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Negative interest incoming

  • 14-11-2020 10:53pm
    #1
    Registered Users Posts: 1,069 Hoffmans


    banks dropping letters most accounts now at 0% and reserving to go into minus in near future ,

    At 0 they are already in minus when considerIng their charges on accounts , are we in for a bail in
    The near future


Comments

  • Posts: 17,733 ✭✭✭✭ [Deleted User]


    Can't remember the cutoff amount but AIB sent me a letter about a company account... Iirc there needed to be quite a few hundred k in there before the rate may be negative.


  • Moderators, Business & Finance Moderators Posts: 7,821 Mod ✭✭✭✭ Jim2007


    Hoffmans wrote: »
    banks dropping letters most accounts now at 0% and reserving to go into minus in near future ,

    At 0 they are already in minus when considerIng their charges on accounts , are we in for a bail in
    The near future

    Well first of all negative interest rates are not news, they have been around Europe for a couple of years now.

    And no zero interest is not negative by any stretch of the imagination. They fact that you’re being required to pay for banking services is just a large dose of reality - you can’t give away product and expect to make profits from customers that are only their for the free stuff.

    Negative interest rates do not impact T1 ratios, the opposite in fact and when combined with service charges it is likely to remain that way, so no bail in/out as a result of this.

    Although a consolidation of European banking is overdue.


  • Registered Users Posts: 293 ✭✭ Tpcl20


    "you can’t give away product and expect to make profits from customers that are only their for the free stuff"

    Surely holding large sums of money would put them in the enviable position of being able to invest it.

    Banks should be rewarding customers for enabling them to keep their money with them. There isn't enough regulation. At a time when governments can borrow for nothing, citizens should get the same privilege and those investing need to be incentivised. What has happened instead is that government wants money to be moving around the economy so the exchequer keeps ticking over. They want people to spend at this time when nobody wants to spend because they either don't have the money or they're planning for the future. But it's very difficult to see virtually anything good in the future with the depression that's on the way.


  • Moderators, Business & Finance Moderators Posts: 7,821 Mod ✭✭✭✭ Jim2007


    Tpcl20 wrote: »
    Surely holding large sums of money would put them in the enviable position of being able to invest it.
    .

    The point of negative interest rates is to discourage you from keeping money on the bank, it is because they can’t find a reasonable opportunity to invest the money and earn sufficient income to pay you interest on your deposit.

    Contrary to what you think banks are highly regulated, so much so that we prevent them from using our money to make high risk investments in case they would loose it!

    The only way to do as you want would be to deregulate banks and put the taxpayers on the hook for the next bail out.


  • Registered Users Posts: 309 ✭✭ Saudades


    What would negative interest rates mean for savers in Irish banks? Would savers have to pay the bank the negative interest rate? Or is that only applied for very large sums?


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  • Registered Users Posts: 5,227 ✭✭✭ The J Stands for Jay


    Tpcl20 wrote: »
    At a time when governments can borrow for nothing, citizens should get the same privilege and those investing need to be incentivised.

    Citizens are getting the other side of the same privilege of low/negative rates. 2 side of the same coin. Governments are getting negative interest rates on borrowing now; someone is putting their money on deposit with governments at a negative interest rate.


  • Moderators, Business & Finance Moderators Posts: 7,821 Mod ✭✭✭✭ Jim2007


    Saudades wrote: »
    What would negative interest rates mean for savers in Irish banks? Would savers have to pay the bank the negative interest rate? Or is that only applied for very large sums?

    Well from what I have seen here in Switzerland, it started with government bodies and institutions, the companies and now its starting to hit the average customers.

    And yes it means your balance I reduced.


  • Registered Users Posts: 11,163 ✭✭✭✭ Geuze


    Saudades wrote: »
    What would negative interest rates mean for savers in Irish banks? Would savers have to pay the bank the negative interest rate? Or is that only applied for very large sums?

    So far it applies just to business and corporate accounts.

    Some banks have announced negative rates for retail accounts above large amounts for 2021.

    Example: above 3m.


  • Registered Users Posts: 11,163 ✭✭✭✭ Geuze


    https://www.askaboutmoney.com/threads/aib-to-charge-negative-rates-on-%E2%82%AC1m-next-year.220234/


    AIB have cut a series of deposit rates today effective January 2021.

    AIB have also updated T&C's to allow AIB charge negative rates for BOTH personal customers and "micro-businesses". AIB already apply negative rates to corporate accounts.

    According to Charlie Weston in the Indo, AIB will first apply negative rates to "wealth individuals" with deposits above 3 million EUR. This will be lowered to 1 million EUR next year.

    "The bank is understood to be planning to lower the threshold to €1m for firms and wealthy individuals next year, which will impact thousands more depositors."

    Big move but it was coming for some time.

    EBS have imposed a cap on savings. No more than 500k.
    Credit unions all have caps on savings.
    Ulster Bank might be about to leave the market.

    Can't be too long before KBC, BoI, PTSB, Revolut, Monese and N26 also apply negative rates to large deposits or caps.


  • Registered Users Posts: 11,163 ✭✭✭✭ Geuze


    https://www.askaboutmoney.com/threads/n26-to-apply-negative-interest-to-balances-over-50k.220503/



    As per the N26 homepage, N26 are now applying negative interest of 0.5% to balances over 50k.

    According to this article:
    - Negative rates apply to new customer only. Not existing customers.
    - Negative rates do not apply to "metal" premium customers.

    AIB are reported to be going to apply negative rates to balances exceeding 3 million next year and then reportedly will drop this to 1 million thereafter.

    Starling Bank in the UK are applying negative rates to euro balances exceeding 50k too. N26 have clearly copied Starlings lead.

    In Germany the threshold for negative rates is typically 100k. N26 have chosen a lower threshold.


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