The unintended consequences of UK banking legislative changes - a Santander rant

Profile picture for user gonzodaddy By Den Howlett January 27, 2020
Delivering on legs and regs is no fun but when it comes with unintended consequences, the problems quickly escalate. Here's one example.

Santander fail

Legs and regs are the bane of any firm's life, no more so than those that impact banks. Sometimes they have unintended consequences. Recent changes in the banking sector for example are leading to confusion among customers. Here's what has happened at Santander. 

In common with other UK banks, Santander is required to show how your overdraft works - assuming you have one. This is the help page describing what they'e done. 


There are several problems with this page. First, 'amount you have in your account' is not what it seems because 'balance including pending' is the amount available to use, including any overdraft facility. But even then that's not really the case. Here's why and why it is confusing. 

Pending transactions can include what are known as 'uncleared effects.' These are amounts credited to your account which have not yet run right through the interbank clearing system. They are, therefore, NOT payments due. But they can appear as listed in the 'current balance.' 

I discovered this problem when checking my business current account only to find a large discrepancy between what was showing as the 'current balance' and the 'balance including pending transactions.' In the current balance was a large credit but it was also showing in pending transactions. OK - I can get my head around that except for one problem. There is no way to access a list of 'pending transactions.' That in turn means it's necessary to contact the call centre who are only able to work off the script and don't understand the nature of the confusion. 


In an age of 'faster payments' you'd think this would be a problem that is readily overcome but if you are running a treasury function or are trying to reconcile accounts for reporting purposes then what do you do? Which balance do you start with? What if you are processing numerous transactions on a daily basis? What if there are identical credits showing in current but also in pending? How do you distinguish which are for which customer?

In my case I was able to quickly figure out what 'pending' means and all the transactions to which it relates but even so, it is still an unsettling problem. But then I have a relatively simple business with a low volume of transactions. 

Back in my day, I was trained to consider the balance on the bank statement as sacrosanct and on which I could confidently rely. I could pass the balance information onto auditors, confident in the knowledge that I'd correctly balanced the books and that they could independently verify the balance both at and after the cut off date. 

Any bank reconciliation would naturally include uncleared effects since they were not shown on the statement but I'd also include uncleared payments as they would have been recorded in my books even if not showing up on the statement. In today's world, payments most likely to be pending constitute direct debits or recent debit card transactions that have been recorded at mine and the ba no's end but not fully processed by the recipient.  

The current way in which balances are presented (sic) - at least by Santander - muddies the waters. 


I get why legislation was enacted to help people better understand overdrafts, overdraft limits and the like. These are topics that often attract negative comment, especially when banks impose outrageous fees for stepping over agreed overdraft lines. But if you're going to do this, then it's equally important to remember that there are communication issues involved that are critically important to the customer. 

In an ideal world, the 'balance including pending' should reconcile back to my manual reconciliation but as you can see, by muddling credits shown in the 'current balance' with uncleared effects in 'balance including pending' can lead to confusion. These should not be on the statement in the first place. 

In an even more ideal world, the bank would be able to display a screen that lists the pending transactions so that I have a double check, or in complex situations, a listing of those uncleared effects along with pending debits.

Calls to the bank where the people answering don't really understand the nature of the problem is incredibly inefficient and time wasting for both sides. The illogical problem of showing credits that are uncleared as part of current balance escapes them. 

Challengers win?

This sort of thing will be music to challenger bank's ears. Love them or hate them, Revolut for example sends me a message within 30 seconds of any transaction whether debit or credit. They've (more or less) obliterated the problem of bank reconciliation. Which is fine for folks like me who use them for various types of occasional travel related expense but it's useless for ongoing commercial volume transactions. It won't always be this way but right now, the incumbent in this case has put one step forward and taken at least two back.

I normally like Santander which, in my view, has emerged as one of the better large banks operating in the UK. Today is not one of those days.   

Important update

Since the credit had not cleared by the afternoon (having been credited last Friday) I called back only to discover that the transaction is being checked by the fraud team. That was not communicated to me on the first call. That compounds the problem because if that's the case then the credit should not show at all. I escalated the issue only to be smacked in the face by the stone wall of policy. Needless to say a complaint has been raised because this is wrong all ways to Christmas - and back.