Our local newspaper had a front-page story yesterday highlighting the fact that in a number of recent bank robberies (yes, they still rob banks here), the security photos were so blurry and grainy that they were simply useless.  In fact, one bank still used a system that shot only black and white photos.  Why would banks have less photographic technology than your cell phone?  The article went on to describe state-of-the-art systems a bank might want to install from $2,000 to $14,000.  My first thought was "Why wouldn't a bank install a $10k security system?"  And my second thought was "Why would a bank spend $10k on a security sytem?"

The answer to these questions would depend on the difference between the costs to the bank of a "cleared" bank robbery versus an "uncleared bank robbery.  Banks obviously have an interest in deterring bank robberies and avoiding employee and/or customer victimization and trauma, violence, and loss of customers.  But once the robbery takes place, does it matter to the bank if the robber is caught?

I found a DOJ report on bank robbery, although it's a few years old.  From this report, I learned that in 80% of robberies, the money is never recovered, and that 20% number includes robbers who are apprehended on the spot.  So, once the robber is out the door, the chances of avoiding a loss is pretty low, even if your photo is incredibly clear.  Also, most bank robbers get caught anyway -- 1/3 in 24 hours, and 1/2 in a month.  If not caught quickly, the chances of the robber being caught rapidly diminish, probably reflecting the difference between amateur robbers and professional robbers.  So, if you are a small-town bank, you may not feel that investing a lot of money in security cameras when the amateur robber will probably be caught anyway, and then even empty-handed.  If you are a big, national bank with a presence in urban centers that might be attractive to professionals, then you might want to be on the forefront of security.

Also, the average robber gets away with $4000, and most banks have a 50% chance of being robbed over 10 years.  So, the probable costs of the robbery, disocunted over time, may just not add up, even if you thought you could recover the $4000.  Other costs to the bank, trauma therapy, employee time off, etc., would not be recoverable anyway.

But, do security cameras deter thieves?  According to the DOJ report, no.  Professionals wear disguises or disable cameras.  Amateurs don't seem to figure them into the calculation.  There are other ways to try to deter theft or minimize it, but some of them are expensive (security guards) or put off customers ("bandit barriers").  It may be that some banks just consider the occasional robbery as a cost of doing business.

Finally, bank robberies are not covered by FDIC insurance, but are covered by private insurance.  Unless the insurer gives discounts or requires additional security measures, similar to smoke detectors or sprinkler systems, then the bank's incentives are even smaller.

But what about convenience stores?  According to our newspaper, these stores have state-of-the-art equipment.  Are convenience store owners' incentives different?  First, 6% of robberies occur at convenience store, as compared to 2% at banks.  Independent stores may not be as well-insured and so may more directly bear the costs of robberies.  Also, convenience stores who are robbed have a greater chance of being robbed again if the robber isn't caught.  In addition, these cameras work better because they have to cover smaller areas and are usually well-positioned.

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