THE BLOODSUCKING BANKS
by Tgopal
Kota Damansara
Once upon a time, not too long ago, when the communication system in the world was at it’s infancy, we had so much problems dealing with banks.
Transferring of fund may take days or even weeks. To withdraw RM10, you may have to queue up for one hour or longer. If you had found a discrepancy in your bank statement, it may take months because the bank clerks/officers had to manually search for files which may be located in a store room hundreds of kilometers away.
But thanks to the latest communication technology now, almost all transactions performed at your fingertips in a matter of seconds, or at least we were convinced that way.
Let’s look at two scenarios and I leave it to the judgment of the readers on to what extent our banks are exploiting us, the customers without whom, they will never exist.
Way back in 1993, when I was still working with a local bank, a house cheque banked into a savings account will be cleared immediately but would be under one day float if it’s deposited into a current account. Still, if the current account holder had an ATM card, he could withdraw the fund after 5pm the same day.
Local cheques would be cleared in two days using KLACH system, in which, these cheques would be sent to the account holder’s branch so that the officers there could verify signature and other technical details. Simply put, if I bank in a local cheque at 3pm on Monday, I can withdraw the money on Tuesday after 5pm at any ATMs.
Fast forward to year 2007. If I bank in the same local cheque at 3pm on Monday, I can only withdraw the cash through ATM on Thursday morning, that this TWO full working days later! ( except for Public Bank, where you can withdraw the night before).
With so much of improvement in the information technology, aren’t we supposed get access to our fund earlier. Why is this working the other way around?
For your information, the account of the customer who issued the cheque will be debited on Monday itself but is credited to the payees account only on Thursday. Now, who’s keeping the fund for two days?
Having worked in the Treasury Department in a financial institution before, I can easily assume that these banks will make hell of profits from interest by lending it to other banks for just two days! And we are talking about billions of fund under float, not millions!
You can argue that the bank passes the interest income back to the customers but for low income earners whom keep less that RM1000 a month in their account, they almost get nothing! On top of that another RM8 or RM10 will be deducted annually for having ATM card. So, am I wrong in assuming that the banks actually exploit the customers, especially the low income earners by denying them access to their own fund and keep in under float for the bank’s own benefit?
A house cheque banked in into savings accounts used to be cleared immediately since the officer at the branch has access to the specimen signature of the customer and can do it straight away, and by the way, they are getting paid to do that, right? But not anymore.
Recently I went to bank in a house cheque at RHB branch and I was told to bank in through the ATM machine. I refused because these cheques would be sent for clearing and it will take three days before I can see my cash. Why sent the cheque for clearing when all particulars and specimen signatures are already at the branch itself?
As usual, the standard answer given was “It’s the decision by HQ and we just follow instructions”. When I insist the cheque to be cleared immediately, they said I have to pay RM10 as a service charge, according to a directive from HQ.
There was a notice on the wall on the service charges approved by Bank Negara but this item was not even there! I did make a complaint and until today, you can guess, no response from their HQ. They must be busy spending their time on how to better make use of the IT technology to further exploit us.
Another problem which affects the low income earners is the ATM machine. It was so much convenient at the beginning but now almost all the banks playing the same trick. They only load RM50 notes into the machines and not RM10 notes, although they have space to do it.
Assuming a low income earner makes RM790 per month after deductions. He can only withdraw RM750. How about the remaining RM40? Well, he has no choice but to keep it in his account because he is working 6 days a week, so you don’t expect him to go to the bank counter and queue up to one hour to withdraw that RM40, right?
In case of an emergency situation where he has to use that cash, like running out of petrol for his motorbike, well, sorry folks. You still have to pay ATM service charges every year but you still cannot withdraw your own money! Sounds absurd, right? And why the banks are doing this?
Again my assumption is for the interest income from inter bank lending. Imagine RM40 from 100,000 customers left in the account against their will for 30 days. At 3% p.a in comes to a cool RM10,000 for the bank for the month. Aren’t the customers will also receive their share?
Dream on, guys. Ask any banks how much is the net interest gained by having an average balance of RM40 for one whole year. It’s actually becomes negative after deducting the service charge for the useless(?) ATM card.
Although the right channel for me to complaint is by complaining to Bank Negara, I prefer not to do it because aren’t they supposed to know by themselves on the ways banks exploit their customers?
I heard some of the best brains in the country are employed there. I only have an ordinary brain but if I can engage it and find out various dirty methods used by banks. Why don’t they? Or do they know about it and was asked to “tutup satu mata” by someone high up there who rub shoulders with the directors of the commercial banks?
How else could the banks make up for the losses they incur from their non-performing loans particularly those that they give to their friends and cronies ? It is a fact of life that ordinary folks get screwed while the rich get richer.
There is the famous saying that banks offer you the umbrella when the sun is shining outside, and takes away the umbrella when it rains.
