Santandair, TSB and Lloyds slash interest rates.
Discussion
London424 said:
Love it, the weekly/monthly thread where financial illiteracy is corrected by those who know what they are talking about but ignored and they just keep digging.
Something to smile about at the end of the day.
Financial literacy in this country is a joke. If it can't be explained by man maths (often incorrectly), it must be wizardry.Something to smile about at the end of the day.
stongle said:
ellroy said:
Add in the Basel III regs and the inability to use deposits of less than 31 days for any collateral and you see it's a large issue for all banks, but the big ones have too much short term cash.
Our rates fall for same day deposits in excess of £10m.
Non maturing deposits (NMDs) get very favourable liquidity treatment under the various local implementations of the Basel 3 liquidity pillar as the prolongation assumption is high (they rollover). The problem with bank deposits though is that:Our rates fall for same day deposits in excess of £10m.
1. They cost money to administer. If your operating costs are around 10bps, you need a high rate of return.
2. Subject to bank levy (a tax on banks liability base) or depositor protection premiums
3. Difficult to matchbook as demand for short term cash has been reduced by regulations. Also the bank needs to lend the money to do this, unmasking the paradox in the OP - unless you want the banks taking prop or punting risk (and we know how that ends up)
Realistically the only real option for positive pick-up is longer term investments or deposit accounts.
Oh, and if rates creep up, equity returns are negatively correlated. What do you think is fuelling the current asset bubble.
ash73 said:
That's not working it's rhetoric. If you're certain operating costs exceed income show us the numbers.
Do the banks publish separate accounts for their bank accounts and allocation of capital and compliance costs etc?Stongle has already posted a few numbers to support the case.
We have zero evidence from the person claiming the other position.
ash73 said:
That's not working it's rhetoric. If you're certain operating costs exceed income show us the numbers.
I actually happen to know that the deposit taking operation of a major Eurozone G-sib is 14bps. UK bank levy is target 18 bps, but as low as 9bps for certain liabilities. We also know the swap rate, and tier1 capital hurdle rates, and I would guess that mortgage administration is probably higher than deposit taking. It's not a great big conspiracy, the biggest costs are those introduced per regulations. whether banks historically misspriced risk is not the issue here (to be fair they did), but the fact is banks have to create or invest in assets to pay interest to liability holders. Mickey Mouse understanding and fag packet maths is a bigger problem to the UK economy than the behaviour of certain banks. Those baby boomers who've benefitted from past economic policy and become asset rich at the expense of future generations - really don't incite any sympathy. Their lack of understanding is as bad as the feckless whom can't manage a PCP or Vodafone contract.stongle said:
I actually happen to know that the deposit taking operation of a major Eurozone G-sib is 14bps. UK bank levy is target 18 bps, but as low as 9bps for certain liabilities. We also know the swap rate, and tier1 capital hurdle rates, and I would guess that mortgage administration is probably higher than deposit taking. It's not a great big conspiracy, the biggest costs are those introduced per regulations. whether banks historically misspriced risk is not the issue here (to be fair they did), but the fact is banks have to create or invest in assets to pay interest to liability holders. Mickey Mouse understanding and fag packet maths is a bigger problem to the UK economy than the behaviour of certain banks. Those baby boomers who've benefitted from past economic policy and become asset rich at the expense of future generations - really don't incite any sympathy. Their lack of understanding is as bad as the feckless whom can't manage a PCP or Vodafone contract.
Thanks.Perhaps we're seeing the start of a change in how people may look for a return on their savings. There seems to be more people looking elsewhere for a return now which is obvious really but also risky. There have always been ponzi schemes and bubbles but the finance world seems a wash with it.
Genuine questions for those who very obviously have a lot of knowledge of banking and finance.
Will the banks be able to return to offering a good rate of interest in line with the previous 40-50 years? Will this be in our lifetime?
Are crypto currencies regarded as a ponzi scheme to the finance world. Do they have a future? Bitcoin for instance has been volatile in the past but seems to be becoming stable with what could have offered fantastic returns over the last 12-18months.
Gold. A good year, but does it actually hold any more value than bitcoin for instance. Physical Gold perhaps, but that's not really how the majority invest in gold now. Where do you see the future in metals?
I've only really been interested in finance recently and find it almost like a parallel world where not everything is as it seems. I certainly don't claim to have any more than very basic knowledge but am interested in others views on the above.
Genuine questions for those who very obviously have a lot of knowledge of banking and finance.
Will the banks be able to return to offering a good rate of interest in line with the previous 40-50 years? Will this be in our lifetime?
Are crypto currencies regarded as a ponzi scheme to the finance world. Do they have a future? Bitcoin for instance has been volatile in the past but seems to be becoming stable with what could have offered fantastic returns over the last 12-18months.
Gold. A good year, but does it actually hold any more value than bitcoin for instance. Physical Gold perhaps, but that's not really how the majority invest in gold now. Where do you see the future in metals?
I've only really been interested in finance recently and find it almost like a parallel world where not everything is as it seems. I certainly don't claim to have any more than very basic knowledge but am interested in others views on the above.
Whilst BTC has seen massive gains, and a lot of price volatility - it's still a risky propoposition. If it all goes bang, you could have nothing but magic beans. Sure Equity has the same price floor, but I struggle with anarcho-libertarian theory which might all be exposed as a big joke someday or not. I think there is value in distributed ledgers and blockchain technologies; but as a way to ease friction costs. Each distributed ledger could have its own coin, but it needs to be backed by real asset or FIAT monies to be a safer investment. Don't get me wrong you can make money - if you know what you are doing, but you can lose a lot too. I like Ether as I see value in the SMART contracts on Etherium, but it's more fun than investment.
