Are the banks robbing savers?

harry_ireland

https://www.boards.ie/discussion/comment/120924070#Comment_120924070

I have zero sympathy for banks exploiting customers. Especially since the GFC.

And while I agree with your argument that the current situation is due to the lack of competition, they shouldn't get away with it.

When they earn 3,75% at the ECB but offer 0,01% to their customers, this clearly doesn't reflect running an honest business.

We are all paying all time high fees and all time high creditcard interestrates, so there goes your charity argument.

And perhaps the scales will balance when enough people withdraw deposits and store these abroad.

Because as I said, the era of cheap, near free money for the banks is over. The reality of this hasn't fully sunken in yet, neither with consumers nor financial institutions.

While some are claiming inflation is under control...it's not. Far from it. Rates will even continue to rise in 2023, so the savingsrates must go up.

Regardless, this current banking climate in Ireland is shameful and I have zero sympathy for predatory / exploitative practices. Zero.

There needs to be an equilibrium between rewarding customers for their deposits, charging exorbitant fees and charges on loans and creditcards.

Right now, no such equilibrium exists.

HerrKuehn

https://www.boards.ie/discussion/comment/120924200#Comment_120924200

It's important to also remember that AIB is nearly half owned by the state, so if they are profitable we will get a better return on our investment. I am not sure I understand your point about there needing to be an equilibrium. Banks exist to make money, that's it, the same as any other business. There are options available to you to get a better return on your savings without much effort, especially if you are happy to lock them away for a year.

Jim2007

https://www.boards.ie/discussion/2058306834/are-the-banks-robbing-savers

Well @realitykeeper the reality is that the customers are robbing the banks, so much so that we are in the process of loosing two banks right now. The reality is that the majority of customers are free loaders who cost the bank money and the fewer you have the better. If fact the best solution would be not to take deposits at all but securitise the loans more or less immediately and get them off the books buy selling them as MBS products to the pension funds, the live assurance companies and public bodies. But unfortunately you can't do that and keep your banking license.

And of course your basic assumption that you can use savers deposits to finance long term borrowing products is completely wrong on top of everything else.

harry_ireland

https://www.boards.ie/discussion/comment/120924314#Comment_120924314

I don't know how I can further explain this when your point of view is that this current situation is perfectly fine.

That banks exist to make money isn't an argument, I understand that. Clearly you don't see a problem in not rewarding depositors/savers while charging recordhigh 22% creditcard interestrates.

The average interestrate on a 12 month fixed term deposit is only 1,5%. Minus 30% DIRT that leaves a measly 1,05%.

Again, the ECB deposit facilityrate is 3,75%.

Unless of course you've grown to accept this type of predatory businesspractice we've all experienced over the last decade or so.

In that case, I can't really blame you for experiencing this as 'normal'.

It isn't though. This behaviour needs to be eliminated and depositors/savers need to be rewarded, rather than being punished or even charged for keeping money in the bank. This delusional era in human history has created so much inequality and we already have enough of that as it is.

Remember that Central Banks are a tiny group of elitists and they absolutely love that you speak in their defense.

harry_ireland

https://www.boards.ie/discussion/comment/120924375#Comment_120924375

Yeah those poor, useless, freeloading schmucks all paying €72/yr just to keep an account. And on top of that being charged for each and every transaction.

But you're describing quite accurately how banks see ordinary people. And if they don't like your opinions they'll just close your account.

I remember having a 72 month fixed deposit at 6,1% where this most definitively was used for long term borrowing products. A far healthier environment back then.

Maybe I'm interpreting your post wrong and you're lamenting the banksters, rather than praising them.

realitykeeper

https://www.boards.ie/discussion/comment/120924375#Comment_120924375

The reason Silicon valley bank went bust was cause customers withdrew their money. Certainly what you say was true back when Ulster decided to pull out but that was when ECB rates were negative. Now they are positive and rising.

realitykeeper

Defaulters can have the couches savers are presently using.

realitykeeper

https://www.boards.ie/discussion/comment/120923882#Comment_120923882

An acre of land was valuable 5000 years ago. So was an ounce of gold. But today, property in this country has been inflated with 200 billion euro of borrowed money since 2008/9. This is why I would be skeptical about property holding it's value. Okay the government is doing all it can to keep property prices inflated but they can't keep it distorted forever.

