AIB finds new ways to ‘screw the customer’
Mr Hodgkinson’s speech, at the summer frolics in Donegal, is very informative and waxes lyrical on how the bank is going to change its culture from top to bottom. However, in reality, it’s a load of the “b” word that rhymes with frolics.
Two elements of the 2,440-word speech betray graphically that nothing has really changed. These linked elements can be summed up in just three words that have been core to Allied Irish Bank’s culture for generations and should be the bank’s motto — “screw the customer”.
One must be fair to Mr Hodgkinson, he has not tried in any way to obfuscate his intentions and lays out cleary how he wants AIB to screw its customers in the new order.
As a banker Mr Hodgkinson outlines a number of “we musts” for the bank and its staff. He says they must: Be transparent in their dealings inside and outside the bank; be accountable for the decisions they make; understand the needs of the communities they serve; focus on the future rather than just on short-term concerns; provide genuine access and assistance.
Mr Hodgkinson said: “If I and my board colleagues are to make the A in AIB stand for accountability, access and assistance, we need to be trusted to do what we need to do in order to make that happen as quickly and effectively as possible.”
However, it is when Mr Hodgkinson said he must “introduce a small bit of both reality and caution” that warning bells sound.
“If I may approach the tomb of the forbidden subject of pricing for a moment, it is also a fact that banks must charge more for credit if they are to achieve commercial viability.
“While this is a very unpopular concept given the amount of taxpayers’ money we have received — it is nevertheless simply not possible to build a sustainable future for any bank that is lending funds without getting a return. It is also dangerous to think that banks can take equity risks for loan returns. We absolutely must, of course, do much better at making credit accessible but we cannot continue to misprice risk,” Mr Hodgkinson argues.
Mr Hodgkinson makes a fair point that lending risks have to be priced correctly, but he doesn’t seem to realise that what’s sauce for the goose is sauce for the gander. You see, while Mr Hodgkinson wants to charge us more to borrow, he also wants to pay us less in interest on the billions AIB holds on deposit. Risk is a two-way street.
This is unconscionable coming from a bank that pays a tiny rate of interest — 1.5% — on the billions it has borrowed from the European Central Bank.
But was he pulling our legs when he said: “There is also, however, the negative spiral of Irish banks paying over the odds for deposits, only forcing up the market price and meaning borrowers have to pay more. This is, in part, because there are insufficient deposits in the domestic system to meet all the economy’s lending requirements. This needs to be managed and perhaps there is scope for state intervention to help achieve this by imposing maximum rates for a period, as well as doing everything necessary to regain international market access for funding.”
I wonder how Mr Hodgkinson would feel if the Government banned usury and placed a cap on the exorbitant interest rates charged by Irish banks.
So let’s sum up, AIB wants to charge you more when you borrow money from them and pay you less when you place your hard-earned cash on deposit. In three simple words — screw the customer.
