Closing a no withdrawal savings account.

jimjames

teddysmum wrote: »

Well the banks don't seem to want our money or rather they don't want to pay us for its use.

I'm pretty happy with the return I'm getting from my bank(s). Not sure how much more return you'd want when inflation is under 1% and you can get 5% on a decent wedge.

Ballard

I don't know what liquidity ratios banks have been allocated. You may know more than me as you have used the word significant to describe the proportion of short term funds which banks can use for long term lending. At the last bank that I worked at where I knew the ratio it was 0% but I bow to your judgement.

If I borrow money from a bank then they will have to borrow it from somewhere. This could be, for example, from another customer or bank. I don't see that this is in any way creating money. In the end I have a credit balance on one account against a debit on another. They balance.

grey_gym_sock

Ballard wrote: »

I don't know what liquidity ratios banks have been allocated. You may know more than me as you have used the word significant to describe the proportion of short term funds which banks can use for long term lending. At the last bank that I worked at where I knew the ratio it was 0% but I bow to your judgement.

i may well not know more than you. i was mainly relying on the commonplace idea that banks usually use significant shorter-term funding to match longer-term borrowing - "significant" meaning that, in the event that there is a run on their deposits, or their other short-term funding dries up, one would expect them to be unable to survive without liquidity being supplied by the BoE.

i've had a quick look at nationwide's last accounts. i know they're a building society, not a bank, but i think the same regulations generally apply to them; and they would, if anything, be more risk-averse than actual banks; and their accounts might be more straightforward to follow.

total balance sheet is £208.9bn.

on the assets side, £162.1bn of that is retail mortgages.

on the liabilities side, £144.9bn is retail funding.

so it would appear they are funding a lot of mortgages with retail funding.

however, not all of that retail funding is immediate access. so let's look at the "residual maturity" table, which breaks down when financial assets and liabilities fall due.

there are £151.0bn of financial assets due after more than 5 years.

and there are £112.8bn of financial liabilities falling due within 1 month (that includes amounts repayable on demand).

from that alone, if everybody wanted their money out of nationwide, they'd require assistance from the BoE within 1 month.

the clarify: i don't find this worrying. just trying to see what their funding model is.

If I borrow money from a bank then they will have to borrow it from somewhere. This could be, for example, from another customer or bank. I don't see that this is in any way creating money. In the end I have a credit balance on one account against a debit on another. They balance.

yes. well, it depends what you mean by "creating money".

if you were thinking of banks waving a magic wand - *ting* - and suddenly they have a pile of money, with no corresponding liability ... then indeed that doesn't happen.

it is more like: *ting* - suddenly the bank has both an asset (in a loan account) and an equal liability (in a deposit account).

however, the balance in the deposit account is money (by common definitions of money), so in that sense money has been created. it's worth noting that the deposit account is, from the bank's point of view, a liability - it's what they owe the account holder - so it's the account holder, not the bank, who has more money.

it's also worth noting that a bank can't perform this (*ting*) magic at will, because they have to find somebody who's willing to take out a loan (whom the bank is prepared to lend to).