Are the banks robbing savers?

realitykeeper

The Times today said that the Central Bank of Ireland assumes banks pwould pass only 60% of the ECB's interest rate hikes onto borrowers. This raises three questions.

1) Why are they not passing on 100% of the increase to borrowers?

2) Why are they not passing on 100% of the increase to savers?

3) Are the banks robbing savers to shield borrowers.

If so, what should savers do about that?

ZookeeperDub

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

1) Why are they not passing on 100% of the increase to borrowers? Probably because they can bury the increase in some of their profit

2) Why are they not passing on 100% of the increase to savers? Same as above, robbing peter to pay paul. Don't worry the Bank will come out on top

3) Are the banks robbing savers to shield borrowers. Long term issue in Ireland, regulations etc are made to make it nearly impossible to throw out non payers and if they do take years. The rest of us have to pay for them

greencap

Time to get my accounts out of this country.

Padre_Pio

https://www.boards.ie/discussion/comment/120907631#Comment_120907631

I found a UK savers accounts at 6% interest, absolutely fantastic returns.

RoboRat

1) Why are they not passing on 100% of the increase to borrowers? It could put a lot of people over the edge in regard to their mortgage payments. This could lead to people defaulting on their mortgage and then the subsequent protracted process of eviction or restructuring of loans. If there ends up being a lot of evictions, that will flood the housing market and will devalue the property they have repossessed. It's also worth remembering that the cost of living has increased massively, and I assume they are trying to mitigate the risk of bad debts by not passing on 100% of the rate increases. The bank is also intrinsically tied to the economy... if people have no money to spend, the economy will tank and we'll be back to the late noughties again.

2) Why are they not passing on 100% of the increase to savers? Savings cost a bank money and the more that is saved with the bank, the more liquidity is needed, and they also need to ensure they have enough reserves. Banks make their money through interest from loans predominately, so their interest (no pun intended) is to side with their borrowers as they pay the bills and they really don't want them defaulting. It's also worth noting that if the ECB decided to start reversing the hikes, the banks could end up at a point like last year where savings were costing them money - hence the savings caps and so forth - It's all a delicate balancing act.

3) Are the banks robbing savers to shield borrowers. No, they are running a business and that means you have to prioritise your customers into those who make you money, those who don't make you money, and those who cost you money. Running a bank is expensive and it's highly regulated so they need to make sure they operate within the parameters that are required whilst ensuring they have enough profits to mitigate exposure to risk, because there is a lot of risk, especially in times like this.

Before people start jumping to conclusions, I don't work for a bank, nor do I have any interest or shares in any banks. I'm just pointing out that there is a lot more to it. We all know what happened when the last Irish bank failed, and we really don't need to see that again.

Furze99

Yep, for savers to take their money out and put it elsewhere. That's the only thing they will understand.

As I understand it, the hoors are using citizens savings to get a good return from the ECB and leaving savers with paltry returns.

All it needs is for many savers to say thank you, can I have my money back please and now. That'll learn them.

ZookeeperDub

https://www.boards.ie/discussion/comment/120907646#Comment_120907646

Share the wealth?

I didn't realise we could open a sharing account in UK anymore

cal naughton

https://www.boards.ie/discussion/comment/120907839#Comment_120907839

The Bank's would be delighted with the scenario you have outlined to take it out. They have far too much deposits on their books with the closing of kbc and Ulster

greencap

https://www.boards.ie/discussion/comment/120907646#Comment_120907646

Wow. 6% is amazing.

dasdog

BOI, AIB and PTSB have a monopoly on the Irish Market. There is no competition so they can do effectively do what they like. It's that simple.

I work in the tech side of a Digital Bank providing services to the UK market and get to see a lot of what goes on behind the scenes. It's actually fascinating but customer trust, security and offering quality services are fundamental. They have zero interest in coming to Ireland. It's like we are fed gruel while the UK are out fine dining. Drives me nuts.

RoboRat

https://www.boards.ie/discussion/comment/120907894#Comment_120907894

Exactly. I find it odd that people with long-term savings are leaving them in banks and in many cases, effectively losing money. There are some investment funds that are offering good returns which would be a far better alternative.

