Deposits with AIB/BOI

[Usjes]

Hi,

Something has been puzzling me since this whole financial s***storm started and I wonder if anyone can shed any light on it. Why are BOI/AIB showing no interest in courting deposits? (There must be billions out there up for grabs but their rates for demand deposits are a derisory 0.01% indicating that they have no interest in competing). These ridiculous rates were the same even when the likes of Anglo were offering 7%. Initially I had assumed that they were afraid to raise the rates as they were still trying to maintain the pretense that they were not grossly overextended like Anglo but now that cat is well and truely out of the bag, all the banks need more capital. So what is the deal, is it just a case of them showing utter contempt for the taxpayer ? What they are effectively saying is, why would we pay you for your deposits when our cronies in government are just going to give it to us for free via increased taxation + a bailout ? Or is there some dimension that I am missing. Why do cash-strapped banks apparently not want deposits?

Thanks,

Usjes.

 

[camlin90]

"Bank of Hibernia"

Pre NAMA
Loans issued €50 bn
Customer deposits €40 bn
Loan to deposit ratio 1.2:1

Along comes NAMA taking €40 bn of bank's assets

Post NAMA
Loans issued €10 bn
Customer deposits €40 bn
Loan to deposit ratio 0.25:1

Bank has a load of money sitting around that it doesn't need so it pays 0.00001% interest.

The top five banks in terms of market leading deposit products are Investec, Anglo Irish Bank, Halifax, Nationwide UK Ireland and Northern Rock.
How many of those are participating in NAMA? Coincidence? I think not.

NAMA is a huge quantitative easing (money printing) exercise - in effect the banks are being handed billions of new money and so they don't give a crap whether you put your few pennies with them.

This is money printing in disguise, because the government issue bonds to finance NAMA, which are bought by banks and then exchanged for "new cash" at the European Central Bank. Historically, the government would just create the cash itself. The ECB are hoping that the interim step confuses people, and they don't realise that the printing presses are actually running at overdrive.

Get used to low rates. All of us AAM'ers need to call a meeting to discuss strategy for when this money printing results in the inevitable torrent of hyperinflation destroying the value of cash.