Banks are likely to come under pressure in the months ahead to offer better rates to customers putting money on deposit, according to one treasury specialist.
The ECB has hiked interest rates by 3.75 percentage points since July of last year.
While the main banks have not passed on the full extent of the rate increases to borrowers – pushing Ireland well down the table of countries with the most expensive lending rates in Europe – they have also been slow to offer depositors more attractive rates on their savings.
Bank of Ireland and Permanent TSB announced marginal increases in rates to depositors in the last week.
John Finn, Managing Director of Treasury Solutions, said all the banks would likely come under increased pressure in the coming months to continue offering more attractive savings products to customers.
“I think we’ll see movement on that, but the increases will be fairly modest,” Mr Finn said.
“They have so much surplus cash, they can deposit it at the ECB at 3.25% and take no risk because the ECB is not going to go bust, and make a handy return on it. It’s quite profitable,” he explained.
John Finn said larger corporates were looking at government bonds as a more attractive option right now.
He pointed out that they can get over 2.6% on 9-12 month German or Irish bonds, which have a higher rating than the banks.
“In essence, savers have been subsidising mortgage customers,” Daragh Cassidy, Head of Communications with comparison website, bonkers.ie said.
“So, if we want to have higher saving rates it’ll likely come at the expense of higher mortgage rates,” he added.
He also pointed out that the rate of return on savings, despite increasing, is still well below the rate of inflation, with DIRT (Deposit Interest Retention Tax) eating further into returns.
Article Source: Pressure likely to mount on banks to hike deposit rates – Brian Finn – RTE