Why are savings rates on the floor?

gozomark

"Why are savings rates on the floor?" because the economy is

grey_gym_sock

CLAPTON wrote: »

well what would the effects of allowing the banks to fail?

there are more options than allowing them to fail or pumping unlimited money into them for decades.

shut down the proprietary trading (a.k.a. casino) operations. save all the money spent on huge bonuses - that's where part of our money is going.

perhaps allow some of the banks' subsidiaries to default, especially where they are involved in derivatives. though it's hard to say what the consequences of this would be, and therefore whether it's worth doing.

relatedly. ban their use of off-balance-sheet vehicles. i.e. insist that their accounts genuinely how a true and fair picture of their finances.

the banks are being continuously bailed out. they are not being properly reformed. that's the alternative.

Thrugelmir

gadgetmind wrote: »

They are because more old loans are being paid off than new ones taken out. As the banks have been ordered to improve their balance sheets, it was hard to imagine any other outcome.

Not the case in terms of mortgages.

Since 2008 net mortgage lending has increased by around £32 billion. While overall consumer debt level has fallen by £60 billion. Net gain is in savings.

Consumer debt rose by £426 billion between 2004 and 2008 so a long way to go to for consumers to deleverage and repay the banks.

pqrdef

melbury wrote: »

As has been said before, it would be interesting to see what would happen if savers starting withdrawing their money from banks/building societies in droves.

The banks would praise the Lord for their salvation. They need to shrink their balance sheets. They're trying their damnedest to lose savers, but the savers won't go away because they haven't got anywhere else to go.

Glen_Clark

Thrugelmir wrote: »

Not the case in terms of mortgages.

Since 2008 net mortgage lending has increased by around £32 billion. While overall consumer debt level has fallen by £60 billion. Net gain is in savings.

Consumer debt rose by £426 billion between 2004 and 2008 so a long way to go to for consumers to deleverage and repay the banks.

I think you are quoting UK figures, but most of the UK banks bad debts are on foreign sub prime loans. Unlike the UK, these foreign governments are not subsidizing property prices for the benefit of the bankers, so this is where the great majority of losses are.
The banks are shrinking their balance sheets by selling off these bad loans (at huge losses), so will have even less need of savers money. (link to FT article behind paywall: http://www.ft.com/cms/s/0/1c04dd1c-34aa-11e2-8b86-00144feabdc0.html#axzz2E4VJ8YCB )

Glen_Clark

grey_gym_sock wrote: »

relatedly. ban their use of off-balance-sheet vehicles. i.e. insist that their accounts genuinely how a true and fair picture of their finances.

The bankers might point out that the Government is itself using off-balance-sheet vehicles (like PFI) to hide the size of its debts.
PS: £229 billion of hidden debts just on PFI according to the Telegraph: http://www.telegraph.co.uk/news/politics/9720404/PFI-reborn-with-pledge-that-this-time-the-taxpayer-wont-lose-out.html
But there is an assurance from Gideon that the taxpayer won't lose out in the next round of PFI :rotfl:

2010

Why rates are crap:

Banks and building societies draw £4.4bn in cheap money from Funding for Lending but lend just £500m more




http://www.dailymail.co.uk/money/news/article-2242219/Lenders-draw-4-4bn-Funding-Lending-lend-extra-500m.html

alanq

2010 wrote: »

Banks and building societies draw £4.4bn in cheap money from Funding for Lending but lend just £500m more

"The number of loans being offered by banks has continued to fall in spite of the Funding for Lending Scheme (FLS)."

http://www.bbc.co.uk/news/business-21653603

ColdIron

It's just another way of re-capitalising the banks

talexuser

ColdIron wrote: »

It's just another way of re-capitalising the banks

...by effectively stealing from taxpayers.