2010-11-23 09:11:04
Eric Cantona Cantona wants a 'real revolution'
Former footballer Eric Cantona has called on a new form of direct protest - a mass cash withdrawal - to bring down the banks. So what would happen if everyone tried to withdraw their savings?
From the footballer who once kung-fu kicked an abusive fan, a new form of direct action without any violence.
Take your money out of the banks and spark their collapse, says Eric Cantona, in advice to the students and public sector workers holding protests in France and the UK.
"We must go to the bank. In this case there would be a real revolution," says the French former Manchester United star in a newspaper interview that has been filmed and widely viewed on YouTube.
The Answer
"It's not complicated. Instead of going on the streets and driving kilometres by car you simply go to the bank in your country and withdraw your money, and if there are a lot of people withdrawing their money the system collapses. No weapons, no blood, or anything like that."
So how effective would this form of protest be?
In the very unlikely circumstance of everyone heeding Cantona's call, there are obvious practical hurdles preventing that number of people getting to cashpoints or queueing up in branches to withdraw their savings.
But setting those aside, the banks would need to find more cash, because only about 5-10% of people's savings are kept in banks' tills. The rest is lent out or invested.
Start Quote
The only effect it would have is to inconvenience a lot of people when they go to the cash machine
End Quote Richard Wellings Institute of Economic Affairs
"Banks only keep a small fraction of their deposits as cash, so the cash machines would run out and cash in the branches would run out," says Richard Wellings, deputy editorial director of the Institute of Economic Affairs.
"They could go to the Bank of England [for some cash] or they could sell assets to release cash but they probably wouldn't bother because it would just be a temporary blip."
Although some branches may have to close, it would be very different from a conventional run on a bank because depositors would know it was related to a protest and not an underlying problem with the bank, so confidence would not be hit in the same way, says Mr Wellings.
Furthermore, all deposits up to 50,000 are government-guaranteed, through the protection of the Financial Services Compensation Scheme, so that would help strengthen confidence and prevent a panic.
All their digital transfers would carry on as normal, this would just affect the physical payments of cash. These could be rationed or temporarily halted.
"The only effect it would have is to inconvenience a lot of people when they go to the cash machine and try to withdraw their money but find there's no cash there. But it would not cause the collapse of the banking system. Notwithstanding the big problems, I can't see it having much of an effect in reality."
When there is a run on a single bank for reasons of confidence, then the government can step in, as it did for Northern Rock in 2007.
But if there was ever a collective panic sparked by a mass withdrawal against all the banks, then the consequences are far more serious.
In 2001 during the Argentinian economic crisis, large numbers of people began taking their cash out of the banks, so all bank accounts were frozen for months.
Mr Cantona was undoubtedly a better footballer than an economist although I regret to say that the grasp of the latter subject appears to be on a par with the level of economic understanding found in France. Mass runs on banks would bankrupt the banks and their customers, ie. most of the rest of the economy. While the desire for revenge is understandable it must be remembered that it was the customers of the banks that [indulged in] the wild folly of the boom times and easy credit and they or we have only ourselves to blame. Bankers did and do some very stupid things but as long as they are unanswerable to their shareholders on things like compensation we can expect such things to recur.
Jim, Zabbar, Malta
Bringing down banks? Now what good will that do to anyone apart from make the economy suffer more than it already is? What a stupid idea.
Zhina Berry, UK
A bank run will have the same effect regardless of what the underlying motivation of its customers will be. The result will be the collapse of the bank, a bailout of insured customers, a takeover of the bank's board of governors, resulting in a huge cost to taxpayers, and for what? To make a point?
Aaron M. Long, San Francisco, US
I like the sentiment. The banks should have been allowed to collapse in the first place. No banks, no debts. Suddenly, everybody would be on a level playing field again. Yeah there would be chaos for while as the economy reboots and finds a new sensible working equilibrium. It is a bit like climate change, the biosphere is already moving to a new equilibrium and it is too late to stop it.
Tom Arnautovic, London
This article is way too optimistic. (Electronic) withdrawal of cash brought down Dutch DSB bank last year.
Robert, Rotterdam
I think this article is short-sighted. It fails to consider the effect on the banks as businesses. Withdrawing assets from a bank includes the possibilty that when customers return their money they may do so to different banks. This possibilty would lead to uncertainty in the stock market and could lead to a collapse of the value of bank stock. However ultimately where the banks would suffer, the poor would suffer more. I cannot think of a more incredibly stupid idea than to deliberately wreck the European banking system. The only beneficiaries would be in Asia, and possibly Brazil.
Mike Fortune-Wood, Dyserth