I believe the shift in banks’ sources of income started a few years back when fees and service charges overtook interest-based income contributing to the bottom line of the banks. That’s why we do not hear very often about the spread between deposits and lending.
In recent years since, we have all the banks sneakily introducing charges here and there to their unsuspecting customers who, to their detriment, find out only after, or during, the transaction.
Yup, I’ve also been instructed to use the bank-in machines at the foyer of Menara Maybank, but I refused and told the counter clerk so, after having taken the queue number and waited about 15 mins already. But then the counter clerk also refused to take my over-counter banking. NIAMAH!!!! So, what to do? Instantly closed my account together with my FD as well. I asked for a bankers cheque, was told I had to pay RM ‘X’ for the cheque!! NIAMAH AGAIN!!! Argued with her, and her Officer behind, that I should not be charged, in fact penalised, for firstly withdrawing my OWN money, and secondly, to be charged for the bank cheque. Surely, their brains cant have expected my to withdraw in CASH in closing my account, particularly FD!! Finally, they relented and didnt charge. But it wasn’t worth it – my BP must’ve gone through the roof! I’m puzzled though – if the Officer could waive charges just like that, why charge in the first place?
And all these silent-but-cumulatively-costly charges are supposed to already have received the approval of BNM before they can be charged by the banks. I dont understand why, too.
Man, RHB is already infamous.
Going overseas, withdrawing FDs, and guess what – I need appointments for all my FDs. Later I found out from HQ that it was a local Cheras branch rule for such nonsense.
I disagreed and said that I was not returning for any appointment and I wanted my money then.
Some scene, and they relented. Well, what happened to the rule. Bent, and broken? Anyway, as if to make life difficult for me (most probably was) they said they could not give me cash and could only bank into my savings account. What if I didn’t have a savings account?
Well I did. I said fine, drove home and returned in five minutes with a request to close account.
You guys may grumble and mumble all you want, but in terms of service Malaysian banks are a lot better than banks e.g. in the U.K. You can for example walk in to any bank in Malaysia and complain about all and sundry – even bang on the table and call for the manager. Try doing the same with Barclays or Westminster in London they’ll stare you down and call security. In the U.K. for a customer to have more than one account with different banks is unheard of. In Malaysia that is the norm i.e. to have more than one bank.
I think Malaysian customers are spoilt, encouraged by the culture which has been nourished by BNM over the last thirty years or so.
I have written countless letters to Bank Negara complianing about banks that are actually “cheating” (there is no other word I can use) clients.
The normal reply from BN is that would refer the complaint to the bank concerned and request it to give a reply to the complaint.
You can write to
Pengarah
Jabatan Pengawalan Bank
Bank Negara Malaysia
P.O.Box 10922
50929 Kuala Lumpur
Tel:03026988044 Fax:03-26913661 / 26987981
Recently my bank charged me RM 10.00 courier charges even though I went personally to the bank to collect my cheque books. When asked why I have to pay when no courier service was involved, the reply was for the cheque to be sent from KL to the branch!!!. Absurd. This cost must be borne by the bank.
I wrote to Bank Negara with a c.c. to the bank and within a week RM 10.00 was refunded.
There are some bank that do not allow customers to collect their cheques personally and the cheque books are sent by courier to their homes, like it or not. Of course the courier charge is between RM 5.00 and Rm 10.00.
Surprising thing is Bank Negara does not take any actions against these banks.
Some bank charge RM 3.00 to have cheques cashed at the counter when this is against BN regulations.
A phone call to top up your account cost RM100.00. This happened to me because the cheques which I had banked in a few days earlier had not been cleared (deliberately) as explained by Togpal above.
And the cheques I had issued had been presented for clearing. If this is not cheating than what is. Bank are legallized Ah Longs.
“Well I did. I said fine, drove home and returned in five minutes with a request to close account.”
This happens rarely in the U.K and when it does nobody takes notice of it. You are free to close your account – but you have no right to scream or thump your fists insisting that individualized service be given. Nobody writes letters of complaints to the authority complaining about this bank or that bank.
They’ll think something is wrong with you.
Banks are important to society. As Muhammad Yunus, the Nobel Prize winner for this year has shown, banks indeed can make for a better society. But you must have the intent, sincerity and most importantly the will that banks can make society better. But our banks blare their billion dollar profits while almost everyone can see that society in general gets a raw deal. For that you only need to fault the PM or the Bank Negara Governor. Mahathir, after the mergers, once mentioned that he would not hesitate to go back to 40 banks if the current bankers took the mergers as a sign of monopoly and took advantage of customers. But they have been taking the lay public for a ride after the mergers…….and this abuse of course will continue for some time because we have currently a lame duck Prime Minister and Finance Minister who allow these abuses to continue….
I had the similar experience as what experienced by riversandlakes in RHB Bank in Taman Tun Dr Ismail KL.
