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The cost to financial institutions for holding deposits

  • #1
    Registered Users Posts: 4,642 ✭✭✭ Chinese whospers

    I'm hoping someone can explain why banks are charged for holding our deposits.

    I get paid from my employer - no cash exchanges hands. A balance on one ledger decreases and is increased on another. So far as far as I can see it's only digits on a computer that have changed.

    The banks then lodge these 'digits' with the central bank for safe keeping and get charged interest. Therefore no banks want to carry high levels of deposits and will potentially charge negative interest rates.

    I'd understand if the banks had to deposit a level of gold, but I doubt that's the case. I'm obviously missing something. Can someone explain please?