all, but they don't: not in telecoms (only in the last few years have US customers had 3G and 4G phones - before that, Sheryl couldn't even send her family an SMS!), banking ("what is an IBAN number?"), airport rules (no international zones in US airports, so you have to enter the USA even if you are only in transit), road signs (would it really be so hard to use pictures on road signs, rather than words for everything - driving in the USA if you don't read English is a nightmare), and so on.

I am sure that we will find a solution. When we do, BMO Harris Bank will be getting a long letter detailing why her account has been closed.

Things are not looking good for the world financial system.

In China, the crises at Evergrande and Country Garden are just the highest profile examples to hit the press, as more than 50 Chinese are have defaulted on their debts, as reported by The New York Times.

A major financial collapse in China will inevitably produce fall-out around the world.

There are some other significant threats that have not yet come to pass.

Many doomsayers are warning of societal collapse due to climate change, with financial collapse being just one symptom. For more on societal collapse, see the environment thread of this blog. It seems that humanity is unable to muster the collective will to stop climate change, so the consequences of it, including societal collapse, seem more inevitable with each passing day.

Another threat is AI, as reported by Gizmodo. AI is penetrating all areas of life, including trading and financial institutions, and one of the problems with that is the lack of diversity of AI models in AI, leading to every institution making the same choices. This has led one expert, Gary Gensler (Chairman of the US Securities and Exchange Commission), to predict that AI will cause a financial meltdown in the next 10 years unless there is comprehensive regulation of this use of AI very soon.

Using AI for trading decisions is inherently dangerous, since it is not so different from algorithmic automated trading systems, which have already caused so much instability in the markets that their use has been heavily regulated. AI will simply bring more of the same, with the added complication that no-one knows how AI works.