Furze99

https://www.boards.ie/discussion/comment/120907894#Comment_120907894

Well let's hope it's put to the test so, what's the last thing a bank wants - a run on deposits.

Victor

https://www.boards.ie/discussion/comment/120907646#Comment_120907646

But at the risk of variations in exchange rate.

Padre_Pio

https://www.boards.ie/discussion/comment/120908355#Comment_120908355

True, but they have been fairly static despite the Brexit nonsense.

It would be worth it, if the only alternative was saving with an Irish bank. Decisions decisions...

ZookeeperDub

https://www.boards.ie/discussion/comment/120907943#Comment_120907943

UK is not better than Ireland. A lot of them came over here looking to make a quick buck and went scurrying back to the UK when they figured out the regulations are different over here. Couldn't kick people out of houses for non payment is and always was the big one.

The Irish banks and the UK banks are in constant contact with each other. If you are working for someone providing services you would be aware of that. They are all up to the same stuff over in the UK as here. The banks trying to close down branches etc etc. sound familiar?

Trying to paint the UK banking system as "fine dining" 😂

If Ireland changed it regulations tomorrow morning every one of those banks would be sitting in Ireland now, but the public would go nuts when mass evictions would happen to non paying mortgage customers etc

FYI AIB and BOI have banking interests in the UK.

dasdog

https://www.boards.ie/discussion/comment/120909026#Comment_120909026

The Irish market is insignificant. There is a general rule of thumb. If you are in the top five of the top five most populous European countries you will make a profit. Ireland, which went from light touch almost zero regulation to over regulation, is not worth the effort. Factor in the fact the state will back up the pillars at any cost and we have no competition.

If you don't pay your debt you should face the consequences not shout what about the famine. The UK consumers and the vast majority of European countries have choice. We don't.

Potatoeman

https://www.boards.ie/discussion/comment/120907938#Comment_120907938

Depends on the exchange rate and where it’s going though.

ZookeeperDub

https://www.boards.ie/discussion/comment/120909083#Comment_120909083

No we didn't go from no regulation to over regulations. The lack of ability to kick someone out of their home if not paying has been in place for years

The crash didn't change that, multiple reasons for the crash.

We had choice, as I said most of the UK banks and some European have come in, didn't like it because they can't make enough profit and run home. It was all down to profit. The European or UK banking is not any better than Ireland, you might have a few more names but they are all looking to screw every penny out of customers.

If we want choice then we need to change the regulations for the banks to kick out bad mortgages etc. The population doesn't want that....

Our best option is a Public Bank but again not enough pressure from the Irish population for that on government.

dasdog

@ZookeeperDub I note you edited your post to include AIB/BOI operating in the UK.

Look at who came last in a 2023 survey

ZookeeperDub

https://www.boards.ie/discussion/comment/120909227#Comment_120909227

and?

Look at who is above them. :-)

This is the fine dining banking is in the UK?

erlichbachman

Banks are dying people, it will take a good few more years but then we will have decentralised finance fully functional and user friendly, no longer will we be at the mercy of the current financial monopolies, a mass transition to cryptocurrencies will occur within the next 3 years

ZookeeperDub

https://www.boards.ie/discussion/comment/120909306#Comment_120909306

Banks are not dying. They are losing market space to fintechs on current account etc but fintechs are not really shaking up the mortgage market etc

Cryptocurrencies are not going to take over. 3 years ago everyone was told crypto would take over, 3 years later we are still been told.

2022 when all those firms and currencies went belly up was the end of crypto seen as the future.

Fox Tail

https://www.boards.ie/discussion/comment/120909026#Comment_120909026

I wouldnt go nuts if non paying customers were kicked out of their house and into social housing.

Oh wait....we dont have any available social housing.

Fox Tail

https://www.boards.ie/discussion/comment/120909552#Comment_120909552

Fintechs just need a better grasp on the mortgage market to really derail the high street banks.

