What is
a bank? Here’s one definition from investorwords.com: “An organisation, usually a corporation,
chartered by a state or federal government, which does most or all of
the following: receives demand deposits and time deposits, honours
instruments drawn on them, and pays interest on them; discounts notes,
makes loans, and invests in securities; collects checks, drafts, and
notes; certifies depositor’s checks; and issues drafts and cashier’s
checks.”

Banks are supposed to make their profits by conducting
a range of financial transactions which yield profit. They borrow at a
cost and charge interest when they lend. Their profit lies in the
difference between interest charged and interest paid. Similarly, they
buy and sell a range of investment instruments making a profit between
the buy price and the sell price. Their advantage, and their
profitability, lies in the large amounts of money at their disposal ie.
their liquidity, which is also boosted by the gearing ratio allowed by
the central bank. Thus they can lend anywhere between five and ten
times what they hold. This, in a nutshell, is the business of banking.

So the most successful banks are those that make the wisest
decisions, right? Not any more, because banks have discovered that it’s
just so much easier to slug those who actually provide them with their
liquidity (the depositors and borrowers) with fees, fees and more fees.

The Commonwealth Bank has now gone over the top. It introduced
internet banking called Netbank, which was sold to us as fee-free
banking. Why? Because we were doing its work for it. We did all the
transfers, the deposits, we became its tellers. No overheads, no
salaries.

Having
captured (by its figures) 1.9 million Netbank users who are now locked
into its system, the CBA is going to charge fees for some Netbank
transactions. What’s thei justification? It is improving Netbank, this
costs, so the users have to bear this cost.

But the numbers just
don’t stack up. Let’s assume a very conservative average fee of only
50c per week is paid by each user. 1.9 million times 50 cents equals
$950,000 per week or $49.4 million per annum. I would like to know what
software costs $49 million a year!