The future for traditional banking products looks less than rosy. Costs to the end user will certainly go up, so it's unlikely that traditional investments will function as they had. Costs to hedge equities are increasing so possibly ETFs will be more popular. Yeild hunting is leading people to lower their credit floors, and the depth of certain instruments is far to opaque.
I don't know many people in banks whom think the future is rosy. Whilst past behaviour needs to be dealt with, the regulations make it more difficult for banks to function full stop. Also, they are creating more risks in the shadow banking with little regulatory oversight. We could see another huge failure, but this time in an asset manager or hedge fund that was performing bank like functions of creating leverage and maturity transformation unchecked (Lehmans Pt2).
Problems in the EU, and potential for Brexit to go anyway except the way the Tories think make it difficult to know what to do. Plus a fragile global outlook.
Now is the best time to be long Vol, and have a balanced and well diversified portfolio.
The future for traditional banking products looks less than rosy. Costs to the end user will certainly go up, so it's unlikely that traditional investments will function as they had. Costs to hedge equities are increasing so possibly ETFs will be more popular. Yeild hunting is leading people to lower their credit floors, and the depth of certain instruments is far to opaque.
I don't know many people in banks whom think the future is rosy. Whilst past behaviour needs to be dealt with, the regulations make it more difficult for banks to function full stop. Also, they are creating more risks in the shadow banking with little regulatory oversight. We could see another huge failure, but this time in an asset manager or hedge fund that was performing bank like functions of creating leverage and maturity transformation unchecked (Lehmans Pt2).
Problems in the EU, and potential for Brexit to go anyway except the way the Tories think make it difficult to know what to do. Plus a fragile global outlook.
Now is the best time to be long Vol, and have a balanced and well diversified portfolio.
sidicks said:
Idiot!
A banker I'm guessing? 
You keep coming back to the same pointless sarcastic rhetoric Of course, because there are absolutely no costs associated with managing a bank and bank accounts...
Try reading my post a little more carefully, not only did I never suggest that was the case, I actually specifically acknowledged that there were!
Ari said:
A banker I'm guessing?
The vast majority of your post was incorrect. And then you followed up with the usual boring anti-banker rhetoric.Ari said:
You keep coming back to the same pointless sarcastic rhetoric Of course, because there are absolutely no costs associated with managing a bank and bank accounts...
Try reading my post a little more carefully, not only did I never suggest that was the case, I actually specifically acknowledged that there were!
You did?Try reading my post a little more carefully, not only did I never suggest that was the case, I actually specifically acknowledged that there were!
Ari said:
Once upon a time banks took the money of their savers in return for a reasonable rate of interest, then prudently loaned it to their borrowers in the form of mortgages, car loans, credit cards, personal loans, business loans and other funding for a higher rate of interest.
The difference was their profit.
I can't see it I'm afraid.The difference was their profit.
Edited by sidicks on Monday 17th October 21:01
sidicks said:
I can't see it I'm afraid.
If you can't comprehend the notion that there is profit in taking money from one group at a lower interest rate and lending it to another at a higher interest rate (even allowing for operating expenses along the way, you know, like every other business in the world) then I guess the conversation stops here. I'm tempted to say that you can't possibly be a banker after all, but actually it would explain rather a lot...
Ari said:
If you can't comprehend the notion that there is profit in taking money from one group at a lower interest rate and lending it to another at a higher interest rate (even allowing for operating expenses along the way, you know, like every other business in the world) then I guess the conversation stops here.
The bit in bold is the key point, something you overlooked previously, as had cranked up.Whether borrowing at one rate and lending at a higher rate is profitable depends on what costs are incurred for doing so. You know, those costs I highlighted earlier in the thread and the ones you ignored (although you claimed otherwise)....
Ari said:
I'm tempted to say that you can't possibly be a banker after all, but actually it would explain rather a lot...
Still waiting for your responses to my questions:- Which banks 'gambled on the stock markets'?
- What proportion of UK sub-prime mortgages defaulted?
Edited by sidicks on Monday 17th October 21:19
sidicks said:
Still waiting for your responses to my questions:
- Which banks 'gambled on the stock markets'?
- What proportion of UK sub-prime mortgages defaulted?
If they never lost any money why did we have to bail out RBS, BoS and close Northern Rock?- Which banks 'gambled on the stock markets'?
- What proportion of UK sub-prime mortgages defaulted?
Edited by sidicks on Monday 17th October 21:19
sidicks said:
Granfondo said:
If they never lost any money why did we have to bail out RBS, BoS and close Northern Rock?
Who said that 'banks never let any money' ?Not me.
The cause of the crisis, was primarily liquidity (or lack thereof) not real losses.
sidicks said:
Granfondo said:
If they never lost any money why did we have to bail out RBS, BoS and close Northern Rock?
Who said that 'banks never let any money' ?Not me.
The cause of the crisis, was primarily liquidity (or lack thereof) not real losses.
RBS losses for 2008 £24.1 billion but Sidicks says " not real losses " seem pretty f
king real to me! 
Edited by Granfondo on Monday 17th October 21:41
Granfondo said:
sidicks said:
Granfondo said:
If they never lost any money why did we have to bail out RBS, BoS and close Northern Rock?
Who said that 'banks never let any money' ?Not me.
The cause of the crisis, was primarily liquidity (or lack thereof) not real losses.
If you have an asset that you bought at 100, it's value fell to 50 and then went back up to 100, how much have you lost?
What happens if you are forced to sell when the price was 50?
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