Doesnt Ireland have the 2nd highest number of Revolut accounts in Europe? despite having only 5 million population.

I doubt many people under the age of 30 in ireland have a high street bank account.

ZookeeperDub

https://www.boards.ie/discussion/comment/120909604#Comment_120909604

in reality they do, majority if not all, a lot will have for saving etc wages get paid in and go directly out to revolut

Thry also need for a mortgage which the fintechs will never take on because the overhead is too much

Revokut has lots of customer but you still need a high street bank account

ZookeeperDub

https://www.boards.ie/discussion/comment/120909594#Comment_120909594

Not really the point is it? If people are non paying they should be thrown out, then the banks have no excuse in regards the charges etc they make on mortgages

Like the rental ban which was supposed to make thousand and thousands homeless, never happened, changing to allow lenders to remove non paying tenants is not going to have a huge flux in ireland

The houses freed up can be sold and increase supply etc

Fox Tail

https://www.boards.ie/discussion/comment/120909725#Comment_120909725

I agree that we should remove non payers and reduce rates for payers as a repercussion.

But I dont see the state doing it when they know they have to house the non payers somewhere.

And they have nowhere.

Things wont change until we have a surplus of housing.

Which wont happen for decades.

ZookeeperDub

https://www.boards.ie/discussion/comment/120909744#Comment_120909744

Its a big circle, if someone is removed as non paying that free's up a house to be sold. Then it will get people moved into the house and the non paying can take up a potential rental

We are building loads of houses and stopping changes in regulations for something that might happen is not the answer, as we seen with the eviction ban it might never happen.

Fox Tail

https://www.boards.ie/discussion/comment/120909985#Comment_120909985

The someone that may move into the house is already housed.

The govt are happy enough for workers to house share and not complain, or 30 somethings to live at home with their parents and not complain, but they dont want people that cant or wont houseshare being kicked out, displaced and ending up on the streets.

in other words, the status quo is better than the shake up.

I am not saying that is right by the way.

But it is the way the Govt look at it.

Path of least resistance and all that.

rogber

https://www.boards.ie/discussion/comment/120909306#Comment_120909306

This is why smart people invest their money in people like Sam Bankman Fried

ZookeeperDub

https://www.boards.ie/discussion/comment/120910034#Comment_120910034

As I said, based on the recent eviction ban and all the gloom that was predicted and never happened

More house in market is what we need, people sitting in houses for years not paying mortgage etc is not good for anyone

Fox Tail

https://www.boards.ie/discussion/comment/120910312#Comment_120910312

More houses needed, yes.

I think the impact of the eviction ban hasnt evolved just yet.

ZookeeperDub

https://www.boards.ie/discussion/comment/120910328#Comment_120910328

Had to be done :-)

We are constantly been told of the impending doom and that is why we can't implement any change in Ireland. Sorry I don't buy it. It's because we didn't make changes post crash that we have issues now.

https://youtu.be/cphNpqKpKc4

pat_sconce

https://www.boards.ie/discussion/comment/120909604#Comment_120909604

Fintechs will never get a hold on the mortgage market as they use investment to fund lending.

Investors will always want more than ECB, so it won't happen.

Look at dillosk/ics - a non bank lender and currently the most expensive

realitykeeper

https://www.boards.ie/discussion/comment/120907646#Comment_120907646

But if it is a sterling account you need to keep an eye on their inflation. Even if a bank pays the same interest rate as it`s central bank overseer, you are losing if inflation is higher.

realitykeeper

https://www.boards.ie/discussion/comment/120907947#Comment_120907947

KBC and Ulster made their decision to pull out when central bank interest rates were negative.

realitykeeper

One argument against gold is it doesn`t pay interest but in an environment where the interest paid is always less than inflation, holding gold makes sense.

realitykeeper

https://www.boards.ie/discussion/comment/120909083#Comment_120909083

The EU market is significant. The UK is not.

Peregrinus

https://www.boards.ie/discussion/comment/120919441#Comment_120919441

Only if gold appreciates faster than inflation.

