Interest on savings

Tonesjones

With ECB raising rates and more to come what would have to happen for banks to start paying customers interest on their savings?

Are the banks themselves not earning money in the form of interest on their customers savings?

Jim_Hodge

https://www.boards.ie/discussion/2058269719/interest-on-savings

They were paying negative rates for quite some time without passing it on to depositors, so it'll be a while before the positive rates will be passed on.

Tonesjones

https://www.boards.ie/discussion/comment/119812162#Comment_119812162

Are they not legally obliged to or can they pick and choose?

A pointless question I suppose considering your statement about the negative rates not being passed on.

ShaneODub

https://www.boards.ie/discussion/2058269719/interest-on-savings

Heard on a podcast that the banks are awash with deposits so they don't need to attract more deposits by offering interest.

pummice

What if you went up the north and opened a sterling deposit account - would you get some interest off that?

Jim_Hodge

https://www.boards.ie/discussion/comment/119812207#Comment_119812207

The best Natwest are offering is 0.5%

NIMAN

There are definitely deals starting to appear in the UK for savings. I've seen ones listed on HUKD for rates between 4.5%--5.12%.

Not sure if any of the NI branches are offering similar yet, but if they were same lender, such as Halifax, don't see why not.

Jim_Hodge

https://www.boards.ie/discussion/comment/119812232#Comment_119812232

They're usually for deposits less than £1000.

NIMAN

I did see one last week or so for a lump sum account. Will see if I can dig it out.

Jim2007

https://www.boards.ie/discussion/2058269719/interest-on-savings

There is a basic misunderstanding here. The purpose of a central bank in this respect is to regulate and ensure the smooth operation of the market not to act as somewhere the banks can dump all the cash they can find and earn interest on it. Yes, they can borrow and deposit money with the ECB, but the business model requires them to actually function as a bank.

Apart from ECB linked mortgages the ECB rate does not make a heap of a difference to the financial products the banks sell including savings accounts. So in order for the banks to offer you a higher rate of interest, they need to be able to find safe opportunities to invest those deposits, in other words demand for business borrowing needs to rise and that is not happening at present.

It is also worth remembering that the rate of return is always associated with the amount of risk you take on. In banking circles Ireland and Germany are seen as two of the safest European economies you can invest in so the interest rates are low, where as the UK is borderline investment grade and you’d expect to receive a higher rate of return.

I would not expect to see Irish deposit rates rise significantly until we start to come out of the recession and business starts to pick up.

walterking

https://www.boards.ie/discussion/comment/119812189#Comment_119812189

Legally obliged?

Absolutely not unless you have a saver tracker (don't think one was ever offered here)

Banks are commercial businesses - they will balance between loan rates and deposit rates

The low deposit rates are keeping mortgage rates low (for the moment) especially short term fixed rates which are amongst the lowest in Europe (funny how the media won't say anything about that cos it's positive)

Jim2007

https://www.boards.ie/discussion/comment/119812207#Comment_119812207

You’d also take on significant risk in doing so. I keep failing to hammer this principle into peoples heads - nobody is going to give you a higher rate of return than they need to because they think you are a nice guy, they do it because you are taking on significant risk beyond the norm. It does not matter what the product is nor who it is dressed up a higher rate of return always represents a higher risk.

Tonesjones

https://www.boards.ie/discussion/comment/119812373#Comment_119812373

Thanks for the info and education. The banking system is something I have no real knowledge of.

Henry Ford III

AIB UK wouldn't open a STG£ deposit account with an Irish address when asked recently.

Jim2007

https://www.boards.ie/discussion/comment/119815360#Comment_119815360

They would not have a license to do so for a start..... The requirements to comply with EU rules would put them at a disadvantage in the UK market.

Henry Ford III

https://www.boards.ie/discussion/comment/119815889#Comment_119815889

They mentioned Brexit as a reason at the time.

The J Stands for Jay

https://www.boards.ie/discussion/2058269719/interest-on-savings

They might offer new accounts with interest (unlikely), bit they sure as hell won't add interest onto accounts that are already full of money where customers seem happy to receive nothing. It could be that the bank would be happier without those deposits.

3DataModem

https://www.boards.ie/discussion/2058269719/interest-on-savings

Bank of Ireland was paying negative interest rates (yes, charging you for holding money) on very large balances (1m+) recently. They had to change their T&C to allow it. Governments have generally not been interested in promoting cash saving as it is not a good use of capital from an economic perspective. They'd rather you invest it. Or better yet, spend it. That may change now that inflation is spiking, but I don't forsee an SSA type situation happening again.