Some time ago my spouse and I went to the RHB Bank Taman Tun Dr Ismail KL planning to place money in FD.
The counter staff told us to get appointment for the next day, and that the quota for FD (4 numbers per day) for the day was used up, no more acceptance of FD for the day.
We were pissed-off and left with our money and never went back to RHB Bank ever.
Here are my bad experience with the blood suckers:
1. I wanted to redeem my housing loan with RHB. Of course, I need to know the balance of the loan. The bank wrote to my solicitor to let them know the balance. With no notice or informing me, RHB just debit RM100 into my housing loan account being redemption fee. Isn’t it the bank obliged to tell how much I still owe them? Without my knowledge, they just charged me RM100 and automatically put it into my loan account. I have been waiting for this moment to highlight this.
2. My new banker send the cheque to RHB to settle my loan on Aug 17. But the loan interest continue to run up to Sep 12. Isn’t this ridiculous especially my new banker had started charging me the loan interest once they sent out the cheque. Then I would be double charge.
God Father correctly posed question, “How else could the banks make up for the losses they incur from their non-performing loans particularly those that they give to their friends and cronies ?â€Â
You must ask who are ultimately the substantial or majority shareholders of banks – government, quasi government institutions, agencies, GLCs, political parties ?
Merger of banks is often an excuse to cover up losses of the weak bank merged with the better one.
Though I won’t say all, but many many banks have poor credit culture. They lend to family members and friends of politicians and those with titles (Datukship, Tan Sri ship etc) who think it is their privilege to borrow as much as possible to finance government contracts awarded to them due to political connections. The motto is to make hay whilst sunshine. These are the people who like to make easy money but don’t like to meet debt obligations.
The many bank officers and even some of top management are susceptible to entertainment and bribes to endorse loan proposal.
If one collaborates with an influential bank officer to borrow for example 30 million without adequate security and with no intention to pay back, one can share the spoils with the bank officer. For the bank officer, losing the bank’s money is bad credit judgment, not theft. The worst fate he suffers is to get sacked.
“f one collaborates with an influential bank officer to borrow for example 30 million without adequate security and with no intention to pay back, one can share the spoils with the bank officer. For the bank officer, losing the bank’s money is bad credit judgment, not theft. The worst fate he suffers is to get sacked.”
Obviously you have never worked in a banking or financial institution.
A loan of that size is likely to be syndicated.
To: MY VIEW
“My new banker send the cheque to RHB to settle my loan on Aug 17. But the loan interest continue..”
When you prepay your loan before due date say some years before its due date which happens all the time, you will not be given a full rebate i.e. you end up paying more interest than it seems you should. That is provided for a clause in your agreement with the bank. Don’t know how much of what I said here applies to you.
“The bank wrote to my solicitor to let them know the balance. With no notice or informing me, RHB just debit RM100 into my housing loan account being redemption fee. Isn’t it the bank obliged to tell how much I still owe them?”
If you merely want to know how much is still owed to your bank all you have to do is read the monthly statement the bank sends you. But if you’re talking about “redemption sum” than request to that effect must be made to your bank normally by the buyer’s lawyer once the contract of sale is confirmed – not before. This represents the actual sum that must be paid to the lending bank so as to have the title free from encumbrances.
If your bank has charged you for anything it must have been provided for under the loan agreement you signed with them. How many ever read the agreements they sign?
Standing Order,,,I issued my personel cheque,when there are not enough fund in my current acc.,they deducted from my saving acc.(they charge 2 RM)NIAMAH.Even if the amount involved is only RM10/.BNM…can you see this!!!!!!
Another incident,With P.ebanking.Paying bill to Maxis ,they change my acc.to 9 digits no.(last time 7),They didn’t update it,till I do the wild goose chase ,just to be a good pay master,calling his damn HQ ,calling Maxis ,in the end ,paying the damn bank a visit only knows what happen.They supplied internet banking user with email account,they didn’t bother to use it to remind me….phishing email,server upgrading they bother,NIAMAH,THIS BANK IS PUBLIC BANK….when I email to the bank till now no NEWS,elegant silence.
Just wonder what Bank Negara is doing when there are many obvious discrepancies that are skewed to provide an undue advantage for the banks at the expense of the customers without any good reasons.
i) as somebody has pointed out the methodology of checks clearing, eg when you receive a check and bank in it will take 1+2 days to clear before you can see your money but if you bank in a check for payment it will be cleared on the same day.
ii) if you owes the bank the monthly interests charge will start on the day you get your money and the month is deemed to be completed one day before that due date but if you keep your money in the bank interests will start from date of deposit until the same date as you put in your money. Why the one day advantage for the bank when rightly the mode of calculation should be the same.
iii) many people are not aware of the ploy that many banks are using to hoodwink the lenders, esp for housing loan. They will advertise a low interest for the 1st year of the loan but beware that in between the lines with small prints that one year will commence from date of approval of loan and not from date of release of loan. By the time you get your check, it could be many months later, so in actual fact that interest rate will be only for the few months and not 1 year.