Jim2007

https://www.boards.ie/discussion/comment/120925806#Comment_120925806

That does not make the slightest bit of difference to your argument and it has no relevance to your questions.

As I have already point out to you your basic assumption that mortgage type products can be financed out of short term savings is wrong and on top of that the ECB is not a lender of last resort, at least not technically, which means you can't run a bank by collecting deposits and parking them with the ECB it just does not work that way. The only like between the ECB rate and banking operations is the artificial and dumb one created by the Irish banks in linking mortgages to it and not surprisingly that did not work well. And it leads to people like you creating even more artificial links that don't exist.

Deposit rates will rise when demand for such funds substantial increase from where it is today.

Jim2007

https://www.boards.ie/discussion/comment/120924611#Comment_120924611

Your argument does not stand up, two banks have left the Irish market, the same think is happening all across Europe. And it will continue, banking has become an unconsolidated commodity industry and it will now follow the well traveled route: consolidation and elimination of competition until we get to a point where fees and commission can be raised to a point where it becomes profitable again. It's not a question of being in favour or against, it is just how it is.

Competition is go for consumers up to a point, but beyond that it comes at the expense of the consumer.

Jim appears to be very well-versed in all this, but it’s such a shame that we cannot invest in ETFs here as consumers in a tax efficient/easy way, despite the IFSC being the home of so many of them. Savings accounts offer very poor rates, there’s a huge amount of capital floating about as small-time landlords flee the property market, and investing in single or narrow ranges of stocks isn’t great from a risk minimisation/diversification perspective. I’m reasonably ok with doing so, but a choice of ETFs would make things far easier to manage.

harry_ireland

https://www.boards.ie/discussion/comment/120926300#Comment_120926300

I think there's the issue of me having trouble with the reality post GFC plus the insanity of the last 4 years which clash with my understanding of how banking USED to coexcist with a healthy balance between savings-rates on deposits and the banks rates for borrowing.

In my opinion, ever since the GFC something went very very wrong and the central banking puppetmasters created a distortion of epochal proportions.

An entire generation has only experienced this insane era of near free money, created through artificially low interestrates. Which in turn, created assetbubbles, speculation with severe consequences, irresponsible risktaking and alltime high levels of inequality.

I don't pretend to know the solution, I'm just observing gigantic distortions between what should be and what we currently experience.

I have no problem paying for a well provided service at all. And luckily for me, I still have local branches in the area that I live.

I prefer to see that continue and while I have issues with the financial repression of the last decade, I believe we need to accept the reality that the era of cheap money has caused enormous damage and that banks need to rebalance the rewarding of savers according with the current levels of interestrates. After more than a decade of fraudulent practices, it'll probably take some time for the realignment to work its way through the bankingsystem. Professor Richard Werner explains this way way better than I've tried to. More, small local communitybanks is the solution (creditunions are useful), not a further consolidation of a few banks that have a cartelposition.

I also think hyperfinancialization, speculation in housing and corporate greed have bitten themselves in the foot. Cars and homes are unaffordable...if they were not (or at least the average income was at the same levels as these price-increases) than banks would be getting more demand for mortgages and loans.

But as of right now, these pricelevels are insanely out of whack.

Add all of this up AND not having had a healthy correction or a recession after an extremely long cycle brings us to present day. A huge mess of overinflated valuations, way too high inflation, price gouging, speculation in just about everything and global leaders forcing through an energytransition in too short a timeframe.

A perfect storm which could turn awfully nasty in a heartbeat. And now that we're possibly on the precipice of that, I'm finding it extremely hard to find any kind of sympathy for the same bunch that has brought us here yet again.

harry_ireland

https://www.boards.ie/discussion/comment/120926369#Comment_120926369

You're talking about the UK, right? Because I'm not getting the impression that small landlords are fleeing the propertymarket here in my area.

What I do see is that we're at peak greed and this is reflecting even in the way realtors are pricing properties. It used to be 269.000 or 429.000......and now its just 450k....or 1 million....or 700k. It's utterly ridiculous and I'm frustrated because I've been trying for a decade.

