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

NoRegretsCoyote said:
For sure there are two less banks than two years ago. But there are still credit unions and other euro area banks accessible via intermediaries.

The issue is that households in Ireland are saving more than at any point in my lifetime. The supply of loanable funds in Ireland vastly exceeds demand so there is no incentive for anyone to increase rates. I doubt it would be much different if KBC and Ulster were still in the market.
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And also that, in my experience anyway, Irish people seem very reluctant to place deposits outside Ireland, despite deposit guarantees. The risk might be greater, but having faith in the guarantee is the thing.
 
DublinHead54 said:
The Central Bank is supposed to focus on Consumer protection, which I feel in this case they are not. In the same way the Governor said banks have to pass on monetary policy from the CBI thus increase mortgage rates, they should be making similar comments about the deposit rates.
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Exactly. The Central Bank of Ireland seem asleep at the wheel with protecting consumers / depositors and ensuring ECB policy is transmitted. The CBI need to act like the FCA, Spanish regulator and other European regulators have but they need to be even stronger because Irish banks are even worse than their European peers.
 
podgerodge said:
And also that, in my experience anyway, Irish people seem very reluctant to place deposits outside Ireland, despite deposit guarantees. The risk might be greater, but having faith in the guarantee is the thing.
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I don't think that's unique to Ireland.

For psychological reasons people like to leave their money in a pile of bricks they pass by every day and not via an intermediary using a cloud-based service! You and I know it's all the same but the typical consumer absolutely does not.

Otherwise I agree that government bodies should do a lot more to more to make customers aware of non-Irish deposit options, but that isn't where their bread is buttered.
 
DublinHead54 said:
The Central Bank is supposed to focus on Consumer protection
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Among other things...

Information About the Central Bank of Ireland | Central Bank of Ireland

Provides a general overview of the role of the Central Bank and links to important publications such as Plans and Strategies, Annual Reports and Code of Ethics.
www.centralbank.ie www.centralbank.ie

Corporate Plans and Strategies​

The Central Bank of Ireland serves the public interest by safeguarding monetary and financial stability and by working to ensure that the financial system operates in the best interests of consumers and the wider economy.
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But, I'd agree that their track record on consumer protection and advocacy has been pretty poor and usually involves lip service.
 
People need to remember that the CBI is an integrated full-spectrum supervisor and monetary policy authority.

I could write a long essay on the benefits and drawbacks of putting money-laundering, prudential, resolution, and consumer protection functions under the one roof. Never mind for all sectors (banks, payments, insurance, funds) not to mention central banking as well.

There were debates in the early 2000s on this (keep these responsibilities a bit separate) and again in the early 2010s (put them back together again).

Every design choice has trade-offs.
 
DublinHead54 said:
The Central Bank is supposed to focus on Consumer protection, which I feel in this case they are not.
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From the Central Bank's recent Governance Framework:

Mandate
In accordance with Article 127(1) and Article 282(2) of the TFEU and Article 2 of the ESCB Statute, the primary objective of the ESCB (and therefore of the Central Bank) is to maintain price stability. **

The Central Bank also has a number of other objectives:
  • the Eurosystem effectiveness and price stability;
  • the stability of the financial system;
  • the protection of consumer of financial services;**
  • the regulation of Financial Institutions and Enforcement Actions;
  • the regulatory policy development;
  • the efficient and effective operation of payment and settlement systems;
  • the recovery and resolution of Financial Institutions;
  • the resolution of financial difficulties in credit institutions, certain investment firms and credit unions;
  • the provision of analysis and comment to support national economic policy development; and
  • the discharge of such other functions and powers as are conferred on it by law, including the
    operation of the Central Credit Register, the Deposit Guarantee Scheme the Insurance Compensation Fund, the Credit Institutions Resolution Fund, and the Bank and Investment Firm Resolution Fund and certain regulatory services.
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** my emphasis

So while many of us look to the central bank to look after us and vindicate our rights, Consumer Protection is hardly a focus as it is just one of ten secondary objectives.

The retail banks are commercial organisations, and while they have a responsibility to treat customer's fairly, they are mandated in the first instance to make profits for their shareholders. As depositors, we may not like the current gap between loan and deposit interest rates, however it is entirely legal.

The real culprit in all of this is the MOF/NTMA/State Savings. This is the tool at the Government's disposal which allows it to intervene and address the interest rate disparity quickly and directly. And the Minister for Finance is failing spectacularly is failing in this regard.

Currently, State Savings are paying obscenely low rates, in particular to the weakest and most vulnerable of their customers. The MOF should intervene and direct NTMA to increase the rates it is paying, in particular in respect of demand and short term products. This would have an immediate impact on the entire market. The MOF is more than aware of this and his failure to act is shameful.
 