I think they were already having this ploy many years ago and at that time there were not even the fine prints to indicate such ploy, but when I detected it ( because I repaid my loan only after a few years and this made it easier to detect the ploy)I wrote to bank Negara contending that 1 year is 365 days and no where in any calender is found to be less than that number of days. Subsequently they just refunded me a token amount and told me to bring them to court if I me not happy. So they can do all these because they had the firepower. One good thing that I had done is at least the banks now are putting this clause albeit in fine prints.
I hope bank Negara will put some credibility into our Malaysian banks as such images are not good inthe eyes of foreign investors.
iv) Why are only some banks paying us interests on the money in our current account and to add salt to it they are charging business accounts service charges twice a year. I think some banks are also charging on personal account.
Erratum
“but if you keep your money in the bank interests will start from date of deposit until the same date as you put in your money the following month.
DarkHorse,
Perhaps you’re not back in Malaysia a long time. RM 30 million bilateral loan or more to limited companies is not uncommon. (I have also known characters who have their proxies in 3 or 4 different companies borrowing in aggregate up to RM70 million).
In case of GLCs borrowing RM500 million or even a RM1billion (without it being a syndicated loan or even a club deal), lent clean, has happened).
It depends on size of the bank, risk appetite, corruptibility of officers right to the top, and who borrows which does not entirely depend on textbook objective credit criteria but also subjective factors.
Tai Lo Chin
Things could not have changed that much – but I could be wrong. For one bank esp commercial bank doing retail as opposed to a merchant bank to lend RM30 million to a single customer ( and I don’t mean individual customer) would be too risky by any standards. Assuming it is possible and is a practice today with certain banks, it would have to get clearance from BNM.
But like I say I could be wrong and the practice could have changed since RM30 million today is not the same 10 years ago. But I doubt it.
A RM30 million exposure to a single customer is not prudent. Loans of this size used to be syndicated not too long ago with participating banks taking up RM5 million or RM2.5 million minimum each and lead managed by a merchant bank. Even then admittedly a loan of this size was regarded as small for syndication but too big for a single bank.
I am talking retail banking of course and not merchant banking.
“If one collaborates with an influential bank officer to borrow for example 30 million without adequate security and with no intention to pay back, one can share the spoils with the bank officer. For the bank officer, losing the bank’s money is bad credit judgment, not theft. The worst fate he suffers is to get sacked.” Tai Lo Chin
Really?? All you need do is “collaborate” with a bank officer and you get RM30 million loan without adequate security? What am I doing here? I should be calling my travel agent and book the first flight back!
“For the bank officer, losing the bank’s money is bad credit judgment, not theft. The worst fate he suffers is to get sacked.”
And not CBT or criminal negligence for which you could be prosecuted and made to serve jail time of between four to seven years – minimum? It is just ‘poor judgment’ on the part of the lending officer who only loses his or her job as a result? I need to get my hands on the employment application form from this bank.
Don’t get me wrong. I’m not ridiculing you in any way.
In the UK currently, it takes 5 full days for a cheque to clear! So Malaysia is not that bad in this area. The UK regulator recently proposed a 2-day clearing system which will only be in place at the end of this year.
True.
All things considered, generally Malaysian banks are more consumer responsive, more service oriented than their counterparts in the U.K., and more efficient (yes, you may laugh but it is true) – except that it is never enough for Malaysians.
oh great… now banks are also cheating the people. so much for a “good” PM. Anyway, to Count Dracula and jytioh, seems like both of u r being good doggies for bn now for adopting their stance when they said “local uni not so bad because we still better than african unis”. similarly, u r saying “malaysian banks not so bad cuz better than UK banks”.
Well, with such mentality, why not juz stop working, destroy all ur properties n sleep whole day because u r still richer than poor people in africa? u wont complain right, since u r still better than some?
the cases r similar w gg to a coffee shop, ordering a cup of coffee which is stated to be RM1, but then u get charges extra 20sen for using e cup, extra 10sen for using e spoon, extra 10sen for the condensed milk n extra 10% service charge when all e service u get is someone taking ur order, making ur coffee and passing it to u. so e promised price of RM1 is now RM1.54. In the end, u get a crappy cup of coffee, thinner wallet and higher blood pressure.
Someone care to write their discontent w RHB to newspapers so tt more ppl will know n close their accounts w RHB. Then they hav less ppl to exploit n who knows, maybe they will even close down, which is a good thing
To DarkHorse
Things have really changed much since 10 years ago.
