Driving Society Forward.
Education the HSBC Way
Glenn Rikowski, 23rd July 2007, London
Traditionally, banks operating in the UK have not charged interest on student overdrafts for three years after they have graduated. However, last month HSBC decided to terminate this policy for university leavers, and:
“…those who bank with HSBC will have to pay nearly 10 per cent interest on their overdraft from August. For those with the maximum overdraft of £1,500, this will cost almost £12 a month. … The bank offers a free overdraft of £1,500 as standard to students in their third year, but from July 16 they will be transferred to a new standard graduate account. Overdraft charges of 9.9 per cent will kick in a month later. Those who graduated before this summer will not be affected” (Charles, 2007).
Whilst having an education section on its web site (see HSBC, und.), HSBC appears to be wreaking revenge on hapless students in the UK for successfully protesting against unfair bank charges.
Protest and Pay
Last year, students in the Edinburgh University Students’ Association, and National Union of Students and students and other higher education institutions ran a successful campaign on unfair bank charges (Aikman, 2007). Furthermore:
“The successful “cash back” campaign against unfair bank charges … demonstrates how individuals can stand up to the banks” (Ibid.).
There was debate in the national press on this issue last year too. Bank customers up and down the country were heartened by an Office of Fair Trading (OFT) ruling which capped credit card penalty charges in April 2006 (see Charles, 2007).
The banks have been seeking ways to bite back. As Charles (2007) noted: “Banks have been looking for ways to recoup money ...” since the OFT ruling last year. Thus, it looks very much like HSBC taking revenge on students for their timely campaign against unfair bank charges by pulling the plug on interest-free overdrafts for final year students just over a year later.
No Profit Is Too Big
HSBC has clamped down on interest-free student overdrafts at a time when it is making record profits. The bank’s pre-tax profits for 2004 were £9.6billion (BBC, 2005, p.1), though Prynn (2006) put HSBC’s 2004 profit surge at £10.8billion (p.1), noting that: “Only Shell has ever achieved higher profits for a UK headquartered company” (Ibid.). HSBC’s profits for 2005 hit £11.5billion (BBC, 2006, p.1), constituting a 5 per cent jump on 2004 (Frei, 2007). Yet these mega profits cut no ice when decisions were made to end interest-free overdrafts for graduating students.
This could be the beginning. The logical next move would be to end interest-free overdrafts to final year students whilst they are still studying. HSBC’s gigantic profits were mainly made overseas (BBC, 2006). Hence, it can teach UK students a financial lesson knowing that its profits will not take a battering.
“Experts say that cutting the perk of interest-free overdrafts for graduates could catch on. Most high street banks have already launched graduate accounts with interest-free overdrafts for this year’s graduates, but next year’s leavers might not be so lucky” (Charles, 2007).
Other banks could follow suite, but to date I have not seen any reports that they have or intend to do that. The point of recruiting and retaining graduates is to secure potential middle-strata folk with incomes and aspirations to match. However, there are a few signs that, with the expansion of higher education numbers of the last 20 years in the UK, any advantage banks might hold in having customers with degrees is dissipating. HSBC may not be now so bothered with recruiting and retaining graduates according to Michelle Slade from Moneyfacts, a price comparison web site:
“I’m very surprised [regarding what HSBC have done]. The impression is that they aren’t interested in the graduate market any more. With the amount of free overdraft deals available graduates will almost certainly look elsewhere” (Charles, 2007).
Thus, if Slade is correct then HSBC might find that their competitors reap the positive fallout from this unilateral action and students will give the bank a sharp lesson in the basics of competition and consumer power.
From HSBC’s perspective, the move to end graduate overdrafts is an instance of engaging in cutting edge financial pedagogy:
“HSBC defended the move [to scrap interest-free overdrafts for graduates] by saying that it would prepare students for life after university. Karen Garner, a spokeswoman, said: “This gets the message across that there is a cost to borrowing and prepares graduates for the transition from student life to that of a young working professional”” (Charles, 2007).
