How can you say banks are creaming margin off variable rate savers, ECB is at 1.25% with variable rate products paying up to 3.50%-3.75%!!! Surely they are losing, so at least with the ECB increase, their margin loss will be narrowed, which is a good thing i think as banks need to start covering the losses they are making on core business.
The constant demand from customers for higher and higher rates is becoming unsustainable
There is merit to saying that deposit rates in Irish banks were at record margins, for some savings products in some banks, and that this could not continue, but there is also some creaming going on.
Take Rabo for example. They have matched all recent ECB rate decreases par from par with variable rate decreases. As soon as the ECB increases rates, Rabo have failed to pass on the increase to their variable customers.
Rabo rate history: [broken link removed]
ECB rate history: http://www.homefinance.nl/english/international-interest-rates/ecb-refinancing-interest-rate.asp
I agree with the analysis, that they have not passed on the increase as yet, but if they are paying 2.00% (1.80 on business) then they are still paying a negative margin of 0.75%, so hardly creaming it. They are just reducing the negative margin. Also, maybe they do not feel the need to acquire further deposits at this time. Bear in mind that less than 5% of Rabo's deposits are coming from Central Banks, with the vast vast majority coming from long-term funding (probably greater than 5 years). The relatively small amount of funding they are taking from the Irish market does not warrant paying up significantly if they can raise term funding at probably similar, or less, premium over mid-swaps. The main reason for them taking funding from Ireland is for diversification, not necessarily to make/lose money.
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