Why can't bank give us a better deposit rates ?

Sensor

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I hear several commentators now saying that Irish banks are safe and we should deposit out money in the Banks and that will stabilize banks.

First of all, I doubt if Irish public have enough money to deposit. But even assuming they have, why should they deposit the money and get an interest rate that is a pittance . Banks & Govt are willing to borrow from ECD (or Germans in effect) at 5%. But to borrow money from us thru deposits, they only give us 2-3%.

Why can't they give us deposit rates same as they are borrowing from ECB ? Considering banks are owned by Govt, and DIRT of 25%, even if they offer 6%interest rate, net cost will be less than what they are paying ECB and on top of it interest income will stay in the country rather than going to external investors.

Am I a fool to think Banks should offer us better interest rates ? Or are the bankers & govt fools that they can't think like this.
 


johnfás

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Because they give a fractional interest rate based on the margin they make on loans. That is - they should take in your deposit at 2% and lend it out at 5%. The 3% difference is their margin and after deducting expenses you arrive at their profit. The problem for the Irish banks is that they ran with a completely different model - whereby they just borrowed for their loanbook and now they can't return to a classic banking model without defaulting on their previous obligations. A default is inevitable,
 

PoliticsDad

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The truth is that Irish domestic deposit and loan rates are not reflecting reality. The current 5 Year Fixed charged by AIB is 4.39% (3.85% APR over 20 yrs). Irish 5 Year bonds are currently trading at around 8.5%. That simply doesn't stack up. Lending rates are meant to reflect the riskiness of the borrower / loan purpose. Clearly Irish domestic rates are way too low.
 

Cassandra Syndrome

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Because it is Central Banks dictating what retail rates should be. Hence why civilisation is on the verge.

The sooner we have community run banks with natural rate of interest determined by the people involved in savings and investing the better.
 

Trophonius

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Am I right in thinking that PermanentTSB is the only solvent irish bank left ie took no money from government bailout nor has had to deal with NAMA?
 

trekkypj

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I believe PTSB has taken plenty of assistance from ECB though.
Even so, they're in a far better position than BOI and AIB.
 

PrinceMax

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Even so, they're in a far better position than BOI and AIB.
Ulster Bank must be doing alright? I mean, I know they're basically owned by the British government. But surely that's less risky than being owned by the Irish government?
 
I

idij

I hear several commentators now saying that Irish banks are safe and we should deposit out money in the Banks and that will stabilize banks.

First of all, I doubt if Irish public have enough money to deposit. But even assuming they have, why should they deposit the money and get an interest rate that is a pittance . Banks & Govt are willing to borrow from ECD (or Germans in effect) at 5%. But to borrow money from us thru deposits, they only give us 2-3%.

Why can't they give us deposit rates same as they are borrowing from ECB ? Considering banks are owned by Govt, and DIRT of 25%, even if they offer 6%interest rate, net cost will be less than what they are paying ECB and on top of it interest income will stay in the country rather than going to external investors.

Am I a fool to think Banks should offer us better interest rates ? Or are the bankers & govt fools that they can't think like this.
When I was transferring from the bank, they said they'd offer me a "very good rate" if I wanted to keep the money there. I didn't enquire what it was (can't put a price on peace of mind), so it may have been closer to "not that good after all", but I think if you want a better rate you can always ask and see what they say.

They may have calmed down now that we are all being placed into indentured servitude to keep them afloat.
 

trekkypj

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Ulster Bank must be doing alright? I mean, I know they're basically owned by the British government. But surely that's less risky than being owned by the Irish government?
I'd say it's a reasonable argument to make. I'm no financial expert but the fact that RBS (parent of UB) is practically UK government-owned makes this situation much more secure, I'd say.
 

Green eyed monster

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More to the point why cannot we own our own debt? Instead of borrowing at 7% from foreign billionaires make that option available to ordinary Irish savers, this way the wealth will remain in the country.

The truth is that Irish domestic deposit and loan rates are not reflecting reality. The current 5 Year Fixed charged by AIB is 4.39% (3.85% APR over 20 yrs). Irish 5 Year bonds are currently trading at around 8.5%. That simply doesn't stack up. Lending rates are meant to reflect the riskiness of the borrower / loan purpose. Clearly Irish domestic rates are way too low.
It reflects the stunning irony that loaning to the organisations that got us into this mess is now a safer proposition to loaning to our country itself... It highlights priorities.
 


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