Gibburt

In the category “small annoyances in daily life” this one certainly has a place: commercials for loans. Over-happy people beaming their smiles into our living rooms while they’re enjoying their new kitchen, TV or car. Their message: borrow cheap!

The culprit of this Dutch visual vulgarity/needless nonsense has now met his downfall: the DSB Bank. For years they’ve been selling their financial products to customers, feeding and getting fatter by the year. Riding the wave of the financial up-trend, until now: the bank joined the list of financial success stories ending in disaster when this week a Dutch court proclaimed DSB Bank bankrupt.

The events that proceeded the bankruptcy were rather interesting.
It started with a fine they got from the Dutch Financial Authority in May this year. The verdict: DSB Bank hadn’t provided customers with sufficient information about the financial product they were selling. That’s not the worst: DSB Bank had been careless while providing mortgages, because they provided higher mortgages than people could pay.
Since this verdict, the central bank of the Netherlands, the DNB, stationed two people at the DSB to keep a permanent eye on all the procedures.

The customers that walked into the DSB financial trap and got into problems because of it, joined forces and tried to negotiate a solution with the bank, while applying pressure through the media.
In the end of September a Dutch news show brought an interview (in Dutch) with several former exployees of DSB. Their story tells how they were selling products under the motto “lying to the client is acceptable, cheating not”.
When selling too high mortgages, clients were obliged to buy a second product: the so called koopsompolis, a kind of insurance, that guarantees the bank you can still pay-off the loan when something bad happens to you. In most cases, these koopsompolis were not necessary, because the client had sufficient other insurances. But DSB didn’t tell the clients this, because 80% of price of these koopsompolissen went straight into the pockets of DSB. Experts say that without the revenue out of these koopsompolissen, DSB didn’t make any profit at all.
As a result of this news feature, members of parlement asked questions to the government. The minister of finance answered that he deemed these actions by DSB as incorrect. A high profile member of the Supervisory board decided to step back.

Three days later the pressure was increased. The now infamous Pieter Lakeman, representing a group of angry clients, declared in an interview for Dutch TV “DSB must go bankrupt!” According to his opinion the only way people would ever get their money back was to withdraw it from their accounts at DSB as soon as possible.
This call got a lot of attention in the media. The Dutch government found it necessary to react, the Parliament, the DNB and DSB, they all came running to tell the people everything was allright with DSB.
The result: a bank run. A mere 2 hours after the interview with mr. Lakeman, the DSB site was down. DSB’s explanation that this was caused by a hacker attack was of course not believed. In three days time, customers fled DSB with 317M Euro.

The same day DSB played the sorry card. Several high ranking DSB managers showed up and apologized for their mistakes. Even big boss Dik Scheringa (no joke) made excuses in a Dutch news mag.

For several days things turned quiet. The turmoil even seemed to have ceased for good as DSB and a group of duped clients announced that they’d come to an agreement: clients could use a part of their payment for excessive insurances to pay off their mortgages, plus they got more time to pay them off.
The agreement is open-ended, meaning DSB promised to accept every single injured customer.
But suddenly, only hours before the agreement would have been signed, the Dutch central bank interfered and stopped DSB from signing the agreement. Why was unclear and speculations rose.

During the following weekend the DNB and high ranking government officials discuss the situation. Their plan was to ask the court to remove the authority of the board of directors and appoint a government administrator, the so called emergency procedure. In the night from Sunday to Monday the minister of finance attended the talks at the main office of the Dutch central bank. The talks went on until deep into the night. The press noticed this and spun their story accordingly.

The next day the court authorized the emergency procedure. People with accounts at DSB could no longer access their accounts. The question is whether this is a problem, because meanwhile more and more people had fled the bank: in less than two weeks 664 million Euro had been withdrawn.
In the following week Dik Scheringa desperately tried to save his burning and sinking ship. All plans failed: no other bank or investor seemed to think there’s any value left at DSB.

On October 19th the curtain fell and the court declared the DSB Bank bankrupt.

Now, to summarize, the DSB Bank was rotting from the inside long before screwed clients and guilty feeling former employees sought media attention. But it certainly helped in creating the bank run that accelerated the process.

In the end it were the customers that brought the bank to its knees. By joining forces, playing the media and withdrawing their money, they showed that they’re not powerless.
It shouldn’t be forgotten, that these were the customers with a savings account, and not the ones with a mortgage.

Greed will get you down, whether you’re a bank director or a small fish with big wishes.
But if you went bankrupt, don’t give up, find others and do research. If you don’t understand the contract you signed, have a specialist look at it. If you’re really lucky he might fand a way to get you out of the contract.
Ofcourse it’d be wiser if you’d done that before you signed it with your name.

Filed under: Finance by Cédric | Social tagging: banks > crime > economy > financial crisis > responsibility