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podgerodge said:
And also that, in my experience anyway, Irish people seem very reluctant to place deposits outside Ireland, despite deposit guarantees. The risk might be greater, but having faith in the guarantee is the thing.
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I'm not sure that it's the "outside Ireland" bit that is the drag on uptake - it's probably more to do with lack of confidence and trust in operations that are exclusively on-line. In recent months, I've had very poor experiences with Raisin, Advanzia and BUNQ (all posted here I think). These relate to both the operation of their technology/platforms and their customer service. I also experienced funds being inaccessible in UB "online only accounts" when Nat West's systems went bye-bye for three weeks a decade ago and in Northern Rock when it went into meltdown. I didn't loose anything, but not being able to access your money is very sobering. While our bricks and mortar banks (AIB, BOI, PTSB) are hardly models of excellence in terms of their technology platforms or their customer service, there is a certain comfort in knowing you can turn up at their front door and demand your money. There are also the local scale and familiarity comforts.

I entire agree with the sentiment that international competition is probably the best way to put manners on the Irish Retail Banks. But the operations that are in that space at present, such as Raisin, Advanzia and BUNQ leave a lot to be desired and I can understand the reasons why people are reluctant to engage with them, especially those who are less financially literate or in any way technology shy. Similarly, while there has been a large and welcome uptake of online only platforms such as Revolut and N26, these have not been without significant issues and in both cases there are lingering/enduring concerns.
 
I am concerned about mortgage rates and customers of vulture funds in particular. They can't switch so they are vulnerable to very high rates.

But there are no barriers to switching deposits from BoI paying 0% to a German bank paying 3%.

But if people leave their money on deposit with Bank of Ireland at 0% and Bank of Ireland has a surplus of deposits at 0%, why should they pay more?

If I can get the Irish Independent free of charge , I wouldn't refuse it and pay for it in the local Tescos instead.

Having said all that, it is hypocritical of the Central Bank Governor to criticise the banks for not passing on ECB rate increases to mortgage holders while saying nothing about deposits.

Brendan
 
skrooge said:
The dysfunction is that depositors wont actively seek out higher rates. If depositors are not price sensitive why should Irish banks increase deposit rates? It serves no purpose for a bank apart from making existing funding more expensive.
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Exactly - consumers need to vote with their feet.....instead of calling into to Joe Duffy and crying for the gubberment to do something about it...there might be a lack of competition in the Irish deposit market.....but dont get that confused with no competition......there are alternatives the median Irish consumer is too lazy or too disengaged in their own finances to do something about it.

On the flip side........and given our now amongst the LOWEST mortgage rates in the Eurozone what type of market I'd want during a housing crisis.......low deposit beta twinned with amongst the lowest mortgage rates in Europe is what Ireland needs right now to keep housing supply moving in the right direction.
 
Brendan Burgess said:
Having said all that, it is hypocritical of the Central Bank Governor to criticise the banks for not passing on ECB rate increases to mortgage holders while saying nothing about deposits.
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You are 100% correct on the excess deposits at the Irish banks........they don't need them and in the past they didnt necessarily want them either.......especially when interest rates were negative.......back then these deposits were a burden on the banks....and they actually shielded their retail depositors from those negative rates to a certain extent.

I think you can argue that the pillar banks have shown relative restraint on their mortgage front book..........all the windfall profits are coming from NII expansion........NIM's have expanded somewhat modestly.......and given the fact non-bank lenders have been DOA since the capital markets moved against them.......they for sure have the competitive wiggle room to have taken more price on mortgages if they wanted too....but they havent......while deposit beta in Ireland is the lowest in Europe........ECB rate increases and their flow through to mortgage rates in Ireland have been amongst the most modest in Europe.

Short version - the banks could be making even more money right now but are choosing not too......their choice....as per my post above is a good one for the macro housing situation in Ireland
 
letitroll said:
Exactly - consumers need to vote with their feet.....instead of calling into to Joe Duffy and crying for the gubberment to do something about it...there might be a lack of competition in the Irish deposit market.....but dont get that confused with no competition......there are alternatives the median Irish consumer is too lazy or too disengaged in their own finances to do something about it.
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Can you list the alternatives, or are we just talking Raisin, BUNQ, Advanzia and Lightyear etc ?
 
Freelance said:
Can you list the alternatives, or are we just talking Raisin, BUNQ, Advanzia and Lightyear etc ?
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Always a good place to start

Best Buy - Savings Best Buys

Savings Best Buys: There are 3 savings best buy threads on AskAboutMoney that are updated frequently. Instant Access and Notice Accounts - Lump sum variable rate savings. Fixed Term Deposits - Fixed Lump Sum Term Deposits from a few months to a few years. Regular Savings - Smaller sum...
www.askaboutmoney.com
 
Freelance said:
From the Central Bank's recent Governance Framework:


** my emphasis

So while many of us look to the central bank to look after us and vindicate our rights, Consumer Protection is hardly a focus as it is just one of ten secondary objectives.