Nowadays there are bank mergers towards 5 mega anchor banks. For instance, Mayban Finance is now no more, absorbed into Maybank. 20 years ago we had Bank of Commerce (BOC) (ulitimately owned by UMNO’s fleet Group). It swallowed the failed United Asian Bank, then Bank Bumiputra Bhd (& its Merchant Bank & Labuan Offshore unit) and last year, took over Southern Bank (which itself earlier swallowed United Merchant Bank Bhd) and merged with CIMB Merchant Bank to form the present mega conglomerate CIMB Bank Bhd helmed by Datuk Nasir, brother of DPM Najib.
So some of these mega banks have everything integrated, retail, corporate & international banking, corporate finance merchant banking, offshore banking etc. They have huge capital base/single customer limit because of these mergers. It depends on risk appetite. They still participate in syndication (as in RM300 million loans) for certain cases (sharing risks sharing income), and for others they whack everything. You know, more than 10 years ago, Offshore banking in Labuan was just fledging. Now’s different. These banks are offshoot of very big banks from overseas. Though Offshore banking Act prevents them from lending in Ringgit, they can still do RM 30 million through backdoor issuance of bank guarantee, performance bond SBLCs etc to correspondent bank (RM funder).
If you should meet Malaysian ex bank cum migrant, ask them about the ways they make enough to ‘temporally retire’ and apply for PR overseas.
“I should be calling my travel agent and book the first flight back!â€Â
Maybe you should. Here can make big money because many on the take. This in some cases include top management of banks.
It’s beyond space here to explain in detail how to go around credit/security parameters. Enough to mention that nowadays we have friendly valuers to overvalue market price of properties mortgaged. We have security like specific mortgage of certain raw materials to be purchased. Borrower can create other companies through proxies to invoice inflated prices. Consignment of these raw materials can in series be mortgaged either by way of specific debentures, assignment or specific mortgages to different banks as “security†but by their very nature they are not divisible to naked eye on inspection. Same property may be collaterised several times by double triple and quadrupled financing. Even listed shares which one pledges as security. You get a market operator to play up price before giving security. When price collapses like deck of card, bank cannot recover.
I am simplifying here for illustration. Bank officers supposed to check counter and fundamentals of companies whose shares are pledged. Eventually there is some accountability depending on the bank since banks have internal and external auditors and in terms of credit, check and balance. But the officer recommending loan and collaborating with both customer and the superior ‘close one eye’ bank executive who is supposed to exercise oversight, will have since resigned by the time the credit goes into default or even emigrated.
If even PM has no time to oversight deputy minister of his portfolio, do you think Bank’s executive got time to exercise oversight function?
In Malaysia, it’s also who you know. Think they won’t close one eye and lend big to family members or cronies of top leaders like what Godfather earlier said? How else can you explain why despite making a lot of money, many banks failed here, have their balance sheet wiped out, need merger to camouflage bail out?
DarkHorse and Tai Lo Chin:
Read the case where Tajuddin Ramli is suing RHB – his nominees were told to fill in the forms to apply for a personal loan of RM100 million each.
There is no need to compare with the banking system in UK or any other countries. I live in Malaysia, hence feels the pain.
Those days, a Saving Account is really where one saves the extra $, now it’s the other way round, banks charge an admin fee for maintaining the account.
The banking system with technology improvement over the years has lead to more unncessary bank charges.
Let me give you another scenario. Mr.A take RM50,000 loan under Hire Purchase (HP) Scheme for his car, for, let say 7 years at the rate of 5% per year. He would be required to pay monthly installment of RM800 (roughly)
After promptly paying for 2 years (RM19200 in total has been paid now), he now wants to change to a new car. He would have assumed that from the initial loan of 50,000 and interest of 17500, he would have paid around RM5000 from the interest and around RM14200 from the principle (on a pro rated basis). Deducting RM14200 from RM50,000, there should be RM35800 still remaining from the initial loan.
But, when he calls the bank and ask for the settlement figure, the bank would tell him the he still owes the bank RM49,500!, meaning to say, only RM500 deducted from the principle. How on the earth he can ever find a buyer for his car when car price depreciate at the rate of 10% to 20% per year.
It shows that the HP agreement always benefit the banks and just imagine for a mere RM500, you are charged with interest of RM18,700! Sounds worst than loan sharks? It is indeed!
If the car is repossessed, the bank will sue the customer and somehow will get back it’s RM49,500.
The only way to escape from this is to promply pay all the instalments until the entire loan term and never ever trade in your car in between.
But, most of the Malaysian cars can hardly last for seven years and the customers will keep on changing their cars every 2 to four years and the banks will always make tons of money from this middle class people. Another form of exploiting!
ahkok1982, please be objective in what you say. I work in the financial industry and I’m currently in the UK now. UK’s services industry is very slow in response compared to Malaysia. This is a fact from my experience, also shared by other Malaysians here. As for universities, I’d agree Malaysian universities suck compared to here as I studied here and have been to Malaysian universities. Please learn to comment objectively based on what you know, and not based on sentiments. You cannot generalise everything.