This cynical defence of their policy by HSBC overlooks some of the other lessons students and others might learn from this affair. First, they might learn that even if a company makes history-making mega profits it still wants more. Second, they might learn that if protestors gain victories against corporate power then that power will seek to open the battle on other, perhaps softer, fronts. Third, and most importantly, students might learn that, even if they have budgeted carefully, fickle and impish representatives of finance capital will not hesitate to spoil the most meticulous and grounded calculations if they feel they need to. Indeed:
“Graduate accounts were originally designed to help inexperienced young professionals master the transition from budgeting on a shoestring to budgeting while starting to earn. While students need to learn how to budget carefully, it is wrong for banks to take advantage of the financial situation of many graduates who endured hardship whilst at university…” (Aikman, 2007, pp.1-2).
Thus, whilst HSBC views graduate overdrafts as constituting poor ‘financial learning’ their whole rationale was based on a supportive pedagogy. Graduates might learn to loath finance capital in general, and banks in particular (with HSBC taking lead bad guy role), on the basis of this kind of treatment. They might become radicalised against the dominance of finance capital in UK society, adding voices to any proposals to impose super-taxes on these financial behemoths; though it’s hard to see New Labour going that far. It’s a risk HSBC are willing to take.
The Long Term
HSBC is involved in the government’s specialist schools strategy. For example, in the London Borough of Redbridge it is involved in sponsoring a number of secondary schools. My middle son, Victor, went to one of those schools. When aged 14, he wrote:
“My school … is already under the influence of the bank ‘HSBC’, which, in my opinion is totally absurd. The bank gives my school some money and pays for certain things, but in return, my school has to show the pupils of the school some advertisements; advertising HSBC of course, and telling children of the so-called ‘fantastic deals’ that HSBC gives out” (Rikowski,2002, p.1).
The school also had its own HSBC-supported bank, with some pupils touting for customers in form periods. The idea is to catch ‘em young: if you join HSBC when you are 12 or 13, it is likely that you will still be with them if you end up as a graduate. Ironically, HSBC claims that it wants to nurture a ‘positive attitude’ amongst young people through its own educational programmes (HSBC, und.). Yet it appears to be flirting with producing cynicism and negativity amongst youth here in the UK. Young people are recruited in school only to learn the harsh lessons offered to them by representatives of finance capital as they progress through the education system.
The overriding pedagogical message from HSBC is that education in the UK, from schools to universities, should be open ground for promoting the interests of its long-term profits. Those who get in the way, such as the student campaigners against unfair bank charges, must be ‘taught a financial lesson’ – especially if they achieve any kind of victory. These are the kinds of lessons that can be learnt from companies like HSBC.
Aikman, G. (2007) Students warned as HSBC moves goalposts on its graduate accounts, The Scotsman, 14th July, online at: http://business.scotsman.com/index.cfm?id=1097082007
BBC (2005) HSBC bank reveals bumper profits, BBC News, 28th February, at: http://news.bbc.co.uk/1/hi/business/4303653.stm
BBC (2006) HSBC bank unveils record profits, BBC News, 6th March, at: http://news.bbc.co.uk/1/hi/business/4777714.stm
Charles, J. (2007) End of free overdraft as bank teaches graduates a harsh lesson, The Times, 21st June, p.6.
Frei, E. (2007) HSBC reports profits up in 2006, Finance Markets, 5th March, at: http://www.financemarkets.co.uk/2007/03/05/hsbc-reports-profits-up-in-2006/
HSBC (und.) Education, online at: http://www.hsbc.com/1/2/education
Prynn, J. (2006) HSBC banks record £11bn profit, London Evening Standard, 6th March, at ‘This Is Money’: http://www.thisismoney.co.uk/news/article.html?in_article_id=407420&in_page_id=2
Rikowski, V. (2002) Future of Global Capitalism, Information for Social Change, No.14 (winter): http://libr.org/isc/articles/14-Victor_Rikowski.html
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