The retail banks are commercial organisations, and while they have a responsibility to treat customer's fairly, they are mandated in the first instance to make profits for their shareholders. As depositors, we may not like the current gap between loan and deposit interest rates, however it is entirely legal.

The real culprit in all of this is the MOF/NTMA/State Savings. This is the tool at the Government's disposal which allows it to intervene and address the interest rate disparity quickly and directly. And the Minister for Finance is failing spectacularly is failing in this regard.

Currently, State Savings are paying obscenely low rates, in particular to the weakest and most vulnerable of their customers. The MOF should intervene and direct NTMA to increase the rates it is paying, in particular in respect of demand and short term products. This would have an immediate impact on the entire market. The MOF is more than aware of this and his failure to act is shameful.
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Having working in Financial Services and dealt directly with regulators over the last 10 years, I can say that consumer protection is put at the forefront of interaction. Quoting a Dear CEO Letter from Dec 2021 it opens with "The Central Bank of Ireland’s (the Central Bank) mission is to serve the public interest by maintaining monetary and financial stability while ensuring that the financial system is operating in the best interests of consumers and the wider economy."

However, at the end of the day consumer protection is not a legal framework or a particular regulation, and pricing of deposit interest rate is a commercial activity. In the spirit of the consumer protection code the banks should be looking at it and asking themselves "is this really fair for our customers?" and making decisions that not only consider commercial activities but also consumer protection.

This doesn't look like it is a consideration, which defeats the purpose of the consumer protection code.
 
skrooge said:
Always a good place to start

Best Buy - Savings Best Buys

Savings Best Buys: There are 3 savings best buy threads on AskAboutMoney that are updated frequently. Instant Access and Notice Accounts - Lump sum variable rate savings. Fixed Term Deposits - Fixed Lump Sum Term Deposits from a few months to a few years. Regular Savings - Smaller sum...
www.askaboutmoney.com
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In other words the pillar banks plus Raisin, BUNQ, Advanzia and Lightyear etc

I was hoping that "there are alternatives the median Irish consumer is too lazy or too disengaged in their own finances to do something about it" amount to a bit more than this.
 
Freelance said:
The real culprit in all of this is the MOF/NTMA/State Savings. This is the tool at the Government's disposal which allows it to intervene and address the interest rate disparity quickly and directly. And the Minister for Finance is failing spectacularly is failing in this regard.
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I would suggest that the lack of action on State Savings is because the government do not want deposit rate rises to jeopardize the (relative) lid or mortgage rate rises:
www.irishtimes.com

Irish mortgage rates climbing but still low by EU standards

Average rates currently 3.63 per cent according to Central Bank data but set to climb higher
www.irishtimes.com www.irishtimes.com
 
Freelance said:
In other words the pillar banks plus Raisin, BUNQ, Advanzia and Lightyear etc

I was hoping that "there are alternatives the median Irish consumer is too lazy or too disengaged in their own finances to do something about it" amount to a bit more than this.
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How much more do you want? There's apparently more choice than most can handle.
 
Early Riser said:
I would suggest that the lack of action on State Savings is because the government do not want deposit rate rises to jeopardize the (relative) lid or mortgage rate rises:
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I believe you are correct. This does not justify or make right the fact that the state is paying its bond holders a huge multiple of what is is paying its most vulnerable and least financially literate depositors.

From a previous post, the state is currently paying:
Per June Bond Sales - 1.3% to 1.5% (Yield 2.84% and 3.36%) to its bond holders
Since March - 1.5%, 1% and 1% respectively on 10 year National Solidarity Bonds, 5 year Savings Certificates, 6 year Instalment Savings
A miserable .35% on Prize Bonds, which is more truthfully .25% when the unattainable large prizes are excluded
And a despicable .05% on the Book Based Deposit Accounts

Depressing the cost of mortgages by savaging the savings of pensioners is disgusting and flies in the face of what the state should stand for. As I said earlier the MOF is wholly culpable as it's in his power to address the issue, quickly and easily. I have no problem with him looking after the interests of hard pressed mortgage holders, but not at the expense of the small depositors who are loyal to State Savings.
 
skrooge said:
How much more do you want? There's apparently more choice than most can handle.
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I wasn't asking for anything other than clarification of what the previous dot ridden post was alluding to. I hoped that it was something other than this jaded list. Sadly not.
 
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