Which, historically, most of the time, it doesn't. It has long periods of price deflation (in real terms) interspersed with shorter periods of very rapid price inflation.

In the long term, a buy-and-hold strategy for gold will usually deliver better returns than cash or bank deposits, but a worse return than real assets (land, equities). Over the shorter term, gold can be quite volatile; you can do well if you time your sales and purchases correctly; time them badly and you can do . . . well, badly.

realitykeeper

https://www.boards.ie/discussion/comment/120909594#Comment_120909594

Yes but why should people who are prepared an able to pay a mortgage in an unrigged housing market be the ones to couch surf. Evict all defaulters pronto and let`s see house prices crash to their true level.

Padre_Pio

https://www.boards.ie/discussion/comment/120919569#Comment_120919569

We won't even see the needle change unless there are 50k plus defaulters (bear in mind these defaulters need somewhere to rent too, which is non-existent)

TheJournal did a story yesterday that shows the country needs 180,000 homes to meet demand.

Bluefoam

BOI made 1 Billion profit last year... That fuels their bonuses, dividends & pay increases... Why don't they pass on the interest rate benefits? I think we know the answer!

tesla_newbie

https://www.boards.ie/discussion/comment/120919441#Comment_120919441

Gold is a terrible investment bar the speculator is lucky with their timing

tesla_newbie

https://www.boards.ie/discussion/comment/120919723#Comment_120919723

Ireland isn’t a normal banking country, you can’t evict rogue mortgage holders so the only option is to stiff both borrowers and savers

we get the government we deserve and the interest rates we deserve

Bluefoam

https://www.boards.ie/discussion/comment/120919854#Comment_120919854

I think you'll find that the banks did all that... The government do not interfere with banking and have no control over the central bank... greed by the banks is a consequence of greedy individuals... I'm not defending our govenment but you need to focus your anger rationally and not follow the propoganda campaign. I hate the way the country is being run but the bankers are not victims here...

tesla_newbie

https://www.boards.ie/discussion/comment/120919950#Comment_120919950

“ the banks did all that “

elaborate ?

Fox Tail

https://www.boards.ie/discussion/comment/120919569#Comment_120919569

I get your point but the govt know there is nowhere to move the non payers to. They could end up on the street so its a last resort to move them out.

If the govt had more social housing available, they would probably be a little stricter with non payers.

it is unfair on everyone else though as it makes mortgages more expensive for those that have planned properly.

Bluefoam

https://www.boards.ie/discussion/comment/120920263#Comment_120920263

The governement don't decide who to evict... the banks manage that process, under the guidance of the central bank and as part of the judicial system which is independent of the goverment. The law of the land informs them how to judge cases.

realitykeeper

https://www.boards.ie/discussion/comment/120919493#Comment_120919493

An ounce of gold was used to buy a suit of armour 3000 years ago in ancient Egypt. Today, an ounce of gold will buy a very good suit. Gold holds it`s value over time. Thousands of paper currencies have failed down through history.

HerrKuehn

https://www.boards.ie/discussion/comment/120920325#Comment_120920325

The law has been set up by successive governments to bias keeping people in their properties, even if they haven't paid anything in years. These are political decisions. It is easier to make sure there are no dramatic sob stories in the press which are very noticeable. What is less noticeable is the high cost we all pay to pay for this system of basically "unsecured home loans" that we have in Ireland. It must be a unique system.

We have calls now for people on trackers to be subsidised as the rate they wanted to track has gone up, it is doing exactly what they wanted. The rate was on the floor for years, with those lucky enough to have a tracker paying very low rates for a decade or so. Only in Ireland would you have calls for the government to help in a situation like that.

Irish banks can take our deposits, pay low interest rates and deposit the money at the ECB earning the deposit rate (3.75%). Unless there is competition they will keep the low rates. I am thinking of using raisin.ie to open an account in one of the other EU countries where you can get 3.5% or so.

HerrKuehn

https://www.boards.ie/discussion/comment/120920917#Comment_120920917

That sounds like it is worth much less in relative terms, I would expect a suit of armor to cost more than normal clothing.