Tai Lo Chin
“Borrower can create other companies through proxies to invoice inflated prices. “
Banks lend to paper companies with two directors, no track record but merely a table and a desk in Hong Kong?
“Consignment of these raw materials can in series be mortgaged either by way of specific debentures, assignment or specific mortgages to different banks as “security†but by their very nature they are not divisible to naked eye on inspection. Same property may be collaterised several times by double triple and quadrupled financing.â€Â
When landed securities are offered as collateral, don’t they do a land search anymore??
“Even listed shares which one pledges as security. You get a market operator to play up price before giving security. When price collapses like deck of card, bank cannot recover.â€Â
With shares from public listed companies offered as collateral, a prudent banker apart from insisting a safety cushion of 60% as a rule of thumb, are also ‘guided’ in what they do by tough guidelines issued by BNM. Bank do periodic and regular evaluation of these collateral by themselves to monitor changes and would call customers to “top up†the shortfall failing they will have their credit limit reduced or recalled. The credit facilities provided, secured by shares, are those that are small, short term or temporary – like overdraft to finance a temporary shortfall in the working capital while waiting for more established lines of credit secured by a more permanent and stable security like landed properties. Don’t banks as a policy insist on borrowing companies creating debentures to secure their entire bank facilities as a form of control over their activities – but as a form of security it is not satisfactory.
Tell me if all these have changed?
“Consignment of these raw materials can in series be mortgaged either by way of specific debentures, assignment or specific mortgages to different banks as “security†but by their very nature they are not divisible to naked eye on inspection. Same property may be collaterised several times by double triple and quadrupled financing.â€Â
Sorry, I missed this one.
Are you saying that some companies who take deliveries of “raw materials†against Trust Receipts for 90 days then go to another bank and mortgage them for facilities? Don’t the banks check claims as to title to these ‘security’ – like a Bill of Sale?
DarkHorse,
Bank A can go check claims to title and warehouse for (say) purchase of 1000 steel bars from a company owned by Borrower’s proxies secured by specific debenture/fixed charge on 1000 steel bars. After check, borrow from Bank B to finance 1000 steel bars. Check by Bank B on same 1000 steel bars in warehouse will not reveal the same 1000 steal bars earlier charged to Bank A because steel bars have no identification markings. Use same method with Bank C, D and so on, each time securing with specific as opposed to General Debenture or Mortgage on 1000 steel bars. Bank manager is in cahoots. Invoicing for supposedly 400 steal bars financed by 4 different banks is done through different seller companies run by proxies of borrower. If LC/TR inconvenient, use revolving credit to finance purchase of 1000 steel bars.
to bill the Borrower (also owned by you), sell in serial way 5 consignment of (eg) 5000 steel bars in each, borrow each time 6 (
Well, theoretically what you say is possible.
But which bank would take a floating charge on work-in-progress or raw materials without more? Remember, the bank manager of a branch of a local bank is guided by SOP etc. He is not free to ‘exercise his discretion’ and then rely on his ‘poor or lapses in judgment’ etc to exonerate himself from possible CBT charges.
We are talking fraud here.
If a borrowing company is in temporary need of additional funds, there are easier ways of raising those funds without resorting to fraud.
The bank teller is a good example to illustrate what I mean. The teller is given cash at the beginning of the day and is required to balance his cash at the end of the day. What is there to prevent him from taking off during lunch and never return?
What is there to prevent a branch manager of a local bank colluding with his second officer to remove RM1.0 million cash from the safe over the weekend and go gamble, or just take off for an unknown destination to enjoy their new lives?
The best safeguards against this kind of behavior can only be as good as the people involved.
Ahkok
I’m not defending any of those. Neither am I saying that Malaysian banks need not look into ways to improve their services or that there is nothing wrong – none of this.
What I am saying living in the U.K. for so long and then returning to Malaysia, I find that Malaysian banks being more service oriented offer as a whole better services than banks in the U.K. You may not be happy with say the counter services of a bank in KL and ask to be able to see the bank’s branch manager. You’ll find yourself almost immediately and efficiently ushered by his secretary to see him.
You don’t see that happening here in the U.K.
It is a strange coincidence that I was about to write about How Silly Bank Charges, in connection with HSBC Mastercard and Visa credit cards.
My son went over to UK to look for a job. He did not cancel his credit cards with HSBC and Standard Chartered. The latter account was left with a few ringgit in credit which did not pose any problem.
When I received the HSBC card statements with small balances and knowing the bank charges a minimum of Rm5.00, I had actually called up their call centre to confirm what would be the following month’s charges so that my cheque would be in time as well as sufficient to cover any outstanding amounts.