So my rants on this issue aren't because I'm just so well off and I demand interest on my savings because I just want more more more.

No, I'm just at the end of my rope and I'm experiencing feelings of utter frustration and anger, witnessing these levels of greed and inequality. I can't even afford a single small modest house meanwhile I see people buying second third or their twelfth property.

So can you blame me (and not just me) for just wanting to see the whole damn thing crash and burn?

HerrKuehn

https://www.boards.ie/discussion/comment/120926369#Comment_120926369

There is literally nothing stopping people from getting close to ECB deposit rates here in Ireland: https://www.raisin.ie/

Open an account with the Portuguese bank and lock your money away for 1 year:

rob316

They'd collapse the housing market over night if they upped the deposit rate, right now Ireland has some of the cheapest mortgage rates as they are subsidized by the deposit rate. The average mortgage rate in the UK is over 6% now, you can still fix here under 4%.

The banks don't want a load of mortgage defaults as its incredibly difficult to repo a property here.

harry_ireland

https://www.boards.ie/discussion/comment/120926664#Comment_120926664

What's stopping me is the ratings of most of these banks.

As for the rates, you don't mention the withholding tax and after those and DIRT, it's not sounding all that great.

The issue is that the Irish banks are lagging with their compensation for savers compared to other EU countries.

But regardless, even at these somewhat higher levels, it doesn't really change the fact that inflation still eats away each and every return.

harry_ireland

https://www.boards.ie/discussion/comment/120926679#Comment_120926679

This is a case in point of course that this government is just horrible. Even though the essential task of a government is making sure its citizens have adequate housing, they can't even accomplish that. By design of course.

Seems like their objectives aren't taking care of its citizens, but rather corporations, hedgefunds and investment firms.

Mortgagerates are well above 4% now. And creeping higher with every ECB ratehike. Whether you personally want this or not, eventually these mortgagerates will move higher. It seems like people still believe this fantasy of a 'pivot' or a return to zero interestrate policies.

Look at the massive amounts of distortion and debt this financial experiment has given us. As I said in previous posts, I can vividly recall mortgagerates of 12-14% and even up to 16% in the 80s. Not saying that's desirable, but something that reflects some kind of historical average.

Without normal levels of mortgagerates, this insanity in the housingmarket will just go on and on....I think we can agree that nobody wants that.

harry_ireland

https://www.boards.ie/discussion/comment/120926679#Comment_120926679

I don't think higher compensation for savers will collapse the housing market. As overinflated as it already is, its due for a much needed correction.

Locally I see properties that have gone up by 80% in 4 years. That's not normal, not sustainable and not healthy.

Neither is 0,01% on your savingsaccount.

These last 15 years have been so utterly fraudulent, look at the distortions in our lives because of it.

Not in the least because you think a 3% interestrate of savings at 6% inflation will 'collapse the housingmarket'.

That kind of thinking is only because this housingmarket was built on articially cheap quicksand money over the backs of those that are fiscally responsible (in other words, savers). When you rewards speculators and risktakers, but penalize savers...this current fake, insane clownworld is what you get.

realitykeeper

https://www.boards.ie/discussion/comment/120926241#Comment_120926241

I think you are mixing me up with someone else. I don`t think I said any of those things.

HerrKuehn

https://www.boards.ie/discussion/comment/120926829#Comment_120926829

I think the comment was in relation to the low deposit rates for savers subsidising the relatively low variable rates for mortgages currently. I have no idea what you mean by the last 15 years being fraudulent. It seems your posts are basically just rants at the increase in house prices and the lack of interest on the deposit you were saving. The world doesn't revolve around you.

harry_ireland

https://www.boards.ie/discussion/comment/120928512#Comment_120928512

I wasn't replying to you, now was I? Obviously you have an issue with my posts and you feel the need to put me down somehow. You probably work in the financial sector and dislike hearing the cesspit it really has become.

