Deposit Interest Rates

Just wondering if anybody can tell me if Banks are required to give a certain amount of notice to reduce their deposit interest rates. Have found in the past that some publish notices in newspapers giving eg. 60 days notice to reduce on a particular date - yet for other accounts, the reductions are not notified either in advance or on the date?

Are there any clear rules that they need to adhere to? Do they differentiate between fixed & variable - or perhaps between product type eg. term & savings & demand etc...

Many thanks

It depends on the type of account.

For fixed term deposits, you enter into an agreement with a fixed rate for a fixed term. So the change in rate only impacts customers who open accounts going forward i.e. does not impact existing customers. These accounts do not require any notice in advance of rate change.

For instant access/regular accounts, the rate change generally impacts all existing customers who have an account. In this case, 60 days notice is required. Worth noting that the 60 days notice is only required for "payment accounts" - so that would be an instant access account but NOT a notice account/non payment accounts (need to give notice to access money).

I've noticed recently that some notifications in newspapers only give a day or two notice for rate cuts - the bank might notify customers personally by means of a letter though so not sure on that one.

I believe the rules are part of the Payment Services Directive brought in a good few years ago.

Don't know about the rules but the recent decrease in the Nationwide UK Notice Plus Savings Account, where 80% of the funds are held for a notice period of 30 days, only gave a day or two's notice. Given the other 20% is instant access, this might have allowed them to get around any rules on the matter.

Another aspect to this is the fact that the NTMA State Savings instant access product is classified as an investment product and not a deposit product. Hence, the NTMA are not subject to the 2 months advanced notice requirement.

The 2 months advanced notice requirement is not always universally obeyed by financial institutions, as it should be.

CiaranT said:

The 2 months advanced notice requirement is not always universally obeyed by financial institutions, as it should be.

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Can anything be done about this?

Do the highly paid staff of the Central Bank not monitor financial institutions in this regard to ensure compliance with regulations?

I'm not sure the NTMA who offer state savings are regarded as a bank. I cant see anywhere if they are regulated by the central bank. If not, they might not need to follow same regulations.

For any banks in Ireland that do not give the notice, they sometimes have some notice element built into their accounts like BOI reg savers I think. This way they might not need to provide notice.

Also, there is a possibility that accounts are offered on an issue basis so that existing customers are still on the old rate but accounts opened going forward are on the new lower rate.

Another option could be to personally notify customers maybe through email or online banking. This would cover off existing customers.

I do agree though, some of the rate cuts that are put in place immediately seem to go against the regulations.

Banks usually don't notify before any reduction of deposit interest rates. Interest rates are dependent on many factors, it depends upon many financial factors. The deposit rates differ from bank to bank.