My son came back on holiday and went to the bank to cancel the cards and I was furious when he showed me the following details:-
Mastercard Visa
Credit used as of last payment 12.51 11.38
Payment – thank you 10.95Cr 11.34Cr
Late payment charge 5.00 5.00
Total credit used 6.56 5.04
Your statement balance 6.56 5.04
Because of the initial outstanding 1.56 and 0.04, by the time he settled, he was slapped with another 5.00 late payment charge each which totalled 11.56 and 10.04 respectively.
In the first place, it was futile of my initial effort to call up and make payments thinking it would settle the accounts, leaving only the formality of his cancellation of the cards.
Secondly, it showed the inflexibility of using computers and the inability of human intervention in the form of using discretion which in the good old days, a bank officer or manager could effect to maintain goodwill.
Tell me if all these have changed?†– DarkHorse.
No, banks still impose security ratios. For security of landed property, it’s the “LTV Ratio†or the loan to collateral value ratio of (for instance) 70%. For marketable securities and listed shares, a security cover ratio of value not less than (for example) 1.65 times of outstanding at any one time during tenure of loan. There’s still practised the usual monitoring requirements. Annual desktop valuation update in case of landed property. In case of shares/securities, monitoring of last traded market price in Bursa Malaysia with margin calls and request for collateral top up if required security cover margin breached.
The trick is in getting a bumped up valuation for landed property offered as security. Must admit it is harder for shares/securities. Their market value can be objectively ascertained.
So borrowing companies create general debentures (fixed and floating charge) over all assets present and future. It sounds all encompassing but as a security, how to value?
In the final analysis, the statement “the best safeguards against this kind of behavior can only be as good as the people involved†is correct.
Not all banks here have good credit culture and sufficient check and balance against abuse by their officers in collaboration with borrowers. The biggest abuse occurs where the top bank executives are also tainted. They have bigger approving limits and more experience to circumvent internal procedures and safeguards.
In case of lending against the value of landed securities, valuation is done by the banks’ panel of valuers. These are carefully screened and their work is assessed yearly. I don’t think it is easy as you make it out to be i.e. registered panel valuers do make conservation evaluation for the different purposes of their use.
Of course, minus/plus 5% ‘margin of error’ is common. No two landed properties are identical – unlike public listed shares value of which like you say can be objectively ascertained to a more accurate degree. Their unsuitability for use as long term collateral is their fluctuating value. On the other landed property usually does not drop in value unless of course it is subject to government acquisition or things like that. Otherwise their values are relatively stable both in the short term and in the long term.
I don’t believe fraud can be perpetrated as easily as you imply.
Debentures with their floating charge over book debts etc and fixed charge over machinery etc are as good as the Balance Sheet and P/Loss a/c of the companies that issues them – and these change from financial year to financial year. Their usefulness as security in the Power of Attorney it gives to the lending bank.
In times of gross mismanagement the lending banks acting through their agents could move in and manage, provide more facilities to try and save the company and later if that does not work to appoint a receiver or/and liquidator to liquidate the assets if that is called for. But then the break-up values of these assets would not come too much. The company is worth more as a going concern. But it does give the lending bank that power.
There is nothing to stop companies like Perwaja, viability of which was in doubt from the very start from ‘suffering’ huge losses. Even an audit and the recommendations that follow to try and reverse the loss could not save it.
What you say about values of landed properties financed by retail housing loans and valued by banks’ panel of valuers is quite true. The valuer too does not relish prospect of being struck out of panel and be sued for negligence for these kind of ‘small retail’ cases. The cost and benefit analysis doen’t add up. How much can retail borrower bribe him for jacking up price? There are also defined criteria of what represents open market value. They look for comparison of cases last sold in vicinity.
Situation is however different when it concerns a big corporate loan, where loan is big and land is an empty land acquired for a certain purpose (eg for mining of granite to provide stones for expected highway nearby to be constructed, for prospecting of residual gas and oil), housing development etc where it is easier, for the right price/bribe, for a not-so-scrupulous valuer to “exercise†judgment.
It did not happen only here in Malaysia. I have seen it happen and done even in squeaky clean Singapore some years back where a Merchant bank took, as collateral, a land in Johore said to be valued 10 million as security for a RM7 million loan.
At the time of forclosure 3 years later, it couldn’t even fetch a bid for RM2 million. The land had red soil, a lot of bauxite. Nothing other than shrubs and hardy lallang can thrive. Bank’s officers apparently didn’t bother with site inspection. Being in middle of nowhere and far from anywhere of development or roads, it is not suitable for housing and commercial development.
The brain behind the borrower is presently a Malaysian disgraced ex-corporate entrepreneur with political affiliation. He is a bankrupt but has lots of moneys and shares held overseas by proxies. He is not paying back his debts to the banks. He is still doing business here through proxies.
