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Malfeasance in banking – is that news?

September 5, 2017

There are many instances of numbers being “fudged” to facilitate lending at banks around the world.

While it is the RBS that is currently in the news, Canadian bankers are not exempt from bad behaviour. That behaviour can range from utilising inflated house appraisals to fudging other information to qualify borrowers for credit cards and lines of credit that they probably ought not have. Just remember, banks are in the business of lending money not of preserving their client’s businesses.

Deregulation of the banking industry opened opportunities to create residuals on an enormous scale. Lower level bankers, tellers and financial advisers, are rewarded for salesmanship in a similar manner to their bosses just on a much smaller scale. Globally, banking culture encourages bad behaviour in order to push credit onto clients and to create the rewards of promotion and bonus payments.

How many times have you been asked if you need and RSP, a line of credit or a mortgage by a front line teller? The upsell is very much akin to the more familiar “would you like fries with that?” proposition in fast food franchises. The significant difference of course, is the impact on the clients’ lives. By rewarding (lower level) “dispensable staff” for developing lending portfolios senior management take the pressure away from themselves but they can bask in bigger bonuses for reaching and exceeding sales targets. So is it any wonder that the RBS is finding documents manipulated to facilitate lending and debt:

Bringing the fudge back to home base, how crazy is it for a major Canadian bank to lend an 88 year old woman with a fixed pension of $1,100 per month $20,000 on each of two credit cards allowing her 158 years for repayment terms? The pitch (sale) was made to a victim with a grade 8 education by a smiley young university educated teller using computers with powerful algorithms and a level of discretion afforded by a largely under regulated culture of greed.

For lenders perpetual debt is akin to perpetual residuals, the quantum of which creates the appearance, for accounting purposes, of wealth and permits bonusing on a massive scale. For the borrower debt represents solitude, fear, and an economic trap.