realitykeeper

https://www.boards.ie/discussion/comment/120928512#Comment_120928512

Well I know exactly what he means about the last 15 years being fraudulent. Enda Kenny and his successors borrowed 200 billion euro sinse 2008 and used it to inflate existing house prices. In a non-fraudulent market, first time buyers would not be confined to new housing stock necessarily, they would be looking at all existing properties. Back in 2009, when house prices were in freefall, Enda Kenny`s government put a false floor under house prices by insuring a traunch of properties belonging to one of the bailed out banks against negative equity and this resulted in people buying houses before the bottom was in and that manipulation stopped house prices falling to their true value. Next Kenny`s government enacted laws making it difficult for banks to repossess properties. In other words, Enda Kenny used our money to bail out banks and then took steps to undercut these businesses from operating to their full potential. The banks had to sell unperforming loans to foreign vulture funds meaning the foreigners get our profits just so FG politicians could keep their seats. Next FG decided to keep house prices high by letting defaulters stay in them to keep them off the market. To do this they used laws and the courts on one hand and by flushing the economy with cheap credit on the other. This was also an attempt at stealth taxation because the funny money they ultimately borrowed from the ECB, devalues people`s hard earned savings.

The 200 billion FG/FF borrowed sinse 2008, made it possible to pay civil servants and state employees more than would otherwise have been possible and much of this money was used (as intended by FG) to fuel house price inflation. The 200 billion also meant taxes on the private sector could be lower than would otherwise have been the case and this resulted in higher salaries/spending by the private sector business and their employees, again much of which was used to inflate property prices, in accordance with FG`s market manipulation strategy.

So who is to pay this 200 billion euro debt? The people priced out of the market it was used to rig?

You know there is a way to correct this mess. First tax all existing housing stock heavily with monthly taxes, and advertize the sale of any property in arrears on a government website. Exempt both new builds and first time buyers from the tax. This will result in existing property owners selling to tax exempt first time buyers in order to buy a tax exempt new build for themselves. This would also result in a market driven construction boom which would really help Ireland in the event of any slowdown in the multinational sector.

The J Stands for Jay

https://www.boards.ie/discussion/comment/120923978#Comment_120923978

You really need to change your bank

The J Stands for Jay

https://www.boards.ie/discussion/comment/120924567#Comment_120924567

Why are you paying credit card interest?

The J Stands for Jay

https://www.boards.ie/discussion/comment/120925806#Comment_120925806

Silicon went bust because they didn't match the term of their investments to the expected term of their liabilities. They ended up having to sell bonds when their value was down and weren't able to pay back their depositors.

harry_ireland

https://www.boards.ie/discussion/comment/120932621#Comment_120932621

Great reply. Although it's not limited to Ireland.

This Central Bank ponzi-scheme has been one of the most delusional periods in financial history and it has created chaos, inequality, perpetual indebtedness and lots and lots of unintended consequences. Well, perhaps they were intended.

harry_ireland

https://www.boards.ie/discussion/comment/120933927#Comment_120933927

I was merely stating the incredible spread between banks charging 22% interestrates on creditcard debt (which is an alltime high) and the rewards given to savers of 0,01%. And yes, I am aware of termdeposits and Raisin alternatives. But let's focus on banks in Ireland, which is the main topic.

Obviously I don't make irrational purchases on my CC and then pay 22% interest on said purchases. Again, I mention these rates in comparison to the virtually non-existent interest on savings.

harry_ireland

https://www.boards.ie/discussion/comment/120933983#Comment_120933983

Saving is not investing. That's an entirely different topic.

Cheers to you if you make double digit returns on your investment portfolio, really.

Havings savings for say, the purchase of a house is a completely different perspective.

There is nothing lazy about building up savings to achieve a goal, making sacrifices AND being risk-averse. It's just a different strategy.

harry_ireland

https://www.boards.ie/discussion/comment/120932621#Comment_120932621

I strongly agree with your remarks on taxation on propertyinvestors. Housing should be for people to live in, not as a vehicle for hedgefunds, investmentfirms and pricegouging flippers. In this current housingcrisis those entities shouldn't even be allowed to purchase homes or at the very least, citizens and families should get priority over them.

It's gotten to a point where supply and demand are so hopelessly out of balance that pricelevels have reached insane levels. And still, there aren't restrictions being put on investors. There's no other explanation than that this is done deliberately.

realitykeeper

https://www.boards.ie/discussion/comment/120933961#Comment_120933961

Precisely. They had to sell bonds because the depositors were withdrawing their money. If depositors withdraw, the soundness or otherwise of a bank's investments come into play.