Why we lose trust in banks

By Herbert Vego

YOU must have seen those TV ads lauding online or digital banking as the safest way to grow money because it allows us to conduct financial transactions via the Internet. We don’t have to enter the bank for such services as deposits, transfers, and bill payments.

The bad news, however, is that it could be vulnerable to hacking.  We have heard and read of depositors complaining about losing their money through unauthorized access. If they remain unrefunded, other bank clients would likewise lose their trust in our banking system.

If truth be told, by depositing money in a savings account, we actually lend it to the bank in exchange for a small interest which would not catch up with inflation. At present, ordinary savings accounts earn a measly rate of 0.10% to 0.25% per year. Worse, accounts that fall below the bank’s required minimum deposit gradually “melt” because of the penalty imposed.

According to Governor Eli M. Remolona Jr. of the Bangko Sentral ng Pilipinas (BSP), “The share of digital payment transactions reached 42% in 2022; account ownership was 56% in 2021; and 65% of households had accounts.”

It means that most Filipino individuals don’t have savings, living from paycheck to paycheck.

Not being one of them, a cousin opened a “kiddie savings account” for her daughter.  She deposited a little amount each month until the account had hit the ₱‎5,000 balance. But she had to withdraw the money eventually due to an emergency, only to discover that the accrued interest could not cover her round-trip taxi fare.

So, it is better to invest in buy-and-sell, in a small sari-sari store or in lending to trustworthy relatives, friends and neighbors. It is not uncommon to see somebody stocking his refrigerator or freezer with soft drinks, ice or ice candy for sale.

On the other hand, banks earn by lending our money to favored entrepreneurs and industrialists at higher interest rates! The BSP data shows that the average interest rate for bank loans today is 7.29%.

While it is easy to open a bank account, closure could be strenuous, as I found out in the case of Ann (surname withheld as requested), whose widowed mom had died intestate. The bank would not release to her and her siblings their mother’s money unless they could produce the required documents, including a deed of adjudication and its publication in a newspaper of general circulation. Failure to comply would mean forfeiture of the claimed amount.

In a past column, I cited why low-income savers are more vulnerable to risks emanating from unexpected situations. I know of one – a retired government employee named Bernardita Lerio – whose ATM balance had “evaporated”.

I wrote about her complaint involving her attempt to withdraw cash at the Landbank ATM (Plaza Libertad branch, Iloilo City) in 2015. Instead of dispensing cash, however, the machine “ate” her card. That day being a Sunday, the security guard advised her to see a bank officer “tomorrow” for her ATM card.

When “tomorrow” came, she got her card back. Unfortunately, the ATM would not dispense the requested cash due to “insufficient balance”.

“How could that be?” she complained to the bank manager. “As of my previous withdrawal, I still had a balance of more than ₱‎26,000.”

The manager promised to have the matter investigated, but to no avail.

Charge to experience?

Distrust in the banking system is probably the biggest reason why wage earners are cautious in keeping their eggs in one basket. It is no longer possible to count in one’s fingers the local banks that have folded up, leaving their depositors at the delayed mercy of the Philippine Deposit Insurance Corporation (PDIC), which could only refund claimants whose deposits do not exceed P500,000. If a depositor has more than that, sorry na lang.

Alas, we would rather be safe than sorry.