Viewing a single comment thread. View all comments

Celtic_Legend t1_jeepttk wrote

Reply to comment by Durumbuzafeju in "No REALLY, we're doing fine" ~ every bank right now by JPowsSecretlover

Money markets. Even retail is pulling out. Why keep money in bank for 0.02% interest when fidelity will automatically put any unused cash in their 4% yield money maket. Other brokers offering similar.

10

W2ttsy t1_jeetq02 wrote

Man what is going on with your banks where interest rates are still this low with such high inflation?

Here in Australia 4.25% is about the average savings interest you can get on any standard bank account. Higher if using fixed term deposits or saver accounts.

I mean I’ve got my money parked in an offset account on my mortgage netting me a guaranteed 6.09% return (more if there are further rate rises) and far less volatile than anything I could buy on the ASX or NASDAQ.

9

Celtic_Legend t1_jeeuvdb wrote

My guess is that getting a full 6-8%+ return with less customers is more profit than retaining customers by offering 4% and making 2-4%.

Small banks are happy to offer 5% right now though. Bank of america and chase are offering essentially 0% which are the 2 biggest banks. Cba googling more.

5

tjonesmachine93 t1_jeh225l wrote

Because banking is sticky. People are more reluctant to change banks than cell phone providers. Consider a big bank like BofA with $2T in deposits. Let’s assume 1/3 is just going to be your average Joe or Joe’s plumbing with 10-20k in checking accounts and another 20k in an emergency savings account. Those accounts are yielding 0.02% currently and have been (or less) for a while. So the price to service these accounts is 130M annually. If they were to just automatically pay a competitive 3-4%, that 130M goes to $20B. They know they are too big to fail and if they experience a run the fed will are in, which they have already. Large banks have literally no reason to pass along a good interest rate to customers bc, frankly, they don’t want their deposits.

1

Trest43wert t1_jefjejx wrote

Bank bond portfolios are filled with low interest bonds from a few years ago. They are stuck with them and are unable to pay more yield given how their bonds are positioned. Its a death spiral.

3

dayby_day t1_jef1ebo wrote

Money market accounts are still bank accounts, they just pay higher interest. So banks still have the money, they're just paying mote for it.

This isn't going to make banks insolvent, it's just going to pinch margins because the cost if funds are going up. It's a profitability issue not a liquidity issue.

3