“Debentures with their floating charge over book debts etc and fixed charge over machinery etc are as good as the Balance Sheet and P/Loss a/c” – exactly. It is as good as lending “clean” on balance sheet. However by reason of power of attorney and appointment of receiver provisions, the general debenture is given a gloss to stand in as “security” which a bank officer, suitably bribed,will recommend the credit and justify on basis that there is security. The moment the loan is granted, the machinery, inventory covered by debenture are all taken out, hidden or disposed so that the receiver upon appointment finds nothing worthwhile to get in for sale. A bank officer can recommend a lot of things passing off as security which superior officer, maybe in cahoots to take spoils, can approve. Take case of a recommendation of loan or RM 10 million to Borrower (Co. A) that is justified by it owing 100% of a company (Co. C) that in turn owns RM25 million of listed shares. Instead of subsidiary pledging RM25 million shares, the guy recomended that shareholder pledges 100% of private Co. A unlisted shares to the bank supported by Co. A’s debenture. This is done without management control of Co. A or co. C by bank. After loan disbursed, the brains behind everything got proxy directors of co. C to further pledge the RM25 million shares, have them forelosed and sold, with balance of money frittered away. When bank took action and foreclosed on Co.A’;s unlisted shares owned by its shareholder and went after Co. A’s assets through debenture/appointment of receiver, tehre were nothing left because assets of RM25 million listed shares in borrower’s subsidiay (Co. C) have already been sold with proceeds dissipated.
There are all kinds of way to take banks for a ride with a willing superior officer who has brought in his cronies as junior officers to recommend to him for approval loans that are not creditworthy, and security illusory. But it will take too much space here to narrate.
Forgot to mention in above case, Borrower co. A was also required to pledge its unlisted shares/equity in co. C (that owns RM25 million marketable listed shares) to the bank.
So everything looks good on paper. Bank has control of Borrower Co A by taking a pledge of all its shares. Bank has control over subsidiary co. C by taking as pledge all of Co. A’s shares og Co. C as security. On top of that Co. A also provided debenture with power of attorney and right to appoint receiver.
But notihing is done until defualt by which time it is too late.
Being chargee of shares in Co. C is no use if the bank neglects to appoint its officers as directors of co. C and control its board’s decision and accounts. These proxy directors just fritter away the RM25 million assets in form of listed shares for the “brains” who has lready got another RM10 million from the bank through borrowing of co. A.
Thanks for the update, Tai.
Is there a School of Fraud that I could enroll in Malaysia?
There is no School of Fraud here. :) People here study the law not only to comply but also often to circumvent (not commit fraud) without breaking it. You can say that the line is hard to draw. It is. Still many would try skate on thin edge between fraud and taking advantage of imperfection in the system. The whole political, cultural, corporate and business milieu is a school for how to ‘beat the system’ without infringing criminal law.
What encourages this tendency?
Profound change has taken place in the business landscape since over 10 or 15 years ago.
Aspiring to be modern in the catch up game with the developed West, the country has adopted many laws, regulations and rules on best practices from the West. They include laws and rules on corporate governance, against conflict of interest, for transparency. However, the habits of mind and practice, in politics and business, remain for many, feudal and patronage based. The line crossing over to corruption is easy to cross.
To reconcile the pretension to be ‘developed’ conforming to best practices of fair play and the innate tendency to gain unfair advantage arising from “feudal†mindset and practices, many would try to thread on that thin edge between beating the system and committing a crime. Many of us do so often that it has become our forte.
In this rather perverted sense, Malaysia is an interesting place to do business and make money.
Sorry to bore readers with story on pennies instead of big bucks.
I am continuing with the saga of HSBC credit cards. My son just received his statement and to his horror, there were still balances of 0.04 and 0.01 outstanding in his Mastercard and Visa respectively.
Just imagine, having personally visited the office to sign cancellation docs and paid outstanding amounts on Feb 27 could not effect it, what else is required?
I bet HSBC’s computer is programmed to leave behind balances so that they can continue with their senseless late payment charges.
What happen to the humans in charge in the silly bank?
I am glad he is still around to give them a piece of his mind.
Here’s another actual scenario….
4 years ago I called up personally to close a credit card account (gone thru the ID verification etc)
….After that, I continue to receive the bank’s credit card statement monthly
6 months after that, I called up again to confirm cancel and close of the credit card account and told them that I am still receiving the credit card statement
…the statement kept coming..and I gave up!
It’s still coming till today…after 4 years
What are our bank staff doing there??
Hong Leong Bank
To close your FD, you have to go to the branch where you open yr FD, either on the date due or later (you will loose out on FD interest). They will not allow to auto close the FD and transfer to your savings account… :-(
HSBC
FD’s are online, you can open and close online :-)
You can set the FD standing instruction to auto terminate at due date and auto transfer to your selected account :-)
Now you tell me how screwup can a local bank get with all the IT technology??