FT: Irish Banks Passing On Just 7% of Rate Gains To Depositors. Worst in Europe.

Totally agree with previous contributors. Politicians are taking the popular approach and criticizing the banks 'laggard behaviour' while saying (and DOING) nothing about State Savings 'laggard behaviour'
 
0.35% for prize bonds.

0.33% AER for a three year product. So invest €1000 with the State and and after three years, you will have €10 of interest. Tax Free of Course!

One could argue that the NTMA is behaving worse than the banks considering the traditional elderly customer base of these products.

It's not even like the NTMA can argue anymore that it is safer to invest with them since the DGS came in....

The NTMA/Government can create a new deposit rate floor overnight if they want... The argument that they are afraid that it could lead to an huge outflow from the banks doesn't stand up either because a) people won't all move and b) the banks are free to respond.

Not much they can do on the loan side but they do have a role to play in deposits.
 
The only way banks will respond is if NTMA does increase rates. Banks won't do it out of kindness to depositors.
So, the most effective tool Govt has is the one they are afraid to use
 
If the State is running a budget surplus, and needs to borrow less than normal, why should they increase the rate they offer on retail Govt Debt?

If there are large outflows from State Savings, they should increase rates.

I don't think that is the case.
 

If banks don't need deposits, why should they raise the rates they offer?

Why should retail customers lending to the State not get the relatively same returns (know its not a like for like) as anyone buying Government bonds, commercial paper or exchequer notes??

I don't necessarily think they should raise rates but when I hear politicians talking about levies, taxes and committees I just laugh. Italy tried this last week and that turned out great for them....

The State has an lever at their disposal. If they are so annoyed about the behaviour of banks, then use it. And they need to accept any knock on impacts that this cause. Otherwise stop playing to the audience with soundbites!
 
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Protocol said:
If the State is running a budget surplus, and needs to borrow less than normal, why should they increase the rate they offer on retail Govt Debt?
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Fairness ??

The State/NTMA has increased the rate offered on Government Bonds and on the longer term state savings products, i.e. those that attract the wealthier clients. It has refused to increase rates for demand deposit products, Post Office Savings Book Deposits and Prize Bonds, products that smaller, poorer, more vulnerable customers. This is wrong.
 

Market funding where banks and insurance firms buy billions of new debt issuances is not really comparable to trying to finance the country on prize bonds. It makes sense to keep a foothold in the market should it be needed quickly. Retail investors are not a realistic source of similar finance.

In the defence of the Government they have other - better - means of helping those who need it. Something like social welfare payments is a much better lever for providing supports.

Besides an increase in rates on a post office account is an un-targeted measure and would not necessarily go to those who really need it.
 

Eh? Social welfare payments because people don't get enough interest on their deposits?

Nobody is talking about the funding a country on prize bonds. Nobody is saying that someone buying a 3 year savings cert should get the same 3 year yield as a bondholders.

But the State offers savings products to its citizens. As I said 0.33% AER for three years. At the same time, Government ministers are going on air criticising banks for not offering proper deposit rates. Why should the State not be judged by same standards?

No idea what you mean about higher interest rates at post office is untargeted measure. Its not social welfare. It is targeted at the person, often elderly who lodges their money in a post office or savings product. Has got nothing to do with 'helping' people.
 
Sunny said:
Banking in Ireland is not dysfunctional. Especially when it comes to deposits. There is plenty of competition. Government are welcome to increase rates on State Savings products to increase competition even more if they wanted.
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Precisely.
The government has a clear and easy path to raising interest rates in High Street deposit accounts. Just increase the State Savings Certificate, Savings Bonds, etc, to 3% per annum and watch the banks jump to it.
 
You're really clutching at straws here.

State savings account for approx 10% of the National Debt and I see no reason why it can't be compared to other segments.

Trying to advance your argument by making out that the interest paid on State Savings is some form of welfare handout is pathetic.
 
I was merely replying to your sad one handed violin call for more post office rates for the oppressed you were spouting on about. It was weak and I explained why.

If you think that the Government can raise a billion in the short term by increasing the post office rate so be it. The reality is market funding is more timely, more liquid and more reliable then the poor oppressed masses you champion. That's why they get the better rate.

Ireland sells €1.25 billion of bonds maturing in 2033 and 2050 by…

8 June 2023 – The National Treasury Management Agency (NTMA) has today completed an auction of €1.25 billion of the benchmark Irish Government bonds, 1.3% Treasury Bond 2033 and 1.5% Treasury Bond 2050. Details are as follows: Bond Maturity Amount sold (million) Yield Bids…
www.ntma.ie

The side discussion on post offices and state savings it moot anyway. The Irish depositor has shown themselves to be a particularly inert and price insensitive already so it's not as if a better looking prize bond will result in any noteworthy move in deposits. It's only when banks have to pay - because depositors are leaving for higher rates will they then pay.
 
This is becoming quite unpleasant and derailed by straw man arguments so I’m best off to bite my tongue and save my breath.
 
skrooge said:
It's only when banks have to pay - because depositors are leaving for higher rates will they then pay.
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That's the point!!!! There is no point the Government bleating on about bank behaviour when they are doing exactly the same thing. Why should banks be punished with a higher levy if the States own savings products have not passed on interest rate rises either?
The State is involved in the deposits market here. It has a whole suite of saving products that they offer because they know some people prefer to invest with them for whatever reason. So the State can set deposit rates that would challenge banks to follow suit. If people don't move, that's their business but let's stop the populist bleating by politicians on how they are going to drag the banks in to committee and sanction them.
Nobody is saying the government NEEDS to raise rates to raise money. But they CAN raise rates to challenge the banks.
 
NTMA website - "The NTMA constantly reviews rates to ensure that products remain competitive in the savings market generally, whilst providing good value to the Exchequer in terms of borrowing costs."

This reads like it wants to follow the banks rather than lead the way. Regardless, McGuinness & Co should not bleat on about the banks not doing something if the NTMA doesn't want to lead and at least set example.
 
I fired off an email to McGuinness and Harris to ask them their thoughts on the NTMA angle. Same email, I'm sure they'll love being in the same email.
 
I don't understand why the likes of Revolut and N26 don't offer savings accounts in Ireland (they do in other countries). I'm sure they would attract a lot of new account holders and siphon off some of the savings from the other banks.
 
euroDilbert said:
I don't understand why the likes of Revolut and N26 don't offer savings accounts in Ireland (they do in other countries). I'm sure they would attract a lot of new account holders and siphon off some of the savings from the other banks.
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As you say N26 and Revolut offer savings accounts on some other countries.

In Ireland they get away with paying zero so therefore earn a full margin of 3.75% by redepositing Irish deposits with the ECB. Can't see Revolut or N26 reducing their margin unless the general competitive landscape changes.
 
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